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OPERATING AGREEMENT OF
METROPOLITAN ACQUISITION VII, L.L.C.
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TABLE OF CONTENTS
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ARTICLE I
Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Place of Business and Office; Registered Agent . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Qualification in Other Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
Purpose and Powers of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Powers of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Admission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
Capital Contributions and Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Capital Contributions by Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Capital Contributions by non-Managing Members . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Investment of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Other Matters Relating to Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . 14
4.6 Member's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.7 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V
Distributions and Allocation of Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Distributions -- General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Amounts and Priority of Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Allocations of Net Profits and Net Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Allocations and Elections In the Event of Transfers of Company Interests . . . . . . . . . . . . 19
5.7 Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Management of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Powers of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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TABLE OF CONTENTS (cont'd)
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6.3 Reimbursement of Expenses to An Affiliate of the Managing Member; Reimbursement of Expenses
to the Managing Member; Engagement of Affiliates of Members; Fees and Certain Other
Payments to Affiliates of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 No Management by Other Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 Limitations on Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.7 Indemnification of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Other Activities of the Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.10 The WIG Partnerships and the Buy/Sell Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII
Rights and Obligations of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Powers of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Outside Activities of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Reimbursement of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 No Interference with Balcor Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII
Transfer of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Transfer of Managing Member's Interest in the Company . . . . . . . . . . . . . . . . . . . . . 30
8.2 Admission of a Managing Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Transfer of Membership Interests by Members other than the Managing Member . . . . . . . . . . . 32
8.4 Substitution of Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Amendment of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.6 Limitation on Sale or Exchange of Company Interests . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX
Dissolution, Liquidation and
Termination of the Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE X
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Adoption of Amendments; Limitations Thereon . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Amendment of Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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TABLE OF CONTENTS (cont'd)
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ARTICLE XI
Consents, Voting and Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1 Method of Giving Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XII
Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XIII
Records and Accounting; Reports; Fiscal Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.3 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XIV
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
14.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.3 JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.5 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.6 Binding Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.8 No Right to Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.10 Reasonable Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.11 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XV
Interpretation and Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XVI
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XVII
IFG Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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This Operating Agreement (this "Agreement") of Metropolitan
Acquisition VII, L.L.C. (the "Company"), a limited liability company organized
pursuant to the Delaware Limited Liability Company Act (the "Act") is entered
into and shall be effective as of February 29, 1996 by and between MAP VII
Acquisition Corporation, a Delaware corporation having its principal office at
One Insignia Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 (the "Managing
Member") and Insignia Financial Group, Inc., a Delaware Corporation having its
principal office at One Insignia Financial Plaza, Greenville, South Carolina,
29102 ("IFG"), as the initial members of the Company. The Managing Member, IFG
and the individuals or entities who are subsequently admitted to the Company
formed hereby as members thereof are collectively referred to as the "Members"
and each is separately referred to as a "Member".
W I T N E S S E T H:
WHEREAS, the parties hereto wish to enter into this Agreement
to provide for their respective rights and obligations in connection with a
limited liability company formed pursuant to the Delaware Limited Liability
Company Act, 6 Del. C. Section 18-101, et. seq., as amended from time to time
(the "Delaware Act"), by filing a Certificate of Formation of the Company (the
"Certificate") with the offices of the Secretary of State of Delaware and
entering into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and
agreements herein made and intending to be legally bound, the Members hereby
agree as follows:
ARTICLE I
Defined Terms
Defined terms used in this Agreement that are not defined
elsewhere herein shall, unless the context otherwise requires, have the
meanings specified in this Article I.
"Adjusted Capital Account" shall mean, with respect to any
Member, the balance in such Member's Capital Account as of the end of the
relevant Fiscal Year or period, adjusted as follows:
(i) Credit to such Capital Account the sum of (x)
any amount which such Member is obligated or has agreed to contribute
(but has not yet contributed) to the Company and (y) the amount which
such Member is deemed to be obligated to restore pursuant to the
penultimate sentence of Treas.
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Reg. Section 1.704-2(g)(1) and the penultimate sentence of Treas.
Reg. Section 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in subclauses (4), (5) and (6) of Treas. Reg. Section
1.704-1(b)(2)(ii)(d).
"Advance Request" shall have the meaning set forth in Section
6.7.3.
"Affiliate" of, or a Person "Affiliated" with, a specified
Member, shall mean a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
"Agreement" shall mean this Operating Agreement, as originally
executed and as amended, modified, supplemented or restated from time to time,
as the context requires.
"Balcor Contract" shall have the meaning set forth in Section
7.5.
"Balcor Partnerships" shall have the meaning set forth in
Section 3.1.2.
"Balcor Partnership Interests" shall have the meaning set
forth in Section 3.1.2.
"Balcor Securities" shall have the meaning set forth in
Section 3.1.2.
"Bankruptcy" shall mean, with respect to a Person, (i) that
such Person has (A) made an assignment for the benefit of creditors; (B) filed
a voluntary petition in bankruptcy; (C) been adjudged bankrupt or insolvent, or
had entered against such Person an order of relief in any bankruptcy or
insolvency proceeding; (D) filed a petition or an answer seeking for such
Person any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation or filed an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against such Person in any proceeding of such
nature; or (E) sought, consented to, or acquiesced in the appointment of a
trustee, receiver or liquidator of such Person or of all or any substantial
part of such Person's properties; (ii) 90 days have elapsed after the
commencement of any proceeding against such Person seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation and such proceeding has not been
dismissed; or (iii) 60 days have elapsed since the appointment without such
Person's consent or acquiescence of a trustee, receiver or liquidator of such
Person or of all or any
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substantial part of such Person's properties and such appointment has not been
vacated or stayed or the appointment is not vacated within 60 days after the
expiration of such stay.
"Capital Account" shall mean, with respect to any Member, the
account maintained by the Company for such Member in accordance with Section
4.7 hereof.
"Capital Commitment" shall have the meaning set forth in
Section 4.3.
"Capital Contributions" of a Member shall mean the total
amount of contributions such Member has made to the Company pursuant to Article
IV, as of the date in question.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor federal income tax code.
"Commencement Date" shall have the meaning set forth in
Section 3.4.
"Company Minimum Gain" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(d), substituting the term "Company" for the term
"partnership" as the context requires.
"Consent" shall mean the approval of a Person, given as
provided in Section 11.1, to do the act or thing for which the approval is
solicited, or the act of granting such approval, as the context may require.
"Death Interest" shall have the meaning set forth in Section
8.3.3.
"Depreciation Recapture" shall have the meaning set forth in
Section 5.7.
"Distributable Cash" shall have the meaning set forth in
Section 5.1(b).
"Fair Market Value" shall mean
(i) for securities which are listed on a national
securities exchange, the value at their last sales prices on the date of
determination;
(ii) for securities which are not so listed, the
value at their last sales prices on the date of determination on the basis of
quotations in the over-the-counter market;
(iii) for securities which are in the form of
unlisted put or call options, their value as determined by the Managing Member
or the Liquidating Trustee, as the case may be.
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(iv) for all other assets, the value of such assets,
as determined from time to time by the Managing Member or Liquidating Trustee,
as the case may be.
"Fiscal Year" shall mean the calendar year or, in the case of
the first and the last fiscal years, the fraction thereof commencing on the
date on which the Company is formed under the Delaware Act or ending on the
date on which the winding up of the Company is completed, as the case may be.
"Incapacity" shall mean, as to any Person, (i) the
adjudication of incompetence or insanity of such Person, or the Bankruptcy of
such Person, or (ii) the death, dissolution (except in any case in which a
Member which is a partnership or limited liability company shall be
reconstituted by its remaining partners or members, as applicable, following
any liquidation or dissolution caused by the legal incapacity of one or more of
its partners or members, as applicable) or termination (other than by merger or
consolidation), as the case may be, of such Person.
"Indemnitee" shall have the meaning set forth in Section 6.7.
"Interest" shall mean all, or the part (as the context
requires), of the interest of a Member in the Company at any particular time,
including the right of such Member to any and all benefits to which a Member
may be entitled as provided in this Agreement, together with the obligations of
such Member to comply with all the terms and provisions of this Agreement.
"Investment" shall have the meaning set forth in Section 3.1.2
"Liquidating Trustee" shall mean a Person selected by the
Managing Member, or, if there is none, by the other Members, to act as a
liquidating trustee as provided in Section 9.2.
"Litigation Advance" shall have the meaning set forth in
Section 6.7.3.
"Majority-in-Interest of the Members" shall mean Members
holding more than 50% of the Percentage Interests in the Company.
"Managing Member" shall have the meaning set forth in Section
6.1.
"Net Profits" and "Net Losses" for any Fiscal Year or period
shall mean, respectively, an amount equal to the Company's income or loss for
such Fiscal Year or period, as computed for federal income tax purposes with
the following adjustments:
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(i) Any income of the Company which is exempt
from federal income tax shall increase such taxable income or shall
reduce such loss;
(ii) Any expenditures of the Company which are
described in Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Treas. Reg. Section
1.704-1(b)(2)(iv)(i), shall reduce such taxable income or shall
increase such loss;
(iii) Any item which is specially allocated
pursuant to Section 5.4 hereof shall not be taken into account in
computing such income or loss;
(iv) For purposes of computing gain or loss
(whether realized by reason of a sale or distribution) and
depreciation and amortization, the basis of any property shall be
equal to the amount shown on the Company's books; and
(v) Any deemed gain or deemed loss for book
purposes resulting from the distribution of appreciated or depreciated
property or the adjustment of the value of such property on the
Company's books shall be taken into account in computing such income
or loss.
"Nonrecourse Deductions" shall have the meaning set forth in
Treas. Reg. Section 1.704-2(b).
"Noticed Partner" shall have the meaning set forth in Section
6.10.1.
"Member Nonrecourse Deduction" shall have the meaning set
forth in Treas. Reg. Section 1.704-2(i), substituting the term "Member" for
the term "partner" as the context requires.
"Member Nonrecourse Loan" shall mean a loan made to, or credit
arrangement for the benefit of, the Company by a Member, substituting the term
"Member" for the term "partner" as the context requires, or by a person related
to a Member (as defined in Treas. Reg. Section 1.752-4(b)) which by its terms
exculpates the Members from personal liability on the debt, but under which
such Member or related person bears the ultimate economic risk of loss within
the meaning of Treas. Reg. Section 1.752-2.
"Offering" shall have the meaning set forth in Section 3.3.
"Offering Memo" shall have the meaning set forth in Section
3.3.
"Percentage Interest" shall mean, with respect to each Member,
the percentage obtained by multiplying 100% by a
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fraction, the numerator of which is the total number of Units owned by such
Member and the denominator of which is the total number of outstanding Units.
"Permitted Temporary Investments" shall have the meaning set
forth in Section 3.1.2.
"Person" shall mean any individual, membership, corporation,
unincorporated organization or association, limited liability company, trust or
other entity.
"REIT" shall have the meaning set forth in Section 3.1.2.
"Subject Partnership Interests" shall have the meaning set
forth in Section 4.5.6.
"Subject Partnerships" shall have the meaning set forth in
Section 4.5.6.
"Subscription Agreement" shall have the meaning set forth in
Section 3.3.
"Substitute Member" shall have the meaning set forth in
Section 8.4.2.
"Successor Managing Member" shall have the meaning set forth
in Section 8.1.2(a).
"Tax Advances" shall have the meaning set forth in Section
5.1(d).
"Treas. Reg." and "Regulations" shall mean the Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Triggering Partner" shall have the meaning set forth in
Section 6.10.1.
"Unit" shall have the meaning set forth in Section 4.1.
"Xxxxxx" shall have the meaning set forth in Section 6.10.1.
"WIG Partnerships" shall have the meaning set forth in Section
4.5.6.
"Withdrawing Managing Member" shall have the meaning set forth
in Section 8.1.2(a).
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ARTICLE II
Organization
2.1 Formation.
(a) The Members hereby agree to form the Company as a
limited liability company under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the
Members shall be as provided in the Delaware Act, except as otherwise
provided herein.
(b) Upon the execution of this Agreement, MAP VII
Acquisition Corporation and IFG shall be members of the Company.
(c) The name and mailing address of each Member of the
Company shall be listed on Schedule A attached hereto. The Managing
Member shall be required to update Schedule A and Schedule B from
time-to-time as necessary to accurately reflect the information
therein. Any reference in this Agreement to Schedule A or Schedule B
shall be deemed to be a reference to Schedule A or Schedule B as
amended and in effect from time-to-time.
(d) The Members hereby authorize and approve the
execution, delivery and filing with the office of the Secretary of
State of Delaware, the Certificate and any and all amendments thereto
and restatements thereof by the Managing Member as an authorized
person within the meaning of the Delaware Act.
(e) Upon admission to the Company of any Member other
than the Managing Member and IFG, IFG shall automatically be deemed to
have withdrawn from the Company and shall no longer be bound by any
provision of this Agreement, except for Article XVII.
2.2 Name. The name of the limited liability company formed hereby
and by the filing of the Certificate is Metropolitan Acquisition VII, L.L.C.
The business of the Company may be conducted upon compliance with all
applicable laws under any other name designated by the Managing Member.
2.3 Place of Business and Office; Registered Agent. The principal
office of the Company shall be c/o Insignia Financial Group, Inc., One Insignia
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000. The registered office of
the Company in the State of Delaware shall be at Corporation Trust Center, 0000
Xxxxxx Xxxxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of New Castle, State of Delaware, and
its registered agent shall be The Corporation Trust Company. The Managing
Member may from time to time (i) designate other places as the Company's
principal or registered office,
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(ii) designate other individuals or entities as the Company's registered agent,
and (iii) establish additional offices of the Company, in each case in
compliance with the laws of the State of Delaware and otherwise in its sole
discretion. The Managing Member shall notify each of the other Members in
writing of the taking by it of any such action.
2.4 Term. The term of the Company shall commence at the time of
filing of the Certificate in the Office of the Secretary of State of Delaware,
and shall continue in full force and effect until March 31, 2016 unless the
Company is sooner dissolved pursuant to the provisions hereof.
2.5 Qualification in Other Jurisdictions. The Managing Member
shall cause the Company to be qualified or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company owns property or transacts business to the extent, in the reasonable
judgment of the Managing Member, such qualification or registration is
necessary or advisable in order to protect the limited liability of the Members
or to permit the Company lawfully to own property or transact business. The
Managing Member, as an authorized person within the meaning of the Delaware
Act, shall execute, deliver and file any certificates (and any amendments
and/or restatements thereof) necessary for the Company to qualify to do
business in a jurisdiction in which the Company may wish to conduct business.
ARTICLE III
Purpose and Powers of the Company
3.1 Purpose. Purposes of the Company.
3.1.1 The purposes of the Company are to engage in any
business in which a limited liability company may engage pursuant to the laws
of the State of Delaware.
3.1.2 The Company may (i) make tender offers to purchase or
otherwise acquire limited partnership interests (the "Balcor Partnership
Interests"), notes, general partner interests and any other securities
(collectively, the "Balcor Securities"), either directly or via special purpose
subsidiaries of the Company, in certain limited partnerships of which The
Balcor Company or any Affiliate thereof serves as the general partner (the
"Balcor Partnerships") at such time, or from time to time, and for such
purchase prices, and on such terms as the Managing Member may determine in its
sole discretion (each such acquisition being referred to herein as an
"Investment"); (ii) in the Managing Member's sole discretion, possibly to vote
on matters with respect to which partners of the Balcor Partnerships may
participate, including, without limitation, calling meetings, amending the
limited partnership agreement, and removing or
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replacing the general partner of one or more of the Balcor Partnerships with
any person or entity, including the Managing Member or an Affiliate thereof;
(iii) dispose of any or all of the Balcor Securities in a securitization
transaction or transactions at any time or from time to time in the sole
discretion of the Managing Member, including in exchange for cash or equity,
debt (including convertible debt) or other securities (whether directly or
indirectly, by merger, consolidation or otherwise) in a real estate investment
trust (a "REIT") which may be a REIT sponsored, controlled or formed (directly
or indirectly) by IFG or any Affiliate of IFG; and (iv) otherwise owning,
holding, selling, or otherwise disposing of any or all of such Balcor
Securities, at any time and from time to time, as may be determined by the
Managing Member in its sole discretion, and (v) purchase or otherwise acquire
real property and/or other assets from any Balcor Partnership in which the
Company owns an interest, provided such acquisition is made in accordance with
Section 7.1.2 hereof. Additionally, the Company may purchase securities issued
by governmental agencies backed by the full faith and credit of the United
States government, certificates of deposit issued by a commercial bank located
in the United States with assets in excess of $10,000,000,000, commercial paper
rated A-1 or P-1, or interest bearing bank deposits in a commercial bank
located in the United States with assets in excess of $10,000,000,000
("Permitted Temporary Investments").
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 Section 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 Delaware 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 of the purpose of the Company;
(iii) to enter into, perform and carry out
contracts of any kind, including, without limitation,
contracts with any Member or any Affiliate thereof, or
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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 individuals or direct
or indirect obligations of the United States or of any
government, state, territory, governmental district or
municipality or of any instrumentality of any of them;
(v) to lend money for any proper purpose, to
invest and reinvest its funds, and to take and hold real and
personal property for the payment of funds so loaned or
invested;
(vi) to 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 Delaware 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;
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(xii) to pay, collect, compromise, litigate,
arbitrate or otherwise adjust or settle any and all other
claims or demands of or against the Company or to hold such
proceeds against the payment of contingent liabilities; and
(xiii) to make, execute, acknowledge and file any
and all documents or instruments necessary, convenient or
incidental to the accomplishment of the purpose of the
Company.
(b) Subject to the other provisions of this Agreement,
the Company, and the Managing Member, on behalf of the Company, may
enter into and perform any and all documents, agreements and
instruments contemplated thereby, all without any further act, vote or
approval of any Member. The Managing Member may authorize any Person
(including, without limitation, any other Member) to enter into and
perform any document on behalf of the Company.
(c) The Company may merge with, or consolidate into, a
REIT, another Delaware limited liability company or any other business
entity (as defined in Section 18-209(a) of the Delaware Act) without
any approval of the Members.
3.3 Admission.
(a) Subject to Section 3.4(c) and 3.4(d) below, the
Managing Member is hereby authorized to admit one or more Persons who
purchase the Units offered in the offering (the "Offering") pursuant
to the Private Placement Memorandum dated March 4, 1996 (the "Offering
Memo") as Members of the Company at any time (each, a "Commencement
Date") after the date hereof to and until April 30, 1996 (with each
Commencement Date being chosen by the Managing Member in its sole
discretion); provided, however, that (i) each additional Member must
purchase at least one Unit, and cannot purchase more than 5 Units, and
(ii) no more than 40 Units may be purchased pursuant to the Offering
Memo (in the sole discretion of the Managing Member subscriptions for
fractional Units may be accepted from subscribers who purchase at
least one Unit). Notwithstanding the immediately preceding sentence,
the Managing Member may, in its sole discretion, (i) waive the five
Unit maximum purchase limit with respect to any investor and (ii)
increase the number of Units that may be purchased pursuant to the
Offering Memo from 40 Units to 50 Units.
(b) After the Offering, the Managing Member may, for any
permitted purpose including funding the Company's acquisition of
additional Balcor Securities, in its sole discretion (i) cause the
Company to issue and sell a number of additional Units (including
fractions of Units) equal to
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up to one-third of the Units purchased pursuant to the Offering Memo
without the consent of the other Members and (ii) cause the Company to
issue and sell a number of additional Units exceeding one-third of the
Units purchased pursuant to the Offering Memo with the consent of a
Majority-In-Interest of the Members. The terms of the issuance and
sale of additional Units shall be determined by the Managing Member in
its sole discretion; provided, however that the price per additional
Unit shall equal the net asset value of the Company, as determined by
the Managing Member in its sole discretion (taking into account a
variety of factors including, but not limited to, the estimated
liquidation value of the assets underlying the Balcor Securities owned
by the Company, the anticipated holding period of the assets
underlying the Balcor Securities, whether the Company controls the
Balcor Partnerships and the Company's ownership percentage of the
Balcor Partnerships), divided by the number of Units (after giving
effect to the sale of the Additional Units (as defined below)). Prior
to consummating any sale of Additional Units, the Managing Member
shall give the Members notice of the impending sale. Each Member will
have a period of three days after delivery of such notice to subscribe
irrevocably to purchase up to its pro rata share, based upon the
number of Units then held by such Member, of the additional Units
covered by such notice (the "Additional Units"); provided, however,
that a Member may subscribe for Additional Units in excess of its pro
rata share to the extent that other Members decline to subscribe for
all of their pro rata share of the Additional Units. If necessary,
such excess Additional Units shall be allocated among the
oversubscribing Members pro rata based upon the respective numbers of
Additional Units for which they oversubscribed. If the Members do not
subscribe for all of the Additional Units, the Managing Member shall
have a period of 90 days in which to obtain subscriptions for the
remaining Additional Units to any person or persons (including
existing Members). Any Additional Units not purchased within such
90-day period shall again be subject to the pre-emption rights of the
Members. The Managing Member may, in its sole discretion, elect to
make more than one offering of Additional Units.
(c) Prior to the admission of any additional Member to
the Company pursuant to Section 3.4(a) above, the Managing Member must
receive from such additional Member (i) an executed copy of a
subscription agreement relating, among other things, to the
subscription by such additional Member to its Interest in the Company,
which subscription agreement shall be satisfactory in form and
substance to the Managing Member in its sole discretion (each, a
"Subscription Agreement"), (ii) such other documents, instruments, and
agreements as may be required by this Agreement or by the
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Managing Member in its sole discretion and (iii) full payment of such
additional Member's Capital Commitment.
(d) Notwithstanding anything to the contrary in this
Section 3.3, the Managing Member will not admit any additional Members
to the Company unless and until a minimum of at least 10 Units have
been subscribed for (including the subscriptions of the Managing
Member) by March 31, 1996.
ARTICLE IV
Capital Contributions and Capital Accounts
4.1 Capital Contributions. "Capital Contributions" shall mean,
for each Member, the aggregate amount of such Member's cash contributions to
the Company pursuant to Sections 4.2 and 4.3 of this Agreement through the date
of determination, and in the case of the Managing Member, shall also include
the Managing Member's non-cash contribution to the Company pursuant to Section
4.5.6 hereof. The total capital of the Company shall consist of the Capital
Contributions made to the Company by the Managing Member pursuant to or as
described in Section 4.2, plus the Capital Contributions made to the Company by
the other Members pursuant to or as described in Section 4.3. The capital of
the Company shall be divided into units of Membership Interests (each, a
"Unit"), and each Member shall hold that number of Units equal to his aggregate
Capital Contributions divided by $1 million.
4.2 Capital Contributions by Managing Member. The Managing Member
has contributed $1.01 to the capital of the Company, and shall make additional
Capital Contributions in the amount and form set forth and described in the
Offering Memo payable on the same terms and conditions as for the Capital
Contributions of the non-managing Members.
4.3 Capital Contributions by non-Managing Members. IFG has
contributed $100 to the capital of the Company. Each additional Member shall
agree in its Subscription Agreement to make Capital Contributions in the amount
set forth in such Subscription Agreement (aggregating not less than $1 million,
or one Unit), as accepted by the Managing Member, acting on behalf of the
Company (the "Capital Commitment"). A Member's Capital Contribution is to be
made at the time the Managing Member accepts such Member's Subscription
Agreement. A complete list of Members and the amount of their Capital
Contributions shall be set forth on Exhibit B hereto, as amended from time to
time.
4.4 Investment of Capital Contributions. Pending use by the
Company for Investments, Capital Contributions may be invested in Permitted
Temporary Investments.
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4.5 Other Matters Relating to Capital Contributions.
4.5.1 Subject to Section 7.1.2(a), any funds provided to
the Company by any Member (other than the Capital Contributions contemplated by
Sections 4.2 and 4.3) shall be treated as a loan made to the Company by such
Member at the time of such provision and not as a Capital Contribution to the
Company. Subject to Section 7.1.2(a), a Member's loans to the Company shall
bear interest at such rate per annum, and shall have such other terms and
conditions, as the Managing Member may determine in its sole discretion;
provided, however, that any loan made to the Company by the Managing Member or
IFG shall bear interest at a rate per annum equal to the Managing Member's cost
of funds or IFG's cost of funds, respectively.
4.5.2 The Managing Member may cause the Company to repay
any loan made to the Company pursuant to this Section 4.5 in accordance with
the terms of such loan as a preference to distributions of the Company to the
Members.
4.5.3 Except as otherwise provided in this Agreement, the
Company shall not pay any interest on any Capital Contributions made by any
Member to the Company.
4.5.4 Except as otherwise provided in this Agreement, a
Member shall not be entitled to withdraw, or to a return of, any part of the
Capital Contributions that it has made to the Company or to receive property or
assets other than cash in return thereof, and the Managing Member shall not be
liable to any Member for a return of the Capital Contributions that such Member
has made to the Company.
4.5.5 Except as otherwise provided in this Agreement, a
Member shall not be entitled to priority over any other Member with respect to
(i) a return to such Member of the Capital Contributions that it has made to
the Company, (ii) allocations of Company items of income, gain, loss,
deduction, or credit, or (iii) Company distributions.
4.5.6 All Capital Contributions to the Company shall be
made in cash provided, however, that the Managing Member shall satisfy
approximately $1,700,000 of the subscription price for its purchase of Units in
the Company by causing FMG Acquisition I, L.L.C. to contribute its 25%
interests in nine partnerships (the "WIG Partnerships") that have previously
acquired interests (the "Subject Partnership Interests") in nine of the Balcor
Partnerships (the "Subject Partnerships"). The effects of such contribution to
the Company are more fully discussed in Section 6.10 hereof.
4.6 Member's Interest. A Member's Interest shall for all purposes
be personal property. A Member has no interest in specific Company property.
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4.7 Capital Accounts.
(a) There shall be established for each Member on
the books of the Company a Capital Account initially reflecting an
amount equal to such Member's Capital Contribution. The Capital
Accounts shall be adjusted from time to time to reflect the Members'
additional Capital Contributions, if any, allocable shares of Net
Profits or Net Losses, special allocations pursuant to Section 5.4,
distributions pursuant to Sections 5.1, and 8.2(c), and as otherwise
required by the Code and Regulations, including but not limited to,
the rules of Treas. Reg. Section 1.704-1(b)(2)(iv).
(b) A Member's Capital Account shall not be
decreased by the payment of any fee to, or the reimbursement of any
expense incurred by such Member, nor shall a Member's Capital Account
be increased by the failure to pay any fee to, or the failure to
reimburse any expense incurred by, such Member.
(c) The Company shall establish and maintain an
Adjusted Capital Account for each Member in its workpapers (and not on
its books).
ARTICLE V
Distributions and Allocation of Profits and Losses
5.1 Distributions -- General Principles.
(a) Distributions made by the Company shall be
made in accordance with this Article V.
(b) The Managing Member shall have discretion as
to the making and timing of distributions out of Distributable Cash.
For purposes of this Section 5.1, "Distributable Cash" shall mean the
gross cash proceeds of the Company regardless of source (excluding
Capital Contributions by the Members and loans obtained by the
Company) less the portion thereof that the Managing Member reasonably
determines necessary to cover the Company's anticipated expenses and
losses or to facilitate the Company's potential acquisition of
additional Balcor Securities or reserves to satisfy any required
withholding pursuant to Section 5.1(d). Notwithstanding the first
sentence of this Section 5.1(b), the Managing Member will distribute
50% of the Distributable Cash no less frequently than annually in
order to assist Members in the payment of taxes on their allocable
portions of the Company's taxable income.
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(c) The Managing Member may elect to distribute
securities, assets or other property in kind. Each distribution in
kind of securities, assets or other property shall be made in
accordance with Section 5.2 based upon the Fair Market Value of such
property.
(d) To the extent the Company is required by law
to withhold or to make tax payments on behalf of or with respect to
any Member (e.g., backup withholding) ("Tax Advances"), the Managing
Member may withhold such amounts and make such tax payments as so
required. All Tax Advances (other than Tax Advances withheld from
distributions) made on behalf of a Member, together with interest
thereon at the "applicable federal rate," shall, at the option of the
Managing Member, (i) be promptly paid to the Company by the Member on
whose behalf such Tax Advances were made or (ii) be repaid by reducing
the amount of the current or next succeeding distribution or
distributions which would otherwise have been made to such Member or,
if such distributions are not sufficient for that purpose, by so
reducing the liquidation proceeds otherwise payable to such Member.
Whenever the Managing Member selects option (ii) pursuant to the
preceding sentence for repayment of a Tax Advance by a Member, for all
other purposes of this Agreement, such Member shall be treated as
having received all distributions (whether before or upon liquidation)
unreduced by the amount of such Tax Advance. Each Member hereby
agrees to indemnify and hold harmless the Company from and against any
liability with respect to Tax Advances required on behalf of or with
respect to such Member.
(e) 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 Section 18-607 of the Delaware Act or other
applicable law.
5.2 Amounts and Priority of Distributions. Distributions shall be
made to the Members in proportion to their Percentage Interests.
5.3 Allocations of Net Profits and Net Losses.
(a) Net Losses shall be allocated to the Members as
follows:
(i) First, to the Members in accordance with
their Percentage Interests; provided, however, that Net Losses
shall not be allocated to a Member to the extent such
allocation would cause the balance of such Member's Adjusted
Capital Account to become negative. Such Net Losses shall be
allocated to the Members who have positive balances in their
Adjusted Capital
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Accounts until the Adjusted Capital Accounts of each of the
Members has a balance of zero.
(ii) Thereafter, to the Managing Member.
(b) Net Profits shall be allocated as follows:
(i) First, to those Members, if any, having
negative balances in their respective Adjusted Capital
Accounts, an amount equal, and in proportion to such negative
balances;
(ii) Second, to the Members in such manner as may
be necessary so that each Member's respective Adjusted Capital
Account balance as a percentage of the total Adjusted Capital
Account balances corresponds with such Member's Percentage
Interest; and
(iii) Thereafter, to the Members in accordance with
their Percentage Interests.
5.4 Special Allocations.
(a) Notwithstanding any other provision of this
Agreement, the following allocations shall be made prior to any other
allocations under this Agreement and in the following order of
priority:
(i) If there is a net decrease in Company
Minimum Gain during any Fiscal Year or period so that
an allocation is required by Treas. Reg. Section
1.704-2(f), items of income and gain shall be
allocated to the Members in the manner and to the
extent required by such Regulation. This provision
is intended to be a minimum gain chargeback within
the meaning of Treas. Reg. Section 1.704-2(f)(1) and
shall be interpreted and applied consistent
therewith.
(ii) If there is a net decrease in the
minimum gain attributable to a Member Nonrecourse
Loan during any Fiscal Year or period so that an
allocation is required by Treas. Reg. Section
1.704-2(i)(4) (minimum gain chargeback attributable
to a member nonrecourse debt), items of income and
gain shall be allocated in the manner and to the
extent required by such Regulation.
(b) If, at the close of any Fiscal Year,
allocations of Net Profits or Net Losses pursuant to Section 5.3 or
distributions made or to be made pursuant to Section 5.2 or Section
9.2(c) would not prevent or
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would cause any Member to have a negative Adjusted Capital Account
balance, then gross income of the Company for such year and each
subsequent year (if necessary) shall be allocated to such Member to
the extent required to eliminate, as quickly as possible, such
negative Adjusted Capital Account balance. This Section 5.4(b) is
intended to comply with the qualified income offset requirement of
Treas. Reg. Section 1.704-1(b)(2)(ii)(d).
(c) Nonrecourse Deductions, if any, for any
Fiscal Year or period shall be allocated to the Members in proportion
to their Percentage Interests.
(d) Any Member Nonrecourse Deduction shall be
allocated to the Member who bears the economic risk of loss with
respect to the loan giving rise to such deduction within the meaning
of Treas. Reg. Section 1.752-2.
5.5 Tax Allocations.
(a) For federal, state and local income tax
purposes, all items of taxable income, gain, loss, and deduction for
each Fiscal Year or period shall be allocated among the Members in
accordance with the manner in which the corresponding items were
allocated under Sections 5.3 and 5.4, except as provided in Sections
5.5(b) and (c) hereof.
(b) If property is contributed to the Company by
a Member and there is a difference between the basis of such property
to the Company for federal income tax purposes and the Fair Market
Value at the time of its contribution, then items of income, gain,
deduction and loss with respect to such property and other property,
as computed for federal income tax purposes (but not for book
purposes), shall be allocated (in any permitted manner determined by
the Managing Member) among the Members so as to take account of such
book/tax difference as required by Code Section 704(c).
(c) If property (other than property described in
Section 5.5(b) hereof) of the Company is reflected in the Capital
Accounts of the Members and on the books of the Company at a book
value that differs from the adjusted basis of such property for
federal income tax purposes by reason of a revaluation of such
property, then items of income, gain, deduction and loss with respect
to such property and other property, as computed for federal income
tax purposes (but not for book purposes), shall be allocated (in any
permitted manner determined by the Managing Member) among the Members
in a manner that takes account of the difference between the adjusted
basis of such property for federal income tax purposes and its book
value in the same manner as differences between adjusted basis and
Fair Market Value are
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taken into account in determining the Members' shares of tax items
under Code Section 704(c).
5.6 Allocations and Elections In the Event of Transfers of Company
Interests. During a year in which a sale or other transfer of an Interest in
the Company shall occur, the following allocations and elections shall be made:
5.6.1 (a) If there is a transfer of all or a part of a
Member's Interest in accordance with this Agreement, the allocation of
Net Profits, Net Losses, gross income and deductions pursuant to this
Article V attributable to that Interest shall be divided between the
transferor and transferee by taking into account their varying
interests during the Fiscal Year and by utilizing any conventions
permitted by law and selected by the Managing Member. Except as
provided in Section 5.6.1(b), solely for purposes of making such
allocations, the Company shall not recognize any transfer until the
first day of the calendar quarter following the calendar quarter in
which such transfer occurred.
(b) Notwithstanding the foregoing, if during the
calendar quarter in which there is a transfer of an Interest, the
Company shall derive substantial income from activities outside of the
ordinary course of business (as determined by the Managing Member),
the allocations of Net Profits, Net Losses, gross income and
deductions attributable to that Interest shall be divided between the
transferor and transferee by taking into account the date on which
such Transfer actually occurred.
5.6.2 The foregoing provisions are intended to comply with
Treas. Reg. section 1.704-1(b), and shall be interpreted and applied as
provided in such Treasury Regulations. If the Managing Member shall reasonably
determine that the manner in which the Capital Accounts or Adjusted Capital
Accounts, or nay increases or decreased thereto, are computed, or the manner in
which any allocations are made under Article V, should be adjusted in order to
comply with Section 704(b) and Section 704(c) of the Code and Regulations
thereunder, the Managing Member shall make such modifications, provided that
the Managing member shall not, pursuant to this Section 5.6.2, modify the
manner of making distributions pursuant to this Agreement. Without limiting
the generality of the foregoing, the Managing Member shall apply the provisions
of this Article V in a manner that does not result in the duplication of the
allocation of items of income, gain, deduction or loss. All elections,
decisions and other matters concerning the allocations hereunder among the
Members, and accounting procedures, not specifically and expressly provided for
by the terms of this Agreement, including, but not limited to, the election
pursuant to section 754 of the Code (or corresponding provisions of subsequent
law)
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to adjust the basis of the Company's assets as provided by sections 734 and 743
of the Code, shall be determined by the Managing Member.
5.7 Other Considerations. Without altering the overall amount of
Net Profits or gross income allocable to any Member, Net Profits or gross
income taxable as ordinary income under Sections 1245 and 1250 of the Code, or
similar provisions of the Code (the "Depreciation Recapture"), shall, to the
extent possible, be allocated to those Members to whom allowances for
depreciation or amortization giving rise to Depreciation Recapture were
allocated.
ARTICLE VI
Management
6.1 Management of the Company.
(a) MAP VII Acquisition Corporation shall be the
managing member of the Company (the "Managing Member") and, in such
capacity, shall manage the Company in accordance with this Agreement.
The actions of the Managing Member taken in such capacity and in
accordance with this Agreement shall bind the Company.
(b) The Managing Member shall have full,
exclusive and complete discretion to manage and control the business
and affairs of the Company, to make all decisions affecting the
business and affairs of the Company and to take all such actions as it
deems necessary or appropriate to accomplish the purpose of the
Company as set forth herein. The Managing Member shall be the sole
Person with the power to bind the Company, except and to the extent
that such power is expressly delegated to any other Person by the
Managing Member, and such delegation shall not cause the Managing
Member to cease to be a Member or the managing member of the Company.
The other Members do not have the right, power or authority to remove
the Managing Member from its position as the managing member of the
Company.
(c) The Managing Member may appoint individuals
with such titles as it may elect, including the titles of President,
Vice President, Treasurer and Secretary, to act on behalf of the
Company with such power and authority as the Managing Member may
delegate in writing to any such Person.
6.2 Powers of the Managing Member. The Managing Member shall have
the right, power and authority, in the management of the business and affairs
of the Company, to do or cause to be done any and all acts, at the expense of
the Company, deemed by
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the Managing Member to be necessary or appropriate to effectuate the business,
purposes and objectives of the Company. Without limiting the generality of the
foregoing, the Managing Member shall have the power and authority to:
(i) purchase, sell, or otherwise acquire or
dispose of any asset when the Managing Member in its sole
discretion deems such purchase, sale, acquisition, or
disposition to be advisable;
(ii) borrow money from any Person (including any
Member) for any Company purpose, or guarantee loans made to
any Person, and to secure such borrowings or guaranties with
Company assets;
(iii) perform, or arrange for the performance of,
the management and administrative services necessary for the
operations of the Company;
(iv) prepare or cause to be prepared in conformity
with good business practice (A) all reports that are to be
furnished to the Members or that are required by or to be
furnished to taxing bodies or other governmental agencies, and
(B) the financial statements and reports referred to in
Section 13.2;
(v) incur all expenditures permitted by this
Agreement and, to the extent that funds of the Company are
available, pay all expenses, debts and obligations of the
Company;
(vi) employ and dismiss from employment any and
all employees, consultants, agents, attorneys, accountants and
professional advisors;
(vii) enter into, execute, amend, supplement,
acknowledge and deliver any and all contracts, agreements or
other instruments as the Managing Member shall determine to be
appropriate in furtherance of the purposes of the Company;
(viii) pay, collect, compromise, arbitrate, resort
to legal action for or otherwise adjust claims or demands of
or against the Company;
(ix) engage in any kind of activity and perform
and carry out contracts of any kind necessary to, or in
connection with, or incidental to, the purposes of the Company
(as set forth in Section 3.1), to the extent the same may be
lawfully carried on or performed by a limited liability
company under the laws of each state in which the Company is
then formed or qualified;
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(x) cause Interests in the Company to be sold,
and admit individuals or entities to the Company as Members or
Substitute Members in accordance with the terms and conditions
of this Agreement; and
(xi) execute on behalf of the Members, pursuant to
the powers of attorney delivered to the Managing Member
pursuant to Article XII, such amendments to this Agreement as
are permitted by and approved by the Members in accordance
with the provisions of Section 10.1, and such amendments to
the Certificate as the Managing Member deems necessary or
advisable to effect the purposes of the Company or the
admission of a new Member or a Substitute Member or to comply
with any applicable income tax or other laws and regulations;
6.3 Reimbursement of Expenses to An Affiliate of the Managing
Member; Reimbursement of Expenses to the Managing Member; Engagement of
Affiliates of Members; Fees and Certain Other Payments to Affiliates of the
Managing Member.
6.3.1 Reimbursement of IFG for Third Party Expenses. The
Company shall reimburse IFG, an Affiliate of the Managing Member, for all
out-of-pocket expenses paid to third parties by IFG in connection with (i) the
formation and organization of the Company, (ii) the offer and sale of Interests
in the Company to the Members, and (iii) other business or affairs of the
Company, in each case at such times as the Managing Member may determine in its
sole discretion.
6.3.2 Reimbursement of the Managing Member and its
Affiliates; IFG's Provision of Corporate Services. The Company shall reimburse
the Managing Member and its Affiliates for all out-of-pocket expenses
(including, without limitation, allocable portions of rent, salaries, and other
overhead items, and legal, accounting, and other expenses) incurred by the
Managing Member and its Affiliates in connection with the business or affairs
of the Company (other than expenses reimbursed pursuant to Section 6.3.1 and
expenses incurred by the Managing Member and its Affiliates in connection with
the formation and organization of the Company which were not paid to third
parties. Additionally, the Managing Member and its Affiliates may cause the
Company to enter into an agreement with IFG pursuant to which IFG, for the
period beginning after the Offering, would provide the Company with financial,
legal and other corporate services at IFG's cost (including an allocation of
rent, salaries and other overhead items that the Managing Member and IFG
determine in their sole discretion to be reasonable).
6.3.3 Engagement of IFG as the Company's Investment
Advisory Firm. Upon the first closing of any of the Company's tender offers
for Balcor Securities (if ever), the Company shall
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pay IFG a one-time investment advisory fee in the amount of $500,000.
6.3.4 INTENTIONALLY OMITTED
6.3.5 Engagement of Affiliates of Members. Except to the
extent restricted by Section 7.1.2(a), the Company, in the sole discretion of
the Managing Member, may retain, and may cause each other entity controlled by
the Company to retain, Affiliates of any Member for any purpose at rates
comparable to the rates charged by comparable individuals or entities that are
not Affiliated with such Member for comparable services.
6.3.6 Potential Engagement of IFG as the Company's Property
and Asset Manager. If the Company (or an entity controlled by the Company)
purchases or otherwise acquires real property and/or other assets from any of
the Balcor Partnerships in which the Company (or an entity controlled by the
Company) owns an interest (pursuant to Sections 3.1.2 and 7.1.2), the Company
shall be able to retain (or where applicable, cause its controlled entity to
retain) IFG or an Affiliate of IFG, as the exclusive provider of property and
asset management services to the Company (and such other entities, as the case
may be) in connection with all real property and other assets acquired from the
Balcor Partnerships, in each case on substantially the same terms as such
services are currently being provided and in no event for property management
fee rates greater than those fee rates presently being paid.
6.4 No Management by Other Members. Except as otherwise expressly
provided herein, no Member other than the Managing Member shall take part in
the day-to-day management, or the operation or control of the business and
affairs of the Company. Except and only to the extent expressly delegated by
the Managing Member, no Member or other Person other than the Managing Member
shall 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 Reliance by Third Parties. Third parties dealing with the
Company may rely conclusively upon any certificate of the Managing Member to
the effect that it (or its designee) is acting on behalf of the Company. The
signature of the Managing Member shall be sufficient to bind the Company in
every manner to any agreement or on any document.
6.6 Limitations on Managing Member. Notwithstanding the
provisions of Section 6.2, the Managing Member shall not do any of the
following:
(i) take any action which would make it
impossible to carry on the ordinary operations of the
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Company, except as otherwise provided in this Agreement;
(ii) admit a Person as a Member, except as
otherwise provided in this Agreement;
(iii) amend this Agreement, except as otherwise
provided in Article X; or
(iv) take any of the actions set forth in Section
7.1 hereof without the prior written consent of Members
holding over 50% of the Percentage Interests of the Company.
6.7 Indemnification of the Managing Member. The Company shall
indemnify and hold harmless the Managing Member, its stockholders, each of
their respective Affiliates, including IFG and its Affiliates, and each of the
directors, officers, stockholders, partners, employees, counsel, agents, and
control persons, if any, of each of the foregoing (each, an "Indemnitee"), from
and against any and all losses, liabilities, or damages incurred or suffered,
and any and all expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement incurred or suffered, by any Indemnitee as a result
of any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, related in whole or in part
to the activities of the Company (including, without limitation, the activities
of such Indemnitee as a director, officer, stockholder, partner, employee,
counsel, agent, or control persons of any other entity, as follows:
6.7.1 An Indemnitee shall be indemnified hereunder for any
loss, liability, damage, expense, judgment, fine, or amount paid in settlement
incurred or suffered by it as a result of any action, suit, or proceeding
arising in whole or in part out of any action that such Indemnitee took or
omitted to take related to the activities of the Company, unless (i) such
Indemnitee is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to have taken
or omitted to take such action in bad faith or in a manner that such Indemnitee
did not reasonably believe to be in or not opposed to the best interests of the
Company, or (ii) if the Indemnitee is the Managing Member, such action or
omission is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to constitute
fraud, willful misconduct, or gross negligence by the Managing Member in the
performance of its duties as the managing member of the Company, including,
without limitation, the management of the Company's business, the purchase,
sale and management of its assets, any extraordinary transaction by the
Company, such as a merger or sale of assets, and the offering and sale of
Units.
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6.7.2 The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that an
Indemnitee did not satisfy the conditions to its indemnification hereunder set
forth in the preceding Section 6.7.1.
6.7.3 The Managing Member (except as otherwise provided in
this Section 6.7.3, acting in its sole discretion) may cause the Company to
make advances (each, a "Litigation Advance") from time to time to any
Indemnitee (including, without limitation, the Managing Member) who incurs, or
who expects to incur, attorneys' fees or other expenses in connection with any
threatened, pending, or completed action, suit, or proceeding (whether civil,
criminal, administrative, or investigative) related in whole or in part to the
activities of the Company, upon the written request made by such Indemnitee
from time to time to the Company (each, an "Advance Request"); provided,
however, that (i) no Litigation Advance shall be in an amount greater than the
amount that, as set forth by such Indemnitee in the relevant Advance Request,
is then required to enable such Indemnitee to pay, or to reimburse such
Indemnitee for payment of, such attorneys' fees and other expenses, and (ii) as
a condition precedent to the making by the Company of any Litigation Advance to
an Indemnitee, such Indemnitee must agree in writing with the Company to repay
promptly such Litigation Advance to the Company in the event that such
Indemnitee is subsequently determined not to be entitled to indemnification
under this Agreement (which written agreement must be satisfactory in form and
substance to the Managing Member, acting in its sole discretion).
6.7.4 Indemnification and Litigation Advances shall be made
from the assets of the Company, and no Member shall be personally liable to any
Indemnitee.
6.7.5 The Managing Member shall not be liable to the
Company or to any Member in damages or otherwise (i) if taxing authorities
disallow or adjust any allocations of profit or loss or any deductions or
credits in the Company's tax returns, (ii) for the repayment of Capital
Contributions made to the Company by any Member, or (iii) for the taking of any
action by the Managing Member, or the failure of the Managing Member to take
any action, the effect of which may be to cause or result in loss, damage, or
liability to the Company, unless the Managing Member is determined in a final
decision of a court of competent jurisdiction, which decision is not subject to
review or appeal, to have taken or omitted to take such action in bad faith or
in a manner which the Managing Member did not reasonably believe to be in or
not opposed to the best interests of the Company, or unless such action or
omission is determined in a final decision of a court of competent
jurisdiction, which decision is not subject to review or appeal, to constitute
fraud, willful misconduct, or
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grossly negligent conduct by the Managing Member in the performance of its
duties as the managing member of the Company.
6.7.6 This Section 6.7 shall inure to the benefit of the
Indemnitees and their respective heirs, executors, administrators, successors,
and assigns, if any, and shall not be deemed exclusive of any other rights to
which such individuals or entities may be entitled under any agreement, vote of
the Members, or law.
6.8 Exculpation. Neither the Managing Member, nor its
stockholders, each of their respective Affiliates (including IFG and its
Affiliates), nor each of the directors, officers, stockholders, partners,
employees, counsel, agents and control persons, if any, of each of the
foregoing, shall be liable to any Member or the Company for honest mistakes of
judgment, or for action or inaction, taken in good faith for a purpose that was
reasonably believed to be in the best interests of the Company, or for losses
due to such mistakes, action or inaction, or to the gross negligence,
dishonesty, or bad faith of any employee, broker, or other agent of the
Company, provided that such employee, broker, or agent was selected, engaged,
or retained and monitored with reasonable care. The Managing Member and such
persons may consult with counsel and accountants in respect of Company affairs
and be fully protected and justified in any action or inaction that is taken in
accordance with the advice or opinion of such counsel or accountants, provided
that they shall have been selected and monitored with reasonable care.
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 6.8 shall not be construed so as to relieve (or attempt to relieve) any
person of any liability by reason of gross negligence, fraud or willful
misconduct or to the extent (but only to the extent) that such liability may
not be waived, modified or limited under applicable law, but shall be construed
so as to effectuate the provisions of this Section 6.8 to the fullest extent
permitted by law.
6.9 Other Activities of the Managing Member and its Affiliates.
The Managing Member and its Affiliates have engaged in, possessed interests in,
and have provided services to, and currently and in the future may engage in,
possess interests in, or provide services to other business ventures of every
kind and description, including, without limitation, ventures directly
competitive with or affiliated with the Company or any Member, for its own
account. Neither the Company nor any of the Members shall have any rights by
virtue of this Agreement in and to such business ventures or services or to the
income or profits derived therefrom. If IFG determines, in its sole
discretion, at any time to make a tender offer to purchase or otherwise acquire
Balcor Securities and IFG believes, in its sole discretion, that the Company
does not have the financial ability to make such offer or acquisition and
cannot obtain financing on an expeditious basis, then none of IFG, the Managing
Member, the
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directors or officers of the Managing Member, or any of their respective
Affiliates will have any requirement or duty to provide such opportunity to the
Company; provided, however, that with respect to any general partner interests
in the Balcor Partnerships, IFG (or any of its Affiliates) will be entitled,
but not required, to purchase such general partner interests without having any
requirement or duty to provide such opportunity to the Company.
6.10 The WIG Partnerships and the Buy/Sell Rights.
6.10.1 Ownership of the WIG Interests will subject the
Company to the terms and conditions set forth in the Agreement of Partnership
of each WIG Partnership, all of which are in substantially identical form.
Such terms and conditions include a right of first refusal for either partner
to cause the WIG Partnerships (or new entities formed on substantially similar
terms except that each partner would have a 50% interest with joint control as
co-managing partners) to make any tender offer for Balcor Partnership Interests
of the Subject Partnership Interests that the other partner desires to make.
Therefore, if the Company desires to make a tender offer for such Balcor
Partnership Interests, it must give the other partner in the WIG Partnerships,
Xxxxxx Street Acquisition Company L.L.C. ("Xxxxxx"), the right to cause the WIG
Partnerships to make such tender offer. The partners of the WIG Partnerships
are also restricted from participating, without the consent of the other
partner, in any proxy solicitation or any election contest with respect to the
general partner interest in the Subject Partnerships.
Furthermore, the Agreement of Partnership of each WIG
Partnership permits either partner (the "Triggering Partner") to require the
other partner (the "Noticed Partner") to elect either to purchase all of the
Triggering Partner's interests in any or all of the WIG Partnerships, or to
sell all of the Noticed Partner's interests in any or all of the WIG
Partnerships to the Triggering Partner, at a price that is fixed by the
Triggering Partner in its notice to the Noticed Partner (the "Buy/Sell Right").
Such right may be exercised between January 15 and January 30 of each year,
beginning January 15, 1997, or within 30 days following a filing with the
Securities and Exchange Commission by or in respect of the Subject Partnerships
of a proposed solicitation or offering of securities in respect of a merger,
sale of all or substantially all the assets, combination, or dissolution
involving the Subject Partnerships.
6.10.2 If the Managing Member determines, in its sole
discretion, that it would be advisable to purchase the interests of Xxxxxx in
one or more WIG Partnerships pursuant to the Buy/Sell Right, either as a
Triggering Partner or as a Noticed Partner in response to one or more offers by
Xxxxxx as the Triggering Partner, then the Managing Member will have the
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discretion to cause such purchases to be made other than by the Company.
However, the Managing Member will, in such case, give the Members the right,
exercisable within five days following delivery of notice by the Managing
Member, to participate in such purchases, pro rata based on the respective
amounts of the Members interests in the Company. If, following the expiration
of such five-day period, the Managing Member has not received funds from the
Members in an amount equal to the price required to purchase Xxxxxx'x interests
in such WIG Partnerships, then the Managing Member may offer the right to
purchase the balance of such interests to any other person or entity, including
affiliates of the Managing Member, on such terms and conditions as the Managing
Member may determine, in its sole discretion. The Managing Member may, in its
sole discretion, cause such purchase to be made by a partnership or other
entity in which Members and other persons who elected to participate in such
purchases will hold equity interests.
ARTICLE VII
Rights and Obligations of Members
7.1 Powers of Members.
7.1.1 Limitations. Except as otherwise specifically
provided in or contemplated by this Agreement or required by the Delaware Act,
no Member other than the Managing Member shall have the power to act for or on
behalf of, or to bind, the Company. Notwithstanding the foregoing sentence,
all Members shall constitute one class or group of members of the Company for
all purposes of the Delaware Act.
7.1.2 Consent Rights. The Managing Member shall not cause
the Company to take, and shall not take on behalf of the Company, any of the
following actions without obtaining the prior written consent of a
Majority-In-Interest of the Members:
(a) the payment by the Company of any salary or other
fees or compensation to the Managing Member, IFG, or
any of their respective Affiliates, except (A) as
contemplated by Sections 6.3.1, 6.3.2, 6.3.3, 6.3.4,
6.4.5, and 14.11, and Articles V and IX, and (B) to
pay at any time and from time to time the principal
of and interest upon any loan made to the Company by
the Managing Member, IFG, or any of their respective
Affiliates in connection with any Company Acquisition
in each case in accordance with the terms of such
loan; or
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(b) purchase or otherwise acquire any real
property and/or other assets from any Balcor
Partnership in which the Company owns an
interest.
Without limiting the foregoing, the Managing Member is
expressly authorized and permitted to transfer any Balcor Securities acquired
by the Company to any REIT, which may include any REIT including a REIT
sponsored, formed, or controlled by IFG (or any of its Affiliates), in exchange
for cash or for equity, debt (including convertible debt) or other securities
in such REIT, without consent of the Members being required. Additionally, the
Managing Member is expressly authorized and permitted to transfer all (and not
less than all) of its Interests in the Company to any such REIT in exchange for
cash or for equity, debt (including convertible debt) or other securities in
such REIT, without any consent of the other Members being required. Upon any
such transfer of the Managing Member's Interest, all the other Members shall be
required to transfer all their Interests in the Company to such REIT in
exchange for cash or for equity, debt (including convertible debt) or other
securities in such REIT.
7.1.3 Special Meetings. A special meeting of the Members
may be called by the Managing Member on its own motion or at the written
request executed and delivered to the Managing Member by Members holding at
least 80% of the Percentage Interests in the Company, at which meeting the
Members may exercise in person or by proxy only those powers expressly granted
to Members pursuant to this Agreement.
7.2 Outside Activities of Members. Each Member may engage in or
possess interests in other business ventures of every kind and description for
its own account. Neither the Company nor any of the Members shall have any
rights by virtue of this Agreement in and to such business ventures or to the
income or profits derived therefrom.
7.3 Reimbursement of Fees and Expenses. The Company shall bear
all of the out-of-pocket expenses, including attorneys' fees and accountants'
fees, incurred in connection with the organization of the Company and the
operation and maintenance of the Company and its assets and business.
7.4 Liability. No Member shall be obligated to (a) provide any
funds to the Company in excess of the amount of its agreed Capital Contribution
to the Company, or (b) make advances or loans to the Company. Except as
otherwise expressly required by law, no Member, including the Managing Member,
in its capacity as Member or Managing Member, shall have any liability for the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise.
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7.5 No Interference with Balcor Contracts. Each Member hereby
agrees that it will not, directly or indirectly, (a) terminate, seek to
terminate, cause the termination of, reduce the compensation then payable
under, or otherwise interfere in any way with any contract between IFG (or an
Affiliate of IFG) and any of the Balcor Partnerships regarding the provision of
management services for the properties held by such Balcor Partnership (the
"Balcor Contracts"); or (b) instigate, encourage or assist any other limited
partner of a Balcor Partnership or any other third party to do any of the
foregoing.
ARTICLE VIII
Transfer of Interests
8.1 Transfer of Managing Member's Interest in the Company.
8.1.1 (a) The Managing Member may (not assign its
Interest in the Company, in whole or in part (and no proposed assignee of all
or a portion of the Managing Member's Interest in the Company shall be admitted
to the Company as a Managing Member of the Company), unless (A) the Managing
Member obtains the prior written consent of a Majority-In-Interest of the
Members (other than the Managing Member) to such assignment and admission, and
(B) such proposed assignee meets the tests set forth in Section 8.1.1(b), or
8.1.1(c), whichever is applicable. A sale of the stock of the Managing Member
shall not be deemed to be an assignment of its Interest in the Company.
(b) The Managing Member may not assign its
Interest in the Company, in whole or in part, to any individual (and no
proposed assignee of all or a portion of the Managing Member's Interest in the
Company shall be admitted to the Company as a managing member of the Company)
if, in the opinion of counsel to the Company, such assignment or admission will
cause the termination of the Company for federal income tax purposes.
(c) The Managing Member may not assign its
Interest in the Company, in whole or in part, to any entity (and no proposed
assignee of all or a portion of the Managing Member's Interest in the Company
shall be admitted to the Company as a managing member of the Company) if, in
the opinion of counsel to the Company, (A) such assignment or admission will
cause the Company to lose its exclusion from the definition of an investment
company under Section 3(c)(1) of the Investment Company Act of 1940, as
amended, after such assignment or admission, (B) such proposed assignee is not
qualified to do business in such states as counsel to the Company determines is
necessary or advisable, or (C) such assignment or admission will cause the
termination of the Company for federal income tax purposes.
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(d) Except in connection with an assignment
permitted by this Section 8.1, the Managing Member may not resign or withdraw
as the managing member of the Company or take any action which would cause its
resignation or withdrawal as the managing member of the Company.
(e) Any purported assignment of all or a portion
of the Managing Member's Interest in the Company that violates any of
subsections 8.1.1(a) through 8.1.1(c) above (other than as provided in
Subsection (f) below) shall be null and void ab initio.
(f) Notwithstanding anything to the contrary in
this Agreement, the stock of the Managing Member may be pledged by IFG to
secure any IFG indebtedness without the consent of the other Members.
8.1.2 (a) Upon the Incapacity or withdrawal of the
Managing Member, which pursuant to the terms of this Agreement and under the
laws of the State of Delaware requires the dissolution of the Company, the
Company shall be dissolved and wound up unless, within a period of 90 days from
the date of the occurrence of such event, Members holding 75% of the Percentage
Interests designate an individual or entity to serve as the new managing member
of the Company that, in the opinion of counsel to the Company, meets the tests
set forth in Section 8.1.1(a) or 8.1.1(b), whichever is applicable (the
"Successor Managing Member"). In such event, the Company shall not be
dissolved and wound up but shall be continued with the Successor Managing
Member being admitted to the Company as its managing member and thereafter
being the Managing Member for all purposes of this Agreement and with the
existing Managing Member thereupon withdrawing as a managing member of the
Company (the "Withdrawing Managing Member"). In such event, the Successor
Managing Member shall purchase from the Withdrawing Managing Member, and the
Withdrawing Managing Member shall sell to the Successor Managing Member, the
Withdrawing Managing Member's Interest in the Company for a purchase price (the
"Successor Purchase Price") determined in accordance with subsection (b) below.
(b) The Successor Purchase Price shall be the
fair market value of the Withdrawing Managing Member's Interest in the Company
as determined by agreement between the Withdrawing Managing Member and the
Successor Managing Member. In the event that such an agreement has not been
reached within 30 days after the designation of the Successor Managing Member,
such determination shall be made by a committee consisting of three members,
with one member being chosen by the Withdrawing Managing Member, one member
being chosen by the Successor Managing Member, and one member being chosen by
the two members so chosen. In the event that the two members so chosen fail to
agree upon the appointment of a third member to the committee, then such third
member shall be selected in accordance with the rules of the
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American Arbitration Association. In the event that either the Withdrawing
Managing Member or the Successor Managing Member fails to choose its committee
member within 30 days after the other has chosen its committee member, the sole
appointed member of the committee shall determine the fair market value of the
Withdrawing Managing Member's Interest in the Company. The proceedings of such
committee shall conform to the rules of the American Arbitration Association to
the extent practicable. Such committee shall determine the fair market value
of the Withdrawing Managing Member's Interest in the Company as promptly as
practicable, and such committee's determination of the fair market value of the
Withdrawing Managing Member's Interest in the Company shall be final and
binding upon the parties hereto, the Withdrawing Managing Member, and the
Successor Managing Member.
8.2 Admission of a Managing Member. Notwithstanding the
provisions of Section 8.1, no assignee of the Managing Member or other
individual or entity shall be admitted as a managing member of the Company
unless and until such individual or entity executes a counterpart of this
Agreement and thereby assumes the rights, duties, and obligations of the
Managing Member pursuant to this Agreement.
8.3 Transfer of Membership Interests by Members other than the
Managing Member.
8.3.1 A Member's Interest will not be assignable or
transferable without the prior written consent of the Managing Member, which
consent (a) will not be unreasonably withheld in the event of a proposed
assignment or transfer to an Affiliate or member of the immediate family of the
assignor or transferor and (b) may be granted or withheld in the Managing
Member's sole discretion in all other instances. In no event will a proposed
assignment or transfer be permitted if, in the opinion of counsel to the
Managing Member, such an assignment or transfer would subject the Company to
any additional regulatory requirements, result in the violation of any
applicable law, or otherwise adversely affect the interests of the Company or
any other Member. No assignee or transferee of a Member shall be admitted to
the Company as a Member in the place of his assignor except in accordance with
the provisions of Section 8.4. The Company shall have no obligation to
recognize, or furnish information or make distributions to, any assignee or
transferee of a Member who does not comply with the provisions of Section 8.4,
and such assignee or transferee shall not have any rights against the Company
and shall have rights only against his assignor/transferor. Any purported
assignment or transfer of all or a portion of any Member's Interest in the
Company that violates any of the provisions of this Section 8.3 shall be null
and void ab initio.
8.3.2 No action of, or event affecting, a Member (other
than the Managing Member) shall dissolve or terminate the Company.
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8.3.3 Upon the death of a Member, (i) the Interest of such
Member (the "Death Interest") shall descend to and vest in the heirs, legatees,
or legal representatives of such Member, and (ii) all of such Member's rights
and obligations under this Agreement as a Member shall descend to and vest in
the heirs, legatees, or legal representatives of such Member, in each case if
the Managing Member consents to the admission of such heir, legatee, or legal
representative to the Company as a Member pursuant to and in compliance with
the provisions of Section 8.4. If the Managing Member does not consent to such
individual's or entity's admission to the Company as a Member pursuant to and
in compliance with the provisions of Section 8.4, such individual or entity
shall not be admitted to the Company as a Member but shall be entitled to the
distributions and allocations to which a Member holding such Death Interest
would be entitled.
8.4 Substitution of Member.
8.4.1 No assignee (including, without limitation, any
transferee, heir, legatee, or purchaser) of all or any portion of an Interest
in the Company shall be admitted to the Company as a Member without the prior
written consent of the Managing Member, which consent may be granted or
withheld in the Managing Member's sole discretion. As a condition to the
consent of the Managing Member to the admission of such an assignee of a Member
to the Company as a Member, the Managing Member, in its sole discretion, may
require such assignee to meet such conditions as it deems necessary or
advisable in its sole discretion including, without limitation, the following:
(i) Accept and assume, in a writing satisfactory
in form and substance to the Managing Member, the rights,
duties and obligations of a Member under this Agreement;
(ii) Execute and deliver to the Managing Member a
power of attorney as contemplated by Article XII;
(iii) Provide to the Company an opinion of counsel,
in form and substance satisfactory to counsel to the Company,
that (A) neither the offering of an Interest in the Company to
such assignee, the assignment of an Interest in the Company to
such assignee, nor the admission of such assignee to the
Company as a Member violates any registration or other
provision of any federal or state securities or other law, and
(B) such assignee will not be deemed to be more than one
beneficial owner of securities of the Company under Section
3(c)(1) of the Investment Company Act of 1940, as amended,
after such assignment and admission;
(iv) Execute and deliver such other documents or
instruments as the Managing Member may reasonably
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require to effect the admission of such assignee to the
Company as a Member; and
(v) Pay such reasonable expenses as the Company
may incur in connection with such admission.
8.4.2 The term "Member" shall include the assignee of all
or a portion of the Interest of a Member, but only if such assignee shall have
been admitted to the Company as a Member (any such assignee who has been so
admitted being referred to herein as a "Substitute Member").
8.5 Amendment of Agreement. Upon the admission of a new Managing
Member or a new or additional Member to the Company, the Managing Member shall
promptly take such steps as may be necessary or appropriate to prepare, file,
and/or record an amendment to this Agreement and, if necessary or appropriate
in the sole discretion of the Managing Member, to the Certificate, to reflect
such admission, and each Member agrees that his attorney-in-fact (appointed
under the power of attorney delivered to the Managing Member by such Member
pursuant to Article XII) may execute each such amendment on its behalf.
8.6 Limitation on Sale or Exchange of Company Interests.
Notwithstanding any other provision of this Agreement to the contrary, no sale,
assignment, exchange, or other transfer of an Interest in the Company may be
made (a) if the Interest sought to be sold, assigned, exchanged, or
transferred, when added to the total of all other Interests in the Company
sold, assigned, exchanged, or transferred within a period of 12 consecutive
months prior thereto, equals or exceeds 50% of the aggregate of all Interests
in the Company, or (b) if such sale, assignment, exchange, or transfer, in the
opinion of counsel to the Company, will cause the Company to be subject to
regulation as an investment company under the Investment Company Act of 1940,
as amended. Any attempt to make any such sale, assignment, exchange, or
transfer shall be null and void ab initio.
8.7 This Article VIII is subject to the last paragraph of Section
7.1.2 hereof.
ARTICLE IX
Dissolution, Liquidation and
Termination of the Membership
9.1 Dissolution.
The Company shall be dissolved and its affairs wound up upon
the happening of any of the following events:
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(i) the expiration of its term as set forth in
Section 2.4;
(ii) the Incapacity or withdrawal of any Managing
Member, or the occurrence of any other event under the
Delaware Act that terminates the continued membership of any
Managing Member in the Company, unless the remaining Members
holding at least 75% of the Percentage Interests (x) agree in
writing, within 90 days thereafter, to continue the business
of the Company and, (y) if there is no other Managing Member,
appoint a Successor Managing Member pursuant to Section 8.1.2;
(iii) upon the sale or other disposition by the
Company of all or substantially all of the assets it then
owns;
(iv) an election to dissolve the Company made in
writing by the Managing Member (which election may be made by
the Managing Member at any time in its sole discretion);
(v) an election to dissolve the Company made in
writing by Members (other than the Managing Member) holding at
least 80% of the Percentage Interests in the Company; or
(vi) the entry of a decree of judicial dissolution
under Section 18-802 of the Delaware Act.
Dissolution of the Company shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Company shall not terminate
until the winding up of the Company has been completed, the assets of the
Company have been distributed as provided in Section 9.2 and the Certificate
shall have been cancelled.
9.2 Liquidation.
(a) Upon dissolution of the Company, the Managing Member
or, if there is none, a Person approved by the remaining Members to
act as a liquidating trustee (the "Liquidating Trustee"), shall wind
up the affairs of the Company and proceed within a reasonable period
of time to sell or otherwise liquidate the assets of the Company and,
after paying or making provision by the setting up of reasonable
reserves for all liabilities to creditors of the Company, to
distribute the assets among the Members in accordance with the
provisions for the making of distributions set forth in this
Agreement.
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(b) The Members shall not be responsible for restoring
any negative balance in their Capital Accounts.
(c) The assets of the Company or the proceeds from
liquidation thereof shall be distributed in the following manner:
(i) First, to pay or make reasonable provision to
pay the liabilities and debts of the Company (including all
contingent, conditional or unmatured claims and obligations,
including the expenses of liquidation and including all loans
made by any Member to the Company), other than liabilities for
distributions to Members; and
(ii) Thereafter, all remaining assets or proceeds
shall be paid or distributed to all Members in accordance with
their Percentage interests.
(d) In any such liquidation, the Company may distribute
to Members the assets of the Company in cash, ratably in kind or any
combination thereof. Each distribution in kind of securities, assets
and/or other property pursuant to Section 9.2.(c)(ii) shall be
distributed based upon the Fair Market Value of such property. To the
extent deemed desirable by the Managing Member or the Liquidating
Trustee, distributions may be made into a liquidating trust or other
appropriate entity, and reserves may be established for contingencies.
(e) When the Managing Member or the Liquidating Trustee
has complied with the foregoing liquidation plan, the Managing Member
or the Liquidating Trustee, on behalf of all Members, shall execute,
acknowledge and cause to be filed an instrument evidencing the
cancellation of the Certificate in the manner required by the Delaware
Act.
ARTICLE X
Amendments
10.1 Adoption of Amendments; Limitations Thereon.
10.1.1 Amendments of this Agreement may be proposed by (i)
the Managing Member or (ii) Members holding at least 80% of the Percentage
Interests. The Managing Member, on behalf of the Member or Members proposing
such amendment, shall submit to all Members a verbatim statement of any such
proposed amendment and identify the persons proposing it. Each such submission
shall include a notice to the effect that the proposed amendment, unless the
laws of the State of Delaware shall otherwise require, shall become effective
(and the Managing Member shall then be
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authorized to file any appropriate amendment to the Certificate) if a
Majority-In-Interest (unless the provision to be changed explicitly requires a
greater percentage consent of the Members) and the Managing Member (if the
provision to be changed explicitly requires the consent of the Managing Member)
shall have consented to such proposed amendment in writing within 90 days after
the mailing of such notice.
10.1.2 An amendment to this Agreement shall not (i) extend
the term of the Company, (ii) reduce the liabilities, obligations, commitments,
or responsibilities of the Managing Member, (iii) increase the liabilities or
commitments of any Member not specifically consenting thereto, (iv) require any
Member to make additional Capital Contributions to the Company, or (v) reduce
(A) the interest of any Member in Company items of income, gain, loss, credit,
or deduction, (B) the distributions to any Member, or (C) the interest of any
Member in the assets of the Company, in each case unless each Member has
consented to such amendment in writing or unless such amendment, in the opinion
of the Managing Member, is required in order to comply with applicable federal
income tax statutes or regulations.
10.1.3 Notwithstanding any provision of this Agreement to
the contrary, and as provided in Section 8.5, the Managing Member will be
entitled to cause this Agreement to be amended to the full extent necessary to
effectuate and properly reflect the admission of an additional or new Member to
the Company upon the terms and conditions set forth in this Agreement.
10.1.4 Notwithstanding the limitations contained in Section
10.1.1, this Agreement may be amended from time to time by the Managing Member
without the consent of all of the Members (i) to add to the representations,
duties or obligations of the Managing Member or surrender any right or power
granted to the Managing Member herein; (ii) to comply with the then existing
requirements imposed by the Code or the Internal Revenue Service affecting the
status of the Company as a partnership for federal income tax purposes; and
(iii) to amend Schedules A and B hereto to provide any necessary information
regarding any Member or any additional or successor Members, and to reflect any
change in the amount of the Capital Contributions of any Member in accordance
with the terms of this Agreement.
10.1.5 Upon the adoption of any amendment to this Agreement,
the amendment shall be executed by the Members and, if required, shall be
recorded in the proper records of each jurisdiction in which recordation is
necessary for the Company to conduct business or to preserve the limited
liability of the Members. Any such adopted amendment may be executed by the
Managing Member on behalf of the Members pursuant to the power of attorney
granted in Article XII. The Managing Member shall send
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each Member a copy of any amendment adopted pursuant to Section 10.1.2.
10.2 Amendment of Certificate. In the event this Agreement shall
be amended pursuant to this Article X, the Managing Member shall amend the
Certificate to reflect such change if such amendment is required or if the
Managing Member deem such amendment to be desirable and shall make any other
filings or publications required or desirable to reflect such amendment,
including any required filing for recordation of any certificate of limited
liability company or similar document of the type contemplated by Section 2.5.
ARTICLE XI
Consents, Voting and Meetings
11.1 Method of Giving Consent. Any Consent required by this
Agreement may be given as follows:
(i) by a written Consent given by the approving
Member at or prior to the doing of the act or thing for which the
Consent is solicited, provided that such Consent shall not have been
nullified by notice to the Managing Member by the approving Member at
or prior to the time of, or the negative vote by such approving Member
at, any meeting held to consider the doing of such act or thing; or
(ii) by the affirmative vote by the approving
Member to the doing of the act or thing for which the Consent is
solicited at any meeting called and held to consider the doing of such
act or thing.
11.2 Meetings. Any matter requiring the Consent of the Members
pursuant to this Agreement may be considered at a meeting of the Members.
ARTICLE XII
Power of Attorney
Each Member, by its execution hereof, hereby irrevocably
makes, constitutes and appoints the Managing Member and the then President and
each Vice President of the Managing Member and the Liquidating Trustee, if any,
in such capacity as Liquidating Trustee for so long as it acts as such (each is
hereinafter referred to as the "Attorney"), as its true and lawful agent and
attorney-in-fact, with full power of substitution and full power and authority
in its name, place and stead, to make, execute, sign, acknowledge, swear to,
deliver, record and file (i) this Agreement and any amendment to this Agreement
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which has been adopted as herein provided; (ii) the original certificate of
limited membership of the Company and all amendments thereto required or
permitted by law or the provisions of this Agreement; (iii) all certificates
and other instruments deemed advisable by the Member or the Liquidating
Trustee, as the case may be, to carry out the provisions of this Agreement and
applicable law or to permit the Company to continue as a limited liability
company wherein the Members have limited liability in each jurisdiction where
the Company may be doing business; (iv) all instruments that the Members or the
Liquidating Trustee deems appropriate to reflect a change, modification or
termination of this Agreement or the Company in accordance with this Agreement;
(v) all conveyances and other instruments or papers deemed advisable by the
Members or the Liquidating Trustee, including, without limitation, those to
effect the dissolution and termination of the Company, including a certificate
of cancellation; (vi) all fictitious or assumed name certificates required or
permitted to be filed on behalf of the Membership; and (vii) all other
instruments or papers which may be required by law to be filed on behalf of the
Company.
The foregoing power of attorney (i) is coupled with an
interest, shall be irrevocable and shall survive and shall not be affected by
the subsequent death, disability or Incapacity of any Member; and (ii) shall
survive the delivery of an assignment by a Member of the whole or any fraction
of its Interest; except that, where the assignee of the whole of such
Membership has been approved by the Members for admission to the Company, as a
Substituted Member, the power of attorney of the assignor shall survive the
delivery of such assignment for the sole purpose of enabling the Attorney to
execute, swear to, acknowledge and file any instrument necessary or appropriate
to effect such substitution.
ARTICLE XIII
Records and Accounting; Reports; Fiscal Affairs
13.1 Records and Accounting.
(a) Proper and complete records and books of account of
the business of the Company, including a list of the names, addresses
and Interests of all Members, shall be maintained at the Company's
principal place of business.
(b) The books and records of the Company shall be kept on
an income tax basis or in accordance with generally accepted
accounting principles, as the Managing Member shall elect. The
accrual basis of accounting shall be followed by the Company for
federal income tax purposes unless the cash method shall be allowed
under the Code and the Managing
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Member shall elect to apply such accounting method. The taxable year
of the Company shall be its Fiscal Year.
13.2 Financial Statements. Commencing after the closing of the
sales of the Units pursuant to the Offering, all Members will be provided
annually with financial statements of the Company. including a balance sheet
and the related statements of income and retained earnings and changes in
financial position. The financial statements of the Company shall be
accompanied by a report of an independent public accountant stating that an
audit of such financial statements has been made in accordance with generally
accepted accounting principles, stating the opinion of such accountant with
respect to the financial statements and the accounting principles and practices
reflected therein and with respect to the consistency of the application of
such accounting principles, and identifying any matters to which such
accountant takes exception and stating, to the extent practicable, the effect
of each such exception on such financial statements. In addition, the Company
shall file all federal, state, and local income tax returns and information
returns, if any, which the Partnership is required to file. Within ninety (90)
days after the end of each Fiscal Year, the Managing Member will cause to be
delivered to each Person who was a Member at any time during such Fiscal Year a
Form K-1 and such other information, if any, with respect to the Company as may
be necessary for the preparation of such Member's federal, state and local
income tax returns, including a statement showing each Member's share of
income, gain or loss, expense and credits for such Fiscal Year for federal
income tax purposes.
13.3 Bank Accounts. The funds of the Company held in Permitted
Temporary Investments or in bank accounts shall be deposited in the name of the
Company in such Permitted Temporary Investments or in such bank account or
accounts as shall be designated by the Managing Member in its sole discretion.
Withdrawals therefrom shall be made upon the signature of the Managing Member
or of any authorized agent of the Managing Member.
ARTICLE XIV
Miscellaneous
14.1 Notices.
(a) Any notice to a Member shall be sent to the address
of such Member set forth in Schedule A hereto or such other mailing
address of which such Member shall advise the Managing Member in
writing. Any notice to the Company shall be sent to the principal
office of the Company as set forth in Section 2.3. The Managing
Member may at any time
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change the location of such office. Prompt notice of any such change
shall be given to the Members.
(b) Any notice shall be deemed to have been duly given if
(i) sent by United States certified or registered mail, return receipt
requested, when received, (ii) personally delivered or delivered by
telecopy, when received, (iii) sent by United States Express Mail or
overnight courier, on the second following business day, or (iv) by
telegram or telex on the following business day.
14.2 GOVERNING LAW; SEPARABILITY OF PROVISIONS. IT IS THE
INTENTION OF THE PARTIES THAT THE INTERNAL LAWS OF THE STATE OF DELAWARE AND,
IN PARTICULAR, THE PROVISIONS OF THE DELAWARE ACT, SHALL GOVERN THE VALIDITY OF
THIS AGREEMENT, THE CONSTRUCTION OF ITS TERMS AND INTERPRETATION OF THE RIGHTS
AND DUTIES OF THE PARTIES. IF ANY PROVISION OF THIS AGREEMENT SHALL BE HELD TO
BE INVALID, THE REMAINDER OF THIS AGREEMENT SHALL NOT BE AFFECTED THEREBY.
14.3 JUDICIAL PROCEEDINGS. ANY JUDICIAL PROCEEDING INVOLVING ANY
DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
TO THE COMPANY'S AFFAIRS OR THE RIGHTS OR INTERESTS OF THE MEMBERS OR ANY OF
THEM OR THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER ARISING DURING
THE COMPANY'S TERM OR AT OR AFTER ITS TERMINATION OR DURING OR AFTER THE
LIQUIDATION OF THE COMPANY (EACH OF THE FOREGOING DISPUTES, CONTROVERSIES AND
CLAIMS IS HEREINAFTER REFERRED TO AS A "COMPANY DISPUTE"), SHALL BE BROUGHT
ONLY IN A COURT LOCATED IN THE STATE OF NEW YORK, AND EACH OF THE PARTIES
HERETO (I) UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS
AND ANY RELATED APPELLATE COURT AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY AND (II) IRREVOCABLY WAIVES ANY OBJECTION SUCH PARTY
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH OF THE PARTIES
HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE
PARTIES INVOLVING A COMPANY DISPUTE.
14.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and it supersedes any prior agreement or
understandings among them, oral or written. There are no representations,
agreements, arrangements or understandings, oral or written, between or among
the Members relating only to the subject matter of this Agreement which are not
fully expressed herein. This Agreement may not be modified or amended other
than pursuant to Article XI.
14.5 Headings, etc. The headings in this Agreement are inserted
for convenience of reference only and shall not affect the interpretation of
this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and
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pronouns stated in either the masculine or the neuter gender shall include the
masculine, the feminine and the neuter.
14.6 Binding Provisions. The covenants and agreements contained
herein shall be binding upon and inure to the benefit of the heirs, executors,
administrators, personal or legal representatives, successors and assigns of
the respective parties hereto.
14.7 No Waiver. The failure of any Member to seek redress for
violation, or to insist on strict performance, of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have constituted
a violation from having the effect of an original violation.
14.8 No Right to Partition. To the extent permitted by law, and
except as otherwise expressly provided in this Agreement, the Members, on
behalf of themselves and their shareholders, members, heirs, executors,
administrators, personal or legal representatives, successors and assigns, if
any, hereby specifically renounce, waive and forfeit all rights, whether
arising under contract or statute or by operation of law, to seek, bring or
maintain any action in any court of law or equity for partition of the Company
or any asset of the Company, or any interest which is considered to be Company
property, regardless of the manner in which title to any such property may be
held.
14.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
14.10 Reasonable Consents. Each of the Members agrees that whenever
the consent of a Member is required or provided for pursuant to this Agreement
(other than the consent of the Managing Member pursuant to Section 8.3.1(b),
Section 8.4, or Section 10.1), such Member shall not unreasonably withhold or
delay its consent.
14.11 Tax Matters Partner. Each Member hereby appoints and
designates the Managing Member as the tax matters partner (the "Tax Matters
Partner"), as such term is defined in the Code and the regulations thereunder.
The Tax Matters Partner is authorized to take all action on behalf of the
Company and the Members permitted under the Code. The Tax Matters Partner may
engage accountants or attorneys to assist the Tax Matters Partner in
discharging its duties hereunder. All reasonable expenses incurred by the Tax
Matters Partner in connection with any administrative proceeding before the
Internal Revenue Service and/or judicial review of such proceeding, including
reasonable accountants' and attorneys' fees, shall be deemed an operating
expense of the Company and shall be paid by the Company.
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ARTICLE XV
Interpretation and Dispute Resolution
The Managing Member shall decide all issues relating to the
Company, and shall have sole authority to interpret this Agreement and to
resolve all ambiguities relating to the interpretation of this Agreement, in
each case in such manner as it deems appropriate in its sole discretion, and
all such decisions, interpretations, and resolutions made by the Managing
Member shall be conclusive and shall bind all of the Members in all respects.
ARTICLE XVI
Release
As a condition to being admitted to the Company, each Member
hereby fully and unconditionally releases and discharges all claims and causes
of action, whether known or unknown, which it or its heirs, personal
representatives, successors, or assigns ever had, now have, or hereafter may
have, against any of the Company, the Managing Member, the Initial Member, IFG,
their respective Affiliates, and their respective directors, officers,
stockholders, partners, employees, agents, counsel, control persons,
successors, and assigns, if any, on account of any matter, act, or occurrence
prior to or on the date that such Member is admitted to the Company in
compliance with the provisions of this Agreement that relates to the Company,
the management of the Company by the Managing Member, the preparation of
valuations of Balcor Securities, the purchase, sale or management of the
Company's assets by the Managing Member, any extraordinary transactions by the
Company, such as a merger or sale of assets, and the Member's purchase of
Units.
ARTICLE XVII
IFG Covenant
IFG covenants to use its commercially reasonable best efforts
to cause any Balcor Partnership Interests that may be acquired by the Company
or its Subsidiaries to be transferred (whether directly or indirectly, by
merger, consolidation, or otherwise) to any REIT that IFG may, in its sole
discretion, directly or indirectly sponsor, control, or form in exchange for
cash or equity, debt (including convertible debt) or other securities in such
REIT. The terms of any such exchange will be set by IFG and the Managing
Member. For the purposes of this Article XVII, IFG shall not be deemed to
directly or indirectly sponsor or control the Angeles Mortgage Investment
Trust.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Members:
MAP VII ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
INSIGNIA FINANCIAL GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Executive Managing
Director
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Schedule A
February 29, 1996
Name of Member: Address of Member
--------------- -----------------
MAP VII Acquisition Corporation One Insignia Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Insignia Financial Group, Inc. One Insignia Financial Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
50
Schedule B
February 29, 1996
Capital Percentage
Name of Member: Contribution Interest
--------------- ------------ ----------
MAP VII Acquisition Corporation $1.01 1%
Insignia Financial Group, Inc. $100 99%
B-1
