LIMITED LIABILITY COMPANY AGREEMENT OF SSPF/CET OPERATING COMPANY LLC
Exhibit 99.1
_________ ___, 2007
THE LIMITED LIABILITY COMPANY MEMBERSHIP UNITS REPRESENTED BY THIS LIMITED
LIABILITY COMPANY AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE DELAWARE SECURITIES ACT, OR OTHER SIMILAR FEDERAL OR
STATE STATUTES OR AGENCIES IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION AS
PROVIDED IN THOSE STATUTES. THE SALE, ASSIGNMENT, TRANSFER, EXCHANGE, MORTGAGE,
PLEDGE OR OTHER DISPOSITION OF ANY LIMITED LIABILITY COMPANY MEMBERSHIP UNIT IS
RESTRICTED IN ACCORDANCE WITH THE PROVISIONS OF THIS LIMITED LIABILITY COMPANY
AGREEMENT, AND THE EFFECTIVENESS OF ANY SUCH SALE, ASSIGNMENT, TRANSFER, EXCHANGE,
MORTGAGE, PLEDGE OR OTHER DISPOSITION MAY BE CONDITIONED UPON, AMONG OTHER THINGS,
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH SALE, ASSIGNMENT, TRANSFER, EXCHANGE, MORTGAGE, PLEDGE OR OTHER
DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, THE DELAWARE SECURITIES ACT AND OTHER APPLICABLE FEDERAL OR STATE
STATUTES. BY ACQUIRING THE LIMITED LIABILITY COMPANY MEMBERSHIP UNITS REPRESENTED
BY THIS LIMITED LIABILITY COMPANY AGREEMENT, EACH MEMBER REPRESENTS THAT IT WILL
NOT SELL, ASSIGN, TRANSFER, EXCHANGE, MORTGAGE, RELEASE OR OTHERWISE DISPOSE OF ITS
LIMITED LIABILITY COMPANY MEMBERSHIP UNITS WITHOUT REGISTRATION OR OTHER COMPLIANCE
WITH THE AFORESAID STATUTES AND RULES AND REGULATIONS THEREUNDER AND THE TERMS AND
PROVISIONS OF THIS LIMITED LIABILITY COMPANY AGREEMENT.
TABLE OF CONTENTS
Page | ||||
ARTICLE I ORGANIZATION |
1 | |||
SECTION 1.1. Formation and Continuation |
1 | |||
SECTION 1.2. Name and Office |
2 | |||
SECTION 1.3. Purpose |
2 | |||
SECTION 1.4. Term |
2 | |||
SECTION 1.5. Defined Terms |
3 | |||
ARTICLE II MEMBERS; CAPITAL |
13 | |||
SECTION 2.1. Members |
13 | |||
SECTION 2.2. Voting Rights |
13 | |||
SECTION 2.3. Dividends |
13 | |||
SECTION 2.4. Redemption of Preferred Units |
14 | |||
SECTION 2.5. Special Redemption Right |
15 | |||
SECTION 2.6. Special Redemption of Common Units |
17 | |||
SECTION 2.7. Preferred Member Consent Right |
17 | |||
ARTICLE III CAPITAL |
17 | |||
SECTION 3.1. Operating Capital; Additional Capital Contributions |
17 | |||
SECTION 3.2. No Third Party Beneficiaries |
18 | |||
SECTION 3.3. Interest |
18 | |||
SECTION 3.4. Capital Accounts |
18 | |||
SECTION 3.5. Return of Capital |
19 | |||
ARTICLE IV DISTRIBUTIONS |
19 | |||
SECTION 4.1. General |
19 | |||
SECTION 4.2. Distributions |
19 | |||
SECTION 4.3. Tax Distributions |
20 | |||
SECTION 4.4. Tax Payments |
20 | |||
SECTION 4.5. Limitation on Distributions |
20 | |||
ARTICLE V ALLOCATION OF PROFITS AND LOSSES |
20 | |||
SECTION 5.1. Profits |
20 | |||
SECTION 5.2. Losses |
21 | |||
SECTION 5.3. Special Allocations |
21 | |||
SECTION 5.4. Other Allocation Rules |
23 | |||
SECTION 5.5. Tax Allocations: Code Section 704(c) |
24 |
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Page | ||||
ARTICLE VI MEMBERS; MANAGEMENT AND CONDUCT OF THE COMPANY |
25 | |||
SECTION 6.1. Members |
25 | |||
SECTION 6.2. Rights and Powers of the Managers and Officers |
25 | |||
SECTION 6.3. Number, Tenure and Qualifications |
25 | |||
SECTION 6.4. Meetings |
25 | |||
SECTION 6.5. Notice |
26 | |||
SECTION 6.6. Quorum/Participation by Telephone |
26 | |||
SECTION 6.7. Manner of Acting |
26 | |||
SECTION 6.8. Vacancies |
26 | |||
SECTION 6.9. Written Action By Managers |
26 | |||
SECTION 6.10. Rights and Powers of Officers |
26 | |||
SECTION 6.11. Reliance |
29 | |||
SECTION 6.12. Indemnification of Managers, Members and Officers; Exculpation |
29 | |||
SECTION 6.13. Organizational and Fictitious Name Filings |
31 | |||
SECTION 6.14. Other Activities; Conflict of Interest; Waiver |
31 | |||
SECTION 6.15. Company’s Counsel |
31 | |||
SECTION 6.16. Transactions with Related Parties |
32 | |||
SECTION 6.17. Indebtedness; UBTI |
32 | |||
SECTION 6.18. VCOC Status |
33 | |||
SECTION 6.19. Debt Financing |
33 | |||
SECTION 6.20. Major Decisions |
33 | |||
ARTICLE VII BOOKS AND RECORDS; RESERVES |
34 | |||
SECTION 7.1. Bank Accounts |
34 | |||
SECTION 7.2. Books of Account; Audits/Access to Information |
34 | |||
SECTION 7.3. Reports |
35 | |||
SECTION 7.4. The Accountant |
37 | |||
SECTION 7.5. Tax Matters Member |
37 | |||
SECTION 7.6. Appraisals |
37 | |||
ARTICLE VIII TRANSFER OF MEMBERSHIP UNITS |
38 | |||
SECTION 8.1. No Transfer |
38 | |||
SECTION 8.2. Succession by Operation of Law/Certain Permitted Transfers/Prorations/Cooperation |
38 | |||
SECTION 8.3. General Conditions Applicable to Transfers |
39 | |||
SECTION 8.4. Bankruptcy or Dissolution of a Member |
41 | |||
SECTION 8.5. Buy/Sell Rights |
41 | |||
ARTICLE IX BROKERS |
43 | |||
SECTION 9.1. Brokers |
43 | |||
ARTICLE X TERMINATION |
43 |
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Page | ||||
SECTION 10.1. Dissolution |
43 | |||
SECTION 10.2. Termination |
43 | |||
SECTION 10.3. Liquidating Trustee |
44 | |||
SECTION 10.4. No Redemption |
45 | |||
SECTION 10.5. Governance |
45 | |||
SECTION 10.6. Return of Capital |
45 | |||
ARTICLE XI MISCELLANEOUS |
45 | |||
SECTION 11.1. Further Assurances |
45 | |||
SECTION 11.2. Notices |
45 | |||
SECTION 11.3. Governing Law |
46 | |||
SECTION 11.4. Captions |
46 | |||
SECTION 11.5. Pronouns |
47 | |||
SECTION 11.6. Successors and Assigns |
47 | |||
SECTION 11.7. Extension Not a Waiver |
47 | |||
SECTION 11.8. Construction |
47 | |||
SECTION 11.9. Severability |
47 | |||
SECTION 11.10. Consents |
47 | |||
SECTION 11.11. Entire Agreement |
47 | |||
SECTION 11.12. Consent to Jurisdiction |
47 | |||
SECTION 11.13. Counterparts |
48 | |||
SECTION 11.14. Tax Characterization |
48 | |||
SECTION 11.15. Costs |
48 | |||
SECTION 11.16. Representations and Warranties; Covenants |
48 | |||
SECTION 11.17. Limitation of Liability |
50 | |||
SECTION 11.18. Company Name |
51 | |||
SECTION 11.19. Ownership of Company Assets |
51 | |||
SECTION 11.20. Time of the Essence |
51 | |||
SECTION 11.21. Waiver of Partition |
51 | |||
SECTION 11.22. Calculation of Days |
51 | |||
SECTION 11.23. Disclosure |
52 | |||
SECTION 11.24. Securities |
52 | |||
SECTION 11.25. Prevailing Party Attorneys’ Fees |
52 |
SCHEDULE A MEMBERS AND CAPITAL CONTRIBUTIONS
SCHEDULE B – PROPERTY PORTFOLIO
SCHEDULE C REPORTING REQUIREMENTS
SCHEDULE D MAJOR DECISIONS
SCHEDULE E PROPERTIES CONTRIBUTED BY HOLDING COMPANY
EXHIBIT A FAIR MARKET VALUE DETERMINATION
EXHIBIT B GUARANTEE
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THIS LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”), is made as of _________ ___, 2007,
by and among CET ACQUISITION COMPANY LLC, a Delaware limited liability company, having an office
c/o X.X. Xxxxxx Investment Management Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (“Holding
Company”), and the Persons who become signatories hereto and who are identified from time to time
on Schedule A hereto as Members, pursuant to the provisions of the Delaware Limited Liability
Company Act, Title 6 of the Delaware Code, Section 18-101 et seq., as amended from
time to time (“Delaware Act”). Capitalized terms used herein are defined in Section 1.5 below or
as elsewhere provided herein.
WHEREAS, SSPF/CET OPERATING COMPANY LLC (the “Company”) was formed by the filing of the
Certificate (as hereinafter defined) on October 11, 2006.
WHEREAS, the Members desire to adopt this Agreement in accordance with the Delaware Act.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
Holding Company and the other Members do hereby mutually covenant and agree as follows:
ARTICLE I
ORGANIZATION
ORGANIZATION
SECTION 1.1. Formation and Continuation.
(a) The Company was formed under and pursuant to the provisions of the Delaware Act and
on the terms and conditions set forth in the Certificate as filed with the Secretary of
State of the State of Delaware. The rights and liabilities of all Members shall be as
provided under the Delaware Act, the Certificate and this Agreement. To the extent
permitted by applicable law, the provisions of this Agreement shall override the provisions
of the Delaware Act in the event of any inconsistency or contradiction between them. The
fact that the Certificate is on file in the office of the Secretary of State shall
constitute notice that the Company is a limited liability company, pursuant to Section
18-207 of the Delaware Act.
(b) In order to maintain the Company as a limited liability company under the laws of
the State of Delaware, the Company shall, from time to time, take appropriate action,
including the preparation and filing of such amendments to the Certificate and such other
assumed name certificates, documents, instruments and publications as may be required by or
desirable under law, including, without limitation, action to reflect:
(i) any change in the Company name; or
(ii) any correction of false or erroneous statements in the Certificate or the
desire of the Members to make a change in any statement therein in order that it
shall accurately represent the agreement among the Members.
(c) Each necessary Member shall further execute, and the Company shall file and record
(or cause to be filed and recorded) and shall publish, if required by law, such other and
further certificates, statements or other instruments as may be necessary or desirable under
the laws of the State of Delaware or such other states as the Board of Managers shall
determine in connection with the formation of the Company and the commencement and carrying
on of its business. The Board of Managers shall be an authorized person of the Company for
purposes of any filings under the Delaware Act and shall be authorized to execute and
deliver on behalf of the Company any of the foregoing certificates.
SECTION 1.2. Name and Office. The name of the Company shall be “SSPF/CET OPERATING
COMPANY LLC”. All business of the Company shall be conducted under such name and title to all
property, real, personal, or mixed, owned by or leased to the Company shall be held in such name.
The principal place of business and office of the Company shall be located at 0000 X Xxxxxx, XX,
Xxxxx 000, Xxxxxxxxxx, XX 00000 or at such other place or places as the Board of Managers may from
time to time designate. The Company may have such additional offices and places of business as may
be established at such other locations as may be determined from time to time by the Board of
Managers. The registered agent of the Company within the State of Delaware is Corporation Service
Company and the registered office of the Company within the State of Delaware is 0000 Xxxxxxxxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
SECTION 1.3. Purpose. The purpose of the Company is to operate as a VCOC and in
furtherance thereof to (a) own, directly or indirectly, equity interests in the Subsidiary
Entities, including without limitation, New Deal LLC, (b) own, directly or indirectly, the Property
Portfolio and in connection therewith to (A) act and perform as a partner or member of each
Subsidiary Entity and (B) directly or indirectly, develop, redevelop, construct, improve, alter,
finance, own, operate, lease, manage, dispose of and otherwise deal with the Property Portfolio and
Company Assets, (c) engage in any lawful act or activity for which a limited liability company may
be organized under the Delaware Act, including, without limitation, acquiring and owning the
membership interests of the Subsidiary Entities, and (d) take all actions necessary, appropriate,
advisable, incidental or convenient to carry out the foregoing. In no event, however, shall the
Company purchase or own any New Investments, it being agreed that all New Investments will be
purchased and owned by New Deal LLC.
SECTION 1.4. Term. The term of the Company commenced on the filing of the Certificate
with the Secretary of State of the State of Delaware and shall continue until December 31, 2056,
unless sooner terminated pursuant to the provisions hereof. The existence of the Company as a
separate legal entity shall continue until the cancellation of the Certificate in the manner
required by the Delaware Act.
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SECTION 1.5. Defined Terms. The following terms shall have the following meanings
when used herein:
“Accountant” - As defined in Section 7.4.
“Acquisition Loan” – As defined in Section 2.5(b).
“Additional Capital Contribution” - As defined in Section 3.1(a).
“Additional Contribution Amount” – As defined in Section 3.1(a).
“Adjusted Capital Account” - With respect to any Member, the balance, if any, in such Member’s
Capital Account as of the end of the relevant Fiscal Year, after giving effect to the adjustments
set forth herein and the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is obligated to
restore pursuant to the terms of this Agreement or is deemed to be obligated to restore
pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) or pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in paragraphs (4), (5) and (6) of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
The foregoing definition of Adjusted Capital Account is intended to comply with the provisions
of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations to the extent relevant thereto and
shall be interpreted consistently therewith.
“Affiliate” - Means with respect to any Person, any other Person directly or indirectly
controlled by, controlling or under direct or indirect common control with the Person in question,
or such Person who owns, directly or indirectly, twenty percent (20%) or more of the equity
interest of the other Person. For the purposes of this definition, “control” when used with
respect to any specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting securities or other
beneficial interest, by contract or otherwise; and the terms “controlling” and “controlled” have
the meanings correlative to the foregoing.
“Agreement” - As defined in the Preamble.
“Applicable Purchase Price” – As defined in Section 8.5(a).
“Bankruptcy Event” - Means, with respect to any Person, the occurrence of any of the following
events: (i) the making by it of an assignment for the benefit of its creditors, (ii) the filing by
it of a voluntary petition in bankruptcy, (iii) an adjudication that it is bankrupt or insolvent
unless such adjudication is stayed or dismissed within sixty (60) days, or the entry against it of
an order for relief in any bankruptcy or insolvency proceeding unless such order is stayed or
dismissed within ninety (90) days, (iv) the filing by it of a petition or an answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
3
dissolution or similar relief under any statute, law or regulation, (v) the filing by it of an
answer or other pleading admitting or failing to contest the material allegations of the petition
filed against it in any proceeding of the nature described in the preceding clause (iv), (vi) its
seeking, consenting to or acquiescing in the appointment of a trustee, receiver or liquidator of it
or of all or any substantial part of its properties, or (vii) ninety (90) days after the
commencement of any proceeding against it seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, if
the proceeding has not been stayed or dismissed, or if within ninety (90) days after the
appointment without its consent or acquiescence of a trustee, receiver or liquidator of it or of
all or any substantial part of its properties, the appointment is not vacated or stayed, or within
ninety (90) days after the expiration of any such stay, the appointment is not vacated.
“Board of Managers” - As defined in Section 6.2.
“Budget” – As defined in Section 6.10(b).
“Business Day” - Any day other than Saturday, Sunday or any other day on which banks or
savings and loan associations in New York, New York are not open for business.
“Buy Option” – As defined in Section 8.5(b).
“Buy-Sell Deposit” – Means an amount equal to ten percent (10%) of the Applicable Purchase
Price.
“Buy-Sell Notice” – As defined in Section 8.5(a).
“Capital Account” - The Capital Account maintained for each Member pursuant to Section
3.4 as the same may be credited or debited in accordance with the terms hereof.
“Capital Contribution” - With respect to any Member, the amount of money and the initial Gross
Asset Value of any property (other than money) contributed, or deemed contributed, by such Member
to the Company (net of any liabilities secured by such property or to which such property is
otherwise subject), in connection with the issuance of Membership Units or otherwise including any
Initial Capital Contribution and Additional Capital Contribution.
“Capital Transaction” - Means any of the following: (a) a Transfer of all or a portion of any
Company Asset other than tangible personal property that is not Transferred in connection with the
Transfer of real property or a leasehold interest in real property and is otherwise Transferred in
the ordinary course of business; (b) any condemnation or deeding in lieu of condemnation of all or
a portion of any Company Asset; (c) any financing or refinancing of any Company Asset; (d) the
receipt of proceeds due to any fire or other casualty to the Company Assets or any other Company
Asset; and (e) any other transaction involving Company Assets, the proceeds of which, in accordance
with generally accepted accounting principles, are considered to be capital in nature.
“Certificate” - The Certificate of Formation for the Company filed with the Secretary of State
of the State of Delaware, pursuant to Section 18-201 of the Delaware Act, as the same may be
amended and restated.
4
“CET” – Means Columbia Equity Trust, Inc., a Maryland corporation.
“CET Common Member” — Means each Common Member other than Holding Company.
“CET Common Units” – Means the Common Units owned by the CET Common Members.
“Check The Box Regulations” - Means regulations (in temporary or in final form) or other
equivalent authority issued by the Internal Revenue Service and all state and local jurisdictions
in which the income, assets or operations of the Company are, or may be, subject to income or
similar tax, permitting the Company to make an election to be treated as a partnership for U.S.
federal, state and, if applicable, local income tax purposes.
“Code” - The Internal Revenue Code of 1986, as amended, or any corresponding provision or
provisions of prior or succeeding law.
“Common Member” – Means a Member holding Common Units.
“Common Units” – Means, as of any date, the Common Units designated as such in accordance with
this Agreement. The number of Common Units held by each Common Member as of any date is set forth
on Schedule A (as amended from time to time in accordance with the terms hereof) as in
effect on such date.
“Company” - As defined in the Recitals.
“Company Assets” - The assets and property, whether tangible or intangible and whether real,
personal, or mixed, at any time owned by or held for the benefit of the Company and all direct or
indirect interests in real property, including all improvements, fixtures, personal property,
appurtenances, rights and interests in connection therewith, including without limitation all
contract rights and the Company’s goodwill.
“Company Loans” – As defined in Section 6.19.
“Company Counsel” - As defined in Section 6.15.
“Company Minimum Gain” - Means “partnership minimum gain” as set forth in Treasury Regulations
Section 1.704-2(d).
“Company Optional Redemption Date” – As defined in Section 2.4(a)(ii).
“Company Optional Redemption Notice” – As defined in Section 2.4(a)(ii).
“Company Optional Redemption Price” — As defined in Section 2.4(a).
“Control” - Direct or indirect ownership of not less than fifty percent (50%) of all the
voting stock of a corporation or direct or indirect ownership of not less than fifty percent (50%)
of the legal and equitable interest in a partnership, limited liability company or other entity,
and
5
the ability to direct management, operations or policy decisions of such corporation,
partnership, limited liability company or other entity.
“Covered Persons”- As defined in Section 6.12(a).
“Delaware Act” - As defined in the Preamble.
“Depreciation” - For each Fiscal Year or other period, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal
Year or other period, except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such Fiscal Year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as
the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal
Year or other period bears to such beginning adjusted tax basis. If any asset shall have a zero
adjusted basis for federal income tax purposes, Depreciation shall be determined utilizing any
reasonable method selected by the Board of Managers.
“Dividend Date” – As defined in Section 2.3.
“Effective Date” - The Closing Date, as defined in the Agreement and Plan of Merger dated as
of November ___, 2006 by and among the Company, SSPF/CET OP Holding Company LLC, SSPF/CET OP
Holding Company Subsidiary L.P., the Partnership and CET.
“ERISA” - Means the Employee Retirement Income Security Act of 1974, as amended.
“Escrow Agent” – Means any reputable, nationally recognized and financially solvent title
insurance company designated by the Member purchasing the Common Units.
“Fair Market Value” – As defined in Exhibit A.
“Financing Document” - Any loan agreement, security agreement, mortgage, deed of trust,
indenture, bond, note, debenture or other instrument or agreement relating to indebtedness of the
Company or any Subsidiary Entity for borrowed money.
“Fiscal Year” - Except as otherwise required by law, the calendar year, except that the first
Fiscal Year of the Company shall have commenced on the date of commencement of the Company and end
on the next succeeding December 31, and the last Fiscal Year of the Company shall end on the date
on which the Company shall terminate and commence on the January 1 immediately preceding such date
of termination.
“GAAP” – As defined in Section 7.2(a).
“Gross Asset Value” - With respect to any asset, the asset’s adjusted basis for federal income
tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross Fair Market Value of such asset, as determined by the
Board of Managers (as evidenced by this Agreement or an
6
amendment hereto), it being agreed that the value of all the Partnership LP
Units contributed to the Company shall be $19.00 per Partnership LP Unit;
(b) The Gross Asset Values of all Company Assets shall be adjusted to equal
their respective gross Fair Market Values, as determined in accordance with
Exhibit A, as of the following times: (i) the acquisition of an interest or
an additional interest in the Company by any new or existing Member in exchange for
more than a de minimis Capital Contribution or for the performance of services; (ii)
the distribution by the Company to a Member of more than a de minimis amount of
property or money as consideration for an interest in the Company; (iii) the
liquidation of the Company within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g) and (iv) the grant by the Company of an interest in the Company
as consideration for the provision of services to or for the benefit of the Company
to an existing Member acting in a Member capacity, or to a new Member acting in a
Member capacity or in anticipation of being a Member; provided, however, that
adjustments pursuant to clauses (i) and (ii) above shall be made only if the Board
of Managers determines that such adjustments are necessary or appropriate to reflect
the relative economic interests of the Members;
(c) The Gross Asset Value of any Company Asset distributed to a Member shall be
the gross Fair Market Value of such asset on the date of distribution;
(d) The Gross Asset Values of Company Assets shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m), clause (f) of the definition of Profits
and Losses and Section 5.3(g); provided, however, that Gross Asset Values shall not
be adjusted pursuant to this paragraph (d) to the extent the Board of Managers
determines that an adjustment pursuant to paragraph (b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this paragraph (d); and
(e) If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (a), (b), or (d), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
“Gross Value Amount” – As defined in Section 8.5(a).
“Holding Company” - As defined in the Preamble.
“Initial Capital Contribution” - Means the Capital Contribution made by each Member (or on its
behalf) on the Effective Date.
“Initial Valuation Date” – As defined in Section 6.18.
7
“Key Documents” - Means all Financing Documents, partnership agreements, limited liability
company agreements or other joint venture agreements to which the Company or any Subsidiary Entity
is a party or by which the Company or any Subsidiary Entity is bound, and any material reciprocal
easement agreement to which the Company is a party or by which the Company is bound.
“Liquidation Preference” – Means the sum of $19.00 per Preferred Unit plus an amount equal to
any accumulated and unpaid distributions with respect to such Preferred Units, subject to equitable
adjustments in the event of unit splits or similar events.
“Liquidating Trustee” - As defined in Section 10.3(a).
“Major Decisions” – As defined on Schedule D attached hereto.
“Management” – Means the former members of management of CET who own Management Common Units.
“Management Common Units” - Means Common Units owned by the former members of management of
CET.
“Manager” - Means each of the members of the Board of Managers.
“Member” - Means, at any time, any person or entity admitted and remaining as a member of the
Company pursuant to the terms of this Agreement, including Common Members and Preferred Members.
As of the date of this Agreement, the Members of the Company are as set forth on Schedule A.
“Member Nonrecourse Debt” - Means “partner non-recourse debt” as set forth in Treasury
Regulations Section 1.704-2(b)(4).
“Member Nonrecourse Debt Minimum Gain” - Means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations
Section 1.704-2(i)(2) and (3).
“Member Nonrecourse Deductions” - Means “partner nonrecourse deductions” as set forth in
Treasury Regulations Section 1.704-2(i)(2). For any Fiscal Year, the amount of Member Nonrecourse
Deductions with respect to a Member Nonrecourse Debt equals the excess, if any, of the net
increase, if any, in the amount of the Member Nonrecourse Debt Minimum Gain attributable to such
Member Nonrecourse Debt over the aggregate amount of any distributions during such Year to the
Member that bears the economic risk of loss for such Member Nonrecourse Debt to the extent such
distributions are from proceeds of such Member Nonrecourse Debt and are allocable to an increase in
Member Nonrecourse Debt Minimum Gain, determined according to the provisions of Treasury
Regulations Section 1.704-2(i)(2).
“Member Optional Redemption” - As defined in Section 2.4(b).
“Member Optional Redemption Date” – As defined in Section 2.4(b).
8
“Member Optional Redemption Price” – As defined in Section 2.4(b).
“Membership Units” – Means the Common Units and the Preferred Units.
“Monthly Reporting Period” – Means the [26th] day of the previous calendar month through the
[25th] day of the current calendar month.
“MRI” - As defined in Section 7.3(c).
“Net Cash Flow” - Means, with respect to the Company, with respect to any period, the sum of
all money available to the Company at the end of that period for distribution to its Members after
(1) payment of all debt service and other expenses (including, without limitation, payments due on
or with respect to operating and maintenance expenses, general and administrative expenses,
insurance costs, taxes (including, without limitation, the D.C. franchise tax), assessments and
other impositions and other expenses paid or required to be paid); (2) satisfaction of the
Company’s liabilities as they come due; and (3) establishment of (and contributions to) such
reserves as are required under any Financing Documents or additional reasonable reserves as
determined by the Board of Managers; provided, however, that Net Cash Flow shall not include Net
Proceeds of a Capital Transaction, Capital Contributions, loans or tenant security deposits or
xxxxxxx money deposits or any interest thereon so long as the Company has a contingent obligation
to return the same.
“Net Expenditures” - Means the Company’s total direct and indirect expenditures incurred in
connection with the transaction to purchase the Redemption Property, including without limitation
any down payments (until such time as such payments are either refunded or applied), brokers fees,
transfer taxes, loan fees (to the extent not deducted from loan proceeds), legal fees of the
counsel designated by the Put Member and the reasonable legal fees of the counsel designated by the
Company to review the purchase transaction, less any amounts funded by the Put Member and any
proceeds from any Acquisition Loans used to purchase the Redemption Property.
“Net Proceeds of a Capital Transaction” - Means the net cash proceeds (other than insurance
proceeds for lost rental incomes) from a Capital Transaction less any portion thereof used to (i)
establish (and contribute to) such reserves as are required under any Financing Documents or
additional reasonable reserves as determined by the Board of Managers, (ii) repay any debts or
other obligations of the Company in connection with such Capital Transaction (iii) restore any
Company Assets following a casualty or condemnation, (iv) pay costs reasonably and actually
incurred in connection with the Capital Transaction, or (v) pay creditors in the event of a
liquidation. “Net Proceeds of a Capital Transaction” shall include all principal, interest and
other payments as and when received with respect to any note or other obligation received by the
Company in connection with a Capital Transaction.
“New Deal LLC” – Means SSPF/CET PI LLC, a Delaware limited liability company.
“New Investments” – Means the development property located at 0000-0000 Xxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx, Xxxxxxxx Commerce Park Buildings presently under option and all income
properties and/or development properties acquired by New Deal LLC or any subsidiaries thereof after
the Effective Date, including those properties acquired in accordance with the terms
9
of that certain letter agreement dated as of November 5, 2006 between CET and Operating
Company.
“Non-Electing Member” – As defined in Section 3.1(a).
“Nonrecourse Deductions” - Has the meaning set forth in Treasury Regulations Section
1.704-2(b)(1). The amount of Nonrecourse Deductions for a Fiscal Year equals the excess, if any,
of the net increase, if any, in the amount of Company Minimum Gain during that Fiscal Year, over
the aggregate amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Company Minimum Gain, determined according to the
provisions of Treasury Regulations Section 1.704-2(c).
“Nonrecourse Liability” - Has the meaning set forth in Treasury Regulations Section
1.704-2(b)(3).
“Notices” - As defined in Section 11.2.
“Offeree” – As defined in Section 8.5(a).
“Partnership” – Means Columbia Equity, L.P., a Virginia limited partnership.
“Partnership LP Units” – Means each unit of partnership interest in the Partnership, including
those designated as LTIP Units.
“Person” - Means any individual, corporation, partnership, limited liability company,
association, trust or other entity or organization.
“Plan Asset Regulations” - As defined in Section 6.18.
“Preferred Member” – Means a Member holding Preferred Units.
“Preferred Units” – Means, as of any date, the Preferred Units designated as such in
accordance with this Agreement. The number of Preferred Units held by each Preferred Member as of
any date is set forth on Schedule A (as amended from time to time in accordance with the
terms hereof) as in effect on such date.
“Profits” and “Losses” - For each Fiscal Year or other period, an amount equal to the
Company’s taxable income or loss for such Fiscal Year or period, determined in accordance with Code
Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(a) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to this
definitional Section shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to
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Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definitional Section, shall
be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Company Asset is adjusted
pursuant to paragraph (b) or (c) under the definition of “Gross Asset Value,” the
amount of such adjustment shall be taken into account as gain or loss from the
disposition of such Company Asset for purposes of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Company property with
respect to which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its Gross
Asset Value;
(e) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there shall
be taken into account Depreciation for such Fiscal Year or other period, computed in
accordance with the definition thereof;
(f) To the extent an adjustment to the adjusted tax basis of any Company Asset
pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution other than in complete
liquidation of a Member’s Membership Units, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases the basis of the asset) from the disposition of
the asset and shall be taken into account for purposes of computing Profits or
Losses; and
(g) Notwithstanding any other provision of this definitional Section, any items
which are specially allocated under this Agreement shall not be taken into account
in computing Profits or Losses.
“Property Portfolio” – Means all of the properties listed on Schedule B and
Schedule E hereto.
“Put Members” – As defined in Section 2.4(b).
“Qualified Organization” - Has the meaning set forth in Section 514(c)(9)(C) of the Code.
“Redemption Event” – As defined in Section 2.6.
“Redemption Price” – As defined in Section 2.5(a).
“Redemption Property” – As defined in Section 2.5(b).
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“Regulations” or “Treasury Regulations” - The Income Tax Regulations promulgated under the
Code as such regulations may be amended from time to time (including Temporary Regulations).
“Regulatory Allocations” - As defined in Section 5.3(i).
“Related Party” - As defined in Section 6.16.
“REOC” – A “real estate operating company” as defined in the Plan Asset Regulations.
“Representative” – As defined in Exhibit A.
“Safe Harbor Election” – As defined in Section 7.3(g).
“Safe Harbor Interests” – As defined in Section 7.3(g).
“Securities Act” – Means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Sell Option” – As defined in Section 8.5(b).
“Special Event” – Means the occurrence of any one or more of the following events: (a) the
net asset value of SSPF shall fall below $1.25 billion; (b) SSPF changes its investment focus from
a value-added strategy to a lower risk strategy; or (c) SSPF shall fail to make (or cause to be
made) within two years from the Effective Date at least $80 million of additional capital
contributions to the Company which are used to make equity investments in New Investments through
New Deal LLC.
“SSPF” – Means Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase
Bank, N.A., a trust governed by the laws of New York.
“SSPF Entity” – Means any Person Controlled by SSPF.
“Subsidiary Entity” - Means each Person in which the Company has a direct or indirect equity
interest.
“Tax Matters Member” - As defined in Section 7.5.
“Tax Payments” - As defined in Section 4.4.
“Transaction Documents” - As defined in Section 11.16(a)(ii).
“Transfer” - As defined in Section 8.1.
“UBTI” - Means “unrelated business taxable income” within the meaning of Sections 511-514 of
the Code.
“VCOC” – A “venture capital operating company” as defined in the Plan Asset Regulations.
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“Withdrawal Event” - As defined in Section 8.4.
“Withdrawn Member” - As defined in Section 8.4.
ARTICLE II
MEMBERS; CAPITAL
MEMBERS; CAPITAL
SECTION 2.1. Members.
(a) The Company shall have two classes of Members, namely Common Members and Preferred
Members, it being understood that a Person may be both a Common Member and a Preferred
Member. Equity ownership of the Company shall be divided into two classes of Membership
Units, which Membership Units shall have the rights and preferences and shall be issued to
the Members for the consideration hereinafter set forth.
(b) Holding Company has made an Initial Capital Contribution to the Company of (i) cash
as set forth on Schedule A and in return has received the number of Common Units set
forth opposite its name on Schedule A at $19.00 per Common Unit and (ii) the
properties set forth on Schedule E attached hereto and in return has received the number of
Common Units set forth opposite its name on Schedule A, with the number of Common Units
received determined by dividing the aggregate fair market value of the contributed
properties by $19.00. The fair market value of each contributed property is set forth on
Schedule E.
(c) Each Common Member other than Holding Company has made an Initial Capital
Contribution to the Company of cash and/or the number of Partnership LP Units set forth
opposite its name on Schedule A attached hereto and in return has received the
number of Common Units set forth opposite its name on Schedule A, with each such
Partnership LP Unit being valued at $19.00.
(d) Each Preferred Member has made an Initial Capital Contribution to the Company of
the number of Partnership LP Units set forth opposite its name on Schedule A and in
return has received an equal number of Preferred Units set forth opposite its name on
Schedule A, with each such Partnership LP Unit being valued at $19.00.
(e) No Member shall have the right to withdraw any capital from the Company or be
repaid its Capital Contribution except as provided in this Agreement.
(f) The Company shall maintain a record of each Membership Unit held by the Members,
which records shall be updated by the Board of Managers from time to time to reflect changes
in such information.
SECTION 2.2. Voting Rights. Each holder of Common Units shall be entitled to one vote
per Common Unit. Except as provided by the Delaware Act, holders of Preferred Units shall have no
voting rights in respect of their Preferred Units.
SECTION 2.3. Dividends. The holders of Preferred Units shall be entitled to
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receive, in preference to the holders of Common Units, cumulative distributions in the nature
of dividends (and sometimes called “dividends” herein), which will accrue from and after the date
of issuance of such Preferred Units at the annual rate of 6.0% of the then applicable Liquidation
Preference for each Preferred Unit held. Dividends on the Preferred Units shall be paid in cash to
the extent permitted by the Delaware Act; provided, that, to the extent such dividends are
not paid in cash on the Dividend Date (as defined below), the then applicable Liquidation
Preference shall be increased by the amount of such accrued and unpaid dividends as of the
applicable Dividend Date. Such dividends shall be payable quarterly in arrears on the first
Business Day of January, April, July and October in each year (each, a “Dividend Date”). Dividends
will be payable to holders of record of Preferred Units as they appear on the books of the Company
on the record date, which will be the December 15, March 15, June 15 or September 15, as the case
may be, before the related Dividend Date. Any dividend for any partial period will be computed on
the basis of twelve (12) thirty (30) day months and a three hundred sixty (360) day year. No
dividends or distributions shall be made with respect to Common Units and no redemption of Common
Units shall be effected by the Company when any dividends are in arrears on the Preferred Units.
The Preferred Units will, with respect to the dividend and distribution rights and rights upon
liquidation, dissolution or winding up of the Company, rank prior or senior to Common Units and any
other units of the Company.
SECTION 2.4. Redemption of Preferred Units.
(a) Redemption at the Option of the Company.
(i) At any time and from time to time subsequent to 54 months from the
Effective Date, the Company shall have the option to redeem from the Preferred
Members (on a pro rata basis) any or all of the Preferred Units then outstanding, at
a redemption price per Preferred Unit payable in cash (the “Company Optional
Redemption Price”) equal to the sum of (1) the Liquidation Preference and (2) any
accrued and unpaid dividends thereon to the extent not included in such Liquidation
Preference.
(ii) Notice of Company Optional Redemption. If any Preferred Units are
to be redeemed pursuant to this Section 2.4(a), notice thereof (the “Company
Optional Redemption Notice”) shall be sent at least 15 and not more than 60 days
prior to the date fixed for redemption (the “Company Optional Redemption Date”) to
each holder of record whose Preferred Units are to be redeemed, by first class mail,
postage prepaid, at such holder’s last address as the same shall appear on the books
of the Company. The Company Optional Redemption Notice shall state (A) the Company
Optional Redemption Date, (B) the Company Optional Redemption Price, and (C) that
dividends on Preferred Units called for redemption cease to accumulate at the close
of business on the Company Optional Redemption Date, except as provided in Section
2.4(a)(iii). Neither the failure to give the Company Optional Redemption Notice,
nor any defect therein, to any particular holder of Preferred Units called for
redemption shall affect the sufficiency of the Company Optional Redemption Notice or
the legality or sufficiency of any such redemption.
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(iii) Company Optional Redemption Payment. After the Company Optional
Redemption Date, unless the Company shall default in the payment of the Company
Optional Redemption Price pursuant to the Company Optional Redemption Notice, all
dividends on the Preferred Units called for redemption shall cease to accrue and all
rights of the holders of such Preferred Units as Preferred Members, except the right
to receive the Company Optional Redemption Price, shall cease and terminate. On a
Company Optional Redemption Date, the Company shall pay to each holder of Preferred
Units to be redeemed at that date, at its address as the same shall appear on the
books of the Company, the aggregate Company Optional Redemption Price due to such
holder.
(b) Redemption at the Option of the Preferred Members. (i) At any time and
from time to time commencing on the second anniversary of the Effective Date and terminating
30 months following the Effective Date, each holder of the Preferred Units shall have the
right by Notice to the Company to elect to cause the Company to redeem all of such holder’s
Preferred Units then outstanding at a redemption price per Preferred Unit payable in cash
(the “Member Optional Redemption Price”) equal to the sum of (A) the Liquidation Preference
and (B) any accrued and unpaid dividends thereon to the extent not included in such
Liquidation Preference (a “Member Optional Redemption”). Such redemption shall be made by
the Company not later than 30 days after Notice of a Members Optional Redemption (a “Member
Optional Redemption Date”). In addition, each Member (other than Holding Company) who has
contributed to the Company Partnership LP Units that have an aggregate value on the date of
contribution of $5,000,000 or more (the “Put Members”) shall have the right by Notice to the
Company to elect to receive Redemption Property in accordance with, and subject to the
procedures set forth in, Section 2.5 with respect to the Preferred Units such Member
elects to have redeemed.
(ii) Member Optional Redemption Payment. After the Member Optional
Redemption Date, unless the Company shall default in the payment of the Member
Optional Redemption Price, all dividends on the Preferred Units called for
redemption shall cease to accrue and all rights of the holders of such Preferred
Units as Preferred Members, except the right to receive the Member Optional
Redemption Price, shall cease and terminate. On a Member Optional Redemption Date,
the Company shall pay to each holder of Preferred Units to be redeemed at that date,
at its address as the same shall appear on the books of the Company, the aggregate
Member Optional Redemption Price due to such holder.
SECTION 2.5. Special Redemption Right.
(a) In addition to the redemption rights contained in Section 2.4, each CET Common
Member and Preferred Member shall have the right by Notice to the Company at any time from
and after the fourth anniversary of the Effective Date or within sixty (60) days after the
occurrence of a Special Event to elect to cause the Company to redeem all of such Member’s
Membership Units for cash equal to (i) the Fair Market Value (in the case of Common Units),
which shall be the Fair Market Value at the end of the fiscal quarter of the Company
immediately prior to the date of the Company’s receipt of Notice
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from the Member (or if a Special Event occurs, Fair Market Value shall be determined as
of the date of the occurrence of the Special Event) and (ii) the Liquidation Preference in
the case of Preferred Units (the “Redemption Price”); provided, however, that any Member who
is also a Put Member may elect to receive cash or property (or a combination thereof) at
such Put Member’s election. If such Notice specifies payment in cash, such redemption shall
be made by the Company not later than thirty (30) days after determination of Fair Market
Value. If such Notice specifies Redemption Property, such redemption shall be made within
one hundred twenty (120) days after receipt of such Notice.
(b) If a Put Member shall elect to receive property (the “Redemption Property”)
in redemption of its Membership Units, the Company shall be obligated to purchase the
Redemption Property designated by the Put Member within sixty (60) days of designation by
the Put Member and to borrow money in connection therewith, provided that (i) any loan is
arranged for, or provided by, the Put Member (the “Acquisition Loan”), (ii) either (x) the
Company has no obligations under the Acquisition Loan, or (y) the Acquisition Loan is
secured by the Redemption Property and is nonrecourse to the Company, (iii) the Company
shall not be obligated to incur Net Expenditures in excess of the Redemption Price, unless
the Put Member funds the balance of any difference, (iv) the Put Member shall deliver or
cause to be delivered any and all guarantees or indemnities that may be required in
connection with such Acquisition Loan or requested by the Company, and (v) the Put Member
shall deliver an amount equal to the transfer, stamp or similar taxes payable in connection
with the purchase of the Redemption Property by the Company and the subsequent distribution
of the Redemption Property by the Company. The Put Member may fund any additional monies
needed to purchase the Redemption Property in any reasonable manner selected by the Put
Members and reasonably approved by the Board of Managers (e.g., through a third party escrow
arrangement). In connection with the purchase of the Redemption Property, the Company shall
create a separate legal entity through which to purchase the Redemption Property, and the
Company shall retain counsel designated by the Put Member and reasonably satisfactory to the
Company.
(c) The Company shall not have (i) any unreimbursed liability or obligation with
respect to the Redemption Property or the transaction pursuant to which such Redemption
Property is acquired or attempted to be acquired if such transaction does not close for any
reason, or (ii) any obligation to incur Net Expenditures in excess of the Redemption Price.
In the event the Redemption Property is not purchased for any reason, the Liquidation
Preference of the Put Member’s Preferred Units shall be reduced by the amount of the Net
Expenditures incurred in connection with the transaction to purchase such Redemption
Property in lieu of any reimbursement pursuant to this Section 2.5(c).
(d) The Company, to the extent permitted by applicable law (which for this purpose
shall include Treasury Regulations and any Internal Revenue Service guidance), will report
the distribution of any Redemption Property as a non-taxable distribution of property to the
redeeming Members under Section 731 of the Code, with no gain or loss required to be
recognized by the redeeming Members in connection therewith except to
16
the extent of any actual payment of cash to them or deemed distribution of cash to them
pursuant to Section 752 of the Code and the regulations thereunder.
SECTION 2.6. Special Redemption of Common Units. The holders of CET Common Units
shall have the right to elect by Notice to the Company within sixty (60) days after the occurrence
of a Special Event or a Liquidity Event or Payment Trigger Date (as such terms are defined in the
New Deal LLC Agreement (collectively, a “Redemption Event”) to cause the Company to redeem all
their Common Units payable in cash at the Fair Market Value thereof as of the date of the
occurrence of the Redemption Event. Such redemption price shall be paid by the Company not later
than thirty (30) days after determination of such Fair Market Value.
SECTION 2.7. Preferred Member Consent Right. Without the prior written consent of
holders of not less than two-thirds (2/3) of the outstanding Preferred Units, the Company may not
issue any membership interests or units having rights, with respect to dividends or liquidation,
equal or senior to the Preferred Units.
ARTICLE III
CAPITAL
CAPITAL
SECTION 3.1. Operating Capital; Additional Capital Contributions.
(a) In the event at any time or from time to time the Board of Managers determines that
the Company requires additional equity capital, including without limitation as necessary to
meet all Company obligations, the Board of Managers shall specify in Notices delivered to
each Common Member the amount so required, the proposed issuance price per Common Unit
(which shall be the Fair Market Value of such Units) and the proposed use thereof (the
“Additional Contribution Amount”) and each Common Member shall have the right to contribute
to the capital of the Company (each, an “Additional Capital Contribution”) up to its
proportionate share (based on the percentage of all then outstanding Common Units owned by
such Member at such time) of the Additional Contribution Amount. All such Additional
Capital Contributions shall be paid to the Company in immediately available funds in United
States dollars by 11:00 A.M. (New York City time) on the tenth (10th) Business Day following
the date set forth in the Notice. If any Member elects not to make an Additional Capital
Contribution (a “Non-Electing Member”), the Holding Company shall be obligated to increase
its Additional Capital Contribution by an amount equal to the Non-Electing Member’s
proportionate share of the Additional Contribution Amount. In addition, if New Deal LLC has
insufficient funds to pay the PIH Redemption Price (as defined in the Limited Liability
Company Agreement of New Deal LLC) and if the equity value of the Company on a consolidated
basis falls below $75 million, then Holding Company shall provide liquidity to the Company
(either through a loan, a capital contribution in exchange for additional Common Units
(based on the Fair Market Value of such Units) or such other method as Holding Company deems
appropriate) so that the Company can provide liquidity to New Deal LLC (either through a
loan, capital contribution or such other method as Company deems appropriate) in an amount
necessary for New Deal LLC to pay the PIH Redemption Price to Management PIH (as defined in
the Limited Liability
17
Company Agreement of New Deal LLC); provided, however, that any loans shall only be
made to the extent such loans and the Company Loans do not exceed 65% of the total project
costs for the New Investments. Holding Company shall cause SSPF to guarantee the
obligations of Holding Company to provide such liquidity, which guaranty shall be delivered
on the Effective Date and shall be in the form of Exhibit B attached hereto. Capital
Contributions may be used for any purpose incident to the business of the Company as
determined by the Board of Managers in its sole discretion. Additional Capital
Contributions shall be credited to the Capital Account of the Member making such Additional
Capital Contributions.
(b) Immediately prior to and in connection with any Additional Capital Contribution,
the Capital Account of each Common Member shall be increased or decreased, as the case may
be, in accordance with clause (b) of the definition of Gross Asset Value and clause (c) of
the definition of Profits and Losses. Such increase or decrease shall be allocated among
the Common Members in proportion to the Common Units held by each such Member. Furthermore,
the Company shall issue a number of additional Common Units to each Member making an
Additional Capital Contribution based on the Fair Market Value of such Units. Accordingly,
immediately following such issuance, the Common Units held by each Member will be in the
same proportion as such Member’s Capital Account (after the adjustments described in this
Section 3.1(b) and without regard to the portion of such Member’s Capital Account,
if any, that is attributable to the Preferred Units) bears to the aggregate Capital Accounts
(without regard to the portion of such Capital Accounts, if any, that is attributable to the
Preferred Units) of all of the Common Members.
SECTION 3.2. No Third Party Beneficiaries. The right of the Board of Managers to
require an Additional Capital Contribution shall not confer upon any creditor or other third party
having dealings with the Company, any right, claim or other benefit, including the right to require
any such Additional Capital Contribution.
SECTION 3.3. Interest. Interest, if any, earned on funds contributed or held by the
Company shall inure to the benefit of the Company. The Members shall not be entitled to receive
any interest or other payments from the Company with respect to their Capital Contributions or
Capital Accounts, except as otherwise provided for herein.
SECTION 3.4. Capital Accounts. The Company shall establish and maintain a separate
Capital Account for each Member in accordance with the following provisions:
(a) To each Member’s Capital Account there shall be credited such Member’s Capital
Contributions, such Member’s allocable share of Profits, and any items in the nature of
income or gain that are specially allocated to such Member under this Agreement, and the
amount of any Company liabilities that are assumed by such Member in accordance with the
terms hereof (other than liabilities that are secured by any Company Asset distributed to
such Member).
(b) To each Member’s Capital Account there shall be debited the amount of cash and the
Gross Asset Value of any Company property distributed to such Member
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pursuant to any provision of this Agreement (net of liabilities secured by such
distributed property that such Member is considered to assume or take subject to under Code
Section 752), such Member’s allocable share of Losses, and any items in the nature of
expenses or losses that are specially allocated to such Member under this Agreement, and the
amount of any liabilities of such Member that are assumed by the Company (other than
liabilities that are secured by any property contributed by such Member to the Company).
(c) In the event any Membership Units are transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred Membership Units. In the case of Transfer of a
Membership Unit at a time when an election under Code Section 754 is in effect, the Capital
Account of the transferee Member shall not be adjusted to reflect the adjustments to the
adjusted tax bases of Company property required under Code Sections 754 and 743, except as
otherwise permitted by Treasury Regulations Section 1.704-1(b)(2)(iv)(m).
(d) In determining the amount of any liability for purposes of paragraphs (a) and (b)
above, there shall be taken into account Code Section 752(c) and the Treasury Regulations
promulgated thereunder, and any other applicable provisions of the Code and Regulations.
(e) The foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury Regulations Section
1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with
such Regulations.
SECTION 3.5. Return of Capital. No Member shall be liable for the return of the
Capital Contributions (or any portion thereof) of any other Member, it being expressly understood
that any such return shall be made solely from the Company Assets. No Member shall be required to
pay to the Company or to any other Member any deficit in its Capital Account upon dissolution of
the Company or otherwise, and no Member shall be entitled to withdraw any part of its Capital
Contributions or Capital Account, to receive interest on its Capital Contributions or Capital
Account or to receive any distributions from the Company, except as expressly provided for in this
Agreement or under the Delaware Act as then in effect.
ARTICLE IV
DISTRIBUTIONS
DISTRIBUTIONS
SECTION 4.1. General. Net Cash Flow and/or Net Proceeds of a Capital Transaction
shall be distributed to the Members as set forth in Section 4.2 below.
SECTION 4.2. Distributions. Subject to Sections 4.3, 4.4, 4.5 and
10.2 hereof, Net Cash Flow and/or Net Proceeds of a Capital Transaction for any Fiscal Year
shall be distributed by the Company to the Members as and when determined by the Board of Managers
in conformance with the terms and conditions of this Agreement as follows: first, to the Preferred
Members in proportion to the number of Preferred Units held by each of them in an amount equal to
accrued but unpaid dividends to which they are entitled pursuant to Section
19
2.3(a), and second, to the Common Members in proportion to the respective numbers of
the Common Units held by them.
SECTION 4.3. Tax Distributions
(a) The Company shall distribute out of available cash to each Member an amount equal
to the excess of (i) such Member’s federal, state and local income tax liabilities
(including such liabilities of the beneficial owners of such Member) arising from the
allocation of Profits to such Member pursuant to Sections 5.1, 5.2 and 5.3,
over (ii) distributions made to such Member pursuant to Section 4.2. Such
distributions shall be made within ninety (90) days after the end of such Fiscal Year (or
earlier to the extent necessary to pay estimated taxes for such current year). The amount
distributable under this Section 4.3(a) shall be determined taking into account any
allocation of taxable losses from the Company for prior periods and shall be calculated
using the maximum federal, state and local income tax rate applicable to a resident of
Washington, D.C. on ordinary income, net short-term capital gain or net long-term capital
gain, as applicable.
(b) The amounts distributed to a Member under this Section 4.3 shall be treated
as an advance of any distributions to which such Member would otherwise be entitled under
this Agreement and the amounts otherwise distributable to a Member pursuant to any other
provision of this Agreement shall be reduced by the amount distributed pursuant to this
Section 4.3.
SECTION 4.4. Tax Payments. To the extent that any taxes or withholding taxes are due
on behalf of or with respect to any Member and the Company is required by law to withhold or to
make such tax payments (“Tax Payments”), the Company shall withhold such amounts and make such Tax
Payments as so required. Each Tax Payment made on behalf of or with respect to a Member shall be
deemed a distribution under Section 4.2 in such amount to such Member, and any such deemed
distribution shall be deemed to have been paid to the Member on the earlier of the date when the
corresponding Tax Payment is made by the Company or the date that the distributions, if any, giving
rise to the obligation to make such Tax Payment were made.
SECTION 4.5. Limitation on Distributions. Notwithstanding anything to the contrary
contained herein, without the prior consent of the Members, no distribution of Net Cash Flow or Net
Proceeds of a Capital Transaction shall be made hereunder (other than tax distributions under
Section 4.3 hereof) if such distribution would cause the Company to default under any Key
Document or violate Section 18-607 of the Delaware Act or other applicable law.
ARTICLE V
ALLOCATION OF PROFITS AND LOSSES
ALLOCATION OF PROFITS AND LOSSES
SECTION 5.1. Profits. After giving effect to the special allocations set forth in
Section 5.3, Profits (including those incurred upon a dissolution of the Company pursuant
to Section 10.1) for each Fiscal Year shall be allocated in the following order and
priority:
(i) First, to the Common Members, in proportion to and to the extent of the
excess, if any, of (A) the cumulative Losses allocated to any of them
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pursuant to Section 5.2(a)(iii) hereof for all prior Fiscal Years (or
any portion thereof) following the last issuance of additional Common Units pursuant
to Section 3.1(b) hereof, over (B) the cumulative Profits allocated pursuant
to this Section 5.1(a)(i) for all prior Fiscal Years (or any portion
thereof) during such period;
(ii) Second, to the Preferred Members in proportion to and to the extent of the
excess, if any, of (A) the cumulative Losses allocated to any of them pursuant to
Section 5.2(a)(ii) for all prior Fiscal Years over (B) the cumulative
Profits allocated pursuant to this Section 5.1(a)(ii) for all prior Fiscal
Years (it being the intent of this Section 5.1(a)(ii) to restore a Preferred
Member’s Capital Account to the amount it would have been had no Losses been
allocated to the Preferred Members with respect to the Preferred Units pursuant to
Section 5.2(a)(ii)); and
(iii) Third, the balance, if any, to the Common Members in proportion to the
number of Common Units held by each of them.
SECTION 5.2. Losses. After giving effect to the special allocations set forth in
Section 5.3 hereof, Losses (including those incurred upon a termination of the Company
pursuant to Section 10.1) for each Fiscal Year shall be allocated in the following order
and priority:
(i) First, to the Common Members in proportion to and to the extent of the
excess, if any, of (A) each such Member’s positive Adjusted Capital Account balance
over (B) the aggregate Liquidation Preference attributable to the Preferred Units
held by each such Member;
(ii) Second, to the Preferred Members in proportion to and to the extent of
aggregate Liquidation Preference attributable to the Preferred Units held by each
such Member; and
(iii) Third, the balance, if any, to the Common Members in proportion to the
number of Common Units held by each of them.
SECTION 5.3. Special Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any other provision of this
Article V, if there is a net decrease in Company Minimum Gain during any Company Fiscal
Year, the Members shall be specially allocated items of Company income and gain for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s
share of the net decrease in Company Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(g)(2). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items so allocated shall be determined in accordance with Treasury
Regulations Section 1.704-2(f). This Section 5.3(a) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and shall be
interpreted consistently therewith.
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(b) Member Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V, except Section 5.3(a), if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal
Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain for such Fiscal
Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share
of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items so allocated
shall be determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This
Section 5.3(b) is intended to comply with the minimum gain chargeback requirement in such
Section of the Treasury Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly receives any
adjustments, allocations, or distributions described in paragraphs (4), (5) and (6) of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d), items of Company income and gain shall be
specially allocated to such Members in an amount and manner sufficient to eliminate, to the
extent required by such Regulations, the Adjusted Capital Account deficit of such Members as
quickly as possible, provided that an allocation pursuant to this Section 5.3(c) shall be
made only if and to the extent that such Member would have an Adjusted Capital Account
deficit after all other allocations provided for in this Article V have been tentatively
made as if this Section 5.3(c) were not in the Agreement.
(d) Nonrecourse Deductions. Nonrecourse Deductions shall be allocated to the
Members in accordance with their pro rata portion of Common Units owned by them.
(e) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any
Fiscal Year or other period shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)(1).
(f) Limitation on Allocation of Losses. In no event shall Losses be allocated
to a Member to the extent such allocation would result in such Member having an Adjusted
Capital Account deficit at the end of any Fiscal Year. All such Losses shall be allocated
to the other Members, provided, however, that (i) appropriate adjustments shall be made to
the allocation of future Profits in order to offset such specially allocated Losses
hereunder and (ii) in the event that the limitation set forth in this Section 5.3(f) would
result in a violation of the “fractions rule” pursuant to Treasury Regulation Section
1.514(c)-2(e), Holding Company shall enter into a deficit restoration agreement or be
permitted to take such other remedial action as necessary to prevent such a violation.
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted tax
basis of any Company Asset pursuant to Code Section 734(b) or Code Section 743(b) is
22
required, pursuant to Treasury Regulations 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 such gain or loss shall be
allocated to the Members in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations.
(h) Special Allocations. Notwithstanding any other provision of this
Agreement, allocations under this Agreement (including allocations pursuant to Section
5.3(i)) and the provisions of this Article V shall be made only to the extent that, and
shall be adjusted to the extent necessary to ensure that, the Company’s allocations satisfy
the requirements of Code Section 514(c)(9)(E), the Treasury Regulations promulgated
thereunder and any administrative guidelines or pronouncements thereunder, including so that
all allocations have “substantial economic effect” for purposes of Code Section
514(c)(9)(E)(i)(II), treating the Company for this purpose as a “qualified organization”
described in Treasury Regulations 1.514(c)-2.
(i) Curative Allocations. The allocations contained in Sections 5.3(a) through
5.3(g) (the “Regulatory Allocations”) are intended to comply with certain requirements of
the Code and Treasury Regulations. The Members intend that, to the extent possible, all
Regulatory Allocations shall be offset either by other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss or deduction pursuant to
this Section 5.3(i). Therefore, notwithstanding any other provisions of this Article V
(other than the Regulatory Allocations and Section 5.3(h)), the Members shall make such
offsetting special allocations of Company income, gain, loss or deduction in whatever manner
they reasonably determine to be appropriate so that, after such offsetting allocations are
made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital
Account balance such Member would have had if the Regulatory Allocations were not part of
this Agreement.
(j) Allocation to Reflect 6% Preferred Return. For each Fiscal Year of the
Company, before any allocations of Profits and Losses shall be made to the Members pursuant
to Section 5.1 or Section 5.2, items of gross income or gain of the Company,
as adjusted for purposes of this Section 5.3(j) in the manner described in clauses
(a) through (f) of the definition of Profits and Losses, shall be allocated to the Preferred
Members, in proportion to the number of Preferred Units held by each of them, in an amount
equal to the excess, if any, of (i) the dividends accrued with respect to the Preferred
Units pursuant to Section 2.3(a) for the current Fiscal Year and all prior Fiscal
Years, over (ii) the cumulative amount of gross income or gain allocated to the Preferred
Members pursuant to this Section 5.3(j) for the current Fiscal Year and all prior
Fiscal Years.
SECTION 5.4. Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any other items allocable to
any period, Profits, Losses, and any such other items shall be determined on a daily,
monthly, or other basis, as reasonably determined by the Board of Managers using
23
any permissible method under Code Section 706 and the Treasury Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all items of Company income, gain,
loss, deduction, and any other allocations not otherwise provided for shall be divided among
the Members for tax purposes in the same proportions as they share Profits or Losses, as the
case may be, for the Fiscal Year.
(c) The Members are aware of the income tax consequences of the allocations made by
this Article V and hereby agree to be bound by the provisions of this Article V in reporting
their shares of Company income and loss for income tax purposes.
(d) Solely for purposes of determining a Member’s proportionate share of the “excess
nonrecourse liabilities” of the Company within the meaning of Treasury Regulations Section
1.752-3(a)(3), the interest of the Members in Company Profits equals one hundred percent
(100%), in proportion to their ownership of Common Units.
(e) To the extent permitted by Treasury Regulations Section 1.704-2(h)(3), the Members
shall treat distributions of Net Proceeds of a Capital Transaction as not allocable to an
increase in Company Minimum Gain to the extent the distribution does not cause or increase a
deficit balance in the Adjusted Capital Account of any Member.
SECTION 5.5. Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) 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 property to the Company for
federal income tax purposes and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any Company property is adjusted pursuant to
paragraph (b) of the definition of Gross Asset Value, subsequent allocations of income,
gain, loss, and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the Treasury Regulations
thereunder.
(c) Any elections or other decisions relating to such allocations shall be made by the
Members, in any manner that reasonably reflects the purpose and intention of this Agreement;
provided, however, the Company agrees to use the Section 704(c) method selected by a
majority of the CET Common Members with respect to the property contributed to the Company
on the Effective Date, provided that such method complies with the provisions of Section
5.3(h) of this Agreement. Allocations pursuant to this Section 5.5 are solely for purposes
of federal, state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Member’s Capital Account or share of Profits, Losses, other items, or
distributions pursuant to any provision of this Agreement.
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ARTICLE VI
MEMBERS; MANAGEMENT AND CONDUCT OF THE COMPANY
MEMBERS; MANAGEMENT AND CONDUCT OF THE COMPANY
SECTION 6.1. Members.
(a) The Company shall consist of the Members executing this Agreement and any
substitute or additional Members admitted to the Company in accordance with the terms
hereof.
(b) Except as otherwise provided herein, the Members agree that no appraisal rights
shall be available with respect to the Membership Units in connection with any amendment of
this Agreement, any merger or consolidation in which the Company is a constituent party, any
conversion of the Company to another business form, any transfer to or domestication in any
jurisdiction by the Company or the sale of all or substantially all of the Company Assets.
SECTION 6.2. Rights and Powers of the Managers and Officers. Subject to Major
Decisions and the terms of Section 6.10 hereof, the business and affairs of the Company
shall be managed by a board of managers (the “Board of Managers”) which shall direct, manage and
control the business of the Company and have all of the rights and powers possessed by managers
under the Delaware Act. Except where the approval of the Members is expressly required by this
Agreement or by nonwaivable provisions of the Delaware Act, the Board of Managers (and each
Manager) shall have full and complete authority, power and discretion, comparable to that of a
board of directors (and of a director) of a corporation formed under the Delaware General
Corporation Law, to manage and control the business, affairs and properties of the Company, to make
all decisions regarding those matters and to perform any and all other acts or activities customary
or incident to the management of the Company’s business, except as otherwise provided by this
Agreement. No Member shall have any right, power or authority to act (as agent or otherwise) for,
or to bind the Company in any manner.
SECTION 6.3. Number, Tenure and Qualifications.
(a) The Board of Managers of the Company shall consist of six (6) Managers. Holding
Company shall appoint four (4) Managers to the Board of Managers and the holders of a
majority of the Management Common Units, for so long as they hold Common Units, shall
appoint two (2) Managers to the Board of Managers. Notwithstanding the foregoing, Xxxxxx X.
Xxxx, III and Xxxx X. Xxxxxxxx shall be the Managers representing the holders of Management
Common Units as long as they continue to be employees of the Company. The Company shall
hold a meeting of its Board of Managers at least once each quarter. The initial members of
the Board of Managers shall be [___].
(b) The Company shall reimburse the Managers for their reasonable expenses incurred in
attending each Board or committee meeting or otherwise serving as a Manager in accordance
with such procedures and limitations as may be adopted by the Board of Managers from time to
time.
SECTION 6.4. Meetings.
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(a) A regular meeting of the Board of Managers shall be held without other notice under
this Section, immediately after the annual meeting of Members. The Board of Managers may
provide, by resolution, the time and place for holding of additional regular meetings
without other notice than such resolution.
(b) Special meetings of the Board of Managers may be called by or at the request of any
Manager. The person or persons authorized to call special meetings of the Board of Managers
may fix any place as the place for holding any special meeting of the Board of Managers
called by them.
SECTION 6.5. Notice. Notice of any special meeting shall be given at least two (2)
Business Days previous thereto by written notice to each Manager at his business address. If
mailed, such notice shall be deemed to be delivered on receipt or attempted delivery if receipt is
refused. If notice is sent by e-mail or facsimile, such notice shall be deemed to be delivered
when sent. The attendance of a Manager at any meeting shall constitute a waiver of notice of such
meeting, except where a Manager attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting of the Board of
Managers need be specified in the notice or waiver of notice of such meeting.
SECTION 6.6. Quorum/Participation by Telephone. A majority of the Board
Managers shall constitute a quorum for transaction of business at any meeting of the Board of
Managers. Managers may participate in a meeting of the Board of Managers, or any committee, by
means of conference telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
SECTION 6.7. Manner of Acting. The act of the majority of the entire Board of
Managers shall be the act of the Board of Managers, unless the act of a greater number is required
by statute or this Agreement. No individual Manager shall have any power or authority to bind the
Company unless such Manager has been authorized by the Board of Managers to do so.
SECTION 6.8. Vacancies. Any vacancy on the Board of Managers may be filled at any
time in accordance with Section 6.3 above.
SECTION 6.9. Written Action By Managers. The authority of the Board of Managers may
be exercised without a meeting if a consent in writing, setting forth the action taken, is signed
by all the Managers.
SECTION 6.10. Rights and Powers of Officers.
(a) General. The Board of Managers shall delegate the management of the
Company’s day-to-day business affairs to the officers of the Company and, unless otherwise
decided by the Board of Managers, all actions of the Company shall be taken by the
appropriate duly authorized officers. Subject to Major Decisions and the limitations set
forth in this Agreement and the availability of sufficient funds, the officers of the
Company shall perform the following on behalf of the Company:
26
(i) Engage qualified persons to assist in the Company’s business, including
design professionals and consultants, attorneys, accountants, real estate brokers
and management agents, as well as to hire and fire Company employees.
(ii) Pay, without duplication, all expenses incurred by the Company and its
Subsidiaries in accordance with the approved Budget.
(iii) Maintain the books and records for the Company and its Subsidiaries and
prepare the reports required to be submitted to the Members in accordance with this
Agreement.
(iv) Operate the business of the Company substantially in accordance with the
approved Budget.
(v) Use its commercially reasonable best efforts to cause each New Investment
to be acquired, developed or redeveloped and operated substantially in accordance
with the approved final presentation therefor and the Budget.
(b) Budget. As soon as reasonably practicable after the Effective Date, but in
no event later than thirty (30) days after the Effective Date, the officers of the Company
will present a proposed annual budget (“Budget”) for Fiscal Year 2007 to the Board of
Managers for its approval. With respect to each subsequent Fiscal Year, the officers of the
Company will, on or before November 1 of each year, present a proposed Budget for the next
succeeding Fiscal Year to the Board of Managers for its approval. The Members anticipate
that the Budget will be revised quarterly or more frequently in response to market
conditions. In addition, the officers of the Company may from time to time during a Fiscal
Year present proposed amendments to the Budget to the Board of Managers for its approval.
The Board of Managers will promptly consider any proposed Budget or amendment thereto and if
the Budget is not approved by the Board of Managers, the Board of Managers shall notify the
officers of the Company in writing of those portions or line items thereof not so approved.
The Board of Managers will work in good faith to approve a Budget.
(c) Election of Officers; Terms. The officers of the Company shall consist of
a President, a Secretary and a Treasurer. Other officers, including a Chairman of the Board
of Managers, one or more Vice Presidents (whose seniority and titles, including Executive
Vice Presidents and Senior Vice Presidents, may be specified by the Board of Managers), and
assistant and subordinate officers, may from time to time be elected by the Board of
Managers. All officers shall hold office until the next annual meeting of the Board of
Managers and until their successors are elected. The President shall be chosen from among
the Board of Managers appointed by the holders of a majority of the Management Common Units
and shall be the Chief Executive Officer of the Company. Any two officers may be combined
in the same person as the Board of Managers may determine.
(d) Removal of Officers; Vacancies. Subject to the terms of any applicable
employment agreement, any officer of the Company may be removed summarily from
27
such office with or without cause, at any time, by the Board of Managers. Vacancies
may be filled by the Board of Managers.
(e) Duties. The officers of the Company shall have such duties as generally
pertain to their offices, respectively, as well as such powers and duties as are hereinafter
provided or as from time to time shall be conferred by the Board of Managers.
(f) Duties of the President. The President shall be the Chief Executive
Officer of the Company and shall be primarily responsible for the implementation of policies
of the Board of Managers. He shall have authority over the general management and direction
of the business and operations of the Company and its divisions, if any, subject only to the
ultimate authority of the Board of Managers. He shall be a Manager, and except as otherwise
provided in this Agreement or in the resolutions establishing such committees, the President
shall be an ex officio member of all Committees of the Board of Managers. In the absence of
the Chairman and the Vice Chairman of the Board of Managers, or if there are no such
officers, the President shall preside at all meetings of the Company. He may sign and
execute in the name of the Company certificates, deeds, mortgages, bonds, contracts or other
instruments except in cases where the signing and the execution thereof shall be expressly
delegated by the Board of Managers or by this Agreement to some other officer or agent of
the Company or shall be required by law otherwise to be signed or executed. In addition, he
shall perform all duties incident to the office of the President and such other duties as
from time to time may be assigned to him by the Board of Managers.
(g) Duties of the Vice President. Each Vice President, if any, shall have such
powers and duties as may from time to time be assigned to him by the President or the Board
of Managers. Any Vice President may sign and execute in the name of the Company
certificates, deeds, mortgages, bonds, contracts or other instruments authorized by the
Board of Managers, except where the signing and execution of such documents shall be
expressly delegated by the Board of Managers or the President to some other officer or agent
of the Company or shall be required by law or otherwise to be signed or executed by some
other officer or agent.
(h) Duties of the Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the company, and shall
deposit all monies and securities of the Company in such banks and depositories as shall be
designated by the Board of Managers. He shall be responsible (a) for maintaining adequate
financial accounts and records in accordance with generally accepted accounting practices;
(b) for the preparation of appropriate operating budgets and financial statements; (c) for
the preparation and filing of all tax returns required by law; and (d) for the performance
of all duties incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Board of Managers, the Finance Committee, if any, or the
President. The Treasurer may sign and execute in the name of the Company certificates,
deeds, mortgages, bonds, contracts or other instruments, except in cases where the signing
and the execution thereof shall be expressly delegated by the Board of Managers or by this
Agreement to some other officer
28
or agent of the Company or shall be required by law or otherwise to be signed or
executed.
(i) Duties of the Secretary. The Secretary shall act as secretary of all
meetings of the Board of Managers and Members of the Company. When requested, he shall also
act as secretary of the meetings of the committees of the Board of Managers. He shall keep
and preserve the minutes of all such meetings in permanent books. He shall see that all
notices required to be given by the Company are duly given and served; shall have custody of
all deeds, leases, contracts and other important documents of the Company; shall have charge
of the books, records and papers of the Company relating to its organization and management
as a Company; shall see that all reports, statements and other documents required by law
(except tax returns) are properly filed; and shall in general perform all the duties
incident to the office of Secretary and such other duties as from time to time may be
assigned to him by the Board of Managers or the President.
(j) Compensation. The Compensation Committee, if any, shall have authority,
subject to approval by the Board of Managers, to fix the compensation of all officers of the
Company.
SECTION 6.11. Reliance. Each Manager shall be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions, reports or statements
presented to the Company by any officers, employees, or committees of the Company, or by any other
Person as to matters such Manager reasonably believes are within such other Person’s professional
or expert competence and who has been selected with reasonable care by or on behalf of the Company,
including, without limitation, information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits or losses of the Company or any other facts pertinent to
the existence and amount of assets from which distributions to Members might properly be paid.
SECTION 6.12. Indemnification of Managers, Members and Officers; Exculpation.
(a) General. The Company shall indemnify any Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including an action by
or in the right of the Company) by reason of the fact that he is or was a Manager, member or
officer of the Company, or is or was serving at the request of the Company as a director,
manager, officer or employee of another limited liability company, corporation, partnership,
joint venture, trust or other enterprise (collectively, the “Covered Persons”), against
expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith with no willful misconduct or gross negligence and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Covered Person did not act in good faith
and in a manner which he reasonably believed to be in or
29
not opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) Indemnification in Certain Cases. To the extent that a Covered Person has
been successful on the merits or otherwise in defense of any action, suit or proceeding
referred to in clause (a) of this Section 6.12, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys’ fees) actually and
reasonably incurred by him in connection therewith.
(c) Advances for Expenses. Expenses (including attorneys’ fees) incurred in
defending a civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the Covered Person to repay
such amount if it shall be ultimately determined that he is not entitled to be indemnified
by the Company as authorized in this Section 6.12.
(d) Rights Non-Exclusive. The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subparagraphs of this Section 6.12 shall not
be deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, agreement or otherwise, both as to
action in his official capacity and as to action in another capacity while holding such
office.
(e) Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any Person who is or was a Covered Person, employee or agent, against
any liability asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Company would have the power to indemnify him
against such liability under the provisions of this Section 6.12.
(f) Exculpation. No Covered Person shall be liable, in damages or otherwise,
to the Company or its Members for any act or omission performed or omitted by such Covered
Person pursuant to authority granted by this Agreement except to the extent such Covered
Person fails to meet the standard for indemnification set forth in Section 6.12(a).
(g) Definition of Company. For the purposes of this Section 6.12, references
to “the Company” include all constituent entities absorbed in a consolidation or merger as
well as the resulting or surviving entity so that any Person who is or was a manager,
Member, director or officer of such a constituent entity or is or was serving at the request
of such constituent entity as a manager, Member, director or officer of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same position under
the provisions of this Section 6.12 with respect to the resulting or surviving entity as he
would if he had served the resulting or surviving entity in the same capacity.
(h) Survival of Rights. The indemnification and advancement of expenses and
exculpation provided by, or granted pursuant to, this Section 6.12 are for the benefit of
the Covered Persons, their heirs, successors, assigns and administrators and shall
30
continue as to a Person who has ceased to be an officer, manager or Member and shall
inure to the benefit of the heirs, executors and administrators of such Person.
SECTION 6.13. Organizational and Fictitious Name Filings. The Managers are hereby
authorized, on behalf of the Company, to execute and file or cause to be executed and filed all
such instruments, certificates, notices and documents, and to do or cause to be done all such
filing, recording, publishing and other acts as may be determined by the Managers to be necessary
or appropriate from time to time to comply with all applicable requirements for the formation or
operation or, when appropriate, termination of a limited liability company in the State of Delaware
and all other jurisdictions where the Company does or shall desire to conduct its business.
SECTION 6.14. Other Activities; Conflict of Interest; Waiver.
(a) Each Member recognizes that the other Members have or may have other business
interests, activities and investments, some of which may be in conflict or competition with
the business of the Company and that such other Member is entitled to carry on such other
business interests, activities and investments. No Member, in its capacity as a Member,
shall be obligated to devote all or any particular part of its time and effort to the
Company and its affairs.
(b) Except as otherwise expressly provided in this Agreement or any other agreement
between the Members or any Affiliates thereof, any Member or Affiliate thereof may engage in
or possess an interest in any other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the Company, and
neither the Company nor any Member shall have any rights by virtue of this Agreement or the
relationship created hereby in or to any other ventures or activities engaged in by any
Member or Affiliate thereof, or to the income or proceeds derived therefrom, and the pursuit
of such ventures or activities by any Member or its Affiliate shall not be deemed wrongful
or improper, even to the extent the same are competitive with the business activities of the
Company. Except as otherwise provided in any other agreement between the Members or any
Affiliates thereof, no Member or Affiliate thereof shall be obligated to present any
particular investment opportunity to the Company even if such opportunity is of a character
which, if presented to the Company, could be taken by the Company, and any Member or
Affiliate thereof shall have the right to take for its own account (individually or as a
partner, member or fiduciary) or to recommend to others any such particular investment
opportunity.
SECTION 6.15. Company’s Counsel. To the extent that the President deems necessary,
the Company shall retain one (1) or more law firms chosen by the President but reasonably
acceptable to the Board of Managers to be the Company’s legal counsel (the “Company Counsel”). The
fees and expenses of the Company Counsel shall be a Company expense. Nothing herein shall restrict
the Company Counsel from acting as counsel to any Member or any Affiliate of such Member, and the
Members agree that Company Counsel may represent such Member or any Affiliate of such Member in any
dispute involving any other Member or the Company. In the event the President shall desire to
terminate the employment of the Company Counsel and to substitute other counsel therefor, such
substitute counsel shall be
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chosen by the President, but subject to the reasonable approval of the Board of Managers.
SECTION 6.16. Transactions with Related Parties.
No agreement or transaction between the Company on the one hand and any Member or any
Affiliate of any Member (each, a “Related Party”) on the other hand shall be void or voidable
solely by reason of such relationship. The execution of any such agreement or the entering into or
consummation of such transaction by the Company shall not subject the participating Related Party
or any of their respective Affiliates, or their respective officers, directors, managers, members
or stockholders to liability to the Company or any Member for breach of fiduciary duty if (i) all
of the material facts as to the agreement or transaction and the relationship between any such
Related Party and the Company and the nature of any conflict of interest are disclosed or are known
to the Company’s officers and Holding Company and (ii) both the Company’s officers and Holding
Company approve or ratify such agreement or transaction (it being agreed that the affirmative vote
or consent of one of the Managers elected or designated by each of the holders of a majority of the
Management Common Units and Holding Company shall constitute such approval).
SECTION 6.17. Indebtedness; UBTI.
(a) The Company’s business (which for this purpose shall include but not be limited to
its investment in, or ownership of, any partnership, limited liability company or other
entity) shall be conducted in a manner necessary to avoid the realization of any UBTI to any
Member, or any of a Member’s direct or indirect members or participants, or the realization
of income that would be UBTI if a Member, or any of a Member’s direct or indirect members or
participants, were subject to the provisions of Sections 511 through 514 of the Code.
Without limiting the generality of the foregoing, the Company will not, and no Member shall
take any action to cause the Company to (i) incur any indebtedness other than (A)
indebtedness that is incurred to acquire or improve real property within the meaning of
Section 514(c)(9)(A) of the Code and that is not described in Section 514(c)(9)(B)(ii) of
the Code, or (B) other indebtedness that will not give rise to UBTI to any Member, or any of
a Member’s direct or indirect members or participants, or will not give rise to income that
would be UBTI if a Member, or any of a Member’s direct or indirect members or participants,
were subject to the provisions of Sections 511 through 514 of the Code, (ii) guarantee the
obligations of others or (iii) incur any Member Nonrecourse Debt.
(b) The Company shall not (i) enter into any lease with, or borrow any amounts for the
acquisition or improvement of any property (or any portion thereof) from, any person
described in Section 514(c)(9)(B)(iii) or (iv) of the Code; or (ii) enter into any lease or
other arrangement with respect to any Company Assets or any portion thereof if such lease or
arrangement would result in (1) the payment of rent or any other amount to the landlord
which depends in whole or in part on the income or profits derived by any person (including,
but not limited to, a tenant or a subtenant) from any portion of the Company Assets (other
than an amount based upon a fixed percentage of the receipts or sales of the tenant and, if
any, the subtenants), (2) an obligation of the landlord to furnish or render any service not
customarily furnished or rendered in
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connection with the rental of space for occupancy, as determined under Section 512(b)
of the Code and any applicable Treasury Regulations, including, but not limited to, services
with respect to parking, or (3) any portion of the Company’s income (or loss) otherwise
being UBTI. Notwithstanding anything to the contrary herein contained, Holding Company
shall have the right to object to any proposed tenant lease or other arrangement if the same
would result in any of the events set forth in clauses (1) — (3) of the immediately
preceding sentence. In the event that Holding Company determines, in its sole reasonable
judgment, that (A) as the result of any change in applicable statute, regulation or
administrative or judicial interpretation thereof (including, without limitation, private
letter rulings, technical advice memoranda and other similar pronouncements), any lease
could cause the Company to generate UBTI or (B) any other arrangement entered into with
respect to the Company Assets or any portion thereof could cause the Company to generate
UBTI, the Members agree to use best efforts to reform such lease or other arrangement, or to
take any other action necessary or appropriate, to prevent the Company from generating any
UBTI.
SECTION 6.18. VCOC Status. The Company shall conduct its affairs in such manner that
the Company shall qualify as a “venture capital operating company” (“VCOC”) within the meaning of
subsection (d) of Department of Labor regulations set forth at 29 C.F.R. Section 2510.3-101 or any
successor to such regulation (the “Plan Asset Regulations”) and relevant authority interpreting the
Plan Asset Regulations. In furtherance of the foregoing, the Company (i) shall, (A) on the date
the Company first makes an investment (other than a short-term investment of funds pending long
term commitment) (the “Initial Valuation Date”) and, (B) thereafter, on one day during each “annual
valuation period” (as hereinafter defined), have at least fifty percent (50%) of its assets (valued
at cost) invested in “operating companies” within the meaning of subsection (c) of the Plan Asset
Regulations, including REOCS which invest in real estate which is managed or developed and with
respect to which the Company has the right to substantially participate in, or substantially
influence, the management of such operating companies to the extent required to maintain the
Company’s status as a VCOC under the Plan Asset Regulations, (ii) establishes an “annual valuation
period” which shall be the 90-day period commencing on the first day of the month which includes
the first anniversary or any subsequent anniversary of the Initial Valuation Date and (iii) in the
ordinary course of its business shall participate in the management of such operating companies to
the extent required to maintain its status as a VCOC. The Members consent and agree to take such
actions as are necessary to maintain the Company’s VCOC status and consent and agree to take no
actions which could prevent the Company from maintaining its VCOC status.
SECTION 6.19. Debt Financing. The Company intends to obtain debt financing for the
development or redevelopment of the Property Portfolio (the “Company Loans”). The aggregate
principal amount of the Company Loans shall be approximately equal to sixty-five (65%) percent of
the total project costs for the Property Portfolio. Each Company Loan shall be non-recourse to the
Members.
SECTION 6.20. Major Decisions. Notwithstanding anything to the contrary contained in
this Agreement, no act shall be taken, sum expended, decision made or obligation incurred by the
Company with respect to a Major Decision, unless and until the Members shall have approved the same
pursuant to this Section 6.20. All Major Decisions shall require the
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approval of the Board of Managers, including at least one Manager of the Board of Managers
appointed by the holders of the Management Common Units, which approval shall not be unreasonably
withheld. In the event the Managers representing the holders of Management Common Units desire to
take any action with respect to any Major Decision, the President shall make such request to the
Board of Managers in writing together with any information reasonably necessary for the Board of
Managers to make an informed decision. On receipt of such writing, the Board of Managers shall
have ten (10) Business Days to either approve or disapprove of the Major Decision (except in the
case of the approval of a proposed lease transaction, in which event the Board of Managers shall
have five (5) Business Days to either approve or disapprove). Failure to respond within the
applicable time limit shall be deemed disapproval.
In the event that Holding Company desires the Company to take an action with respect to any
Major Decision, Holding Company shall recommend in writing to the Managers representing the holders
of Management Common Units that such action be taken. Such Managers shall have ten (10) Business
Days to respond to such written recommendation. Approval by such Managers shall not be
unreasonably withheld. If such Managers shall disagree with such recommendation, such Managers
shall so notify Holding Company in writing within such ten (10) Business Day period. Failure to
respond within the applicable time period shall be deemed disapproval.
ARTICLE VII
BOOKS AND RECORDS; RESERVES
BOOKS AND RECORDS; RESERVES
SECTION 7.1. Bank Accounts. The Board of Managers shall have authority to open bank
accounts and designate signatories with respect thereto on behalf of the Company as it shall deem
necessary or desirable for the management and operation of the Company Assets and the conduct of
Company business. An individual designated by Holding Company, from time to time, shall at all
times be a designated signatory with respect to all Company bank accounts. The Company’s funds
shall not be commingled with any other funds.
SECTION 7.2. Books of Account; Audits/Access to Information.
(a) The Company shall keep, and cause each property manager to keep, accurate and
complete books of account and records showing the assets and liabilities, operations,
transactions and financial condition of the Company and the Company Assets on a modified
accrual basis in accordance with fair market value and historical cost accounting principles
generally accepted in the United States of America (such generally accepted accounting
principles, “GAAP”). The books of account and records of the Company and the Company Assets
shall at all times be maintained at the principal office of the Company. All such books of
account and records may be inspected, copied and audited by any Member, its designees or
representatives from time to time and upon reasonable prior notice at the office of the
Company or other Person maintaining the same.
(b) In addition to the annual audit by the Accountant, upon reasonable advance notice
to the Board of Managers, any Member may, at its option and at its own expense, conduct
audits of the books, records and accounts of the Company. The
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Company shall provide, or shall cause the applicable property managers to provide, the
auditing Member’s appraisers, accountants and advisors with access to all information
related to the value of the Company Assets and to the management personnel involved directly
or indirectly in the affairs of the Company, and shall cause such personnel to cooperate
fully with such Member or its designees, and to furnish information requested by it or its
designees, as to the status of the affairs of the Company.
SECTION 7.3. Reports.
(a) The Company shall prepare and distribute, or cause each property manager to prepare
and distribute, such reports and information to the Members as shall be reasonably requested
by such Members in order to enable them to effectively manage their respective Membership
Units and be fully informed about the affairs of the Company Assets and the Company. The
reports and other information distributed to the Members pursuant to the preceding sentence
shall include, without limitation, the appraisals referenced in Section 7.6 hereof.
The Company shall furnish, or cause each property manager to furnish, at the Company’s or
such property manager’s expense, monthly reports prepared on a modified accrual basis in
accordance with fair market value GAAP for Holding Company showing monthly and year-to-date
activity on or about the tenth (10th) day following the end of each Monthly Reporting Period
(see Schedule C for reporting requirements). All reporting and budgeting shall be on a
Fiscal Year basis. All reports shall be completed in hard copy format. In addition, the
Company shall submit certain information in a format requested by Holding Company via
diskette or electronically using Holding Company’s account numbers.
(b) The Company shall, as a Company expense, at least once every calendar year have the
Company’s books and records audited by the Accountant. The Company shall use good faith
efforts to cause the Accountant to submit a copy of the annual audited financial statements
in accordance with fair market value GAAP to all Members as soon as practicable after the
end of the each Fiscal Year. However, a copy of the annual audited financial statements
shall be submitted promptly after completion to all Members, and not later than ninety (90)
days after the end of each Fiscal Year.
(c) The Company shall use or cause the property managers to use Management Reports,
Inc. (“MRI”) property management software. Holding Company may require the Company or the
property managers, as the case may be, to use another property management software, with the
version and release number to be provided by Holding Company, if X.X. Xxxxxx Investment
Management Inc. requires such other property management software on a consistent basis for
substantially all other properties for which X.X. Xxxxxx Investment Management Inc. serves
as asset manager. The modules required for implementation shall include, without
limitation, general ledger, commercial management, accounts payable and distributed
processing. Holding Company, in its sole discretion, may require modified version and
release of the property management software. The database structure, system type and
property number will be provided by Holding Company and will not be modified without the
consent of Holding Company. Holding Company will provide the Company with a standard chart
of accounts, tenant charge (billing) codes and report formats that are to be used unless
35
otherwise agreed to in advance by Holding Company. The Company will submit or cause
the property managers to submit to Holding Company on the twenty-fifth (25th) day of each
month, a monthly electronic download of selected financial and operational data, including
general ledger information, using either the distributive processing function of MRI or data
extract routines identified and/or provided by Holding Company. Holding Company reserves
the right to periodically modify the foregoing software and reporting requirement at the
Company’s expense, as long as such expenses are reasonable, otherwise at the requesting
party’s expense. The Company shall pay all costs and expenses of any outside consultants
employed and the purchase of any computer software to assist in the conversion of its
financial data from its property management software to MRI property management software.
Holding Company will use good faith efforts not to make any changes to property-level
financial information contained on the MRI property accounting system without the knowledge
of the applicable property manager and Management.
(d) No later than one hundred twenty (120) days after the end of each Fiscal Year of
the Company, the Company shall, as a Company expense, furnish the Members with all necessary
tax reporting information required by the Members for the preparation of their respective
federal, state and local income tax returns, including each Member’s pro rata share of
income, gain, loss, deductions and credits for such Fiscal Year. The Board of Managers
shall supervise the Accountant in the preparation of the Company’s tax returns.
(e) Within one hundred twenty (120) days following the end of the Fiscal Year of the
Company, the Company shall, as a Company expense, furnish each Member with copies of the
Company’s federal partnership tax return and other income tax returns, together with each
Member’s Schedule K-1 or analogous schedule, which returns shall be signed by the Tax
Matters Member on behalf of the Company and co-signed by the Accountant as preparer.
(f) Except as otherwise provided in this Agreement, all decisions as to accounting
principles, whether for the Company’s books or for income tax purposes (and such decisions
may be different for each such purpose) and all elections available to the Company under
applicable tax law, shall be made by the Tax Matters Member. Upon the request of any Member
in connection with the Transfer of all or part of such Member’s Membership Units, the
Company shall make an election under Code Section 754. The Tax Matters Member shall, on
behalf of the Company, use best efforts to cause all federal, state and local income and
other tax returns to be timely filed by the Company and each Subsidiary Entity. The Tax
Matters Member shall deliver to the other Members for their review and comment on all
federal, state and local income tax returns at least twenty (20) days prior to the filing
thereof.
(g) The Members, intending to be legally bound, hereby authorize the Company to make an
election (the “Safe Harbor Election”) to have the “liquidation value” safe harbor provided
in Proposed Treasury Regulation § 1.83-3(1) and the Proposed Revenue Procedure set forth in
Internal Revenue Service Notice 2005-43, as such safe harbor may be modified when such
proposed guidance is issued in final form or
36
as amended by subsequently issued guidance (the “Safe Harbor”), apply to any interest
in the Company transferred to a service provider while the Safe Harbor Election remains
effective, to the extent such interest meets the Safe Harbor requirements (collectively,
such interests are referred to as “Safe Harbor Interests”). The Tax Matters Member is
authorized and directed to execute and file the Safe Harbor Election on behalf of the
Company and the Members. The Company and the Members (including any person to whom an
interest in the Company is transferred in connection with the performance of services)
hereby agree to comply with all requirements of the Safe Harbor (including forfeiture
allocations) with respect to all Safe Harbor Interests and to prepare and file all U.S.
federal income tax returns reporting the tax consequences of the issuance and vesting of
Safe Harbor Interests consistent with such final Safe Harbor guidance. Notwithstanding the
foregoing, the Company shall not be permitted to make any allocations that would result in
its failing to satisfy the requirements of Code Section 514(c)(9)(E), including the
requirement that the Company satisfy the “fractions rule” (within the meaning of Treasury
Regulations Section 1.514(c)-2(b)(1)(i)) and that all allocations have “substantial economic
effect” for purposes of Code Section 514(c)(9)(E)(i)(II).
SECTION 7.4. The Accountant. The Company shall retain a “Big Four” or other
independent certified public accounting firm selected by the Board of Managers to be the accountant
and auditor for the Company (the “Accountant”). The fees and expenses of the Accountant shall be a
Company expense. The initial Accountant shall be Deloitte & Touche LLP.
SECTION 7.5. Tax Matters Member. Holding Company shall have full power and authority
to act for the Company and the Members as “Tax Matters Member,” under Code Section 6231(a)(7), with
all the rights and responsibilities of that position described in Code Sections 6222-32 and to act
in any similar capacity under applicable state or local law. The Tax Matters Member shall keep the
other Members informed of the progress of any tax audits or examinations. The Tax Matters Member
shall not extend the statute of limitations with respect to Company matters without the consent of
the holders of a majority of the CET Common Units. In addition, the Tax Matters Member shall not,
without the consent of Managers representing the holders of Management Common Units, (i) enter into
any settlement agreement that is binding on the CET Common Members with respect to any Company
items allocated to or affecting the CET Common Members or (ii) file a petition under Section
6226(a) or Section 6228(a) of the Code with respect to any Company items allocated to or affecting
the CET Common Members. The Company shall reimburse the Tax Matters Member for all unrelated third
party costs and expenses, and any other costs and expenses, incurred by it in the exercise of the
rights and/or the performance of the responsibilities referred to in this Section 7.5. The Company
shall indemnify and hold harmless the Tax Matters Member from all unrelated third party claims,
liabilities, costs and expenses, including, without limitation, reasonable attorney’s fees and
court costs, incurred by it in the exercise of the rights and/or the performance of the
responsibilities referred to in this Section 7.5.
SECTION 7.6. Appraisals. The Board of Managers, on behalf of and at the expense of
the Company, shall cause an independent appraiser to determine the appraised value of the Company
Assets not more than one time per calendar year. Any appraiser so appointed
37
shall furnish the Company and each of its Members with a written appraisal within forty-five
(45) days after its appointment. All appraisals conducted for the Company shall be addressed to
the Company and each of the Members. Such appraisal shall set forth the appraiser’s determination
of the appraised value of the Company Assets. In making the appraisal of the Company Assets, the
appraiser shall value the Company Assets unencumbered and shall assume that the improvements then
situated on the Company Assets are the highest and best use to which the Company Assets can
lawfully be put.
ARTICLE VIII
TRANSFER OF MEMBERSHIP UNITS
TRANSFER OF MEMBERSHIP UNITS
SECTION 8.1. No Transfer. No CET Common Member may sell, assign, pledge, transfer,
give, hypothecate or otherwise encumber (any such sale, assignment, pledge, transfer, gift,
hypothecation or encumbrance being hereinafter referred to as a “Transfer”), directly or
indirectly, or by operation of law or otherwise, any direct or indirect interest in the Company,
except as hereinafter set forth in this Article VIII (or as otherwise permitted pursuant to this
Agreement) or upon prior written consent of Holding Company, which may be granted or withheld in
the sole and absolute discretion of Holding Company. Holding Company may not Transfer, directly or
indirectly, or by operation of law or otherwise, any direct or indirect interest in the Company,
except as hereinafter set forth in this Article VIII (or as otherwise permitted pursuant to
this Agreement) or upon prior written consent of the holders of a majority of the CET Common Units,
which may be granted or withheld in the sole and absolute discretion of CET Common Members.
Preferred Members may not Transfer, directly or indirectly, or by operation of law or otherwise,
any direct or indirect interest in the Company, except as hereinafter set forth in this Article
VIII (or as otherwise permitted pursuant to this Agreement) or upon prior written consent of
Holding Company, which shall not be unreasonably withheld. In order to effectuate the purpose of
this Section 8.1, each Member agrees that to the extent it desires that its Company Interest be at
any time held by any other Person, such Member will Transfer its Company Interest, or part thereof,
to such Person only through a direct Transfer in the manner contemplated in Article VIII, and that,
except as expressly authorized in Section 8.2, no Transfer or other disposition of any stock,
partnership, limited liability company or other beneficial interest in any Member or other such
Person which holds any Membership Unit, will be effected, directly or indirectly, unless approved
by Holding Company; provided that, notwithstanding anything to the contrary contained in this
Agreement, transfer of units of participation in SSPF shall be permitted. Any Transfer of any
Company Interest in contravention of this Article VIII shall be null and void and shall be deemed a
material breach of the terms of this Agreement, and the other Members shall have all the rights and
remedies available under this Agreement and applicable law.
SECTION 8.2. Succession by Operation of Law/Certain Permitted
Transfers/Prorations/Cooperation.
(a) Subject to this Article VIII and Section 10.1, in the event of the merger,
consolidation, dissolution or liquidation of any Member, all of such Member’s rights to
distributions and allocations by the Company, shall pass to such Member’s legal successor,
but such legal successor shall not become a Member of the Company without the prior written
consent of Holding Company.
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(b) Subject to this Article VIII, a Member may Transfer all or a portion of such
Member’s Membership Units to such Member’s (i) parent or parent’s spouse, (ii) spouse, (iii)
natural or adopted descendant or descendants, (iv) spouse of such Member’s descendant, (v)
brother or sister, (vi) trust created by such Member for the primary benefit of such Member
and/or any such Person(s) or bank or other commercial entity in the business of acting as a
fiduciary in its ordinary course of business and having an equity capitalization of at least
$100,000,000 is a trustee, (vii) a corporation, partnership or limited liability company
controlled by a Person or Persons named in (i) through (v) above, or (viii) if the Member is
an entity, its beneficial owners.
(c) No Member may effect a Transfer of its Membership Units, in whole or in part, if,
in the opinion of legal counsel for the Company, such proposed Transfer would require the
registration of the Membership Unit under the Securities Act or would otherwise violate any
applicable federal or state securities or blue sky law (including investment suitability
standards).
(d) Notwithstanding anything in this Agreement to the contrary, any SSPF Entity holding
an interest in Holding Company shall have the right, at any time, and without the
requirement of Member consent, to Transfer all or any portion of such interest or any direct
or indirect interest therein to any other SSPF Entity and each such SSPF Entity shall, upon
complying with the provisions of Section 8.3(d), become a Member hereunder.
(e) If any Membership Unit is Transferred pursuant to this Article VIII, except as
otherwise expressly provided in this Article VIII, items of income and expense that would
customarily be adjusted between a seller and purchaser of commercial real estate will be
adjusted in accordance with local custom as of the date of such Transfer in the States in
which the Company Assets are located.
(f) If any Membership Unit is Transferred or proposed to be Transferred pursuant to
this Article VIII, the parties hereto agree to reasonably cooperate with each other in good
faith to structure such Transfer to avoid or minimize transfer fees to lenders and any
transfer, deed or similar taxes due in connection therewith.
SECTION 8.3. General Conditions Applicable to Transfers.
(a) Notwithstanding anything in this Agreement to the contrary (including but not
limited to any of the other sections of this Article VIII), in no event shall (i) any
Transfer be made, recognized or consented to by the Members or deemed effective unless such
Transfer will not constitute or result in a material violation or default under any Key
Document or (ii) a Company Interest be Transferred to a Person who is the subject of any
pending bankruptcy proceedings, or to a Person who is a minor or who otherwise lacks legal
capacity, and any attempt to effect a Transfer to such a Person shall be void and of no
effect and shall not bind the Company.
(b) In the event that any filing, application, approval or consent is required in
connection with any Transfer, whether by any governmental entity or other third-party,
39
the transferring Member shall promptly make such filing or application or obtain such
approval or consent, at its sole expense.
(c) Notwithstanding anything to the contrary contained in this Agreement (including but
not limited to the other sections of this Article VIII), each Member and each transferee of
all or any Membership Unit, (i) shall at all times maintain an office or agency for the
service of process in the United States of America, which shall also be its address for
delivery of Notices hereunder or (ii) shall be a citizen or national of the United States.
(d) Notwithstanding anything to the contrary contained in this Agreement (including but
not limited to the other sections of this Article VIII), no Transfer of all or any portion
of any Member’s Membership Units shall be binding upon the other Members or the Company, and
the Company shall be entitled to treat the record owner of any Company Membership Units as
the absolute owner thereof in all respects, unless and until (i) true copies of the
instruments of transfer executed and delivered pursuant to or in connection with such
Transfer shall have been delivered to Holding Company and the Company, (ii) the transferee
shall have delivered to Holding Company and the Company an executed and acknowledged
assumption agreement pursuant to which the transferee assumes all the obligations of the
transferor arising and accruing from and after the date of such Transfer under, and agrees
to be bound by all the provisions of, this Agreement, (iii) the transferee shall have
executed, acknowledged and delivered any instruments required under any applicable laws to
effect such Transfer and, if applicable, its admission to the Company, (iv) the transferee
shall have executed and delivered such other instruments, documents and agreements
reasonably required by the Company in connection with such Transfer which are consistent
with the other terms hereof and (v) the transferee shall have executed and delivered such
other instruments or documents or shall have provided such information to the
non-transferring Members as the Company may reasonably require to assure itself that neither
the transferee’s acquisition and holding of the Company Membership Units nor any transaction
contemplated under this Agreement will result in a non-exempt prohibited transaction under
ERISA or Section 4975 of the Code. Upon compliance with the provisions of this Section
8.3(d), any Person who acquires a Membership Unit in a transaction permitted by this Article
VIII shall, unless otherwise provided in this Agreement, be admitted as a Member. Except as
otherwise set forth herein, upon the execution and delivery of such assumption agreement,
the transferor shall have no further obligation hereunder after the date of the Transfer
except that the transferor shall remain primarily liable for all accrued obligations (as of
the date of Transfer) of the transferor under this Agreement, notwithstanding any Transfer
pursuant to this Article VIII.
(e) Except as otherwise expressly provided herein, all reasonable costs and expenses
incurred by the Company in connection with any Transfer of a Membership Unit and, if
applicable, the admission of a Person or Entity as a Member hereunder, shall be paid by the
transferor. Upon compliance with all provisions hereof applicable to any transferee of a
Membership Unit becoming a Member, all Members hereby agree to execute and deliver such
reasonable amendments hereto as are necessary to constitute such person or entity a Member
of the Company.
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(f) If any Person acquires all or any part of a Membership Unit of a Member in
violation of this Article VIII whether by operation of law, judicial proceeding, or other
manner not expressly permitted hereunder, such Person shall have no rights under this
Agreement with respect to the Membership Unit so acquired.
SECTION 8.4. Bankruptcy or Dissolution of a Member. Upon the occurrence of a
Bankruptcy Event or any other occurrence with respect to a Member of any event which under the
Delaware Act causes the Member to cease to be a member of a limited liability company (a
“Withdrawal Event”), the Member affected by such Withdrawal Event shall, unless the Company shall
otherwise consent within ninety (90) days of such Withdrawal Event, be deemed to have withdrawn as
a Member on the expiration of such ninety (90) day period. In the event that a Member is deemed to
have withdrawn from the Company pursuant to this Section 8.4, then such Member (a “Withdrawn
Member”) shall continue to have the rights of an assignee of its Membership Units which was not
admitted as a Member and shall not be entitled to participate in the management of the Company or
to vote, approve or consent to any matter for which the vote, approval or consent of any Members is
required. Unless the Members (other than the Withdrawn Member) otherwise agree, the Company shall
not terminate or dissolve upon the occurrence of a Bankruptcy Event or any other occurrence which
under the Act causes a Member to cease to be a member of the Company. No Member shall withdraw or
retire from the Company without the prior consent of the Board of Managers, except in connection
with a Transfer of its entire Membership Units in accordance with the terms of this Agreement. In
furtherance of the foregoing, each Member hereby waives any and all rights such Member may have to
withdraw and/or resign from the Company pursuant to Section 18-603 of the Delaware Act and hereby
waives any and all rights such Member may have to receive the fair value of such Member’s
Membership Units upon such resignation and/or withdrawal pursuant to Section 18-604 of the Delaware
Act, and such Member shall continue to hold its Membership Units in accordance with the provisions
hereof.
SECTION 8.5. Buy/Sell Rights.
(a) Subject to the terms and conditions of Article VIII of this Agreement, at
any time within sixty (60) days following the occurrence of a Special Event, the holders of
a majority of the CET Common Units may, as Offeror, deliver a Notice (a “Buy-Sell Notice”)
to the Holding Company (the “Offeree”) that the Offeror desires to exercise its rights under
this Section 8.5 to sell all the CET Common Units. All CET Common Members hereby
acknowledge and agree that the holders of a majority of the Management Common Units shall
have the right to exercise the buy-sell rights hereunder on behalf of all CET Common
Members. The Buy-Sell Notice shall designate an amount (the “Gross Value Amount”) that
shall be the Offeror’s determination of the value of all Company Assets and its estimate of
the Applicable Purchase Price, subject to adjustments, with respect to Holding Company’s
Common Units and the CET Common Units, including payment of the aggregate Liquidation
Preference of the then outstanding Preferred Units. For the purposes hereof, the
“Applicable Purchase Price” payable to any Member that sells its Common Units pursuant to
this Section 8.5 shall be the amount that such selling member would receive if, as
of the date of the Offer Notice, the Gross Value Amount, after payment of all debts and
liabilities of the Company, was distributed among the Members in accordance with the
provisions of Section 10.2.
41
(b) Upon receipt of the Buy-Sell Notice given pursuant to Section 8.5(a) hereof,
Offeree shall then be obligated either to:
(i) purchase all CET Common Units for cash at a price equal to the Applicable
Purchase Price (the “Buy Option”); or
(ii) sell to Offeror its entire Common Units for cash at a price equal to the
Applicable Purchase Price (the “Sell Option”).
(c) If a Buy-Sell Notice is given to an Offeree, the Offeree shall have a period of up
to sixty (60) days after the giving of such notice in which to accept, by Notice to the
Offeror, the Buy Option or the Sell Option. If Notice of such election is not given to the
Offeror within such period following the Buy-Sell Notice, it shall be conclusively deemed
that the Offeree has elected to accept the Offeror’s offer to buy the Offeree’s Common Units
pursuant to the Buy Option. If the Sell Option is accepted, the Offeree shall
contemporaneously deliver a certified or bank check drawn on a bank that is a member of the
New York Clearinghouse Association payable to the order of the Escrow Agent in an amount
equal to the Buy-Sell Deposit. If the Buy Option is accepted (or deemed accepted), the
Offeror shall within five (5) Business Days deliver the Buy-Sell Deposit to the Escrow
Agent. If the Member obligated to deliver the Buy-Sell Deposit fails to do so, the other
party may either (i) elect within five (5) Business Days to become the buyer under the Buy
Option (in which case it shall promptly deliver the Buy-Sell Deposit as contemplated herein)
or (ii) xxx the defaulting party for breach of contract.
(d) If either a Buy Option or a Sell Option is properly exercised as set forth above,
the Offeror and the Offeree shall each buy and sell, as the case may be, the entire Common
Units in the Company of the Offeror or the Offeree, as the case may be, such Common Units to
be transferred to the other or the other’s designee on or the sixtieth (60th) day after the
delivery of the exercise notice, or deemed election, if applicable (or the next Business Day
thereafter if such day is not a Business Day). At the closing, the purchase price specified
above shall be paid by the purchasing Member by official bank check or by bank wire transfer
of immediately available funds. The terms of the purchase and sale shall be unconditional,
except that (i) each of the Members whose Common Units are being sold shall be deemed to
represent and warrant to the purchasing Members that its entire Common Units in the Company
are owned by the selling Member free and clear of all liens and encumbrances and is subject
to no legal or equitable claims and (ii) the purchasing Member shall be deemed to have
assumed all obligations and liabilities relating to the purchased Common Units arising from
transactions or events first occurring after the date of such sale, and upon demand each
such Member shall deliver to the other appropriate documentation evidencing the sale,
assignment, representation and assumption set forth herein. If any Member shall fail to
comply with its obligation to sell its Common Units in the Company or purchase the Common
Units of the other Member, as applicable, such Member shall be deemed to be in default
hereunder and the other Member shall have, in addition to the rights and remedies set forth
herein, all rights and remedies at law or equity.
42
ARTICLE IX
BROKERS
BROKERS
SECTION 9.1. Brokers. Each Member represents and warrants to the other Member that it
has not dealt with any real estate broker or finder in connection with the formation of the Company
or the transactions contemplated herein. Each Member agrees to indemnify and hold harmless the
other Members and the Company from and against any actions, claims or demands for any commissions
or fees and all losses, costs and expenses (including reasonable attorneys’ fees) arising from a
breach of the foregoing representation and warranty.
ARTICLE X
TERMINATION
TERMINATION
SECTION 10.1. Dissolution. Except as hereinafter provided to the contrary, the
Company shall be dissolved and its business wound up upon the happening of any of the following
events, whichever shall first occur:
(a) As approved by Holding Company and the holders of a majority of the CET Common
Units to dissolve;
(b) At any time that there are no Members; provided that the Company shall not be
dissolved if within ninety (90) days after the occurrence of the event that terminated the
continued membership of the last remaining Member, the personal representative of the last
remaining Member agrees in writing to continue the Company and to the admission of such
personal representative or its nominee or designee to the Company as a Member effective as
of the occurrence of the event that terminated the continued membership of the last
remaining Member; or
(c) The occurrence of any event, other than those referred to in paragraph (b), which
causes dissolution of a limited liability company under the Delaware Act, unless the Members
agree to continue the Company pursuant to the Delaware Act.
SECTION 10.2. Termination. Notwithstanding any other provision of this Agreement, in
all cases of dissolution of the Company, the business of the Company shall be wound up and the
Company terminated as promptly as practicable thereafter, and each of the following shall be
accomplished:
(a) The Liquidating Trustee shall cause to be prepared (i) statements setting forth the
assets and liabilities of the Company as of the date of dissolution and as of the date of
complete liquidation, a copy of such statements shall be furnished to all of the Members and
(ii) a report in reasonable detail of the manner or disposition of assets.
(b) The Company Assets shall be liquidated by the Liquidating Trustee as promptly as
possible, but in an orderly and businesslike and commercially reasonable manner. The
Liquidating Trustee may, in the exercise of its business judgment and if commercially
reasonable, determine to defer the sale of all or any portion of the Company Assets if
deemed necessary or appropriate to realize the fair market value of any such property or
assets.
43
(c) The proceeds of sale and all other Company Assets shall be applied and distributed
as follows and in the following order of priority:
(i) To the payment of (x) the debts and liabilities of the Company (including
any outstanding amounts due on any recourse indebtedness encumbering the Company
Assets, or any part thereof) and (y) the expenses of liquidation.
(ii) To the setting up of any reserves which the Liquidating Trustee shall
determine in its commercially reasonable judgment to be reasonably necessary for
contingent, unliquidated or unforeseen liabilities or obligations of the Company or
the Members arising out of or in connection with the Company. Such reserves may, in
the commercially reasonable discretion of the Liquidating Trustee, be paid over to a
national bank or national trust company selected by the Members and authorized to
conduct business as an escrow agent to be held by such bank or trust company as
escrow agent for the purposes of disbursing such reserves to satisfy the liabilities
and obligations described above, and at the expiration of such period distributing
any remaining balance as provided in clause (iv) below.
(iii) To the payment of the aggregate Liquidation Preference of the then
outstanding Preferred Units.
(iv) The balance, if any, to the Members, in accordance with and to the extent
of the Members’ ending positive Capital Account balances, after giving effect to all
contributions, distributions and allocations for all periods, including, without
limitation, any allocations of Profits or Losses from any Capital Transactions
causing or resulting in the dissolution and termination of the Company.
Distributions pursuant to the preceding clause (iii) shall be made by the end of the Fiscal Year
during which the dissolution of the Company occurs (or, if later, within ninety (90) days of such
dissolution). To the fullest extent permitted by applicable law, the Members hereby waive any
rights to distributions under Section 18-604 of the Delaware Act.
(d) The Liquidating Trustee shall cause the filing of the Certificate of Cancellation
pursuant to Section 18-203 of the Delaware Act and shall take all such other actions as may
be necessary to terminate the Company.
SECTION 10.3. Liquidating Trustee.
(a) The term “Liquidating Trustee” shall mean the Person appointed by the Board of
Managers for this express purpose, to the exclusion of the Members.
(b) Without limiting the foregoing, the Liquidating Trustee shall, upon the dissolution
and upon completion of the winding up of the affairs of the Company, file appropriate
certificate(s) to such effect in the proper governmental office or offices under the
Delaware Act as then in effect. Notwithstanding the foregoing, each Member, upon
44
the request of the Liquidating Trustee, shall promptly execute, acknowledge and deliver
all such documents, certificates and other instruments as the Liquidating Trustee shall
reasonably request to effectuate the proper dissolution and termination of the Company,
including the winding up of the business of the Company.
SECTION 10.4. No Redemption. Except as otherwise set forth herein, the Company may
not acquire, by purchase, redemption or otherwise any Membership Unit of any Member.
SECTION 10.5. Governance. Notwithstanding a dissolution of the Company, until the
termination of the business of the Company, the affairs of the Members, as such, shall continue to
be governed by this Agreement. The Liquidating Trustee shall be subject to the same restrictions
on transactions with related parties or involving conflicts of interest as applied prior to the
dissolution of the Company, including but not limited to the consent requirements set forth herein
of any such transaction. The Liquidating Trustee shall also be required to perform its duties
under this Agreement using the same standard of care that would be required of the Liquidating
Trustee if the Liquidating Trustee was acting as a Manager.
SECTION 10.6. Return of Capital. No Member shall have any right to receive the return
of its Capital Contribution or to seek or obtain partition of the Company Assets, other than as
provided in this Agreement.
ARTICLE XI
MISCELLANEOUS
MISCELLANEOUS
SECTION 11.1. Further Assurances. Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further reasonable certificates, amendments to certificates,
instruments and documents, and do all such other reasonable acts and things as may be required by
law, or as may be required to carry out the intent and purposes of this Agreement so long as any of
the foregoing do not materially increase any Member’s obligations hereunder or materially decrease
any Member’s rights hereunder.
SECTION 11.2. Notices. Except as set forth in Section 6.5, all notices,
demands, consents, approvals, requests or other communications which any of the parties to this
Agreement may desire or be required to give hereunder (collectively, “Notices”) shall be in writing
and shall be given by personal delivery or facsimile or United States registered or certified mail
(postage prepaid, return receipt requested) addressed as hereinafter provided, provided, however,
that any Notice given by facsimile shall also be given by personal delivery or United States
registered or certified mail. Except as otherwise specified herein, the time period in which a
response to any notice or other communication must be made, if any, shall commence to run on the
earliest to occur of (a) if by personal delivery, the date of receipt, or attempted delivery, if
receipt of such delivery is refused; (b) if given by facsimile, the date on which such facsimile is
transmitted and confirmation of delivery thereof is received; and (c) if sent by mail (as
aforesaid), the date of receipt or attempted delivery, if such mailing is refused. Until further
notice, Notices and other communications under this Agreement shall be addressed to the parties
listed below as follows:
45
(i)
|
If to the Holding Company, to: | |
SSPF/CET Operating Company LLC | ||
c/o X.X. Xxxxxx Investment Management Inc. | ||
000 Xxxx Xxxxxx | ||
Xxx Xxxx, Xxx Xxxx 00000 | ||
Attention: | ||
Fax Number: | ||
with a copy to: | ||
c/o X.X. Xxxxxx Investment Management Inc. | ||
X.X. Xxx 0000 | ||
Xxx Xxxx, Xxx Xxxx 00000-0000 | ||
with a copy to: | ||
Xxxxxx Xxxxxxxxx, Esq. | ||
Stroock & Stroock & Xxxxx LLP | ||
000 Xxxxxx Xxxx | ||
Xxx Xxxx, Xxx Xxxx 00000 | ||
Fax Number: (000) 000-0000 | ||
(ii)
|
If to other Members, at the addresses set forth | |
on Schedule A attached hereto | ||
with copy to: | ||
Xxxxx X. Xxxxx, Esq. | ||
Watt, Tieder, Hoffar & Xxxxxxxxxx, L.L.P. | ||
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000 | ||
XxXxxx, Xxxxxxxx 00000 | ||
Fax Number: (000) 000-0000 |
Any Member may designate another addressee (and/or change its address) for Notices hereunder
by a Notice given pursuant to this Section. Copies of all Notices required to be sent by a Member
to the Company under the terms of this Agreement shall also be sent to Holding Company in
accordance with the terms hereof.
SECTION 11.3. Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by and construed in
accordance with the laws of the State of Delaware (but not including the choice of law rules
thereof).
SECTION 11.4. Captions. All titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define, limit, extend, or
describe the scope of this Agreement or the intent of any provision hereof.
46
SECTION 11.5. Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, and neuter, singular and plural, as the identity of the party or
parties may require.
SECTION 11.6. Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective executors, administrators, legal representatives, heirs,
successors and permitted assigns, and shall inure to the benefit of the parties hereto and, except
as otherwise provided herein, their respective executors, administrators, legal representatives,
heirs, successors and permitted assigns.
SECTION 11.7. Extension Not a Waiver. Except as otherwise expressly provided herein,
no delay or omission in the exercise of any power, remedy or right herein provided or otherwise
available to a Member or the Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same. Any extension of time or other indulgence granted to a Member
hereunder shall not otherwise alter or affect any power, remedy or right of any other Member or of
the Company, or the obligations of the Member to whom such extension or indulgence is granted.
SECTION 11.8. Construction. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor of the Company or any third party. No Member shall be
obligated personally for any debt, obligation or liability of the Company solely by being a Member
of the Company.
SECTION 11.9. Severability. In case any one or more of the provisions contained in
this Agreement or any application thereof shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions contained herein and
other application thereof shall not in any way be affected or impaired thereby.
SECTION 11.10. Consents. Except as otherwise expressly provided herein, any consent
or approval to any act or matter required under this Agreement must be in writing and shall apply
only with respect to the particular act or matter to which such consent or approval is given, and
shall not relieve any Member from the obligation to obtain the consent or approval, as applicable,
wherever required under this Agreement to any other act or matter.
SECTION 11.11. Entire Agreement. This Agreement contains the entire agreement between
the parties relating to the subject matter hereof and all prior agreements relative hereto which
are not contained herein are terminated. Amendments, variations, modifications or changes herein
may be made effective and binding upon the parties by, and only by, the setting forth of same in a
document duly executed by Holding Company and the holders of a majority of the CET Common Units,
and any alleged amendment, variation, modification or change herein which is not so documented
shall not be effective as to any party. Any such amendments, variations, modifications or changes
which would materially adversely affect any right or preference of the Preferred Units must also be
approved by the holders of a majority of the Preferred Units.
SECTION 11.12. Consent to Jurisdiction. Any action, suit or proceeding in connection
with this Agreement may be brought against any Member or the Company in a court
47
of record of the State of New York, County of New York, or of the United States District Court
for the Southern District of New York or the District of Columbia, each Member and the Company
hereby consenting and submitting to the jurisdiction thereof. Nothing herein shall affect the
right of any Member to commence legal proceedings or otherwise to proceed against any other Member
or the Company in any other jurisdiction or to serve process in any manner permitted by applicable
law. In any action, suit or proceeding in connection with this Agreement, each Member and the
Company hereby waives trial by jury, and any claim that New York County or the Southern District of
New York or the District of Columbia is an inconvenient forum.
SECTION 11.13. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart will for all purposes be deemed an original, and all such
counterparts shall constitute one and the same instrument.
SECTION 11.14. Tax Characterization. The Members shall take all actions necessary to
cause the Company to be treated at all times as a partnership for federal, state and, if
applicable, local income tax purposes including, without limitation, making all elections necessary
for such purpose under any applicable Check The Box Regulations.
SECTION 11.15. Costs. The Company shall be responsible for each Member’s costs and
expenses, including legal fees and other third party consultants, incurred in connection with the
preparation, negotiation, execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder.
SECTION 11.16. Representations and Warranties; Covenants.
(a) Holding Company represents and warrants as follows as of the Effective Date:
(i) Holding Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(ii) The execution and delivery of this Agreement and all other documents,
instruments and agreements to be executed in connection with the transactions
contemplated by this Agreement (the “Transaction Documents”) have been duly and
validly authorized by all necessary actions of Holding Company, and shall constitute
the legal, valid and binding obligations of Holding Company enforceable against
Holding Company in accordance with the terms hereof and thereof except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
liquidation, receivership, moratorium or other similar laws related to or affecting
the enforcement of creditors’ rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in equity or
at law.
(iii) No consent, waiver, approval or authorization of or notice to any other
Person (including any governmental entity) is required to be made, obtained or given
by Holding Company in connection with the execution and delivery of this Agreement
or any other Transaction Document except for those which have
48
been heretofore obtained.
(iv) Neither the execution or delivery of this Agreement nor any other
Transaction Document does or will, with or without the giving of notice, lapse of
time or both, (i) violate, conflict with or constitute a default under any term or
provision of (A) any agreement to which Holding Company is a party or by which it is
bound, or (B) any judgment, decree, order, statute, injunction, rule or regulation
of a governmental entity applicable to Holding Company, or by which it or its assets
or properties are bound, or (ii) result in the creation of any lien or encumbrance
upon Holding Company or its assets.
(v) For purposes of the Investment Company Act of 1940, as amended, Holding
Company is counted as one investor in the Company.
(b) Each Member other than Holding Company represents and warrants as follows as of the
Effective Date:
(i) If such Member is a legal entity, it is duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation and if such
Member is a natural person, he has the legal capacity to enter into this Agreement.
(ii) The execution and delivery of this Agreement and all other Transaction
Documents required to be executed by such Member hereunder have been duly and
validly authorized by all necessary actions of such Member and shall constitute the
legal, valid and binding obligations of such Member enforceable against such Member
in accordance with the terms hereof and thereof except as the enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, liquidation, receivership,
moratorium or other similar laws related to or affecting the enforcement of
creditors’ rights generally or by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(iii) No consent, waiver, approval or authorization of or notice to any other
Person (including any governmental entity) is required to be made, obtained or given
by such Member in connection with the execution and delivery of this Agreement or
any other Transaction Document except for those which have been heretofore obtained.
(iv) Neither the execution or delivery of this Agreement nor any other
Transaction Document does or will, with or without the giving of notice, lapse of
time or both, (i) violate, conflict with or constitute a default under any term or
provision of (A) any agreement to which such Member is a party or by which it is
bound, or (B) any judgment, decree, order, statute, injunction, rule or regulation
of a governmental entity applicable to such Member or by which such Member or its
assets or properties are bound, or (ii) result in the creation of any lien or
encumbrance upon such Member or its assets.
49
(v) The Member is acquiring the Membership Units to be received by such Member
for its own account and not with the view to the sale or distribution of the same or
any part thereof in violation of the Securities Act.
(vi) The Member understands that the Membership Units to be issued to such
Member will not be registered under the Securities Act or the securities laws of any
state by reason of a specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws.
(vii) The Member understands that, for the reasons set forth in clause (vi)
above, (X) the Membership Units may not be offered, sold, transferred, pledged, or
otherwise disposed of by the Member except (a) pursuant to an effective registration
statement under the Securities Act and any applicable state securities laws, (b)
pursuant to a no-action letter issued by the Securities and Exchange Commission to
the effect that a proposed transfer of the Membership Units may be made without
registration under the Securities Act, together with either registration or an
exemption under applicable state securities laws, or (c) upon the Company receiving
an opinion of counsel knowledgeable in securities law matters and reasonably
acceptable to the Company to the effect that the proposed transfer is exempt from
the registration requirements of the Securities Act and any applicable state
securities laws, and (Y) accordingly, the Member must bear the economic risk of any
investment in the Membership Units for an indefinite period of time.
(viii) The Member is an accredited investor as defined in Rule 501 promulgated
under the Securities Act.
(ix) The Member understands that an investment in the Company involves
substantial risks and the Member has had the opportunity to review all documents and
information which the Member has requested concerning its investment in the Company
and to ask questions of the management of the Company, which questions were answered
to the Member’s satisfaction.
(x) The Member shall execute such other instruments or documents as the Company
may deem necessary or desirable in connection with the acquisition of the Membership
Units.
SECTION 11.17. Limitation of Liability. Notwithstanding anything to the contrary
contained in this Agreement, but subject to the terms of the immediately succeeding sentence, no
recourse shall be had for the payment of any loans or other payments due or for any other claim
under this Agreement or based on the failure of performance or observance of any of the terms and
conditions of this Agreement against any Member (for the avoidance of doubt, including the Board of
Managers), any Affiliate of any Member or any principal, partner, member, manager, shareholder,
controlling person, officer, director, agent or employee of any of the aforesaid Persons or any of
their respective assets other than such Member’s interest in the Company or the Company Assets to
which such Member is entitled under any rule of law, statute or constitution, or by the enforcement
of any assessment or penalty, or otherwise, nor shall any of
50
such Persons be personally liable for any contributions, loans, payments or claims, or
personally liable for any deficiency judgment based thereon or with respect thereto, it being
expressly understood that the sole remedies of the Company or any other Member with respect to such
amounts and claims shall be against such interest in the Company and the Company Assets to which
such Member is entitled and as otherwise expressly set forth in this Agreement, and that all such
liability of the aforesaid Persons, except as expressly provided in this Section 11.17, is
expressly waived and released as a condition of, and as consideration for, the execution of this
Agreement and the admission of each Member to the Company. Notwithstanding the terms of the
immediately preceding sentence, nothing contained in this Agreement (including, without limitation,
the provisions of this Section 11.17), (i) shall constitute a waiver of any obligation of a Member
under this Agreement, (ii) shall be taken to prevent recourse to and the enforcement against such
Member’s Membership Units and the Company Assets to which such Member is entitled for all of the
respective liabilities, obligations, and undertakings of the aforesaid Persons contained in this
Agreement, (iii) shall be taken to limit or restrict any action or proceeding against any of the
aforesaid Persons which does not seek damages or a money judgment or does not seek to compel
payment of money (or the performance of obligations which would require the payment of money) by
any of the aforesaid Persons, or (iv) a waiver of any contractual obligations of any of the
aforesaid Persons pursuant to contracts and agreement between any such Person, and the Company.
SECTION 11.18. Company Name. If, at any time, the Company name shall include the name
of, or any trade name used by, a Member or any of its Affiliates, neither the Company nor any other
Member shall acquire any right, title or interest in or to such name or trade name.
SECTION 11.19. Ownership of Company Assets. The interest of each Member in the
Company shall be personal property for all purposes. All real and other property owned by the
Company shall be deemed owned by the Company as Company property. No Member, individually, shall
have any direct ownership of such property and title to such property shall be held in the name of
the Company.
SECTION 11.20. Time of the Essence. Except as otherwise expressly provided in this
Agreement, time shall be of the essence with respect to all time periods set forth in this
Agreement.
SECTION 11.21. Waiver of Partition. Except as otherwise expressly provided for in
this Agreement, no Member shall, either directly or indirectly, take any action to require
partition or appraisement of the Company or any of its assets or properties or cause the sale of
any Company assets or property, and notwithstanding any provisions of applicable law to the
contrary, each Member (for itself and its legal representatives, successors and assigns) hereby
irrevocably waives any and all right to partition, or to maintain any action for partition, or to
compel any sale with respect to its interest in, or with respect to, any assets or properties of
the Company, except as expressly provided in this Agreement.
SECTION 11.22. Calculation of Days. The provisions of this Agreement relative to
number of days shall be deemed to refer to calendar days, unless otherwise specified. When the
date for performance of any monetary obligation of any Member falls on a non-business day, such
obligation need not be performed until the next-following Business Day.
51
SECTION 11.23. Disclosure. Notwithstanding any terms or conditions in this Agreement
to the contrary, but subject to restrictions reasonably necessary to comply with federal or state
securities laws, any person may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transaction and all materials of any kind (including
opinions or other tax analyses) that are provided relating to such tax treatment and tax structure.
For the avoidance of doubt, this authorization is not intended to permit disclosure of the names
of, or other identifying information regarding, the participants in the transaction, or of any
information or the portion of any materials not relevant to the tax treatment or tax structure of
the transaction.
SECTION 11.24. Securities. The Members acknowledge and agree that the Membership
Units are securities governed by Article 8 of the Uniform Commercial Code as in effect in the State
of Delaware.
SECTION 11.25. Prevailing Party Attorneys’ Fees. In the event of any dispute,
contest, arbitration or litigation between the parties hereto, the prevailing party in such
dispute, contest, arbitration or litigation shall be fully reimbursed by the other party for all
costs, including reasonable attorneys’ fees, court costs, expert or consultant’s fees and
reasonable travel and lodging expenses, incurred by the prevailing party in its successful
prosecution or defense thereof, including any appellate proceedings.
52
IN WITNESS WHEREOF, the parties hereto have duly executed this Limited Liability Company
Agreement as of the day and year first above written.
CET ACQUISITION COMPANY LLC a Delaware limited liability company |
||||||
By: | ||||||
Name: | ||||||
Title: | ||||||
MEMBERS |
SCHEDULE A
LIST OF MEMBERS
DATED AS OF ___, 2007
DATED AS OF ___, 2007
Name and Address of | Number of | Number of | ||||||||||
Member | Capital Contribution | Common Units | Preferred Units | |||||||||
SCHEDULE B
PROPERTY PORTFOLIO
Ownership | Net Rentable | |||||||||
Property | Interest | Area | Address | |||||||
000 Xxxxxxx Xxxxx
|
100.0 | % | 102,396 | 000 Xxxxxxx Xxxxx Xxxxx Xxxxxxxxxxxx, Xxxxxxxx 00000 |
||||||
0000 Xxxxxxx Xxxxxx
|
100.0 | % | 114,801 | 0000 Xxxxxxx Xxxxxx, XX Xxxxxxxxxx, X.X. 00000 |
||||||
00000 Xxx Xxxx
|
100.0 | % | 84,652 | 00000 Xxx Xxxx Xxxxxxxxx, Xxxxxxxx 00000-0000 |
||||||
0000 Xxxxxxxx Xxxxxx
Xxxxx
|
100.0 | % | 41,358 | 0000 Xxxxxxxx Xxxxxx Xxxxx Xxxxxx, Xxxxxxxx 00000 |
||||||
Fair Oaks
|
100.0 | % | 126,949 | 11200,11202,11208,11216 Xxxxxx Xxxx Xxxx Xxxxxxx, Xxxxxxxx 00000-0000 |
||||||
Greenbriar
|
100.0 | % | 111,721 | 00000 Xxx Xxxxxxx Xxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000 |
||||||
Loudoun Gateway IV
|
100.0 | % | 102,987 | 00000 Xxxxxx Xxxxx Xxxxx Xxxxxx, Xxxxxxxx 00000 |
||||||
Xxxxxxx IV
|
100.0 | % | 148,160 | 0000 Xxxxxx Xxxx Xxxx Xxxxxxxxx, Xxxxxxxx 00000-0000 |
||||||
Oakton Corporate Center
|
100.0 | % | 64,648 | 00000 Xxxxx Xxxxxxx Xxxxx Xxxxxx, Xxxxxxxx 00000 |
||||||
Park Plaza II (Leasehold interest) |
100.0 | % | 126,229 | 0000 Xxxxxxx Xxxx Xxxxxxxxx, Xxxxxxxx 00000-0000 |
||||||
Xxxxxxx Xxxxx Corporate
Center
|
100.0 | % | 98,883 | 00000 Xxxxxxxxx Xxx Xxxxxxx Xxxx, XX 00000-0000 |
||||||
Sherwood Plaza
|
100.0 | % | 92,960 | 0000 Xxx Xxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000 |
||||||
King Street
|
50.0 | % | 149,080 | 0000 Xxxxxxxx Xxxx Xxxxxxxxxx, Xxxxxxxx 00000-0000 |
||||||
Madison Place
|
50.0 | % | 107,960 | 000 Xxxxxxxxxx Xxxxxx Xxxxxxxxxx, Xxxxxxxx 00000 – 1565 |
Ownership | Net Rentable | |||||||||
Property | Interest | Area | Address | |||||||
Xxxxxx Building
|
40.0 | % | 270,480 | 0000 Xxxxxxxxx Xxxxxx Chevy Chase, Maryland 20815-6901 |
||||||
Georgetown Plaza (Leasehold interest) |
40.0 | % | 148,330 | 0000 Xxxxxxxxx Xxxxxx, XX Xxxxxxxxxx, X.X. 00000 |
||||||
Atrium Building
|
37.0 | % | 138,507 | 000 Xxxxx Xxxxxxxxxx Xxxxxx Xxxxxxxxxx, Xxxxxxxx 00000-0000 |
||||||
Suffolk Building
|
36.5 | % | 257,425 | 0000 Xxxxxxxx Xxxx Xxxxx Xxxxxx, Xxxxxxxx 00000-0000 |
||||||
Independence Center
|
14.7 | % | 275,002 | 00000 Xxxxxxxxxx Xxxxxx Xxxxx Xxxxxxxxx, Xxxxxxxx 00000-0000 |
||||||
Independence Center II
|
8.1 | % | 115,368 | 00000 Xxxxxxxxxx Xxxxxx Xxxxx Xxxxxxxxx, Xxxxxxxx 00000 |
||||||
Victory Point
|
10.0 | % | 147,743 | 00000 Xxxx Xxxxxx Xxxxx Xxxxxxxxx, Xxxxxxxx 00000-0000 |
||||||
0000 Xxx Xxxxxx
|
9.2 | % | 210,372 | 0000 Xxx Xxxxxx, XX Xxxxxxxxxx, X.X. 00000-0000 |
||||||
Stafford Commerce Center (Contract Property) |
100.0 | % | 149,145 | 10,16,24 & 00 Xxxxxx Xxxxxx Xxxxxxxx, XX 00000 |
2
SCHEDULE C
REPORTING REQUIREMENTS
(To be agreed to by Management and Holding
Company before Effective Date)
Company before Effective Date)
SCHEDULE D
MAJOR DECISIONS
(a) the approval and/or modification of all budgets (capital, operating, development or
otherwise and leasing parameters), acquisition diligence procedures, and the authorization by the
Company or any Subsidiary Entity of unbudgeted expenditures on an annual basis in excess of 10% of
the approved operating and capital expense budgets for any property;
(b) the form of lease or agreement related to the use of space to be used by the Company
and/or each Subsidiary Entity and the form and substance of each lease (or series of related
releases) proposed to be entered into by the Company or any Subsidiary Entity (i) in excess of
25,000 square feet (each, a “Major Lease), and any material amendment, material modification,
termination or consent to assignment of a Major Lease (unless expressly permitted pursuant to the
terms of a Major Lease) or (ii) not in material compliance with approved leasing parameters;
(c) the approval of final plans and specifications for any renovation or redevelopment of all
or any portion of a property (i) with budgeted costs in excess of $10,000,000, or (ii) which
materially affects the appearance, value or use of a property;
(d) the institution or settlement with respect to any lawsuit, claim, counterclaim or other
legal proceeding (except for a lawsuit against CET Acquisition Company LLC in order to enforce its
Guarantee) by or against the Company or any Subsidiary Entity (including, without limitation,
condemnation proceedings) with respect to matters in which the Company or any Subsidiary Entity may
admit to criminal liability or penalty or an amount at risk to the Company or any Subsidiary Entity
in excess of $50,000 in the aggregate, including, without limitation, confessing a judgment against
the Company or any Subsidiary Entity, accepting the settlement, compromise or payment of any claim
asserted against the Company, any Subsidiary Entity, or any of the property and assets of the
Company or any Subsidiary Entity;
(e) the acquisition of any additional real property (or interests therein) by the Company or
any Subsidiary Entity;
(f) the sale, transfer, assignment, conveyance, exchange or disposition of any property or the
Company Assets (other than personal property which may be disposed of or replaced due to wear and
tear or obsolescence or otherwise in the ordinary course of business);
(g) the commitment by the Company or any Subsidiary Entity to accept, enter into or refinance,
whether as borrower or lender, any loan, or the material modification or amendment of any loan, or
the mortgaging, pledge or encumbrance of all or any part of any property or any interest of the
Company or any Subsidiary Entity, as security for indebtedness incurred on behalf of the Company,
any Subsidiary Entity or otherwise, or the material modification or amendment of any such mortgage,
pledge or encumbrance (other than drawing down approved credit lines in the ordinary course of
business pursuant to approved budgets);
(h) changing the nature of the business of the Company or any Subsidiary Entity or permitting
the Company or any Subsidiary Entity to enter into any business other than or in addition to that
contemplated by this Agreement;
(i) filing a petition for relief under the United States Bankruptcy Code, as amended, with
respect to the Company or any Subsidiary Entity, making an assignment for the benefit of creditors,
applying for the appointment of a custodian, receiver or trustee for the Company, any Subsidiary
Entity or any of the Company Assets or any Subsidiary Entity, consenting to any other bankruptcy or
similar proceeding, consenting to the filing of such proceeding or admitting in writing the
inability of the Company or any Subsidiary Entity to pay its debts generally as they become due;
(j) changing the name of the Company or any Subsidiary Entity;
(k) issuing guaranties or otherwise becoming responsible on behalf of the Company or any
Subsidiary Entity of obligations of any Person whether or not in connection with the operation,
improvement, management and maintenance of any property other than (i) the issuance of customary
“non-recourse carve out” guaranties on behalf of any Subsidiary Entity in connection with approved
financings and (ii) guaranties, indemnities and assurances not exceeding $1,000,000 in the
aggregate provided to utility companies, municipalities and other governmental and
quasi-governmental entities in the ordinary course of business;
(l) causing the formation of any entity owned (in whole or in part) or controlled (directly or
indirectly) by the Company or any Subsidiary Entity, except for wholly owned subsidiary entities
formed for the ordinary conduct of business;
(m) making investments other than as expressly approved in an annual plan or budget other than
for short-term cash management;
(n) in the event of a material condemnation of a property, electing to restore or not to
restore any property;
(o) all decisions with respect to tax matters (but excluding contests of real estate taxes)
which matters could reasonably be anticipated to have a material adverse effect upon Holding
Company, or any direct or indirect owner of an interest in Holding Company;
(p) entering into, assigning, extending, amending, modifying, canceling or waiving material
rights under any agreement with any Person in which an officer of the Company or any Subsidiary
Entity or any Person related to an officer of the Company or any Subsidiary Entity directly or
indirectly owns a controlling interest, and all material decisions on behalf of the Company or any
Subsidiary Entity in connection with any such agreement;
(q) the exchange or subdivision of, or grant of an option with respect to, all or any portion
of a property, and the acquisition of any option with respect to the purchase of any real property
or interest therein;
(r) the selection, removal or replacement of the Accountants, the removal or replacement of
property managers and leasing agents, making any material accounting decisions
2
for the Company or any Subsidiary Entity; and approving financial statements prepared by the
Company’s or any Subsidiary Entities’ auditors;
(s) approving the property insurance program (property, liability and otherwise) for the
Company or any Subsidiary Entity;
(t) the entering into (including approval of the terms and conditions thereof), assignment,
cancellation, termination, extension, modification or amendment by the Company or any Subsidiary
Entity of (i) any service, maintenance or other contract for the provision or delivery of goods,
supplies or services with respect to a property unless such contract either (A) has a term of two
(2) year or less, or (B) is cancelable on thirty (30) days’ notice without penalty, or (ii) any
contract pursuant to which the Company or any Subsidiary Entity will incur any obligation in excess
of $500,000 or which has a term exceeding two (2) years, notwithstanding the fact that the making
of such expenditure was approved in an annual plan or budget;
(u) any merger or consolidation of the Company or any Subsidiary Entity with or into any
Person or entering into a joint venture with any Person;
(v) approving the admission to the Company of a successor or an additional Member or the
issuance of any additional interests in the Company or any Subsidiary Entity;
(w) approving the admission to a Subsidiary Entity of any member, shareholder, partner or
other owner of an ownership interest;
(x) exercising any “exit strategy” on behalf of the Company or any Subsidiary Entity
including, without limitation, buy/sell rights, rights of first offer and/or rights of first
refusal, and making material elections with respect to any “exit strategy” on behalf of the Company
or any Subsidiary Entity (whether such “exit strategy” was exercised by or on behalf of the Company
or any Subsidiary Entity);
(y) any decisions with respect to the liquidation of the Company or any Subsidiary Entity
other than those of a ministerial nature;
(z) hiring, firing and establishing the terms and conditions of employment of the chief
executive officer, the chief financial officer, director of asset management, director of
acquisitions, and the chief accounting officer, including without limitation bonus awards;
(aa) entering into, assigning, extending, amending, modifying or canceling any (i) employment
agreement or any employee benefit plan which obligates the Company or any Subsidiary Entity for
more than 1 year or which is otherwise non-routine, or (ii) change of control agreement or tax
gross up arrangement or other similar agreement or arrangement, or (iii) labor contract, or (iv)
any defined benefit pension plan or retiree benefit plan; and
(bb) issuing any equity awards of the Company or any Subsidiary Entity.
3
SCHEDULE E
PROPERTIES CONTRIBUTED BY HOLDING COMPANY
Property and Address
|
Fair Market Value | |
Xxxxxx Building |
||
0000 Xxxxxxxxx Xxxxxx |
||
Xxxxx Xxxxx, XX 00000-0000 |
||
Independence Center |
||
00000 Xxxxxxxxxx Xxxxxx Xxxxx |
||
Xxxxxxxxx, XX 00000-0000 |
||
Independence Center II |
||
00000 Xxxxxxxxxx Xxxxxx Xxxxx |
||
Xxxxxxxxx, XX 00000 |
||
Victory Point |
||
00000 Xxxx Xxxxxx Xxxxx |
||
Xxxxxxxxx, XX 00000-0000 |
EXHIBIT A
FAIR MARKET VALUE DETERMINATION
Unless the Holding Company and the Representative mutually agree otherwise or except as
otherwise provided in this Agreement, the Fair Market Value of the Company Assets shall be
determined on the date specified in this Agreement as follows:
(i) Within ten (10) days after the Company receives notice of an event which triggers
determination of Fair Market Value, Holding Company and a representative of the CET Common Members
entitled to receive Fair Market Value (the “Representative”) shall negotiate in good faith to reach
a mutual agreement on the Fair Market Value of the Company Assets. If no agreement is reached at
the expiration of such ten (10) day period, each of Holding Company and the Representative shall
designate an appraiser by written notice to the other within three (3) Business Days following the
expiration of such ten (10) day period, specifying in such notice the name and address of such
appraiser. Each party shall cause its designated appraiser to appraise the Company Assets for the
purpose of determining the Fair Market Value thereof in accordance with this Agreement. Each such
determination shall be set forth in a narrative appraisal submitted to the Representative and
Holding Company not later than forty-five (45) days after such designation. The Representative
shall be designated by the holders of a majority of the CET Common Units.
(ii) If either party shall not have designated an appraiser within the three (3) Business Day
period following the ten (10) day period described above, and if such party shall not designate an
appraiser within an additional period of five (5) days after being given written notice reminding
such party that the aforesaid ten-day period has expired and that such party has not designated an
appraiser, then the determination of the Fair Market Value of the Company Assets by the appraiser
designated by the other party shall be binding upon the parties. If each party shall have
designated an appraiser as provided in this subsection (ii), but neither of the two appraisers so
designated shall have submitted the required narrative appraisal to both parties within the
aforesaid forty-five-day period, then such period of time shall be extended for successive periods
of ten (10) days each until one or both appraisals have been submitted to both parties. If each
party shall have designated an appraiser as provided in this subsection (ii), but only one of the
two appraisers so designated shall have submitted the required narrative appraisal to both parties
within the aforesaid forty-five-day period (as such period may have been extended pursuant to the
immediately preceding sentence), then the determination of the Fair Market Value of the Company
Assets by that appraiser shall be binding upon the parties.
(iii) If the determinations of the Fair Market Value of the Company Assets by the aforesaid
two appraisers do not differ by more than ten percent (10%) of the lower of the two determinations,
then the arithmetic average of those two determinations shall be the Fair Market Value. Otherwise,
the parties shall promptly direct the two appraisers to consult with one another for the purpose of
jointly designating a third appraiser. If a third appraiser has not been so designated within five
(5) days after such direction, then the parties shall request the designation of a third appraiser
by the American Institute of Real Estate Appraisers (or any other organization which is successor
to the American Institute of Real Estate Appraisers and mutually acceptable to Management and
Holding Company). The third appraiser shall not review the two
narrative appraisals prepared by the other two appraisers unless and until such third
appraiser has prepared its own narrative appraisal of the Fair Market Value of the Company Assets.
The Fair Market Value shall be the arithmetic average of the Fair Market Value of the Company
Assets of the two appraisals which are closest together in amount.
(iv) Each appraiser designated pursuant to this provision shall be a duly licensed appraiser
in the applicable jurisdictions where Company Assets are located, shall be a certified member of
the American Institute of Real Estate Appraisers (or any equivalent organization) and shall have at
least ten (10) years continuous experience in appraising properties comparable to the Company
Assets in the market area in which the Company Assets are located. The fees and expenses of the
appraisers referred to herein shall be paid by the Company.
(v) Each appraiser shall determine the Fair Market Value of the Company Assets to an all cash
purchaser in an “arms length” transaction as of the date of determination. Each such determination
shall consider such Company Assets as being free and clear of encumbrances, with due consideration
for both the improvements existing on or forming a part of the Company Assets and the use of such
Company Assets as commercial buildings.
EXHIBIT B
GUARANTEE
Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank, N.A. (the
“Guarantor”) unconditionally and irrevocably guarantees the due payment and timely performance by
CET Acquisition Company LLC (the “Subsidiary”) of its obligations, covenants and agreements
relating to the funding of the PIH Redemption Price contained in Section 3.1 of the Limited
Liability Company Agreement of SSPF/CET Operating Company LLC (“Operating Company”) dated as of
___(the “LLC Agreement”) among the Subsidiary and the Members (as defined therein).
Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in
the LLC Agreement.
1. This is a guarantee of payment and performance and the Guarantor acknowledges and agrees
that, except as provided in paragraph 5, this guarantee is full and unconditional, and no release
or extinguishment of Subsidiary’s obligations or liabilities (other than in accordance with the
terms of the LLC Agreement), whether by decree in any bankruptcy proceeding or otherwise, shall
affect the continuing validity and enforceability of this guarantee, as well as any provision
requiring or contemplating performance by the Guarantor.
2. The Guarantor hereby waives, for the benefit of Operating Company, any right to require it
as a condition of payment or performance by the Guarantor, to proceed against the Subsidiary or
pursue any other remedy whatsoever. The Guarantor acknowledges that it has derived a financial
advantage from this Guarantee.
3. This Guarantee shall be a continuing guaranty and shall remain in full force and effect
until terminated as provided in the next sentence. Notwithstanding anything to the contrary
contained herein, this Guarantee shall terminate and be of no further force or effect on payment in
full of the PIH Redemption Price.
4. The Guarantor understands that the Operating Company is relying on this Guarantee in
entering into the LLC Agreement and may enforce this Guarantee as if the Guarantor was a party
thereto.
5. The following shall constitute representations and warranties of the Operating Company and
the Operating Company hereby acknowledges that Guarantor executes this Guarantee in reliance
thereon and that Guarantor shall have no obligation or duty to perform under this Guarantee if the
Operating Company’s representations are not true on the date this Guarantee is executed. The
Operating Company represents and warrants that either:
(i) It is not a “party in interest” (as defined in Section 3(14) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or a
“disqualified person” (as defined in Section 4975 of the Internal Revenue Code of
1986, as amended (the “Code”) (each a “Party in Interest”) with respect to the
General Motors Hourly-Rate Employees Pension Plan, or the General Motors Retirement
Program for Salaried Employees (each a “10% Plans”), or
(ii) If Operating Company is a Party in Interest that: (A) neither Operating
Company nor its “affiliate” (as defined in Section V(c) of Prohibited Transaction
Class Exemption 84-14 (“PTCE 84-14”) “Affiliate”) has the authority to either: (A)
appoint or terminate XX Xxxxxx Xxxxx Bank, N.A. (“JPMCB”) as the qualified
professional asset manager (as defined in Section V(a) of PTCE 84-14) of the assets
invested in Guarantor of the 10% Plan with respect to which Operating Company or its
Affiliate is a Party in Interest; or (B) negotiate the terms of the management
agreement with JPMCB, including renewals or modifications thereof, on behalf of such
10% Plan.
6. Any notice or other communication required or permitted hereunder shall be in writing
(including facsimile transmission) and shall be given,
If to the Guarantor to:
X.X. Xxxxxx Investment Management, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxx
Fax: (000-000-0000
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxx
Fax: (000-000-0000
with a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
If to Operating Company to:
Columbia Equity Trust, Inc.
0000 X Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxx III
Fax: (000) 000-0000
0000 X Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxx III
Fax: (000) 000-0000
with a copy to:
Hunton & Xxxxxxxx LLP
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
7. This Guarantee may not be amended, modified or rescinded except by an instrument in writing
signed by the Guarantor and Operating Company.
8. This Guarantee shall be governed by, and construed in accordance with, the laws of the
State of Maryland, regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
9. If any term or other provision of this Guarantee is invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other conditions and provisions of this
Guarantee shall nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner materially adverse
to the Sellers. Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Operating Company and Guarantor shall negotiate in good faith to
modify this Guarantee so as to effect the original intent of the parties as closely as possible in
a mutually acceptable manner.
10. This Agreement constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and undertakings, both written and oral,
with respect to the subject matter hereof. This Guarantee shall not be assigned by operation of
law or otherwise.
11. The Guarantor waives to the fullest extent permitted by applicable Law any right it may
have to a trial by jury with respect to any litigation directly or indirectly arising out of, under
or in connection with this Guarantee or the transactions contemplated hereby. The Guarantor hereto
certifies that no representative, agent or attorney of Guarantor has represented, expressly or
otherwise, that Guarantor would not, in the event of litigation, seek to enforce that foregoing
waiver.
Date: , 2007
Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank, N.A. |
||||||
By: JPMorgan Chase Bank, N.A., as Trustee | ||||||
By: | ||||||
Xxxxxxxxx X. Xxxx, Vice President | ||||||
Section 5 is hereby agreed to: |
||||||
SSPF/CET Operating Company LLC |
By:
|
||||