EXHIBIT 10-1
LIMITED LIABILITY COMPANY AGREEMENT
OF
KEYSTONE NEW JERSEY ASSOCIATES, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS LIMITED LIABILITY COMPANY AGREEMENT of KEYSTONE NEW JERSEY ASSOCIATES,
LLC (the "COMPANY"), dated and effective as of January 31, 2001, is adopted,
executed and entered into by and between Keystone Operating Partnership, L.P., a
Delaware limited partnership, and CalEast Industrial Investors, LLC, a
California limited liability company (collectively, the "MEMBERS").
R E C I T A L S:
A. The Members desire to form a joint venture for the purpose of acquiring,
owning, developing, operating, leasing and selling industrial real properties as
further set forth in this Agreement.
B. On January 31, 2001 (the "FORMATION DATE"), the Company was formed
pursuant to the Delaware Limited Liability Company Act, 6 Del. C. ss.18-101 et
seq. (as from time to time amended and including any successor statute of
similar import, the "ACT") by the filing of the Certificate with the
Secretary of State of the State of Delaware in accordance with the Act.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein made and intending to be legally bound, the Members hereby agree as
follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"15 DAY PROPERTY CERTIFICATION" shall have the meaning set forth in Section
10.1.
"ACCEPTANCE PERIOD" shall have the meaning set forth in Section 6.8(A).
"ACQUISITIONS AND DEVELOPMENT OFFICER" shall have the meaning set forth in
Section 6.2(E).
"ACT" means the Delaware Limited Liability Company Act, Title 6,
ss.ss.18-101 et seq., and any successor statute, as amended from time to time.
"AFFILIATE" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" means this Limited Liability Company Agreement, as executed and
as amended, modified, supplemented or restated from time to time, as the context
requires.
"ANNUAL OPERATING BUDGET" has the meaning given in Section 6.9.
"APPROVED" or "APPROVAL" means, with respect to any matter considered or to
be considered by the Board, the affirmative vote of a Majority of the members of
the Board.
"ARBITRATION PERIOD" shall have the meaning set forth in Section 10.7(A).
"ASSIGNEE" shall have the meaning set forth in Section 9.1.
"BOARD" shall have the meaning set forth in Section 6.1.
"BOOK VALUE" means, with respect to any Company Property, the Company's
adjusted basis for federal income tax purposes, adjusted from time to time to
reflect the adjustments required or permitted by Treasury Regulation Section
1.704-1(b)(2)(iv)(d)-(g) (provided that, in the case of permitted adjustments,
the Company chooses to make such adjustments); provided, that the Book Value of
any asset contributed to the Company shall be equal to the Fair Market Value of
the contributed asset on the date of contribution.
"BREACH OF EXCLUSIVITY" shall be deemed to have occurred if KOP or any of
its Affiliates (other than a Keystone Excluded Affiliate) fails to present a New
Jersey Investment Opportunity to the Company during the Exclusivity Period as
required by Section 3.6.
"BUSINESS DAY" means any day, other than Saturday, Sunday or a day banks
are authorized or required to be closed in Chicago, Illinois.
"BUYING MEMBER" shall have the meaning set forth in Section 10.6.
"BUY-SELL DEPOSIT" shall have the meaning set forth in Section 10.4(B).
"BUY-SELL ELECTION NOTICE" shall have the meaning set forth in Section
10.3.
"BUY-SELL EVENT" shall mean (a) termination by the Company of the
Management Agreement for Cause (as defined in the Management Agreement) (b) a
Breach of Exclusivity, or (c) an election by either Member to give a Buy-Sell
Notice as a result of a Termination Event as set forth under Section 11.1(B), or
(d) the delivery by either Member of a Buy-Sell Notice at any time after the
expiration of the Commitment Period or as a result of an amendment to this
Agreement pursuant to Section 12.25 hereof.
"BUY-SELL NOTICE" shall have the meaning set forth in Section 10.2.
"BUY-SELL PRICE" shall have the meaning set forth in Section 10.2.
"CALEAST" means CalEast Industrial Investors, LLC, a California limited
liability company.
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"CALEAST INITIAL CAPITAL" means CalEast's initial capital contribution to
the Company in the amount of $33,216,000 to be made as set forth in Section
3.4(B).
"CALEAST OFFER" shall have the meaning set forth in Section 6.8(B).
"CALPERS" shall have the meaning set forth in Section 6.1.
"CALEAST COUNTER OFFER" shall have the meaning set forth in Section 6.8(B).
"CALPERS OBSERVER" shall have the meaning set forth in Section 6.1.
"CASH ADJUSTMENT PAYMENT" shall have the meaning set forth in Section
10.7(D)(ii).
"CAPEX PROPERTY" shall have the meaning set forth in Section 6.8(B).
"CAPITAL ACCOUNT" shall have the meaning set forth in Section 4.1.
"CAPITAL CALL" shall have the meaning set forth in Section 3.4(C).
"CAPITAL CONTRIBUTION" means, with respect to any Member, the contributions
made by or on behalf of such Member to the Company pursuant to ARTICLE III,
which contributions shall be noted opposite such Member's name on Schedule 3.2,
as the same may be amended from time to time, in each case net of any
liabilities assumed by the Company from such Member in connection with such
contribution and net of any liabilities to which assets contributed by such
Member in respect thereof are subject.
"CAUSE" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Subsidiaries or any of their
customers or suppliers or with respect to its Members, (ii) conduct tending to
bring the Company, its Members, or any of its Subsidiaries into public disgrace
or disrepute, (iii) substantial or repeated failure to comply with the terms of
this Agreement or to perform duties of the office held by the Executive as
reasonably directed in writing by the Board, which failure is not cured (if
curable) within five (5) days after the Executive receives written notice
thereof from the board or, if not reasonably curable within such period, then
within forty-five (45) days so long as the Executive is diligently attempting to
cure and so long as such failure does not constitute an act or conduct falling
within clause (i) or (ii) above, or (iv) negligence or willful misconduct with
respect to the Company or any of its Subsidiaries.
"CERTIFICATE" means the Certificate of Formation of the Company as filed
with the Secretary of State of the State of Delaware.
"CERTIFICATION CONFIRMATION" shall have the meaning set forth in Section
10.1.
"CHANGE OF CONTROL" means with respect to Keystone; (i) an acquisition by
any Person (including any syndicate or group deemed to be a "person" under
Section 13(d)(3) of the United States Securities Exchange Act of 1934) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of capital
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stock of the company entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the company entitled to vote
generally in the elections of directors, other than any such acquisition by the
company, any subsidiary of the company or any employee benefit plan of the
company; or (ii) any consolidation of the company with, or merger of the company
into, any other Person, any merger of another Person into the company, or any
conveyance, sale transfer or lease of all or substantially all of the assets of
the company to another Person (other than (a) any such transaction (x) which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock of the company and (y) pursuant to which the
holders of 50% or more of the total voting power of all shares of the company's
capital stock entitled to vote generally in the election of directors
immediately prior to such transaction have the entitlement to exercise, directly
or indirectly, 50% or more of the total voting power of all shares of capital
stock entitled to vote generally in the election of directors of the continuing
or surviving corporation immediately after such transaction and (b) any merger
which is effected solely to change the jurisdiction of incorporation of the
company and results in a reclassification, conversion or exchange of outstanding
shares of common stock of the company into solely shares of common stock);
provided that the following shall not constitute a Change of Control: the merger
of KOP and/or KOP's general partner, (A) with another entity, so long as the
surviving entity (i) has a net worth and gross asset value (as reasonably
determined by CalEast) equal to or greater than the combined net worth and gross
asset value of KOP and KOP's general partner immediately prior to the Formation
Date, (ii) enjoys a favorable reputation in the industrial real estate
community, (iii) is not a direct competitor of LaSalle Investment Management or
CalPERS, and (iv) whose business has, as one of its focuses, a focus on
industrial properties located in New Jersey or (B) with any of the entities set
forth on Schedule 11.1(B) so long as such entities meet the requirements set
forth in clause (A)(i) above.
"CLAIM" shall have the meaning set forth in Section 10.6.
"CODE" means the Internal Revenue Code of 1986 and any successor statute,
as amended from time to time, in effect as of the date hereof. The Board may, in
its sole discretion, treat any amendment to the Code as having been in effect as
of the date hereof, provided that such amendment does not result in a material
change in the rights or obligations of any Member under this Agreement.
"COMMITMENT PERIOD" means, with respect to each Member, the period of time
ending at 11:59 p.m. Central Time on the date which is twenty-four (24) months
from the date on which title to the Initial Portfolio transfers to the Company.
"COMPANY" means the Delaware limited liability company formed pursuant to
the Certificate and this Agreement, as such limited liability company may be
constituted from time to time, and including its successors.
"COMPANY MINIMUM GAIN" has the meaning set forth for "partnership minimum
gain" in Treasury Regulation Section 1.704-2(d).
"COMPANY PROPERTY" means each Proposed Investment acquired by the Company.
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"CONFIDENTIAL INFORMATION" means information that is not generally known to
the public and that is used, developed or obtained by the Company or any of its
Affiliates or subsidiaries in connection with their respective businesses,
including but not limited to (i) financial information and projections, (ii)
business strategies, (iii) products or services, (iv) fees, costs and pricing
structures, (v) designs, (vi) analysis, (vii) drawings, photographs and reports,
(viii) computer software, including operating systems, applications and program
listings, (ix) flow charts, manuals and documentation, (x) data bases, (xi)
accounting and business methods, (xii) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xiii) customers and clients and customer or client lists,
(xiv) copyrightable works, (xv) all technology and trade secrets, and (xvi) all
similar and related information in whatever form.
"CONTRACT" means that certain contribution and sale agreement by and
between Keystone New Jersey, L.P., a Delaware limited partnership, ▇▇▇▇▇ Park,
LLC, a Delaware limited liability company, and the Company pursuant to which the
Contributed Property will be contributed and the Sold Properties will be, sold
to the Company, and which KOP and CalEast have joined in the execution thereof
for certain limited purposes, to be executed by the Company only upon Approval
by a Majority of the Board pursuant to Section 3.1(A).
"CONTRIBUTED PROPERTY" means the improvements and leasehold estate
designated on Schedule 3.4(B) as the Contributed Property which shall be
contributed to the Company by KOP (or its Affiliates) as part of its Capital
Contribution pursuant to the Contract and a Subscription Agreement.
"CONTRIBUTING MEMBER" has the meaning set forth in Section 3.4(F).
"CREDIT FACILITY" means a credit facility to be Approved by a Majority of
the Board, which in no event shall be for an amount that exceeds sixty percent
(60%) of the value of the Company Properties at the time of the borrowing under
the Credit Facility.
"DEFAULT AMOUNT" shall have the meaning set forth in Section 3.4(E).
"DEFAULT CONTRIBUTION" shall have the meaning set forth in Section 3.4(E).
"DEFAULT ELECTION NOTICE" shall have the meaning set forth in Section
3.4(E).
"DEFAULT ELECTION PERIOD" shall have the meaning set forth in Section
3.4(E).
"DEFAULT LOAN" shall have the meaning set forth in Section 3.4(E).
"DEFAULTING MEMBER" shall have the meanings set forth in Sections 3.4(E)
and 10.3(B).
"DEFAULT RATE" means a per annum rate of interest equal to the lesser of
(i) eighteen percent (18%) and (ii) the maximum rate permitted under applicable
law.
"DETERMINATION PERIOD" shall have the meaning set forth in Section 6.8(B).
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"DISTRIBUTABLE CASH" means, with respect to any period of time, the sum of
the Net Operating Cash Flow and Net Capital Proceeds received by the Company
during such period of time.
"DISTRIBUTION" means a distribution made by the Company to a Member,
whether in cash, property or securities and whether by liquidating distribution
or otherwise; provided that none of the following shall be a Distribution: (a)
any redemption or repurchase by the Company or any Member of any Membership
Interests, (b) any recapitalization or exchange of securities of the Company,
(c) any subdivision or any combination of any outstanding Membership Interests,
or (d) any reasonable fees or remuneration paid to any Member in such Member's
capacity as an Officer, consultant or other provider of services to the Company.
"DRAFT NOTICE" shall have the meaning set forth in Section 10.7.
"DRAFT VALUE" shall have the meaning set forth in Section 10.7(D)(i).
"DRAFTING PROCESS" shall have the meaning set forth in Section 10.7.
"DRAW REPORT" shall have the meaning set forth in Section 3.4(C).
"DUE DILIGENCE PROCEDURES" shall have the meaning set forth in Section 3.1.
"ECONOMIC INTEREST" means a Member's share of the Company's Profits, Losses
and Distributions pursuant to this Agreement and the Act, but shall not include
any right to participate in the management or affairs of the Company, including
the right to vote on, consent to or otherwise participate in any decision of the
Members, or any right to receive information concerning the business and affairs
of the Company, in each case to the extent provided for herein or otherwise
required by the Act.
"ELECTING MEMBER" shall have the meaning set forth in Section 9.3.
"ELECTION NOTICE" shall have the meaning set forth in Section 9.3.
"ELECTION PERIOD" shall have the meaning set forth in Section 9.3.
"EMERGENCY REQUIREMENTS" means expenditures required in the reasonable
judgment of the Officers or Members to prevent or mitigate imminent danger to
Persons or property, including Company Properties, or to prevent or mitigate a
default under the Credit Facility.
"ENTITY PURCHASE" means a transaction in which KOP or any Affiliate (other
than a Keystone Excluded Affiliate) acquires an interest in a Person that owns
one or more Opportunity Properties in addition to one or more other properties.
"ERISA" shall have the meaning set forth in Section 3.2(C)(xii).
"EXCESS" shall have the meaning set forth in Section 10.7(D)(ii).
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"EXCLUSIVITY PERIOD" means the period commencing on the date hereof and
ending on the earlier of (i) the date on which Capital Contributions equal to
ninety percent (90%) of the respective Member Commitments are required to have
been made, or (ii) if KOP gives written notice thereof to CalEast, upon the
occurrence of the Termination Event specified in Section 11.1(B)(iii).
"EXECUTIVE" means any person rendering services to the Company or its
Subsidiaries, whether as an Officer, advisor, consultant, member of the Board or
otherwise but specifically excluding the CalPERS Observer.
"FAIR MARKET VALUE" means the fair market value of the asset in question,
as determined in the good faith judgment of the Board as the amount which would
be distributable to the Members if the assets of the Company were sold in an
orderly transaction designed to maximize proceeds therefrom, and such proceeds
were then distributed in accordance with Section 5.2, as determined in good
faith by the Board with due regard to the value implied by any transaction
giving rise to the need for a determination of Fair Market Value, in each case
without discount for minority interest.
"FISCAL YEAR" means the fiscal year of the Company and shall be the same as
its Taxable Year, which shall be the period beginning on July 1st of a given
year and ending on June 30th of the next year unless otherwise required by the
Code. Each Fiscal Year shall commence on the day immediately following the last
day of the immediately preceding Fiscal Year.
"FLOW THROUGH ENTITY" shall have the meaning set forth in Section 3.2.
"FORMATION DATE" means the date the Certificate was filed with the
Secretary of State of the State of Delaware.
"FUNDING DEFAULT" shall have the meaning set forth in Section 3.4(E).
"GAAP" shall have the meaning set forth in Section 6.9.
"GFMV" shall have the meaning set forth in Section 10.7(A).
"GROSS REVENUES" means, with respect to a Company Property, the total
revenues received by the Company from such Company Property.
"INDEBTEDNESS" means, without duplication, all indebtedness for borrowed
money (including purchase money obligations), all indebtedness under revolving
credit arrangements, all capitalized lease obligations (as determined in
accordance with GAAP) and all guarantees of any of the foregoing.
"INDEMNIFYING MEMBER" shall have the meaning set forth in Section 12.3.
"INITIAL DRAFTING MEMBER" shall have the meaning set forth in Section
10.7(B).
"INITIAL PORTFOLIO" shall mean, collectively, the Contributed Property and
the Sold Properties.
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"INITIAL PORTFOLIO DATE" shall mean March 23, 2001.
"INVESTED CAPITAL ACCOUNT" means a memorandum account maintained by the
Company with respect to each Member which shall reflect, as of any date, the
excess, if any, of (i) the aggregate Capital Contributions of such Member over
(ii) the aggregate Distributions to such Member pursuant to Section 5.2(B) but
in no event shall the Invested Capital Account be reduced to less than zero.
"INVESTMENT" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests, limited liability company interests and joint venture interests) of
any other Person and (ii) any capital contribution by such Person to any other
Person.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of 1940, 15
U.S.C. ss.ss.80a-1 through 80a-52, as amended from time to time.
"INVESTMENT CRITERIA" means the criteria set forth on Schedule 2.6.
"INVESTMENT REPORT" shall have the meaning set forth in Section 3.1.
"KEYSTONE" means Keystone Property Trust, a Maryland real estate investment
trust.
"KEYSTONE EXCLUDED AFFILIATES" means (i) a shareholder of Keystone or a
limited partner of KOP who is a natural person and who is not also an officer of
Keystone (other than the Chairman as of the Formation Date) or Keystone Realty
Services, Inc., (ii) a shareholder of Keystone or a limited partner of KOP who
is not a natural person and whose officers, or beneficial owners of five percent
(5%) or more of the applicable entity, are not also officers of Keystone (other
than the Chairman as of the Formation Date) or Keystone Realty Services, Inc.,
and (iii) any director of Keystone who is not also an officer of Keystone (other
than the Chairman as of the Formation Date) or Keystone Realty Services, Inc.,
or (iv) Persons that are Affiliates of KOP solely as a result of being an
Affiliate of a Person that is a Keystone Excluded Affiliate pursuant to
subparagraphs (i) through (iii) above and who do not otherwise directly fall
within subparagraphs (i) through (iii) above. A list of Keystone Excluded
Affiliates described in foregoing subparagraphs (i), (ii) and (iii) as of the
Formation Date has been previously delivered by KOP to CalEast which KOP hereby
certifies, to its knowledge, to be true, correct and complete as of the date
hereof.
"KOP" means Keystone Operating Partnership L.P., a Delaware limited
partnership.
"KOP CAP EX OFFER" shall have the meaning set forth in Section 6.8(B).
"KOP COUNTER OFFER" shall have the meaning set forth in Section 6.8(B).
"KOP INITIAL CAPITAL" means the value of the Contributed Property,
increased by KOP's pro rata share (based on its Membership Interest) of all
costs and expenses incurred by the Company in acquiring the Contributed
Property, and reduced by the amount of cash distributed
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by the Company to KOP on the date of the contribution of the Contributed
Property to the Company.
"KOP THRESHOLD" shall have the meaning set forth in Section 10.7(C).
"LEASE AGREEMENT" means that certain lease agreement by and between ▇▇▇▇▇
Park, LLC and the Company pursuant to which the real property described therein
will be leased to the Company, to be executed by the Company only upon Approval
by a Majority of the Board pursuant to Section 3.1(A).
"LEASING GUIDELINES" shall have the meaning set forth in Section 6.9.
"LIQUIDATED COMPANY PROPERTY" means a Company Property that has been sold
or otherwise disposed of by the Company.
"LOSS" shall have the meaning set forth in Section 7.4.
"LOSSES" means items of Company loss and deduction determined according to
Section 4.2.
"MAJORITY" means, with respect to the Board, a majority of the members of
the Board designated by Members who, at the time in question, are not Defaulting
Members (I.E. three (3) members of the Board if there are no Defaulting Members)
and for purposes of Approval over matters described in Sections 6.3(B)(i), (ii)
(beginning one (1) year from the date hereof), and (iii), any one of the members
of the Board designated by CalEast shall have the right to cast an additional
deciding vote in the event of a tie; provided further, however, that such right
shall not be exercised during the period commencing on the date which is (1) one
year from the date hereof and ending on the date which is two (2) years from the
date hereof to force the sale of Company Properties which number in excess of
twenty five percent (25%) of the number of Company Properties owned or leased by
the Company on the date which is one (1) year from the date hereof.
Notwithstanding the above restriction on votes of Defaulting Members, KOP shall
have a right to vote and the members of the Board designated by KOP shall be
included in the calculation of a Majority regardless of whether or not KOP is a
Defaulting Member (and any additional Board Members designated by CalEast
pursuant to Section 6.1(A) hereof shall not be included in the calculation of a
Majority) (A) in those instances where KOP certifies to CalEast and the Board in
writing that the decision at issue would (1) result in Keystone becoming subject
to material taxes imposed by Section 857 of the Code, (2) cause a material
amount of the income of the Company to fail to be characterized as gross income
meeting the requirements of Section 856(c) of the Code, or (3) cause Keystone to
violate the asset test of Section 856(c)(4) of the Code, and (B) in connection
with any vote to disapprove the making of a distribution of Distributable Cash
pursuant to Section 5.1 hereof.
"MANAGEMENT AGREEMENT" shall have the meaning set forth in Section 6.7.
"MATERIAL LEASE" shall mean a lease of a Company Property for which: (i)
the net present value of all rental payments under such lease exceeds
$2,000,000, or (ii) the premises demised thereby exceeds 100,000 square feet in
size.
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"MARKETING PERIOD" shall have the meaning set forth in Section 6.8(A).
"MEMBER" means each Person identified on Schedule 3.2 hereto as of the date
hereof who has executed this Agreement or a counterpart hereof and each Person
who is hereafter admitted as a Member in accordance with the terms of this
Agreement and the Act, in each case so long as such Person is shown on the
Company's books and records. The Members shall constitute the "members" (as that
term is defined in the Act) of the Company. Except as expressly provided herein,
the Members shall constitute a single class or group of members of the Company
for all purposes of the Act and this Agreement.
"MEMBER COMMITMENT" means, with respect to each Member, the amount that is
set forth opposite such Member's name on Schedule 3.2 attached hereto which
represents the amount of the aggregate Capital Contribution to be made by such
Member to the Company as contemplated by Section 3.4 and such Member's
Subscription Agreement.
"MEMBERSHIP INTEREST" means a Member's interest in the Company, and the
right, if any, to participate in the management of the business and affairs of
the Company, including the right, if any, to vote on, consent to, or otherwise
participate in, any decision or action of or by the Members and the right to
receive information concerning the business and affairs of the Company, in each
case to the extent expressly provided in this Agreement or otherwise required by
the Act.
"NET CAPITAL PROCEEDS" means, with respect to any Company Property, the
gross proceeds, if any, realized by the Company from the sale, financing,
refinancing or other disposition of such Company Property or any interest
therein, net of the actual costs and expenses incurred by the Company in
connection with the transaction giving rise to such proceeds, including
repayment of any indebtedness secured by such Company Property and any
reasonable reserves established by the Board in connection therewith.
"NET OPERATING CASH FLOW" means, for any period (i) all Gross Revenues,
interest, rents and other payments received by the Company during such period
(excluding Capital Contributions and Net Capital Proceeds) and reduction in
reserves less (ii) all debt service payments and cash expenses paid by the
Company during such period, including any fees paid under the Management
Agreement, and all additions to reserves contemplated in one or more approved
Annual Operating Budgets. Proceeds from tenant security deposits and casualty
insurance shall not be included in Net Operating Cash Flow.
"NET VALUE" shall have the meaning set forth in Section 10.7(A).
"NEW JERSEY INVESTMENT OPPORTUNITY" means any investment opportunity
identified by KOP or Keystone involving an acquisition of existing industrial
buildings in the following New Jersey counties: Bergen, Hudson, Union, Somerset,
Hunterdon, Mercer, Monmouth, Middlesex, Passaic, ▇▇▇▇▇▇, Sussex, Essex, or
▇▇▇▇▇▇ whether or not consistent with the Investment Criteria; provided,
however, that a New Jersey Investment Opportunity shall not include (i) "ground
up" development (which shall include properties on which the principal existing
buildings or buildings are destroyed and a new building or buildings are
constructed), (ii) buy-outs of existing joint venture partners, (iii) the
acquisition of less than a 50% interest in a Person that owns
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Opportunity Properties or (iv) the acquisition of an Opportunity Property
or Opportunity Properties where more than thirty three percent (33%) of the
equity (non-debt financed) portion of the consideration for such acquisition
consists of securities of Keystone, KOP or any of their respective Affiliates.
"NON-CONTRIBUTING MEMBER" shall have the meaning set forth in Section
3.4(G).
"NON-DEFAULTING MEMBER" shall have the meaning given in Section 3.4(E).
"OFFER PERIOD" shall have the meaning set forth in Section 6.8(A).
"OFFEREE MEMBER" shall have the meaning set forth in Section 10.2.
"OFFEREE VALUE" shall have the meaning set forth in Section 10.2.
"OFFEROR MEMBER" shall have the meaning set forth in Section 10.2.
"OFFEROR VALUE" shall have the meaning set forth in Section 10.2.
"OFFICER" means each Person designated as an officer of the Company
pursuant to ARTICLE VI for so long as such Person remains an officer pursuant to
the provisions of ARTICLE VI.
"OPPORTUNITY PROPERTY" is a property that, if purchased directly, would
constitute a New Jersey Investment Opportunity.
"PERSON" means a natural person, partnership (whether general or limited),
limited liability company, trust, estate, association, corporation, custodian,
nominee or any other individual or entity in its own or any representative
capacity.
"PLAN ASSET REGULATIONS" shall have the meaning set forth in Section
3.2(C).
"PORTFOLIO PURCHASE" means a transaction in which KOP or any Affiliate
(other than a Keystone Excluded Affiliate) acquires one or more Opportunity
Properties as part of an acquisition of one or more other properties.
"PREFERRED RATE" means a cumulative, compounded (on a quarterly basis) rate
of interest equal to eleven and sixth tenths percent (11.6%) per annum.
"PREFERRED RETURN ACCOUNT" means a memorandum account established and
maintained by the Company for each Member which shall be increased on the last
day of each calendar quarter by an amount equal to a return in the nature of
interest accruing during such calendar quarter on such Member's Weighted Average
Invested Capital for such calendar quarter at the Preferred Rate, and reduced by
an amount equal to the aggregate amount of distributions received by such Member
during such calendar quarter pursuant to Section 5.2(A) but in no event shall
the Preferred Return Account be reduced to less than zero.
"PRICE LIST" shall have the meaning set forth in Section 10.7(A).
"PROMOTE" shall have the meaning set forth in Section 5.2(C).
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"PROPORTIONATE VALUE" shall have the meaning set forth in Section
10.7(D)(i).
"PROCEEDING" shall have the meaning set forth in Section 7.4.
"PROFITS" means items of Company income and gain determined according to
Section 4.2.
"PROPOSED INVESTMENT" shall have the meaning set forth in Section 3.1.
"QUALIFIED APPRAISER" shall have the meaning set forth in Section 10.7(A).
"QUALIFYING BANK" means a bank or trust company that is (i) organized as a
banking association or corporation under the laws of the United States or any
State thereof, or in the District of Columbia, (ii) subject to supervision or
examination by federal, state or District of Columbia banking authorities, (iii)
with capital and surplus of not less than $250,000,000, and (iv) the debt
securities of which are rated at least "A" by ▇▇▇▇▇'▇ Investors Services, Inc.
or "A2" by Standard & Poor's Ratings Group.
"QUALIFYING PURCHASE OFFER" shall have the meaning set forth in Section
6.8(A).
"REJECTION THRESHOLD" shall have the meaning set forth in Section 11.1(B).
"SALE NOTICE" shall have the meaning set forth in Section 6.8.
"SALE PROPERTY" shall have the meaning set forth in Section 6.8(A).
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SELECTION NOTICE" shall have the meaning set forth in Section 10.7(B).
"SELLING MEMBER" shall have the meaning set forth in Section 10.6.
"SHARING PERCENTAGE" means, with respect to each Member, as of any date,
the fraction, expressed as a percentage, the numerator of which is the aggregate
Capital Contributions made by such Member and the denominator of which is the
aggregate Capital Contributions made by all of the Members, subject to
adjustment as provided in Section 3.4(E).
"SHORTFALL AMOUNT" shall have the meaning set for in Section 5.2(E).
"SHORT TERM INVESTMENTS" means U.S. Dollar denominated, readily available
instruments consisting of one or more of:
(a) interest bearing transaction accounts in a Qualifying Bank
(including, without limitation, money market accounts);
(b) time deposits, or certificates of deposit, in a Qualifying Bank, in
each case having a maturity of one year or less;
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(c) securities that, at the date of investment, are direct obligations
of, or obligations fully guaranteed or insured by, the United States or any
agency or instrumentality of the United States having a maturity of not more
than one year from the date of purchase;
(d) such other short-term, liquid investments having a maturity of three
months or less rated at ▇▇▇▇▇ "▇▇" by Moody's Investor's Services, Inc. or "P1"
by Standard & Poor's Ratings Group; and
(e) money market mutual funds with assets of at least $500,000,000,
substantially all of which assets consist of obligations of the type included in
clauses (i) through (iv) above.
"SOLD PROPERTIES" means the six (6) properties designated on Schedule
3.4(B) as Sold Properties, which shall be sold to the Company by KOP or its
Affiliates pursuant to the Contract.
"SUBSCRIPTION AGREEMENT" shall have the meaning set forth in Section
3.4(A).
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the membership, partnership or other similar ownership interest thereof or
the power to elect a majority of the members or the governing body thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director, general partner or managing member of
such limited liability company, partnership, association or other business
entity.
"TAX MATTERS PARTNER" shall have the meaning set forth in Section 8.2.
"TAXABLE YEAR" means the Company's taxable year commencing on July 1st of
each calendar and ending on June 30th of each calendar year (or part thereof, in
the case of the Company's last taxable year), or such other year as is (i)
required by Section 706 of the Code or (ii) determined by the Board.
"TERMINATION DATE" shall mean the earlier of (i) the date which is seven
(7) years from the Formation Date, or (ii) the later of (a) June 30, 2006 or (b)
the date that the existence of CalEast terminates.
"TERMINATION EVENT" shall have the meaning set forth in Section 11.1(B).
"TRANSFER" shall mean any sale, assignment, pledge, hypothecation or other
disposition of a Membership Interest, Economic Interest or Company Property.
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"TRANSFER NOTICE" shall have the meaning set forth in Section 9.3.
"TRANSFERRED INTEREST" shall have the meaning set forth in Section 9.3.
"TRANSFERRING MEMBER" shall have the meaning set forth in Section 9.3.
"TREASURY REGULATIONS" means the Federal income tax regulations, including
any temporary or proposed regulations, promulgated under the Code, in effect as
of the date hereof. The Board may, in its sole discretion, treat any amendment
to such Treasury Regulations as having been in effect as of the date hereof,
provided that such amendment does not result in a material change in the rights
or obligations of any Member under this Agreement.
"VALUATION PERIOD" shall have the meaning set forth in Section 10.7(A).
"WEIGHTED AVERAGE INVESTED CAPITAL" means, with respect to any Member for
any calendar quarter, the quotient obtained by dividing (i) the sum of (a) the
Capital Contributions of such Member as of the first day of such quarter
multiplied by the number of days in such quarter, plus (b) the sum of the
products obtained by multiplying (1) the amount of each Capital Contribution
made by such Member during such quarter by (2) the number of days in the period
commencing on the date on which such Capital Contribution was made and ending on
the last day of such quarter (inclusive) minus the sum of the products obtained
by multiplying (x) the amount of each Distribution made to such Member pursuant
to Section 5.2(B) during such quarter by (y) the number of days in the period
commencing on the date on which such distribution was made and ending on the
last day of such quarter (inclusive) by (ii) the number of days in such calendar
quarter.
SECTION 1.2 CONSTRUCTION. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine and neuter and the
singular number includes the plural number and vice versa. All references to
Articles and Sections refer to articles and sections of this Agreement, and all
references to Schedules are to Schedules attached hereto, each of which is made
a part hereof for all purposes.
SECTION 1.3 INCLUDING. Reference in this Agreement to "including,"
"includes" and "include" shall be deemed to be followed by "without limitation."
ARTICLE II.
ORGANIZATION
SECTION 2.1 FORMATION. The Company has been organized as a Delaware limited
liability company on the Formation Date by the execution and filing of the
Certificate under and pursuant to the Act and shall be continued in accordance
with the terms of this Agreement. The rights, powers, duties, obligations and
liabilities of the Members shall be determined pursuant to the Act and this
Agreement. To the extent that the rights, powers, duties, obligations and
liabilities of the Members are different by any provision of this Agreement than
they would be in the absence of such provision, this Agreement shall, to the
extent permitted by the Act, control.
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SECTION 2.2 COMPANY NAME. The name of the Company shall be "Keystone New
Jersey Associates, LLC" and all Company business shall be conducted in that name
or such other names that comply with applicable law as the Board may select from
time to time. Notification of any change in the name of the Company shall be
given to all Members. The Company's business may be conducted under its name
and/or any other name or names deemed advisable by the Board.
SECTION 2.3 THE CERTIFICATE, ETC. The Certificate was filed with the
Secretary of State of the State of Delaware on the Formation Date. The Members
hereby agree to execute, file and record all such other certificates and
documents, including amendments to the Certificate and to do such other acts as
may be appropriate to comply with all requirements for the formation,
continuation and operation of a limited liability company, the ownership of
property, and the conduct of business under the laws of the State of Delaware
and any other jurisdiction in which the Company may own property or conduct
business.
SECTION 2.4 TERM OF THE COMPANY. The term of the Company commenced on the
Formation Date and shall continue in existence until termination and dissolution
thereof as determined under Section 11.1 of this Agreement.
SECTION 2.5 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE; OTHER
OFFICES. The registered office of the Company required by the Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not
be a place of business of the Company) as the Board may designate from time to
time in the manner provided by law. The registered agent of the Company in the
State of Delaware shall be the initial registered agent named in the Certificate
or such other Person or Persons as the Board may designate from time to time in
the manner provided by law. The principal office of the Company shall be at such
place as the Board may designate from time to time, which need not be in the
State of Delaware, and the Company shall maintain records there. The Company may
have such other offices as the Board may designate from time to time.
SECTION 2.6 PURPOSES. The nature of the business or purposes to be
conducted or promoted by the Company is to acquire, develop, own, operate, lease
and sell industrial properties, either directly or through one or more
Subsidiaries or Affiliates. The Company may engage in any and all activities
necessary, desirable or incidental to the accomplishment of the foregoing.
Notwithstanding anything herein to the contrary, nothing set forth herein shall
be construed as authorizing the Company to possess any purpose or power, or to
do any act or thing, forbidden by law to a limited liability company organized
under the laws of the State of Delaware.
SECTION 2.7 POWERS OF THE COMPANY. Subject to the provisions of this
Agreement, the Company shall have the power and authority to take any and all
actions necessary, appropriate, proper, advisable, convenient or incidental to
or for the furtherance of the purposes set forth in Section 2.6, including,
without limitation, the power either directly or through one or more
Subsidiaries or Affiliates:
15
(i) to conduct its business, carry on its operations and have and
exercise the powers granted to a limited liability company by the Act in
any ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇.
(ii) to acquire by purchase, lease, contribution of property or
otherwise, develop, rehabilitate, own, hold, operate, maintain, finance,
refinance, improve, lease, sell, convey, mortgage, transfer, demolish or
dispose of any real or personal property that may be necessary, convenient
or incidental to the accomplishment of the purposes of the Company;
(iii) to enter into, perform and carry out contracts of any kind,
including contracts with any Member or any Affiliate thereof, or any agent
of the Company necessary to, in connection with, convenient to or
incidental to the accomplishment of the purposes of the Company including
agreements for the management of the affairs of the Company;
(iv) to purchase, take, receive, subscribe for or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise
dispose of, and otherwise use and deal in and with, shares or other
interests in or obligations of domestic corporations, associations, general
or limited partnerships (including the power to be admitted as a partner
thereof and to exercise the rights and perform the duties created thereby),
trusts, limited liability companies (including the power to be admitted as
a member or appointed as a manager thereof and to exercise the rights and
to perform the duties created thereby) or individuals or direct or indirect
obligations of the United States any state, governmental district or
municipality or of any instrumentality of any of them;
(v) to lend money for any proper purpose, to invest and reinvest its
funds and to take and hold real and personal property for the payment of
funds so loaned or invested;
(vi) to ▇▇▇ and be sued, complain and defend, and participate in
administrative or other proceedings, including binding arbitration
proceedings, in its name;
(vii) to appoint agents of the Company and define their duties and fix
their compensation;
(viii) to indemnify any Person in accordance with the Act and to
obtain any and all types of insurance;
(ix) to cease its activities and cancel its Certificate;
(x) to negotiate, enter into, renegotiate, extend, renew, terminate,
modify, amend, waive, execute, acknowledge or take any other action with
respect to any lease, contract or security agreement in respect of any
assets of the Company;
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(xi) to borrow money and issue evidences of indebtedness and guaranty
indebtedness and to secure the same by a mortgage, pledge or other lien on
the assets of the Company and to confess judgment against the Company in
connection therewith;
(xii) to pay, collect, compromise, litigate, arbitrate or otherwise
adjust or settle any and all other claims or demands of or against the
Company or to hold such proceeds against the payment of contingent
liabilities; and
(xiii) to make, execute, acknowledge and file any and all documents or
instruments necessary, convenient or incidental to the accomplishment of
the purpose of the Company.
SECTION 2.8 BOARD AUTHORITY. Subject to the provisions of this Agreement,
(i) the Company may, upon the direction of the Board, enter into and perform any
and all documents, agreements and instruments contemplated thereby, all without
any further act, vote or approval of any Member, and (ii) the Board may
authorize any Person (including any Member or Officer) to enter into and perform
any and all documents, agreements and instruments on behalf of the Company. Each
person so authorized by the Board, whether pursuant to this Agreement or
subsequent action of the Board, shall be deemed a "manager" for purposes of the
Act.
SECTION 2.9 FOREIGN QUALIFICATION. Prior to the Company's conducting
business in any jurisdiction other than Delaware, the Officers shall cause the
Company to comply with all requirements necessary to qualify the Company as a
foreign limited liability company in that jurisdiction. At the request of the
Board or any Officer, each Member shall execute, acknowledge, swear to and
deliver any or all certificates and other instruments conforming with this
Agreement that are necessary or appropriate to qualify, continue and terminate
the Company as a foreign limited liability company in all such jurisdictions in
which the Company may conduct business. Unless a Majority of the Board
determines otherwise, CSC shall be the Company's registered agent in Delaware
and other applicable states.
SECTION 2.10 NO STATE-LAW PARTNERSHIP. The Members intend that the Company
shall not be a partnership (including a general or limited partnership) or, in
any jurisdiction in which a joint venture may be considered a partnership, a
joint venture, and that no Member shall be a partner or joint venturer of any
other Member by virtue of this Agreement, for any purposes other than federal
and, if applicable, state tax purposes, and neither this Agreement nor any other
document entered into the Company or any Member shall be construed to suggest
otherwise. The Members intend that the Company shall be treated as a partnership
for federal and, if applicable, state income tax purposes, and each Member and
the Company shall file all tax returns and shall otherwise take all tax and
financial reporting positions in a manner consistent with such treatment.
ARTICLE III.
COMPANY INVESTMENTS; MEMBERSHIP; CAPITAL CONTRIBUTIONS
SECTION 3.1 COMPANY INVESTMENTS.
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(A) CONTRIBUTED PROPERTY AND SOLD PROPERTIES. On or prior to the Initial
Portfolio Date, KOP shall submit to the Board for its Approval the Company's
acquisition and receipt of the contribution of the Initial Portfolio, together
with the Contract and the Lease Agreement and such supporting material as may be
reasonably requested by any member of the Board. If the Board has not Approved
the acquisition and receipt of the contribution of the Initial Portfolio by the
Company including, without limitation (i) the form of the Contract and Lease
Agreement and (ii) the terms and form of the documents evidencing and securing
the debt secured by the Initial Portfolio on or prior to the Initial Portfolio
Date, then the Company shall be immediately dissolved in accordance with Section
11.1 hereof. Each Member acknowledges and agrees that the other Member shall
have no obligation whatsoever to cause its designees to the Board to approve the
acquisition and receipt of the Initial Portfolio unless such Member has
approved, in its sole discretion, all such items.
(B) During the Commitment Period, KOP shall endeavor to identify and cause
the Company to acquire properties generally conforming with the Investment
Criteria identified from time to time by KOP for possible acquisition by the
Company ("PROPOSED INVESTMENTS"). With respect to each Proposed Investment, the
Company shall deliver to the Board a report which shall contain the information
set forth in Schedule 3.1(a) attached hereto (an "INVESTMENT REPORT"). The Board
shall have ten (10) Business Days from the date of the delivery of the
Investment Report within which to approve or disapprove the commencement of due
diligence for the possible acquisition of the Proposed Investment by the
Company. In the event that the Board does not take any action within such ten
(10) Business Day period, the Board shall be deemed to have disapproved the
Proposed Investment. Upon the Approval of the Board in accordance with this
Section 3.1(B), the Company shall perform or cause to be performed the due
diligence procedures set forth on Schedule 3.1(b) (the "DUE DILIGENCE
PROCEDURES"). Upon completion of the Due Diligence Procedures, the Company shall
report the results of the due diligence review to the Board for its Approval.
The Board shall thereafter have two (2) Business Days to review the results of
the due diligence review, and, if the information regarding such Proposed
Investment obtained through the Due Diligence Procedures is acceptable to the
Board, the Board shall authorize and direct the Officers to complete the
acquisition of such Proposed Investment. If the Board shall fail to Approve a
Proposed Investment within two (2) Business Days after receiving the results of
the due diligence review, then such Proposed Investment shall be deemed
disapproved. In the event the Board disapproves the Proposed Investment, then
the Member or its Affiliates whose Board members voted to approve such Proposed
Investment shall be permitted to acquire such Proposed Investment on terms not
materially more favorable than those offered to the Company.
SECTION 3.2 MEMBERS.
(A) NAMES, ETC. The names, residence, business or mailing addresses, Member
Commitments and Capital Contributions of each Member are set forth on Schedule
3.2. Any reference in this Agreement to Schedule 3.2 shall be deemed to be a
reference to Schedule 3.2 as amended and in effect from time to time in
accordance with the terms of this Agreement. Each Person listed on Schedule 3.2
shall, upon his, her or its execution of this Agreement or counterpart thereto,
be admitted to the Company as a Member of the Company.
18
(B) LOANS BY MEMBERS. No Member, as such, shall be required to lend any
funds to the Company or to make any contribution of capital to the Company,
except as otherwise required by applicable law, this Agreement, such Member's
Subscription Agreement, or any other written agreement between such Member and
the Company explicitly requiring the making of capital contributions. Any Member
may, with the approval of the Board, make loans to the Company, and any loan by
a Member to the Company shall not be considered to be a Capital Contribution.
Such loans shall be on such terms as shall be specified and agreed to by the
Board.
(C) REPRESENTATIONS AND WARRANTIES OF MEMBERS. Each Member hereby
represents and warrants to the Company and acknowledges that:
(i) such Member has knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of an investment
in the Company and making an informed investment decision with respect
thereto;
(ii) such Member has reviewed and evaluated all information necessary
to assess the merits and risks of his, her or its investment in the Company
and has had answered to its satisfaction any and all questions regarding
such information;
(iii) such Member is able to bear the economic and financial risk of
an investment in the Company for an indefinite period of time;
(iv) such Member is acquiring Membership Interests in the Company for
investment only and not with a view to, or for resale in connection with,
any distribution to the public or public offering thereof;
(v) the Membership Interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of
unless they are subsequently registered and/or qualified under applicable
securities laws and the provisions of this Agreement have been complied
with;
(vi) the execution, delivery and performance of this Agreement have
been duly authorized by such Member and do not require such Member to
obtain any consent or approval that has not been obtained and do not
contravene or result in a default under any provision of any law or
regulation applicable to such Member or other governing documents or any
agreement or instrument to which such Member is a party or by which such
Member is bound, and the Person executing this Agreement on behalf of such
Member has been duly authorized to do so;
(vii) the determination of such Member to invest in the Company has
been made by such Member independent of any other Member and independent of
any statements or opinions as to the advisability of such purchase or as to
the properties, business, prospects or condition (financial or otherwise)
of the Company and its subsidiaries which may have been made or given by
any other Member or by any Affiliate or agent of any other Member;
19
(viii) this Agreement is valid, binding and enforceable against such
Member in accordance with its terms;
(ix) if a Member is a partnership, limited liability company or other
entity classified as a partnership for federal income tax purposes, or a
grantor trust (within the meaning of Sections 671-679 of the Code) or an S
corporation (within the meaning of Section 1361 of the Code) (each, a "FLOW
THROUGH ENTITY"), that either: (a) no Person will own, directly or
indirectly through one or more flow-through entities, an interest in such
Member where more than seventy percent (70%) of the value of the Person's
interest in such Member is attributable to such Member's investment in the
Company; or (b) if one or more Persons will own, directly or indirectly
through one or more Flow-Through Entities, an interest in such Member where
more than seventy percent (70%) of the value of the Person's interest in
such Member is attributable to the Member's investment in the Company,
neither the Member nor any such Person has or will have any intent or
purpose of having such Person invest in the Company indirectly through
Member in order to enable the Company to satisfy the 100-Member limitation
in Treas. Reg. ss.1.7704-1(h) (the private placement safe harbor from
publicly traded status);
(x) unless such Member has notified the Board to the contrary, that
such Member: (a) is a United States Person within the meaning of Section
7701 of the Code (i.e., is not any of the following (as defined in the
Code): a nonresident alien individual, foreign partnership, foreign
corporation, foreign estate, foreign trust, other foreign entity or
organization, or grantor trust having a foreign person as an owner): (b)
shall notify the Company within sixty (60) days of the date such Member
ceases to be a United States Person; and (c) may be asked to recertify its
non-foreign status at periodic intervals (and that this information may be
disclosed to the Internal Revenue Service);
(xi) if such Member will beneficially own ten percent (10%) or more of
the Membership Interests in the Company, the Member is not an "investment
company" as defined in the Investment Company Act nor is the Member itself
relying on Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act
as an exemption from classification as an "investment company;" and
(xii) such Member is not holding and, for the term of the Company,
will not hold "plan assets," as that term is defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules
and regulations promulgated thereunder, including, without limitation, the
Department of Labor Regulations Section 2510.3-101 (the "PLAN ASSET
REGULATIONS"), and, consequently, the administration and management of the
Company and the investment of the Company's assets are not, and will not
be, subject to the fiduciary duty requirements of ERISA.
SECTION 3.3 NO LIABILITY OF MEMBERS.
(A) NO LIABILITY. Except as otherwise required by applicable law, no
Member shall have any personal liability whatsoever in such Member's capacity as
a Member, whether to the Company, to any of the other Members, to the creditors
of the Company or to any other third party, for the debts, liabilities,
commitments or any other obligations of the Company or for any
20
losses of the Company. Each Member shall be liable only to make such
Member's Capital Contributions to the Company pursuant to its Member Commitment
and Subscription Agreement and the other payments provided expressly herein.
(B) DISTRIBUTIONS. In accordance with the Act and the laws of the State of
Delaware, a member of a limited liability company may, under certain
circumstances, be required to return amounts previously distributed to such
member. It is the intent of the Members that no distribution to any Member
pursuant to ARTICLE V hereof shall be deemed a return of money or other property
paid or distributed in violation of the Act. The payment of any such money or
distribution of any such property to a Member shall be deemed to be a compromise
within the meaning of the Act, and the Member receiving any such money or
property shall not be required to return to any Person any such money or
property. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Member is obligated to
make any such payment, such obligation shall be the obligation of such Member
and not of any other Member.
SECTION 3.4 CAPITAL CONTRIBUTIONS.
(A) Pursuant to an agreement dated the same date herewith pursuant to which
KOP agreed to acquire its Membership Interest in the Company (a "SUBSCRIPTION
AGREEMENT") and subject to Section 3.1(A), simultaneously with or prior to the
time of CalEast's Initial Capital Contribution to the Company, KOP shall
contribute to the Company all of its (or its Affiliates') right, title and
interest in and to the Contributed Property and shall sell to the Company all of
its (or its Affiliates') right, title, and interest in and to the Sold
Properties, agreed values of each are as set forth on Schedule 3.4(A). On the
date of the contribution by KOP of the Contributed Property, the Company shall
distribute to KOP the amount of cash set forth in the Contract. KOP represents
that the cash to be distributed pursuant to the preceding sentence qualifies as
a reimbursement of KOP's preformation expenses, within the meaning of Treasury
Regulations Section 1.707-4(d) and, as such, the tax consequences of the
distribution shall be reported in a manner consistent therewith. The initial
Capital Contribution of KOP shall equal the KOP Initial Capital and shall equal
$8,304,000. Pursuant to its Subscription Agreement, KOP further agreed to make
additional Capital Contributions in an aggregate amount, together with its
Initial Capital, not to exceed its Member Commitment.
(B) CalEast shall, and hereby covenants and agrees to, fund the CalEast
Initial Capital on the date of KOP's transfer of the Contributed Property and
the Company's purchase of the Sold Properties subject to the satisfaction of the
terms and conditions set forth in the Subscription Agreement of even date
herewith between CalEast and the Company. Pursuant to its Subscription
Agreement, CalEast further agreed to make additional Capital Contributions in an
aggregate amount, together with its Initial Capital, not to exceed its Member
Commitment.
(C) The Company may through its Officers call Capital Contributions by the
Members from time-to-time (each a "CAPITAL CALL") in accordance with a Draw
Report (as defined below) in an amount, which together with the Initial Capital
Contributions and all prior additional Capital Contributions does not exceed the
Members' Commitment. With respect to each such Capital Call, the Members shall
make Capital Contributions to the Company equal to the aggregate amount of such
Capital Call pro rata based upon their relative Member
21
Commitments. With respect to each Capital Call, the Officers shall deliver
to the Members along with written notice of such Capital Call a detailed
description of the use of the proceeds thereof and the particular items being
funded thereby in substantially the form of EXHIBIT 1 (a "DRAW REPORT"), which
the Officers shall deliver to the Members on or before (i) the fifth (5th)
Business Day prior to the date upon which the funding of any Capital Call is due
or (ii) with respect to any Capital Call required to fund Emergency
Requirements, as far in advance of the date upon which the funding of such
Capital Call is due as the circumstances reasonably permit. The Officers shall
provide a detailed written report to the Board regarding any Emergency
Requirements as promptly as practicable following the occurrence of the event or
events giving rise thereto specifying the circumstances of such emergency
situation and the recommendations of the Officers with respect thereto. The
Officers (and, with respect to items (ii) and (iii) below, the Members) shall be
authorized to make Capital Calls and issue Draw Reports only with respect to:
(i) the acquisition of Proposed Investments previously Approved by the Board;
(ii) capital expenditures with respect to one or more Company Properties to the
extent provided for in the current Annual Operating Budget for such Company
Property so long as, in the case of a Member making the Capital Call, in such
Member's reasonable judgment such funds are not available from the sources and
at substantially the same rates and upon substantially the same timing as
contemplated by the Annual Operating Budget; (iii) Emergency Requirements; and
(iv) such other matters as may be Approved by the Board from time to time.
(D) All Capital Calls that are consistent with the foregoing provisions of
Sections 3.4(A), (B) and (C) shall be paid in U.S. Dollars by the date specified
in the Capital Call made in accordance with Subsection (C) above. Any and all
amounts that are called by the Board and that are not immediately applied for
the purpose called shall be (i) returned to the funding Members or (ii) invested
by the Board in the name of the Company in Short Term Investments until such
time as they are applied for the purpose called. During the Commitment Period,
any amounts returned to the funding Members pursuant to this Section 3.4(D)
together with all distributions to the Members pursuant to Sections 5.2(B) and
(C): (i) shall reduce each such Member's Capital Account by the amount returned
to each such Member, (ii) shall restore the Member Commitment of each such
Member by the amount returned to each such Member, and (iii) may be recalled by
the Board in accordance with this Agreement.
(E) If a Member fails to make, in a timely fashion, a Capital Contribution
to the Company equal to its pro rata portion of the aggregate amount of the
Capital Call therefore based upon its relative Member Commitment when called by
the Officers or the Board in accordance with this Section 3.4 (a "FUNDING
DEFAULT"), the Officers shall deliver to such Member (a "DEFAULTING MEMBER") a
written notice of such Funding Default. If the Member fails to cure such Funding
Default within three (3) Business Days after such written notice, the Company
shall have all rights and remedies as are available at law or in equity to
compel the Defaulting Member to make the required Capital Contribution. In
addition, the Officers shall provide written notice of any Funding Default (the
"DEFAULT ELECTION NOTICE") to each Member who has timely funded its Member
Commitment (a "NON-DEFAULTING MEMBER") as quickly as reasonably practical
pursuant to which such Non-Defaulting Members may elect to exercise any of the
rights and remedies in respect of such Funding Default specified in clauses (i)
and (ii) below:
22
(i) Each Non-Defaulting Member may elect in writing to make a loan (a
"DEFAULT LOAN") to the Defaulting Member to fund all or a portion of the
amount of the Defaulting Member's required contribution of capital (the
principal amount of any such unsatisfied obligation being the "DEFAULT
AMOUNT"), and such Default Loan, if any, shall be paid directly to the
Company by the Non-Defaulting Member and treated by the Company as a
Capital Contribution to the Company by the Defaulting Member. A Default
Loan shall earn interest at the Default Rate, and shall be secured by the
Defaulting Member's interest in the Company and repaid out of the first
distributions made to such Defaulting Member pursuant to this Agreement. No
Non-Defaulting Member shall be obligated to make any Default Loan. If, at
the end of the fifteen (15) calendar day period following delivery of the
Default Election Notice (the "DEFAULT ELECTION PERIOD"), the aggregate
amount of the Default Loan(s) committed by the Non-Defaulting Members is
equal to or greater than one hundred percent (100%) of the Default Amount,
then each such Non-Defaulting Member shall make a Default Loan in an amount
determined in accordance with the amount committed to by such
Non-Defaulting Members. If, at the end of the Default Election Period, the
aggregate amount of the Default Loan(s) committed by the Non-Defaulting
Members is less than one hundred percent (100%) of the Default Amount, then
each such Non-Defaulting Members may make such Default Loan(s) in the
amount committed to by such Non-Defaulting Members, or in such greater
amount as such Non-Defaulting Members may agree to advance up to the
Default Amount. A Default Loan: (A) shall reduce the unfunded portion of
the Member Commitment of a Defaulting Member and shall be deemed to have
been contributed thereby to the Company on behalf of the Defaulting Member;
(B) shall not reduce the unfunded portion of the Member Commitment of the
participating Non-Defaulting Members; and (C) shall not release the
Defaulting Member from its obligations to fund the remaining unfunded
portion of its Member Commitment. The Defaulting Member may cause any such
Default Loan to be repaid at any time by payment to such Non-Defaulting
Members of the outstanding principal balance of and all accrued but unpaid
interest on such Default Loan at the Default Rate in accordance with the
amount of the Default Amount loaned by each Non-Defaulting Member. In the
event that any Default Loan (or portion thereof) remains unpaid following
final winding-up and liquidation of the Company, then the Non-Defaulting
Member making such Default Loan shall have all of its rights and remedies
against the Defaulting Member with respect to the collection of any unpaid
balance, including accrued but unpaid interest thereon, from the Defaulting
Member. The Defaulting Member shall execute and deliver all instruments and
documents reasonably requested by the Non-Defaulting Member(s) to evidence
and secure such Default Loan. Upon repayment of all such Default Loan(s),
the Defaulting Member shall no longer be a Defaulting Member for purposes
of this Agreement.
(ii) In the event that any Default Loan (or portion thereof) remains
unpaid for a period of three (3) months after the date of the making of the
Default Loan, each Non-Defaulting Member making such Default Loan may elect
in writing to convert the outstanding amount of such Default Loan to an
additional Capital Contribution (a "DEFAULT CONTRIBUTION"). Upon such
conversion to a Default Contribution by any of the Non-Defaulting Members,
the Board shall recalculate the Members' Sharing Percentages, effective as
of the date of such conversion to a Default Contribution, so that each
Member's Sharing Percentage equals the percentage equivalent of the
quotient
23
determined by dividing (x) the sum of (i) 200% of the amount of all Default
Contributions made by such Member plus (ii) 100% of all other Capital
Contributions made by such Member minus (iii) 100% of all Default
Contributions made by the other Member in respect of Funding Defaults by
such Member by (y) the sum of all Capital Contributions made by all
Members. In addition, in the event the Defaulting Member is KOP, the
Promote shall be reduced by a percentage which equals the percentage
reduction in the Sharing Percentage resulting from the formula set forth
immediately above. An example of the operation of this provision is
attached hereto as Schedule 3.4(E).
(F) If a Member is required to and makes a payment under the Credit
Facility as a result of its pledge of its Subscription Agreement thereunder
(such Member being a "CONTRIBUTING MEMBER"), then such payment shall be deemed
to be a Capital Contribution hereunder pursuant to a Capital Call to the
Contributing Member in the amount equal to the Contributing Member's pro rata
share of the payment made thereby based upon its relative Member Commitment. The
Company shall be deemed to have simultaneously made a Capital Call to the other
Member in an amount equal to such other Member's pro rata share of such payment
based upon its relative Member Commitment. In the event that the other Member
does not make a Capital Contribution based upon such deemed Capital Call within
the time period set forth in Section 3.4(D) above, then (i) the other Member
shall immediately be deemed to be a Defaulting Member, and (ii) the Contributing
Member shall be deemed to have made a Default Contribution in the amount of the
deemed Capital Call to the other Member in accordance with Section 3.4(E)(ii)
without regard to the time periods set forth in Section 3.4(E)(ii).
(G) If a Member is required to but fails to make a payment under the Credit
Facility as a result of its pledge of its Subscription Agreement under the
Credit Facility (a "NON-CONTRIBUTING MEMBER"), such failure shall be a Funding
Default by the Non-Contributing Member in the amount of the payment required to
have been funded, and if the Non-Contributing Member does not fund such amount
within the time period set forth in Section 3.4(D) above, then the other Member
shall have the right to elect to make a Default Loan in accordance with Section
3.4(E)(i) or to make a Default Contribution in accordance with Section
3.4(E)(ii) without regard to the time periods set forth in said Section 3.4(E).
SECTION 3.5 CERTIFICATION OF MEMBERSHIP INTERESTS. The Company may in its
discretion issue certificates to the Members representing the Membership
Interests held by such Member.
SECTION 3.6 OTHER ACTIVITIES. Subject to the other express provisions of
this Agreement and any other agreements with the Company, including, without
limitation, any services agreements to which a Member or Affiliate of a Member
may be a party, each Member, member of the Board or Officer of the Company, at
any time and from time to time may engage in and own interests in other business
ventures of any type and description, independently or with others (including
business ventures in competition with the Company). In this regard, CalEast
recognizes that KOP and its Affiliates are in the business of acquiring,
developing, owning, leasing, operating and selling real property and interests
therein for profit and engaging in all activities related or incidental thereto.
Neither the Company nor CalEast nor any Affiliate of CalEast shall have any
right by virtue of this Agreement or the Company relationship created
24
hereby in or to any ventures or activities of KOP and its Affiliates or to
the income or proceeds derived therefrom or the pursuit of such other ventures
or opportunities by KOP and its Affiliates, even if competitive with the
business of the Company, and the same are hereby consented to by CalEast.
Similarly, KOP recognizes that LaSalle Investment Management, Inc., CalEast and
their respective Affiliates are in the business of acquiring, developing,
owning, leasing, operating and selling real property and interests therein for
profit and engaging in all activities related or incidental thereto. Neither the
Company nor KOP nor any Affiliate of KOP shall have any right by virtue of this
Agreement or the Company relationship created hereby in or to any ventures or
activities of LaSalle Investment Management, Inc., CalEast or their respective
Affiliates or to the income or proceeds derived therefrom or the pursuit of such
other ventures or opportunities by LaSalle Investment Management, Inc., CalEast
and their respective Affiliates, even if competitive with the business of the
Company, and the same are hereby consented to by KOP. Notwithstanding anything
to the contrary contained herein, neither KOP nor its Affiliates (other than a
Keystone Excluded Affiliate) shall acquire an Opportunity Property (directly or
indirectly, through a joint venture, a Portfolio Purchase, Entity Purchase, or
otherwise) during the Exclusivity Period unless the opportunity to acquire such
Opportunity Property is first presented to the Company and the Company has not
agreed to acquire such Opportunity Property. Where KOP or any Affiliate is
obligated to present a New Jersey Investment Opportunity to the Company that
involves a Portfolio Purchase or an Entity Purchase, the incremental
transactions costs and other incremental costs, expenses and benefits which
result from separating the Opportunity Properties from the other properties
involved in the Portfolio Purchase or Entity Purchase, as the case may be, shall
be allocated to the Company. KOP shall determine such incremental costs, and
shall allocate the applicable purchase price between the Opportunity Properties
and the other properties involved in the Portfolio Purchase or Entity Purchase,
as the case may be, in a good faith, fair and reasonable manner, and such
determination and allocation shall be presented to the Company together with the
Investment Report for the Board's consideration pursuant to Section 3.1(B)
hereof.
SECTION 3.7 CREDIT FACILITY. Each Member shall take all acts and execute
and deliver all documents as are reasonably required of such Member to comply
with the terms of the Credit Facility. Each Member agrees to pledge its
Subscription Agreement to the lender under the Credit Facility if so required on
such terms as are reasonably approved by the Members.
ARTICLE IV.
CAPITAL ACCOUNTS
SECTION 4.1 ESTABLISHMENT AND DETERMINATION OF CAPITAL ACCOUNTS. A capital
account ("CAPITAL ACCOUNT") shall be established for each Member on the books of
the Company. Each Member's Capital Account shall be (a) increased by any Capital
Contributions made by such Member pursuant to the terms of this Agreement
(including, without limitation, the amount of any Default Contributions made by
such Member) and such Member's share of Profits, the amount of any Company
liabilities that are assumed by such Member and any other items of income and
gain allocated to such Member pursuant to ARTICLE V, (b) decreased by such
Member's share of Loss, any distributions to such Member of cash or the Fair
Market Value of any other Company property (net of liabilities assumed by such
Member and liabilities to which such property is subject) distributed to such
Member, the amount of any liabilities of such Member that are assumed by the
Company and any other deduction allocated to such Member
25
pursuant to ARTICLE V, and (c) adjusted as otherwise required by the Code
and the regulations thereunder, including but not limited to, the rules of
Treasury Regulation Section 1.704-1(b)(2)(iv). Any references in this Agreement
to the Capital Account of a Member shall be deemed to refer to such Capital
Account as the same may be increased or decreased from time to time as set forth
above.
SECTION 4.2 COMPUTATION OF AMOUNTS. For purposes of computing the amount of
any item of Company income, gain, loss or deduction to be allocated pursuant to
this ARTICLE IV and to be reflected in the Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including any method of depreciation, cost recovery or amortization used for
this purpose), provided that:
(A) the computation of all items of income, gain, loss and deduction shall
include tax-exempt income and those items described in Treasury Regulation
Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not
includable in gross income or are not deductible for federal income tax
purposes;
(B) if the Book Value of any Company property is adjusted pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such property and the amount of such gain or loss shall be allocated according
to Section 5.3 to the Members immediately prior to the event that causes the
calculation of such gain or loss;
(C) items of income, gain, loss or deduction attributable to the
disposition of Company property having a Book Value that differs from its
adjusted basis for tax purposes shall be computed by reference to the Book Value
of such property;
(D) items of depreciation, amortization and other cost recovery deductions
with respect to Company property having a Book Value that differs from its
adjusted basis for tax purposes shall be computed by reference to the property's
Book Value in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g);
(E) to the extent an adjustment to the adjusted tax basis of any Company
asset pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis); and
(F) to the extent that the Company distributes any asset in kind to the
Members, the Company shall be deemed to have realized Profit or Loss thereon in
the same manner as if the Company had sold such asset for an amount equal to the
Fair Market Value (as determined by all the Members) of such asset or, if
greater and otherwise required by the Code, the amount of debts to which such
asset is subject.
SECTION 4.3 NEGATIVE CAPITAL ACCOUNTS. No Member shall be required to pay
to the Company or any other Member any deficit or negative balance which may
exist from time to time in such Member's Capital Account.
26
SECTION 4.4 COMPANY CAPITAL. No Member shall be paid interest on any
Capital Contribution to the Company or on such Member's Capital Account, and no
Member shall have any right (a) to demand the return of such Member's Capital
Contribution or any other distribution from the Company (whether upon
resignation, withdrawal or otherwise), except upon dissolution of the Company
pursuant to ARTICLE X hereof, or (b) to cause a partition of the Company's
assets; provided, however, that the interest restrictions in this paragraph
shall not apply to a Default Loan the maker of which shall be entitled to
interest at the Default Rate as provided in Section 3.4.
SECTION 4.5 ADJUSTMENTS TO BOOK VALUE. The Company shall adjust the Book
Value of its assets to fair market value in accordance with Treasury Regulation
ss.1.704-1(b)(2)(iv)(f) as of the following times: (i) at the Board's discretion
in connection with the issuance of Membership Interests in the Company; (ii) at
the Board's discretion in connection with the distribution by the Company to a
Member of more than a de minimis amount of Company assets, including money, if
as a result of such distribution, such Member's interest in the Company is
reduced; and (iii) the liquidation of the Company within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(G). Any such increase or decrease in Book
Value of an asset shall be allocated as a Profit or Loss to the Capital Accounts
of the Members under Section 5.5 (determined immediately prior to the acceptance
of additional capital).
SECTION 4.6 COMPLIANCE WITH SECTION 1.704-1(b). The provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Section 1.704-1(b) of the Treasury Regulations, and shall be interpreted
and applied in a manner consistent with such Treasury Regulations. In the event
the Board shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Company or any
Member), are computed in order to comply with such regulation, the Board may
make such modification, provided that it is not likely to have a material effect
on the amount distributable to any Member pursuant to Section 5.2 hereof upon
the dissolution of the Company. The Board also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company capital reflected on the
Company's balance sheet, as computed for book purposes, in accordance with
Treas. Reg. ss.1.704-1(b)(iv)(g), and (ii) make any appropriate modifications in
the event unanticipated events might otherwise cause this Agreement not to
comply with Treas. Reg. ss.1.704-1(b).
SECTION 4.7 TRANSFER OF CAPITAL ACCOUNTS. The original Capital Account
established for each substituted Member shall be in the same amount as the
Capital Account of the Member which such substituted Member succeeds, at the
time such substituted Member is admitted to the Company. The Capital Account of
any Member whose interest in the Company shall be increased or decreased by
means of the transfer to it of all or part of the Interest of another Member
shall be appropriately adjusted to reflect such transfer. Any reference in this
Agreement to a Capital Contribution of or distribution to a Member that has
succeeded any other Member shall include any Capital Contributions or
distributions previously made by or to the former Member on account of the
Interest of such former Member transferred to such Member.
27
ARTICLE V.
DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES
SECTION 5.1 GENERALLY. Subject to the provisions of Section 18-607 of the
Act and to the provisions of this ARTICLE V, the Board shall have sole
discretion regarding the amounts and timing of distributions to Members, in each
case subject to the retention and establishment of or reserves of, or payment to
third parties of, such funds as it deems necessary with respect to the
reasonable business needs of the Company which shall include the payment or the
making of provision for the payment when due of the Company's obligations,
including (i) the payment of any and all fees and expenses or any other
obligations of the Company, and (ii) acquisition of Proposed Investments on
behalf of the Company. Notwithstanding the foregoing, the Board, unless a
Majority of the Board disapproves, shall provide for distributions to Members at
least once per calendar quarter in an amount equal to Distributable Cash on
account of that quarter. The making of distributions hereunder shall be subject
to the terms and conditions of any indebtedness for borrowed money incurred by
the Company or its Subsidiaries.
SECTION 5.2 DISTRIBUTABLE CASH DISTRIBUTIONS. Subject to Section 5.1,
distributions of Distributable Cash pursuant to this Section 5.2 shall be made,
to the extent of Distributable Cash, on a quarterly basis at the end of each
calendar quarter, to each Member in the following order and priority:
(A) First, to the Members, in accordance with their respective Sharing
Percentages, until each Member's Preferred Return Account has been reduced to
zero;
(B) Second, to the Members, in accordance with their respective Sharing
Percentages, until each Member's Invested Capital Account has been reduced to
zero.
(C) Third, subject to Section 5.2(D) below (x) twenty-two percent (22%) to
KOP (the "Promote") and (y) seventy-eight percent (78%) to the Members in
accordance with their respective Sharing Percentages. A Permitted Transferee of
KOP's Membership Interest shall be entitled to receive the Promote as part of
such transfer.
(D) In the event that CalEast makes a Capital Contribution pursuant to
Section 3.4(F) which results in a Default Contribution made by CalEast on behalf
of KOP, the amount of Distributable Cash that would otherwise be distributed to
KOP as the Promote above from and after such date shall be paid instead to the
Members in accordance with their respective Sharing Percentages.
(E) If, upon the dissolution of the Company as a result of the operation of
Section 10.7, any Member shall have a positive balance in such Member's
Preferred Return Account or its Invested Capital Account (a "SHORTFALL AMOUNT")
and KOP shall have received distributions of, or had its Proportionate Value
during the Drafting Process determined in part by deemed distributions of, the
Promote, then KOP shall promptly pay to the Company the lesser of (i) the amount
of the Promote distributed or deemed to have been distributed to KOP and (ii)
the aggregate Shortfall Amount for all Members, and such amount shall be
distributed by the Company to the Members ratably in proportion to their
respective Shortfall Amounts.
28
SECTION 5.3 ALLOCATION OF PROFITS AND LOSSES.
(A) ALLOCATIONS. The items of income, expense, gain and loss of the Company
comprising Profit or Loss for a Taxable Year shall be allocated among the
Members during such Taxable Year in a manner that will, as nearly as possible,
cause the Capital Account balance of each Member at the end of such Taxable Year
to equal the excess (which may be negative) of:
(i) the hypothetical distribution (if any) that such Member would
receive if, on the last day of the Taxable Year, (x) all Company assets,
including cash, were sold for cash equal to their Book Value, taking into
account any adjustments thereto for such Taxable Year, (y) all Company
liabilities were satisfied in cash according to their terms (limited, with
respect to each nonrecourse liability, to the Book Value of the assets
securing such liability) and (z) the net proceeds thereof (after
satisfaction of such liabilities) were distributed in full pursuant to
Section 5.2., over
(ii) the sum of (x) the amount, if any, which such Member is obligated
to contribute to the capital of the Company, (y) such Member's share of the
minimum gain determined pursuant to Regulations Section 1.704-2(g), and (z)
such Member's share of partner nonrecourse debt minimum gain determined
pursuant to Regulations Section 1.704-2(i)(5), all computed immediately
prior to the hypothetical sale described in Section 5.3(A)(i).
(B) DETERMINATION OF ITEMS COMPRISING ALLOCATIONS.
(i) In the event that the Company has Profit for a Taxable Year;
(1) for any Member as to whom the allocation pursuant to Section
5.3(A) is negative, such allocation shall be comprised of a
proportionate share of each of the Company's items of
expense or loss entering into the computation of Profits for
such Taxable Year; and
(2) the allocation pursuant to Section 5.3(A) in respect of each
Member (other than a Member referred to in Section
5.3(B)(i)(a)) shall be comprised of a proportionate share of
each Company item of income, gain, expense and loss entering
into the computation of Net Income for such Taxable Year
(other than the portion of each Company item of expense and
loss, if any, that is allocated pursuant to Section
5.3(B)(i)(a)).
(ii) In the event that the Company has a Loss for a Taxable Year;
(1) for any Member as to whom the allocation pursuant to Section
5.3(A) is positive, such allocation shall be comprised of a
proportionate share of the Company's items of income and
gain entering into the computation of Loss for such Taxable
Year; and
29
(2) the allocation pursuant to Section 5.3(A) in respect of each
Member (other than a Member referred to in Section
5.3(B)(ii)(a)) shall be comprised of a proportionate share
of each Company item of income, gain, expense and loss
entering into the computation of Net Loss for such Taxable
Year (other than the portion of each Company item of income
and gain, if any, that is allocated pursuant to Section
5.3(B)(ii)(a)).
(iii) For purposes of this Section 5.3, a gain recognized by the
Company upon the disposition of an item of Company property shall be
considered to be a single item of gain regardless of whether, for federal
income tax purposes, part of the gain is treated differently from the
remainder.
SECTION 5.4 REGULATORY AND SPECIAL ALLOCATIONS. Notwithstanding the
provisions of Section 5.3:
(A) COMPANY MINIMUM GAIN CHARGEBACK. If there is a net decrease in Company
Minimum Gain during any Taxable Year, each Member shall be specially allocated
items of taxable income or gain for such Taxable Year (and, if necessary,
subsequent Taxable Years) in an amount equal to such Member's share of the net
decrease in Company Minimum Gain, determined in accordance with Treasury
Regulation Section 1.704-2(g). The items to be so allocated shall be determined
in accordance with Treasury Regulation Sections 1.704-2(f)(6) and 1.704-2(j)(2).
This paragraph is intended to comply with the minimum gain chargeback
requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted
consistently therewith.
(B) MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. Member Nonrecourse
Deductions shall be allocated in the manner required by Treasury Regulation
Section 1.704-2(i). Except as otherwise provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Member Minimum Gain during any
Taxable Year, each Member that has a share of such Member Minimum Gain shall be
specially allocated items of taxable income or gain for such Taxable Year (and,
if necessary, subsequent Taxable Years) in an amount equal to that Member's
share of the net decrease in Member Minimum Gain. Items to be allocated pursuant
to this paragraph shall be determined in accordance with Treasury Regulation
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This paragraph is intended to comply
with the minimum gain chargeback requirements in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(C) QUALIFIED INCOME OFFSET. If any Member unexpectedly receives any
adjustments, allocations or distributions described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of taxable income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate the adjusted capital account deficit (determined according to
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)) created by such adjustments,
allocations or distributions as quickly as possible. This paragraph is intended
to comply with the qualified income offset requirement in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
30
(D) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions (as determined according
to Treasury Regulation Section 1.704-2(b)(1)) for any Fiscal Year shall be
allocated to the Members in accordance with the allocation of Losses hereunder.
(E) ORDERING RULES. Anything contained in this Agreement to the contrary
notwithstanding, allocations for any Fiscal Year or other period of nonrecourse
deductions (as defined in clause (d) above), or of items required to be
allocated pursuant to the minimum gain chargeback requirements contained in
Section 5.4(A) and Section 5.4(B), shall be made before any other allocations
hereunder.
(F) OFFSETTING ALLOCATIONS. If, and to the extent that, any Member is
deemed to recognize any item of income, gain, deduction or loss as a result of
any transaction between such Member and the Company pursuant to Sections
1272-1274, 7872, 483, 482 or 83 of the Code or any similar provision now or
hereafter in effect, and the Board determines that any corresponding Profit or
Loss of the Member who recognizes such item should be allocated to such Member
in order to reflect the Members' Economic Interest in the Company, then the
Board may so allocate such Profit or Loss.
(G) In accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its
initial Book Value. Such allocations shall be made using any reasonable method
specified in Treasury Regulations section 1.704-3 as the Board determines. In
the event the Book Value of any Company asset is adjusted pursuant to paragraph
(b) of the definition of "Book Value", subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take into account any
variation between the adjusted basis of such asset for federal income tax
purposes and its Book Value in the same manner as under Section 704(c) of the
Code and the Treasury Regulations thereunder. Such allocation shall be made
based on any reasonable method specified in Treasury Regulations section 1.704-3
as the Board determines.
(H) Except as provided in Section 5.4(G), for federal, state and local
income tax purposes, each item of income, gain, loss or deduction shall be
allocated among the Members in the same manner and in the same proportion that
the corresponding book items have been allocated among the Members' respective
Capital Accounts.
SECTION 5.5 ELECTION. Upon the request of the Board, the Company shall
elect, pursuant to Section 754 of the Code, to adjust the basis of Company
property as permitted and provided in Sections 734 and 743 of the Code. Such
election shall be effective solely for Federal (and, if applicable, state and
local) income tax purposes and shall not result in any adjustment to the Book
Value of any Company asset or to the Member's Capital Accounts (except as
provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(m)) or in the
determination or allocation of Profit or Loss for purposes other than such tax
purposes.
31
ARTICLE VI.
MANAGEMENT POWER, RIGHTS AND DUTIES
SECTION 6.1 MANAGEMENT BY THE BOARD.
(A) BOARD. The business and affairs of the Company shall be managed under
the direction of a board of managers (the "BOARD"). The Board shall initially
consist of four (4) Persons designated as follows: on or prior to February 5,
2001 KOP shall designate two (2) Persons in writing to CalEast and on or prior
to February 5, 2001 CalEast shall designate two (2) Persons in writing to KOP.
Any Member having the right to designate a member or members of the Board shall
also have the power to remove or replace members of the Board so designated by
such Member; provided, however, that if such Member shall become a Defaulting
Member, then for such time as such Member shall be a Defaulting Member, the
Non-Defaulting Member or Members entitled to designate Board Members shall have
the right to designate an additional Board Member who shall serve until such
time, if any, as such Defaulting Member shall no longer be a Defaulting Member.
In addition, for so long as CalEast shall remain a Member, CalEast shall have
the right to designate one (1) Person on behalf of the California Public
Employees Retirement System ("CALPERS") who shall have the right to receive
notice of and attend or otherwise observe all meetings of the Board (the
"CALPERS OBSERVER"); provided, however, that the CalPERS Observer shall not have
the right to vote on any matter coming before the Board nor shall the CalPERS
Observer have or owe any duties, fiduciary or otherwise, to the Board, the
Company or its Members.
(B) GENERAL POWERS. All powers of the Company shall be exercised by the
Board, except to the extent that the Officers are permitted to act without the
Approval of the Board in accordance with Section 6.3. Decisions of the Board
within its scope of authority shall be binding upon the Company and each Member
and shall be evidenced by the affirmative vote of a Majority of the members of
the Board. The Board shall have full, exclusive, and complete discretion, power,
and authority, subject to any other provisions of this Agreement or by
non-waivable provisions of applicable law, to manage, control, administer, and
operate the business and affairs of the Company, and to make all decisions
affecting such business and affairs, including, without limitation, as described
in Section 2.7 above. The Members agree that the Officers and the Board Members
designated by KOP are not obligated to submit or approve transactions that would
adversely affect Keystone's status as a real estate investment trust under
applicable provisions of the Code and Treasury Regulations, or that would result
in the imposition of a tax under Section 857 or 4981 of the Internal Revenue
Code. The Members further agree that CalEast will not be liable to KOP or
Keystone in the event that a Board Member designated by CalEast submits, votes
for or approves a transaction that would adversely affect Keystone's status as a
real estate investment trust under applicable provisions of the Code and
Treasury Regulations, or that would result in the imposition of a tax under
Section 857 or 4981 of the Internal Revenue Code.
(C) TERM OF OFFICE. Members of the Board shall serve until their
resignation, death or removal in accordance with Section 6.1(F) below by any
Person or group of Persons having the right to designate such member of the
Board.
32
(D) VACANCIES. Any vacancy on the Board shall be filled in accordance with
Section 6.1(A) above.
(E) RESIGNATION. A member of the Board may resign as such by delivering
his, her or its written resignation to the Company at the Company's principal
office addressed to the Board. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
(F) REMOVAL. Any member of the Board may be removed as such by the Person
having the right to designate such member of the Board.
(G) COMPENSATION. A member of the Board shall not be paid compensation by
the Company for his, her or its services as such. The foregoing shall not be
deemed to limit or restrict the payment of any reasonable compensation or
remuneration to any Person in such Person's capacity as an Officer, advisor or
consultant to the Company or any agreement or arrangement with the Company which
has been approved by the Board.
(H) REIMBURSEMENT. The members of the Board shall be entitled to be
reimbursed for reasonable out-of-pocket costs and expenses incurred in the
course of their service hereunder, including, without limitation, attendance at
Board and Member meetings.
(I) RELIANCE BY THIRD PARTIES. Any Person dealing with the Company, other
than a Member, may rely on the authority of the Board (or any Officer authorized
by the Board) in taking any action in the name of the Company without inquiry
into the provisions of this Agreement or compliance herewith, regardless of
whether that action actually is taken in accordance with the provisions of this
Agreement. Every agreement, instrument or document executed by the Board (or any
Officer authorized by the Board) in the name of the Company with respect to any
business or property of the Company shall be conclusive evidence in favor of any
Person relying thereon or claiming thereunder that (i) at the time of the
execution or delivery thereof this Agreement was in full force and effect, (ii)
such agreement, instrument or document was duly executed according to this
Agreement and is binding upon the Company, and (iii) the Board or such Officer
was duly authorized and empowered to execute and deliver such agreement,
instrument or document for and on behalf of the Company.
(J) MEETINGS OF THE BOARD; ACTIONS. Meetings of the Board shall be held at
the principal place of business of the Company or at any other place that a
Majority of the members of the Board determine. At any meeting, any member of
the Board and the CalPERS Observer may participate by telephone or similar
communication equipment, provided each member of the Board and the CalPERS
Observer can hear the others. Persons present by telephone shall be deemed to be
present "in person" for purposes hereof. The presence of at least three (3)
members of the Board shall constitute a quorum for the transaction of business.
Meetings shall be held at least once each quarter, or more often in accordance
with a schedule established by the Board. The Board also may make decisions,
without holding a meeting, by written consent of a Majority of the members of
the Board required for such decision, with prior notice thereof to all other
members of the Board and the CalPERS Observer. Minutes of each meeting and a
record of each decision shall be kept by the secretary. Decisions of the Board
shall require the approval of at least a Majority of its members. Only members
of the Board and
33
the CalPERS Observer shall be entitled hereunder to attend meetings of the
Board; provided, however, that a Majority of the members of the Board present at
a meeting may approve the presence of any other Person for all or any portion of
such meeting. In addition, any two (2) or more members of the Board may convene
a meeting thereof upon at least five (5) business days' prior written notice to
the other members of the Board and the CalPERS Observer. Notwithstanding the
foregoing provisions, each member of the Board and the CalPERS Observer who is
entitled to notice waives notice if before or after the meeting the member of
the Board or the CalPERS Observer signs a waiver of notice or appears at or
participates in the meeting.
SECTION 6.2 OFFICERS.
(A) DESIGNATION AND APPOINTMENT. Subject to Approval by the Board, and to
Section 6.2(E) below, KOP may, from time to time, designate employees of KOP or
an Affiliate of KOP as may be necessary or appropriate for the conduct of the
Company's day-to-day business (subject to the supervision and control of the
Board) as Officers of the Company. Any number of offices may be held by the same
person. In its discretion, KOP may choose not to fill any office for any period
as it may deem advisable. Officers need not be residents of the State of
Delaware or Members. Any Officers so designated shall have such authority and
perform such duties as are herein provided and as the Board may, from time to
time, delegate to them. The Board may assign titles to particular Officers. Each
Officer shall hold office until his or her successor shall be duly designated
and shall qualify or until his or her death or until he shall resign or shall
have been removed in the manner hereinafter provided. The Officers of the
Company shall serve without compensation unless otherwise Approved by the Board.
The initial Officers of the Company, shall be designated in writing by KOP to
the Board and shall include, (in descending rank): President; Acquisitions and
Development Officer; Vice President; Secretary; and Asst. Secretary.
(B) RESIGNATION/REMOVAL. Subject to Section 11.1(B)(ii)(3), any Officer may
resign as such at any time. Such resignation shall be made in writing and shall
take effect at the time specified therein, or if no time be specified, at the
time of its receipt by the Board. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the resignation.
Any Officer may be removed as such, either with or without Cause, without
limiting CalEast's rights under Section 11.1(B)(ii)(3), at any time by the Board
or KOP, or with Cause at any time by CalEast. Designation of an Officer shall
not of itself create any contractual or employment rights. Notwithstanding
anything to the contrary within this Agreement, if KOP becomes a Defaulting
Member, CalEast shall have the right to remove any or all of the current
Officers with or without Cause and designate new Officers, who may or may not be
employees of KOP.
(C) DUTIES OF OFFICERS GENERALLY. The Officers, in the performance of their
duties as such, shall owe to the Company duties of loyalty and due care of the
type owed by the officers of a corporation to such corporation and its
equityholders under the laws of the State of Delaware.
(D) PRESIDENT. The president shall, subject to the powers of the Board, be
the chief administrative officer of the Company and shall have general charge of
the business, affairs and property of the Company, and control over its other
Officers and agents. The president shall
34
see that all orders and resolutions of the Board are carried into effect and
shall have authority to suspend or to remove any agent or Officer of the Company
and, in the case of the suspension for Cause of any such Officer, to recommend
to the Board what further action should be taken. In the absence of the
president the duties of the president shall be performed and his or her
authority may be exercised by any other Officer of the Company. The president
shall have such other powers and perform such other duties as may be prescribed
by the Board, and shall be a "manager" for purposes of the Act.
(E) ACQUISITIONS AND DEVELOPMENT OFFICER. The "ACQUISITIONS AND DEVELOPMENT
OFFICER" shall be a senior officer of Keystone which shall be designated by KOP
on the date hereof and approved by CalEast in writing, and once so designated
and approved, resignation or removal of the Acquisitions and Development Officer
shall be governed by Section 11.1(B)(ii)(3). During the Exclusivity Period, the
Acquisitions and Development Officer shall be responsible for identifying
Proposed Investments and consummating transactions involving same, and for
managing and implementing the development of unimproved Company Properties or
Company Properties which are to be re-developed. The Acquisitions and
Development Officer shall perform such additional duties as may be prescribed,
from time to time, by the President or the Board, and shall be a "manager" for
the purposes of the Act.
(F) VICE PRESIDENT. Each vice president shall perform such duties and have
such other powers as the president or the Board may from time to time prescribe,
and shall be a "manager" for purposes of the Act.
(G) SECRETARY. The secretary shall have the general duties, powers and
responsibilities of a secretary of a corporation. The secretary shall attend all
meetings of the Board and of the Members and record all of the proceedings of
such meetings in a book to be kept for that purpose. The secretary shall keep
all documents as may be required under this Agreement and the Act. The secretary
shall perform such other duties and have such other authority as may be
prescribed elsewhere in this Agreement or from time to time by the president or
the Board, and shall be a "manager" for purposes of the Act.
(H) ASSISTANT SECRETARY. In the absence, disability or inability of the
secretary, the assistant secretary shall perform the duties and exercise the
powers of the secretary, and shall perform such other duties and have such other
powers as the president or the Board may from time to time prescribe, and shall
be a "manager" for purposes of the Act.
(I) DOCUMENTS. All documents to be entered into by the Company shall be
executed by either the president or a vice president or by any other Officer
authorized by the Board.
SECTION 6.3 AUTHORITY OF OFFICERS; RESTRICTIONS ON CERTAIN ACTIONS.
(A) Subject to the provisions of this Agreement, the Officers, without the
prior Approval of the Board, shall have the power and authority to take any and
all actions on behalf of the Company as are necessary, appropriate, proper,
advisable, convenient or incidental to or for the furtherance of the purposes
set forth in Section 2.6 as enumerated in Section 2.7, subject to the
restrictions set forth in Section 6.3(B), including the power and authority (i)
to enter into
35
leases of Company Property that (a) are not Material Leases and (b) do not
violate the Leasing Guidelines and (ii) to enter into any and all contracts or
agreements (other than those referred to in clause (i) above) consistent with
the then Approved Annual Operating Budget.
(B) Notwithstanding anything to the contrary contained herein, an Officer
may not take any of the following actions (or delegate authority to any Person
to approve the taking of any of the following actions or commit to doing any of
the following actions) on behalf of the Company without the prior Approval of
the Board:
(i) execute or cause to be executed on behalf of the Company any lease
of Company Property that (a) is a Material Lease, or (b) subject to
subsection (iii) below, violates the Leasing Guidelines;
(ii) sell or otherwise dispose of any Company Property;
(iii) modify the Annual Operating Budget by more than $25,000 in the
aggregate for all Company Properties, or make any capital expenditure in
excess of $25,000 in any individual instance or $25,000 in the aggregate
per Company Property during any twelve (12) month period, except for
capital expenditures which have been authorized in an approved Annual
Operating Budget or are necessary for Emergency Requirements;
(iv) to change the Leasing Guidelines for a Property;
(v) commence (including the filing of a counterclaim), settle or
otherwise dispose of any claim or litigation, regulatory proceeding or
arbitration (other than ordinary course employer or commercial claims) to
which the Company or its Subsidiaries is, or is to be, a party or by which
the Company or its Subsidiaries or any of its business, assets or
properties may be affected;
(vi) directly or indirectly declare or make any Distributions other
than the quarterly Distributions as required by Section 5.2;
(vii) enter into or make a material amendment to or terminate any
agreement, contract or commitment except as consistent with an approved
Annual Operating Budget;
(viii) create any liens or any other encumbrances whatsoever upon any
assets or properties of the Company or its Subsidiaries;
(ix) enter into any joint venture or material business alliance or
create any Subsidiary, or acquire any capital stock of or other ownership
interest in any Person, other than the creation of Subsidiaries for the
purpose of owning one or more Company Properties;
(x) amend or terminate any agreement relating to a joint venture or a
material business alliance of the Company or any of its Subsidiaries;
36
(xi) make any political or charitable contribution;
(xii) pledge the credit of CalEast;
(xiii) do any act which would make it impossible to carry on the
ordinary business of the Company or to alter the status of the Company as a
partnership for federal income tax purposes;
(xiv) change the name of the Company;
(xv) change the Investment Criteria;
(xvi) directly or indirectly redeem, purchase or otherwise acquire, or
permit any of its Subsidiaries to redeem, purchase or otherwise acquire,
any of the Company's or any Subsidiary's equity securities (including, in
the case of Subsidiaries, warrants, options and other rights to acquire
equity securities);
(xvii) authorize, issue, sell or enter into any agreement providing
for the issuance (contingent or otherwise), or permit any of its
Subsidiaries to authorize, issue, sell or enter into any agreement
providing for the issuance (contingent or otherwise) (other than to the
Company) of any equity securities or debt securities with equity features
or securities exercisable or convertible into equity securities or debt
securities with equity features;
(xviii) merge or consolidate with any Person or permit any of its
Subsidiaries to merge or consolidate with any Person (other than a wholly
owned Subsidiary);
(xix) except in accordance with Section 11.1, liquidate, dissolve or
effect, or permit any of its Subsidiaries to liquidate, dissolve or effect,
a recapitalization or reorganization in any form of transaction;
(xx) enter into or modify any term of the Credit Facility, or any
replacement or renewal of the Credit Facility or make any draw under the
Credit Facility, except for draws of amounts reasonably required to meet an
Emergency Requirement if the Credit Facility is available for such a draw;
(xxi) create, incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist Indebtedness
exceeding the amounts Approved therefor by the Board in one or more
Approved Annual Operating Budgets;
(xxii) enter into, create, modify or cause or agree to cause to be
prepaid prior to its stated maturity, or permit any of its Subsidiaries to
enter into, create, modify or cause or agree to cause to be prepaid prior
to its stated maturity, any Indebtedness secured, directly or indirectly,
by any Company Property or by the Company's or any Subsidiary's interest in
any Company Property;
37
(xxiii) make, or permit any of its Subsidiaries to make, any loans or
advances to, guarantees for the benefit of, or Investments in, any Person
(other than a wholly owned Subsidiary), except for Short Term Investments;
(xxiv) enter into, or permit any of its Subsidiaries to enter into,
any transaction with any Person (or any Affiliate thereof) who is an
Affiliate of Keystone, KOP, Keystone Realty Services, Inc., any Officer or
member of the Board or to KOP's knowledge, CalEast, (or, to KOP's
knowledge, a lineal descendant, sibling, lineal descendant of a sibling,
parent, grand parent or great grand parent, spouse or lineal descendant or
sibling of a spouse of any of the foregoing Persons that are individuals),
except as provided for in this Agreement or one or more current Annual
Operating Budgets;
(xxv) register any of the Company's or its Subsidiaries' securities
under any securities laws;
(xxvi) make any change in the Company's or its Subsidiaries' Fiscal
Year;
(xxvii) make any amendment or terminate any constitutive or governing
document of the Company or its Subsidiaries, including without limitation
the Agreement or Certificate;
(xxviii) enter into any property management agreement with respect to
a Company Property;
(xxix) do any act in contravention of this Agreement;
(xxx) approve under the Lease Agreement or Contract, the submission,
or any material modifications to any prior submission of, any materials
submitted to governmental authorities by the lessor under the Lease
Agreement in connection with the subdivision of the real property which is
the subject of the Lease Agreement, or exercise any right to acquire such
real property from such lessor;
(xxxi) commit to do any of the foregoing.
(C) In the event that: (i) CalEast and KOP disagree over CalEast's desire
to sell or otherwise dispose of a Company Property (except in the case of a
dissolution under Section 11.1(B), in which event this Section shall not apply),
(ii) the Board vote with respect to such matter in disagreement results in a
tie; and (iii) CalEast exercises its additional vote over the matter in
disagreement, then, and thereby requires a sale of the Company Property, the
Company Property shall be sold pursuant to the provisions of Section 6.8(A) and
KOP shall have a right of first offer with respect to such Company Property in
accordance with Section 6.8(A).
(D) In the event that: (i) CalEast and KOP disagree over any modification
to an Annual Operating Budget with respect to a Company Property requiring an
additional capital expenditure in an amount having a net present value in excess
of five percent (5%) of the aggregate Invested Capital Account for such Company
Property, (ii) the Board vote with respect
38
to such matter in disagreement results in a tie; and (iii) CalEast exercises its
additional vote over the matter in disagreement and thereby requires the
expenditure to be made, then, if so elected in writing by KOP within ten (10)
Business Days thereafter, the capital expenditure shall not be made, and the
Company Property shall be sold pursuant to the provisions of Section 6.8(B) and
CalEast and KOP shall have right(s) to make offers with respect to such Company
Property in accordance with Section 6.8(B).
SECTION 6.4 LIMITATION ON AUTHORITY OF MEMBERS. No Member is an agent of
the Company solely by virtue of being a Member, and no Member has authority to
act for the Company solely by virtue of being a Member. This Section 6.4
supersedes any authority granted to the Members pursuant to the Act. Any Member
who takes any action or binds the Company in violation of this Section 6.4 shall
be solely responsible for any loss and expense incurred by the Company as a
result of the unauthorized action and shall indemnify and hold the Company
harmless with respect to the loss or expense.
SECTION 6.5 INTENTIONALLY OMITTED.
SECTION 6.6 POWER OF ATTORNEY.
(A) GRANT OF POWER. Each Member constitutes and appoints the Officers of
the Company as the Member's true and lawful attorney-in-fact, and in the
Member's name, place and stead, to make, execute, sign, acknowledge, and file:
(i) one or more certificates of formation consistent with the terms of
this Agreement;
(ii) all documents (including amendments to the Certificates of
Formation) which the attorney-in-fact deems appropriate to reflect any
written amendment, change or modification of this Agreement approved in
accordance with Section 12.8 below;
(iii) upon the requisite approval, if any, required elsewhere in this
Agreement, any and all other certificates or other instruments required to
be filed by the Company under the laws of the State of Delaware or of any
other state or jurisdiction, including, without limitation, any certificate
or other instruments necessary in order for the Company to continue to
qualify as a limited liability company under the laws of the State of
Delaware;
(iv) one or more applications to use an assumed name; and
(v) all documents which may be required to dissolve and terminate the
Company and to cancel its Certificate of Formation upon the requisite
approval required elsewhere in this Agreement.
(B) IRREVOCABILITY. The foregoing power of attorney is irrevocable and is
coupled with an interest, and, to the extent permitted by applicable law, shall
survive the death or disability of a Member. It also shall survive the Transfer
of a Membership Interest, except that if
39
the transferee is approved for admission as a Member, this power of attorney
shall survive the delivery of the assignment for the sole purpose of enabling
the Attorney-in-Fact to execute, acknowledge and file any documents needed to
effectuate the substitution. Each Member shall be bound by any representations
made by the attorney-in-fact acting in good faith pursuant to this power of
attorney, and each Member hereby waives any and all defenses which may be
available to contest, negate or disaffirm the action of the attorney-in-fact
taken in good faith under this power of attorney.
SECTION 6.7 MANAGEMENT AGREEMENT. The Board shall cause the Company to
enter into the Management Agreement with Keystone Realty Services, Inc., a copy
of which is attached hereto as Exhibit 2 (the "MANAGEMENT AGREEMENT"). Any
Member shall have the right to terminate the Management Agreement for Cause (as
such term is defined in the Management Agreement). The Officers may delegate to
the Manager, from time to time, such power and authority as may be necessary to
assist the Officers in performing their duties and obligations as set forth in
Section 6.3.; provided, however, that the Manager shall not have the power to
execute agreements on behalf of or otherwise bind, the Company unless such power
is specifically delegated to the Manager, in writing, by the Board.
SECTION 6.8 RIGHT OF FIRST OFFER FOR CERTAIN COMPANY PROPERTIES.
(A) BY KOP. Upon a sale of a Company Property pursuant to Section 6.3(C) (a
"SALE Property"), KOP shall have thirty (30) days from the date of CalEast's
exercise of its additional vote pursuant to Section 6.3(C)(iii) (the "Offer
Period") to provide CalEast with a written offer to purchase the Sale Property
(a "KOP OFFER"), which KOP Offer shall include the price which KOP is willing to
pay for the Sale Property and such other terms and conditions of such proposed
purchase as are reasonably required for CalEast to determine whether to accept
the KOP Offer. Should KOP fail to deliver a KOP Offer to CalEast within the
Offer Period, KOP shall be deemed to have elected not to purchase the Sale
Property and the Company shall market the Sale Property for sale to any Person
for a period of 180 days. During such 180 day period, CalEast shall have the
right, on behalf of the Company, to accept any Qualifying Purchase Offer (as
defined below), and, if a Qualifying Purchase Offer (as defined below) is not
received within such period, then the Sale Property shall be removed from the
market and CalEast shall have the right to request a new vote of the Board to
decide whether to sell the Sale Property, and, if applicable, the process set
forth in Section 6.3(C) and this Section 6.8(A) shall be repeated. If KOP
delivers a KOP Offer to CalEast within the Offer Period, CalEast shall have
thirty (30) days following receipt of the KOP Offer (the "ACCEPTANCE PERIOD") to
determine whether the Company it will accept or reject the KOP Offer. Should
CalEast fail to reject the KOP Offer on behalf of the Company within such 30 day
period the KOP Offer shall be deemed accepted.
(i) If CalEast rejects the KOP Offer, on behalf of the Company, the
Company shall use the 180 day period after the date of rejection of the KOP
Offer (the "MARKETING PERIOD") to market the Sale Property for sale to any
Person. In the event that, on or prior to the expiration of the Marketing
Period, the Company receives a bona-fide offer which CalEast is willing to
accept from any Person to purchase the Sale Property, which offer shall be
in writing in the form of a letter of intent between the Company and such
Person and shall set forth the price and other terms relevant to the sale
and purchase
40
of the Sale Property (a "QUALIFYING PURCHASE OFFER"), the Company shall
promptly provide a copy thereof to each of the Members, who shall have the
following rights in respect thereof:
(1) if such Qualifying Purchase Offer is in an amount which is
less than ninety-five percent (95%) of the KOP Offer, KOP shall have
the right to purchase the Sale Property at the price and upon the
terms contained within the Qualifying Purchase Offer by giving notice
of its intention to do so within five (5) business days after receipt
of written notice from CalEast stating that it is willing to accept
the Qualifying Purchase Offer on behalf of the Company, or if KOP does
not exercise this right within the five (5) business day period, then
CalEast shall have the right to accept such Qualifying Purchase Offer
on behalf of the Company and the Company shall proceed to consummate
the sale of the Sale Property in accordance with the terms of the
Qualifying Purchase Offer.
(2) if such Qualifying Purchase Offer is in an amount equal to or
greater than ninety-five percent (95%) of the KOP Offer, then CalEast
shall have the right to accept such Qualifying Purchase Offer on
behalf of the Company and the Company shall proceed to consummate the
sale of the Sale Property in accordance with the terms of the
Qualifying Purchase Offer.
(ii) If CalEast accepts or is deemed to have accepted the KOP Offer on
behalf of the Company, or if KOP exercises is rights under Section
6.8(A)(i)(1) above, the completion of the sale and purchase of the Sale
Property shall take place at the Company's principal place of business on a
date specified by KOP which shall be no later than the date which is sixty
(60) days after the CalEast's acceptance of the KOP Offer (or, in the case
of a deemed acceptance, within sixty (60) days after the end of the
Acceptance Period) or KOP's notice of its exercise of its rights under
Section 6.8(A)(i)(1) above, as applicable.
(B) Upon KOP's election to force a sale of a Company Property pursuant to
Section 6.3(D) (a "CAP EX PROPERTY"), CalEast shall have fifteen (15) days from
the receipt of KOP's election to provide KOP with a written offer to purchase
the Cap Ex Property (a "CALEAST OFFER"), which CalEast Offer shall include the
price at which CalEast is willing to pay for the Cap Ex Property and such other
terms and conditions of such proposed purchase as are reasonably required for
KOP to determine whether to submit a Counter Offer (as defined below) to
purchase the Cap Ex Property.
(i) If CalEast delivers to KOP a CalEast Offer within the 15 day
period specified above, KOP shall have fifteen (15) days following receipt
thereof (the "DETERMINATION PERIOD") to determine which of the following it
shall do:
41
(1) accept the CalEast Offer on behalf of the Company, in which
case, the completion of the sale and purchase of the such Cap Ex
Property shall take place at the Company's principal place of business
on a date specified by CalEast which shall be no later than the date
which is sixty (60) days after the acceptance by KOP of the CalEast
Offer;
(2) submit a counter offer to purchase the Cap Ex Property on
substantially the same terms and conditions as set forth in the
CalEast Offer except at a price which is at least ten percent (10%)
higher than the CalEast Offer (a "KOP COUNTER OFFER"), within two (2)
business days of receipt of the KOP Counter Offer, in which case,
CalEast may deliver to KOP a written notice stating its election to
re-counter the KOP Counter Offer at a price which is at least ten
percent (10%) higher than the KOP Counter Offer, and each Member may
re-counter the previous counter offer from the other Member at a price
which is at least ten percent (10%) higher than the previous counter
offer by delivering written notice to the other Member within two (2)
business days of receipt of the previous counter offer until one
Member fails to timely make a new counter offer, at which point the
Company shall accept the highest offer theretofore made. If CalEast
does not re-counter the KOP Counter Offer on a timely basis, the
Company shall accept the KOP Counter Offer. In either case, the
completion of the sale and purchase of the Cap Ex Property shall take
place at the Company's principal place of business on the date
specified by the purchaser which shall be no later than sixty (60)
days after the acceptance of the KOP Counter Offer or the applicable
later counter-offer; or
(3) cause the Company to market the Cap Ex Property for sale to
any Person in accordance with the procedure set forth in Section
6.8(A)(i); provided, however, that KOP (rather than CalEast) shall
have the right to conduct the marketing of the CapEx Property and to
determine whether a Qualifying Purchase Offer is acceptable and
CalEast (rather than KOP) shall have the right to purchase the Cap Ex
Property in the event that the Qualifying Purchase Offer is at a price
which is less than 95% of the CalEast Offer.
(ii) If CalEast does not deliver a CalEast Offer to KOP within the 15
day period specified above, then KOP may make an offer (a "KOP CAP EX
OFFER") and CalEast shall have the Determination Period to determine which
of the following it shall do:
(1) accept the KOP Cap Ex Offer, in which case, the completion of
the sale and purchase of the such Cap Ex Property shall take place at
the Company's principal place of business on a date specified by KOP
which shall be no later than the date which is sixty (60) days after
the acceptance of the KOP Cap Ex Offer;
42
(2) submit a counter offer to purchase the Cap Ex Property on
substantially the same terms and conditions as set forth in the KOP
Cap Ex Offer except at a price which is at least ten percent (10%)
higher than the KOP Cap Ex Offer (a "CALEAST COUNTER OFFER"), within
two (2) business days of receipt of the CalEast Counter Offer, in
which case, KOP may deliver to CalEast a written notice stating its
election to re-counter the CalEast Counter Offer at a price which is
at least ten percent (10%) higher than the CalEast Counter Offer, and
each Member may re-counter the previous counter offer from the other
Member at a price which is at least ten percent (10%) higher than the
previous counter offer by delivering written notice to the other
Member within two (2) business days of receipt of the previous counter
offer until one Member fails to timely make a new counter offer at
which point the Company shall accept the highest offer theretofore
made. If KOP does not re-counter the CalEast Counter Offer on a timely
basis, the Company shall accept the CalEast Counter Offer. In either
case, the completion of the sale and purchase of the Cap Ex Property
shall take place at the Company's principal place of business on the
date specified by the purchaser which shall be no later than sixty
(60) days after the acceptance of the CalEast Counter Offer or the
applicable later counter-offer; or
(3) cause the Company to market the Cap Ex Property for sale to
any Person in accordance with the procedure set forth in Section
6.8(A)(i).
(iii) If CalEast does not make a CalEast Offer and KOP does not make a
KOP Cap Ex Offer, then the Cap Ex Property shall be marketed for sale under
the direction of the Board.
SECTION 6.9 ANNUAL OPERATING BUDGET. Not later than sixty (60) days after
the acquisition of each Company Property with respect to the balance of the
Fiscal Year during which such Company Property is acquired and thereafter by no
later than June 1st of each year in which the Company continues to hold such
Company Property, the Officers shall submit to the Board, for the Board's
Approval, proposed budgets, operating plans and leasing plans (the "ANNUAL
OPERATING BUDGET") for each Company Property, as well as a description of major
business objectives and challenges (including, but not limited to, vacancy,
lease rollover, reletting, sale, refinance, lease option dates, major
renovations, and major capital requirements) for such Company Property for the
forthcoming Fiscal Year. The Annual Operating Budget also shall set forth the
following on a monthly basis with annual totals, together with an explanation of
all material assumptions made in determining the same: (i) a detailed estimate
of the projected Gross Revenues for the Company Property for the forthcoming
Fiscal Year, which estimate shall set forth as separate line items the projected
Gross Revenues from rent, escalations, and each other type of revenue expected
to be received in such year; (ii) a detailed estimate of the projected operating
expenses for the Company Property for the forthcoming Fiscal Year, which
estimate shall set forth as separate line items the projected operating expenses
with respect to each type of expense expected to be incurred for such year;
(iii) a detailed estimate showing projected debt service payments; (iv) a
detailed estimate of the projected reimbursable expenses
43
with respect to each type of expense expected to be incurred for such year; (v)
a statement as to the projected balances of any reserves with respect to the
Company Property as of the first day of the forthcoming year; (vi) a statement
as to the projected additions to or disbursements from such reserves for the
forthcoming Fiscal Year; (vii) an estimate of the projected Net Operating Cash
Flow from such Company Property for the forthcoming Fiscal Year; (viii) a
detailed description of the renovations or other capital improvements, if any,
proposed to be undertaken with respect to the during the forthcoming Fiscal
Year; (ix) an estimate of the total costs of the renovations or other capital
improvements, if any, to be undertaken with respect to the Company Property
during the forthcoming Fiscal Year together with proposed sources of funding
such costs, maximum financing rates (if the proposed source is borrowings) and
timing for obtaining such funds and implementing the proposed renovations or
capital improvements; (x) a list of each space for which the lease then in
effect will expire during the forthcoming eighteen (18) month period, and a
description of the proposed terms and conditions for leasing each such vacant
space for the forthcoming Fiscal Year, including, without limitation, a
calculation of net effective rent for each such vacant space, and projected
costs of tenant improvements and tenant allowances for each such vacant space
(collectively, the "LEASING GUIDELINES"); (xi) a description of the terms and
conditions proposed with respect to material contracts relating to the Company
Property for the forthcoming Fiscal Year; (xii) a description of the minimum
insurance coverage to be maintained with respect to the Company Property for the
forthcoming Fiscal Year; and (xiii) and such other information as may be
reasonably requested by the Board. With respect to Company Properties that are
build-to-suit or other new development projects, the Annual Operating Budget
shall also include the Investment Report for such Company Property, including
all development budgets and construction schedules included therein, together
with a narrative report describing the status of such project and any realized
or projected variances from the development budget and construction schedule
pertaining thereto together with the Officer's recommendations for mitigation of
any negative variances. In addition, the Officers shall provide to the Board
such other financial data and other information as may be reasonably requested
by the Board. All Annual Operating Budgets and other reports prepared pursuant
to this Section 6.9 shall be prepared in accordance with United States generally
accepted accounting principles consistently applied ("GAAP") unless otherwise
requested by the Board.
SECTION 6.10 REPORTING REQUIREMENTS. The Officers shall do the following:
(A) Within seven (7) Business Days after the end of each month, prepare and
deliver to CalEast such monthly reports as CalEast may reasonably request;
(B) Within twenty-five (25) days after the end of CalEast's fiscal quarter
(based upon a July 1 to June 30 fiscal year), prepare and deliver to CalEast
such quarterly reports as CalEast may reasonably request;
(C) Within seventy-five (75) days after the end of CalEast's fiscal year,
deliver to CalEast such tax information with respect to such year as is
necessary for inclusion in CalEast's federal and state income tax and other tax
returns;
(D) Within forty-five (45) days of the end of CalEast's fiscal year,
deliver to CalEast (i) the balance sheet of the Company as of the end of such
year and statement of income (loss), equity and statement of cash flow of the
Company for such year, and (ii) a statement of
44
Cash Available for Distribution (defined in the CalEast operating agreement) and
actual cash distributions for such year, all of which shall be audited;
(E) Within five (5) Business Days of the occurrence of such a default, give
notice to CalEast of (i) any default under any financing or breach of or default
under any other material agreement of which the Company is a party, and (ii) any
default in the payment of property taxes with respect to a Company Property, or
any matter which could result in a substantial and material loss (i.e., greater
than $250,000) to the Company; and
(F) Promptly deliver to CalEast such additional information regarding the
Company as CalEast may reasonably request from time to time.
All of the above reports, balance sheets or other financial statements shall be
prepared in accordance with GAAP. For each Business Day that any of the above
reports is late, the Company shall pay CalEast One Hundred Dollars ($100).
Furthermore, the Company shall reimburse CalEast for the actual costs incurred
by CalEast in correcting any error in the reports and financial information
submitted to CalEast under the Company Agreement. CalEast may, from time to
time, at its sole cost and expense, perform or cause to be performed an audit or
appraisal of the Company and its operations, and the Company shall reasonably
cooperate in such appraisal.
ARTICLE II.
EXCULPATION AND INDEMNIFICATION
SECTION 7.1 PERFORMANCE OF DUTIES; NO LIABILITY OF OFFICERS. No Member
shall have any duty to the Company or any Member of the Company except as
expressly set forth herein or in other written agreements. No Member, member of
the Board or Officer of the Company shall be liable to the Company or to any
Member for any loss or damage sustained by the Company or to any Member, unless
the loss or damage shall have been the result of gross negligence, fraud or
intentional misconduct by the Member, member of the Board or Officer in question
or, in the case of an Officer, breach of such Person's duties pursuant to
Section 6.2(c). In performing his or her duties, each such Person shall be
entitled to rely in good faith on the provisions of this Agreement and on
information, opinions, reports or statements (including financial statements and
information, opinions, reports or statements as to the value or amount of the
assets, liabilities, profits or losses of the Company or any facts pertinent to
the existence and amount of assets from which distributions to Members might
properly be paid) of the following other Persons or groups: one or more Officers
of the Company, any attorney, independent accountant, appraiser or other expert
or professional employed or engaged by or on behalf of the Company or the Board;
or any other Person who has been selected with reasonable care by or on behalf
of the Company, or the Board in each case as to matters which such relying
Person reasonably believes to be within such other Person's competence. The
preceding sentence shall in no way limit any Person's right to rely on
information to the extent provided in Section 18-406 of the Act. No Member,
member of the Board or Officer of the Company shall be personally liable under
any judgment of a court, or in any other manner, for any debt, obligation or
liability of the Company, whether that liability or obligation arises in
contract, tort or otherwise, solely by reason of being a Member, member of the
Board or Officer of the Company or any combination of the foregoing.
45
SECTION 7.2 CONFIDENTIAL INFORMATION. Without limiting the applicability of
any other agreement to which any Member may be subject, no Member or member of
the Board shall, directly or indirectly disclose or use at any time, either
during his, her or its association or employment with the Company or thereafter,
any Confidential Information of which such Member is or becomes aware. Each
Member and member of the Board in possession of Confidential Information shall
take all appropriate steps to safeguard such information and to protect it
against disclosure, misuse, espionage, loss and theft. Notwithstanding the
above, a Member or member of the Board may disclose Confidential Information to
the extent (i) the disclosure is necessary for the Member, member of the Board
and/or the Company's agents, representatives, and advisors to fulfill their
duties to the Company pursuant to this Agreement and/or other written
agreements, (ii) the disclosure is required by law or a court order, and (iii)
to the extent necessary to enforce rights hereunder.
SECTION 7.3 TRANSACTIONS BETWEEN THE COMPANY AND THE MEMBERS.
Notwithstanding that it may constitute a conflict of interest, the Members, the
members of the Board or their Affiliates may engage in any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service with the Company) so long as such
transaction is at arm's length and approved by a majority of the disinterested
members of the Board.
SECTION 7.4 RIGHT TO INDEMNIFICATION. Subject to the limitations and
conditions provided in this ARTICLE VII, each Person who was or is made a party
or is threatened to be made a party to or is involved in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or arbitrative (hereinafter, a "PROCEEDING"), or any appeal in such a Proceeding
or any inquiry or investigation that could lead to such a Proceeding, by reason
of the fact that such Person, or a Person of which such Person is the legal
representative, is or was a Member, a member of the Board or Officer shall be
indemnified by the Company to the fullest extent permitted by applicable law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said law permitted the Company to provide
prior to such amendment) against judgments, penalties (including excise and
similar taxes and punitive damages), fines, settlements and reasonable expenses
(including, without limitation, reasonable attorneys' and experts' fees)
actually incurred by such Person in connection with such Proceeding, appeal,
inquiry or investigation (each a "LOSS"), unless such Loss shall have been the
result of gross negligence, fraud or intentional misconduct by such Person, in
which case such indemnification shall not cover such Loss to the extent
resulting from such gross negligence, fraud or intentional misconduct.
Indemnification under this ARTICLE VII shall continue as to a Person who has
ceased to serve in the capacity which initially entitled such Person to
indemnity hereunder. The rights granted pursuant to this ARTICLE VII shall be
deemed contract rights, and no amendment, modification or repeal of this ARTICLE
VII shall have the effect of limiting or denying any such rights with respect to
actions taken or Proceedings, appeals, inquiries or investigations arising prior
to any amendment, modification or repeal.
SECTION 7.5 ADVANCE PAYMENT. The right to indemnification conferred in this
ARTICLE VII shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a Person (other than an Officer of the Company
or any of its Subsidiaries
46
thereof in respect of claims by the Company or any of its subsidiaries thereof
against such Officer in such Officer's capacity as such) entitled to be
indemnified under Section 7.4 who was, is or is threatened to be made a named
defendant or respondent in a Proceeding in advance of the final disposition of
the Proceeding and without any determination as to the Person's ultimate
entitlement to indemnification; provided, however, that the payment of such
expenses incurred by any such Person in advance of the final disposition of a
Proceeding shall be made only upon delivery to the Company of a written
affirmation by such Person of his or her good faith belief that he has met the
standard of conduct necessary for indemnification under ARTICLE VII and a
written undertaking, by or on behalf of such Person, to repay all amounts so
advanced if it shall ultimately be determined that such indemnified Person is
not entitled to be indemnified under this ARTICLE VII or otherwise.
SECTION 7.6 INDEMNIFICATION OF AGENTS. The Company, at the direction of the
Board, may indemnify and advance expenses to an agent of the Company to the same
extent and subject to the same conditions under which it may indemnify and
advance expenses under Sections 7.4 and 7.5.
SECTION 7.7 APPEARANCE AS A WITNESS. Notwithstanding any other provision of
this ARTICLE VII, the Company may pay or reimburse reasonable out-of-pocket
expenses incurred by an Officer or agent in connection with his or her
appearance as a witness or other participation in a Proceeding at a time when he
is not a named defendant or respondent in the Proceeding.
SECTION 7.8 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement and payment of expenses conferred in this ARTICLE VII shall not be
exclusive of any other right that a Member, member of the Board, Officer or
other Person indemnified pursuant to this ARTICLE VII may have or hereafter
acquire under any law (common or statutory) or provision of this Agreement.
SECTION 7.9 INSURANCE. The Company shall obtain and maintain, at its
expense, insurance to protect itself and any Member, member of the Board,
Officer or agent of the Company who is or was serving at the request of the
Company as a manager, representative, director, officer, partner, venturer,
proprietor, trustee, agent or similar functionary of another foreign or domestic
limited liability company, corporation, Company, sole proprietorship, trust or
other enterprise against any expense, liability or loss, in amounts and on terms
that the Officers determine are reasonable, whether or not the Company would
have the power to indemnify such Person against such expense, liability or loss
under this ARTICLE VII.
SECTION 7.10 SAVINGS CLAUSE. If this ARTICLE VII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Company shall nevertheless indemnify and hold harmless each Person
indemnified pursuant to this ARTICLE VII as to costs, charges and expenses
(including reasonable attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any such Proceeding, appeal, inquiry or investigation
to the full extent permitted by any applicable portion of this ARTICLE VII that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
47
SECTION 7.11 LIMITED LIABILITY. Except as otherwise provided by the Act,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member, member of the Board or Officer of the
Company shall be obligated personally for any such debt, obligation or liability
of the Company solely by reason of being a Member, member of the Board or
Officer of the Company. Neither the Members nor any member of the Board shall be
required to lend any funds to the Company. Each of the Members shall only be
liable to make payment of its respective Member Commitment as and when due
hereunder and other payments as expressly provided in this Agreement. If and to
the extent a Member's Member Commitment shall be fully paid, such Member shall
not, except as required by the express provisions of the Act regarding repayment
of sums wrongfully distributed to Members, be required to make any further
contributions. No Member in his or her capacity as a Member shall have any power
to represent, act for, sign for or bind the members of the Board or the Company,
and the Members hereby consent to the exercise by the Board and Officers of the
Company of the powers conferred on them by law and this Agreement.
ARTICLE III.
TAXES
SECTION 8.1 TAX RETURNS. The President shall cause to be prepared and filed
all necessary federal and state income tax returns for the Company, and shall
make any elections and filings it may deem appropriate and in the best interests
of the Members. Each Member shall furnish to the Company all pertinent
information in its possession relating to Company operations that is necessary
to enable the Company's income tax returns to be prepared and filed. The
Officers shall cause the Company to furnish all pertinent information to the
Members that is necessary to determine amounts includable on their tax returns
with respect to the Company (including Schedule K-1) not later than 75 days
after the end of the Taxable Year or any extension period granted by the
relevant authority having jurisdiction over such matters. Notwithstanding the
foregoing, the Officers shall cause the Company to timely furnish to KOP any
information regarding the Company, its assets, or operations as KOP shall
reasonably request and as may be necessary in order to determine the status of
Keystone as a "real estate investment trust" within the meaning of Section 856
of the Code.
SECTION 8.2 TAX MATTERS PARTNER. KOP shall be designated to serve as the
initial tax matters partner (subject to replacement) as and when required
pursuant to Section 6231(a)(7) of the Code (the "TAX MATTERS PARTNER"), subject
to removal by the Majority of the Board, and such Tax Matters Partner shall also
be the "notice partner" within the meaning of Section 6223 of the Code. The Tax
Matters Partner may, in its sole discretion, make or revoke any election under
the Code or the Treasury Regulations issued thereunder (including for this
purpose any new or amended Treasury Regulations issued after the Formation
Date). The Tax Matters Partner is authorized to represent the Company before the
Internal Revenue Service and any other governmental agency with jurisdiction,
and to sign such consents and to enter into settlements and other agreements
with such agencies as the Board deems necessary or advisable. Promptly following
the written request of the Tax Matters Partner, the Company shall, to the
fullest extent permitted by law, reimburse and indemnify the Tax Matters Partner
for all reasonable expenses, including reasonable legal and accounting fees,
claims, liabilities, losses and damages incurred by the Tax Matters Partner in
connection with any administrative or
48
judicial proceeding (i) with respect to the tax liability of the Company and/or
(ii) with respect to the tax liability of the Members in connection with the
operations of the Company. The provisions of this Section 8.2 shall survive the
termination of the Company or the termination of any Member's interest in the
Company and shall remain binding on the Members for as long a period of time as
is necessary to resolve with the Internal Revenue Service any and all matters
regarding the Federal income taxation of the Company or the Members.
SECTION 8.3 RESERVES. The Board may from time to time establish, increase,
reduce and eliminate such reasonable cash reserves as it shall reasonably
determine.
ARTICLE IV.
TRANSFERS AND OTHER EVENTS
SECTION 9.1 TRANSFER OF INTEREST. Except as provided in this ARTICLE IX, no
Member shall have the right to sell, assign, transfer or otherwise dispose of,
whether voluntarily or involuntarily or by operation of law, all or any portion
of its, his or her Membership Interest (a "TRANSFER") in the Company to any
Person (an "ASSIGNEE") without the prior Approval of the Board.
SECTION 9.2 PERMITTED TRANSFER. Subject to the conditions and restrictions
of Sections 9.3 and 9.4, the Approval of the Board shall not be required for any
Transfer by any Member of all of any portion of its Membership Interests to any
Affiliate of such Member, unless the Transferring Member (as defined below)
seeks to be released or in any manner avoid further obligations to fund the
unfunded portion of its Member Commitment as a result of such Transfer.
SECTION 9.3 RIGHT OF FIRST OFFER-MEMBERSHIP INTEREST. Before any Member
(the "TRANSFERRING MEMBER") transfers all or any portion of its Membership
Interest (the "TRANSFERRED INTEREST") to any Person other than an Affiliate of
the Transferring Member, the Transferring Member shall notify the Board in
writing of such intended Transfer, which notice (the "TRANSFER NOTICE") shall
contain the terms of the proposed Transfer (including, the price at which the
Transferring Member is seeking to Transfer the Transferred Interest). The Board
shall provide all Members with a copy of the Transfer Notice within five (5)
business days after receiving such notice. Each Non-Defaulting Member shall have
thirty (30) days (such period the "ELECTION PERIOD") from the Board's delivery
of the Transfer Notice to notify the Board in writing of its election to acquire
all or a portion of the Transferred Interest and the percentage of the
Transferred Interest that such Non-Defaulting Member (and "ELECTING MEMBER")
proposes to acquire (such notice by an Electing Member, an "ELECTION NOTICE").
The Board shall provide a copy of each Election Notice it receives to all other
Members within five (5) business days after receiving such Election Notice. If
at the end of the Election Period, the aggregate percentage of the Transferred
Interest specified by the Electing Partners in Election Notices is equal to or
greater than 100%, then the Transferring Member shall transfer the Transferred
Interest to such Electing Members on a prorata basis in accordance with the
percentages of the Transferred Interest set forth in their respective Election
Notices, and in accordance with all other terms set forth in the Transfer
Notice. If, at the end of the Election Period no Members deliver an Election
Notice, or the aggregate percentage of the Transferred Interest specified by the
Electing Members in Election Notices is less than 100%, then the Transferring
Member shall have the
49
right, subject to the terms and conditions of Section 9.4, to Transfer the
Transferred Interest to any Person, for an amount not less than 98% of the price
specified in the Transfer Notice and otherwise on substantially identical terms
as the terms specified in the Transfer Notice, within ninety (90) days of the
expiration of the Election Period. If the Transferring Member fails to Transfer
the Transferred Interest within such ninety (90) day period, or materially
deviates from the terms of the Transfer Notice other than the variance in price
allowed pursuant to this Section 9.3, the Transferring Member shall be required
to re-offer the Transferred Interest to the other Members in accordance the
above procedure. If a Transferring Member shall Transfer all or any portion of
its interest in the Company to one or more Members, in accordance with this
Section 9.3, then the Transferring Member shall be released from any further
obligations under this Agreement to the extent of such Transferred Interest.
Notwithstanding the foregoing provisions of this Section 9.3, and without
limiting the authority of the Board to grant or withhold Approval to any
proposed Transfer to any party who is not a Member or an Affiliate of a Member,
the Board may withhold Approval to any proposed Transfer that the Board
determines, based upon the advice of counsel, would (i) violate applicable
federal, state or foreign securities laws, (ii) require the Company to register
as an investment company under the Investment Company Act of 1940, as amended,
(iii) create a material risk of adverse tax consequences to any Member (other
than the Transferring Member), including without limitation material risk that
the Company shall be treated as a "publicly traded partnership" under Section
7704 of the Code or shall fail to qualify for any safe harbor, exemption or
other favorable treatment under Section 7704 of the Code, the regulations
thereunder, and any administrative rulings or policies with respect thereto,
(iv) threaten or result in a liquidation of the Company, or (v) violate the
terms of any existing financing of Company Properties.
SECTION 9.4 ASSIGNMENTS GENERALLY; SUBSTITUTED MEMBER. Without limiting the
provisions of Sections 9.1 through 9.3, a Transfer shall be valid hereunder only
if:
(A) the Transferring Member and the Assignee each execute and deliver to
the Company such documents and instruments of conveyance as may be reasonably
requested by the Board to effect such Transfer and to confirm the agreement of
the Assignee to be bound by the provisions of this Agreement;
(B) the Transferring Member and Assignee provide to the Board the
Assignee's taxpayer identification number and any other information reasonably
necessary to permit the Company to file all required federal and state tax
returns and other legally required information statements or returns. Without
limiting the generality of the foregoing, the Company shall not be required to
make any distribution otherwise provided for in this Agreement with respect to
any interest Transferred until the Board has received such information;
(C) the Transferring Member furnishes to the Company (unless waived by the
Board) an opinion of counsel, which counsel and opinion shall be reasonably
satisfactory to the Board, that (i) the Transfer will not cause the Company to
be deemed to be an "investment company" under the Investment Company Act of
1940, as amended, (ii) the Transfer will not cause the Company to be taxed as a
corporation pursuant to Section 7704 of the Code and (iii) either the interest
Transferred has been registered under the Securities Act and any applicable
50
state securities laws or the Transfer is exempt from all applicable registration
requirements and will not violate any applicable laws regulating the Transfer of
securities; and
(D) the Transferring Member reimburses the Company for all costs and
expenses that the Company reasonably incurs in connection with the Transfer.
SECTION 9.5 RIGHTS AND OBLIGATIONS OF ASSIGNEES AND TRANSFERRING MEMBERS.
(A) A Transfer by a Member or other person shall not itself dissolve the
Company or entitle the Assignee to become a Member or exercise any rights of a
Member.
(B) A Transfer by a Member to an Affiliate or to any Person with the
Approval of the Board shall not affect the Transferring Member's power or right
to vote on any matter submitted to the Members, or its right to appoint a
representative to the Board, unless such Assignee is admitted to the Company as
a Member pursuant to Section 9.6, in which event Assignee shall have the
foregoing power and rights. A Transfer shall not eliminate the Member's
entitlement to any rights associated with the Member's remaining interest,
including, without limitation, rights to information, and shall not cause the
Member to be released from any liability to the Company solely as a result of
the Transfer.
(C) An Assignee that is not admitted as a Member pursuant to Section 9.3
and 9.4 shall be entitled only to the Economic Interest with respect to the
Transferred Interest and shall have no other rights (including, without
limitation, rights to any information or accounting of the affairs of the
Company or to inspect the books or records of the Company) with respect to the
Transferred Interest. The Assignee shall nevertheless be subject to all of the
obligations applicable to a Member under this ARTICLE IX if the Assignee becomes
a Member, the voting and other rights associated with the interest held by the
Assignee shall be restored and be held by the Member along with all other rights
with respect to the Transferred Interest. The Assignee shall have no liability
as a Member solely as a result of the Transfer.
SECTION 9.6 EFFECT OF ADMISSION OF MEMBER ON TRANSFERRING MEMBER AND
COMPANY. A Transferee may be admitted to the Company as a Member upon the
Approval of the Board. Notwithstanding the admission of an Assignee as a Member,
the Transferring Member shall not be released from any obligations to the
Company existing as of the date of the transfer (other than obligations of the
Transferring Member to make future Capital Contributions), but such admission
shall cause the Transferring Member to cease to be a Member with respect to the
interest Transferred when the Assignee becomes a Member. In any such case, the
admission of the Assignee as a Member shall constitute the requisite consent of
the Members to continue the business of the Company notwithstanding that such
admission will cause the termination of the membership of the Transferring
Member with respect to the interest Transferred.
SECTION 9.7 DISTRIBUTIONS AND ALLOCATIONS REGARDING TRANSFERRED INTERESTS.
Upon any Transfer during any Fiscal Year of the Company made in compliance with
the provisions of this ARTICLE IX, Profits, Losses, each item thereof and all
other items attributable to such interest for such Fiscal Year shall be divided
and allocated between the Transferring
51
Member and the Assignee by taking into account their varying interests during
such Fiscal Year, using any conventions permitted by law and selected by the
Board. All distributions on or before the date of such Transfer shall be made to
the Transferring Member and all distributions thereafter shall be made to the
Assignee. Solely for purposes of making such allocations and distributions, the
Company shall recognize such Transfer not later than the end of the calendar
month during which it is given notice of such Transfer; provided that, if the
Company is given notice of a Transfer at least 10 business days prior to the
Transfer, the Company shall recognize such Transfer as the date of such
Transfer, and provided, further, that, if the Company does not receive a notice
stating the date such interest was Transferred and such other information as the
Board may reasonably require within 30 days after the end of the Fiscal Year
during which the Transfer occurs, then all such items shall be allocated, and
all distributions shall be made, to the Member that, according to the books and
records of the Company, was the owner of the interest on the last day of the
Fiscal Year during which the Transfer occurs. Neither the Company nor the Board
shall incur any liability for making allocations and distributions in accordance
with the provisions of this Section 9.7, whether or not the Company or the Board
has knowledge of any Transfer of any interest.
SECTION 9.8 REQUIRED AMENDMENTS; CONTINUATION. If and to the extent any
Assignee is admitted as a Member pursuant to Section 9.6, this Agreement shall
be amended to admit such Assignee as a Member and to reflect the elimination of
the Transferring Member (or the reduction of such Membership Interest) and (if
and to the extent then required by the Act) a certificate of amendment to the
Certificate reflecting such admission and elimination (or reduction) shall be
filed in accordance with the Act. The admission of any substitute Member
pursuant to this ARTICLE IX shall be deemed effective on the effective date of
such amendment to this Agreement.
SECTION 9.9 RESIGNATION. No Member shall have the right to resign or
withdraw as a Member without the prior written Approval of the Board, which may
be given or withheld in its sole and absolute discretion. Any Member that
resigns without the Approval of the Board in contravention of this Section 9.9
shall be liable to the Company for all damages (including all lost profits and
special, indirect and consequential damages) directly or indirectly caused by
the resignation of such Member, and such Member shall be entitled to receive the
fair value of his, her or its Membership Interest as of the date of his, her or
its resignation (or, if less, the fair value of his, her or its interest as of
the winding-up of the Company), as conclusively determined by the Board, only
following the occurrence of the winding-up of the Company.
SECTION 9.10 NO APPRAISAL RIGHTS. No Member shall be entitled to any
appraisal rights with respect to such Member's Membership Interest, whether
individually or as part of any class or group of Members, in the event of a
merger, consolidation, or other transaction involving the Company or its
securities unless such rights are expressly provided herein or by the agreement
of merger, agreement of consolidation or other document effectuating such
transaction.
SECTION 9.11 VOID ASSIGNMENT. Any Transfer by any Member in contravention
of this Agreement shall be void and ineffectual and shall not bind or be
recognized by the Company or any other party. In the event of any Transfer in
contravention of this Agreement,
52
the purported transferee shall have no right to any profits, losses or
distributions of the Company or any other rights of a Member.
ARTICLE V.
BUY-SELL/DRAFTING OF ASSETS
SECTION 10.1 BUY-SELL INFORMATION. Within fifteen (15) days after request
by a Member given anytime (A) after the occurrence of a Buy-Sell Event as
described in clauses (a) or (b) of the definition of a Buy-Sell Event, (B) after
the occurrence of a Termination Event, or (C) after the expiration of the
Commitment Period, the Officers shall prepare and deliver to each Member a
property certification executed by KOP in the form of Schedule 10.1 (a "PROPERTY
CERTIFICATION"). In addition, the Officers shall prepare and shall deliver to
each Member a Property Certification within fifteen (15) days after the delivery
by one Member to the other of a Buy-Sell Notice (the "15 DAY PROPERTY
CERTIFICATION"). Notwithstanding anything to the contrary contained herein, each
Member shall be limited to no more than two (2) requests per calendar year
pursuant to Section 10.1(C) above. Requests by a Member pursuant to this Section
10.1 shall not in any way obligate such Member to deliver a Buy-Sell Notice
under this Article X. Within ten (10) days after receipt of a Property
Certification, CalEast shall deliver to KOP a confirmation that it has no
knowledge of any material misstatements or omissions contained in the Property
Certification or a statement of any material misstatements or omissions of which
it has knowledge (the "CERTIFICATION CONFIRMATION").
SECTION 10.2 BUY-SELL NOTICE. Upon an occurrence of a Buy-Sell Event as
described in clause (d) of the definition of a Buy-Sell Event, either Member
(the "OFFEROR MEMBER") may elect, in its sole discretion to give written notice
(a "BUY-SELL NOTICE") to the other Member (the "OFFEREE MEMBER") (A) stating a
price determined by the Offeror Member for a one hundred percent (100%) interest
in the Company Properties and all other assets of the Company (the "BUY-SELL
PRICE"), and (B) requiring the Offeree Member to either (1) sell its entire
Membership Interest to the Offeror Member for a price equal to the amount that
the Offeree Member would receive (the "OFFEREE VALUE") if (i) all of the Company
Properties and all other assets of the Company were sold for the Buy-Sell Price,
(ii) all liabilities of the Company were paid in full (including amounts due
under the Credit Facility, if any), and (iii) the remaining proceeds of the
Company were distributed to the Members in accordance with Section 5.2, or (2)
purchase the entire Membership Interest of the Offeror Member for a price equal
to the amount that the Offeror Member would receive (the "OFFEROR VALUE") if the
events specified in the foregoing clauses (i) through (iii) were to occur. Upon
an occurrence of a Buy-Sell Event as described in clause (c) of the definition
of a Buy-Sell Event, only the appropriate Member designated in Section 11.1(B)
shall have the right to elect, in its sole discretion, to give a Buy-Sell
Notice. Upon an occurrence of a Buy-Sell Event as described in clauses (a) or
(b) of the definition of a Buy-Sell Event, only CalEast shall have the right to
elect, in its sole discretion, to give a Buy-Sell Notice. Notwithstanding the
above, in the event that either (X) any 15 Day Property Certification, or (Y)
any Certification Confirmation delivered in response to the delivery of any 15
Day Property Certification contains information which materially differs from
the information contained in the Property Certification or Certification
Confirmation upon which the Buy-Sell Notice which triggered the 15 Day Property
Certification was based, then the Member who delivered such Buy-Sell Notice
shall have ten (10) Business Days from and after the delivery of the
Certification Confirmation delivered in response to the 15 Day Property
53
Certification to modify or withdraw its Buy-Sell Notice by delivering written
notice of such modification or withdrawal to the other Member. Failure to modify
or withdraw a Buy-Sell Notice within such ten (10) Business Day period shall be
conclusively deemed to be a waiver of this right to withdraw or modify a
Buy-Sell Notice. In the event that a Member elects to deliver a modified
Buy-Sell Notice within this time period, the 15 Day Property Certification and
Certification Confirmation requirements of Section 10.1 shall again apply.
SECTION 10.3 BUY-SELL ELECTION. Upon receipt of a Buy-Sell Notice, the
Offeree Member shall have sixty (60) days after delivery of the Certification
Confirmation delivered in response to the 15 Day Property Certification to
elect, by written notice to the Offeror Member signed by or on behalf of the
Offeree Member (the "BUY-SELL ELECTION NOTICE"), either to:
(A) sell its Membership Interest to the Offeror Member for a cash purchase
price equal to the Offeree Value; or
(B) purchase the Membership Interest of the Offeror Member for a cash
purchase price equal to the Offeror Value.
SECTION 10.4 CASH DEPOSIT.
(A) If the Offeree Member elects to purchase the Offeror Member's
Membership Interest pursuant to Section 10.3(B), the Offeree Member shall make
contemporaneously with such election a cash deposit in escrow with a bank or
other financial institution selected by the Offeror Member and identified in the
Buy-Sell Notice in an amount calculated in accordance with Section 10.4(B)
below. If the Offeree Member elects to sell its Membership Interest pursuant to
Section 10.3(A) the Offeror Member shall make, within five (5) Business Days of
such election, a cash deposit in escrow with a bank or other financial
institution selected by the Offeree Member and identified in the Buy-Sell
Election Notice in an amount calculated in accordance with Section 10.4(B)
below.
(B) The cash deposit (the "BUY SELL DEPOSIT") referred to in Section
10.4(A) above shall be equal to ten percent (10%) of the Offeree Value or
Offeror Value, as applicable. In the event that: (i) the Offeree Member elects
to sell its Membership Interest pursuant to Section 10.3(A) or purchase the
Offeror Member's Membership Interest pursuant to Section 10.3(B); and (ii) the
purchasing Member fails to complete such purchase within the ninety (90) day
period provided in Section 10.5, then the purchasing Member shall be deemed to
be a Defaulting Member and the selling Member may retain the Buy Sell Deposit
and either:
(1) purchase the purchasing Member's Membership Interest for a cash
purchase price equal to the Offeree Value or the Offeror Value, as
applicable; or
(2) exercise any other rights or remedies available at law or in
equity.
54
SECTION 10.5 COMPLETION OF TRANSFER OF MEMBERSHIP INTERESTS BETWEEN
MEMBERS. Completion of the sale and purchase of any Membership Interests under
Sections 10.3 and 10.4 shall take place at the Company's principal place of
business no later than the date which is ninety (90) days after the date of the
Buy-Sell Election Notice. All transfer, stamp and other taxes imposed on the
transfer and all loan prepayment penalties or fees or assumption fees shall be
payable by the purchasing Member, and all other costs associated with the
transfer (including without limitation, any costs of review or negotiation of
the documents evidencing or securing the Credit Facility or other debt of the
Company or debt secured by the Company Properties necessary to implement the
terms of this Section 10.5) shall be borne equally by the Members.
Simultaneously with the sale and purchase of a Membership Interest, the Offeror
Member and the Offeree Member shall execute such documents, and shall cause the
lender under the Credit Facility to execute such documents, as reasonably
necessary to release the selling Member from any and all of its obligations
under the Credit Facility. All Membership Interests sold pursuant to this
ARTICLE X shall be sold free and clear of any liens or other encumbrances and
together with all rights attached thereto as of the date of transfer.
SECTION 10.6 INDEMNIFICATION. Any Member who shall purchase a Membership
Interest (the "BUYING MEMBER") from another Member (the "SELLING MEMBER")
pursuant to Section 10.5 shall as of and after the date of the transfer of the
Membership Interest indemnify and hold harmless the Selling Member and its
Affiliates from and against any and all manner of liability, loss, damage, cost,
cause of action, lien, indebtedness or claim (collectively, a "CLAIM") arising
out of or relating to the Company or the Selling Member's Membership Interest
that the Selling Member may suffer or incur as a result of any event that may
occur after the date of the transfer of the Membership Interest, except for a
Claim arising as a result of the gross negligence, fraud or intentional
misconduct of the Selling Member, in which case such indemnification shall not
cover the Claim to the extent resulting from such gross negligence, fraud or
intentional misconduct.
SECTION 10.7 DRAFTING OF ASSETS. Upon receipt of a Buy-Sell Notice
delivered as a result of the occurrence of a Buy-Sell Event as described in
clauses (c) or (d) of the definition of a Buy-Sell Event, the Offeree Member may
elect, in its sole discretion, to dissolve the Company and distribute the
Company Properties through the process described in this Section 10.7 (the
"DRAFTING PROCESS") in lieu of a transfer of Membership Interests pursuant to
Sections 10.3 and 10.4 above, by giving written notice of its election to
initiate the Drafting Process (the "DRAFT NOTICE") to the Offeror Member within
fifteen (15) days after the delivery of the Certification Confirmation delivered
in response to the 15 Day Property Certification. The failure to deliver a Draft
Notice within said fifteen (15) day period shall be deemed to be an irrevocable
waiver of its right to initiate the Drafting Process by the Offeree Member.
(A) Within the thirty (30) day period commencing upon the date the Offeror
Member receives a Draft Notice (the "VALUATION PERIOD"), each Member shall
prepare and deliver to the other Member such Member's determination of the gross
fair market value (the "GFMV") of each Company Property and the net value of
each Company Property resulting after deducting all debt and other liabilities
relating to each Company Property (both specific debt and the pro rata portions
of all general or cross-collateralized and cross-defaulted debt and including
any prepayment penalties or fees or assumption costs or fees which would be
incurred as a result of the distribution of a Company Property to a Member, and
with respect to which penalties, fees or
55
expenses the Members agree to pursue the most economical alternative) (the "NET
VALUE"), and the Members shall jointly agree upon and designate a duly qualified
appraiser who (i) is licensed in New Jersey, (ii) has a minimum of ten (10)
years experience appraising industrial properties in the New Jersey counties of
Bergen, Hudson, Union, Somerset, Hunterdon, ▇▇▇▇▇▇, Monmouth, Middlesex,
Passaic, ▇▇▇▇▇▇, Sussex, Essex, and ▇▇▇▇▇▇, and (iii) is a member of The
Appraisal Institute (a "QUALIFIED APPRAISER"). If the Members cannot agree upon
a Qualified Appraiser prior to the expiration of the Valuation Period, then
within five (5) business days after the expiration of the Valuation Period, each
Member shall designate a Qualified Appraiser, which Qualified Appraisers shall,
on or prior to the date which is ten (10) business days after the expiration of
the Valuation Period, jointly designate a third Qualified Appraiser; if the two
Qualified Appraisers cannot agree on a third Qualified Appraiser within such ten
(10) business day period, then the two Qualified Appraisers shall cause the
third Qualified Appraiser to be selected by the Appraisal Institute within
fifteen (15) business days after the expiration of the Valuation Period. The
Qualified Appraiser designated by the Members, designated by the Members'
Qualified Appraisers or designated by the Appraisal Institute, as the case may
be, shall have thirty (30) days from and after the latest to occur of its
selection, its receipt of the Members' GFMV and Net Value determinations, its
receipt of the Property Certification and its receipt of the Certification
Confirmation (the "ARBITRATION PERIOD") to choose the GFMV and Net Value which,
in such Qualified Appraiser's professional judgement, most closely approximates
the GFMV and Net Value of each Company Property. In connection therewith, the
Qualified Appraiser shall be instructed not to take into account as base
assumptions facts which are inconsistent with the facts set forth in the
Property Certification and Certification Confirmation unless such facts have
been approved in writing by the Members. The Qualified Appraiser shall not
average the values or determine new values for the GFMV or Net Value for any
Company Property and shall be strictly limited to choosing one or the other
Member's designation of such values. The Qualified Appraiser's selection of one
GFMV and Net Value for each Company Property from the Members' determinations of
the GFMV and Net Value of each Company Property shall be final, conclusive and
binding on the Members for the purpose of this Section 10.7 and shall be
delivered to the Members on or before the expiration of the Arbitration Period
by a written notice, which shall set forth the GFMV and Net Value of each
Company Property (a "PRICE LIST"), which Price List shall not be subject to
further review or challenge by either Member.
(B) Within five (5) business days after receipt of the Price List, the
Initial Drafting Member shall deliver to the other Member a written notice
stating which Company Property it selects to have distributed to it (a
"SELECTION NOTICE"). The other Member shall then have three (3) business days
after receipt of such notice to select a Company Property to be distributed to
it and to deliver a Selection Notice to the Initial Drafting Member. Subject to
subsection (C) below, this procedure shall continue with each Member alternating
delivery of Selection Notices to the other Member every three (3) business days
until all of the Company Properties have been selected or until neither Member
wishes to make a selection from the remaining unselected Company Properties. In
the event that a Member fails to deliver a Selection Notice to the other Member
within the allotted five (5) or three (3) business day period, as applicable,
such Member shall be deemed to have waived that selection (but only that
selection) and the other Member shall have three (3) business days from the
expiration of the preceding three (3) business day period to deliver a Selection
Notice to the other Member. In the event that at the conclusion of this process
neither Member has selected a particular Company
56
Property or group of Company Properties, then the Company shall market such
Company Property or group of Company Properties for sale to any Person. For the
purpose of this Section 10.7(B), the "INITIAL DRAFTING MEMBER" shall be as
follows: (i) CalEast in the event that the Buy-Sell Notice was delivered as a
result of the events described in Sections 11.1(B)(i); 11.1(B)(ii)(1),
11.1(B)(ii)(2) or 11.1(B)(ii)(3); (ii) KOP in the event that the Buy-Sell Notice
was delivered as a result of the events described in Sections 11.1(B)(ii)(4) or
11.1(B)(iii); or (iii) the Offeree Member in the event that the Buy-Sell Notice
was delivered as a result of the occurrence of a Buy-Sell Event as described in
clause (d) of the definition of a Buy-Sell Event.
(C) Notwithstanding Sections 10.7(A) and (B), in the event that, at any
time during the procedure set forth in Section 10.7(B), a selection by KOP would
result in KOP receiving Company Properties whose aggregate Net Values would
exceed the KOP Threshold, then (i) KOP shall be entitled to make an alternate
selection so long as such alternate selection would not cause the aggregate Net
Values of the Company Properties selected by KOP to exceed the KOP Threshold and
the procedure set forth in Section 10.7(B) shall continue until such time as
this Section 10.7(C) applies again, or, if KOP elects not to make such alternate
selection, or if no such alternate then exists, then (ii) no selection shall be
made by KOP and instead, CalEast shall have the right to select any or all of
the remaining Company Properties in its Selection Notice. In the event that
CalEast selects less than all of the remaining Company Properties, then KOP
shall have the right to select any or all of the remaining Company Properties
remaining after CalEast's selection. If KOP selects less than all of the
remaining Company Properties, such remaining Company Properties shall be
marketed for sale to any Person. For purposes of this Section 10.7(C) the "KOP
THRESHOLD" shall be as follows: (1) 50% of the aggregate Net Values of the
Company Properties as set forth on the Price List in the event that the Drafting
Process was instituted as result of a Buy-Sell Notice delivered as a result of
the occurrence of a Buy-Sell Event as described in clause (d) of the definition
of Buy-Sell Event or (2) an amount equal to the sum of (A) the Offeror Value or
Offeree Value, as the case may be, that KOP would have received assuming that
all Company Properties were sold for cash and the Net Capital Proceeds from such
sale which would be distributed to the Members in accordance with Section 5.2
equaled the sum of the Net Values set forth on the Price List plus (B) the
greater of (i) three percent (3%) of the sum of the GFMVs for all Company
Properties as set forth on the Price List, and (ii) five million dollars
($5,000,000), in the event that the Drafting Process was instituted as a result
of a Buy-Sell Notice delivered other than as a result of the occurrence of a
Buy-Sell Event as described in clause (d) of the definition of Buy-Sell Event.
(D) After the Members have completed selecting the Company Properties
(whether or not all of the Company Properties have been selected), the following
procedure shall be followed:
(i) within five (5) business days after the completion of the
selection process, the Net Value of all of the Company Properties selected
by each Member (the "DRAFT VALUE") shall be compared to the amount (the
"PROPORTIONATE VALUE") such Member would have received on account of its
Membership Interest assuming all of the Company Properties selected by the
Members were sold for cash and the Net Capital Proceeds from such sales
which would be distributed to the Members in accordance with Section 5.2
equaled the sum of the Net Values set forth on the Price List for such
Company Properties;
57
(ii) in the event that one Member has selected Company Properties
whose Draft Value is in excess of such Member's Proportionate Value (an
"EXCESS"), then at the time of the distribution of the Company Properties
to the Members pursuant to Section 10.7(E) below, such Member shall make a
cash payment to the other Member in an amount equal to the Excess (a "CASH
ADJUSTMENT PAYMENT"). If a Member does not make the Cash Adjustment Payment
when the Company Properties are to be distributed, no Company Properties
shall be distributed, such Member shall be deemed to be a Defaulting Member
hereunder and in order to eliminate the need for the Defaulting Member to
make the Cash Adjustment Payment, the Non-Defaulting Member shall, in
addition to having the right to pursue any rights or remedies available at
law or in equity, have the right, exercisable in its sole discretion by
delivering written notice to the Defaulting Member within thirty (30) days
after the Cash Adjustment Payment was to be made, to either (A) cancel the
Drafting Process and purchase the Defaulting Member's Membership Interest
at a price equal to ninety percent (90%) of the Offeree Value based upon
the Net Values set forth in the Price List, or (B) complete the Drafting
Process by selecting one or more of the Company Properties previously
selected by the Defaulting Member to be (1) distributed to the
Non-Defaulting Member and/or (2) marketed for sale to any Person by the
Company in accordance with clause (iii) below, even if such election
results in the Non-Defaulting Member having to make a Cash Adjustment
Payment to the Defaulting Member in which case the Company Properties shall
be distributed in accordance with this notice;
(iii) any Company Property not selected by a Member under Sections
10.7(B) or (C) or which goes to market as a result of Section 10.7(D)(ii)
will be marketed for sale to any Person and the proceeds of such sale(s)
shall be distributed in accordance with Section 5.2. For the purpose of
cash distributions under this Section 10.7(D)(iii), distributions of
Company Properties pursuant to subsection (E) below shall be treated as
distributions of cash in an amount equal to the aggregate Net Values of
such Company Properties as adjusted by any Cash Adjustment Payments made or
received under Section 10.7(D)(ii) on the date such transfers took place
and payments were made. Upon the completion of the sale of all remaining
Company Properties, the Company shall be dissolved.
(E) Within sixty (60) days of completion of the selection of Company
Properties set forth in Sections 10.7(B), (C), and if applicable, (D)(ii), the
Board shall cause the Company Properties to be distributed to the appropriate
Member, any Cash Adjustment Payment required to be made by one Member to the
other Member shall be made, and each Member's Capital Account shall be adjusted
accordingly. Costs incurred in connection with the Drafting Process and
distribution of Company Properties pursuant thereto shall be allocated as
follows: (i) all survey, title and escrow costs incurred in connection with the
distribution of a Company Property to a Member shall be borne by the Member
receiving the applicable Company Property, (ii) all transfer taxes incurred in
connection with the distribution of a Company Property to a Member shall be
borne by the Company and shall be paid prior to the distribution of any
Distributable Cash, or in the event that the Company does not have sufficient
Distributable Cash to pay such expenses, then such expenses shall be borne
ratably by the Members in proportion to the Member's respective Proportionate
Values, (iii) all early payment penalties or fees, or assumption costs or fees,
or like charges incurred in connection with the prepayment or
58
assumption of debt secured by Company Properties to be distributed shall be
borne by the Member receiving the applicable Company Property (with respect to
which the Members agree to pursue the most economical alternative), (iv) all
costs of reviewing or renegotiating Company debt or debt secured by Company
Properties (excepting those costs set forth in clause (iii) above) shall be
shared equally between the Members, (v) all costs of the Qualified Appraiser who
determines the Price List shall be borne by the Member delivering the Draft
Notice, and (vi) all costs of any other Qualified Appraisers required by this
Section 10.7 shall be borne by the Member designating such Qualified Appraiser.
Any Member receiving a Company Property pursuant to a distribution under this
Section 10.7 shall, as of and after the date of the distribution of such Company
Property, hold harmless the Company and the other Member from and against any
and all manner of Claim arising out of or relating to that Company Property that
the Company or such other Member may suffer or incur as a result of any event
that may occur after the date of such distribution, except for a Claim arising
as a result of the gross negligence, fraud or intentional misconduct of the
Company or such other Member (and in the case of KOP being such other Member,
such exception shall include Claims (1) arising as a result of the gross
negligence, fraud or intentional misconduct of any Affiliate of KOP providing
services under the Management Agreement and (2) if the facts of which would
result in a breach of any representations, warranties or indemnities given by
KOP or any Affiliate of KOP to the Company under or in connection with the
Contract or the Lease Agreement) in which case such indemnification shall not
cover the Claim to the extent resulting from such gross negligence, fraud or
intentional misconduct or to the extent the facts of which result in a breach of
any such representations, warranties or indemnities, as the case may be.
ARTICLE VI.
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 11.1 DISSOLUTION.
(A) The Company shall be dissolved and its affairs shall be wound up on the
first to occur of the following:
(i) the Approval of the Board;
(ii) the entry of a decree of judicial dissolution of the Company
under Section 18-802 of the Act;
(iii) upon the election by the applicable Member (i.e., the Member
entitled to deliver a Buy-Sell Notice upon the applicable Termination
Event) after a Termination Event, unless such Member elects to give a
Buy-Sell Notice as set forth in Section (B) below;
(iv) the failure of the Board to Approve the acquisition and receipt
of the contribution of the Initial Portfolio on or prior to the Initial
Portfolio Date; and
(v) the Termination Date.
59
The death, retirement, resignation, expulsion, incapacity, bankruptcy or
dissolution of a Member, or the occurrence of any other event that terminates
the continued membership of a Member in the Company, shall not cause a
dissolution of the Company, and the Company shall continue in existence subject
to the terms and conditions of this Agreement.
(B) Notwithstanding anything to the contrary contained in Sections
6.3(B)(ii) or 6.3(C), following the occurrence of any of the following (each, a
"TERMINATION EVENT"), the Member specified below may elect to cause the Company
to be dissolved pursuant to this Article XI or to deliver a Buy-Sell Notice to
the other Member:
(i) by CalEast, at any time during the period that begins on the date
which is eighteen months after the Formation Date and ends on the date on
which the Members have been obligated to contribute ninety percent (90%) of
their respective Member Commitments, if:
(1) CalEast is not then a Defaulting Member; and
(2) KOP fails to present to the Company at least $150,000,000 of
Proposed Investments which conform to the Investment
Criteria (the "Conforming Investment Threshold") during any
eighteen (18) month period prior to the earlier of the
expiration of the Commitment Period or the date on which the
Members have been obligated to contribute ninety percent
(90%) of their respective Member Commitments;
notwithstanding the above, any Proposed Investment which is
Approved by the Board pursuant to Section 3.1(B) shall be
counted toward the Conforming Investment Threshold whether
or not it conforms to the Investment Criteria; or
(ii) by CalEast, at any time, if:
(1) KOP ceases to be controlled by Keystone;
(2) there is a Change of Control at Keystone; or
(3) During the Exclusivity Period, the Acquisitions and
Development Officer resigns or is removed or ceases to be
employed by Keystone or a Keystone Affiliate and has not
been replaced within ninety (90) days by someone who enjoys
a favorable reputation in the industrial real estate
community and who has a minimum of (a) ten (10) years of
industrial acquisition experience; (b) the last four (4)
years of which were concentrated on industrial real estate
located in Northern and Central New Jersey, (c) five (5)
years of which were in an executive position and who is
reasonably acceptable to CalEast; or
60
(4) KOP exercises its right to terminate the Exclusivity Period
as the result of the occurrence of the Termination Event
specified in Section 11.1(B)(iii); or
(iii) by KOP, at any time during the period that begins on the date
which is eighteen months after the Formation Date and ends on the date on
which the Members have been obligated to contribute ninety percent (90%) of
their respective Member Commitment, if:
(1) KOP is not a Defaulting Member; and
(2) KOP has exceeded the Conforming Investment Threshold during
any eighteen (18) month period prior to the earlier of the
expiration of the Commitment Period or the date on which the
Members have contributed ninety percent (90%) of their
respective Member Commitments, and the Board shall have
failed to Approve at least $100,000,000 (the "REJECTION
THRESHOLD") of Proposed Investments for acquisition. Any
Proposed Investment which is Approved by the Board pursuant
to Section 3.1(B) shall be counted toward the Rejection
Threshold whether or not it conforms to the Investment
Criteria.
SECTION 11.2 LIQUIDATION AND TERMINATION. On dissolution of the Company,
the Board shall act as liquidator or may appoint one or more Officers as
liquidator. The liquidators shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
costs of liquidation shall be borne as a Company expense. Until final
distribution, the liquidators shall continue to operate the Company's Officers
Properties with all of the power and authority of the Board. The steps to be
accomplished by the liquidators are as follows:
(A) As promptly as possible after dissolution and again after final
liquidation, the liquidator(s) shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable.
(B) The liquidator(s) shall cause the notice described in the Act to be
mailed to each known creditor of and claimant against the Company in the manner
described thereunder.
(C) The liquidator(s) shall pay, satisfy or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including, without
limitation, all expenses incurred in liquidation) or otherwise make adequate
provision for payment and discharge thereof (including, without limitation, the
establishment of a cash fund for contingent liabilities in such amount and for
such term as the liquidator may reasonably determine).
(D) The balance, if any, of the Company's remaining assets shall be
distributed to the Members in accordance with Section 5.2. Notwithstanding the
provisions of
61
Section 5.3, items of income, gain, deduction and loss for the final Taxable
Year of the Company shall be allocated to the Members' Capital Accounts in such
a manner that the Members' positive Capital Account balances shall be,
immediately prior to the distribution pursuant to Section 11.2(D), in such
proportion. To the extent practicable, distributions pursuant to this Section
11.2(D) shall be made by the end of the Taxable Year of the Company during which
the liquidation occurs (or, if later, 90 days after the date of the
liquidation).
The liquidator(s) shall cause only cash, evidences of indebtedness and other
securities to be distributed in any liquidation. The distribution of cash and/or
property to a Member in accordance with the provisions of this Section 11.2
constitutes a complete return to such Member of its Capital Contributions and a
complete distribution to the Member of its interest in the Company and all the
Company's property and constitutes a compromise to which all Members have
consented within the meaning of the Act. The distribution of cash and/or
property to an Assignee who is not a Member in accordance with the provisions of
this Section 11.2 constitutes a complete distribution to such Assignee of its
interest in the Company and all the Company's property and constitutes a
compromise to which all Members have consented within the meaning of the Act. To
the extent that a Member returns funds to the Company, it has no claim against
any other Member for those funds.
SECTION 11.3 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any
other provision of this ARTICLE XI, in the event the Company is "liquidated"
within the meaning of Treasury Regulation section 1.704-1(b)(2)(ii)(g), the
Company's assets shall not be liquidated, the Company's liabilities shall not be
paid or discharged, and the Company's affairs shall not be wound up. Instead,
the Company shall be deemed to have contributed its assets to a newly-created
limited liability company in exchange for such company's assumption of the
Company's liabilities and equity interests in such new company. Immediately
thereafter, the Company shall be deemed to have distributed the new limited
liability company equity interests to the Members in accordance with their
Capital Accounts.
SECTION 11.4 DEFICIT CAPITAL ACCOUNTS. Notwithstanding any custom or rule
of law to the contrary, to the extent that any Member has a deficit Capital
Account balance, upon dissolution of the Company such deficit shall not be an
asset of the Company and such Members shall not be obligated to contribute such
amount to the Company to bring the balance of such Member's Capital Account to
zero.
SECTION 11.5 CANCELLATION OF CERTIFICATE. On completion of the distribution
of Company assets as provided herein, the Company is terminated, and shall file
a certificate of cancellation with the Secretary of State of the State of
Delaware, cancel any other filings made pursuant to Section 2.1 and take such
other actions as may be necessary to terminate the Company.
SECTION 11.6 TAX DEFERRAL. If so requested in writing by KOP, CalEast shall
cooperate with KOP in facilitating one or more tax deferred exchanges pursuant
to ss.1031 of the Code or other tax deferred transaction or transactions by KOP
in connection with the sale of any Company Property and the winding-up and
liquidation of the Company, provided, however, that CalEast shall not be
required hereby to: (i) incur costs or liabilities other than costs and
liabilities incurred in a sale of the Company Property or Properties in question
for cash in the
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ordinary course; or (ii) accept as consideration for such sale
or other disposition any medium of payment other than cash; or (iii) materially
delay receipt of its consideration as a result of its cooperation.
ARTICLE VII.
GENERAL/MISCELLANEOUS PROVISIONS
SECTION 12.1 OFFSET. Whenever the Company is to pay any sum to any Member,
any amounts that such Member owes to the Company may be deducted from that sum
before payment; provided that the full amount that would otherwise be
distributed shall be debited from the Member's Capital Account pursuant to
Section 4.1.
SECTION 12.2 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any
right it may have to demand any distributions or withdrawal of property from the
Company or to maintain any action for dissolution (except pursuant to Section
18-802 of the Act) of the Company or for partition of the property of the
Company.
SECTION 12.3 INDEMNIFICATION AND REIMBURSEMENT FOR PAYMENTS ON BEHALF OF A
MEMBER. If the Company is obligated to pay any amount to a governmental agency
(or otherwise makes a payment) because of a Member's status or otherwise
specifically attributable to a Member (including, without limitation, federal,
state or local withholding taxes imposed with respect to any issuance of
Membership Interests to a Member or any payments to a Member, federal
withholding taxes with respect to foreign Persons, state personal property
taxes, state personal property replacement taxes, state unincorporated business
taxes, etc.), then such Member (the "INDEMNIFYING MEMBER") shall indemnify the
Company in full for the entire amount paid (including, without limitation, any
interest, penalties and expenses associated with such payments). At the option
of the Board, either:
(A) promptly upon notification of an obligation to indemnify the Company,
the Indemnifying Member shall make a cash payment to the Company equal to the
full amount to be indemnified (provided that the amount paid shall not be
treated as a Capital Contribution); or
(B) the Company shall reduce distributions that would otherwise be made to
the Indemnifying Member, until the Company has recovered the amount to be
indemnified (provided that the amount of such reduction shall be deemed to have
been distributed for all purposes of this Agreement).
An Indemnifying Member's obligation to make contributions to the Company under
this Section 12.3 shall survive the termination, dissolution, liquidation and
winding up of the Company and, for purposes of this Section 12.3, the Company
shall be treated as continuing in existence. The Company may pursue and enforce
all rights and remedies it may have against each Indemnifying Member under this
Section 12.3, including instituting a lawsuit to collect such contribution with
interest calculated at Prime Rate plus five percentage points per annum (but not
in excess of the highest rate per annum permitted by law).
SECTION 12.4 NOTICES. Except as expressly set forth to the contrary in this
Agreement, all notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement must be in writing and
shall be deemed delivered: (i)
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upon delivery if delivered in person; (ii) upon the date indicated in the return
receipt as being the date of actual receipt if mailed by United States
registered or certified mail with return receipt requested, addressed to the
recipient, postage paid; (iii) upon transmission if sent via telecopier, with a
confirmation copy sent via overnight mail, provided that confirmation of such
overnight delivery is received; or (iv) one (1) Business Day after deposit with
a national overnight courier provided that confirmation of such overnight
delivery is received. All notices, requests and consents to be sent to a Member
must be sent to or made at the address (or facsimile number) given for that
Member on SCHEDULE 3.2, or such other address (or facsimile number) as that
Member may specify by notice to the other Members. Any notice, request or
consent to the Company or the Board must be given to the Board or, if appointed,
the secretary of the Company at the Company's chief executive offices. Whenever
any notice is required to be given by law or this Agreement, a written waiver
thereof, signed by the Person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
SECTION 12.5 PUBLIC ANNOUNCEMENTS. No Member shall make any public
announcement or filing with respect to the transactions provided for herein
without the prior Approval of the Board, unless such party has been advised by
counsel such disclosure is required by applicable law. To the extent reasonably
feasible, any press release or other announcement or notice regarding the
transactions contemplated by this Agreement shall be made by the Board or any
other party designated by the Board.
SECTION 12.6 ENTIRE AGREEMENT. This Agreement and other written agreements
among the Members and their Affiliates relating to the Company of even date
herewith constitute the entire agreement among the Members relating to the
Company and supersedes all prior contracts or agreements with respect to the
Company, whether oral or written.
SECTION 12.7 EFFECT OF WAIVER OR CONSENT. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations hereunder or with respect to the Company is not a
consent or waiver to or of any other breach or default in the performance by
that Person of the same or any other obligations of that Person hereunder or
with respect to the Company. Failure on the part of a Person to complain of any
act of any Person or to declare any Person in default hereunder or with respect
to the Company, irrespective of how long that failure continues, does not
constitute a waiver by that Person of its rights with respect to that default
until the applicable statute-of-limitations period has run.
SECTION 12.8 AMENDMENT OR MODIFICATION. This Agreement and any provision
hereof may be amended or modified from time to time only by a written instrument
signed by both Members. Notwithstanding the preceding sentence, the Board may
amend and modify the provisions of this Agreement (including ARTICLE V) and
SCHEDULE 3.2 hereto to the extent necessary to reflect the admission or
substitution of any Member permitted under this Agreement.
SECTION 12.9 SEVERABILITY. Should any provision of this Agreement be held
to be enforceable only if modified, such holding shall not affect the validity
of the remainder of this Agreement, the balance of which shall continue to be
binding upon each Member with any such modification to become a part hereof and
treated as though originally set forth in this Agreement.
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The Members further agree that any court or arbitrator is expressly authorized
to modify any such unenforceable provision of this Agreement in lieu of severing
such unenforceable provision from this Agreement in its entirety, whether by
rewriting the offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by making such other
modifications as it deems warranted to carry out the intent and agreement of the
Members as embodied herein to the maximum extent permitted by law. The Members
expressly agree that this Agreement as so modified shall be binding upon and
enforceable against each of them. In any event, should one or more of the
provisions of this Agreement be held to be invalid, illegal or unenforceable in
any respect under applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision hereof, and
if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
SECTION 12.10 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement is binding on and shall inure to the benefit of the parties
hereto and their respective heirs, legal representatives, administrators,
executors, successors and permitted assigns.
SECTION 12.11 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
SECTION 12.12 NOTICE TO MEMBERS OF PROVISIONS. By executing this Agreement,
each Member acknowledges that it has actual notice of (a) all of the provisions
hereof (including, without limitation, the restrictions on the transfer set
forth in ARTICLE IX) and (b) all of the provisions of the Certificate.
SECTION 12.13 REMEDIES. The Company and the Members shall be entitled to
enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement (including costs of
enforcement) and to exercise any and all other rights at law or at equity
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement (and thus waive as defense that there is an adequate remedy at law),
and that the Company or any Member may in his, her or its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
or injunctive relief (without posting a bond or other security) in order to
enforce or prevent any violation or threatened violation of the provisions of
this Agreement.
SECTION 12.14 THIRD PARTIES. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or entity,
other than the parties to this Agreement and their respective successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.
SECTION 12.15 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE
65
THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW
OF ANOTHER JURISDICTION. In the event of a direct conflict between the
provisions of this Agreement and any provision of the Certificate or any
mandatory provision of the Act, the applicable provision of the Certificate or
the Act shall control. If any provision of this Agreement or the application
thereof to any Person or circumstance is held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of that provision to
other Persons or circumstances is not affected thereby and that provision shall
be enforced to the greatest extent permitted by law.
SECTION 12.16 WAIVER OF JURY TRIAL. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any right to trial of any
claim, demand, action, or cause of action (i) arising under this Agreement or
(ii) in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the transactions related
hereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity, or otherwise. The parties to this Agreement each hereby
agrees and consents that any such claim, demand, action, or cause of action
shall be decided by court trial without a jury and that the parties to this
Agreement may file an original counterpart of a copy of this Agreement with any
court as written evidence of the consent of the parties hereto to the waiver of
their right to trial by jury.
SECTION 12.17 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any
right it may have to demand any distributions or withdrawal of property from the
Company or to maintain any action for dissolution (except pursuant to Section
18-802 of the Act) of the Company or for partition of the property of the
Company.
SECTION 12.18 COUNTERPARTS. This Agreement may be executed in multiple
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
SECTION 12.19 DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a substantive
part of this Agreement.
SECTION 12.20 CONFLICTS. In the event of a direct conflict between the
provision of this Agreement and any provision of the Certificate or any
mandatory provision of the Act, the applicable provision of the Certificate or
the Act shall control. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Agreement in such
jurisdiction or affect the validity, legality or enforceability of any provision
in any other jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
SECTION 12.21 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the
essence for each and every provision of this Agreement. Whenever the last day
for the exercise
66
of any privilege or the discharge or any duty hereunder shall fall upon a
Saturday, Sunday, or any date on which banks in Chicago, Illinois are authorized
to be closed, the party having such privilege or duty may exercise such
privilege or discharge such duty on the next succeeding day which is a regular
business day.
SECTION 12.22 NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
SECTION 12.23 TRANSACTION EXPENSES. Except as otherwise provided in the
Contract, all legal, due diligence and other consulting fees, costs and expenses
incurred by the Members in negotiating this Agreement, the Contract, the Lease
Agreement and any related documents and in evaluating the Contributed Property
and Sold Properties shall be borne by the party incurring such fees, costs and
expenses. The filing fees and expenses incurred by the Company in its formation
shall be borne by the Company.
SECTION 12.24 DISCOUNT RATE. As used in this Agreement, all calculations of
net present value shall apply a discount rate of ten percent (10%) per annum.
SECTION 12.25 APPRAISAL. The parties agree that in the event that in
connection with the appraisal of CalEast's portfolio that is to take place in
June, 2002, the appraiser, after having reviewed ARTICLE X, states that he would
be required to discount the value CalEast's Membership Interest to reflect a
venture interest rather than a pro rata interest in the Company Properties, the
parties will promptly amend this Agreement to provide either Member with an
option to deliver a Buy-Sell Notice in accordance with the procedures applicable
to Buy-Sell Events described in clause (d) of the definition of Buy-Sell Events
as set forth in ARTICLE X.
* * * * * *
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IN WITNESS WHEREOF, the Members have executed this Agreement as of the date
first set forth above.
KEYSTONE OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: Keystone Property Trust
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------------
Its: Vice President
-----------------------------
CALEAST INDUSTRIAL INVESTORS, LLC, a California
limited liability company,
By: LaSalle Investment Management, Inc.
Its: Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Its: Managing Director
-----------------------------
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