ATRIUM BUILDING, LLC OPERATING AGREEMENT
TABLE OF CONTENTS
Page | ||||
ARTICLE I DEFINED TERMS |
1 | |||
§1.1 Definitions |
1 | |||
§1.2 Use of Certain Terms |
14 | |||
ARTICLE II FORMATION AND TERM |
15 | |||
§2.1 Formation; Capital Contributions |
15 | |||
§2.2 Name |
15 | |||
§2.3 Term |
15 | |||
§2.4 Registered Agent and Office |
15 | |||
§2.5 Principal Place of Business |
15 | |||
ARTICLE III PURPOSE AND POWERS OF THE COMPANY |
16 | |||
§3.1 Purpose |
16 | |||
§3.2 Powers of the Company |
16 | |||
ARTICLE IV CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
AND MEMBER LOANS |
17 | |||
§4.1 Initial Capital Contributions |
17 | |||
§4.2 Additional Funding Request |
18 | |||
§4.3 Payment of Member Loans and Additional Member Loans |
18 | |||
§4.4 Limitations Pertaining to Capital Contributions |
19 | |||
§4.5 Member’s Interest |
19 | |||
§4.6 Status of Capital Contributions |
19 | |||
§4.7 Capital Accounts |
19 | |||
§4.8 Third-Party Beneficiaries |
20 | |||
ARTICLE V MEMBERS |
20 | |||
§5.1 Powers of Members |
20 | |||
§5.2 Partition |
21 | |||
§5.3 Transfer and Admission of New Members |
21 | |||
§5.4 Special Purpose Entity |
21 | |||
ARTICLE VI MANAGEMENT |
23 | |||
§6.1 Management of the Company |
23 | |||
§6.2 Day-to-Day Operations |
24 | |||
§6.3 Management Services and Other Fees |
24 | |||
§6.4 No Management by Members |
25 | |||
§6.5 Arbitration |
25 | |||
§6.6 Buy/Sell Provisions |
26 |
-ii-
Page | ||||
27 | ||||
§6.8 CCA’s Right to Acquire Portion of Aetna’s Interest |
28 | |||
ARTICLE VII AMENDMENTS AND MEETINGS |
28 | |||
§7.1 Amendments |
28 | |||
§7.2 Meetings of the Members |
28 | |||
ARTICLE VIII ALLOCATION OF PROFITS AND LOSSES |
29 | |||
§8.1 Profits and Losses |
29 | |||
§8.2 Special Allocations |
30 | |||
§8.3 Corrective Allocations |
31 | |||
§8.4 Allocation Rules |
32 | |||
§8.5 Tax Allocations; §704(c) and Capital Account Revaluation
Allocations |
32 | |||
§8.6 Intentions and Construction of Allocations |
33 | |||
ARTICLE IX DISTRIBUTIONS |
33 | |||
§9.1 Net Cash Flow Distributions |
33 | |||
§9.2 Proceeds of Capital Transactions |
33 | |||
§9.3 Limitations on Distributions |
34 | |||
ARTICLE X RESTRICTIONS ON TRANSFER OF INTERESTS |
34 | |||
§10.1 Transfer |
34 | |||
§10.2 Assignee of Member’s Interest |
35 | |||
§10.3 Substituted Members |
36 | |||
§10.4 Withdrawal |
36 | |||
36 | ||||
§11.1 Books, Records and Financial Statements |
36 | |||
§11.2 Accounting Method |
37 | |||
§11.3 Annual Budget |
37 | |||
§11.4 Notices from Manager |
37 | |||
ARTICLE XII TAX MATTERS |
38 | |||
§12.1 Tax Matters Member |
38 | |||
§12.2 Taxation as Partnership |
39 | |||
§12.3 Section 754 Election |
39 | |||
ARTICLE XIII LIABILITY; OTHER BUSINESSES |
39 | |||
§13.1 Liability |
39 | |||
§13.2 Indemnity |
40 | |||
§13.3 Other Businesses |
40 |
-iii-
Page | ||||
ARTICLE XIV DISSOLUTION, LIQUIDATION AND TERMINATION |
41 | |||
§14.1 Dissolution |
41 | |||
§14.2 Liquidation |
41 | |||
§14.3 Termination |
41 | |||
ARTICLE XV MISCELLANEOUS |
42 | |||
§15.1 Remedies |
42 | |||
§15.2 Notices |
42 | |||
§15.3 Binding Effect |
42 | |||
§15.4
Severability |
42 | |||
§15.5 Counterparts |
42 | |||
§15.6 Integration |
42 | |||
§15.7 Governing Law |
42 |
-iv-
ATRIUM BUILDING,
This
OPERATING AGREEMENT of ATRIUM BUILDING, LLC (the
“Company”) is made as of May _____, 2004 (this
“Agreement”), by and among XXXX
CAPITAL ATRIUM, LLC, a Virginia limited liability company
(“CCA”) and AETNA LIFE INSURANCE
COMPANY, a Connecticut corporation (“Aetna”), as members of the Company (collectively, the
“Members” and each a “Member”), and
XXXX CAPITAL REAL ESTATE INVESTMENTS, LLC, a Virginia limited
liability company and a member of CCA (“CCREI”), as the initial Manager (as hereinafter defined)
of the Company.
ARTICLE I
DEFINED TERMS
DEFINED TERMS
§1.1. Definitions. Unless the context otherwise requires, capitalized terms
used herein shall have the meanings ascribed to them as set forth below:
“Accountants” shall mean such certified public accountants as the Manager shall designate
with the Consent of Aetna; provided, in the event the Accountants do not provide service
reasonably acceptable to Aetna, Aetna shall have the right, upon thirty (30) days’ prior written
notice to Manager (which notice shall provide specifics of unacceptable accounting services), to
have the Company replace the Accountants with another certified public accounting firm designated
by the Manager with the Consent of Aetna.
“Act”
means the Delaware Limited Liability Company Act, Del. Code Title 6,
§§18-101 et seq.,
as amended from time to time.
“Additional Member Loan” has the meaning set forth in § 4.2 hereof.
“Adjusted Capital Account Deficit” shall mean, at any time, the then balance in the Capital
Account of a Member, after giving effect to the following adjustments:
(i) credit to such Capital Account any amounts that such Member is deemed obligated to restore
as described in the penultimate sentences of Treasury Regulations §1.704-2(g)(l) and Treasury
Regulations § 1.704-2(i)(5), or any successor provisions; and
(ii) debit to such Capital Account the items described in Treasury Regulations
§§1.704-l(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Account
Deficit is intended to comply with the provisions of § 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
“Advancing Member” has the meaning set forth in §4.2 hereof.
“Affiliate” means with respect to a specified Person, any Person that directly or indirectly
Controls, is Controlled by, or is under common Control with, the specified Person.
“Agreement” means this Agreement, as amended, modified, supplemented or restated from time to
time.
“Annual
Budget” has the meaning set forth in § 11.3(a) hereof.
“Asset Value” means, with respect to any asset, such asset’s adjusted basis for federal
income tax purposes, except as follows:
(i) the initial Asset Value of any asset contributed by a Member to the Company shall be the
fair market value of such asset, as agreed to by the contributing Member and the Manager;
(ii) the Asset Value of all Company assets shall be adjusted to equal their respective fair
market values, as determined by the Manager, as of the following times: (a) the contribution of
assets to the Company by a new or existing Member as consideration for such Member’s Interest; (b)
the distribution by the Company to a Member of more than a de minimis amount of Company
assets as consideration for such Member’s Interest; and (c) the liquidation of the Company within
the meaning of Treasury Regulations §1.704-l(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (a) and (b) of this sentence shall be made only if the Manager
reasonably determines that such adjustments are necessary or appropriate to reflect the relative
economic interests of the Members in the Company; and
(iii) the Asset Value of any Company asset distributed to any Member shall be the fair market
value of such asset on the date of distribution (net of the amounts of any liens thereon), as
approved by the Manager.
2
If the Asset Value of any asset has been determined or adjusted pursuant to Paragraph
(i) or Paragraph (ii) above, such Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing Profits and Losses.
“Bankruptcy” means the voluntary or involuntary filing (which is not
discharged within ninety (90) days) under federal or state bankruptcy or
insolvency laws, or assignment for the benefit of creditors, receivership
or similar creditor reorganization proceedings.
“Business Day” means any day on which commercial banks in the
Commonwealth of Virginia are open for the transaction of business.
“Buy/Sell Event” shall mean any event, action or condition which,
pursuant to the terms of this Agreement, would permit the initiation of
the Buy/Sell Provisions of §6.6.
“Capital Account” means, with respect to any Member, the account
maintained for such Member in accordance with the provisions of Article
IV hereof.
“Capital Contribution” means with respect to any Member, the
aggregate amount of money and the initial Asset Value of any property
(other than money) contributed to the Company pursuant to Article IV
hereof with respect to such Member’s Interest.
“Capital Transaction” means any financing, refinancing, sale,
exchange or any other disposition or transfer of the Property or any part
thereof, including, without limitation, (i) a ground lease of any part of
the Property (but excluding space leases of any of the Property in the
ordinary course of business), (ii) any condemnation or taking by eminent
domain of all or any portion of the Property, (iii) any casualty to the
Property or any part thereof, or (iv) any loss as a result of a title
defect in the Property covered by title insurance.
“Capital Transaction Proceeds” means the net proceeds received by
the Company from any Capital Transaction after the payment of (i) all
reasonable and customary costs, expenses, charges, fees, including
collection expenses and taxes paid by the Company (other than taxes
imposed on Members in their individual capacities), and other reasonable
and customary expenses related thereto, (ii) any costs of restoration or
repair of the Property performed in connection with such Capital
Transaction, or any other capital expenditures or other reasonable and
customary expenses for which such proceeds or awards are used, and/or
(iii) any mortgage loan, including debt service
payments hereunder, or any other debts or liabilities of the Company
that are being refinanced, discharged or paid with such proceeds.
“Xxxx Capital” means Xxxx Capital Corporation, a District of
Columbia corporation.
3
“Xxxx REIT” means a publicly-traded real estate investment
trust of which Xxxx Capital is the sponsor and which acquires, by
contribution or otherwise, substantially all of the assets of Xxxx
Capital consisting of investments in office buildings (whether held
directly or indirectly).
“CCA” means CCA or its permitted successors or assigns in interest as a Substitute Member.
“Certificate” means that certain Certificate of Formation and any and all amendments thereto
and restatements thereof filed on behalf of the Company with the Office of the Secretary of State
for the State of Delaware.
“Closing” means the effective date of the acquisition of the Property by the Company.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any
corresponding federal tax statute enacted after the date of this Agreement. A reference to a
specific section (§) of the Code refers not only to such specific section, but also to any
corresponding provision of any federal tax statute enacted after the date of the Agreement, as such
specific section or corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
“Company” shall have the meaning ascribed to such term in the first paragraph of this
Agreement.
“Consent of Aetna” means the prior written consent of Aetna as may be required hereunder.
“Control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
“Day-to-Day Management” means the supervision, overseeing and management by Manager of the
day-to-day operations of the use, operation, leasing and maintenance of the Property and
compliance of the Property with material Requirements, and any sale or other disposition of the
Property for which the Consent of Aetna has been given.
“Decision Threshold Amount” shall mean seventy-five thousand dollars ($75,000).
“Default” shall mean the material default of a Member or the Manager in respect of any of
such Member’s or such Manager’s obligations hereunder, as applicable, including, without
limitation, any failure by Manager to obtain the Consent of Aetna prior to taking any action
constituting a Major Decision, which default remains uncured (i) for a period of ten (10) days
after receipt by the defaulting Member or Manager as applicable, of notice thereof by the other
Member if such default is monetary in nature or
4
(ii) for a period of thirty (30) days after receipt by the defaulting Member or Manager of
notice thereof by the other Member if such default is not monetary in
nature, provided,
however, that if a default is not monetary in nature and cannot reasonably be cured within such
thirty (30) day period, then such defaulting Member or Manager shall not be deemed to be in Default
hereunder so long as such Member or Manager shall both commence to cure such default during such
thirty (30) day period and thereafter diligently pursue to completion the curing of such default.
In addition, the following shall constitute a “Default” hereunder with respect to a Member or the
Manager, as applicable: (a) the dissolution or liquidation of such Member or Manager, the
Bankruptcy of such Member or Manager or any of its principals, or any other event that results in
such Member ceasing to be a Member (other than as expressly provided in this Agreement); (b) such
Member becoming subject to any final order of a court of competent jurisdiction requiring such
Member to divest itself of all or any portion of its interest in the Company; (c) the failure of
Manager to maintain the Company as a “special purpose entity” as provided in §5.4 of this
Agreement; (d) the withdrawal or retirement of such Member from the Company in breach of the
covenant contained in §10.3; (e) the transfer of all or any part of such Member’s interest in the
Company, or any interest therein, in breach of the covenants contained in §5.3 or §10.1 of this
Agreement.
“Defaulting Member” means, at any time, a Member which has committed or is the subject of a
Default which has not been cured or waived,
“Depreciation” means, for each Fiscal Year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable for federal income tax
purposes with respect to an asset for such Fiscal Year or other
period; provided, however,
that if the 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
that bears the same ratio to such beginning Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction with respect to such asset for such Fiscal Year or
other period bears to such beginning adjusted tax basis; and
provided further, that if the
federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal
Year or other period is zero, Depreciation shall be determined with reference to such beginning
Asset Value using any reasonable method selected by the Manager.
“Electing Member” has the meaning set forth in §6.6(a) hereof.
“Fiscal Year” means the calendar year.
“Funding Notice” has the meaning set forth in § 4.2 hereof.
“Hazardous Materials” means (i) asbestos in any form; (ii) urea formaldehyde foam insulation;
(iii) polychlorinated biphenyls; (iv) any other “hazardous waste”, as that term is defined by the
Resource Conservation and Recovery Act, 42 U.S.C. §6903(5), “hazardous substances”, as that term
is defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”), 42 U.S.C. §9601(14),
5
“pollutants” or “contaminants”, as those terms are defined by CERCLA, 42 U.S.C. §9601(33), (v)
volatile organic compounds, including oil and petroleum products, or (vi) any other substance,
compound or material whose use, storage, manufacture, transportation or disposal is proscribed or
conditioned by the documents evidencing or securing the Mortgage Loan or other indebtedness
secured by the Property.
“Interest” means a Member’s entire interest as a Member in the Company, including without
limitation, such Member’s rights under this Agreement, such Member’s share of the Profits and
Losses of the Company and such Member’s rights to receive distributions of Net Cash Flow and the
Company’s assets in accordance with the provisions of this Agreement and the Act.
“IRR” means, as to any Member as of any date (an “IRR Determination Date”), the rate of return
at which, as of the IRR Determination Date: (i) the then present value of all distributions made
from time to time with respect to such Member’s investment in the Company equals, (ii) the then
present value of all capital invested from time to time by such Member in the Company. For purposes
of the foregoing: (a) present values shall be calculated from the time of the making of each
Capital Contribution and based on a monthly accrual at a rate equal to the IRR for which the
equation is being solved; (b) a Member’s reinvestment rate shall be assumed to equal the IRR for
which the equation is being solved; (c) a Member’s “investment in the Company” shall mean all
capital contributed by such Member to the Company from time to time; (d) subject to the provisions
of clause (e), all of the present value calculations are to be made’as of the date when Capital
Contributions were contributed to the Company; (e) all Capital Contributions after the date hereof
shall be treated as having been contributed to the Company on the first day of the month during
which a Member’s funds were actually delivered (or deemed delivered) to the Company; (f) all
distributions shall be treated as if received on the last day of the month in which the
distribution was made; (g) the rates of return shall be per annum rates and all amounts shall be
calculated on a monthly basis and compounded on a monthly basis on the basis of a 12 month year;
and (h) solely for purposes of computing an IRR, Capital Contribution of the Members set forth on
Schedule A shall be treated, subject to the provisions of clause (e), as having been made
on the date of this Agreement.
“Liquidation” has the meaning set forth in §14.2 hereof
“Major Decision” shall mean any of the following decisions or actions to be made or taken, as
the case may be, that is not provided for in the Annual Budget:
• | A decision to sell, transfer, pledge, hypothecate, grant a mortgage on or security interest in, or dispose of any part of the Property, other than personal property of the Company having a fair market value less than the Decision Threshold Amount; | ||
• | Except as otherwise described in §4.3(c) of this Agreement, a decision to borrow any sums on behalf of the Company which, individually or in the |
6
aggregate, are in excess of the Decision Threshold Amount, excluding any debt incurred in the ordinary course of business for goods, materials, services or supplies; | |||
• | Approval of the Annual Budget; | ||
• | A decision to exceed or deviate from the applicable Annual Budget and the schedule of expenditures on a line item basis set forth therein, in excess of 10% of any line item or in excess of 5% of an aggregate of all line items of the applicable Annual Budget, other than with respect to Non-Discretionary Expenses; | ||
• | Subject to the requirements of any mortgage lender to the Company, a decision to retain any cash or cash equivalents of the Company in excess of the reserve amounts specified in the Annual Budget, other than as otherwise provided herein; | ||
• | A decision to institute any litigation or pursue any claims or remedies on behalf of the Company, other than with respect to; (i) disputes encountered in the course of the Day-to-Day Management of the Property; (ii) claims on or for insurance coverage; or (iii) delivering notices of default, applying security deposits and commencing enforcement and eviction proceedings in the Company’s ordinary course of business in connection with the leasing of space at the Property , or (iv) real estate tax appeals, provided, however, that at the time that any of the foregoing actions are commenced, Manager in good faith believes that such action would not result in the Company incurring costs or liabilities in excess of the Decision Threshold Amount and provided further that if at any time subsequent to the commencement of any such action Manager has reason to believe that the Company likely may incur or has already incurred costs or liabilities in excess of the Decision Threshold Amount, Manager at such time promptly shall seek the Consent of Aetna with regard to the continued pursuit of such action, which consent shall not be unreasonably delayed, withheld or conditioned; | ||
• | A decision to enter into any dispute, settlement, consent decree, stipulated court order or other resolution on behalf of the Company with any third party or any governmental or regulatory agency pursuant to which the Company would incur costs or liabilities in excess of the Decision Threshold Amount; | ||
• | A decision to select or change the banks, accountants, brokers, tax advisors, managing agents (other than in accordance with the Management Agreement) or auditors; |
7
• | A decision to submit the Property to the condominium form of ownership or the use of the Property for a purpose other than its current use; | ||
• | A decision to enter into any lease of the Property, other than space leases entered into in the ordinary course of business on arm’s length terms; | ||
• | A decision for the Company to acquire or to contract to acquire (i) any additional land, or (ii) any other real property or development rights; | ||
• | A decision to demolish or abandon the Property or any material portion thereof; | ||
• | A decision under the Management Agreement that would otherwise be a Major Decision hereunder; | ||
• | A decision to require each Member to make an additional Capital Contribution to the Company; | ||
• | A decision to change the Company’s depreciation or accounting methods or other methods with respect to treatment of various Company transactions for income tax purposes or other financial purposes; | ||
• | A decision to retain or employ any individuals or entities on behalf of the Company to perform or assist Manager in the performance of Manager’s duties hereunder that would obligate the Company for more than the Decision Threshold Amount; | ||
• | A decision to make any material amendment to or terminate any contract, agreement or arrangement between the Company and any third party or any individual or entity Affiliated with or controlled by Manager (including, specifically, but not limited to, any contract, agreement or arrangement to reimburse the expenses of or otherwise compensate any individual or entity), except as contemplated in the Annual Budget or the Management Agreement, and any market-rate leasing and construction contracts with Manager’s Affiliates; | ||
• | A decision to make any material amendment to or termination of the Management Agreement or change or permit the Property Manager to delegate its responsibilities under the Management Agreement, except as permitted hereunder or thereunder; | ||
• | A decision to make, execute or deliver any assignment for the benefit of creditors or file a voluntary petition in bankruptcy by or on behalf of the Company, or to acquiesce in the filing against the Company of a petition in bankruptcy; |
8
• | A decision to admit any additional or substituted members to the Company, except as provided for in this Agreement; | ||
• | A decision to voluntarily dissolve, directly or indirectly, the Company or Manager or liquidate the assets of either of them; | ||
• | A decision to institute any merger, consolidation or incorporation of the Company (or the assets or business thereof); | ||
• | A decision to amend any provision of this Agreement, and/or any provision of any loan documents relating to the Mortgage Loan and any refinancing thereof, except as permitted hereunder or thereunder; | ||
• | A decision to use any portion of any Capital Transaction Proceeds except in accordance with Article IX hereof; | ||
• | A decision to make distributions to the Members except in accordance with Article IX hereof; or | ||
• | A decision to decrease the amount of any liability, hazard, rent or other insurance coverage existing with respect to the Property unless such insurance coverage is unavailable from the Company’s existing insurer at the cost provided for in the Annual Budget. |
“Management Agreement” shall mean that certain property management agreement entered into
between the Company and the Property Manager as provided in §6.3, and any successor management
agreement.
“Manager” shall mean CCREI, unless and until (a) a successor Manager is designated pursuant
to §6.1(e), or (b) Aetna exercises its right to replace CCREI as Manager pursuant to §6.7, in
either of which case “Manager” shall mean and refer to such successor or replacement Manager on
and after such date.
“Member Loan” has the meaning set forth in § 4.2 hereof.
“Member Nonrecourse Deductions” means an item of loss, expense or deduction attributable to a
nonrecourse liability of the Company for which a Member bears the economic risk of loss within the
meaning of Treasury Regulations §1.704-2(b)(4).
“Members” means CCA and Aetna collectively, or their respective permitted successors or
assigns in interest as a substitute Member.
“Membership Percentage” means, with respect to any Member at any time, its proportionate
ownership interest in the Company at such time, expressed as a percentage. The Membership
Percentage for each Member is, as of the date of this Agreement, set
9
forth on Schedule A, which shall be updated by Manager from time to time as
necessary to reflect any changes in such Membership Percentages in accordance with this Agreement.
“Minimum Gain” means “partnership minimum gain”, as that term is defined in Treasury
Regulations §1.704-2(d). The amount of Minimum Gain equals the total amount of gain the Company
would realize for federal income tax purposes if it disposed of all assets subject to Nonrecourse
Debts for no consideration other than full satisfaction thereof.
“Mortgage Loan” means, collectively, those certain loans in the aggregate principal amount of
$24,613,532.78 made to or assumed by the Company and made by Allstate Life Insurance Company or an
Affiliate thereof, secured by a mortgage lien on the Property.
“Mortgage Loan Documents” means the documents evidencing or securing the Mortgage Loan or
executed by the Company for the benefit of the holder of the Mortgage Loan in connection
therewith.
“Net Cash Flow” means, with respect to any Fiscal Year or other period of the Company, the
net income of the Company, calculated in accordance with generally accepted accounting principles,
plus the amount of depreciation and other non-cash items that were deducted for the purpose of
calculating net income, minus the amount of capital expenditures, principal payments upon
indebtedness for money borrowed and other cash expenditures that were not deducted for the purpose
of calculating net income (excluding any payments of principal and interest on Member Loans) and
minus amounts deposited for the establishment or replenishment of any Company reserves established
and maintained in accordance with the then applicable Annual Budget or required under the terms of
the Mortgage Loan.
“Non-Defaulting Member” at any time mean a Member who is not a Defaulting Member at such
time.
“Non-Discretionary Expenses” means the following:
(i) real estate taxes and assessments on the Property;
(ii) payments required to be made pursuant to the Mortgage Loan and any other
mortgage loan secured by the Property and approved by all Members or any other
indebtedness of the Company approved by the Members or permitted hereunder, as well as any
costs of curing any default under any such mortgage or other indebtedness;
(iii) utility costs and insurance premiums directly related to the Property;
10
(iv) any costs of any alteration, repair or replacement necessary to comply with any
Requirements;
(v) any amount required to be paid by the Company pursuant to any final order,
judgment, or decree of any court or governmental body having jurisdiction;
(vi) any amount required to fulfill any contractual obligation of the Company,
including any contracts with any Affiliates of Members; and
(vii) any amount required for the safety of tenants, occupants or invitees of the
Property or to avoid the suspension of any services necessary to such tenants, occupants
or invitees.
“Non-Electing Member” has the meaning set forth in §6.6(a) hereof.
“Non-Participating Member” has the meaning set forth in § 4.2 hereof.
“Nonrecourse Debt” means debt of the Company or any partnership (or other entity treated as a
partnership for federal income tax purposes) in which the Company holds an interest, directly or
indirectly through other partnerships (or other such entities), as to which no partner or member
of the applicable partnership or other entity is personally liable, as determined under §752 of
the Code and Treasury Regulations §1.752-l(a)(2).
“Nonrecourse Deductions” has the meaning set forth in Treasury Regulations § 1.704-2(c). The
amount of Nonrecourse Deductions for a Fiscal Year equals the net increase, if any, in the amount
of Company Minimum Gain during the fiscal year, reduced (but not below zero) by the aggregate
distributions made during the year of proceeds of a nonrecourse liability that are allocable to an
increase in Company Minimum Gain.
“Percentage Interest” means, at any time unless and until CCA has exercised its option under
§6.8 to acquire a portion of Aetna’s Interest, (a) in determining the distribution of Net Cash Flow
pursuant to §9.1 of this Agreement, Aetna’s Percentage Interest shall be 85% and CCA’s Percentage
Interest shall be 15%; and (b) in determining the distribution of Capital Transaction Proceeds and
any other cash pursuant to §9.2 of this Agreement, as follows: (i) from the date hereof, Aetna
100%, until such time as Aetna has received Capital Transaction Proceeds equal to its Capital
Contributions, and then (ii) CCA, 100%, until such time as it has received Capital Transaction
Proceeds equal to all its Capital Contributions, and then (iii) Aetna 100%, until such time as
Aetna has received a 11% IRR on all its Capital Contributions, and then (iv) CCA 100%, until such
time as CCA has received a 11% IRR on its Capital Contributions, and then (v) Aetna, on the one
hand, 65% and CCA, on the other hand, 35%, until such time as Aetna has received a 13.5% IRR on all
its Capital Contributions, and then (vi) Aetna, on the one hand, 50% and CCA, on the other hand,
50%. Upon consummation of CCA’s
11
acquisition of a portion of Aetna’s Interest pursuant to Section 6.8, if any, (i)
Aetna’s Percentage Interest pursuant to clause (a) of the immediately preceding sentence shall be
reduced from 85% to 51%, and CCA’s Percentage Interest pursuant to clause (a) of the immediately
preceding sentence shall be increased from 15% to 49%, (ii) Aetna’s Percentage Interest pursuant to
clause (b)(v) of the immediately preceding sentence shall be reduced from 65% to 36% and CCA’s
Percentage Interest pursuant to clause (b)(v) of the immediately preceding sentence shall be
increased from 35% to 64%, and (iii) Aetna’s Percentage Interest pursuant to clause (b)(vi) of the
immediately preceding sentence shall be reduced from 50% to 26% and CCA’s Percentage Interest
pursuant to clause (b)(vi) of the immediately preceding sentence shall be increased from 50% to
74%. For purposes of determining the distribution of Net Cash Flow and the annual returns of the
Members in respect of their Capital Contributions, (x) subject to the provisions of clause (y) of
this sentence, all of the annual return calculations are to be made as of the date when Capital
Contributions were contributed to the Company; and (y) the initial Capital Contributions made by
the Members shall be deemed to have been made as of the date of the Closing.
“Person” means any individual, corporation, association, partnership (general or limited),
joint venture, trust, estate, limited liability company, or other legal entity or organization.
“Personal Representative” means the successor or legal representative (including, without
limitation, a guardian, executor, administrator or conservator) of a dead or incompetent Member.
“Prime Rate” means, with respect to any Member Loan or Additional Member Loan the prime rate
of interest announced as such (for U.S. money center commercial banks) from time to time in The
Wall Street Journal, on the most recent business day preceding the day such Member Loan or
Additional Member Loan was made.
“Profits” and “Losses” means, for each Fiscal Year an amount equal to the Company’s taxable
income or loss for such Fiscal Year, determined in accordance with §703(a) of the Code (but
including in taxable income or loss, for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to §703(a)(l) of the Code), with the following
adjustments:
(i) any income of the Company exempt from federal income tax and not otherwise taken
into account in computing Profits or Losses pursuant to this definition shall be added to
such taxable income or loss;
(ii) any expenditures of the Company described in §705(a)(2)(B) of the Code (or
treated as expenditures described in §705(a)(2)(B) of the Code pursuant to Treasury
Regulations §1.704-1 (b)(2)(iv)(i)) and not otherwise taken into account in computing
Profits or Losses pursuant to the definition shall be subtracted from such taxable income
or loss;
12
(iii) in the event the Asset Value of any Company asset is adjusted in
accordance with Paragraph (ii) or Paragraph (iii) of the definition of “Asset Value”
above, the amount of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or
Losses;
(iv) gain or loss resulting from any disposition of any asset of the Company with
respect to which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Asset Value of the asset disposed of, notwithstanding that
the adjusted tax basis of such asset differs from its Asset Value; and
(v) 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 of “Depreciation” above.
(vi) notwithstanding any other provision hereof, any items which are specially
allocated pursuant to Article VIII shall not be taken into account in computing Profit or
Losses.
“Property” means the real property and improvements thereon commonly known as The Atrium
Building, consisting of a-five-story brick office building located at 000 X. Xxxxxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx.
“Property Manager” has the meaning set forth in §6.3.
“Proposed Budget” has the meaning set forth in §11.3(a) hereof.
“Purchase Agreement” means that certain Agreement of Purchase and Sale dated as of April 9,
2004 by and between AREH Atrium LLC (“Seller”) and Xxxx Capital, as amended by the First Amendment
to Agreement of Purchase and Sale, dated April 9, 2004, and the Second Amendment to Agreement of
Purchase and Sale, dated April 26, 2004, and as assigned by Purchaser to the Company by Assignment
and Assumption Agreement of even date herewith.
“Real Estate Operating Company” shall have the meaning ascribed to such term in Department of
Labor Regulation §2510.3-101 (e) (29 CFR §2510.3-101 (e)).
“Recourse Debt” means debt of the Company or any partnership (or other entity treated as a
partnership for federal income tax purposes) in which the Company holds an interest, directly or
through other partnerships (or other such entities), as to which a partner or member or any
related person bears the economic risk of loss, as determined under §752 of the Code and Treasury
Regulations §1.752-1 (a)(l).
13
“Requirements” shall mean all present and future laws, rules, orders, ordinances,
regulations, statutes, requirements, codes and executive orders, of all governmental authorities
having jurisdiction over the Property, or the National Board of Fire Underwriters, affecting the
maintenance, use or occupation of the Property.
“State” shall mean the State of Delaware.
“Tax
Matters Partner” has the meaning set forth in §12.1 hereof.
“Transfer” has the meaning set forth in §10.1 hereof
“Treasury Regulations” means the income tax regulations, including temporary regulations,
promulgated under the Code, as such regulations may be amended from time to time (including
corresponding provision of succeeding regulations).
§1.2 Use of Certain Terms. The terms “approve”, “approval”,
or
“authorized”, as well as any derivations of such terms, when used in reference to any Person,
shall refer to the approval or authorization of such Person, as signified in writing from such
Person.
ARTICLE II
FORMATION AND TERM
FORMATION AND TERM
§2.1 Formation; Capital Contributions.
(a) The Company was formed pursuant to the filing of the Certificate pursuant to the
provisions of the Act. The Members hereby agree that, effective upon the date of this Agreement,
the rights, duties and liabilities of the Members shall be governed by this Agreement, subject to
the Act.
(b) The name and mailing address of each Member and the Capital Contributions to the
Company of each Member as of the date hereof are listed on Schedule A attached hereto. The
Manager shall update Schedule A from time to time as necessary to accurately reflect the
information therein, including, without limitation, to reflect any Capital Contributions after the
date hereof, any Transfers of Interests and any admissions of new Members pursuant to Article X
hereof. Any reference in this Agreement to Schedule A shall be deemed to be a reference to
Schedule A as amended and in effect from time to time.
(c) Any of Manager or any other officer of the Company, duly authorized by the Manager as an
authorized person within the meaning of the Act, shall execute, deliver and file any and all
amendments to the Certificate and any restatements thereof.
§2.2. Name. The name of the limited liability company formed by the filing of the
Certificate and governed by this Agreement is Atrium Building, LLC. The business of the Company
may be conducted upon compliance with all applicable laws under any
14
other name approved by the Manager and Aetna, provided, such name shall not include “Aetna” or any
phonetic equivalent thereto.
§2.3. Term. The term of the Company commenced on the date of the filing of the
Certificate with the Secretary of State for the State of Delaware and shall continue until
dissolved in accordance with the provisions of this Agreement.
§2.4. Registered Agent and Office. The Company’s registered agent and office in the
State shall be The Corporation Trust Company, Corporation Trust Center, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000. At any time, the Manager may approve another registered agent and/or
registered office.
§2.5. Principal Place of Business. The principal place of business of the Company
shall be located at c/x Xxxx Capital Corporation, 0000 X Xxxxxx, X.X., Xxxxx 000, Xxxxxxxxxx, X.X.
00000. At any time, Manager may change the location of the Company’s principal place of business,
provided Manager provides all other Members with prior written notice of such change.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
PURPOSE AND POWERS OF THE COMPANY
§3.1. Purpose. The Company is formed for the object and purpose of, and the
nature of the business to be conducted and promoted by the Company is, to acquire, own, hold,
manage, operate, lease, sell, finance, refinance and otherwise deal with the Property, and to
engage in any and all activities necessary, convenient, desirable or incidental to the foregoing.
The Company shall not carry on or engage in any other activity.
§3.2. Powers of the Company.
(a) The Company shall have the power and authority to take any and all actions
necessary, appropriate, proper, advisable, convenient or incidental to or for the furtherance of
the purposes set forth in §3.1, including, but not limited to, the power:
(i) to conduct its business, carry on its operations and have and exercise the powers granted
to a limited liability company by the Act in any state, territory, district or possession of the
United States, or in any foreign country that may be necessary, convenient or incidental to the
accomplishment of the purpose of the Company;
(ii) to acquire by purchase, lease, contribution of property or otherwise, own, hold,
operate, maintain, finance, improve, lease, sell, convey, mortgage, transfer, demolish or dispose
of any real or personal property that may be necessary, convenient or incidental to the
accomplishment or the purposes of the Company;
15
(iii) to enter into, perform and carry out contracts of any kind, including, without
limitation, the Purchase Agreement, contracts with any Member, Manager or any officer of the
Company or any Affiliate thereof, or any agent of the Company necessary to, in connection with,
convenient to, or incidental to the accomplishment of the purpose of the Company;
(iv) to purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use,
employ, sell, mortgage, lend, pledge or otherwise dispose of, and otherwise use and deal in and
with, shares or other interests in or obligations of domestic or foreign corporations,
associations, general or limited partnerships (including, without limitation, the power to be
admitted as a partner thereof and to exercise the rights and perform the duties created thereby),
trusts, limited liability companies (including, without limitation, the power to be admitted as a
member or appointed as a manager thereof and to exercise the rights and perform the duties created
thereby), or direct or indirect obligations of the United States or of any foreign government, or
of any state, territory, governmental district or municipality or instrumentality or any of them;
(v) to lend money for any proper purpose, to invest and reinvest its funds, and to take and
hold real and personal property for the payment of funds so loaned or invested;
(vi) to xxx and be sued, complain and defend, and participate in administrative or other
proceedings, in its name;
(vii) to appoint employees and agents of the Company, and define their duties and fix their
compensation;
(viii) to indemnify any Person in accordance with the Act and to obtain any and all types of
insurance;
(ix) to cease its activities and cancel its Certificate;
(x) to negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend, waive,
execute, acknowledge or take any other action with respect to any lease, contract or security
agreement in respect of any assets of the Company;
(xi) to borrow money and issue evidences of indebtedness, and to secure the same by a
mortgage, pledge or other lien on the assets of the Company;
(xii) to pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and
all claims or demands of or against the Company; and
(xiii) to make, execute, acknowledge and file any and all documents or instruments necessary,
convenient or incidental to the accomplishment of the purpose of the Company.
16
(b) The Manager may authorize any Person (including, without limitation, any Member) to enter
into and perform any document, instrument or agreement on behalf of, and in the name of the
Company.
(c) Notwithstanding the provisions of this Article III, Article IV or any other provisions of
this Agreement, all Major Decisions shall require the prior approval of all Non-Defaulting Members.
All Members hereby approve the Company entering into the Mortgage Loan and executing the Mortgage
Loan Documents and hereby authorize the Manager to execute and deliver the Mortgage Loan Documents
for and on behalf of the Company.
ARTICLE IV
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS AND MEMBER LOANS
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS AND MEMBER LOANS
§4.1. Initial Capital Contributions. As of the date of this Agreement, the
Capital Contributions made by each Member to the Company are set forth opposite its name on
Schedule A hereto, such Capital Contributions to be made not later than the date of the
Closing.
§4.2. Additional Funding Request. If Manager determines, in its reasonable discretion,
that additional funds are required for the operation of the Company or the Property, then Manager
shall, if and only to the extent permitted under the Mortgage Loan, first attempt to arrange for
the Company to borrow such funds from third party lenders at market rates. If it is not possible to
borrow funds from third party lenders, Manager shall give written notice (the “Funding Notice”)
thereof to all of the Members setting forth (i) the amount of additional funds so required, (ii)
the proposed application of such funds, and (iii) when any such additional funds are to be funded
(which funding date shall not be less than sixty (60) days following the delivery of the notice
pursuant to this Section; provided that the time for such funding shall be determined at
Manager’s discretion in the event of an emergency). Upon receipt of a Funding Notice, any Member
shall have the right, but not the obligation, to make a loan (a “Member Loan”) to the Company in an
amount equal to the product obtained by multiplying its Membership Percentage by the additional
funds required. A Member’s failure to fund a Member Loan shall not be considered to be a Default
hereunder. Any Member Loan made pursuant to this Section shall bear interest at the rate of the
Prime Rate plus two percent (2%) per annum, and shall be repaid as hereinafter provided. If any
Member (the “Non-Participating Member”) chooses not to make a Member Loan to the Company within the
time period set forth in the applicable Funding Notice, then the other Members, or any of them (the
“Advancing Member(s)”) may make such additional Member Loans (“Additional Member Loans”) to such
Non-Participating Member which in the aggregate are equal to the amount of the Member Loan which
the Non-Participating Member elected not to make, in such proportion (in the event there is more
than one (1) Advancing Member) between them as their Membership Percentages bear inter
se, and any such Additional Member Loans shall bear interest at the rate of the Prime Rate
plus four percent (4%) per annum, and shall be repaid as hereinafter provided. If an Advancing
Member makes an Additional Member Loan to a Non-Participating Member,
17
the Non-Participating Member shall immediately make a Member Loan in the same amount to the
Company, and the Advancing Member may remit the proceeds of the Additional Member Loan directly to
the Company in satisfaction of such Non-Participating Member’s obligation to make such Member Loan.
§4.3. Payment of Member Loans and Additional Member Loans. Any
Member Loan made to the Company pursuant to Section 4.2 shall be evidenced by a promissory note
duly issued by the Company. Any Additional Member Loan made to a Non-Participating Member pursuant
to §4.2 shall be evidenced by a promissory note duly issued by the Non-Participating Member. Member
Loans shall be payable from the first available Net Cash Flow. Additional Member Loans shall be
payable to the Advancing Member solely from (i) payments received by the Non-Participating Member
on account of Member Loans made by the Non-Participating Member to the Company, and (ii) the
Non-Participating Member’s allocable share of the first available Net Cash Flow after payments with
respect to any Member Loans. In the event that distributions of Net Cash Flow have been
insufficient to fully repay any Member Loans or Additional Member Loans, then any remaining balance
due (including accrued interest) shall be repaid solely from distributions of Company assets
pursuant to Section 9.2 below. Additional Member Loans shall be non-recourse to the
Non-Participating Member.
(a) Return of Capital. Except as otherwise provided in this Agreement, no Capital
Contributions or any money or other property shall be withdrawn from or paid by the Company unless
such withdrawal or payment is approved by the unanimous consent of the Members. Under circumstances
requiring a return of any Capital Contributions, no Member shall have the right to receive property
other than cash.
(b) No Third Party Rights. Nothing in this Agreement is intended or will be deemed to
benefit any creditor of the Company, and no creditor or the Company will be entitled to require any
Member to solicit or demand Capital Contributions or loans from any other Member.
§4.5. Member’s Interest. A Member’s Interest shall for all purposes be personal
property. A Member has no interest in specific Company property.
§4.6. Status of Capital Contributions. No Member, and no member of the Manager, and
no officer of the Company, shall receive any interest, salary or drawing with respect to its
Capital Contributions or its Capital Account or for services rendered on behalf of the Company,
the Manager or otherwise in its capacity as a Member, Manager or officer of the Company, as the
case may be, except as otherwise specifically provided in this Agreement and in the Management
Agreement, and except for any compensation expressly included in an Annual Budget.
18
§4.7. Capital Accounts.
(a) A separate Capital Account shall be maintained for each Member in accordance with the
provisions of this §4.7. Each Member’s Capital Account shall be determined and adjusted as
follows: (i) each Member’s Capital Account shall be increased by (A) such Member’s Capital
Contributions, (B) such Member’s distributive share of Profits, (C) such Member’s distributive
share of any items in the nature of income or gain which are specially allocated pursuant to
Article VIII, and (D) the amount of any Company liabilities assumed by such Member or which are
secured by any Company property distributed to such Member within the meaning of Regulations
§1.704-l(b)(2)(iv)(c); and (ii) such Member’s Capital Account shall be decreased by (A) the amount
of money and Asset Value of any other Company property distributed to such Member pursuant to this
Agreement, (B) such Member’s distributive share of Losses, (C) such Member’s distributive share of
items in the nature of deduction or losses which are specially allocated pursuant to Article VIII,
and (D) the amount of any liabilities of such Member assumed by the Company or which are secured by
any property contributed by such Member to the Company within the meaning of Regulations
§1.704-l(b)(2)(iv)(c).
(b) In the event any Interest is transferred in accordance with the terms of this Agreement,
the transferee shall succeed to the Capital Account of the transferor to the extent such Capital
Account relates to the transferred Interest.
(c) In determining the amount of any liability for the purposes of
§§4.7(a)(i)(D) and 4.7(a)(ii)(D) hereof, there shall be taken into account Code §752(c) and any
other applicable provisions of the Code and Regulations.
(d) The foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations §1.704-l(b) and shall be
interpreted and applied in a manner consistent with such Regulations. In the event that the
Members shall determine that it is prudent to modify the manner in which the Capital Accounts, or
any increases or decreases thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which are assumed by the
Company or the Members) are computed in order to comply with such Regulations, the Members may make
such modification, provided that it is not likely to have a material effect on the amounts
distributable to any Member upon the dissolution of the Company. The Company shall also (i) make
any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts
of the Members and the amount of Company capital reflected on the Company’s balance sheet, as
computed for book purposes, in accordance with Regulations §1.704-l(b)(2)(iv)(g), and (ii) make any
appropriate modifications in the event that unanticipated events might otherwise cause this
Agreement not to comply with Regulations §1.704-1(b).
§4.8. Third-Party Beneficiaries. Neither this Article IV, nor any other provision of
this Agreement, shall be construed to create any rights or benefits in any Person, other than the
Members, and, subject to the limitations on transfer contained
19
herein, their respective legal representatives, transferees, successors, and assigns.
Without limiting the foregoing, the future agreement of the Members to make additional capital
contributions to the Company shall not be construed as conferring any rights or benefits to or
upon any Person not a party to this Agreement, including, but not limited to, any guest, licensee,
invitee, purchaser or tenant or any part of the Property, or the holder of any obligations secured
by a mortgage, or other lien or encumbrance upon or affecting the Company or any interest of a
Member therein or in the Property or any part thereof or any interest therein.
§5.1. Powers of Members. The Members shall have the power to exercise any and all
rights or powers specifically granted to the Members pursuant to this Agreement or as otherwise
required by the Act. Except as otherwise specifically provided by this Agreement or required by
the Act, no Member (other than a Member who is also a Manager) shall have the power to act for or
on behalf of, or to bind, the Company or to manage the business and affairs of the Company which,
as more specifically provided in §6.1 hereof, is delegated to the Manager.
§5.2. Partition. Each Member waives any and all rights that it may now or hereafter
would otherwise have to maintain an action for partition of the Company’s property.
§5.3. Transfer and Admission of New Members. A Member may not Transfer all or any part
of its Interest to any Person except in accordance with Article X hereof. Any assignee or
transferee of any Interest transferred in accordance with Article X hereof shall be entitled to the
allocations of Profits and Losses under Article VIII and distributions under Articles IX and XIV to
which the assignor or transferor was entitled with respect to such Interest, but shall not be
entitled to exercise any rights of a Member hereunder unless and until such assignee or transferee
is admitted as a Member in accordance with the provisions hereof. Except as provided in Article X,
no assignee or transferee of any Interest may be admitted as a Member in the Company except with
the prior approval of the Manager and Consent of Aetna. Admission of a new Member shall not cause
dissolution of the Company. Following or coincident with any such admission, the Manager shall
amend Schedule A to this Agreement to reflect such event and the terms of such admission.
Any assignee or transferee of any Interest shall, regardless of whether such assignee or transferee
becomes a Member, be deemed to have been assigned all obligations of its assignor or transferor in
respect of such Interest.
§5.4. Special Purpose Entity. The Company shall be a special purpose entity and,
except as required by any mortgage lender to the Company, shall comply with the following:
(a) | maintain records and books of account separate from those of any other Person; |
20
(b) | maintain financial statements separate from those of any other Person (except that the Company may be included in consolidated financial statements of another Person where required by GAAP); | ||
(c) | file its own tax returns; | ||
(d) | except for certain overhead and transaction costs that are allocated on a reasonable basis among the Company and certain of its Affiliates and specifically identified on the Annual Budget, pay its own liabilities from its own funds and pay the salaries of its own employees, if any; | ||
(e) | participate in the fair and reasonable allocation of any and all overhead expenses and other common expenses for facilities, goods or services provided to multiple entities (which allocation shall be specifically identified in §6.3(b) or on the Annual Budget); | ||
(f) | except as otherwise agreed, deal with its Affiliates only on a basis which is equivalent to the way it would deal with independent third parties and maintain an arms’ length relationship with any other parties furnishing services to it; | ||
(g) | use invoices and checks separate from any of its Affiliates; | ||
(h) | deposit all of its funds in checking accounts, savings accounts, time deposits or certificates of deposit in its own name or invest such funds in its own name; | ||
(i) | observe all limited liability company formalities necessary to maintain its identity as an entity separate and distinct from its Affiliates; | ||
(j) | hold itself out as a separate and distinct entity from any other Person; | ||
(k) | hold title to its assets in its own name; | ||
(1) | conduct its business in its own name or under such trade name as will not be reasonably likely to cause confusion as to its separate existence; and | ||
(m) | correct any known misunderstanding regarding its separate identity; | ||
(n) | not commingle its funds or other assets with those of any other Person; | ||
(o) | not guarantee or become obligated for the debts of any other Person or hold its credit as being available to satisfy the obligations of any other Person; provided, however, that this provision shall not be deemed to prohibit customary joint and several obligations and any indemnification |
21
and contribution agreements entered into in the ordinary course of business of the Company; | |||
(p) | not pledge any of its assets for the benefit of any other Person; | ||
(q) | to the fullest extent permitted by law, not engage in any dissolution, liquidation, consolidation, merger, asset sale or transfer of ownership interests, except as otherwise permitted hereunder; | ||
(r) | not acquire obligations or securities of its Affiliates or Members; | ||
(s) | not make any loans to any other Person; | ||
(t) | not identify any of the Members or any of its Affiliates as a division or part of it or itself as a division or part of any of them; | ||
(u) | not take any action in contravention of the limitations on powers set forth in its organizational or formation documents; | ||
(v) | not engage (either as transferor or transferee) in any material transaction with any Affiliate other than for fair value and on terms similar to those obtainable in arm’s length transactions with unaffiliated parties (which transactions shall be specifically identified on the Annual Budget), or engage in any transaction with any Affiliate involving any intent to hinder, delay or default any entity; or | ||
(w) | not engage in any business activity other than as permitted by this Agreement. |
(a) The business and affairs of the Company shall be managed by and under the direction of
the Manager. The Manager shall have full, exclusive and complete discretion to manage and control
the Day-to-Day Management of the Company, to carry out all other actions as may be determined by
the Members with respect to Major Decisions and consistent therewith to take all such actions as
they deem necessary or appropriate to accomplish the purpose of the Company as set forth herein,
subject to the terms of this Agreement and the Act. So long as Aetna is a Member, the Manager
shall cause the Company to be a Real Estate Operating Company, to the extent necessary to prevent
any of the assets of the Company from constituting “plan assets”, as such term is used in
Department of Labor Regulation §2510.3-101 (29 CFR §2510.3-101).
22
(b) Notwithstanding anything to the contrary contained in this Article VI or in any other Section
of this Agreement, all Major Decisions shall require approval of all Members, other than
Defaulting Members.
(c) A Member who is also a Manager shall cease to be a Manager upon any Transfer or other
withdrawal by it in contravention of the provisions of Article X. A Manager shall cease to be a
Manager upon its Bankruptcy. While the Manager need not itself be a Member, a Manager shall cease
to be a Manager upon a Transfer or other withdrawal, which has the result that neither such
Manager, nor any Person who is an Affiliate of such Manager, is a Member. As of the date of this
Agreement, CCA is an Affiliate of CCREI.
(d) At any time, if there is no Manager, a successor Manager shall be designated by consent of
the Members. In the event of any successor Manager, such new Manager shall enter into an agreement
which is valid and binding with respect to such Manager, all of the Members and the Company, the
effect of which is that the new Manager is subject to the applicable provisions of this Agreement
with the same force and effect as if such Manager had originally been the Manager hereunder. Such
agreement may make such amendments to this Agreement as may be necessary or appropriate to reflect
and provide for the participation of such new Manager as a Manager and for the continued
classification of the Company as a partnership for state and federal income tax purposes.
§6.2.
Day-to-Day Operations. The Manager may appoint such officers of the Company as
the Manager determines from time to time to be necessary or convenient for the conduct of the
Company’s business. Such officers shall perform such duties and have such powers as from time to
time may be assigned to them by the Manager or otherwise provided herein. All checking and deposit
accounts of the Company shall be in the name of the Company and shall require such signatures as
shall be designated by the Manager.
(a) Pursuant to the Management/Leasing Agreement (the “Management Agreement”) dated
as of May ___, 2004, as amended, between the Company and Xxxxxxxx Xxxx Services, Inc. (the
“Property Manager”), the Company shall pay the Property Manager a management fee in the
amount of 3% of the gross monthly income derived from the Property, plus reimbursement of
such costs and expenses of the Property Manager as set forth in the Management Agreement.
The Manager shall have no right to terminate or replace the Property Manager (except as
specifically provided in the Management Agreement) or amend, modify, or terminate the
Management Agreement without the Consent of Aetna. Pursuant to an Asset Management
Agreement (the “Asset Management Agreement”) dated as of July ___, 2003, between the Property
Manager and Xxxx Capital (“Asset Manager”, which term shall include any successor to Xxxx
Capital as asset manager under such Asset Management Agreement), the Property Manager pays
the Asset Manager for services rendered from the Property Manager’s management fee an asset
management fee equal to 1.5% of the gross income derived
23
from the Property. Manager shall have the right to engage Standard & Poors to perform a
cost segregation study for the Company at a cost not to exceed $15,000. In the event that the
Management Agreement is terminated for any reason, the Company shall enter into or cause the
replacement property manager to enter into a replacement asset management agreement with the Asset
Manager on the same terms and conditions as the Asset Management Agreement.
(b) Manager shall be entitled to reimbursement from the Company for actual and direct expenses
incurred by Manager or its Affiliates for legal, accounting, auditing and other professional
services provided for the benefit of the Company as necessary to perform all functions anticipated
by the terms of this Agreement. Where “in house” accounting services are provided by employees of
Manager or its Affiliates, the costs of such services shall be $5,000 for the Company’s first
Fiscal Year and thereafter reasonably determined by Manager based upon the actual compensation and
benefits associated with the applicable employees, and shall be specifically identified on the
Annual Budget.
(c) Upon the effectiveness of this Agreement, Asset Manager shall receive an acquisition fee
from the Company in the amount of $352,750 in compensation for its services with respect to the
sourcing, due diligence, structuring and closing of Aetna’s
investment in the Company.
(d) Upon the effectiveness of this Agreement, NorthMarq Capital, Inc. (“NorthMarq”) shall
receive from the Company a fee equal to $159,375 in compensation for its
services with respect to the placement of Aetna’s investment in the Company. In addition,
NorthMarq shall receive a fee from the Company of $30,000 upon closing of the Mortgage Loan in
compensation for its services with respect to the placement of the
Mortgage Loan.
§6.4. No Management by Members. Except as otherwise expressly provided herein, no
Member, who is not also a Manager, shall take part in the management, or the operation or control
of the business and affairs of the Company. Except and only to the extent expressly provided for
in this Agreement and as delegated by the Manager, no Member or other person other than the
Manager shall be an agent of the Company or have any right, power or authority to transact any
business in the name of the Company or to act for or on behalf of or to bind the Company.
§6.5. Arbitration.
(a) In the event of any dispute or disagreement among the Members and/or the Manager as to
any matter which requires their agreement under this Agreement, any or all of the Members and/or
the Manager may set forth their respective positions and disagreements in writing and give notice
of same to the other Members and the Manager. They shall make a good faith effort to resolve the
dispute or disagreement. If the dispute or disagreement is not settled at the expiration of
fifteen (15) days from the time any such notice is received, then the entire matter shall be
submitted to binding arbitration subject
24
(b) Notwithstanding §6.5(a) above, in the event that, at any time any Member and/or the
Manager reasonably and in good faith determines that (i) the dispute resolution procedures set
forth above cannot be completed within a reasonable period of time or for any reason are not
satisfactory, or (ii) the arbitration has continued for an excessive period of time, then the
Members and the Manager hereby agree that, in the event that the dispute specifically concerns a
deadlock between any Members and/or the Manager concerning a Major Decision, any Member who is a
party to such dispute may treat such event as a Buy/Sell Event and may employ the procedures for
such set forth in §6.6 hereof.
§6.6. Buy/Sell Provision.
(a) Either Member (in either case, the “Electing Member”), provided such Member is not a
Defaulting Member, by written notice (the “Election
Notice”) to the other (the “Non-Electing
Member”), may declare that a “Buy/Sell Event” has occurred and initiate the provisions of this
§6.6, (i) at any time that the circumstances set forth in §6.5(b) shall have occurred, (ii) at any
time the other Member is in Default, or (iii) at any time on or after the second anniversary of the
date of this Agreement.
(b) The Election Notice shall include the Electing Member’s good faith best estimate of the
fair market value of one hundred percent (100%) of all the assets of
the Company (“Bid Price”) and
such reasonable financial information relating to the Property and the Company which is reasonably
available to the Electing Member, so as to permit the Non-Electing Members to make a decision with
respect to the Election Notice.
(c) Within the next sixty (60) days following the receipt by the Non-Electing Members of the
Election Notice, the Non-Electing Members shall notify the Electing Member (the “Purchase or Sale
Notice”) either that (A) the Non-Electing Members have elected to purchase the Electing Member’s
Interest for the Purchase Price, determined as hereinafter provided, or (B) the Non-Electing
Members have elected to sell their respective Interests to the Electing Member for the Purchase
Price, determined as hereinafter provided. The “Purchase Price” in each case shall be the amount
the selling Member would receive as a distribution from the Company if the assets were sold for the
Bid Price, the amount of all debts and liabilities (including transaction costs and contingent
liabilities) were subtracted, the Company were dissolved and its assets distributed in accordance
with Article XIV. A reasonable reserve may be withheld from the Purchase Price based on the
Accountants’ estimate of the Company’s needs with respect to any such contingent liabilities and
the selling Member’s share thereof in determining the Purchase Price; provided, that at the
expiration of such period of time as
25
may be determined by the Accountants, the balance of such reserve remaining shall be paid to the
selling Member. Failure by the Non-Electing Members to give a Purchase or Sale Notice within the
aforesaid sixty (60) day period shall be deemed an absolute and binding election to sell at the
purchase price set forth above.
(d) Within thirty (30) days after the date of the Purchase or Sale Notice, or, if applicable,
the lapse of the sixty (60) day period referred to in §6.6(c) above, the purchasing Member or
Members shall make a deposit with an escrow agent mutually acceptable to the Members (the “Escrow
Agent”), in an amount equal to five percent (5%) of the Purchase Price (the “Deposit”). The Escrow
Agent shall hold the Deposit in an interest bearing account until the closing of the Buy/Sell at
which time the Escrow Agent shall deliver the Deposit as provided in this Article.
(e) In the event the Manager is a selling Member, the Manager shall, without requirement of
further action by the Company, be divested of all authority to act for and on behalf of the Company
and shall be removed as Manager of the Company from and after the date of the delivery of the
Purchase or Sale Notice, or, if applicable, the lapse of the sixty (60) day period referred to in
§6.6(c) above, whereupon the purchasing Member shall be vested with such authority and be the
replacement Manager.
(f) The closing shall be held on a date not more than ninety (90) days after the date of the
Purchase or Sale Notice (or lapse of the sixty (60) day period referred to in §6.6(c) above), and
at a place in Virginia specified by notice from the purchasing Member given not less than thirty
(30) days before the closing. Any Member who is a party to the closing shall have the right to
extend the closing for an additional thirty (30) days upon written notice to the other party or
parties to the closing. At the closing, in return for the Purchase Price, the selling
Member or Members shall execute, acknowledge and deliver such documents as the purchasing
Member or Members may reasonably require to vest in the purchasing Member or Members (or designee
thereof) the selling Member’s or Members’ then existing Interests, free and clear of all liens,
encumbrances, claims of others, and charges of others, and charges of any kind, and the purchasing
Member or Members shall tender the applicable Purchase Price (less the Deposit) in cash or by
immediately available funds, and the Deposit held by the Escrow Agent shall be paid to the selling
Member or Members.
(g) In the event the selling Member fails to sell, as provided herein, and provided that the
purchasing Member is not then in default of its obligations under this section, the Deposit shall
be returned to the purchasing Member and the purchasing Member shall be entitled to pursue any and
all legal and equitable remedies it may have against the selling Member to enforce the buy/sell
provisions of this §6.6 of this Agreement by specific performance or similar action. In the event
the purchasing Member fails to purchase the selling Member’s Interest as provided herein, the
selling Member may, at its election, either (i) accept delivery of the Deposit as liquidated
damages and as its sole remedy, and the purchasing Member shall have no further liability to the
selling Member with respect to the proposed purchase under this §6.6 or (ii) elect to purchase the
Electing Member’s Interest and shall proceed to so purchase the
26
Electing Member’s Interest in accordance with the terms of this §6.6 upon written notice to the
Electing Member.
§6.7. Aetna’s Right to Acquire CCA’s Interest and/or Replace CCREI as Manager. In the
event of any of (a) Default by CCREI, or (b) a material act or omission of CCREI that was performed
or omitted fraudulently, that results from CCREI’s willful misconduct or was due to CCREI’s gross
negligence, and provided that Aetna is not a Defaulting Member hereunder, or (c) the occurrence of
an “Event of Default” under, and as defined in, the Mortgage Loan Documents as a result of a
failure to make a regularly scheduled payment due thereunder, which failure continues for at least
thirty (30) days after such payment is due, or (d) acceleration of the maturity of the Mortgage
Loan as the result of any such Event of Default, Aetna shall have the right, exercisable by notice
to CCA and CCREI within ninety (90) days after Aetna’s actual knowledge of any such event, either
or both to (i) acquire the Interest of CCA for a purchase price equal to that which CCA would
receive under §6.6 if CCA was the selling Member, provided that the Bid Price shall be determined
by mutual agreement, or if not, by the appraisal procedure set forth in Appendix A to this
Agreement, and (ii) replace CCREI as the Manager of the Company, effective immediately upon
exercise of such right. Aetna’s right under this §6.7 to acquire CCA’s Interest shall apply to any
portions of such Interest transferred by CCA to another person or party, regardless of whether such
transfer was permitted under this Agreement.
§6.8. CCA’s Right to Acquire Portion of Aetna’s Interest. Provided CCA is not then a
Defaulting Member, CCA shall have the option, during the six-month period commencing on the date
of Closing, to purchase, for cash, forty percent (40%) of Aetna’s Interest, such that after such
purchase Aetna shall have a fifty-one percent (51%) Membership Percentage. Such purchase may be by
CCA, or a Xxxx REIT or an Affiliate of a Xxxx REIT, or by an Affiliate of CCA. CCA shall provide
Aetna with not less than fifteen (15) days’ prior written notice of its intent to purchase such
Interest. The purchase price for such Interest shall be the sum of (a) Aetna’s Capital
Contribution allocable to such Interest (i.e., forty percent (40%) of Aetna’s initial Capital
Contribution as shown on Schedule A hereto), plus (b) an amount equal to the
greater of (i) the amount that will provide Aetna with an IRR of 14% on the amount paid to Aetna
pursuant to clause (a), or (ii) $200,000. Upon such sale and purchase, Aetna’s Capital
Contribution shall be reduced by, and CCA’s Capital Contribution shall be increased by (or if the
purchaser is an Affiliate of CCA, such purchaser’s Capital Contribution shall be) the amount paid
to Aetna pursuant to clause (a). Such Interest shall be conveyed free and clear of any right,
title or interest of any third party and with appropriate authorization, execution, delivery and
enforceability representations, but such sale shall be made without any other representation or
warranty by, or recourse to, Aetna.
27
§7.1. Amendments. Any amendments to this Agreement shall be adopted and be effective
as an amendment hereto only if approved by all the Members.
§7.2. Meetings of the Members.
(a) Meetings of the Members may be called at any time by the Manager. Notice of any meeting,
including the date, time and location, shall be given to all Members not less than fifteen (15)
days nor more than thirty (30) days prior to the date of such meeting. Each Member may authorize
any Person to act for it by proxy on all matters in which a Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at a meeting. Every proxy
must by signed by the Member or its attorney-in-fact.
(b) Unless otherwise provided by law or by this Agreement, all questions shall be decided only
by an affirmative vote of all of the Members.
(c) Any action of Members may be taken without a meeting, without prior notice and without a
vote, if a consent, or consents in writing, setting forth the action so taken, shall be signed by
all the Members.
§8.1. Profits and Losses.
(i) with respect to all items other than those in connection with a Capital
Transaction:
First, to the extent Losses have previously been allocated to any
Member for prior Fiscal Years, Profits shall be allocated to the Members first to
offset any Losses allocated to them from and after the date hereof which have not
previously been offset and the balance of such Profits shall offset any Losses
allocated to them which have not previously been offset (in each case pro rata
among the Members in proportion to the share of Losses to be offset); and
Second, to the Members until the aggregate amount of Profits
allocated to each Member under this §8.1(a)(i) Second equals the amount
distributed or distributable to each Member pursuant to §9.1, Second
28
hereof (in each case pro rata among the Members in proportion to such
distributions to the Members) and thereafter in the same ratio as distributions.
(ii) with respect to those items in connection with a Capital
Transaction:
First, to the extent Losses have previously been allocated to any
Member for prior Fiscal Years, Profits shall be allocated to the Members first to
offset any Losses allocated to them which have not previously been offset (in
each case pro rata among the Members in proportion to the share of Losses to be
offset); and
Second, to each Member until the aggregate amount of Profits allocated to
each Member under this §8.1(a)(ii) Second equals the amount distributed or
distributable to each Member pursuant to §9.2(b), Second hereof (in each case pro
rata among the Members in proportion to such distributions to the Members) and
thereafter in the same ratio as distributions.;
First, to the extent Profits have previously been allocated to any Member for
prior Fiscal Years, Losses shall be allocated to the Members first to offset any
Profits allocated to them which have not previously been offset (in each case pro
rata among the Members in proportion to the share of Profits to be offset);
Second, Losses shall be allocated among the Members in proportion to
the respective then positive balances in the Capital Accounts; and
Thereafter, to the Members in accordance with their respective
Membership Percentages.
§8.2 Special Allocations. The following special allocations shall be made in the
following order:
29
possible. The items to be so allocated shall be determined in accordance with Treasury
Regulations §1.704-2(f) and (i). This §8.2(a) is intended to comply with the minimum gain
chargeback requirement in Treasury Regulations §§l.704-2(f)(6) and 1.704-2(j)(2)(i) through (iii)
and shall be interpreted consistently therewith.
30
§8.3
Corrective Allocations. If allocations are made pursuant to §8.2 that would
materially change the amounts distributable to any Member (whether currently or upon liquidation),
corrective allocations of Profits or Losses, or corrective allocations of items of income, gain,
loss and deduction, shall be made as soon as possible, to the extent consistent with §704(b) of the
Code, to produce distributions that do not differ from the distributions that would have been made
if the above allocations had not been made.
§8.4. 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 (but no less frequently than once annually), as determined by the Manager using any method
that is permissible under §706 of the Code and the Treasury Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all items of Company income, gain, loss
and deduction or any other allocations not otherwise provided for shall be allocated among the
Members in the same manner as is applicable to Profits and Losses for the Fiscal Year in question.
(c) The Members are aware of the income tax consequences of the allocations made by this
Article VIII and hereby agree to be bound by the provisions of this Article VIII in reporting their
shares of Company income and loss for income tax purposes.
(d) To the extent that the allocations made pursuant to this Agreement for any taxable year
include the allocation of an item of income or gain that is recaptured as ordinary income under
Code §§1245 or 1250, such ordinary income shall be allocated to the Members who received the
allocation of the depreciation or cost recovery deductions that generated the ordinary income
recapture in proportion to their shares of such deductions, provided that any such allocation of
ordinary income shall not change the aggregate amount of income or gain allocated to any Member for
any taxable year.
(a) In accordance with §704(c) of the Code and the Treasury Regulations thereunder, income,
gain, loss and deduction with respect to any property contributed to the capital of the Company
shall, solely for income 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 Asset Value.
31
(b) In the event the Asset Value of any Company asset is adjusted pursuant to Paragraph (ii)
of the definition of “Asset Value” contained in Article I hereof, 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 Asset Value in the same manner
as under §704(c) of the Code and the Treasury Regulations thereunder.
(c) Any
elections or other decisions relating to allocations under this §8.5, including the
selection of any allocation method permitted under Treasury Regulations §1.704-3, shall be made by
approval of the Manager in any manner that reasonably reflects the purpose and intention and the
consent of Aetna as provided in §11.1 of this Agreement; provided, however, that the Manager shall
elect the “traditional method” of §704(c) allocations as provided in Treasury Regulations
§1.704-3(b). Allocations pursuant to this §8.5 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.
§8.6. Intentions and Construction of Allocations. It is the intention of the Members
to allocate Profits and Losses in such a manner as to cause each Member’s Capital Account to
always equal the amount of cash such Member would be entitled to receive if the Company sold its
assets for their respective book values and, after satisfying all Company liabilities, the
proceeds from such sale, as well as all other funds of the Company, were then distributed to the
Members pursuant to Section 9.2(b). These provisions shall be so interpreted as necessary to
accomplish such result.
§9.1. Net Cash Flow Distributions. The Company’s Net Cash Flow will be determined
quarterly by the Manager and distributed within forty-five (45) days after the end of each fiscal
quarter to the Members as follows:
First, to each Member who has made a Member Loan (pro rata on the basis of
the relative amounts of the Members’ respective Member Loans) the amount required to repay
each Member Loan and all accrued interest thereon in full, payments being applied first to
accrued interest and then to principal (provided that any outstanding Additional Member
Loan(s) and accrued interest thereon shall be payable to Advancing Member(s) from the
Non-Participating Member’s share of Member Loan repayments); and
Second, to the Members, in accordance with their respective Percentage
Interests (provided that any outstanding Additional Member Loan(s) and accrued interest
thereon shall be payable to Advancing Member(s) from the Non-Participating Member(s)’
allocable share of Net Cash Flow).
32
(b) Distribution of Capital Transaction Proceeds. After application of Capital
Transaction Proceeds pursuant to §9.2(a), remaining Capital Transaction Proceeds shall be
distributed as follows:
First, to Members in satisfaction of any Member Loans which have not been
satisfied pursuant to § 9.2(a) (pro rata on the basis of the relative amounts of the
Member’s outstanding Member Loans the amount required to repay each Member Loan and all
accrued interest thereon provided that any outstanding Additional Member Loan(s) and
accrued interest thereon shall be payable to Advancing Member(s) from the
Non-Participating Member(s) share of Member Loan repayments); and
Second, the balance, if any, to the Members in accordance with their
respective Percentage Interests (provided that any outstanding Additional Member Loan(s)
and accrued interest thereon shall be payable to Advancing Member(s) from the
Non-Participating Member(s) allocable share of Capital Transaction Proceeds).
§9.3. Limitations on Distributions. Notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not make a distribution to any Member with respect
to such Member’s Interest if such distribution would violate the
Act or other applicable law.
§10.1. Transfer.
(a) No Member shall assign, pledge, hypothecate, encumber or otherwise voluntarily transfer
by any means whatever (“Transfer”) all or any portion of its Interest
33
without the prior written consent of Manager and the other Member(s), or except as
otherwise expressly provided in herein. Consent to any proposed Transfer may be withheld by Manager
or the other Members at the sole discretion of Manager or the other Members, as applicable.
Notwithstanding the foregoing, in the event that Aetna seeks to Transfer its entire Interest to an
insurance company, a state or federally chartered bank or savings association, or other financial
institutional investor, Manager and the other Member(s) shall not unreasonably withhold, condition
or delay its consent to such proposed Transfer. In connection with any such proposed Transfer,
Aetna shall provide Manager and the other Member(s) with such financial and other information
concerning the proposed transferee as Manager and the other Member(s) shall reasonably request. In
no event, however, may any Transfer occur that would constitute or cause a default under any
mortgage on the Property.
(b) A transfer of a controlling interest within a Member shall also be considered a Transfer
for purposes of this Agreement. For purposes of this provision, a “controlling interest within a
Member” shall mean (i) the transfer of fifty (50%) or more of the ownership interest of the Member
or the transfer and/or issuance of more than fifty percent (50%) of the voting stock of the Member,
if the Member is not a publicly held corporation, to any Person that is not an owner or stockholder
of the Member on the date of execution of this Agreement, or (ii) the sale, transfer or other
conveyance of all or substantially all of the Member’s assets. The Transfer prohibitions of this
Section 10.1 shall not apply to Transfers (w) as a result of death, or in connection with the
estate planning, of a natural person to a spouse, son or daughter or descendant of either, to a
stepson or stepdaughter or descendant of either, (x) from a Member to its Affiliate, (y) from a
Member to a Xxxx REIT or Affiliate of a Xxxx REIT, or (z) with regard to Aetna, as a result of a
corporate merger or acquisition of substantially all of the ownership interests within Aetna or
substantially all of Aetna’s assets (a “Permitted Transfer”). A transferee of a Member’s Interest
will be admitted as a Substituted Member only pursuant to Section 10.3, Any purported Transfer that
does not comply with the provisions of this Section 10 shall be void and shall not cause or
constitute a dissolution of the Company.
(c) Any provisions of this §10.1 to the contrary notwithstanding, unless Aetna has exercised
its rights under §§6.6 or 6.7 to acquire CCA’s Interest, at all times while Aetna is a Member, not
less than twenty percent (20%) of the membership interests in CCA shall be owned, directly or
indirectly, by any one or more of Xxxx Capital, Affiliates of Xxxx Capital, a Xxxx REIT, an
Affiliate of a Xxxx REIT and the immediate family members of Xxxxxx T, Xxxx III.
(d) It is the general intent that all Members in the Company shall remain as Members until
such time as the Property has been sold.
(e) In the event CCA transfers its Interest (or one or more of the members of CCA transfers
its interest in CCA) to a Xxxx REIT or an Affiliate thereof, CCA shall have the right to replace
CCREI as Manager with such Xxxx REIT or an Affiliate thereof.
34
§10.2. Assignee of Member’s Interest. If, pursuant to a Transfer of an Interest
by operation of law (or pursuant to a Transfer that the Company is required to recognize
notwithstanding any contrary provisions of this Agreement), a person or entity acquires an
Interest, but is not admitted as a Substituted Member pursuant to Section 10.3, such person or
entity:
(a) shall be an assignee of a Member’s Interest, as provided in the Act;
(b) shall have no right to participate in the business and affairs of the Company or to
exercise any rights of a Member under this Agreement or the Act; and
(c) shall share in distributions from the Company with respect to the transferred Interest,
on the same basis as the transferring Member.
§10.3. Substituted Members No person or entity taking or acquiring, by whatever means,
the Interest of any Member shall be admitted as a Substituted Member in the Company (a “Substituted
Member”) except upon the written consent of Manager and Aetna, or where such person or entity has
taken or acquired the Interest in the Company pursuant to the unanimous consent of the Members.
Notwithstanding the foregoing, any transferee of a Member’s Interest pursuant to a Permitted
Transfer under the terms of Section 10.1(b) and the purchaser of a portion of Aetna’s Interest
pursuant to §6.8 shall be deemed to be a Substituted Member without further approval required.
§10.4. Withdrawal. A Member may not resign or withdraw from the Company without the
consent of the other Members.
§11.1. Books, Records and Financial Statements. Manager shall keep or cause to be kept
full and complete books and records of account, which shall accurately and completely reflect each
transaction of the Company. All such books and records and all leases and contracts and agreements
to which the Company is a party shall at all times be kept and maintained at the principal office
of the Property Manager. The books and records of the Company shall be open to inspection and
examination by the Members and their representatives, upon reasonable prior written notice, during
regular business hours. Manager shall cause the Company’s books and records to be closed reasonably
promptly after the end of each Fiscal Year. Manager shall require that the Accountants prepare and
submit to the Company and Aetna (a) not later than one hundred-twenty (120) days after the end of
such Fiscal Year, annual audited financial statements for the Company, which statements shall
include a statement of profits and losses for such Fiscal Year, a balance sheet as of the last day
of such Fiscal Year, a cash flow statement for such Fiscal Year and a statement of each Member’s
Capital Account, (b) not later than the tenth (10th) day after receipt by Manager, bank
statements for the Company for such month; (c) not later than forty-five (45) days following each
fiscal quarterly period, internally prepared financial statements for such quarter in a form
reasonably approved by Aetna, and (d) on
35
or before the ninetieth (90) day after the end of each Fiscal Year, copies of the Company’s tax
return, and such other information respecting the Company (including Form K-l and a form 1065) as
may be required to enable each Member to complete properly its federal income tax return and any
income tax return of any state and any other reporting or filing requirement imposed by any
governmental authority. The costs and expenses of such statements and preparation of tax returns
shall be borne by the Company. The actual filing of all tax returns shall be timely made on behalf
of the Company by Manager. The determination of whether the Company should make available elections
for tax purposes shall be made by Manager, subject in all respects to the prior reasonable approval
of Aetna.
§11.2. Accounting Method. The books and records of the Company shall be kept on the
accrual method of accounting applied in a consistent manner, for all tax and financial purposes,
§11.3. Annual Budget.
(a) Annually, the Manager shall prepare and submit to the other Members a projected operating
budget and capital budget (herein collectively referred to as a
“Proposed Budget”) for the
operation of the Property for each Fiscal Year. The Members will consider such Proposed Budget and
consult with the Manager to agree on an approved operating budget and an approved capital budget
(such budgets, when approved by all Members, being collectively
referred to as an “Annual Budget”).
The Manager shall prepare and submit to the other Members the Proposed Budget for Fiscal Year 2004
within 90 days after the Closing and shall prepare and submit the Proposed Budget for each Fiscal
Year thereafter no later than 45 days prior to the commencement of each such Fiscal Year. The
Manager shall furnish to the Members such reasonable financial information relating to the Property
and the Company as is requested by the Members and is available to the Manager. Unless and until an
Annual Budget is so approved for a Fiscal Year, the Manager shall operate the Company in accordance
with the Annual Budget for the prior Fiscal Year, subject, however, to changes in Non-Discretionary
Expenses.
(b) The Company shall not incur any expenses except those (a) which do not exceed or deviate
from the applicable Annual Budget by more than 10% of any line item nor more than 5% in the
aggregate of all line items or (b) which are Non-Discretionary Expenses to the extent in excess of
the amount provided therefor in the applicable Annual Budget. If a Proposed Budget is not approved,
Manager may, nevertheless, pay Non-Discretionary Expenses.
§11.4. Notices from Manager. Manager shall provide the following notices and
information to the other Members:
(a) | Copy of any notice from the holder of the Mortgage Loan or any subsequent mortgage loan alleging or declaring an event of default under such mortgage loan or other loan documents executed in connection |
36
therewith or, if no such notice has been issued by the holder of such mortgage loan but Manager has actual knowledge of an event of default under such mortgage loan, a statement by Manager of such event of default; |
(b) | On a quarterly basis, a current rent roll for the Property, which shall include a tenant delinquency report and shall be certified by Manager as complete and accurate in all material respects; | ||
(c) | Manager’s actual knowledge of any actual or threatened litigation against the Company or the Property which is not covered by applicable insurance policies and which seeks or demands damages in excess of the Decision Threshold Amount; | ||
(d) | Notice from any governmental or quasi-governmental agency or authority alleging or declaring a violation or breach of the Property (including the use or operation thereof) with any Requirements, beyond any applicable notice and cure period; | ||
(e) | Manager’s actual knowledge of any event or condition described in the non-recourse carveout provisions of the Mortgage Loan Documents or any other mortgage loan documents to which the Company is a party or by which it is bound; • • | ||
(f) | Manager’s actual knowledge of any discharge, leakage or spill of any Hazardous Materials on or affecting the Property and not previously disclosed in the existing environmental reports provided to Aetna; | ||
(g) | Notice of any proposed eminent domain or similar proceeding for or affecting the Property of which Manager becomes aware; | ||
(h) | The occurrence of any casualty to the Property which, in the Manager’s good faith judgment, would cost more than $100,000 to repair or replace; and | ||
(i) | Notice from any insurance company providing insurance coverage for or relating to the Property, stating that such coverage will be discontinued or not renewed, or rejecting a claim for coverage which exceeds $100,000. |
§12.1. Tax Matters Member. Manager shall be the “Tax Matters Partner” as defined in
§623l(a)(7) of the Code and the “Tax Matters Member” for purposes of this Agreement and shall
perform comparable duties, and have comparable obligations, as to state and local tax-related
matters. The Company shall reimburse Tax Matters Member
37
for all expenses reasonably incurred by it in connection with any administrative or
judicial proceeding with respect to the tax liabilities of the Members. The Tax Matters Member
shall promptly take such action as may be necessary to cause the Members to become “Notice
Partners” within the meaning of §6231(a)(8) of the Code. The Tax Matters Member shall keep the
other Members apprised of all substantive matters related to the Company’s taxes that may come to
the attention of the Tax Matters Member by giving notice thereof to the other Members reasonably
promptly after the Tax Matters Member becomes informed of any such matter or within such shorter
period as may be required to comply with the applicable statutory or regulatory provision. The Tax
Matters Member shall not (a) take any action to enter into an agreement with the Internal Revenue
Service to extend the limitation period for assessment of any tax controversy with the Internal
Revenue Service, (b) settle, institute or compromise any controversy, or make any material (as
reasonably determined by Aetna) decision regarding or affecting Company taxes or respond in any
manner to any request or notice from the Internal Revenue Service, or (c) choose a forum for
litigation of a tax controversy, except in each such case with the Consent of Aetna.
§12.2. Taxation as Partnership. The Company intends to be treated as a partnership for
federal income tax purposes. The Manager and officers of the Company shall make any filings
required for this purpose and shall not take any action which would be inconsistent with the
Company being treated as a partnership for federal income tax purposes. Without limiting the
foregoing, each of the Members agrees that it shall not file an election under Treasury Regulations
§301.7701-3 on behalf of the Company which is inconsistent with this intention.
§12.3. Section 754 Election. In the event of a transfer of all or any part of the
interest of any Member for an amount in excess of the adjusted basis of such interest for Federal
income tax purposes, the Manager shall elect, on behalf of the Company, and with the Consent of
Aetna as provided in §11.1, and pursuant to §754 of the Code (or corresponding provisions of any
succeeding law), to adjust the basis of the Company’s property. Each Member will furnish the
Manager with all information necessary to give effect to such election and will pay the costs of
any election applicable to it.
§13.1. Liability. Except as otherwise provided by the Act, the debts, obligations
and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and no Member or Manager or any officer of the
Company shall be obligated personally for any such debt, obligation or liability of the Company, or
for the repayment of the Capital Contributions, Additional Member Loans or Member Loans of any
other Member. Except as otherwise expressly required by law and as set forth in §13.2 below, a
Member, individually, and in its capacity as a Manager, shall have no liability in excess of (a)
the amount of its Capital Contributions, (b) its share of any assets and undistributed profits of
the Company, (c) its obligation to make any payments expressly provided for in §§4.1 and 6.6 of
this
38
Agreement or Appendix A to this Agreement, and (d) the amount of any distributions
wrongfully distributed to it.
§13.2 Indemnity. Subject to the provisions of any other agreement to which the Members
are parties, no Member shall be liable to, responsible for or accountable in damages or otherwise
to the Company or to another Member for any action taken or failure to act on behalf of the Company
within (or reasonably believed by such Member to be within) the scope of the authority conferred on
such Member by this Agreement or by law, unless such action or omission was performed or omitted
fraudulently or constituted willful misconduct or gross negligence. The Company shall indemnify
each Member for, and shall hold each Member harmless from and against any and all claims,
liabilities, losses, penalties, costs, expenses, damages or injuries suffered or sustained by such
Member by reason of any acts or omission arising out of its activities as a Member hereunder on
behalf of the Company or in furtherance of the interests of the Company within (or reasonably
believed by such Member to be within) the scope of authority conferred on such Member by this
Agreement or by law, including any judgments, awards, settlements, reasonable attorneys’ fees and
disbursements and other costs and expenses incurred in connection with the defense of any actual or
threatened actions, proceedings or claims, provided that any such acts or omissions or alleged acts
or omissions were not performed or omitted fraudulently and were not the result of willful
misconduct or gross negligence on the part of such Member. The Company’s liability under this §13.2
shall be limited to its interest in the Property and no Member shall be personally liable therefor,
except with respect to acts or omissions that were performed or omitted fraudulently or constituted
willful misconduct on the part of such Member. Notwithstanding the foregoing, the Manager and Xxxx
Capital (which is the Manager’s managing member) (collectively, the “Indemnitors”), by separate
agreement executed simultaneously herewith, shall indemnify Aetna from any liability which Aetna
may incur in connection with the financing, ownership, operation of the Property or Aetna being a
Member of the Company, to the extent arising from the gross negligence or willful misconduct of the
Indemnitors.
§13.3. Other Businesses. Aetna, CCA, CCREI and/or any of their respective Affiliates
may engage in or possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the Company, and the Company
shall have no rights by virtue of this Agreement in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if competitive with the
business of the Company, shall not be deemed wrongful or improper or a breach of any legal duty. No
Member, Manager or Affiliate thereof shall be obligated to present any particular investment
opportunity to the Company, even if such opportunity is of a character that, if presented to the
Company, could be taken by same, and Aetna, CCA and CCREI and/or any of their respective Affiliates
shall have the right to take for its own account (individually or as a partner, shareholder,
fiduciary or otherwise) or to recommend to others any such particular investment opportunity.
39
§14.1. Dissolution.
(a) The Company shall be dissolved only upon the occurrence of any of the following
events:
(i) | by the written agreement of Manager and the Members; or | ||
(ii) | upon the entry of a decree of dissolution under §18-802 of the Act. |
(b) The death, legal incapacity, retirement, resignation, expulsion, bankruptcy or
dissolution of any Member or the occurrence of any other event which terminates the continued
membership of a Member in the Company, shall not result in the dissolution of the Company.
§14.2. Liquidation. Upon dissolution of the Company, the Manager or a Person
designated by the Manager with the Consent of Aetna, as liquidating trustee, shall immediately
commence to wind up the Company’s affairs; provided, however, that a reasonable time shall be
allowed for the orderly liquidation of the assets the Company and the satisfaction of liabilities
to creditors so as to enable the Members to minimize the normal losses attendant upon a liquidation
(the foregoing process being referred to herein as a
“Liquidation”). The Members shall continue to
share Profits and Losses during Liquidation in the same manner, as specified in the Article IX
hereof, as is applicable before Liquidation. The proceeds of Liquidation shall be distributed, as
realized, to creditors of the Company and then to the Members, pro rata in proportion to their
respective positive Capital Accounts (after reflecting in such Capital Accounts all adjustments
thereto necessitated by (A) all other Company transactions (distributions and allocations of
Profits and Losses and items of income, gain, deduction, and loss) and (B) such Liquidation) until
such Capital Accounts have been reduced to zero. It is the intent of the Members that the amount of
cash distributed to each Member under this Section 14.2 corresponds to the amount each Member would
receive if amounts distributable pursuant to this Section 14.2 instead were distributable pursuant
to Section 9.2(b), and the allocations provided for in Article VIII are intended to produce that
result. If for any reason the amount of cash otherwise distributable to each Member under this
Section 14.2 differs from the amounts that each Member would receive if such amounts were
distributable pursuant to Section 9.2(b), then allocations of items of income, gain, loss and
deduction shall be made to eliminate all such differences to the extent permitted by the Code and
the applicable Regulations.
§14.3. Termination. The Company shall terminate when all of the assets of the Company
have been distributed in the manner provided for in this Article XIV, and the Certificate shall
have been canceled in the manner required by the Act.
40
§15.1. Remedies. The rights and remedies of the Members under this Agreement in
the event of a Default by a Member shall not be exclusive and shall be cumulative of all rights or
remedies available at law, in equity or under this Agreement. Each Member confirms that damages at
law may be an inadequate remedy for a breach or threatened breach of this Agreement and agrees that
without prejudice to the right of a Member in an appropriate case to pursue a remedy at law or
otherwise, in the event of a breach or threatened breach of any provision hereof, the respective
rights and obligations hereunder shall be enforceable by specific performance, injunction, or other
equitable remedy.
§15.2.
Notices. All notices provided for in this Agreement shall be in writing, duly
signed by the party giving such notice, and shall be delivered in person or by recognized overnight
delivery service, telecopied or mailed by registered or certified mail to the Members and the
Manager at their respective addresses set forth at Schedule A.
All such notices shall be deemed to have been given when received or when delivery is refused,
for any reason. Either party may change the address to which notices shall be sent by a notice
served in accordance with the terms hereof.
§15.3. Binding Effect. This Agreement shall be binding upon and inure to the benefit
of all of the parties and; to the extent permitted by this Agreement, their respective successors,
heirs, legal representatives and assigns.
§15.4. Severability. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed
in all respects as if such invalid or unenforceable provision were omitted.
§15.5. Counterparts. This Agreement may be executed by faxed signatures and in any
number of counterparts with the same effect as if the parties hereto had signed the same document.
All counterparts shall be construed together and shall constitute one instrument.
§15.6. Integration. This Agreement constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersedes all prior agreements and
understanding pertaining thereto.
§15.7. Governing Law. This Agreement and the rights of the parties hereunder shall be
interpreted in accordance with the laws of the State, and all rights and remedies shall be governed
by such laws without regard to principles of conflict of laws.
Remainder of Page is Intentionally Blank; Following are Signature Pages
41
MEMBERS; | ||||||||||
AETNA LIFE INSURANCE COMPANY, a Connecticut corporation |
||||||||||
By: | /s/ Xxxxx X. Xxxxxx | |||||||||
Xxxxx X. Xxxxxx | ||||||||||
Managing Director | ||||||||||
XXXX CAPITAL ATRIUM, LLC, a Virginia limited liability company |
||||||||||
By: | XXXX CAPITAL REAL ESTATE
INVESTMENTS, LLC, a Virginia limited
liability company Administrative Member |
|||||||||
By: | XXXX CAPITAL CORPORATION, a District of Columbia corporation Managing Member |
|||||||||
By: | /s/ Xxxxxx X. Xxxx, III | |||||||||
Xxxxxx X. Xxxx, III | ||||||||||
President | ||||||||||
MANAGER: | ||||||||||
By: | XXXX CAPITAL REAL
ESTATE
INVESTMENTS, LLC, a Virginia limited
liability company Administrative Member |
|||||||||
By: | XXXX CAPITAL CORPORATION, a District of Columbia corporation Managing Member |
|||||||||
By: | /s/ Xxxxxx X. Xxxx, III | |||||||||
President |
[Signature Page to Atrium Building, LLC Operating Agreement]
SCHEDULE A
Members and Addresses | ||||||||
Percentage | Initial Capital Contributions | Membership | ||||||
Aetna Life Insurance Company |
$ | 10,625,000 | 85 | % | ||||
000 Xxxxxxxxxx Xxxxxx, XX0 0 Xxxxxxxx, Xxxxxxxxxxx 00000 Attn: Xxxxx X. Xxxxxx fax: (000)000-0000 |
||||||||
Xxxx Capital Atrium, LLC |
$ | 1,875,000 | 15 | % | ||||
c/x Xxxx Capital Corporation 0000 X Xxxxxx, X.X. Xxxxx 000 Xxxxxxxxxx, X.X. 00000 Attention: Xxxxxx X. Xxxx, III fax: (000)000-0000 |
||||||||
$ | 12,500,000 | 100 | % |
Manager and Address
Xxxx Capital Real Estate
Investments, LLC
c/x Xxxx Capital Corporation
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxx, III
fax: (000)000-0000
c/x Xxxx Capital Corporation
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxx, III
fax: (000)000-0000
Schedule A-1
APPENDIX A
Unless the Members of the Company mutually agree otherwise, the “Bid Price”, for purposes
of §6.7 of the Operating Agreement, shall be the fair market value of the assets of the Company,
determined as follows:
(i) Within ten (10) days after Aetna notifies CCA of its election to exercise its right under
§6.7 to acquire the Interest of CCA, CCA and Aetna each shall designate an appraiser by written
notice to the other, specifying in such notice the name and address of such appraiser. Each party
shall cause its designated appraiser to appraise the assets of the Company 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 CCA and Aetna not later than
forty-five (45) days after such designation.
(ii) If either party shall not have designated an appraiser within the aforesaid ten-day
period, and if such party shall not designate an appraiser within an additional period of five (5)
days after receiving 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’s Assets by the appraiser designated by the other party shall be
binding upon the parties and shall constitute the Bid Price. 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’s
assets by that appraiser shall be binding upon the parties and shall constitute the Bid Price.
(iii) If the determinations of the fair market value of the Company’s 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 Bid Price. 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 Aetna and CCA). 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
Appendix A-l
own narrative appraisal of the fair market value of the Company’s assets. The Bid Price, in
such event, shall be the arithmetic average of the fair market value of the Company’s assets as
determined by those two appraisals being closest together in the
amount of their determinations.
(iv) Each appraiser designated pursuant to this provision shall be a licensed appraiser in the
Commonwealth of Virginia, 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 Property in the market area in which the
Property is 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’s assets
to an all cash purchaser in an “arms length” transaction as of the date of determination. Each
such determination shall consider such assets as being free and clear of encumbrances, with due
consideration for both the improvements existing on or forming a part of the Property and the use
of such Property as an office building.
(vi) Aetna shall purchase, and CCA shall sell and convey, CCA’s Interest within ten (10) days
after determination of the Bid Price.
Appendix A-2