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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 17, 1997
BRE PROPERTIES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Maryland 0-5305 94-1722214
(STATE OR OTHER (COMMISSION FILE (I.R.S. EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION
INCORPORATION OR NUMBER)
ORGANIZATION)
One Montgomery Street
Telesis Tower, Suite 2500
San Francisco, California 14104 94104-5525
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 445-6530
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit No. Description
10.1 Amended and Restated Limited Liability Company Agreement of BRE
Property Investors LLC, dated as November 18, 1997, by and among
BRE Properties, Inc., and the other parties named therein
10.2 Limited Liability Company Agreement of Blue Ravine Investors, LLC,
dated as of November 18, 1997, by and between BRE Properties,
Inc., and Blue Ravine Realty Partners
10.3 Unsecured Line of Credit Loan Agreement, dated as of November 17,
1997, by and between BRE Properties, Inc., and Bank of America
National Trust and Savings Association
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BRE PROPERTIES, INC.
Date: December 18, 1997 By:/s/ LeRoy E. Carlson
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LeRoy E. Carlson
Executive Vice President,
Chief Financial Officer and Secretary
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EXHIBIT INDEX
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Exhibit No. Description
10.1 Amended and Restated Limited Liability Company Agreement of BRE
Property Investors LLC, dated as November 18, 1997, by and among
BRE Properties, Inc., and the other parties named therein
10.2 Limited Liability Company Agreement of Blue Ravine Investors,
LLC, dated as of November 18, 1997, by and between BRE
Properties, Inc., and Blue Ravine Realty Partners
10.3 Unsecured Line of Credit Loan Agreement, dated as of November 17,
1997, by and between BRE Properties, Inc., and Bank of America
National Trust and Savings Association
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Exhibit 10.1
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
BRE PROPERTY INVESTORS LLC
a Delaware limited liability company
Dated as of November 18, 1997
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TABLE OF CONTENTS
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ARTICLE 1. DEFINED TERMS.......................................................1
ARTICLE 2. ORGANIZATIONAL MATTERS.............................................18
Section 2.1. Formation......................................................18
Section 2.2. Name...........................................................18
Section 2.3. Registered Office and Agent; Principal Place of Business;
Other Places of Business.......................................18
Section 2.4. Power of Attorney..............................................18
Section 2.5. Term...........................................................19
ARTICLE 3. PURPOSE............................................................20
Section 3.1. Purpose and Business...........................................20
Section 3.2. Powers.........................................................20
Section 3.3. Specified Purposes.............................................20
Section 3.4. Representations and Warranties by the Members..................21
ARTICLE 4. CAPITAL CONTRIBUTIONS..............................................23
Section 4.1. Capital Contributions of the Initial Members...................23
Section 4.2. Additional Members.............................................23
Section 4.3. Loans by Third Parties.........................................24
Section 4.4. Additional Funding and Capital Contributions...................24
Section 4.5. No Interest; No Return.........................................26
ARTICLE 5. DISTRIBUTIONS......................................................26
Section 5.1. Requirement and Characterization of Distributions..............26
Section 5.2. Distributions in Kind..........................................27
Section 5.3. Amounts Withheld...............................................27
Section 5.4. Distributions Upon Liquidation.................................28
Section 5.5. Restricted Distributions.......................................28
ARTICLE 6. ALLOCATIONS........................................................28
Section 6.1. Timing and Amount of Allocations of Net Income and Net Loss....28
Section 6.2. General Allocations............................................28
Section 6.3. Additional Allocation Provisions...............................29
Section 6.4. Tax Allocations................................................31
Section 6.5. Other Provisions...............................................31
Section 6.6. Amendments to Allocation to Reflect Issuance of Additional
Membership Interests..........................................32
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ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS..............................32
Section 7.1. Management.....................................................32
Section 7.2. Certificate of Formation.......................................37
Section 7.3. Restrictions on Managing Member's Authority....................38
Section 7.4. Reimbursement of the Managing Member...........................40
Section 7.5. Other Business of Managing Member..............................41
Section 7.6. Contracts with Affiliates......................................42
Section 7.7. Indemnification................................................43
Section 7.8. Liability of the Managing Member...............................45
Section 7.9. Other Matters Concerning the Managing Member...................45
Section 7.10. Title to Company Assets.......................................46
Section 7.11. Reliance by Third Parties.....................................47
ARTICLE 8. RIGHTS AND OBLIGATIONS OF MEMBERS..................................47
Section 8.1. Limitation of Liability........................................47
Section 8.2. Managing of Business...........................................47
Section 8.3. Outside Activities of Members..................................48
Section 8.4. Return of Capital..............................................48
Section 8.5. Rights of Non-Managing Members Relating to the Company.........48
Section 8.6. Exchange Rights................................................49
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS.............................52
Section 9.1. Records and Accounting.........................................52
Section 9.2. Fiscal Year....................................................52
Section 9.3. Reports........................................................52
ARTICLE 10. TAX MATTERS.......................................................53
Section 10.1. Preparation of Tax Returns....................................53
Section 10.2. Tax Elections.................................................53
Section 10.3. Tax Matters Partner...........................................53
Section 10.4. Organizational Expenses.......................................53
ARTICLE 11. TRANSFERS AND WITHDRAWALS.........................................53
Section 11.1. Transfer......................................................53
Section 11.2. Transfer of Managing Member's Membership Interest.............54
Section 11.3. Non-Managing Members' Rights to Transfer......................55
Section 11.4. Substituted Members...........................................56
Section 11.5. Assignees.....................................................57
Section 11.6. General Provisions............................................57
ARTICLE 12. ADMISSION OF MEMBERS..............................................58
Section 12.1. Admission of Successor Managing Member........................58
Section 12.2. Admission of Additional Members...............................59
Section 12.3. Amendment of Agreement and Certificate of Membership..........59
Section 12.4. Limitation on Admission of Members............................59
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ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION..........................60
Section 13.1. Dissolution...................................................60
Section 13.2. Winding Up....................................................61
Section 13.3. Deemed Distribution and Recontribution........................62
Section 13.4. Rights of Members.............................................62
Section 13.5. Notice of Dissolution.........................................62
Section 13.6. Cancellation of Certificate of Limited Partnership............63
Section 13.7. Reasonable Time for Winding-Up................................63
Section 13.8. Liability of Liquidator.......................................63
ARTICLE 14. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS;
AMENDMENTS; MEETINGS...........................................63
Section 14.1. Procedures for Actions and Consents of Members................63
Section 14.2. Amendments....................................................64
Section 14.3. Meetings of the Members.......................................64
ARTICLE 15. GENERAL PROVISIONS................................................65
Section 15.1. Addresses and Notice..........................................65
Section 15.2. Titles and Captions...........................................65
Section 15.3. Pronouns and Plurals..........................................65
Section 15.4. Further Action................................................65
Section 15.5. Binding Effect................................................65
Section 15.6. Creditors.....................................................66
Section 15.7. Waiver........................................................66
Section 15.8. Counterparts..................................................66
Section 15.9. Applicable Law................................................66
Section 15.10. Entire Agreement.............................................66
Section 15.11. Invalidity of Provisions.....................................66
Section 15.12. Limitation to Preserve REIT Status...........................66
Section 15.13. No Partition.................................................67
Exhibit A - Members, Capital Contributions and Percentage Interests........A-1
Exhibit B - Notice of Exchange.............................................B-1
Exhibit C - Approved Note..................................................C-1
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
BRE PROPERTY INVESTORS LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") of BRE Property Investors LLC, a Delaware limited liability company
(the "Company"), dated as of November 18, 1997, is entered into by and among BRE
Properties, Inc., a Maryland corporation (the "Managing Member"), and the
Persons whose names are set forth on Exhibit A as attached hereto (the "Non-
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Managing Members" and together with the Managing Member, the "Members"),
together with any other Persons who become Members in the Company as provided
herein.
WHEREAS, the Company was formed on September 25, 1997 and an original
limited liability company agreement (the "Original LLC Agreement") was entered
into between the Managing Member and LeRoy E. Carlson ("Carlson") as members;
WHEREAS, simultaneously with the execution of this Agreement, the
Managing Member has purchased the interest of Carlson in the Company pursuant to
and in accordance with the Original LLC Agreement and Carlson thereupon ceased
to be a Member in the Company; and
WHEREAS, the Managing Member, the Company, the parties set forth on
Exhibit A hereto and certain other TCR Signatories (as defined therein) have
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entered into that certain Contribution Agreement dated as of September 29, 1997
(the "Contribution Agreement"), providing for the contribution of certain assets
to, and the acquisition of certain interests in, the Company;
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Contribution Agreement that the parties hereto enter this
Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree to amend and restate the Original LLC Agreement to read in
full, and hereby agree, as follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ACT" means the Delaware Limited Liability Company Act, as it may be
amended from time to time, and any successor to such statute.
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"ACTIONS" has the meaning set forth in Section 7.7 hereof.
"ADDITIONAL FUNDS" has the meaning set forth in Section 4.4.A hereof.
"ADDITIONAL MEMBER" means a Person admitted to the Company as a Member
pursuant to Section 4.2 or Section 4.4.D and Section 12.2 hereof and who is
shown as such on the books and records of the Company.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(a) decrease such deficit by any amounts that such Member is
obligated to restore pursuant to this Agreement or by operation of law upon
liquidation of such Member's Membership Interest or is deemed to be
obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)
or the penultimate sentence of each of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
(b) increase such deficit by the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account Deficit" is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"ADJUSTMENT FACTOR" means 1.0; provided, however, that in the event
that: the Managing Member (i) declares or pays a dividend on its outstanding
REIT Shares in REIT Shares or makes a distribution to all Members of its
outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its
outstanding REIT Shares or (iii) effects a reverse stock split or otherwise
combines all of its outstanding REIT Shares into a smaller number of REIT
Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment
Factor previously in effect by a fraction, (1) the numerator of which shall be
the number of REIT Shares issued and outstanding on the record date for such
dividend, distribution, split, subdivision, reverse split or combination
(assuming for such purposes that such dividend, distribution, split,
subdivision, reverse split or combination has occurred as of such time) and (2)
the denominator of which shall be the actual number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, split,
subdivision, reverse split or combination (assuming for such purposes that such
dividend, distribution, split, subdivision, reverse split or combination has not
occurred as of such time). Any adjustments to the Adjustment Factor shall
become effective immediately after the effective date of such event, retroactive
to the record date, if any, for such event and; provided further that in the
event that one entity (the "Predecessor Entity") shall cease to be the Managing
Member and another entity (the "Successor Entity") becomes the Managing Member,
the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor
previously in effect by a fraction, the numerator of which is the value of one
REIT Share of the Predecessor Entity, determined as of the time immediately
prior to when the Successor Entity becomes the Managing Member, and the
denominator of which is the Value of one REIT Share
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of the Successor Entity, determined as of that same date. (For purposes of the
second proviso in the preceding sentence, in the event that any shareholders of
the Predecessor Entity will receive consideration in connection with the
transaction in which the Successor Entity becomes the Managing Member, the
numerator in the fraction described above for determining the adjustment to the
Adjustment Factor (that is, the Value of one REIT Share of the Predecessor
Entity) shall be the sum of the greatest amount of cash and the fair market
value of any securities and other consideration that the holder of one REIT
Share in the Predecessor Entity could have received in such transaction
(determined without regard to any provisions governing fractional shares)).
"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition, "control" when used with respect
to any Person means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGREEMENT" means this Amended and Restated Limited Liability Company
Agreement of BRE Property Investors LLC, as it may be amended, supplemented or
restated from time to time.
"APPRAISAL" means, with respect to any assets, the written opinion of
an independent third party experienced in the valuation of similar assets,
selected by the Managing Member in good faith. Such opinion may be in the form
of an opinion by such independent third party that the value for such property
or asset as set by the Managing Member is fair, from a financial point of view,
to the Company.
"APPRAISED VALUE" means, with respect to any asset, including any
Contributed Property, the value of such asset as determined by Appraisal.
"APPROVED GUARANTY" means the guaranty by the Company of the
obligations of the Managing Member under the Managing Member's bank credit
facility.
"APPROVAL LOAN" means the loan by the Managing Member to the Company
represented by the Approved Note.
"APPROVED NOTE" means the promissory note in the principal amount of
$40 million in substantially the form attached to this Agreement as Exhibit C.
"ASSIGNEE" means a Person to whom one or more LLC Units have been
Transferred in a manner permitted under this Agreement, but who has not become a
Substituted Member, and who has the rights set forth in Section 11.5 hereof.
"AVAILABLE CASH" means, with respect to any period for which such
calculation is being made,
(a) the sum, without duplication, of:
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(1) the Company's Net Income or Net Loss (as the case may
be) for such period,
(2) Depreciation and all other noncash charges to the extent
deducted in determining Net Income or Net Loss for such period,
(3) the amount of any reduction in reserves of the Company
referred to in clause (b)(6) below (including, without limitation,
reductions resulting because the Managing Member determines such
amounts are no longer necessary),
(4) the excess, if any, of the net cash proceeds from the
sale, exchange, disposition, financing or refinancing of Company
property for such period over the gain (or loss, as the case may be)
recognized from such sale, exchange, disposition, financing or
refinancing during such period, and
(5) all other cash received (including amounts previously
accrued as Net Income and amounts of deferred income) or any net
amounts borrowed by the Company for such period that was not included
in determining Net Income or Net Loss for such period;
(b) less the sum, without duplication, of:
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(1) all principal debt payments made during such period by
the Company,
(2) capital expenditures made by the Company during such
period,
(3) investments in any entity (including loans made thereto)
to the extent that such investments are not otherwise described in
clause (b)(1) or clause (b)(2) above,
(4) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period (including amounts
paid in respect of expenses previously accrued and payments made in
connection with any guaranty of Affiliate indebtedness),
(5) any amount included in determining Net Income or Net
Loss for such period that was not received by the Company during such
period, and
(6) the amount of any increase in reserves (including,
without limitation, working capital reserves) established during such
period that the Managing Member determines are necessary or
appropriate in its sole and absolute discretion.
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Notwithstanding the foregoing, Available Cash shall not include (i) any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Company or (ii) any Capital Contributions,
whenever received.
"BANKRUPTCY LAW" means Title II, U.S. Code or any similar federal or
state law for the relief of debtors.
"BENEFICIAL OWNERSHIP" means ownership of REIT Shares by a Person who
is or would be treated as an owner of such REIT Shares either actually or
constructively through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code. The terms "Beneficially Own,"
"Beneficially Owned," "Beneficially Owns" and "Beneficial Owner" shall have the
correlative meanings.
"BLUE RAVINE LLC" means Blue Ravine Investors, LLC, a Delaware limited
liability company.
"BLUE RAVINE LLC AGREEMENT" means The Limited Liability Company
Agreement of Blue Ravine Investors, LLC dated as of The Effective Date by and
between BRE Properties, Inc. and Blue Ravine Realty Partners, as the same may be
amended or supplemented.
"BLUE RAVINE LOAN" means the loan in the principal amount of
approximately $5,700,000 made by the Managing Member to Blue Ravine Realty
Partners, a California limited partnership, and assumed by Blue Ravine LLC.
"BLUE RAVINE MERGER" means the merger of Blue Ravine LLC with and into
the Company as contemplated by the Blue Ravine LLC Agreement.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco, California are authorized or required
by law to close.
"CAPITAL ACCOUNT" means, with respect to any Member, the Capital
Account maintained for such Member on the Company's books and records in
accordance with the following provisions:
(a) To each Member's Capital Account, there shall be added such
Member's Capital Contributions, such Member's allocable share of Net Income
and any items of income or gain specially allocated pursuant to Section 6.3
hereof, and the principal amount of any Company liabilities assumed by such
Member or that are secured by any property distributed to such Member.
(b) From each Member's Capital Account, there shall be subtracted
the amount of cash and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, such Member's
allocable share of Net Loss and any items of loss or deductions specially
allocated pursuant to Section 6.3 hereof, and
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the principal amount of any liabilities of such Member assumed by the
Company or that are secured by any property contributed by such Member to
the Company.
(c) In the event any interest in the Company is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent that it relates to
the Transferred interest.
(d) In determining the principal amount of any liability for
purposes of subsections (a) and (b) hereof, there shall be taken into
account Code Section 752(c) and any other applicable provisions of the Code
and Regulations.
(e) The provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Regulations Sections 1.704-
1(b) and 1.704-2, and shall be interpreted and applied in a manner
consistent with such Regulations. If the Managing Member shall determine
that it is prudent to modify the manner in which the Capital Accounts are
maintained in order to comply with such Regulations, the Managing Member
may make such modification provided that notwithstanding any other
provision in this Agreement such modification will not have a material
effect on the amounts distributable to any Member without such Member's
Consent. The Managing Member also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts
of the Members and the amount of Company capital reflected on the Company's
balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise cause
this Agreement not to comply with Regulations Section 1.704-1(b) or Section
1.704-2.
"CAPITAL CONTRIBUTION" means, with respect to any Member, the amount
of money and the initial Gross Asset Value of any Contributed Property that such
Member contributes to the Company pursuant to Section 4.1, Section 4.2 or
Section 4.4 hereof.
"CASH AMOUNT" means an amount of cash equal to the product of (a) the
Value of a REIT Share and (b) the REIT Shares Amount determined as of the
applicable Valuation Date.
"CERTIFICATE" means the Certificate of Formation of the Company filed
in the office of the Secretary of State of the State of Delaware, as amended
from time to time in accordance with the terms hereof and the Act.
"CHARTER" means the Articles of Incorporation of the Managing Member,
as amended, supplemented or restated from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time or any successor statute thereto, as interpreted by the
applicable Regulations thereunder. Any reference herein to a specific section
or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
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"COMPANY" means the limited liability company formed under the Act and
pursuant to this Agreement, and any successor thereto.
"COMPANY MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2) for the phrase "partnership minimum gain," and the amount
of Company Minimum Gain, as well as any net increase or decrease in Company
Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules
of Regulations Section 1.704-2(d).
"CONSENT" means the consent to, approval of, or vote on a proposed
action by a Member given in accordance with Article 14 hereof.
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"CONSENT OF THE NON-MANAGING MEMBERS" means the Consent of a Majority
in Interest of the Non-Managing Members, which Consent shall be obtained prior
to the taking of any action for which it is required by this Agreement and,
except as otherwise provided in this Agreement, may be given or withheld by a
Majority in Interest of the Non-Managing Members, in their absolute discretion.
"CONSTRUCTIVE OWNERSHIP" means ownership of REIT Shares, or any other
interest in an entity by a Person who is or would be treated as an owner thereof
either actually or constructively through the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code. The terms "Constructively
Own," "Constructively Owned," "Constructively Owns" and "Constructive Owner"
shall have the correlative meanings.
"CONTRIBUTED PROPERTY" means each Property or other asset, in such
form as may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Company.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement dated as of
September 29, 1997 by and between the TCR Signatories (as defined therein), the
Managing Member and the Company.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or other
similar official under any Bankruptcy Law.
"DEBT" means, as to any Person, as of any date of determination, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
that, in accordance with generally accepted accounting principles, should be
capitalized.
"DEPRECIATION" means, for each Fiscal Year or other applicable period,
an amount equal to the federal income tax depreciation, amortization or other
cost recovery deduction
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allowable with respect to an asset for such year or other period, except that,
if the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or period, Depreciation shall
be in an amount that bears the same ratio to such beginning Gross Asset Value as
the federal income tax depreciation, amortization or other cost recovery
deduction for such year or other period bears to such beginning adjusted tax
basis; provided, however, that, if the federal income tax depreciation,
amortization or other cost recovery deduction for such year or period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Managing Member.
"EFFECTIVE DATE" means the date on which the transactions contemplated
by the Contribution Agreement are consummated.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCEPTED PROPERTY" has the meaning set forth in Section 7.3.E(2)
hereof.
"EXCESS LLC UNITS" means any LLC Units held by a Non-Managing Member
to the extent that, if such LLC Units were exchanged for the REIT Shares Amount
pursuant to Section 8.6 hereof, such Non-Managing Member would Beneficially Own
or Constructively Own REIT Shares in excess of the Ownership Limit.
"EXCHANGE" has the meaning set forth in Section 8.6.A hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"FAMILY MEMBERS" means, as to a Person that is an individual, (a) such
Person's spouse, (b) such Person's ancestors, (c) such Person's descendants
(whether by blood or by adoption), (d) such Person's brothers and sisters, (e)
inter vivos or testamentary trusts of which only such Person or his spouse,
ancestors, descendants (whether by blood or by adoption), brothers or sisters
are beneficiaries and (f) any partnership or limited liability company all of
whose partners or members consist of such Person or his spouse, ancestors,
descendants (whether by blood or by adoption), brothers or sisters or inter
vivos or testamentary trusts of which only such Person or his spouse, ancestors,
descendants (whether by blood or by adoption), brothers or sisters are
beneficiaries.
"FISCAL YEAR" means the fiscal year of the Company, which shall be the
calendar year.
"FUNDING DEBT" means any Debt incurred by or on behalf of the Managing
Member for the purpose of providing funds to the Company.
"FUNDING NOTICE" has the meaning set forth in Section 4.4.B hereof.
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"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be its fair market value, as agreed to by such
Member and the Managing Member, and set forth on Exhibit A with respect to
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that Member.
(b) The Gross Asset Values of all Company assets immediately
prior to the occurrence of any event described in clause (1), clause (2),
clause (3), or clause (4) hereof shall be adjusted to equal their
respective gross fair market values, as determined by the Managing Member
using such reasonable method of valuation as it may adopt, as of the
following times:
(1) the acquisition of an additional interest in the Company
(other than in connection with the execution of this Agreement but
including, without limitation, acquisitions pursuant to Section 4.4
hereof or contributions or deemed contributions by the Managing Member
pursuant to Section 4.4 hereof) by a new or existing Member in
exchange for more than a de minimis Capital Contribution, if the
Managing Member reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic interests of
the Members in the Company;
(2) the distribution by the Company to a Member of more than
a de minimis amount of Company property as consideration for an
interest in the Company, if the Managing Member reasonably determines
that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Members in the Company;
(3) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
(4) at such other times as the Managing Member shall
reasonably determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Company asset distributed to a
Member shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the Managing Member,
provided that, if the distributee is the Managing Member or if the
distributee and the Managing Member cannot agree on such a determination,
such gross fair market value shall be determined by Appraisal.
(d) At the election of the Managing Member, the Gross Asset
Values of Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that
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Gross Asset Values shall not be adjusted pursuant to this subsection (d) to
the extent that the Managing Member reasonably determines that an
adjustment pursuant to subsection (b) above is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subsection (d).
(e) If the Gross Asset Value of a Company asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset for
purposes of computing Net Income and Net Loss.
"HIGHLANDS/SOMERSET LOANS" has the meanings set forth in Section 7.1.C
hereof.
"INCAPACITY" or "INCAPACITATED" means, (i) as to any Member who is an
individual, death, total physical disability or entry by a court of competent
jurisdiction of an order adjudicating such Member incompetent to manage his or
her person or his or her estate; (ii) as to any Member that is a corporation or
limited liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Member that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Member that is
an estate, the distribution by the fiduciary of the estate's entire interest in
the Company; (v) as to any trustee of a trust that is a Member, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Member, the bankruptcy of such Member. For purposes of this definition,
bankruptcy of a Member shall be deemed to have occurred when (a) the Member
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Member under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt
or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Member, (c) the Member executes and delivers a general
assignment for the benefit of the Member's creditors, (d) the Member files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any proceeding of the
nature described in clause (b) above, (e) the Member seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Member or for all or any substantial part of the Member's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (g) the
appointment without the Member's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (h) an appointment referred to in clause (g) above is not vacated within 90
days after the expiration of any such stay.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of its status as (A) a Member or any Affiliate thereof or (B) a director,
officer or employee of the Company, a Member or Affiliate thereof and (ii) such
other Persons (including Affiliates of any Member or the Company) as the
Managing Member may designate from time to time (whether before or after the
event giving rise to potential liability), in its sole and absolute discretion.
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"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
"LIQUIDATOR" has the meaning set forth in Section 13.2.A hereof.
"LLC DISTRIBUTION DATE" means the date established by the Managing
Member for the payment of actual distributions declared by the Managing Member
pursuant to Sections 5.1 and 5.2, which date shall be the same as the date
established by the Managing Member for the payment of dividends to holders of
REIT Shares.
"LLC RECORD DATE" means the record date for the distribution of
Available Cash pursuant to Section 5.1 hereof, which record date shall be the
same as the record date established by the Managing Member for a dividend to
holders of REIT Shares.
"LLC UNIT" means a fractional share of the Membership Interests of all
Members issued pursuant to Section 4.1, Section 4.2 or Section 4.4 hereof, as
the same may be modified from time to time as provided in this Agreement. The
ownership of LLC Units may (but need not, in the sole and absolute discretion of
the Managing Member) be evidenced in the form of a certificate for LLC Units.
"MAJORITY IN INTEREST OF THE NON-MANAGING MEMBERS" means those Non-
Managing Members (excluding any Affiliates of the Managing Member who are Non-
Managing Members) holding in the aggregate more than 50% of the aggregate
outstanding LLC Units held by all the Non-Managing Members (excluding any
Affiliates of the Managing Member who are Non-Managing Members).
"MAJORITY OF REMAINING MEMBERS" means Non-Managing Members owning (a)
a majority of the profits interests in the Company held by all Non-Managing
Members, determined and allocated based on any reasonable estimate of profits
from the relevant date to the projected termination of the Company and taking
into account present and future allocations of profits under the Agreement as it
is in effect on the relevant date, and (b) a majority of the capital interests
in the Company, determined as of the relevant date under the Agreement, owned by
all Non-Managing Members.
"MANAGING MEMBER" means BRE Properties, Inc., a Maryland corporation,
in its capacity as a Member, or any successor Managing Member designated
pursuant to the terms of this Agreement.
"MANAGING MEMBER LOAN" has the meaning set forth in Section 4.4.C
hereof.
"MANAGING MEMBER'S CAPITAL RETURN" means an amount initially equal to
zero, and increased cumulatively on the last day of each Fiscal Year of the
Company by an amount equal to the Managing Member's Capital Contribution
multiplied by .15; provided, however, that the increase that shall occur in
accordance with the foregoing on the last day of the first Fiscal
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Year of the Company ending on December 31, 1997 shall be the amount specified
above multiplied by a fraction, the numerator of which shall be the number of
days in the period commencing on the Effective Date and ending on December 31,
1997, and the denominator of which is 365.
"MANUAL" has the meaning set forth in Section 8.6.B hereof.
"MEMBER MINIMUM GAIN" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i) with respect to "partner
nonrecourse debt minimum gain."
"MEMBER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4) for the phrase "partner nonrecourse debt."
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2) for the phrase "partner nonrecourse
deductions," and the amount of Member Nonrecourse Deductions with respect to a
Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with
the rules of Regulations Section 1.704-2(i)(2).
"MEMBERS" means the Persons owning Membership Interests, including the
Managing Member and any Additional and Substitute Members, named as Members in
Exhibit A attached hereto, which Exhibit A may be amended from time to time.
- --------- ---------
"MEMBERSHIP INTEREST" means an ownership interest in the Company
representing a Capital Contribution by a Member and includes any and all
benefits to which the holder of such a Membership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. A Membership Interest
may be expressed as a number of LLC Units.
"NET INCOME" or "NET LOSS" means, for each Fiscal Year of the Company,
an amount equal to the Company's taxable income or loss for such year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Net Income (or Net
Loss) pursuant to this definition of "Net Income" or "Net Loss" shall be
added to (or subtracted from, as the case may be) such taxable income (or
loss);
(b) Any expenditure of the Company described in Code Section
705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Income (or Net Loss) pursuant to this definition
of "Net Income" or "Net
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Loss," shall be subtracted from (or added to, as the case may be) such
taxable income (or loss);
(c) In the event that the Gross Asset Value of any Company asset
is adjusted pursuant to subsection (b) or subsection (c) of the definition
of "Gross Asset Value," the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;
(d) In lieu of the depreciation, amortization and other cost
recovery deductions that would otherwise be taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation
for such Fiscal Year;
(e) To the extent that an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's interest in the
Company, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Income
or Net Loss; and
(f) Notwithstanding any other provision of this definition of
"Net Income" or "Net Loss," any item of income, gain, loss or deduction
specially allocated pursuant to Section 6.2.A(3) or Section 6.3.A hereof
shall not be taken into account in computing Net Income or Net Loss. The
amounts of the items of Company income, gain, loss or deduction available
to be allocated pursuant to Section 6.2.A(3) or Section 6.3.A hereof shall
be determined by applying rules analogous to those set forth in this
definition of "Net Income" or "Net Loss."
"NO TRANSFER MEMBERS" means the Members (or Assignees or successors in
interest thereof) who acquired their LLC Units in exchange for Real Properties
on the Effective Date.
"NO TRANSFER PERIOD" means (i) a period of 10 years from the Effective
Date in the case of the Real Properties commonly known as The Highlands and
Somerset Park and (ii) with respect to all other Real Properties, either (a) a
period of eight years from the Effective Date if the Real Property is not an
Excepted Property, or (b) a period of one year from the Effective Date for an
Excepted Property.
"NON-MANAGING MEMBER" means any Member other than the Managing Member.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
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"NONRECOURSE LIABILITY" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B attached to this Agreement.
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"OWNERSHIP LIMIT" means 9.8% of the number of shares or value
(whichever is more restrictive) of the outstanding REIT Shares. The number and
value of REIT Shares of the Managing Member shall be determined by the Board of
Directors of the Managing Member, in good faith, which determination shall be
conclusive for all purposes hereof.
"PERCENTAGE INTEREST" means as to a Member holding a Membership
Interest, its interest in the Company as determined by dividing the LLC Units
owned by such Member by the total number of LLC Units then outstanding as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
---------
to time.
"PERMITTED TRANSFER" has the meaning set forth in Section 11.3.A
hereof.
"PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
"PREFERRED RETURN PER UNIT" means with respect to an LLC Unit
outstanding on an LLC Record Date (other than those LLC Units held by the
Managing Member) an amount initially equal to zero, and increased cumulatively
on each LLC Record Date by an amount equal to the product of (i) the cash
dividend per REIT Share declared by the Managing Member for holders of REIT
Shares on that LLC Record Date, multiplied by (ii) the Adjustment Factor in
effect on that LLC Record Date.
"PREFERRED RETURN SHORTFALL" means, for any holder of LLC Units (other
than the Managing Member), the excess (if any) of (i) the Preferred Return Per
Unit with respect to all LLC Units held by such holder over (ii) the aggregate
amount previously distributed with respect to such LLC Units pursuant to Section
5.1 hereof together with cumulative interest accruing thereon at the Prime Rate
from the applicable LLC Record Date to the date of distribution pursuant to
Section 5.1.A.
"PRIME RATE" means on any date, a rate equal to the annual rate on
such date announced by Bank of America to be its prime, base or reference rate
for 90-day unsecured loans to its corporate borrowers of the highest credit
standing but in no event greater than the maximum rate then permitted under
applicable law. If Bank of America discontinues its use of such prime, base or
reference rate or ceases to exist, the Managing Member shall designate the
prime, base or reference rate of another state or federally chartered bank based
in New York or San Francisco to be used for the purpose of calculating the Prime
Rate hereunder (which rate shall be subject to limitation by all applicable
usury laws).
"PROPERTIES" means any assets and property of the Company such as, but
not limited to, interests in real property (including the Real Properties) and
personal property,
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including, without limitation, fee interests, interests in ground leases,
interests in limited liability companies, joint ventures or partnerships,
interests in mortgages, and Debt instruments as the Company may hold from time
to time.
"PUBLICLY TRADED" means listed or admitted to trading on the New York
Stock Exchange, the American Stock Exchange or another national securities
exchange or designated for quotation on the NASDAQ National Market System, or
any successor to any of the foregoing.
"QUALIFIED TRANSFEREE" means an "accredited investor" as defined in
Rule 501 promulgated under the Securities Act.
"REAL PROPERTIES" has the meaning set forth in Section 7.3.E(2)
hereof.
"REGULATIONS" means the applicable income tax regulations under the
Code, whether such regulations are in proposed, temporary or final form, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"REGULATORY ALLOCATIONS" has the meaning set forth in Section 6.3.A(7)
hereof.
"REIT" means a real estate investment trust qualifying under Code
Section 856, et seq.
"REIT MEMBER" means a Member or Assignee that is, or has made an
election to qualify as, a REIT.
"REIT PAYMENT" has the meaning set forth in Section 15.12 hereof.
"REIT REQUIREMENTS" has the meaning set forth in Section 5.1 hereof.
"REIT SHARE" means a share of the Managing Member's Common Stock, par
value $.01 per share.
"REIT SHARES AMOUNT" means a number of REIT Shares equal to the
product of (a) the number of Tendered Units and (b) the Adjustment Factor;
provided, however, that, in the event that the Managing Member issues to all
holders of REIT Shares prior to the Specified Exchange Date any rights, options,
warrants or convertible or exchangeable securities entitling the Managing
Member's shareholders to subscribe for or purchase REIT Shares, or any other
securities or property (collectively, the "Rights"), then the REIT Shares Amount
shall also include such Rights that a holder of that number of REIT Shares would
be entitled to receive, expressed, where relevant hereunder, in a number of REIT
Shares determined by the Managing Member in good faith.
"RELATED PARTY" means, with respect to any Person, any other Person
whose ownership of shares of the Managing Member's capital stock would be
attributed to the first such Person under Code Section 544 (as modified by Code
Section 856(h)(1)(B)).
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"RIGHTS" has the meaning set forth in the definition of "REIT Shares
Amount."
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SHORTFALL AMOUNT" has the meaning set forth in Section 6.2.A(1)
hereof.
"SPECIFIED EXCHANGE DATE" means the 10th Business Day after the
receipt by the Managing Member of a Notice of Exchange; provided, however, that
no Specified Exchange Date shall occur prior to the first anniversary of the
Effective Date.
"SUBSTITUTED MEMBER" means an Assignee who is admitted as a Member to
the Company pursuant to Section 11.4 hereof. The term "Substituted Member"
shall not include any Additional Member.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"TAX ITEMS" has the meaning set forth in Section 6.4.A hereof.
"TENANT SCHEDULE" means a schedule, to be prepared by the Managing
Member and timely provided to any Member making the representation required
pursuant to Section 3.4.A(v) or Section 3.4.B(v) that lists all of the entities
that are a tenant of either the Managing Member, the Company or any partnership,
venture or limited liability company of which the Managing Member or the Company
is a member. The Tenant Schedule shall be amended from time to time as
necessary to reflect any changes to the list of the foregoing entities.
"TENDERED UNITS" has the meaning set forth in Section 8.6.A hereof.
"TENDERING PARTY" has the meaning set forth in Section 8.6.A hereof.
"TERMINATING CAPITAL TRANSACTION" means any sale or other disposition
of all or substantially all of the assets of the Company or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Company.
"TERMINATION PAYMENT" has the meaning set forth in Section 11.2.B
hereof.
"TRANSFER," when used with respect to an LLC Unit or all or any
portion of a Membership Interest, means any sale, assignment, bequest,
conveyance, devise, gift (outright or in trust), pledge, encumbrance,
hypothecation, mortgage, exchange, transfer or other disposition or act of
alienation, whether voluntary or involuntary or by operation of law; provided,
however, that, when the term is used in Article 11 hereof (other than in Section
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11.6), Transfer does not
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include any Exchange of LLC Units by any Non-Managing Member pursuant to Section
8.6 hereof. The terms "Transferred" and "Transferring" have correlative
meanings.
"VALUATION DATE" means (a) in the case of a tender of LLC Units for
Exchange, the date of receipt by the Managing Member of a Notice of Exchange or,
if such date is not a Business Day, the immediately preceding Business Day or
(b) in any other case, the date specified in this Agreement.
"VALUE" means, on any Valuation Date with respect to a REIT Share, the
average of the daily market prices for a REIT Share over the ten (10)
consecutive trading days immediately preceding the Valuation Date. The market
price for any such trading day shall be:
(1) if the REIT Shares are listed or admitted to trading on
any securities exchange or the Nasdaq Stock Market's National Market
System, the closing price, regular way, on such day, or if no such
sale takes place on such day, the average of the closing bid and asked
prices on such day, in either case as reported in the principal
consolidated transaction reporting system,
(2) if the REIT Shares are not listed or admitted to trading
on any securities exchange or the Nasdaq Stock Market's National
Market System, the last reported sale price on such day or, if no sale
takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reliable quotation source
designated by the Managing Member, or
(3) if the REIT Shares are not listed or admitted to trading
on any securities exchange or the Nasdaq Stock Market's National
Market System and no such last reported sale price or closing bid and
asked prices are available, the average of the reported high bid and
low asked prices on such day, as reported by a reliable quotation
source designated by the Managing Member, or if there shall be no bid
and asked prices on such day, the average of the high bid and low
asked prices, as so reported, on the most recent day (not more than
ten (10) days prior to the date in question) for which prices have
been so reported; provided, however, that, if there are no bid and
asked prices reported during the ten (10) days prior to the date in
question, the market price of the REIT Shares shall be determined by
the Managing Member acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable
judgment, appropriate.
In the event that the REIT Shares Amount includes Rights that a holder of REIT
Shares would be entitled to receive, then the Value of such Rights shall be
determined by the Managing Member acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.
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ARTICLE 2.
ORGANIZATIONAL MATTERS
SECTION 2.1. FORMATION
The Company is a limited liability company formed pursuant to the
provisions of the Act for the purposes and upon the terms and subject to the
conditions set forth in this Agreement. Except as expressly provided herein,
the rights and obligations of the Members and the administration and termination
of the Company shall be governed by the Act.
SECTION 2.2. NAME
The name of the Company is BRE Property Investors LLC. The Company's
business may be conducted under any other name or names deemed advisable by the
Managing Member, including the name of the Managing Member or any Affiliate
thereof. The Managing Member in its sole and absolute discretion may change the
name of the Company at any time and from time to time in accordance with
applicable law and shall notify the Members of such change in the next regular
communication to the Members.
SECTION 2.3. REGISTERED OFFICE AND AGENT; PRINCIPAL PLACE OF
BUSINESS; OTHER PLACES OF BUSINESS
The address of the registered office of the Company in the State of
Delaware is located at The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the
registered agent for service of process on the Company in the State of Delaware
at such registered office is The Corporation Trust Company. The principal
office of the Company is located at One Montgomery Street, Suite 2500, Telesis
Tower, San Francisco, California 94104, or such other place as the Managing
Member may from time to time designate by notice to the Members. The Company
may maintain offices at such other place or places within or outside the State
of Delaware as the Managing Member deems advisable.
SECTION 2.4. POWER OF ATTORNEY
A. Each Member (other than the Managing Member) and each Assignee
hereby irrevocably constitutes and appoints the Managing Member, any Liquidator,
and authorized officers and attorneys-in-fact of each, and each of those acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the Managing
Member or any Liquidator deems appropriate or necessary to form, qualify or
continue the existence or qualification of the Company as a limited
liability company in the State of Delaware and in all other jurisdictions
in which
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the Company may conduct business or own property; (b) all instruments that
the Managing Member or any Liquidator deems appropriate or necessary to
reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the Managing Member or any Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation of the
Company pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all instruments relating to
the admission, withdrawal, removal or substitution of any Member pursuant
to, or other events described in, Articles 11, 12 or 13 hereof or the
---------------------
Capital Contribution of any Member; and (e) all certificates, documents and
other instruments relating to the determination of the rights, preferences
and privileges of Member Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
Managing Member or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Members hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the
Managing Member or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained in this Section 2.4 shall be construed as authorizing the
Managing Member or any Liquidator to amend this Agreement except in accordance
with Article 14 hereof or as may be otherwise expressly provided for in this
----------
Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Members and Assignees will be relying upon the power of
the Managing Member to act as contemplated by this Agreement, and it shall
survive and not be affected by the subsequent Incapacity of any Member or
Assignee and the Transfer of all or any portion of such Member's or Assignee's
LLC Units or Membership Interest and shall extend to such Member's or Assignee's
heirs, successors, assigns and personal representatives. Each Member or
Assignee shall execute and deliver to the Managing Member or any Liquidator,
within 15 days after receipt of the Managing Member's or Liquidator's request
therefor, such further designation, powers of attorney and other instruments as
the Managing Member or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Company.
SECTION 2.5. TERM
The term of the Company commenced on September 25, 1997, the date that
the original Certificate was filed in the office of the Secretary of State of
Delaware in accordance with the Act, and shall continue until September 25, 2012
unless extended by unanimous agreement of the Members or earlier terminated
pursuant the provisions of Section 13 hereof or as otherwise provided by law.
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ARTICLE 3.
PURPOSE
SECTION 3.1. PURPOSE AND BUSINESS
The purpose and nature of the business to be conducted by the Company
is (i) to conduct any business that may be lawfully conducted by a limited
liability company organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
Managing Member at all times to be classified as a REIT for federal income tax
purposes, unless the Managing Member ceases to qualify as a REIT for reasons
other than the conduct of the business of the Company, (ii) to enter into any
partnership, joint venture, limited liability company or other similar
arrangement to engage in any business described in the foregoing clause (i) or
to own interests in any entity engaged, directly or indirectly, in any such
business, and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing, and without limiting the Managing Member's right
in its sole discretion to cease qualifying as a REIT, the Members acknowledge
that the Managing Member's current status as a REIT inures to the benefit of all
the Members and not solely the Managing Member or its Affiliates.
SECTION 3.2. POWERS
The Company is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Company including, without limitation, full power
and authority, directly or through its ownership interest in other entities, to
enter into, perform and carry out contracts of any kind, borrow money and issue
evidences of indebtedness and guaranty indebtedness of the Managing Member and
other Affiliates (whether or not Funding Debt), whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, that notwithstanding any other provision in this Agreement,
the Managing Member may cause the Company not to take, or to refrain from
taking, any action that, in the judgment of the Managing Member, in its sole and
absolute discretion, (i) could adversely affect the ability of the Managing
Member to continue to qualify as a REIT, (ii) could subject the Managing Member
to any additional taxes under Code Section 857 or Code Section 4981 or (iii)
could violate any law or regulation of any governmental body or agency having
jurisdiction over the Managing Member, its securities or the Company, unless
such action (or inaction) under clause (i), clause (ii) or clause (iii) above
shall have been specifically consented to by the Managing Member in writing.
SECTION 3.3. SPECIFIED PURPOSES
The Company shall be a limited liability company only for the purposes
specified in Section 3.1 hereof, and this Agreement shall not be deemed to
create a joint venture or partnership between or among the Members with respect
to any activities whatsoever other than the activities within the purposes of
the Company as specified in Section 3.1 hereof. Except as otherwise provided in
this Agreement, no Member shall have any authority to act for, bind,
20
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commit or assume any obligation or responsibility on behalf of the Company, its
properties or any other Member. No Member, in its capacity as a Member under
this Agreement, shall be responsible or liable for any indebtedness or
obligation of another Member, nor shall the Company be responsible or liable for
any indebtedness or obligation of any Member, incurred either before or after
the execution and delivery of this Agreement by such Member, except as to those
responsibilities, liabilities, indebtedness or obligations incurred pursuant to
and as limited by the terms of this Agreement and the Act.
SECTION 3.4. REPRESENTATIONS AND WARRANTIES BY THE MEMBERS
A. Each Member that is an individual (including, without limitation,
each Additional Member or Substituted Member as a condition to becoming an
Additional Member or a Substituted Member) represents and warrants to the
Company, the Managing Member and each other Member that (i) such Member has the
legal capacity to enter into this Agreement and perform such Member's
obligations hereunder, (ii) the consummation of the transactions contemplated by
this Agreement to be performed by such Member will not result in a breach or
violation of, or a default under, any material agreement by which such Member or
any of such Member's property is bound, or any statute, regulation, order or
other law to which such Member is subject, (iii) such Member is neither a
"foreign person" within the meaning of Code Section 1445(f) nor a "foreign
partner" within the meaning of Code Section 1446(e), (iv) if the representation
hereunder is being made on or prior to December 31, 1997, such Member (other
than the Managing Member), except as disclosed in writing to the Managing
Member, does not own, directly or indirectly or by attribution under Code
Section 318 (as modified by Code Section 856(d)(5)) any shares of stock of the
Managing Member, (v) if the representation hereunder is being made subsequent to
December 31, 1997 and such Member has been timely provided a Tenant Schedule,
such Member (other than the Managing Member), except as otherwise disclosed in
writing to the Managing Member, either (A) does not own, directly or indirectly
or by attribution under Code Section 318 (as modified by Code Section 856(d)(5))
more than 25% of the interests in capital or profits of the Company or (B) (1)
does not own, directly or indirectly or by attribution under Code Section 318
(as modified by Code Section 856(d)(5)) any shares of stock of the Managing
Member and (2) does not own directly or indirectly or by attribution under Code
Section 318 (as modified by Code Section 856(d)(5)) any interest in any entity
that is listed on the Tenant Schedule, and (vi) this Agreement is binding upon,
and enforceable against, such Member in accordance with its terms.
B. Each Member that is not an individual (including, without
limitation, each Additional Member or Substituted Member as a condition to
becoming an Additional Member or a Substituted Member) represents and warrants
to the Company, the Managing Member and each other Member that (i) all
transactions contemplated by this Agreement to be performed by it have been duly
authorized by all necessary action, including, without limitation, that of its
managing member(s) (or, if there is no managing member, a majority in interest
of all members), committee(s), trustee(s), general partner(s), beneficiaries,
directors and shareholder(s), as the case may be, as required, (ii) the
consummation of such transactions will not result in a breach or violation of,
or a default under, its partnership or operating agreement, trust agreement,
charter or bylaws, as the case may be, any material agreement by which such
Member or any of such
21
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Member's properties or any of its partners, members, beneficiaries, trustees or
shareholders, as the case may be, is or are bound, or any statute, regulation,
order or other law to which such Member or any of its partners, members,
trustees, beneficiaries or shareholders, as the case may be, is or are subject,
(iii) such Member is neither a "foreign person" within the meaning of Code
Section 1445(f) nor a "foreign partner" within the meaning of Code Section
1446(e), (iv) if the representation hereunder is being made on or prior to
December 31, 1997, such Member (other than the Managing Member), except as
disclosed in writing to the Managing Member, (A) does not own, directly or
indirectly or by attribution under Code Section 318 (as modified by Code Section
856(d)(5)) any shares of stock of the Managing Member, (v) if the representation
hereunder is being made subsequent to December 31, 1997 and such Member has been
timely provided a Tenant Schedule, such Member (other than the Managing Member),
except as otherwise disclosed in writing to the Managing Member, either (A) does
not own, directly or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)) more than 25% of the interests in capital or
profits of the Company or (B) (1) does not own, directly or indirectly or by
attribution under Code Section 318 (as modified by Code Section 856(d)(5)) and
shares of stock of the Managing Member and (2) does not own directly on
indirectly or by attribution under Code Section 318 (as modified by Code Section
856(d)(5)) any interest in any entity that is listed on the Tenant Schedule, and
(vi) this Agreement is binding upon, and enforceable against, such Member in
accordance with its terms.
C. Each Member (including, without limitation, each Substituted
Member as a condition to becoming a Substituted Member) represents, warrants and
agrees that it has acquired and continues to hold its interest in the Company
for its own account for investment only and not for the purpose of, or with a
view toward, the resale or distribution of all or any part thereof, nor with a
view toward selling or otherwise distributing such interest or any part thereof
at any particular time or under any predetermined circumstances without
prejudice, however, to each Member's right at all times to sell or otherwise
dispose of all or any part of such Member's REIT Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from
registration available under the Securities Act.. Each Member further
represents and warrants that it is an "accredited investor" as defined in Rule
501 promulgated under the Securities Act and is a sophisticated investor, able
and accustomed to handling sophisticated financial matters for itself,
particularly real estate investments, and that it has a sufficiently high net
worth that it does not anticipate a need for the funds that it has invested in
the Company in what it understands to be a highly speculative and illiquid
investment.
D. The representations and warranties contained in Sections 3.4.A,
3.4.B and 3.4.C hereof shall survive the execution and delivery of this
Agreement by each Member (and, in the case of an Additional Member or a
Substituted Member, the admission of such Additional Member or Substituted
Member as a Member in the Company) and the dissolution, liquidation and
termination of the Company. The Managing Member may, in its sole and absolute
discretion on behalf of the Company and its Members, grant waivers and
exceptions to the representations and warranties contained in Sections 3.4.A,
3.4.B and 3.4.C hereof, but any such waiver or exception must be in writing,
must refer to this Section 3.4.D and must describe with particularity the
representation or warranty as to which such waiver or exception shall apply.
22
<PAGE>
E. Each Member (including, without limitation, each Substituted
Member as a condition to becoming a Substituted Member) hereby represents that
it has consulted and been advised by its legal counsel and tax advisor in
connection with, and acknowledges that no representations as to potential
profit, tax consequences of any sort (including, without limitation, the tax
consequences resulting from forming the Company, executing this Agreement,
consummating the transaction provided for in or contemplated by the Contribution
Agreement, making a Capital Contribution, being admitted to the Company or being
allocated Tax Items), cash flows, funds from operations or yield, if any, in
respect of the Company or the Managing Member have been made by any Member or
any employee or representative or Affiliate of any Member, and that projections
and any other information, including, without limitation, financial and
descriptive information and documentation, that may have been in any manner
submitted to such Member shall not constitute any representation or warranty of
any kind or nature, express or implied.
ARTICLE 4.
CAPITAL CONTRIBUTIONS
SECTION 4.1. CAPITAL CONTRIBUTIONS OF THE INITIAL MEMBERS
At the time of their respective execution of this Agreement, the
Members shall make Capital Contributions as set forth in Exhibit A to this
---------
Agreement. The Members shall own LLC Units in the amounts set forth in Exhibit
-------
A and shall have a Percentage Interest as set forth in Exhibit A, which
- - ---------
Percentage Interest shall be adjusted in Exhibit A from time to time by the
---------
Managing Member to the extent necessary to accurately reflect exchanges, Capital
Contributions, the issuance of additional LLC Units or similar events having an
effect on a Member's Percentage Interest. Except as required by law or as
otherwise provided in Sections 4.3 and 4.4, no Member shall be required or
permitted to make any additional Capital Contributions or loans to the Company.
Unless otherwise specified by the Managing Member at the time of the creation of
any class of Membership Interests, the corresponding class of capital stock for
any LLC Units issued shall be REIT Shares.
SECTION 4.2. ADDITIONAL MEMBERS
The Managing Member is authorized to admit one or more Additional
Members to the Company from time to time, on terms and conditions and for such
Capital Contributions as may be established by the Managing Member in its
reasonable discretion; provided that any person to whom Development Incentive
Units, Additional Retained Units or Performance Incentive Units (as such terms
are defined in the Contribution Agreement) are issued shall be admitted as
Additional Members with the same rights hereunder as the original Non-Managing
Members including, without limitation, the rights to distributions as set forth
in clause (1) of Section 5.1.A hereof; provided further that any other
Additional Members shall have no right to receive distributions before all
distributions required by clause (1) of Section 5.1.A have been paid. No action
or consent by the Non-Managing Members shall be required in connection with the
admission of any Additional Members. In the sole and absolute discretion of the
Managing Member, the Company may acquire in the future additional Properties by
means of Capital
23
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Contributions by other Persons, which Capital Contributions shall be set forth
in Exhibit A. As a condition to being admitted to the Company, each Additional
---------
Member shall execute an agreement to be bound by the terms and conditions of
this Agreement. Notwithstanding the foregoing, (ii) no Affiliate of the Managing
Member will be permitted to make a Capital Contribution or to otherwise be
admitted as an Additional Member and accordingly no issuance of LLC Units will
be made to any Affiliate of the Managing Member and (ii) neither the Managing
Member nor any Affiliate of the Managing Member may have any interest in the
Company or a Non-Managing Member.
SECTION 4.3. LOANS BY THIRD PARTIES
Subject to the provisions of Section 4.4 and Section 7.3 hereof, the
Company may incur or assume Debt, or enter into other similar credit, guarantee,
financing or refinancing arrangements, for any purpose (including, without
limitation, in connection with any further acquisition of Properties from any
Person), upon such terms as the Managing Member determines appropriate;
provided, however, that the Company shall not incur or assume any Debt under
which a breach, violation or default would be deemed to occur by virtue of the
Transfer of any Membership Interest; provided, further, that any Debt shall be
nonrecourse to each Member unless the Member to whom any Debt would be recourse
otherwise agrees.
SECTION 4.4. ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS
A. GENERAL. The Managing Member may, at any time and from time to
time, determine that the Company requires additional funds ("Additional Funds")
for the acquisition or development of additional Properties or for such purposes
as the Managing Member may determine. Additional Funds may be raised by the
Company, at the election of the Managing Member, in any manner provided in, and
in accordance with, the terms of this Section 4.4 or, alternatively, the terms
of Section 4.3 hereof. No Person, including, without limitation, any Member or
Assignee, shall have any preemptive, preferential, participation or similar
right or rights to subscribe for or acquire any Membership Interest.
B. NOTICE OF ADDITIONAL FUNDS REQUIREMENT. The Managing Member may,
but shall not be required to, give written notice (the "Funding Notice") to the
Members of the need for Additional Funds and the anticipated source(s) thereof.
C. MANAGING MEMBER LOANS. Whether or not a Funding Notice is given
to the Members, the Managing Member may enter into a Funding Debt and lend the
Additional Funds to the Company (a "Managing Member Loan"); provided, however,
that the Managing Member shall not be obligated to lend the net proceeds of any
Funding Debt to the Company in a manner that would be inconsistent with the
Managing Member's ability to remain qualified as a REIT. If the Managing Member
enters into such a Funding Debt, the Managing Member Loan will consist of the
net proceeds from such Funding Debt and, to the extent permitted by law, will be
on the same terms and conditions, including interest rate and repayment
schedule, and providing for the reimbursement of costs and expenses, as shall be
applicable with respect to or incurred in connection with such Funding Debt;
provided, however, that any repayments (including principal and interest) on a
Funding Debt or a Managing Member Loan will be
24
<PAGE>
subordinate to the payment of any distributions pursuant to clause (1) of
Section 5.1.A, and no repayments shall be made unless at the time of repayment
all distributions previously required to be made pursuant to Section 5.1 have
been made in full (i.e., no Preferred Return Shortfall required to be paid has
not been paid). Otherwise, all Managing Member Loans made pursuant to this
Section 4.4 shall be on terms and conditions no less favorable to the Company
than would be available to the Company from any third party.
D. ADDITIONAL MANAGING MEMBER CONTRIBUTIONS; ADDITIONAL MEMBERS.
Whether or not a Funding Notice is given to the Members, the Managing Member on
behalf of the Company may raise all or any portion of the Additional Funds by
making additional Capital Contributions or accepting additional Capital
Contributions from any other Members or third parties and either (a) in the case
of Members (including the Managing Member), increasing that Member's LLC Units
or (b) in the case of a third party, admitting that third party as an Additional
Member as contemplated by Section 4.2 of this Agreement. Subject to the terms
of this Section 4.4 and to the definition of "Gross Asset Value," the Managing
Member shall determine in good faith the amount, terms and conditions of such
additional Capital Contributions; provided, however, that, in the case of an
additional Capital Contribution by the Managing Member, the Company shall issue
to the Managing Member the number of LLC Units derived by dividing (1) the
amount of the additional Capital Contribution (net of any liabilities assumed or
taken subject to by the Company) by (2) the Value determined as of the date of
such Capital Contribution.
E. CERTAIN ADDITIONAL CAPITAL CONTRIBUTIONS. Notwithstanding the
foregoing provisions of this Section 4.4, if the Managing Member anticipates
that, based upon its projections of Available Cash or otherwise, the Available
Cash generated by the Company during a quarterly period will be insufficient to
enable the Company to distribute in full the amount specified in clause (1) of
the first sentence of Section 5.1.A, then the Managing Member shall finance any
(i) capital expenditures (including principal payments on any Debt to the extent
incurred to finance capital expenditures) made by the Company during that
quarterly period (ii) shortages in Available Cash resulting from any payments
made by the Company during that quarterly period with respect to any guaranty of
the obligations of the Managing Member or its Affiliates, or (iii) shortages in
Available Cash resulting from loans made during that quarterly period by the
Company to, or investments made by the Company during that quarterly period in,
the Managing Member or its Affiliates by making additional cash Capital
Contributions to the Company in an amount equal to the lesser of (a) the amount
necessary to enable the Company to distribute in full for that quarterly period
the amount specified in clause (1) of the first sentence of Section 5.1.A, or
(b) the sum of any capital expenditures, guaranty payments, loans and
investments made during that quarterly period as specified in clauses (i)
through (iii) of this Section 4.4.E.
F. TIMING OF ADDITIONAL CAPITAL CONTRIBUTIONS. If additional Capital
Contributions are made by Members on any day other than the first day of a
Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of
income, gain, loss, deduction and credit allocable among Members and Assignees
for such Fiscal Year shall be allocated among such Members and Assignees by
taking into account their varying interests during the Fiscal
25
<PAGE>
Year in accordance with Code Section 706(d), using the "interim closing of the
books" or "daily proration" method or another permissible method selected by the
Managing Member. Solely for purposes of making such allocations, each of such
items for the calendar month in which an admission of any Additional Member
occurs shall be allocated among all the Members and Assignees including such
Additional Member, in accordance with the principles described in Section 11.6.C
hereof.
SECTION 4.5. NO INTEREST; NO RETURN
No Member shall be entitled to interest on its Capital Contribution or
on such Member's Capital Account. Except as provided herein or by law, no
Member shall have any right to demand or receive the return of its Capital
Contribution from the Company.
ARTICLE 5.
DISTRIBUTIONS
SECTION 5.1. REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
A. GENERAL. The Managing Member shall cause the Company to
distribute quarterly on the LLC Distribution Date all (or with respect to
amounts distributed pursuant to the following clause (2), such portion as the
Managing Member may in its discretion determine) Available Cash generated by the
Company during such quarter to the Members on the LLC Record Date for such
quarter as follows: (1) first, to the Non-Managing Members, pro rata in
accordance with their relative Preferred Return Shortfall, until the Preferred
Return Shortfall for each Non-Managing Member is zero; and (2) thereafter, to
the Managing Member; provided, however, if dividends are paid to holders of REIT
Shares more frequently than quarterly, then the LLC Distribution Date shall be
the date of the payment of the more frequent dividends and the period with
respect to which Available Cash is computed for purposes of this Section 5.1.A
shall be correspondingly adjusted. The Managing Member shall take such
reasonable efforts, as determined by it in its sole and absolute discretion and
consistent with its qualification as a REIT, to cause the Company to distribute
sufficient amounts to enable the Managing Member to pay stockholder dividends
that will (a) satisfy the requirements for qualifying as a REIT under the Code
and Regulations ("REIT Requirements"), and (b) avoid any federal income or
excise tax liability of the Managing Member.
B. CONDUCT OF COMPANY OPERATIONS TO MAINTAIN LEVEL OF DISTRIBUTIONS.
The Managing Member intends to use reasonable efforts to cause the Company to
operate in a manner (including, without limitation, incurring Debt, establishing
and maintaining cash reserves, and undertaking and financing recurring and non-
recurring capital expenditures) that enables the Company to make the quarterly
distribution required pursuant to clause (1) of Section 5.1.A above. The
Managing Member shall act in good faith in attempting to accomplish the
foregoing objective, but there is no assurance that such objective will be
accomplished, and neither the Managing Member nor the Company shall have any
liability for the failure to achieve such objective so long as the Managing
Member acts in good faith.
26
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C. MINIMUM DISTRIBUTIONS IF MANAGING MEMBER NOT PUBLICLY TRADED
ENTITY. In addition (and without regard to the amount of Available Cash) if the
REIT Shares of the Managing Member are not Publicly Traded, the Company shall
make cash distributions to the Members at least annually, in proportion to the
numbers of LLC Units owned by each Member, for each taxable year of the Company
beginning prior to the fifteenth (15th) anniversary of the Effective Date in an
aggregate amount with respect to each such taxable year at least equal to 95% of
the Company's taxable income for such year, with such distributions to be made
not later than 60 days after the end of such year; provided, however, neither
the Managing Member nor any of its Affiliates shall be obligated to make any
Capital Contributions, loans, advances or other funds available to the Company
(other than to repay any outstanding loans or advances from the Company to the
Managing Member or its Affiliates) in order to satisfy the distribution
requirement of this Section 5.1.C.
SECTION 5.2. DISTRIBUTIONS IN KIND
No right is given to any Member to demand and receive property other
than cash. The Managing Member may determine, in its sole and absolute
discretion, to make a distribution in kind to the Members of Company assets, and
such assets shall be distributed in such a fashion as to ensure that the fair
market value is distributed and allocated in accordance with Articles 5 and 6
----------------
hereof.
SECTION 5.3. AMOUNTS WITHHELD
Each Member hereby authorizes the Company to withhold from or pay on
behalf of or with respect to such Member any amount of federal, state, local or
foreign taxes that the Managing Member determines that the Company is required
to withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Company pursuant to Code Section 1441,
Code Section 1442, Code Section 1445 or Code Section 1446; provided, however,
the Managing Member, on behalf of the Company, shall make such filings with
state and local authorities in accordance with customary business practices to
minimize or eliminate any withholding requirement. Any amount paid on behalf of
or with respect to a Member shall constitute a loan by the Company to such
Member, which loan shall be repaid by such Member within 15 days after notice
from the Managing Member that such payment must be made unless (i) the Company
withholds such payment from a distribution that would otherwise be made to the
Member or (ii) the Managing Member determines, in its sole and absolute
discretion, that such payment may be satisfied out of the Available Cash of the
Company that would, but for such payment, be distributed to the Member. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Member. Each Member hereby unconditionally
and irrevocably grants to the Company a security interest in such Member's
Membership Interest to secure such Member's obligation to pay to the Company any
amounts required to be paid pursuant to this Section 5.3. In the event that a
Member fails to pay any amounts owed to the Company pursuant to this Section 5.3
when due, the Managing Member may, in its sole and absolute discretion, elect to
make the payment to the Company on behalf of such defaulting Member, and in such
event shall be deemed to have loaned such amount to such
27
<PAGE>
defaulting Member and shall succeed to all rights and remedies of the Company as
against such defaulting Member (including, without limitation, the right to
receive distributions). Any amounts payable by a Member hereunder shall bear
interest at the Prime Rate plus four (4) percentage points (but not higher than
the maximum lawful rate) from the date such amount is due (i.e., 15 days after
demand) until such amount is paid in full. Each Member shall take such actions
as the Company or the Managing Member shall request in order to perfect or
enforce the security interest created hereunder.
SECTION 5.4. DISTRIBUTIONS UPON LIQUIDATION
Notwithstanding the other provisions of this Article 5, net proceeds
---------
from a Terminating Capital Transaction and any other cash received or reductions
in reserves made after commencement of the liquidation of the Company shall be
distributed to the Members in accordance with Section 13.2 hereof.
SECTION 5.5. RESTRICTED DISTRIBUTIONS
Notwithstanding any provision to the contrary contained in this
Agreement, neither the Company nor the Managing Member, on behalf of the
Company, shall make a distribution to any Member on account of its Membership
Interest or interest in LLC Units if such distribution would violate Section 18-
607 of the Act or other applicable law.
ARTICLE 6.
ALLOCATIONS
SECTION 6.1. TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME AND NET
LOSS
Net Income and Net Loss of the Company shall be determined and
allocated with respect to each Fiscal Year of the Company as of the end of each
such year. Except as otherwise provided in this Article 6, an allocation to a
---------
Member of a share of Net Income or Net Loss shall be treated as an allocation of
the same share of each item of income, gain, loss or deduction that is taken
into account in computing Net Income or Net Loss.
SECTION 6.2. GENERAL ALLOCATIONS Except as otherwise provided in this
Article 6:
- ---------
A. NET INCOME. Net Income for any Fiscal Year shall be allocated, for
purposes of adjusting the Capital Accounts of the Members, in accordance with
the following order of priority:
(1) First, to the Non-Managing Members, pro rata in accordance
with their relative Shortfall Amounts, until the cumulative amount of Net
Income allocated to each such Non-Managing Member pursuant to this Section
6.2.A(1) for the current and all prior Fiscal Years is equal to the sum of
(a) the cumulative amount distributed to each such Non-Managing Member
pursuant to Section 5.1 for the current and all prior Fiscal
28
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Years and (b) the cumulative amount of Net Loss allocated to such Non-
Managing Member for all prior Fiscal Years. "Shortfall Amount" shall mean,
with respect to each Member, the excess if any of (i) the sum of (x) the
cumulative amount distributed to such Non-Managing Member pursuant to
Section 5.1 for the current and all prior Fiscal Years and (y) the
cumulative amount of Net Loss allocated to such Non-Managing Member for all
prior Fiscal Years over (ii) the cumulative amount of Net Income previously
allocated to such Non-Managing Member pursuant to this Section 6.2.A(1);
(2) Second, to the Managing Member until the cumulative amount
allocated to the Managing Member pursuant to this Section 6.2.A(2) for the
current Fiscal Year and all prior Fiscal Years equals the Managing Member's
Capital Return; and
(3) Thereafter, 99% to the Managing Member and 1% to the Non-
Managing Members as a group in proportion to their relative LLC Units;
provided, however, that any gain from the sale or other disposition of one
or more of the Properties allocated pursuant to this Section 6.2.A(3) shall
be allocated 100% to the Managing Member.
B. NET LOSS. Net Loss for any Fiscal Year shall be allocated, for
purposes of adjusting the Capital Accounts of the Members, pro rata to each
Member in accordance with their relative positive Capital Account balances
(calculated for this purpose by adding to such Member's Capital Account such
Member's share of Company Minimum Gain and Member Minimum Gain).
SECTION 6.3. ADDITIONAL ALLOCATION PROVISIONS
A. REGULATORY ALLOCATIONS
(1) Minimum Gain Chargeback. Except as otherwise provided in
-----------------------
Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2
hereof, or any other provision of this Article 6, if there is a net decrease in
---------
Company Minimum Gain during any Fiscal Year, each Member shall be specially
allocated items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member's share of the net decrease
in Company Minimum Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items to be allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(1) is intended to
qualify as a "minimum gain chargeback" within the meaning of Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(2) Member Minimum Gain Chargeback. Except as otherwise provided
------------------------------
in Regulations Section 1.704-2(i)(4) or in Section 6.3.A(1) hereof, if there is
a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt
during any Fiscal Year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company
income and gain for such year (and, if necessary,
29
<PAGE>
subsequent years) in an amount equal to such Member's share of the net decrease
in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Sections 1.704-
2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is intended to qualify as a
"chargeback of partner nonrecourse debt minimum gain" within the meaning of
Regulations Section 1.704-2(i) and shall be interpreted consistently therewith.
(3) Member Nonrecourse Deductions. Any Member Nonrecourse
-----------------------------
Deductions for any Fiscal Year shall be specially allocated to the Member(s) who
bears the economic risk of loss with respect to the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable, in accordance with
Regulations Section 1.704-2(i).
(4) Qualified Income Offset. If any Member unexpectedly receives
-----------------------
an adjustment, allocation or distribution described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be
allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such
Member in an amount and manner sufficient to eliminate, to the extent required
by such Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section
6.3.A(4) shall be made if and only to the extent that such Member would have an
Adjusted Capital Account Deficit after all other allocations provided in this
Article 6 have been tentatively made as if this Section 6.3.A(4) were not in the
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Agreement. It is intended that this Section 6.3.A(4) qualify and be construed as
a "qualified income offset" within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(5) Limitation on Allocation of Net Loss. To the extent that any
------------------------------------
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Member, such allocation of Net Loss shall be reallocated among
the other Members in accordance with their respective LLC Units, subject to the
limitations of this Section 6.3.A(5).
(6) Section 754 Adjustment. To the extent that an adjustment to
----------------------
the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken
into account in determining Capital Accounts as the result of a distribution to
a Member in complete liquidation of its interest in the Company, the amount of
such adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Members in accordance with their LLC Units in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such distribution was
made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(7) Curative Allocations. The allocations set forth in Sections
--------------------
6.3.A(1) through (6) hereof (the "Regulatory Allocations") are intended to
comply with certain regulatory requirements, including the requirements of
Regulations Sections 1.704-1(b) and
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1.704-2. Notwithstanding the provisions of Section 6.1 hereof, the Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, loss and deduction among the Members so that, to the extent possible
without violating the requirements giving rise to the Regulatory Allocations,
the net amount of such allocations of other items and the Regulatory Allocations
to each Member shall be equal to the net amount that would have been allocated
to each such Member if the Regulatory Allocations had not occurred.
B. ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. Solely for purposes
of determining a Member's proportional share of the "excess nonrecourse
liabilities" of the Company within the meaning of Regulations Section 1.752-
3(a)(3), each Member's interest in Company profits shall be equal to such
Member's interest in the allocations provided in Section 6.2.A(1).
SECTION 6.4. TAX ALLOCATIONS
A. IN GENERAL. Except as otherwise provided in this Section 6.4, for
income tax purposes under the Code and the Regulations, each Company item of
income, gain, loss and deduction (collectively, "Tax Items") shall be allocated
among the Members in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof.
B. ALLOCATIONS RESPECTING SECTION 704(C) REVALUATIONS.
Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that is
contributed to the Company with a Gross Asset Value that varies from its basis
in the hands of the contributing Member immediately preceding the date of
contribution shall be allocated among the Members for income tax purposes
pursuant to the "traditional method" as described in Regulations Section 1.704-
3(b). In the event that the Gross Asset Value of any Company asset is adjusted
pursuant to subsection (b) of the definition of "Gross Asset Value" (provided in
Article 1 hereof), subsequent allocations of Tax Items with respect to such
- ---------
asset shall take account of the variation, if any, between the adjusted basis of
such asset and its Gross Asset Value in the same manner as under Code Section
704(c) and the applicable Regulations and this Section 6.4.B.
SECTION 6.5. OTHER PROVISIONS
A. OTHER ALLOCATIONS. In the event that (i) any modifications are
made to the Code or any Regulations, (ii) any changes occur in any case law
applying or interpreting the Code or any Regulations, (iii) the IRS changes or
clarifies the manner in which it applies or interprets the Code or any
Regulations or any case law applying or interpreting the Code or any Regulations
or (iv) the IRS adjusts the reporting of any of the transactions contemplated by
this Agreement which, in each case, either (a) requires allocations of items of
income, gain, loss, deduction or credit or (b) requires reporting of any of the
transactions contemplated by this Agreement in a manner different from that set
forth in this Article 6, the Managing Member is hereby authorized to make new
allocations or report any such transactions (as the case may be) in reliance of
the foregoing, and such new allocations and reporting shall be deemed to be made
pursuant to the fiduciary duty of the Managing Member to the Company and the
other Members,
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and no such new allocation or reporting shall give rise to any claim or cause of
action by any Member.
B. CONSISTENT TAX REPORTING. The Members acknowledge and are aware of
the income tax consequences of the allocations made by this Article 6 and hereby
---------
agree to be bound by the provisions of this Article 6 in reporting their shares
---------
of Net Income, Net Loss and other items of income, gain, loss, deduction and
credit for federal, state and local income tax purposes.
SECTION 6.6 AMENDMENTS TO ALLOCATION TO REFLECT ISSUANCE OF
ADDITIONAL MEMBERSHIP INTERESTS
In the event that the Company issues additional Membership Interests
to the Managing or any Additional Member pursuant to Article 4 hereof, the
---------
Managing Member shall make such revisions to this Article 6 as it determines are
---------
necessary to reflect the terms of the issuance of such additional Membership
Interests, including making preferential allocations to certain classes of
Membership Interests; provided, that no class of Membership Interest shall be
entitled to receive any distributions before all distributions required by
clause (1) of Section 5.1.A have been paid.
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1. MANAGEMENT
A. Except as otherwise expressly provided in this Agreement, the
Managing Member, in its capacity as a Member of the Company under the Act, shall
have sole and complete charge and management over the business and affairs of
the Company, in all respects and in all matters. The Managing Member shall be
an agent of the Company's business, and the actions of the Managing Member taken
in such capacity and in accordance with this Agreement shall bind the Company.
The Managing Member shall at all times be a Member of the Company. Except as
otherwise expressly provided in this Agreement or required by any non-waivable
provisions of applicable law, the Non-Managing Members shall not participate in
the control of the Company, shall have no right, power or authority to act for
or on behalf of, or otherwise bind, the Company and shall have no right to vote
on or consent to any other matter, act, decision or document involving the
Company or its business. The Managing Member may not be removed by the Members
with or without cause, except with the consent of the Managing Member. In
addition to the powers now or hereafter granted a manager of a limited liability
company under applicable law or that are granted to the Managing Member under
any other provision of this Agreement, the Managing Member, subject to the other
provisions hereof including the limitations on the authority of the Managing
Member set forth in Section 7.3, shall have full power and authority to do all
things deemed necessary or desirable by it to conduct the business of the
Company, to exercise all powers set forth in Section 3.2 hereof and to
effectuate the purposes set forth in Section 3.1 hereof, including, without
limitation:
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(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on loans and
borrowing money to permit the Company to make distributions to its Members
in such amounts as will permit the Managing Member (so long as the Managing
Member qualifies as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to Code Section 4981)
and to make distributions to its shareholders sufficient to permit the
Managing Member to maintain REIT status or otherwise to satisfy the REIT
Requirements), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of any of the foregoing by deed to
secure debt, mortgage, deed of trust or other lien or encumbrance on the
Company's assets and the execution of the Approved Note and agreements,
documents and instruments evidencing Managing Member Loans) and the
incurring of any obligations that it deems necessary for the conduct of the
activities of the Company;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Company;
(3) except as restricted pursuant to Section 7.3.E(2) hereof,
the acquisition, sale, transfer, exchange or other disposition of any
assets of the Company (including, but not limited to, the exercise or grant
of any conversion, option, privilege or subscription right or any other
right available in connection with any assets at any time held by the
Company) or the merger, consolidation, reorganization or other combination
of the Company with or into another entity;
(4) except as restricted pursuant to Section 7.1.C hereof, the
mortgage, pledge, encumbrance or hypothecation of any assets of the Company
(including, without limitation, any Contributed Property), the use of the
assets of the Company (including, without limitation, cash on hand) for any
purpose consistent with the terms of this Agreement which the Managing
Member believes will directly benefit the Company and on any terms that the
Managing Member sees fit, including, without limitation, the financing of
the conduct or the operations of the Managing Member or the Company, the
lending of funds to other Persons (including, without limitation, the
Managing Member, if necessary to permit the financing or capitalization of
a subsidiary of the Managing Member or the Company) and the repayment of
obligations of the Company, any of its Subsidiaries and any other Person in
which it has an equity investment;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition, replacement or improvement of any Property,
including, without limitation, any Contributed Property, or other asset of
the Company or any Subsidiary;
(6) the negotiation, execution and performance of any contracts,
leases, conveyances or other instruments that the Managing Member considers
useful or necessary to the conduct of the Company's operations or the
implementation of the
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Managing Member's powers under this Agreement, including contracting with
property managers (including, without limitation, as to any Contributed
Property or other Property, contracting with the contributing or any other
Member or its Affiliates for property management services), contractors,
developers, consultants, accountants, legal counsel, other professional
advisors and other agents and the payment of their expenses and
compensation out of the Company's assets;
(7) the distribution of Company cash or other Company assets in
accordance with this Agreement, the holding, management, investment and
reinvestment of cash and other assets of the Company, and the collection
and receipt of revenues, rents and income of the Company;
(8) the selection and dismissal of employees of the Company or
the Managing Member (including, without limitation, employees having titles
or offices such as "president," "vice president," "secretary" and
"treasurer"), and agents, outside attorneys, accountants, consultants and
contractors of the Company or the Managing Member and the determination of
their compensation and other terms of employment or hiring;
(9) the maintenance of such insurance for the benefit of the
Company and the Members as it deems necessary or appropriate including
casualty, liability and other insurance on the Properties of the Company;
(10) the formation of, or acquisition of an interest in, and the
contribution of property to, any corporation, limited or general
partnerships, joint ventures, limited liability companies or other
relationships that it deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property to any
Subsidiary and any other Person in which it has an equity investment from
time to time); provided that, as long as the Managing Member has determined
to continue to qualify as a REIT, the Company may not engage in any such
formation, acquisition or contribution that would cause the Managing Member
to fail to qualify as a REIT;
(11) the control of any matters affecting the rights and
obligations of the Company, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment, of any claim, cause of action, liability, debt or damages, due
or owing to or from the Company, the commencement or defense of suits,
legal proceedings, administrative proceedings, arbitrations or other forms
of dispute resolution, and the representation of the Company in all suits
or legal proceedings, administrative proceedings, arbitrations or other
forms of dispute resolution, the incurring of legal expense, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(12) the undertaking of any action in connection with the
Company's direct or indirect investment in its Subsidiaries or any other
Person (including, without
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limitation, contributing or loaning Company funds to, incurring
indebtedness on behalf of, or guaranteeing the obligations of any such
Persons);
(13) the determination of the fair market value of any Company
property distributed in kind using such reasonable method of valuation as
it may adopt; provided that such methods are otherwise consistent with the
requirements of this Agreement;
(14) the enforcement of any rights against any Member pursuant to
representations, warranties, covenants and indemnities relating to such
Member's contribution of property or assets to the Company;
(15) the collection and receipt of revenues and income of the
Company;
(16) the exercise, directly or indirectly, through any attorney-
in-fact acting under a general or limited power of attorney, of any right,
including the right to vote, appurtenant to any asset or investment held by
the Company;
(17) the exercise of any of the powers of the Managing Member
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Company or any other Person in which the Company has a
direct or indirect interest, or jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the Managing Member
enumerated in this Agreement on behalf of any Person in which the Company
does not have an interest pursuant to contractual or other arrangements
with such Person;
(19) the maintenance of working capital and other reserves in
such amounts as the Managing Member, in its sole and absolute discretion,
deems appropriate and reasonable from time to time;
(20) the making, execution and delivery of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees (including, without
limitation, the Approved Guaranty), warranties, indemnities, waivers,
releases or legal instruments or agreements in writing necessary or
appropriate in the judgment of the Managing Member for the accomplishment
of any of the powers of the Managing Member enumerated in this Agreement;
and
(21) the amendment and restatement of Exhibit A hereto to reflect
---------
accurately at all times the Capital Accounts, LLC Units, and Percentage
Interests of the Members as the same are adjusted from time to time to the
extent necessary to reflect redemptions, Capital Contributions, the
issuance of LLC Units, the admission of any Additional Members or any
Substituted Member or otherwise, as long as the matter or event being
reflected in Exhibit A hereto otherwise is authorized by this Agreement.
---------
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B. Each of the Non-Managing Members agrees that, except as provided
in Section 7.3 hereof, the Managing Member is authorized to execute, deliver and
perform the above-mentioned agreements and transactions on behalf of the Company
without any further act, approval or vote of the Non-Managing Members,
notwithstanding any other provision of this Agreement (except as provided in
Section 7.3 hereof), the Act or any applicable law, rule or regulation. The
execution, delivery or performance by the Managing Member or the Company of any
agreement authorized or permitted under this Agreement shall not constitute a
breach by the Managing Member of any duty that the Managing Member may owe the
Company or the Members or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. Prior to the expiration of the No Transfer Period with respect to
any of the Real Properties, the Managing Member shall either (1) (a) not permit
the Company to refinance any loan (each such loan, a "Loan") that is secured by
an applicable Real Property for an amount that is less than the outstanding
principal balance of such loan immediately prior to the Effective Date, reduced
from time to time by scheduled payments of principal pursuant to the documents
governing the Loan; (b) not permit the Company to make any prepayments of
principal due under a Loan; and (c) not permit the Company to guarantee or
otherwise assume the economic risk of loss (within the meaning of Sections 704
and 752 of the Code and the Regulations promulgated thereunder) with respect to
a Loan or (2) prior to taking any action described in (1) above, first offering
the applicable No Transfer Members the opportunity to guarantee or otherwise
assume the economic risk of loss (within the meaning of Sections 704 and 752 of
the Code and the Regulations promulgated thereunder) with respect to any amount
of indebtedness (up to the full amount of the Loan) desired by the No Transfer
Members; provided, however, that (i) no No Transfer Member shall be offered the
opportunity to guarantee or otherwise assume the economic risk of loss of an
amount of indebtedness that would result in an overall increase in the amount of
Company liabilities allocable to such Member pursuant to Code Section 752, as
compared with the amount of liabilities allocable to such Member prior to the
action described in (1) above and (ii) with respect to the indebtedness
encumbering the Real Properties commonly known as The Highlands and Somerset
Park (the "Highlands/Somerset Park Loans"), the Managing Member shall
notwithstanding any provision of this Agreement to the contrary, (a) not take,
or permit the Company to take, any action which would cause the
Highlands/Somerset Park Loans not to be Nonrecourse Liabilities of the Company,
(b) cause the Company to assume and satisfy all obligations existing under the
Highlands/Somerset Park Loans (including obligations to the housing authorities)
thereunder throughout the No Transfer Period, (c) not cause, or permit the
Company to cause, a default under the Highlands/Somerset Park Loans or the bonds
issued in connection therewith, (d) not take, or permit the Company to take, any
action (including, without limitation, any change in the manner in which items
of profit, loss, gain and deduction are allocated) that would result in the
Company not being classified as a partnership for federal income tax purposes or
would reduce the amount of the Highlands/Somerset Park Loans that is allocable
to the Non-Managing Members who previously owned interests in the Real
Properties commonly known as The Highlands and Somerset Park and thereby reduce
the federal income tax basis of such Non-Managing Members in The Highlands and
Somerset Park from federal income tax basis on such properties immediately prior
to the transfer of their interests in The Highlands and Somerset Park to the
Company and the Managing Member.
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D. At all times from and after the date hereof, the Managing Member
shall cause the Company to:
(1) maintain a ratio of secured indebtedness to the book value of
total assets of not more than 0.40 to 1;
(2) maintain a ratio of indebtedness (excluding indebtedness to
the Managing Member) to the sum of (i) the market value of all real
property and (ii) the book value of total assets (other than real property)
of not more than 0.55 to 1;
(3) maintain a ratio of (i) the market value of real property not
encumbered by a lien securing indebtedness (excluding indebtedness to the
Managing Member) for borrowed money to (ii) unsecured indebtedness
(excluding indebtedness to the Managing Member) of more than 1.75 to 1;
(4) maintain a ratio of EBITDA to debt service (other than debt
service on indebtedness to the Managing Member) of not less than 1.80 to 1;
and
(5) not incur indebtedness for borrowed money bearing interest at
a rate per annum in excess of the most favorable rate of interest that
could have been obtained by the Managing Member if indebtedness with the
same terms had been incurred at the same time by the Managing Member rather
than the Company, provided, however, that this Section 7.1.D(5) shall not
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be deemed to limit the authority of the Managing Member to make a Managing
Member Loan to the Company on the terms described in Section 4.4.C. or to
make the Approved Loan to the Company.
For purposes of this Section 7.1.D, the term "indebtedness" shall not
include any indebtedness of the Managing Member guaranteed by the Company
including, without limitation, the Approved Guaranty.
E. At all times from and after the date hereof, the Managing Member
may cause the Company to obtain and maintain (i) casualty, liability and other
insurance on the properties of the Company and (ii) liability insurance for the
Indemnitees hereunder.
F. In exercising its authority under this Agreement, the Managing
Member may, but (except as otherwise provided in Section 7.1C or Section 7.3E(2)
hereof) shall be under no obligation to, take into account the tax consequences
to any Member (including the Managing Member) of any action taken by it. The
Managing Member and the Company shall not have liability to a Member under any
circumstances as a result of an income tax liability incurred by such Member as
a result of an action (or inaction) by the Managing Member pursuant to its
authority under this Agreement so long as the action or inaction is taken in
good faith.
SECTION 7.2. CERTIFICATE OF FORMATION
To the extent that such action is determined by the Managing Member to
be reasonable and necessary or appropriate, the Managing Member shall file
amendments to and
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restatements of the Certificate and do all the things to maintain the Company as
a limited liability company under the laws of the State of Delaware and each
other state, the District of Columbia or any other jurisdiction in which the
Company may elect to do business or own property. Subject to the terms of
Section 8.5.A(4) hereof, the Managing Member shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Member. The Managing Member shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited liability company in the State of Delaware and any other
state, or the District of Columbia or other jurisdiction in which the Company
may elect to do business or own property.
SECTION 7.3. RESTRICTIONS ON MANAGING MEMBER'S AUTHORITY
A. The Managing Member may not take any action in contravention of
an express prohibition or limitation of this Agreement, including, without
limitation:
(1) take any action that would make it impossible to carry on
the ordinary business of the Company;
(2) possess Company property, or assign any rights in specific
Company property, for other than a Company purpose except as otherwise
provided in this Agreement;
(3) admit a Person as a Member, except as otherwise provided in
this Agreement;
(4) perform any act that would subject a Non-Managing Member to
liability as a Managing Member in any jurisdiction or any other liability
except as provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other agreement
that expressly prohibits or restricts, or has the effect of prohibiting or
restricting, the ability of (a) the Managing Member or the Company from
satisfying its obligations under Section 5.1 or 8.6 hereof in full or (b) a
Member from exercising its rights to an Exchange in full, except, in either
case, with the written consent of such Member affected by the prohibition.
B. The Managing Member shall not, without the prior Consent of the
Non-Managing Members undertake or have the authority to do or undertake, on
behalf of the Company, any of the following actions or enter into any
transaction which would have the effect of such transactions:
(1) except as provided in Section 7.3.C, amend, modify or
terminate this Agreement other than to reflect the admission, substitution,
termination or withdrawal of Members pursuant to Section 6.6 or Article 11
----------
or Article 12 hereof;
----------
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(2) make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian, receiver or trustee
for all or any part of the assets of the Company;
(3) institute any proceeding for bankruptcy on behalf of the
Company;
(4) confess a judgment against the Company;
(5) approve or acquiesce to the Transfer of the Membership
Interest of the Managing Member to any Person other than the Company; or
(6) admit into the Company any Additional or Substitute Managing
Member.
C. Notwithstanding Section 7.3.B, the Managing Member shall have
the exclusive power to amend this Agreement as may be required to facilitate or
implement any of the following purposes:
(1) to add to the obligations of the Managing Member or
surrender any right or power granted to the Managing Member or any
Affiliate of the Managing Member for the benefit of the Non-Managing
Members;
(2) to reflect the issuance of additional Membership Interests
pursuant to Section 4.4.D or the admission, substitution, termination, or
withdrawal of Members in accordance with this Agreement and to amend
Exhibit A in connection with such admission, substitution or withdrawal;
---------
(3) to reflect a change that is of an inconsequential nature and
does not adversely affect the Non-Managing Members in any material respect,
or to cure any ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions, or make other
changes with respect to matters arising under this Agreement that will not
be inconsistent with law or with the provisions of this Agreement;
(4) to satisfy any requirements, conditions, or guidelines
contained in any order, directive or regulation of a federal or state
agency or contained in federal or state law;
(5) to reflect such changes as are reasonably necessary for the
Managing Member to maintain its status as a REIT or to satisfy the REIT
Requirements; and
(6) to modify, as set forth in the definition of "Capital
Account," the manner in which Capital Accounts are computed; provided,
however, under no circumstances may any such modification change the amount
or the timing of any amount to be received by any Member under this
Agreement.
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The Managing Member will provide notice to the Non-Managing Members when any
action under this Section 7.3.C is taken.
D. Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement
shall not be amended with respect to any Member adversely affected, and no
action may be taken by the Managing Member, without the Consent of such Member
adversely affected if such amendment or action would (i) convert a Non-Managing
Member's interest in the Company into a managing member's interest (except as
the result of the Managing Member acquiring such interest), (ii) modify the
limited liability of a Non-Managing Member, (iii) alter rights of the Member to
receive distributions pursuant to Article 5 or Section 13.2.A(4), or the
---------
allocations specified in Article 6 (except as permitted pursuant to Section 4.4
---------
and Section 7.3.C(3) hereof), (iv) materially alter or modify the rights to an
Exchange as set forth in Section 8.6, and related definitions hereof or (v)
amend this Section 7.3.D. Further, no amendment may alter the restrictions on
the Managing Member's authority set forth elsewhere in this Section 7.3 without
the Consent specified in such section. Any such amendment or action consented
to by any Member shall be effective as to that Member, notwithstanding the
absence of such consent by any other Member.
E. The Managing Member shall not, on behalf of the Company, take
any of the following actions without the prior Consent of the Non-Managing
Members:
(1) dissolve the Company, other than incident to a Termination
Transaction (as defined in Section 11.2); or
(2) except in connection with a tax-free transaction, sell,
dispose, convey or otherwise transfer any of the real properties the
Company acquired in connection with the transactions consummated pursuant
to the Contribution Agreement (collectively, the "Real Properties") for (i)
a period of ten years from the Effective Date in the case of the Real
Properties commonly known as The Highlands and Somerset Park, (ii) a period
of eight years from the Effective Date in the case of all Real Properties
other than the Real Properties commonly known as The Highlands and Somerset
Park, or (iii) for a period of one year from the Effective Date if the
Managing Member determines that the proceeds from the sale of a Real
Property (other than The Highlands and Somerset Park) will be less than or
equal to the tax basis in that Real Property of the Member credited with
its contribution to the Company and the Managing Member so notifies such
Member 45 days prior to consummating such sale the foregoing Real Property
being referred to herein as an "Excepted Property"; provided, however, that
nothing in this Section 7.3.E(2) shall restrict the ability of the Managing
Member acting on behalf of the Company, to encumber any Real Property.
SECTION 7.4. REIMBURSEMENT OF THE MANAGING MEMBER
A. The Managing Member shall not be compensated for its services as
the Managing Member of the Company. Distributions, payments and allocations to
which the Managing Member may be entitled in its capacity as the Managing Member
shall not constitute
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compensation for services rendered by the Managing Member as provided in this
Agreement (including the provisions of Articles 5 and 6 hereof).
----------------
B. Subject to Sections 7.4.C and 15.12 hereof, the Company shall be
liable, and shall reimburse the Managing Member on a monthly basis (or such
other basis as the Managing Member may determine in its sole and absolute
discretion), for all sums expended in connection with the Company's business.
Any such reimbursements shall be in addition to any reimbursement of the
Managing Member as a result of indemnification pursuant to Section 7.7 hereof.
C. To the extent practicable, Company expenses shall be billed
directly to and paid by the Company. Subject to Sections 7.1.C and 15.12
hereof, reimbursements to the Managing Member or any of its Affiliates by the
Company shall be allowed, however, for the actual cost to the Managing Member or
any of its Affiliates of operating and other expenses of the Company, including,
without limitation, the actual cost of goods, materials and administrative
services related to (i) Company operations, (ii) Company accounting, (iii)
communications with Members, (iv) legal services, (v) tax services, (vi)
computer services, (vii) risk management, (viii) mileage and travel expenses and
(ix) such other related operational and administrative expenses as are necessary
for the prudent organization and operation of the Company. "Actual cost of
goods and materials" means the actual cost to the Managing Member or any of its
Affiliates of goods and materials used for or by the Company obtained from
entities not affiliated with the Managing Member, and "actual cost of
administrative services" means the pro rata cost of personnel (as if such
persons were employees of the Company) providing administrative services to the
Company. The cost for such services to be reimbursed to the Managing Member or
any Affiliate thereof shall be the lesser of the Managing Member's or
Affiliate's actual cost, or the amount the Company would be required to pay to
independent parties for comparable administrative services in the same
geographic location.
D. The Managing Member shall also be reimbursed for all expenses it
incurs relating to any issuance of additional Membership Interests or Debt of
the Company (including, without limitation, all costs, expenses, damages and
other payments resulting from or arising in connection with litigation related
to the foregoing), all of which expenses are considered by the Members to
constitute expenses of, and for the benefit of, the Company.
To the extent that reimbursements to the Managing Member or any of its
Affiliates by the Company pursuant to this Section 7.4 would constitute gross
income to the Managing Member for purposes of Code Section 856(c)(2) or
856(c)(3), then such amounts shall be treated as "guaranteed payments" within
the meaning of Code Section 707(c).
SECTION 7.5. OTHER BUSINESS OF MANAGING MEMBER
The Managing Member shall devote to the Company such time as may be
necessary for the performance of its duties as Managing Member, but the Managing
Member is not required, and is not expected, to devote its full time to the
performance of such duties. The Managing Member may engage independently or
with others in other business ventures of every nature and description,
including, without limitation, the ownership of other properties and the
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making or management of other investments. Nothing in this Agreement shall be
deemed to prohibit the Managing Member or any Affiliate of the Managing Member
from dealing, or otherwise engaging in business with, Persons transacting
business with the Company, or from providing services related to the purchase,
sale, financing, management, development or operation of real or personal
property and receiving compensation therefor, not involving any rebate or
reciprocal arrangement that would have the effect of circumventing any
restriction set forth herein upon dealings with the Managing Member or any
Affiliate of the Managing Member. Neither the Company nor any Member shall have
any right by virtue of this Agreement or the relationship created hereby in or
to such other ventures or activities or to the income or proceeds derived
therefrom, and the pursuit of such ventures, even if competitive with the
business of the Company, shall not be deemed wrongful or improper.
SECTION 7.6 CONTRACTS WITH AFFILIATES
A. Subject to Section 7.6.B below, the Company may lend or
contribute to Persons in which it has an equity investment, and such Persons may
borrow funds from the Company, on terms and conditions established in the sole
and absolute discretion of the Managing Member. The foregoing authority shall
not create any right or benefit in favor of any Person.
B. Neither the Managing Member nor any of its Affiliates, directly
or indirectly, shall sell, transfer or convey any property to, or purchase any
property from, or borrow funds from, or lend funds to, the Company or engage in
any other transaction with the Company, except upon terms determined by the
Managing Member in good faith to be fair and reasonable and comparable to terms
that could be obtained from an unaffiliated party in an arm's length
transaction. Nothing contained in this Section 7.6.B or any other provision of
this Agreement shall be deemed to limit the authority of the Managing Member to
enter into the Approved Guaranty on behalf of the Company, to make the Approved
Loan to the Company, to execute the Approved Note on behalf of the Company, to
make a Managing Member Loan to the Company on the terms described in Section
4.4.C, to effect the Blue Ravine Merger on behalf of the Company or to assume
the Blue Ravine Loan on behalf of the Company upon consummation of the Blue
Ravine Merger.
C. The Company may transfer assets to joint ventures, limited
liability companies, partnerships, corporations, business trusts or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the Managing Member, in its sole and absolute discretion,
believes to be advisable.
D. The Managing Member in its sole and absolute discretion and
without the approval of the Non-Managing Members, may propose and adopt on
behalf of the Company employee benefit plans funded by the Company for the
benefit of employees of the Managing Member, the Company, Subsidiaries of the
Company or any Affiliate of any of them in respect of services performed,
directly or indirectly, for the benefit of the Company or any of the Company's
Subsidiaries.
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E. The Managing Member is expressly authorized to enter into, in
the name and on behalf of the Company, a right of first opportunity arrangement
and other conflict avoidance agreements with various Affiliates of the Company
and the Managing Member, on such terms as the Managing Member, in its sole and
absolute discretion, believes are advisable.
SECTION 7.7. INDEMNIFICATION
A. To the fullest extent permitted by applicable law, the Company
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
attorney's fees and other legal fees and expenses), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, that
relate to the operations of the Company ("Actions") as set forth in this
Agreement in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise, for any indebtedness of the Company or any Subsidiary of the Company
(including, without limitation, any indebtedness which the Company or any
Subsidiary of the Company has assumed or taken subject to), and the Managing
Member is hereby authorized and empowered, on behalf of the Company, to enter
into one or more indemnity agreements consistent with the provisions of this
Section 7.7 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. The termination of any proceeding by judgment, order
or settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 7.7.A. The termination
of any proceeding by conviction or upon a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, creates a
rebuttable presumption that the Indemnitee acted in a manner contrary to that
specified in this Section 7.7.A with respect to the subject matter of such
proceeding. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Company and any insurance proceeds from the liability
policy covering the Managing Member and any Indemnitees, and neither the
Managing Member nor any Non-Managing Member shall have any obligation to
contribute to the capital of the Company or otherwise provide funds to enable
the Company to fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to
a proceeding or otherwise subject to or the focus of or is involved in any
Action shall be paid or reimbursed by the Company as incurred by the Indemnitee
in advance of the final disposition of the Action upon receipt by the Company of
(i) a written affirmation by the Indemnitee of the Indemnitee's good faith
belief that the standard of conduct necessary for indemnification by the Company
as authorized in Section 7.7.A has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
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C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Members, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written agreement with
such Indemnitee or in the writing pursuant to which such Indemnitee is
indemnified.
D. The Company may, but shall not be obligated to, purchase and
maintain insurance, on behalf of any of the Indemnitees and such other Persons
as the Managing Member shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in connection
with the Company's activities, regardless of whether the Company would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.7, (i) the Company shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Company also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 7.7 and (iii) actions
taken or omitted by the Indemnitee with respect to an employee benefit plan in
the performance of its duties for a purpose reasonably believed by it to be in
the interest of the participants and beneficiaries of the plan shall be deemed
to be for a purpose which is not opposed to the best interests of the Company.
F. In no event may an Indemnitee subject any of the Members to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Company's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
I. If and to the extent any reimbursements to the Managing Member
pursuant to this Section 7.7 constitute gross income to the Managing Member (as
opposed to the repayment of advances made by the Managing Member on behalf of
the Company) such amounts shall constitute guaranteed payments within the
meaning of Code Section 707(c), shall be treated
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consistently therewith by the Company and all Members, and shall not be treated
as distributions for purposes of computing the Members' Capital Accounts.
SECTION 7.8 LIABILITY OF THE MANAGING MEMBER
A. Notwithstanding anything to the contrary set forth in this
Agreement, neither the Managing Member nor any of its directors or officers
shall be liable or accountable in damages or otherwise to the Company, any
Members or any Assignees for losses sustained, liabilities incurred or benefits
not derived as a result of errors in judgment or mistakes of fact or law or of
any act or omission if the Managing Member or such director or officer acted in
good faith.
B. The Non-Managing Members expressly acknowledge that the Managing
Member is acting for the benefit of the Company, the Members and the Managing
Member's shareholders collectively, that the Managing Member is under no
obligation to give priority to the separate interests of the Members or the
Managing Member's shareholders (including, without limitation, the tax
consequences to Members, Assignees or the Managing Member's shareholders) in
deciding whether to cause the Company to take (or decline to take) any actions
and that the Managing Member shall not be liable to the Company or to any Member
for monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Non-Managing Members in connection with such decisions, provided that
the Managing Member has acted in good faith.
C. Subject to its obligations and duties as Managing Member set
forth in Section 7.1.A hereof, the Managing Member may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its employees or agents. The
Managing Member shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the Managing Member's, and its officers' and directors',
liability to the Company and the Non-Managing Members under this Section 7.8 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
SECTION 7.9. OTHER MATTERS CONCERNING THE MANAGING MEMBER
A. The Managing Member may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it in good faith to be genuine and to have been signed
or presented by the proper party or parties.
B. The Managing Member may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental
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consultants and other consultants and advisers selected by it, and any act taken
or omitted to be taken in reliance upon the opinion of such Persons as to
matters that the Managing Member reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
C. The Managing Member shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the Managing Member in the power of attorney,
have full power and authority to do and perform all and every act and duty that
is permitted or required to be done by the Managing Member hereunder.
D. Notwithstanding any other provisions of this Agreement or the
Act, any action of the Managing Member on behalf of the Company or any decision
of the Managing Member to refrain from acting on behalf of the Company
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Managing Member to continue
to qualify as a REIT, (ii) for the Managing Member otherwise to satisfy the REIT
Requirements or (iii) to allow the Managing Member to avoid incurring any
liability for taxes under Section 857 or Section 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the Non-
Managing Members.
E. In connection with any pledge by a Non-Managing Member of its
LLC Units to a lending institution pursuant to Section 11.3 hereof, the Managing
Member agrees to cooperate in providing to the Non-Managing Member the following
documents as may reasonably be requested by the lending institution from time to
time and upon ten (10) days prior notice from the requesting Non-Managing
Member: (i) a certificate from the Managing Member certifying that as of a
specific date there have been no amendments to its organizational documents or
this Agreement; (ii) certified copies of the Certificate and the organizational
documents of the Managing Member; (iii) good standing certificates for the
Managing Member and the Company; (iv) a letter from the Managing Member
acknowledging the pledge by the Non-Managing Member of its LLC Units; and (v) an
opinion of counsel regarding the transferability of the REIT Shares into which
the LLC Units may be exchanged. The Non-Managing Member requesting any of the
foregoing shall pay the reasonable expenses incurred by the Company and the
Managing Member in providing any of the foregoing.
SECTION 7.10. TITLE TO COMPANY ASSETS
Title to Company assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Company as an entity,
and no Member, individually or collectively with other Members or Persons, shall
have any ownership interest in such Company assets or any portion thereof.
Title to any or all of the Company assets may be held in the name of the
Company, the Managing Member or one or more nominees, as the Managing Member may
determine, including Affiliates of the Managing Member. The Managing Member
hereby declares and warrants that any Company assets for which legal title is
held in the name of the Managing Member or any nominee or Affiliate of the
Managing Member
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shall be held by the Managing Member for the use and benefit of the Company in
accordance with the provisions of this Agreement; provided, however, that the
Managing Member shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Company as soon as reasonably practicable.
All Company assets shall be recorded as the property of the Company in its books
and records, irrespective of the name in which legal title to such Company
assets is held.
SECTION 7.11. RELIANCE BY THIRD PARTIES
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Company shall be entitled to assume that the Managing Member
has full power and authority, without the consent or approval of any other
Member or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Company and to enter into any contracts on behalf of the Company,
and take any and all actions on behalf of the Company, and such Person shall be
entitled to deal with the Managing Member as if it were the Company's sole party
in interest, both legally and beneficially. In no event shall any Person
dealing with the Managing Member or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expediency of any act or action of the Managing Member or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Company by the Managing Member or its representatives
shall be conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (ii) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Company and (iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and is
binding upon the Company.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF MEMBERS
SECTION 8.1. LIMITATION OF LIABILITY
The Non-Managing Members shall have no liability under this Agreement
except as expressly provided in this Agreement or under the Act.
SECTION 8.2. MANAGING OF BUSINESS
No Non-Managing Members or Assignee (other than the Managing Member,
any of its Affiliates or any officer, director, employee, partner, agent or
trustee of the Managing Member, the Company or any of their Affiliates, in their
capacity as such) shall take part in the operations, management or control
(within the meaning of the Act) of the Company's business, transact any business
in the Company's name or have the power to sign documents for or otherwise bind
the Company. The transaction of any such business by the Managing Member, any
of its Affiliates or any officer, director, employee, partner, agent or trustee
of the Managing Member, the Company or any of their Affiliates, in their
capacity as such, shall not affect, impair
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or eliminate the limitations on the liability of the Non-Managing Members or
Assignees under this Agreement.
SECTION 8.3. OUTSIDE ACTIVITIES OF MEMBERS
Subject to any agreements entered into pursuant to Section 7.6 hereof
and any other agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary (including, without limitation, any
employment agreement), any Member and any Assignee, officer, director, employee,
agent, trustee, Affiliate or shareholder of any Member shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Company, including business interests and activities that
are in direct or indirect competition with the Company or that are enhanced by
the activities of the Company. Neither the Company nor any Member shall have
any rights by virtue of this Agreement in any business ventures of any Member or
Assignee. Subject to such agreements, none of the Members nor any other Person
shall have any rights by virtue of this Agreement or the relationship
established hereby in any business ventures of any other Person (other than the
Managing Member, to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement, subject to Section 7.6 hereof and
any other agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary, to offer any interest in any such
business ventures to the Company, any Member or any such other Person, even if
such opportunity is of a character that, if presented to the Company, any Member
or such other Person, could be taken by such Person.
SECTION 8.4. RETURN OF CAPITAL
Except pursuant to the rights of Exchange set forth in Section 8.6
hereof, no Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. Except as
otherwise expressly provided in this Agreement, no Member or Assignee shall have
priority over any other Member or Assignee either as to the return of Capital
Contributions or as to profits, losses, distributions or credits.
SECTION 8.5. RIGHTS OF NON-MANAGING MEMBERS RELATING TO THE COMPANY
A. In addition to other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Non-Managing Member
shall have the right, upon written demand with a statement of the purpose of
such demand and at such Non-Managing Member's own expense:
(1) to obtain a copy of (i) the most recent annual and
quarterly reports filed with the SEC by the Managing Member pursuant to the
Exchange Act and (ii) each report or other written communication sent to
the shareholders of the Managing Member;
(2) to obtain a copy of the Company's federal, state and
local income tax returns for each Fiscal Year;
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(3) to obtain a current list of the name and last known
business, residence or mailing address of each Member;
(4) to obtain a copy of this Agreement and the Certificate
and all amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount
of cash and a description and statement of any other property or services
contributed by each Member and that each Member has agreed to contribute in
the future, and the date on which each became a Member.
B. The Company shall notify any Non-Managing Member of the then
current Adjustment Factor or any change made to the Adjustment Factor or to the
REIT Shares Amount each time such a change occurs.
C. Notwithstanding any other provision of this Section 8.5, the
Managing Member may keep confidential from the Non-Managing Members, for such
period of time as the Managing Member determines in its reasonable discretion,
any information that (i) the Managing Member reasonably believes to be in the
nature of trade secrets or other information the disclosure of which the
Managing Member in good faith believes is not in the best interests of the
Company or could damage the Company or its business or (ii) the Company or the
Managing Member is required by law or by agreements with unaffiliated third
parties to keep confidential.
SECTION 8.6. EXCHANGE RIGHTS
A. On or after the date one year after the Effective Date, each
Non-Managing Member shall have the right (subject to the terms and conditions
set forth herein) to require the Managing Member to acquire all or a portion of
the LLC Units held by such Non-Managing Member (such LLC Units being hereafter
called "Tendered Units") in exchange (an "Exchange") for, at the election of and
in the sole and absolute discretion of the Managing Member, either the Cash
Amount or a number of REIT Shares equal to the REIT Shares Amount payable on the
Specified Exchange Date. Any Exchange shall be exercised pursuant to a Notice of
Exchange delivered to the Managing Member by the Non-Managing Member exercising
the Exchange right (the "Tendering Party"). On the Specified Exchange Date, the
Tendering Party shall sell the Tendered Units to the Managing Member in exchange
for, at the election of and in the sole and absolute discretion of the Managing
Member, either the Cash Amount or a number of REIT Shares equal to the REIT
Shares Amount in each case computed as of the Specified Exchange Date. In
addition, the Managing Member shall cause the Company to pay the Tendering Party
the amount of any Preferred Return Shortfall outstanding as of the Specified
Exchange Date with respect to the Tendered Units. The Tendering Party shall
submit (i) such information, certification or affidavit as the Managing Member
may reasonably require in connection with the application of the Ownership Limit
and the application of any restrictions and limitations of the Charter to any
such Exchange and (ii) such written representations, investment letters, legal
opinions or other instruments reasonably necessary, in the Managing
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Member's view, to effect compliance with the Securities Act. If applicable, the
Cash Amount shall be delivered as a certified check payable to the Tendering
Party or, in the Managing Member's sole discretion, in immediately available
funds. If applicable, the REIT Shares Amount shall be delivered by the Managing
Member as duly authorized, validly issued, fully paid and nonassessable REIT
Shares and, if applicable, Rights, free of any pledge, lien, encumbrance or
restriction, other than the Ownership Limit and other restrictions provided in
the Charter, the Bylaws of the Managing Member, the Securities Act and relevant
state securities or "blue sky" laws. Neither any Tendering Party whose Tendered
Units are acquired by the Managing Member pursuant to this Section 8.6.A, any
other Member, any Assignee nor any other interested Person shall have any right
to require or cause the Managing Member to register, qualify or list any REIT
Shares owned or held by such Person, whether or not such REIT Shares are issued
pursuant to this Section 8.6.A, with the SEC, with any state securities
commissioner, department or agency, under the Securities Act or the Exchange Act
or with any stock exchange; provided, however, that this limitation shall not be
in derogation of any registration or similar rights granted pursuant to any
other written agreement between the Managing Member and any such Person.
Notwithstanding any delay in such delivery, the Tendering Party shall be deemed
the owner of such REIT Shares and Rights for all purposes, including, without
limitation, rights to vote or consent, receive dividends, and exercise rights,
as of the Specified Exchange Date. REIT Shares issued upon an acquisition of the
Tendered Units by the Managing Member pursuant to this Section 8.6.A may contain
such legends regarding restrictions under the Securities Act and applicable
state securities laws as the Managing Member in good faith determines to be
necessary or advisable in order to ensure compliance with such laws.
B. Notwithstanding the foregoing, until such time as the Managing
Member shall have obtained the shareholder approval to do so if required by and
in compliance with Section 312.03 of the New York Stock Exchange Listed Company
Manual (the "Manual"), the Managing Member will be prohibited from issuing REIT
Shares in exchange for LLC Units (and will be required, therefore, to pay cash
in lieu of REIT Shares) to the extent that the REIT Shares to be issued upon an
Exchange, when combined with (i) all REIT Shares previously issued in connection
with an Exchange of LLC Units, plus (ii) the number of REIT Shares issued or
issuable (other than in connection with an Exchange of LLC Units) in connection
with the transactions contemplated by the Contribution Agreement, either (A)
have or will have upon issuance voting power in excess of 19.9% of the voting
power of the Managing Member outstanding immediately prior to the Effective
Date, or (B) are or will be in excess of 19.9% of the number of REIT Shares
outstanding immediately prior to the Effective Date where (in each instance) the
meaning of "voting power" and "voting power outstanding" and the calculation of
"outstanding" shares are in compliance with the requirements of Section 312.03
of the Manual.
C. Notwithstanding the provisions of Section 8.6.A hereof, any
Excess LLC Units held by a Non-Managing Member which are tendered for Exchange
will be purchased by the Managing Member for the Cash Amount and such Non-
Managing Member will have no right to receive the REIT Shares Amount in exchange
for its tendered Excess LLC Units.
D. Notwithstanding anything herein to the contrary, with respect to
any Exchange pursuant to this Section 8.6:
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(1) Without the Consent of the Managing Member, no Non-
Managing Member may effect an Exchange for less than 1,000 LLC Units or, if
the Non-Managing Member holds less than 1,000 LLC Units, less than all of
the LLC Units held by such Non-Managing Member.
(2) The consummation of any Exchange shall be subject to the
expiration or termination of the applicable waiting period, if any, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(3) Each Tendering Party shall continue to own all LLC Units
subject to any Exchange, and be treated as a Member with respect to such
LLC Units for all purposes of this Agreement, until such LLC Units are
transferred to the Managing Member and paid for or exchanged on the
Specified Exchange Date. Until a Specified Exchange Date and an acquisition
of the Tendered Units by the Managing Member pursuant to Section 8.6.A
hereof, the Tendering Party shall have no rights as a shareholder of the
Managing Member with respect to the REIT Shares issuable in connection with
such acquisition.
E. In connection with an exercise of Exchange rights pursuant to
this Section 8.6, the Tendering Party shall submit the following to the Managing
Member, in addition to the Notice of Exchange:
(1) A written affidavit, dated the same date as, and
accompanying, the Notice of Exchange, (a) disclosing the actual and
constructive ownership, as determined for purposes of Code Sections
856(a)(6), 856(h), 856(d)(2)(B) and 856(d)(5), of REIT Shares by (i) such
Tendering Party and (ii) any Related Party and (b) representing that, after
giving effect to the Exchange, neither the Tendering Party nor any Related
Party will own REIT Shares in excess of the Ownership Limit based on the
number of shares outstanding as reported in the most recent filing made by
the Managing Member with the SEC;
(2) A written representation that neither the Tendering
Party nor any Related Party has any intention to acquire any additional
REIT Shares prior to the closing of the Exchange on the Specified Exchange
Date; and
(3) An undertaking to certify, at and as a condition to the
closing of the Exchange that either (a) the actual and constructive
ownership of REIT Shares by the Tendering Party and any Related Party
remain unchanged from that disclosed in the affidavit required by Section
8.6.E(1) or (b) after giving effect to the Exchange, neither the Tendering
Party nor any Related Party shall own REIT Shares in violation of the
Ownership Limit based on the number of shares outstanding as reported in
the most recent filing made by the Managing Member with the SEC.
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ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1. RECORDS AND ACCOUNTING
A. The Managing Member shall keep or cause to be kept at the
principal office of the Company those records and documents required to be
maintained by the Act and other books and records deemed by the Managing Member
to be appropriate with respect to the Company's business, including, without
limitation, all books and records necessary to provide to the Members any
information, lists and copies of documents required to be provided pursuant to
Section 8.5 and 9.3 hereof. Any records maintained by or on behalf of the
Company in the regular course of its business may be kept on, or be in the form
of, punch cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time.
B. The books of the Company shall be maintained, for financial and
tax reporting purposes, on an accrual basis in accordance with generally
accepted accounting principles, or on such other basis as the Managing Member
determines to be necessary or appropriate. To the extent permitted by sound
accounting practices and principles, the Company and the Managing Member may
operate with integrated or consolidated accounting records, operations and
principles.
SECTION 9.2. FISCAL YEAR
The Fiscal Year of the Company shall be the calendar year.
SECTION 9.3. REPORTS
A. As soon as practicable, but in no event later than 105 days after
the close of each Fiscal Year, the Managing Member shall cause to be mailed to
each Member, of record as of the close of the Fiscal Year, an annual report
containing financial statements of the Company, or of the Managing Member if
such statements are prepared solely on a consolidated basis with the Managing
Member, for such Fiscal Year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally recognized
firm of independent public accountants selected by the Managing Member.
B. As soon as practicable, but in no event later than 60 days after
the close of each calendar quarter (except the last calendar quarter of each
year), the Managing Member shall cause to be mailed to each Member, of record as
of the last day of the calendar quarter, a report containing unaudited financial
statements of the Company, or of the Managing Member, if such statements are
prepared solely on a consolidated basis with the Managing Member, and such other
information as may be required by applicable law or regulation or as the
Managing Member determines to be appropriate.
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ARTICLE 10.
TAX MATTERS
SECTION 10.1. PREPARATION OF TAX RETURNS
The Managing Member shall arrange for the preparation and timely
filing of all returns with respect to Company income, gains, deductions, losses
and other items required of the Company for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within 90 days of the
close of each taxable year, the tax information reasonably required by Members
for federal and state income tax reporting purposes.
SECTION 10.2. TAX ELECTIONS
Except as otherwise provided herein, the Managing Member shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code, including, without limitation, the election under Section
754 of the Code. The Managing Member shall have the right to seek to revoke any
such election (including, without limitation, any election under Code Sections
754) upon the Managing Member's determination in its sole and absolute
discretion that such revocation is in the best interests of the Members.
SECTION 10.3. TAX MATTERS PARTNER
A. The Managing Member shall be designated and shall operate as "Tax
Matters Partner" (as defined in Code Section 6231), to oversee or handle matters
relating to the taxation of the Company and shall notify each Member of any
material proposed adjustment to any income tax return of the Company.
B. The Member designated as "Tax Matters Partner" may make all
elections for federal income and all other tax purposes (including, without
limitation, pursuant to Code Section 754).
C. Income tax returns of the Company shall be prepared by such
certified public accountant(s) as the Managing Member shall retain at the
expense of the Company.
SECTION 10.4. ORGANIZATIONAL EXPENSES
The Company shall elect to deduct expenses, if any, incurred by it in
organizing the Company ratably over a 60-month period as provided in Code
Section 709.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
SECTION 11.1. TRANSFER
A. No part of the Membership Interest of a Member shall be subject to
the claims of any creditor, to any spouse for alimony or support, or to legal
process, and may not be
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voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement.
B. No Membership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
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Any Transfer or purported Transfer of a Membership Interest not made in
accordance with this Article 11 shall be null and void ab initio.
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SECTION 11.2. TRANSFER OF MANAGING MEMBER'S MEMBERSHIP INTEREST
A. Except in connection with a transaction described in Section
11.2.B, the Managing Member shall not withdraw from the Company and shall not
Transfer all or any portion of its interest in the Company without the Consent
of all of the Non-Managing Members, which may be given or withheld by each Non-
Managing Member in its sole and absolute discretion. Upon any transfer of the
Membership Interest of the Managing Member in accordance with the provisions of
this Section 11.2, the transferee shall become a Substitute Managing Member for
all purposes herein, and shall be vested with the powers and rights of the
transferor Managing Member, and shall be liable for all obligations and
responsible for all duties of the Managing Member, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Membership Interest so
acquired. It is a condition to any Transfer otherwise permitted hereunder that
the transferee assumes, by operation of law or express agreement, all of the
obligations of the transferor Managing Member under this Agreement with respect
to such Transferred Membership Interest, and such Transfer shall relieve the
transferor Managing Member of its obligations under this Agreement accruing
subsequent to the date of such Transfer. In the event the Managing Member
withdraws from the Company, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Incapacity of the Managing
Member, a Majority in Interest of the Non-Managing Members may elect to continue
the Company business by selecting a Substitute Managing Member in accordance
with the Act.
B. The Managing Member shall not engage in any merger, consolidation
or other combination with or into another person, sale of all or substantially
all of its assets or any reclassification, recapitalization or change of its
outstanding equity interests (a "Termination Transaction"), unless either (i)
the Termination Transaction has been approved by the Consent of the Non-Managing
Members or (ii) in connection with the Termination Transaction, all holders of
LLC Units (other than the Managing Member) either will receive, or will have the
right to elect to receive, for each LLC Unit an amount of cash, securities, or
other property equal to the amount that would have been paid to the holder had
the LLC Unit been Exchanged for REIT Shares pursuant to Section 8.6 hereof
immediately prior to the consummation of the Termination Transaction (the
"Termination Payment"; provided, however, that, if, in connection with the
Termination Transaction, a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than fifty percent (50%) of the
outstanding REIT Shares, each Member shall have the right to elect to receive in
lieu of the Termination Payment, the greatest amount of cash, securities, or
other property which such Member would have received
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had it exchanged its LLC Units for REIT Shares pursuant to Section 8.6
immediately prior to the expiration of such purchase, tender or exchange offer
and had thereupon accepted such purchase, tender or exchange offer.
SECTION 11.3. NON-MANAGING MEMBERS' RIGHTS TO TRANSFER
A. GENERAL. No Non-Managing Member shall Transfer all or any portion
of its Membership Interest, or any of such Non-Managing Members economic rights
as a Non-Managing Member, to any transferee without the consent of the Managing
Member, which consent may be withheld in its sole and absolute discretion;
provided, however, that any Non-Managing Member may, at any time, without the
consent of the Managing Member, Transfer all or part of its Membership Interest
(i) in the case of a Member which is an individual, to any Family Member, any
trust (whether or not revocable) of which such Non-Managing Member or such Non-
Managing Member's Family Members are the sole beneficiaries, (ii) in the case of
a Member which is not an individual, to the persons who were partners,
stockholders or owners of the Member as of the Effective Date, (iii) pursuant to
a gift or other transfer without consideration, (iv) pursuant to the applicable
laws of descent or distribution, (v) to another Member, (vi) subject to the
provisions of Section 11.6, pursuant to a grant of a security interest, pledge
or other encumbrance effected in a bona fide transaction or as a result of the
exercise of remedies related to the security interest, pledge or other
encumbrance (other than, in each case, to a lender to the Company or a Person
who is related to a lender to the Company) or (vii) to any Affiliate, provided
that the transferee is, in any such case, a Qualified Transferee. Any Transfer
permitted by this proviso is referred to as a "Permitted Transfer." It is a
condition to any Transfer otherwise permitted hereunder that the transferee
assume by operation of law or express agreement all of the obligations of the
transferor Member under this Agreement with respect to such Transferred
Membership Interest. Notwithstanding the foregoing, any transferee of any
Transferred Membership Interest shall be subject to the Ownership Limits and any
and all ownership limitations contained in the Charter. Any transferee, whether
or not admitted as a Substituted Member, shall take subject to the obligations
of the transferor hereunder. Unless admitted as a Substituted Member, no
transferee, whether by a voluntary Transfer, by operation of law or otherwise,
shall have any rights hereunder, other than the rights of an Assignee as
provided in Section 11.5 hereof.
B. INCAPACITY. If a Non-Managing Member is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator or receiver
of such Non-Managing Member's estate shall have all the rights of a Non-Managing
Member, but not more rights than those enjoyed by other Non-Managing Members,
for the purpose of settling or managing the estate, and such power as the
Incapacitated Non-Managing Member possessed to Transfer all or any part of its
interest in the Company. The Incapacity of a Non-Managing Member, in and of
itself, shall not dissolve or terminate the Company.
C. OPINION OF COUNSEL. In connection with any Transfer of a
Membership Interest, the Managing Member shall have the right to receive an
opinion of counsel reasonably satisfactory to it to the effect that the proposed
Transfer may be effected without registration under the Securities Act and will
not otherwise violate any federal or state securities laws or
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regulations applicable to the Company or the Membership Interests Transferred.
If, in the opinion of such counsel, such Transfer would require the filing of a
registration statement under the Securities Act or would otherwise violate any
federal or state securities laws or regulations applicable to the Company or the
LLC Units, the Managing Member may prohibit any Transfer by a Member of
Membership Interests otherwise permitted under this Section 11.3.
D. ADVERSE TAX CONSEQUENCES. No Transfer by a Member of its
Membership Interests (including any Exchange or exchange for REIT Shares
pursuant to Section 8.6) may be made to any Person if (i) in the opinion of
legal counsel for the Company, it would result in the Company being treated as
an association taxable as a corporation for federal income tax or for state
income or franchise tax purposes, (ii) in the opinion of legal counsel for the
Company, it would adversely affect the ability of the Managing Member to
continue to qualify as a REIT or would subject the Managing Member to any
additional taxes under Code Section 857 or Code Section 4981 or (iii) such
Transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Code Section 7704.
E. TRANSFERS TO LENDERS. No Transfer of any LLC Units may be made to
a lender to the Company or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Company whose loan
constitutes a Nonrecourse Liability, without the consent of the Managing Member,
in its sole and absolute discretion; provided that, as a condition to such
consent, the lender will be required to enter into an arrangement with the
Company and the Managing Member to redeem or exchange for the REIT Shares Amount
any LLC Units in which a security interest is held simultaneously with the time
at which such lender would be deemed to be a member in the Company for purposes
of allocating liabilities to such lender under Code Section 752.
SECTION 11.4. SUBSTITUTED MEMBERS
A. No Member shall have the right to substitute a transferee
(including any transferees pursuant to Transfers permitted by Section 11.3
hereof) as a Member in its place. The Managing Member shall, however, have the
right to consent to the admission of a transferee of the interest of a Member
pursuant to this Section 11.4 as a Substituted Member, which consent may be
given or withheld by the Managing Member in its sole and absolute discretion.
The Managing Member's failure or refusal to permit a transferee of any such
interests to become a Substituted Member shall not give rise to any cause of
action against the Company or any Member.
B. A transferee who has been admitted as a Substituted Member in
accordance with this Article 11 shall have all the rights and powers and be
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subject to all the restrictions and liabilities of a Member under this
Agreement. The admission of any transferee as a Substituted Member shall be
subject to the transferee executing and delivering to the Company an acceptance
of all of the terms and conditions of this Agreement (including without
limitation, the provisions of Section 2.4 and such other documents or
instruments as may be required to effect the admission).
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C. Upon the admission of a Substituted Member, the Managing Member
shall amend Exhibit A to reflect the name, address, Capital Account, number of
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LLC Units and Percentage Interest of such Substituted Member and to eliminate or
adjust, if necessary, the name, address, Capital Account, number of LLC Units
and Percentage Interest of the predecessor of such Substituted Member (and any
other Member, as necessary).
SECTION 11.5. ASSIGNEES
If the Managing Member, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 hereof
as a Substituted Member, as described in Section 11.4 hereof, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited liability
company interest under the Act, including the right to receive distributions
from the Company and the share of Net Income, Net Losses and other items of
income, gain, loss, deduction and credit of the Company attributable to the LLC
Units assigned to such transferee, the rights to Transfer the LLC Units provided
in this Article 11, and the right of Exchange provided in Section 8.6, but shall
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not be deemed to be a holder of LLC Units for any other purpose under this
Agreement, and shall not be entitled to effect a Consent or vote with respect to
such LLC Units on any matter presented to the Members for approval (such right
to Consent or vote, to the extent provided in this Agreement or under the Act,
fully remaining with the transferor Member). In the event that any such
transferee desires to make a further assignment of any such LLC Units, such
transferee shall be subject to all the provisions of this Article 11 to the same
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extent and in the same manner as any Members desiring to make an assignment of
LLC Units. The Managing Member shall have no liability under any circumstance
with respect to any Assignee as to which it does not have notice.
SECTION 11.6. GENERAL PROVISIONS
A. No Non-Managing Member may withdraw from the Company other than as
a result of (i) a permitted Transfer of all of such Non-Managing Member's LLC
Units in accordance with this Article 11 and the transferee(s) of such LLC Units
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being admitting to the Company as a Substituted Member or (ii) pursuant to an
Exchange by the Managing Member of all of its LLC Units under Section 8.6
hereof.
B. Any Member who shall (i) Transfer all of its LLC Units in a
Transfer permitted pursuant to this Article 11 where such transferee was
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admitted as a Substituted Member or (ii) exercise its rights to effect an
Exchange of all of its LLC Units under Section 8.6 hereof, shall cease to be a
Member.
C. All distributions of Available Cash attributable to an LLC Unit
with respect to which the LLC Record Date is before the date of a Transfer or an
Exchange of the LLC Unit shall be made to the transferor Member or the
exchanging Member, as the case may be, and, in the case of a Transfer other than
an Exchange, all distributions of Available Cash thereafter attributable to such
LLC Unit shall be made to the transferee Member.
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D. In addition to any other restrictions on Transfer herein
contained, in no event may any Transfer or assignment of a Membership Interest
by any Member (including any acquisition of LLC Units by the Company) be made:
(a) to any person or entity who lacks the legal right, power or
capacity to own a Membership Interest;
(b) in violation of applicable law;
(c) if such Transfer would, in the opinion of counsel to the
Company or the Managing Member, cause an increased tax liability to any
other Member or Assignee as a result of the termination of the Company, in
either case for federal or state income or franchise tax purposes (except
as a result of the Exchange of all LLC Units held by all Members);
(d) if such Transfer would, in the opinion of legal counsel to
the Company, cause the Company either (i) to cease to be classified as a
partnership or (ii) to be classified as a publicly traded partnership
treated as a corporation, in either case for federal or state income tax
purposes (except as a result of the Exchange of all LLC Units held by all
Members);
(e) if such Transfer would cause the Company to become, with
respect to any employee benefit plan subject to Title I of ERISA, a "party-
in-interest" (as defined in ERISA Section 3(14)) or a "disqualified person"
(as defined in Code Section 4975(c));
(f) if such Transfer would, in the opinion of legal counsel to
the Company, cause any portion of the assets of the Company to constitute
assets of any employee benefit plan pursuant to Department of Labor
Regulations Section 2510.2-101;
(g) if such Transfer causes the Company (as opposed to the
Managing Member) to become a reporting company under the Exchange Act; or
(h) if such Transfer subjects the Company to regulation under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended.
ARTICLE 12.
ADMISSION OF MEMBERS
SECTION 12.1. ADMISSION OF SUCCESSOR MANAGING MEMBER
A successor to all of the Managing Member's Membership Interest
pursuant to Section 11.2 hereof who is proposed to be admitted as a successor
Managing Member shall be admitted to the Company as the Managing Member,
effective immediately upon such Transfer. Any such successor shall carry on the
business of the Company without dissolution. In each
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case, the admission shall be subject to the successor Managing Member executing
and delivering to the Company an acceptance of all of the terms, conditions and
applicable obligations of this Agreement and such other documents or instruments
as may be required to effect the admission.
SECTION 12.2. ADMISSION OF ADDITIONAL MEMBERS
A. A Person (other than an existing Member) who makes a Capital
Contribution to the Company in accordance with this Agreement shall be admitted
to the Company as an Additional Member, subject to the receipt of the Consent of
the Non-Managing Members required by Section 7.3.C, only upon furnishing to the
Managing Member (i) evidence of acceptance, in form and substance satisfactory
to the Managing Member, of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 2.4
hereof, and (ii) such other documents or instruments as may be required in the
sole and absolute discretion of the Managing Member in order to effect such
Person's admission as an Additional Member.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Member without the consent of the
Managing Member, which consent may not be unreasonably withheld. The admission
of any Person as an Additional Member shall become effective on the date upon
which the name of such Person is recorded on the books and records of the
Company, following the consent of the Managing Member to such admission.
C. All distributions of Available Cash with respect to which the LLC
Record Date is before the date of the admission of any Additional Members shall
be made solely to Members and Assignees other than the Additional Member, and
all distributions of Available Cash thereafter shall be made to all the Members
and Assignees including such Additional Member.
SECTION 12.3. AMENDMENT OF AGREEMENT AND CERTIFICATE OF MEMBERSHIP
For the admission to the Company of any Member, the Managing Member
shall take all steps necessary and appropriate under the Act to amend the
records of the Company and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
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required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.
SECTION 12.4. LIMITATION ON ADMISSION OF MEMBERS
No Person shall be admitted to the Company as a Substituted Member or
an Additional Member if, the in the opinion of legal counsel for the Company, it
would result in the Company being treated as a corporation for federal income
tax purposes or otherwise cause the Company to become a reporting company under
the Exchange Act.
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ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 13.1. DISSOLUTION
The Company shall not be dissolved by the admission of Substituted
Members or Additional Members or by the admission of a successor Managing Member
in accordance with the terms of this Agreement. Upon the withdrawal of the
Managing Member, any successor Managing Member shall continue the business of
the Company without dissolution. However, the Company shall dissolve, and its
affairs shall be wound up, upon the first to occur of any of the following (each
a "Liquidating Event"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the Managing Member, as defined in the
Act (other than an event of bankruptcy), unless within 90 days after the
withdrawal, a Majority of Remaining Members agree in writing to continue the
business of the Company and to the appointment, effective as of the date of
withdrawal, of a substitute Managing Member;
C. after September 30, 2012, an election to dissolve the Company made
by the Managing Member, in its sole and absolute discretion;
D. entry of a decree of judicial dissolution of the Company pursuant
to the provisions of the Act;
E. after September 30, 2012, the sale of all or substantially all of
the assets and properties of the Company for cash or marketable securities;
F. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the Managing Member is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the Managing Member, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect,
unless prior to or within ninety days after the entry of such order or judgment
a Majority in Interest of the remaining Members Consent in writing to continue
the business of the Company and to the appointment, effective as of a date prior
to the date of such order or judgment, of a substitute Managing Member;
G. the Incapacity of the Managing Member, unless a Majority of
Remaining Members agree in writing to continue the business of the Company and
to the appointment, effective as of a date prior to the date of such Incapacity,
of a substitute Managing Member; or
H. the Exchange of all LLC Units (other than those of the Managing
Member).
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SECTION 13.2. WINDING UP
A. Upon the occurrence of a Liquidating Event, the Company shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its creditors and Members.
After the occurrence of a Liquidating Event, no Member shall take any action
that is inconsistent with, or not necessary to or appropriate for, the winding
up of the Company's business and affairs. The Managing Member (or, in the event
that there is no remaining Managing Member, any Person elected by a Majority in
Interest of the Non-Managing Members (the Managing Member or such other Person
being referred to herein as the "Liquidator")) shall be responsible for
overseeing the winding up and dissolution of the Company and shall take full
account of the Company's liabilities and property, and the Company property
shall be liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds therefrom (which may, to the extent determined by the
Managing Member, include shares of stock in the Managing Member) shall be
applied and distributed in the following order:
(1) First, to the satisfaction of all of the Company's debts and
liabilities to creditors other than the Members and their Assignees
(whether by payment or the making of reasonable provision for payment
thereof);
(2) Second, to the satisfaction of all of the Company's debts and
liabilities to the Managing Member (whether by payment or the making of
reasonable provision for payment thereof), including, but not limited to,
amounts due as reimbursements under Section 7.4 hereof;
(3) Third, to the satisfaction of all of the Company's debts and
liabilities of the other Members and any Assignees (whether by payment or
the making of reasonable provision for payment thereof); and
(4) The balance, if any, to the Members and any Assignees in
accordance with and proportion to their positive Capital Account balances,
after giving effect to all contributions, distributions and allocations for
all periods.
The Managing Member shall not receive any additional compensation for any
services performed pursuant to this Article 13.
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B. Notwithstanding the provisions of Section 13.2.A hereof that
require liquidation of the assets of the Company, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Company the
Liquidator determines that an immediate sale of part of all of the Company's
assets would be impractical or would cause undue loss to the Members, the
Liquidator may, in its sole and absolute discretion, defer for a reasonable time
the liquidation of any assets except those necessary to satisfy liabilities of
(including to those Members as creditors) and/or distribute to the
Members, in lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2.A hereof, undivided interests in such Company assets
as the Liquidator deems not suitable for liquidation. Any such distributions in
kind shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Members, and shall be
subject to such
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conditions relating to the disposition and management of such properties as the
Liquidator deems reasonable and equitable and to any agreements governing the
operation of such properties at such time. The Liquidator shall determine the
fair market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
C. In the event that the Company is "liquidated" within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the Members and Assignees that have positive
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Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2)
to the extent of, and in proportion to, their positive Capital Account balances.
If any Member has a deficit balance in its Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Member shall have
no obligation to make any contribution to the capital of the Company with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any purpose whatsoever. In the sole and
absolute discretion of the Managing Member or the Liquidator, a pro rata portion
of the distributions that would otherwise be made to the Members pursuant to
this Article 13 may be withheld or escrowed to provide a reasonable reserve for
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Company liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Company, provided that such
withheld or escrowed amounts shall be distributed to the Members in the manner
and order of priority set forth in Section 13.2.A hereof as soon as practicable.
SECTION 13.3. DEEMED DISTRIBUTION AND RECONTRIBUTION
Notwithstanding any other provision of this Article 13, in the event
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that the Company is liquidated within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Company's Property
shall not be liquidated, the Company's liabilities shall not be paid or
discharged and the Company's affairs shall not be wound up. Instead, for
federal and state income tax purposes, the Company shall be deemed to have
distributed its assets in kind to the Members, who shall be deemed to have
assumed and taken such assets subject to all Company liabilities, all in
accordance with their respective Capital Accounts. Immediately thereafter, the
Members shall be deemed to have recontributed the Company assets in kind to the
Company, which shall be deemed to have assumed and taken such assets subject to
all such liabilities.
SECTION 13.4. RIGHTS OF MEMBERS
Except as otherwise provided in this Agreement, (a) each Member shall
look solely to the assets of the Company for the return of its Capital
Contribution, (b) no Member shall have the right or power to demand or receive
property other than cash from the Company and (c) no Member shall have priority
over any other Member as to the return of its Capital Contributions,
distributions or allocations.
SECTION 13.5. NOTICE OF DISSOLUTION
In the event that a Liquidating Event occurs or an event occurs that
would, but for an election or objection by one or more Members pursuant to
Section 13.1 hereof, result in a
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dissolution of the Company, the Managing Member shall, within 30 days
thereafter, provide written notice thereof to each of the Members and, in the
Managing Member's sole and absolute discretion or as required by the Act, to all
other parties with whom the Company regularly conducts business (as determined
in the sole and absolute discretion of the Managing Member), and the Managing
Member may, or, if required by the Act, shall, publish notice thereof in a
newspaper of general circulation in each place in which the Company regularly
conduct business (as determined in the sole and absolute discretion of the
Managing Member).
SECTION 13.6. CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the liquidation of the Company cash and
property as provided in Section 13.2 hereof, the Company shall be terminated and
the Certificate and all qualifications of the Company as a foreign limited
liability company in jurisdictions other than the State of Delaware shall be
cancelled and such other actions as may be necessary to terminate the Company
shall be taken.
SECTION 13.7. REASONABLE TIME FOR WINDING-UP
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Company and the liquidation of its assets pursuant
to Section 13.2 hereof, in order to minimize any losses otherwise attendant upon
such winding-up, and the provisions of this Agreement shall remain in effect
between the Members during the period of liquidation.
SECTION 13.8. LIABILITY OF LIQUIDATOR
The Liquidator shall be indemnified and held harmless by the Company
from and against any and all claims, liabilities, costs, damages, and causes of
action of any nature whatsoever arising out of or incidental to the Liquidator's
taking of any action authorized under or within the scope of this Agreement;
provided, however, that the Liquidator shall not be entitled to indemnification,
and shall not be held harmless, where the claim, demand, liability, cost, damage
or cause of action at issue arises out of (i) a matter entirely unrelated to the
Liquidator's action or conduct pursuant to the provisions of this Agreement or
(ii) the proven willful misconduct or gross negligence of the Liquidator.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS
SECTION 14.1. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS
The actions requiring consent or approval of Non-Managing Members
pursuant to this Agreement, including Section 7.3 hereof, or otherwise pursuant
to applicable law, are subject to the procedures set forth in this Article 14.
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SECTION 14.2. AMENDMENTS
Amendments to this Agreement may be proposed by the Managing Member or
by a Majority in Interest of the Non-Managing Members. Following such proposal,
the Managing Member shall submit any proposed amendment to the Members. The
Managing Member shall seek the written Consent of the Members on the proposed
amendment or shall call a meeting to vote thereon and to transact any other
business that the Managing Member may deem appropriate. The affirmative vote or
consent, as applicable, of the Managing Member and a Majority in Interest of the
Non-Managing Members is required for the approval of a proposed amendment. For
purposes of obtaining a written consent, the Managing Member may require a
response within a reasonable specified time, but not less than 15 days, and
failure to respond in such time period shall constitute a consent that is
consistent with the Managing Member's recommendation with respect to the
proposal; provided, however, that an action shall become effective at such time
as requisite consents are received even if prior to such specified time.
SECTION 14.3. MEETINGS OF THE MEMBERS
A. Meetings of the Members may be called by the Managing Member and
shall be called upon the receipt by the Managing Member of a written request by
a Majority in Interest of the Non-Managing Members. The call shall state the
nature of the business to be transacted. Notice of any such meeting shall be
given to all Members not less than seven days nor more than 30 days prior to the
date of such meeting. Members may vote in person or by proxy at such meeting.
Whenever the vote or Consent of Members is permitted or required under this
Agreement, such vote or Consent may be given at a meeting of Members or may be
given in accordance with the procedure prescribed in Section 14.3.B hereof.
B. Any action required or permitted to be taken at a meeting of the
Members may be taken without a meeting if a written consent setting forth the
action so taken is signed by Members holding a majority of the LLC Units (or
such other percentage as is expressly required by this Agreement for the action
in question). Such consent may be in one instrument or in several instruments,
and shall have the same force and effect as a vote of Members holding a majority
of the LLC Units (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the Managing Member. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Member may authorize any Person or Persons to act for it by
proxy on all matters in which a Member is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Member or its attorney-in-fact. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided in the proxy (or there is receipt of a proxy authorizing a later date).
Every proxy shall be revocable at the pleasure of the Member executing it, such
revocation to be effective upon the Company's receipt of written notice of such
revocation from the Member executing such proxy.
D. Each meeting of Members shall be conducted by the Managing Member
or such other Person as the Managing Member may appoint pursuant to such rules
for the conduct
64
<PAGE>
of the meeting as the Managing Member or such other Person deems appropriate in
its sole and absolute discretion. Without limitation, meetings of Members may be
conducted in the same manner as meetings of the Managing Member's shareholders
and may be held at the same time as, and as part of, the meetings of the
Managing Member's shareholders.
ARTICLE 15.
GENERAL PROVISIONS
SECTION 15.1. ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to be
given or made to a Member or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent by first
class United States mail or by other means of written communication (including
by telecopy, facsimile, or commercial courier service) (i) in the case of a
Member, to that Member at the address set forth in Exhibit A or such other
---------
address of which the Member shall notify the Managing Member in writing and (ii)
in the case of an Assignee, to the address of which such Assignee shall notify
the Managing Member in writing.
SECTION 15.2. TITLES AND CAPTIONS
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" or
"Sections" are to Articles and Sections of this Agreement.
SECTION 15.3. PRONOUNS AND PLURALS
Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
SECTION 15.4. FURTHER ACTION
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 15.5. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
65
<PAGE>
SECTION 15.6. CREDITORS
Other than as expressly set forth herein with respect to Indemnitees,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Company.
SECTION 15.7. WAIVER
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
SECTION 15.8. COUNTERPARTS
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart.
SECTION 15.9. APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law. In the event of a conflict between any provision of this
Agreement and any non-mandatory provision of the Act, the provisions of this
Agreement shall control and take precedence.
SECTION 15.10. ENTIRE AGREEMENT
This Agreement together with the Contribution Agreement contains all
of the understandings and agreements between and among the Members with respect
to the subject matter of this Agreement and the rights, interests and
obligations of the Members with respect to the Company.
SECTION 15.11. INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
SECTION 15.12. LIMITATION TO PRESERVE REIT STATUS
Notwithstanding anything else in this Agreement, to the extent that
the amount paid, credited, distributed or reimbursed by the Company to, for or
with respect to any REIT Member or its officers, directors, employees or agents,
whether as a reimbursement, fee, expense or indemnity (a "REIT Payment"), would
constitute gross income to the REIT Member for purposes of Code Section
856(c)(2) or Code Section 856(c)(3), then, notwithstanding any other provision
of this Agreement, the amount of such REIT Payments, as selected by the Managing
66
<PAGE>
Member in its discretion from among items of potential distribution,
reimbursement, fees, expenses and indemnities, shall be reduced for any Fiscal
Year so that the REIT Payments, as so reduced, to, for or with respect to such
REIT Member shall not exceed the lesser of:
(a) an amount equal to the excess, if any, of (i) four and nine-
tenths percent (4.9%) of the REIT Member's total gross income (but
excluding the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (H) of Code Section 856(c)(2) over
(ii) the amount of gross income (within the meaning of Code Section
856(c)(2)) derived by the REIT Member from sources other than those
described in subsections (A) through (H) of Code Section 856(c)(2) (but not
including the amount of any REIT Payments); or
(b) an amount equal to the excess, if any, of (i) 24% of the REIT
Member's total gross income (but excluding the amount of any REIT Payments)
for the Fiscal Year that is described in subsections (A) through (I) of
Code Section 856(c)(3) over (ii) the amount of gross income (within the
meaning of Code Section 856(c)(3)) derived by the REIT Member from sources
other than those described in subsections (A) through (I) of Code Section
856(c)(3) (but not including the amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts set forth in
clauses (a) and (b) above may be made if the Managing Member, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Member's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 15.12, such REIT
Payments shall carry over and shall be treated as arising in the following
Fiscal Year. The purpose of the limitations contained in this Section 15.12 is
to prevent any REIT Member from failing to qualify as a REIT under the Code by
reason of such REIT Member's share of items, including distributions,
reimbursements, fees, expenses or indemnities, receivable directly or indirectly
from the Company, and this Section 15.12 shall be interpreted and applied to
effectuate such purpose.
SECTION 15.13. NO PARTITION
No Member nor any successor-in-interest to a Member shall have the
right while this Agreement remains in effect to have any property of the Company
partitioned, or to file a complaint or institute to any proceeding at law or in
equity to have such property of the Company partitioned, and each Member, on
behalf of itself and its successors and assigns hereby waives any such right.
It is the intention of the Members that the rights of the parties hereto and
their successors-in-interest to Company property, as among themselves, shall be
governed by the terms of this Agreement, and that the rights of the Members and
their successors-in-interest shall be subject to the limitations and
restrictions as set forth in this Agreement.
[SIGNATURE PAGES FOLLOW]
67
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first written above.
MANAGING MEMBER:
BRE Properties Inc.,
a Maryland corporation
/s/ Frank C. McDowell
-------------------------------------------
By: Frank C. McDowell
Its: Chief Executive Officer
NON-MANAGING MEMBERS:
SALOMON BROTHERS REAL ESTATE
DEVELOPMENT CORP.
By: /s/ John P. Buza
---------------------------------------
Name: John P. Buza
Title: Vice President
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Eugene R. Skaggs
---------------------
Name: Eugene R. Skaggs
Title: Vice President
/s/ Kevin A. Baldridge
---------------------------------------
Kevin A. Baldridge
/s/ Clifford A. Breining
---------------------------------------
Clifford A. Breining
<PAGE>
CFP RESIDENTIAL, L.L.P.
By: Crow Family, Inc., its
General Partner
By: /s/ Timothy J. Hogan
---------------------------------
Name: Timothy J. Hogan
Title: Vice President
LEONARD W. WOOD FAMILY
LIMITED PARTNERSHIP
By: /s/ Leonard W. Wood
---------------------------------
Leonard W. Wood, its
General Partner
/s/ Robert M. Hutt
---------------------------------
Robert M. Hutt
/s/ V. Jay Hiemenz
---------------------------------
V. Jay Hiemenz
/s/ Trammell S. Crow
---------------------------------
Trammell S. Crow
/s/ Patrick W. Dukes
---------------------------------
Patrick W. Dukes
/s/ Jeffrey A. Duke
---------------------------------
Jeffrey A. Duke
/s/ David J. Elwell
---------------------------------
David J. Elwell
/s/ E. Garth Erdossy
---------------------------------
E. Garth Erdossy
<PAGE>
/s/ Harlan R. Crow
---------------------------------
Harlan R. Crow
/s/ Randy J. Pace
---------------------------------
Randy J. Pace
/s/ Robert C. Speicher
---------------------------------
Robert C. Speicher
/s/ Robert C. Talbott
---------------------------------
Robert C. Talbott
TCF RESIDENTIAL PARTNERSHIP, LTD.
By: Mill Spring Holdings, Inc., its
General Partner
By: /s/ Timothy J. Hogan
-------------------------------
Name: Timothy J. Hogan
Title: Vice President
/s/ J. Ronald Terwilliger
---------------------------------
J. Ronald Terwilliger
/s/ William W. Thompson
---------------------------------
William W. Thompson
/s/ Bruce C. Ward
---------------------------------
Bruce C. Ward
<PAGE>
CROW-WESTERN N.C. HIGHLANDS
LIMITED PARTNERSHIP
By: TCF Residential Partnership, Ltd.
Its: Managing General Partner
By: Mill Spring Holdings, Inc.
Its: General Partner
By: /s/ Timothy J. Hogan
-------------------------------
Timothy J. Hogan
Its: Vice President
CROW-WESTERN #402 - VALLEJO II
LIMITED PARTNERSHIP
By: TCF Residential Partnership, Ltd.
Its: Managing General Partner
By: Mill Spring Holdings, Inc.
Its: General Partner
By: /s/ Timothy J. Hogan
-------------------------------
Timothy J. Hogan
Its: Vice President
CROW RESIDENTIAL REALTY
INVESTORS, L.P.
By: Crow Family Inc., its
General Partner
By: /s/ Timothy J. Hogan
-------------------------------
Timothy J. Hogan
Its: Vice President
<PAGE>
J. RONALD TERWILLIGER GRANTOR
TRUST
By: /s/ J. Ronald Terwilliger
------------------------------
J. Ronald Terwilliger
Trustee
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Paul L. Bordogna
-----------------------------
Paul L. Bordogna
Vice President
<PAGE>
EXHIBIT A
MEMBERS, CAPITAL CONTRIBUTIONS
AND PERCENTAGE INTERESTS
<TABLE>
<CAPTION>
Gross Asset
Value of
Cash Contributed LLC Percentage
Name of Member Contributions Property Units Interest
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MANAGING MEMBER:
BRE Properties, Inc.
- ---------------------------------------------------------------------------------------------
NON-MANAGING MEMBERS:
- ---------------------------------------------------------------------------------------------
Salomon Brothers Real Estate
Development Corp $ 600,000 22,280
- ---------------------------------------------------------------------------------------------
The Northwestern Mutual Life
Insurance Company 11,990,905 445,262
- --------------------------------------------------------------------------------------------
Kevin A. Baldridge 1,361,715 50,565
- ---------------------------------------------------------------------------------------------
Clifford A. Breining 1,004,220 37,290
- ---------------------------------------------------------------------------------------------
CFP Residential, L.P. 7,189,044 266,953
- ---------------------------------------------------------------------------------------------
Leonard W. Wood Family Limited
Partnership 4,098,584 152,194
- ---------------------------------------------------------------------------------------------
Robert M. Hutt 1,481,123 54,999
- ---------------------------------------------------------------------------------------------
V. Jay Hiemenz 1,382,101 51,322
- ---------------------------------------------------------------------------------------------
Trammell S. Crow 19,901 739
- ---------------------------------------------------------------------------------------------
Patrick W. Dukes 2,702,022 100,335
- ---------------------------------------------------------------------------------------------
Jeffrey A. Duke 1,389,938 51,613
- ---------------------------------------------------------------------------------------------
David J. Elwell 206,688 7,675
- ---------------------------------------------------------------------------------------------
E. Garth Erdossy 1,853,753 68,836
- ---------------------------------------------------------------------------------------------
Harlan R. Crow 2,370 88
- ---------------------------------------------------------------------------------------------
Randy J. Pace 1,661,662 61,703
- ---------------------------------------------------------------------------------------------
Robert C. Speicher 819,641 30,436
- ---------------------------------------------------------------------------------------------
Robert C. Talbott 1,317,308 48,916
- ---------------------------------------------------------------------------------------------
TCF Residential Partnership, Ltd. 3,882,983 144,188
- ---------------------------------------------------------------------------------------------
J. Ronald Terwilliger 11,116,650 412,798
- ---------------------------------------------------------------------------------------------
William W. Thompson 960,539 35,668
- ---------------------------------------------------------------------------------------------
Bruce C. Ward 12,950,664 480,901
- ---------------------------------------------------------------------------------------------
Crow-Western N.C. Highlands 642,254 23,849
Limited Partnership
- ---------------------------------------------------------------------------------------------
Crow-Western #402 - Vallejo II 42,011 1,560
Limited Partnership
- ---------------------------------------------------------------------------------------------
J. Ronald Terwilliger
Grantor Trust
- ---------------------------------------------------------------------------------------------
Crow Residential Realty Investors, L.P.
- ---------------------------------------------------------------------------------------------
The Prudential Insurance Company of
America
- ---------------------------------------------------------------------------------------------
Totals $
- ---------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
EXHIBIT B
NOTICE OF EXCHANGE
To: BRE Properties, Inc.
One Montgomery Street, Suite 2500
Telesis Tower
San Francisco, CA 94104
The undersigned Member or Assignee hereby irrevocably tenders for Exchange
__________ LLC Units in BRE Property Investors LLC in accordance with the terms
of the Amended and Restated Limited Liability Company Agreement of BRE Property
Investors LLC, dated as of November ___, 1997 (the "Agreement"), and the
Exchange rights referred to therein. The undersigned Member or Assignee:
(a) undertakes (i) to surrender such LLC Units and any certificate
therefor at the closing of the Exchange and (ii) to furnish to the Managing
Member, prior to the Specified Exchange Date, the documentation, instruments and
information required under Section 8.6.D of the Agreement;
(b) directs that, at the sole discretion of the Managing Member,
either (i) a certified check representing the Cash Amount deliverable upon
closing of the Exchange be delivered to the address specified below or (ii) a
certificate(s) representing the REIT Shares deliverable upon the closing of such
Exchange be delivered to the address specified below; and
(c) represents, warrants, certifies and agrees that: (1) the
undersigned Member or Assignee has, and at the closing of the Exchange will
have, good, marketable and unencumbered title to such LLC Units, free and clear
of the rights or interests of any other person or entity, (2) the undersigned
Member or Assignee has, and at the closing of the Exchange will have, the full
right, power and authority to tender and surrender such LLC Units as provided
herein, and (3) the undersigned Member or Assignee has obtained the consent or
approval of all persons and entities, if any, having the right to consent to or
approve such tender and surrender.
All capitalized terms used herein and not otherwise defined shall have the
same meaning ascribed to them respectively in the Agreement.
Dated:
-----------------------
Name of Member or Assignee:
-----------------------------------------------
-----------------------------------------------
(Signature of Member or Assignee)
-----------------------------------------------
(Street Address)
-----------------------------------------------
(City) (State) (Zip)
Signature Guaranteed by:
-----------------------------------------------
Issue REIT Shares in the name of:
---------------------------
Please insert social security or identifying number:
---------------------------
B-1
<PAGE>
EXHIBIT C
UNSECURED DEMAND PROMISSORY NOTE
$40,000,000 November ___, 1997
FOR VALUE RECEIVED, BRE Property Investors, LLC, a Delaware limited
liability company ("Maker") promises to pay the BRE Properties, Inc., a Maryland
corporation, or order ("Holder") at San Francisco, California, or such other
place as Holder may from time to time designate, in lawful money of the United
States, the principal sum of Forty Million Dollars ($40,000,000.00) plus
interest thereon, as set forth below.
1. Interest. Interest on the principal sum of this Note shall
--------
accrue at the rate of ten percent (10%) per annum, based on a 365 day year and
the actual number of days elapsed.
2. Payments. Interest only shall be payable in arrears on the
--------
first day of each and every month, commencing on December 1, 1997, and
continuing until December 1, 2007, or until earlier demand for payment by
Holder, at which time the entire principal sum and all accrued but unpaid
interest and any other sums payable hereunder shall be due and payable in full.
3. Default Interest; Late Charge. If Maker fails to make a
-----------------------------
payment of interest or principal within fifteen (15) days after the date such
payment was due, whether or not Holder has declared a default hereunder,
interest shall accrue on the delinquent payment of the rate of 15% percent (15%)
per annum (the "Default Rate") commencing on the date the payment was due and
continuing until the delinquent payment is received by Holder.
4. Prepayment. This Note may be prepaid in whole or in part, at
----------
any time, without penalty or premium, on any date that a payment of interest is
due hereunder.
5. Application of Payments. All payments received by Holder shall
-----------------------
be applied first to accrued interest, then to other charges due with respect to
this Note, or any other document executed by Maker in connection therewith, and
then to the unpaid principal balance.
6. Default and Remedies.
--------------------
a. Default. Maker will be in default under this Note if
-------
(i) Maker fails to make a payment of principal and/or interest hereunder when
due, or (ii) Maker breaches any other covenant or agreement under this Note or
other document executed in connection therewith.
b. Remedies. Upon Maker's default, Holder may (i) upon
--------
written notice to Maker, declare the entire principal sum and all accrued and
unpaid interest hereunder immediately due and payable and (ii) exercise any and
all of the remedies provided by law.
C-1
<PAGE>
7. Waivers. Maker, and any endorsers or guarantors hereof,
-------
severally waive diligence, presentment, protest and demand and also notice of
protest, demand, dishonor, acceleration, intent to accelerate, and nonpayment of
this Note, and expressly agree that this Note, or any payment hereunder, may be
extended from time to time without notice, and consent to the acceptance of
further security or the release of any security for this Note, all without in
any way affecting the liability of Maker or any endorsers or guarantors hereof.
No extension of time for the payment of this Note, or any installment hereof,
agreed to by Holder with any person now of hereafter liable for the payment of
this Note, shall affect the original liability of Maker under this Note, even if
Maker is not a party to such agreement. Holder may waive its right to require
performance of or compliance with any term, covenant or condition of this Note
only by express written waiver.
8. Maximum Legal Rate of Interest. All agreements between Maker
------------------------------
and Holder, whether now existing or hereafter arising, are hereby limited so
that in no event shall the interest charged hereunder or agreed to be paid to
Holder exceed the maximum amount permissible under applicable law. Holder shall
be entitled to amortize, prorate and spread throughout the full term of this
Note all interest paid or payable so that the interest paid does not exceed the
maximum amount permitted by law. If Holder ever receives interest or anything
deemed interest in excess of the maximum lawful amount, an amount equal to the
excessive interest shall be applied to the reduction of the principal, and if it
exceeds the unpaid balance of principal hereof, such excess shall be refunded to
Maker. If interest otherwise payable to Holder would exceed the maximum lawful
amount, the interest payable shall be reduced to the maximum amount permitted
under applicable law. This paragraph shall control all agreements between Maker
and Holder in connection with the indebtedness evidenced hereby.
9. Miscellaneous.
-------------
a. Maker shall pay all costs, including, without
limitation, reasonable attorneys' fees and costs incurred by Holder in
collecting the sums due hereunder or in connection with the release of any
security for this Note whether or not any legal action is actually filed,
litigated or prosecuted to judgment of award. In the event any action or legal
proceeding concerning this Note or the enforcement of any rights hereunder,
Holder shall be entitled to, in addition to any other relief to which Holder may
be entitled, all legal and court costs and expenses, including reasonable
attorneys' fees, incurred by Holder in connection with such action.
b. This Note may be modified only by a written agreement
executed by Maker and Holder.
c. This Note shall be governed by California law.
d. The terms of this Note shall inure to the benefit of and
bind Maker and Holder and their respective heirs, legal representatives and
successors and assigns.
e. Time is of the essence with respect to all matters set
forth in this Note.
C-2
<PAGE>
f. If this Note is destroyed, lost or stolen, Maker will
deliver a new note to Holder on the same terms and conditions as this Note with
a notation of the unpaid principal and accrued and unpaid interest in
substitution of the prior Note. Holder shall furnish to Maker reasonable
evidence that the Note was destroyed, lost or stolen and any security or
indemnity that may be reasonably required by Maker in connection with the
replacement of this Note.
C-3
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note as of the date and
year first above written.
Maker: BRE PROPERTY INVESTORS, LLC
By: BRE Properties, Inc.,
Its Managing Member
By:
--------------------
Title:
-----------------
C-4
<PAGE>
Exhibit 10.2
------------
================================================================================
LIMITED LIABILITY COMPANY AGREEMENT
OF
BLUE RAVINE INVESTORS, LLC
a Delaware limited liability company
Dated as of November 18, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINED TERMS..............................................................1
ARTICLE 2. ORGANIZATIONAL MATTERS....................................................17
Section 2.1. Formation.............................................................17
Section 2.2. Name..................................................................17
Section 2.3. Registered Office and Agent; Principal Place of Business; Other
Places of Business.......................................................17
Section 2.4. Power of Attorney.....................................................18
Section 2.5. Term..................................................................19
ARTICLE 3. PURPOSE...................................................................19
Section 3.1. Purpose and Business..................................................19
Section 3.2. Powers................................................................19
Section 3.3. Specified Purposes....................................................20
Section 3.4. Representations and Warranties by the Members.........................20
ARTICLE 4. CAPITAL CONTRIBUTIONS.....................................................22
Section 4.1. Capital Contributions of the Initial Members..........................22
Section 4.2. Additional Members....................................................23
Section 4.3. Loans by Third Parties................................................23
Section 4.4. Additional Funding and Capital Contributions..........................23
Section 4.5. No Interest; No Return................................................25
ARTICLE 5. DISTRIBUTIONS.............................................................25
Section 5.1. Requirement and Characterization of Distributions.....................25
Section 5.2. Distributions in Kind.................................................26
Section 5.3. Amounts Withheld......................................................26
Section 5.4. Distributions Upon Liquidation........................................27
Section 5.5. Restricted Distributions..............................................27
ARTICLE 6. ALLOCATIONS...............................................................27
Section 6.1. Timing and Amount of Allocations of Net Income and Net Loss...........27
Section 6.2. General Allocations...................................................28
Section 6.3. Additional Allocation Provisions......................................28
Section 6.4. Tax Allocations.......................................................30
Section 6.5. Other Provisions......................................................30
Section 6.6. Amendments to Allocation to Reflect Issuance of Additional
Membership Interests.....................................................31
ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS.....................................31
Section 7.1. Management............................................................31
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.2. Certificate of Formation..............................................36
Section 7.3. Restrictions on Managing Member's Authority...........................36
Section 7.4. Reimbursement of the Managing Member..................................39
Section 7.5. Other Business of Managing Member.....................................40
Section 7.6. Contracts with Affiliates.............................................40
Section 7.7. Indemnification.......................................................41
Section 7.8. Liability of the Managing Member......................................43
Section 7.9. Other Matters Concerning the Managing Member..........................44
Section 7.10. Title to Company Assets..............................................45
Section 7.11. Reliance by Third Parties............................................45
ARTICLE 8. RIGHTS AND OBLIGATIONS OF MEMBERS.........................................46
Section 8.1. Limitation of Liability...............................................46
Section 8.2. Managing of Business..................................................46
Section 8.3. Outside Activities of Members.........................................46
Section 8.4. Return of Capital.....................................................47
Section 8.5. Rights of Non-Managing Members Relating to the Company................47
Section 8.6. Exchange Rights.......................................................48
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS....................................50
Section 9.1. Records and Accounting................................................50
Section 9.2. Fiscal Year...........................................................51
Section 9.3. Reports...............................................................51
ARTICLE 10. TAX MATTERS..............................................................51
Section 10.1. Preparation of Tax Returns...........................................51
Section 10.2. Tax Elections........................................................51
Section 10.3. Tax Matters Partner..................................................52
Section 10.4. Organizational Expenses..............................................52
ARTICLE 11. TRANSFERS AND WITHDRAWALS................................................52
Section 11.1. Transfer.............................................................52
Section 11.2. Transfer of Managing Member's Membership Interest....................52
Section 11.3. Non-Managing Members' Rights to Transfer.............................53
Section 11.4. Substituted Members..................................................55
Section 11.5. Assignees............................................................55
Section 11.6. General Provisions...................................................56
ARTICLE 12. ADMISSION OF MEMBERS.....................................................57
Section 12.1. Admission of Successor Managing Member...............................57
Section 12.2. Admission of Additional Members......................................57
Section 12.3. Amendment of Agreement and Certificate of Membership.................58
Section 12.4. Limitation on Admission of Members...................................58
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION.................................58
Section 13.1. Dissolution..........................................................58
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 13.2. Winding Up...........................................................59
Section 13.3. Deemed Distribution and Recontribution...............................61
Section 13.4. Rights of Members....................................................61
Section 13.5. Notice of Dissolution................................................61
Section 13.6. Cancellation of Certificate of Limited Partnership...................61
Section 13.7. Reasonable Time for Winding-Up.......................................61
Section 13.8. Liability of Liquidator..............................................62
ARTICLE 14. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS.....62
Section 14.1. Procedures for Actions and Consents of Members.......................62
Section 14.2. Amendments...........................................................62
Section 14.3. Meetings of the Members..............................................62
ARTICLE 15. GENERAL PROVISIONS.......................................................63
Section 15.1. Addresses and Notice.................................................63
Section 15.2. Titles and Captions..................................................63
Section 15.3. Pronouns and Plurals.................................................64
Section 15.4. Further Action.......................................................64
Section 15.5. Binding Effect.......................................................64
Section 15.6. Creditors............................................................64
Section 15.7. Waiver...............................................................64
Section 15.8. Counterparts.........................................................64
Section 15.9. Applicable Law.......................................................64
Section 15.10. Entire Agreement....................................................65
Section 15.11. Invalidity of Provisions............................................65
Section 15.12. Limitation to Preserve REIT Status..................................65
Section 15.13. No Partition........................................................66
Exhibit A - Members, Capital Contributions and Percentage Interests
Exhibit B - Notice of Exchange
</TABLE>
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<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
BLUE RAVINE INVESTORS, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of Blue
Ravine Investors, LLC, a Delaware limited liability company (the "Company"),
dated as of November 18, 1997, is entered into by and among BRE Properties,
Inc., a Maryland corporation (the "Managing Member"), and Blue Ravine Realty
Partners, a California limited partnership (the "Non-Managing Member" and
together with the Managing Member, the "Members"), together with any other
Persons who become Members in the Company as provided herein.
WHEREAS, the Managing Member and the Non-Managing Member, among
others, have entered into that certain Contribution Agreement dated as of
September 29, 1997 and amended of even date herewith (the "Contribution
Agreement"), providing for the contribution of certain assets to, and the
acquisition of certain interests in, the Company;
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Contribution Agreement that the parties hereto enter this
Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Limited Liability Company Act, as it may be
amended from time to time, and any successor to such statute.
"Actions" has the meaning set forth in Section 7.7 hereof.
"Additional Funds" has the meaning set forth in Section 4.4.A hereof.
"Additional Member" means a Person admitted to the Company as a Member
pursuant to Section 4.2 or Section 4.4.D and Section 12.2 hereof and who is
shown as such on the books and records of the Company.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
<PAGE>
(a) decrease such deficit by any amounts that such Member is
obligated to restore pursuant to this Agreement or by operation of law upon
liquidation of such Member's Membership Interest or is deemed to be
obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)
or the penultimate sentence of each of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
(b) increase such deficit by the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account Deficit" is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Adjustment Factor" means 1.0; provided, however, that in the event
that: the Managing Member (i) declares or pays a dividend on its outstanding
REIT Shares in REIT Shares or makes a distribution to all Members of its
outstanding REIT Shares in REIT Shares, (ii) splits or subdivides its
outstanding REIT Shares or (iii) effects a reverse stock split or otherwise
combines all of its outstanding REIT Shares into a smaller number of REIT
Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment
Factor previously in effect by a fraction, (1) the numerator of which shall be
the number of REIT Shares issued and outstanding on the record date for such
dividend, distribution, split, subdivision, reverse split or combination
(assuming for such purposes that such dividend, distribution, split,
subdivision, reverse split or combination has occurred as of such time) and (2)
the denominator of which shall be the actual number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, split,
subdivision, reverse split or combination (assuming for such purposes that such
dividend, distribution, split, subdivision, reverse split or combination has not
occurred as of such time). Any adjustments to the Adjustment Factor shall
become effective immediately after the effective date of such event, retroactive
to the record date, if any, for such event and; provided further that in the
event that one entity (the "Predecessor Entity") shall cease to be the Managing
Member and another entity (the "Successor Entity") becomes the Managing Member,
the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor
previously in effect by a fraction, the numerator of which is the value of one
REIT Share of the Predecessor Entity, determined as of the time immediately
prior to when the Successor Entity becomes the Managing Member, and the
denominator of which is the Value of one REIT Share of the Successor Entity,
determined as of that same date. (For purposes of the second proviso in the
preceding sentence, in the event that any shareholders of the Predecessor Entity
will receive consideration in connection with the transaction in which the
Successor Entity becomes the Managing Member, the numerator in the fraction
described above for determining the adjustment to the Adjustment Factor (that
is, the Value of one REIT Share of the Predecessor Entity) shall be the sum of
the greatest amount of cash and the fair market value of any securities and
other consideration that the holder of one REIT Share in the Predecessor Entity
could have received in such transaction (determined without regard to any
provisions governing fractional shares)).
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling or controlled by or under common control with such
Person. For the purposes of this
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<PAGE>
definition, "control" when used with respect to any Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Limited Liability Company Agreement of Blue
Ravine Investors LLC, as it may be amended, supplemented or restated from time
to time.
"Appraisal" means, with respect to any assets, the written opinion of
an independent third party experienced in the valuation of similar assets,
selected by the Managing Member in good faith. Such opinion may be in the form
of an opinion by such independent third party that the value for such property
or asset as set by the Managing Member is fair, from a financial point of view,
to the Company.
"Appraised Value" means, with respect to any asset, including any
Contributed Property, the value of such asset as determined by Appraisal.
"Approved Guaranty" means the guaranty by the Company of the
obligations of the Managing Member under the Managing Member's bank credit
facility.
"Assignee" means a Person to whom one or more LLC Units have been
Transferred in a manner permitted under this Agreement, but who has not become a
Substituted Member, and who has the rights set forth in Section 11.5 hereof.
"Assumed Loan" means a loan in the aggregate principal amount of
$5,700,000 from the Managing Member to the Non-Managing Member, the obligation
of the Non-Managing Member under which will be assumed by the Company on or
about the Effective Date.
"Available Cash" means, with respect to any period for which such
calculation is being made,
(a) the sum, without duplication, of:
(1) the Company's Net Income or Net Loss (as the case may
be) for such period,
(2) Depreciation and all other noncash charges to the extent
deducted in determining Net Income or Net Loss for such period,
(3) the amount of any reduction in reserves of the Company
referred to in clause (b)(6) below (including, without limitation,
reductions resulting because the Managing Member determines such
amounts are no longer necessary),
(4) the excess, if any, of the net cash proceeds from the
sale, exchange, disposition, financing or refinancing of Company
property for such
3
<PAGE>
period over the gain (or loss, as the case may be) recognized from
such sale, exchange, disposition, financing or refinancing during such
period, and
(5) all other cash received (including amounts previously
accrued as Net Income and amounts of deferred income) or any net
amounts borrowed by the Company for such period that was not included
in determining Net Income or Net Loss for such period;
(b) less the sum, without duplication, of:
----
(1) all principal debt payments made during such period by
the Company,
(2) capital expenditures made by the Company during such
period,
(3) investments in any entity (including loans made thereto)
to the extent that such investments are not otherwise described in
clause (b)(1) or clause (b)(2) above,
(4) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period (including amounts
paid in respect of expenses previously accrued and payments made in
connection with any guaranty of Affiliate indebtedness),
(5) any amount included in determining Net Income or Net
Loss for such period that was not received by the Company during such
period, and
(6) the amount of any increase in reserves (including,
without limitation, working capital reserves) established during such
period that the Managing Member determines are necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include (i) any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Company or (ii) any Capital Contributions,
whenever received.
"Bankruptcy Law" means Title II, U.S. Code or any similar federal or
state law for the relief of debtors.
"Beneficial Ownership" means ownership of REIT Shares by a Person who
is or would be treated as an owner of such REIT Shares either actually or
constructively through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code. The
4
<PAGE>
terms "Beneficially Own," "Beneficially Owned," "Beneficially Owns" and
"Beneficial Owner" shall have the correlative meanings.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in San Francisco, California are authorized or required
by law to close.
"Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member on the Company's books and records in
accordance with the following provisions:
(a) To each Member's Capital Account, there shall be added such
Member's Capital Contributions, such Member's allocable share of Net Income
and any items of income or gain specially allocated pursuant to Section 6.3
hereof, and the principal amount of any Company liabilities assumed by such
Member or that are secured by any property distributed to such Member.
(b) From each Member's Capital Account, there shall be subtracted
the amount of cash and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, such Member's
allocable share of Net Loss and any items of loss or deductions specially
allocated pursuant to Section 6.3 hereof, and the principal amount of any
liabilities of such Member assumed by the Company or that are secured by
any property contributed by such Member to the Company.
(c) In the event any interest in the Company is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent that it relates to
the Transferred interest.
(d) In determining the principal amount of any liability for
purposes of subsections (a) and (b) hereof, there shall be taken into
account Code Section 752(c) and any other applicable provisions of the Code
and Regulations.
(e) The provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Regulations Sections 1.704-
1(b) and 1.704-2, and shall be interpreted and applied in a manner
consistent with such Regulations. If the Managing Member shall determine
that it is prudent to modify the manner in which the Capital Accounts are
maintained in order to comply with such Regulations, the Managing Member
may make such modification provided that notwithstanding any other
provision in this Agreement such modification will not have a material
effect on the amounts distributable to any Member without such Member's
Consent. The Managing Member also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts
of the Members and the amount of Company capital reflected on the Company's
balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise cause
this Agreement not to comply with Regulations Section 1.704-1(b) or Section
1.704-2.
5
<PAGE>
"Capital Contribution" means, with respect to any Member, the amount
of money and the initial Gross Asset Value of any Contributed Property that such
Member contributes to the Company pursuant to Section 4.1, Section 4.2 or
Section 4.4 hereof.
"Cash Amount" means an amount of cash equal to the product of (a) the
Value of a REIT Share and (b) the REIT Shares Amount determined as of the
applicable Valuation Date.
"Certificate" means the Certificate of Formation of the Company filed
in the office of the Secretary of State of the State of Delaware, as amended
from time to time in accordance with the terms hereof and the Act.
"Charter" means the Articles of Incorporation of the Managing Member,
as amended, supplemented or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time or any successor statute thereto, as interpreted by the
applicable Regulations thereunder. Any reference herein to a specific section
or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Company" means the limited liability company formed under the Act and
pursuant to this Agreement, and any successor thereto.
"Company Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2) for the phrase "partnership minimum gain," and the amount
of Company Minimum Gain, as well as any net increase or decrease in Company
Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules
of Regulations Section 1.704-2(d).
"Consent" means the consent to, approval of, or vote on a proposed
action by a Member given in accordance with Article 14 hereof.
----------
"Consent of the Non-Managing Member" means the Consent of the Non-
Managing Member, which Consent shall be obtained prior to the taking of any
action for which it is required by this Agreement and, except as otherwise
provided in this Agreement, may be given or withheld by the Non-Managing Member,
in its absolute discretion.
"Constructive Ownership" means ownership of REIT Shares, or any other
interest in an entity by a Person who is or would be treated as an owner thereof
either actually or constructively through the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code. The terms "Constructively
Own," "Constructively Owned," "Constructively Owns" and "Constructive Owner"
shall have the correlative meanings.
"Contributed Property" means each Property or other asset, in such
form as may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Company.
6
<PAGE>
"Contribution Agreement" means the Contribution Agreement dated as of
September 29, 1997 by and between the Managing Member and the Non-Managing
Member, among others.
"Custodian" means any receiver, trustee, assignee, liquidator or other
similar official under any Bankruptcy Law.
"Debt" means, as to any Person, as of any date of determination, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
that, in accordance with generally accepted accounting principles, should be
capitalized.
"Depreciation" means, for each Fiscal Year or other applicable period,
an amount equal to the federal income tax depreciation, amortization or other
cost recovery deduction allowable with respect to an asset for such year or
other period, except that, if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
period, Depreciation shall be in an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that, if the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing
Member.
"Effective Date" means the date on which the transactions contemplated
by the Contribution Agreement are consummated.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess LLC Units" means any LLC Units held by a Non-Managing Member
to the extent that, if such LLC Units were exchanged for the REIT Shares Amount
pursuant to Section 8.6 hereof, such Non-Managing Member would Beneficially Own
or Constructively Own REIT Shares in excess of the Ownership Limit.
"Exchange" has the meaning set forth in Section 8.6.A hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
7
<PAGE>
"Family Members" means, as to a Person that is an individual, (a) such
Person's spouse, (b) such Person's ancestors, (c) such Person's descendants
(whether by blood or by adoption), (d) such Person's brothers and sisters, (e)
inter vivos or testamentary trusts of which only such Person or his spouse,
ancestors, descendants (whether by blood or by adoption), brothers or sisters
are beneficiaries and (f) any partnership or limited liability company all of
whose partners or members consist of such Person or his spouse, ancestors,
descendants (whether by blood or by adoption), brothers or sisters or inter
vivos or testamentary trusts of which only such Person or his spouse, ancestors,
descendants (whether by blood or by adoption), brothers or sisters are
beneficiaries.
"Fiscal Year" means the fiscal year of the Company, which shall be the
calendar year.
"Funding Debt" means any Debt incurred by or on behalf of the Managing
Member for the purpose of providing funds to the Company.
"Funding Notice" has the meaning set forth in Section 4.4.B hereof.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be its fair market value, as agreed to by such
Member and the Managing Member, and set forth on Exhibit A with respect to
---------
that Member.
(b) The Gross Asset Values of all Company assets immediately
prior to the occurrence of any event described in clause (1), clause (2),
clause (3), or clause (4) hereof shall be adjusted to equal their
respective gross fair market values, as determined by the Managing Member
using such reasonable method of valuation as it may adopt, as of the
following times:
(1) the acquisition of an additional interest in the Company
(other than in connection with the execution of this Agreement but
including, without limitation, acquisitions pursuant to Section 4.4
hereof or contributions or deemed contributions by the Managing Member
pursuant to Section 4.4 hereof) by a new or existing Member in
exchange for more than a de minimis Capital Contribution, if the
Managing Member reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic interests of
the Members in the Company;
(2) the distribution by the Company to a Member of more than
a de minimis amount of Company property as consideration for an
interest in the Company, if the Managing Member reasonably determines
that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Members in the Company;
8
<PAGE>
(3) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
(4) at such other times as the Managing Member shall
reasonably determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Company asset distributed to a
Member shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the Managing Member,
provided that, if the distributee is the Managing Member or if the
distributee and the Managing Member cannot agree on such a determination,
such gross fair market value shall be determined by Appraisal.
(d) At the election of the Managing Member, the Gross Asset
Values of Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross
Asset Values shall not be adjusted pursuant to this subsection (d) to the
extent that the Managing Member reasonably determines that an adjustment
pursuant to subsection (b) above is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to
this subsection (d).
(e) If the Gross Asset Value of a Company asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset for
purposes of computing Net Income and Net Loss.
"Incapacity" or "Incapacitated" means, (i) as to any Member who is an
individual, death, total physical disability or entry by a court of competent
jurisdiction of an order adjudicating such Member incompetent to manage his or
her person or his or her estate; (ii) as to any Member that is a corporation or
limited liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Member that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Member that is
an estate, the distribution by the fiduciary of the estate's entire interest in
the Company; (v) as to any trustee of a trust that is a Member, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Member, the bankruptcy of such Member. For purposes of this definition,
bankruptcy of a Member shall be deemed to have occurred when (a) the Member
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Member under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt
or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Member, (c) the Member executes and delivers a general
assignment for the benefit of the Member's creditors, (d) the Member files an
answer or other pleading admitting or failing to
9
<PAGE>
contest the material allegations of a petition filed against the Member in any
proceeding of the nature described in clause (b) above, (e) the Member seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator for the Member or for all or any substantial part of the Member's
properties, (f) any proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect has not been dismissed within 120 days after the commencement thereof,
(g) the appointment without the Member's consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within 90 days of such
appointment, or (h) an appointment referred to in clause (g) above is not
vacated within 90 days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of its status as (A) a Member or any Affiliate thereof or (B) a director,
officer or employee of the Company, a Member or Affiliate thereof and (ii) such
other Persons (including Affiliates of any Member or the Company) as the
Managing Member may designate from time to time (whether before or after the
event giving rise to potential liability), in its sole and absolute discretion.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Liquidating Event" has the meaning set forth in Section 13.1 hereof.
"Liquidator" has the meaning set forth in Section 13.2.A hereof.
"LLC Distribution Date" means the date established by the Managing
Member for the payment of actual distributions declared by the Managing Member
pursuant to Sections 5.1 and 5.2, which date shall be the same as the date
established by the Managing Member for the payment of dividends to holders of
REIT Shares.
"LLC Merger" means a state law merger of the Company with and into BRE
Property Investors, LLC, a Delaware limited liability company, with BRE Property
Investors, LLC being the surviving entity of such merger. Upon consummation of
the LLC Merger (i) each LLC Unit held by the Non-Managing Member will be
automatically exchanged for one LLC Unit in BRE Property Investors LLC, (ii) the
Non-Managing Member will be admitted as a non-managing member of BRE Property
Investors LLC, and (iii) each LLC Unit held by the Managing Member will be
automatically exchanged for one LLC Unit in BRE Property Investors LLC.
"LLC Record Date" means the record date for the distribution of
Available Cash pursuant to Section 5.1 hereof, which record date shall be the
same as the record date established by the Managing Member for a dividend to
holders of REIT Shares.
"LLC Unit" means a fractional share of the Membership Interests of all
Members issued pursuant to Section 4.1, Section 4.2 or Section 4.4 hereof, as
the same may be modified from time to time as provided in this Agreement. The
ownership of LLC Units may (but need not, in the sole and absolute discretion of
the Managing Member) be evidenced in the form of a certificate for LLC Units.
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<PAGE>
"Majority in Interest of the Non-Managing Members" means those Non-
Managing Members (excluding any Affiliates of the Managing Member who are Non-
Managing Members) holding in the aggregate more than 50% of the aggregate
outstanding LLC Units held by all the Non-Managing Members (excluding any
Affiliates of the Managing Member who are Non-Managing Members).
"Majority of Remaining Members" means Non-Managing Members owning (a)
a majority of the profits interests in the Company held by all Non-Managing
Members, determined and allocated based on any reasonable estimate of profits
from the relevant date to the projected termination of the Company and taking
into account present and future allocations of profits under the Agreement as it
is in effect on the relevant date, and (b) a majority of the capital interests
in the Company, determined as of the relevant date under the Agreement, owned by
all Non-Managing Members.
"Managing Member" means BRE Properties, Inc., a Maryland corporation,
in its capacity as a Member, or any successor Managing Member designated
pursuant to the terms of this Agreement.
"Managing Member Loan" has the meaning set forth in Section 4.4.C
hereof.
"Managing Member's Capital Return" means an amount initially equal to
zero, and increased cumulatively on the last day of each calendar quarter by an
amount equal to the Managing Member's Capital Contribution multiplied by .0375;
provided, however, that the increase that shall occur in accordance with the
foregoing on the last day of the calendar quarter ending on December 31, 1997
shall be the amount specified above multiplied by a fraction, the numerator of
which shall be the number of days in the period commencing on the Effective Date
and ending on December 31, 1997, and the denominator of which is 92.
"Manual" has the meaning set forth in Section 8.6.B hereof.
"Member Minimum Gain" means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i) with respect to "partner
nonrecourse debt minimum gain."
"Member Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4) for the phrase "partner nonrecourse debt."
"Member Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2) for the phrase "partner nonrecourse
deductions," and the amount of Member Nonrecourse Deductions with respect to a
Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with
the rules of Regulations Section 1.704-2(i)(2).
"Members" means the Persons owning Membership Interests, including the
Managing Member and any Additional and Substitute Members, named as Members in
Exhibit A attached hereto, which Exhibit A may be amended from time to time.
- --------- ---------
11
<PAGE>
"Membership Interest" means an ownership interest in the Company
representing a Capital Contribution by a Member and includes any and all
benefits to which the holder of such a Membership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. A Membership Interest
may be expressed as a number of LLC Units.
"Net Income" or "Net Loss" means, for each Fiscal Year of the Company,
an amount equal to the Company's taxable income or loss for such year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Net Income (or Net
Loss) pursuant to this definition of "Net Income" or "Net Loss" shall be
added to (or subtracted from, as the case may be) such taxable income (or
loss);
(b) Any expenditure of the Company described in Code Section
705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Net Income (or Net Loss) pursuant to this definition
of "Net Income" or "Net Loss," shall be subtracted from (or added to, as
the case may be) such taxable income (or loss);
(c) In the event that the Gross Asset Value of any Company asset
is adjusted pursuant to subsection (b) or subsection (c) of the definition
of "Gross Asset Value," the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;
(d) In lieu of the depreciation, amortization and other cost
recovery deductions that would otherwise be taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation
for such Fiscal Year;
(e) To the extent that an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's interest in the
Company, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Income
or Net Loss; and
(f) Notwithstanding any other provision of this definition of
"Net Income" or "Net Loss," any item of income, gain, loss or deduction
specially allocated pursuant to Section 6.2.A(3) or Section 6.3.A hereof
shall not be taken into account in computing Net Income or Net Loss. The
amounts of the items of Company income, gain,
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loss or deduction available to be allocated pursuant to Section 6.2.A(3) or
Section 6.3.A hereof shall be determined by applying rules analogous to
those set forth in this definition of "Net Income" or "Net Loss."
"No Transfer Member" means the Non-Managing Member (or its Assignees
or successors in interest thereof) who acquired its LLC Units in exchange for
the Real Property on the Effective Date.
"No Transfer Period" means (i) a period of eight years from the
Effective Date, or (ii) a period of one year from the Effective Date if the
Managing Member determines that the proceeds from the sale of the Real Property
will be less than or equal to the Non-Managing Member's tax basis in the Real
Property and the Managing Member so notifies the Non-Managing Member 45 days
prior to consummating such sale as required by Section 7.3.E(2) hereof.
"Non-Managing Member" means any Member other than the Managing Member.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Exchange" means the Notice of Exchange substantially in the
form of Exhibit B attached to this Agreement.
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"Ownership Limit" means 9.8% of the number of shares or value
(whichever is more restrictive) of the outstanding REIT Shares. The number and
value of REIT Shares of the Managing Member shall be determined by the Board of
Directors of the Managing Member, in good faith, which determination shall be
conclusive for all purposes hereof.
"Percentage Interest" means as to a Member holding a Membership
Interest, its interest in the Company as determined by dividing the LLC Units
owned by such Member by the total number of LLC Units then outstanding as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
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to time.
"Permitted Transfer" has the meaning set forth in Section 11.3.A
hereof.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
"Preferred Return Per Unit" means with respect to an LLC Unit
outstanding on an LLC Record Date (other than those LLC Units held by the
Managing Member) an amount initially equal to zero, and increased cumulatively
on each LLC Record Date by an amount equal
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to the product of (i) the cash dividend per REIT Share declared by the Managing
Member for holders of REIT Shares on that LLC Record Date, multiplied by (ii)
the Adjustment Factor in effect on that LLC Record Date.
"Preferred Return Shortfall" means, for any holder of LLC Units (other
than the Managing Member), the excess (if any) of (i) the Preferred Return Per
Unit with respect to all LLC Units held by such holder over (ii) the aggregate
amount previously distributed with respect to such LLC Units pursuant to Section
5.1 hereof together with cumulative interest accruing thereon at the Prime Rate
from the applicable LLC Record Date to the date of distribution pursuant to
Section 5.1.A.
"Prime Rate" means on any date, a rate equal to the annual rate on
such date announced by Bank of America to be its prime, base or reference rate
for 90-day unsecured loans to its corporate borrowers of the highest credit
standing but in no event greater than the maximum rate then permitted under
applicable law. If Bank of America discontinues its use of such prime, base or
reference rate or ceases to exist, the Managing Member shall designate the
prime, base or reference rate of another state or federally chartered bank based
in New York or San Francisco to be used for the purpose of calculating the Prime
Rate hereunder (which rate shall be subject to limitation by all applicable
usury laws).
"Properties" means any assets and property of the Company such as, but
not limited to, interests in real property (including the Real Properties) and
personal property, including, without limitation, fee interests, interests in
ground leases, interests in limited liability companies, joint ventures or
partnerships, interests in mortgages, and Debt instruments as the Company may
hold from time to time.
"Publicly Traded" means listed or admitted to trading on the New York
Stock Exchange, the American Stock Exchange or another national securities
exchange or designated for quotation on the NASDAQ National Market System, or
any successor to any of the foregoing.
"Qualified Transferee" means an "accredited investor" as defined in
Rule 501 promulgated under the Securities Act.
"Real Property" has the meaning set forth in Section 7.3.E(2) hereof.
"Regulations" means the applicable income tax regulations under the
Code, whether such regulations are in proposed, temporary or final form, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 6.3.A(7)
hereof.
"REIT" means a real estate investment trust qualifying under Code
Section 856, et seq.
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"REIT Member" means a Member or Assignee that is, or has made an
election to qualify as, a REIT.
"REIT Payment" has the meaning set forth in Section 15.12 hereof.
"REIT Requirements" has the meaning set forth in Section 5.1 hereof.
"REIT Share" means a share of the Managing Member's Common Stock, par
value $.01 per share.
"REIT Shares Amount" means a number of REIT Shares equal to the
product of (a) the number of Tendered Units and (b) the Adjustment Factor;
provided, however, that, in the event that the Managing Member issues to all
holders of REIT Shares prior to the Specified Exchange Date any rights, options,
warrants or convertible or exchangeable securities entitling the Managing
Member's shareholders to subscribe for or purchase REIT Shares, or any other
securities or property (collectively, the "Rights"), then the REIT Shares Amount
shall also include such Rights that a holder of that number of REIT Shares would
be entitled to receive, expressed, where relevant hereunder, in a number of REIT
Shares determined by the Managing Member in good faith.
"Related Party" means, with respect to any Person, any other Person
whose ownership of shares of the Managing Member's capital stock would be
attributed to the first such Person under Code Section 544 (as modified by Code
Section 856(h)(1)(B)).
"Rights" has the meaning set forth in the definition of "REIT Shares
Amount."
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shortfall Amount" has the meaning set forth in Section 6.2.A(1)
hereof.
"Specified Exchange Date" means the 10th Business Day after the
receipt by the Managing Member of a Notice of Exchange; provided, however, that
no Specified Exchange Date shall occur prior to the first anniversary of the
Effective Date.
"Substituted Member" means an Assignee who is admitted as a Member to
the Company pursuant to Section 11.4 hereof. The term "Substituted Member"
shall not include any Additional Member.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"Tax Items" has the meaning set forth in Section 6.4.A hereof.
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"Tenant Schedule" means Schedule 3.4.A(ii) attached hereto that lists
all of the entities that are a tenant of either the Managing Member, the Company
or any partnership, venture or limited liability company of which the Managing
Member or the Company is a member. The Tenant Schedule shall be amended from
time to time as necessary to reflect any changes to the list of the foregoing
entities.
"Tendered Units" has the meaning set forth in Section 8.6.A hereof.
"Tendering Party" has the meaning set forth in Section 8.6.A hereof.
"Terminating Capital Transaction" means any sale or other disposition
of all or substantially all of the assets of the Company or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Company.
"Transfer," when used with respect to an LLC Unit or all or any
portion of a Membership Interest, means any sale, assignment, bequest,
conveyance, devise, gift (outright or in trust), pledge, encumbrance,
hypothecation, mortgage, exchange, transfer or other disposition or act of
alienation, whether voluntary or involuntary or by operation of law; provided,
however, that, when the term is used in Article 11 hereof (other than in Section
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11.6), Transfer does not include any Exchange of LLC Units by any Non-Managing
Member pursuant to Section 8.6 hereof. The terms "Transferred" and
"Transferring" have correlative meanings.
"Valuation Date" means (a) in the case of a tender of LLC Units for
Exchange, the date of receipt by the Managing Member of a Notice of Exchange or,
if such date is not a Business Day, the immediately preceding Business Day or
(b) in any other case, the date specified in this Agreement.
"Value" means, on any Valuation Date with respect to a REIT Share, the
average of the daily market prices for a REIT Share over the ten (10)
consecutive trading days immediately preceding the Valuation Date. The market
price for any such trading day shall be:
(1) if the REIT Shares are listed or admitted to trading on
any securities exchange or the Nasdaq Stock Market's National Market
System, the closing price, regular way, on such day, or if no such
sale takes place on such day, the average of the closing bid and asked
prices on such day, in either case as reported in the principal
consolidated transaction reporting system,
(2) if the REIT Shares are not listed or admitted to trading
on any securities exchange or the Nasdaq Stock Market's National
Market System, the last reported sale price on such day or, if no sale
takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reliable quotation source
designated by the Managing Member, or
(3) if the REIT Shares are not listed or admitted to trading
on any securities exchange or the Nasdaq Stock Market's National
Market System
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and no such last reported sale price or closing bid and asked prices
are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable quotation source
designated by the Managing Member, or if there shall be no bid and
asked prices on such day, the average of the high bid and low asked
prices, as so reported, on the most recent day (not more than ten (10)
days prior to the date in question) for which prices have been so
reported; provided, however, that, if there are no bid and asked
prices reported during the ten (10) days prior to the date in
question, the market price of the REIT Shares shall be determined by
the Managing Member acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable
judgment, appropriate.
In the event that the REIT Shares Amount includes Rights that a holder of REIT
Shares would be entitled to receive, then the Value of such Rights shall be
determined by the Managing Member acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Formation
The Company is a limited liability company formed pursuant to the
provisions of the Act for the purposes and upon the terms and subject to the
conditions set forth in this Agreement. Except as expressly provided herein,
the rights and obligations of the Members and the administration and termination
of the Company shall be governed by the Act.
Section 2.2. Name
The name of the Company is BRE Property Investors LLC. The Company's
business may be conducted under any other name or names deemed advisable by the
Managing Member, including the name of the Managing Member or any Affiliate
thereof. The Managing Member in its sole and absolute discretion may change the
name of the Company at any time and from time to time in accordance with
applicable law and shall notify the Members of such change in the next regular
communication to the Members.
Section 2.3. Registered Office and Agent; Principal Place of
Business; Other Places of Business
The address of the registered office of the Company in the State of
Delaware is located at The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the
registered agent for service of process on the Company in the State of Delaware
at such registered office is The Corporation Trust Company. The principal
office of the Company is located at One Montgomery Street, Suite 2500, Telesis
Tower, San Francisco, California 94104, or such other place as the Managing
Member may from time to time designate by notice to the Members. The Company
may
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maintain offices at such other place or places within or outside the State
of Delaware as the Managing Member deems advisable.
Section 2.4. Power of Attorney
A. Each Member (other than the Managing Member) and each Assignee
hereby irrevocably constitutes and appoints the Managing Member, any Liquidator,
and authorized officers and attorneys-in-fact of each, and each of those acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the Managing
Member or any Liquidator deems appropriate or necessary to form, qualify or
continue the existence or qualification of the Company as a limited
liability company in the State of Delaware and in all other jurisdictions
in which the Company may conduct business or own property; (b) all
instruments that the Managing Member or any Liquidator deems appropriate or
necessary to reflect any amendment, change, modification or restatement of
this Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the Managing Member or any Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation of the
Company pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all instruments relating to
the admission, withdrawal, removal or substitution of any Member pursuant
to, or other events described in, Articles 11, 12 or 13 hereof or the
---------------------
Capital Contribution of any Member; and (e) all certificates, documents and
other instruments relating to the determination of the rights, preferences
and privileges of Member Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
Managing Member or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Members hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the
Managing Member or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained in this Section 2.4 shall be construed as authorizing the
Managing Member or any Liquidator to amend this Agreement except in accordance
with Article 14 hereof or as may be otherwise expressly provided for in this
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Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Members and Assignees will be relying upon the power of
the Managing Member to act as contemplated by this Agreement, and it shall
survive and not be affected by the subsequent Incapacity of any Member or
Assignee and the Transfer of all or any portion of such Member's or Assignee's
LLC
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Units or Membership Interest and shall extend to such Member's or Assignee's
heirs, successors, assigns and personal representatives. Each Member or
Assignee shall execute and deliver to the Managing Member or any Liquidator,
within 15 days after receipt of the Managing Member's or Liquidator's request
therefor, such further designation, powers of attorney and other instruments as
the Managing Member or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Company.
Section 2.5. Term
The term of the Company commenced on November 13, 1997, the date that
the original Certificate was filed in the office of the Secretary of State of
Delaware in accordance with the Act, and shall continue until September 25, 2012
unless extended by unanimous agreement of the Members or earlier terminated
pursuant the provisions of Section 13 hereof or as otherwise provided by law.
ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business
The purpose and nature of the business to be conducted by the Company
is (i) to conduct any business that may be lawfully conducted by a limited
liability company organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
Managing Member at all times to be classified as a REIT for federal income tax
purposes, unless the Managing Member ceases to qualify as a REIT for reasons
other than the conduct of the business of the Company, (ii) to enter into any
partnership, joint venture, limited liability company or other similar
arrangement to engage in any business described in the foregoing clause (i) or
to own interests in any entity engaged, directly or indirectly, in any such
business, and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing, and without limiting the Managing Member's right
in its sole discretion to cease qualifying as a REIT, the Members acknowledge
that the Managing Member's current status as a REIT inures to the benefit of all
the Members and not solely the Managing Member or its Affiliates.
Section 3.2. Powers
The Company is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Company including, without limitation, full power
and authority, directly or through its ownership interest in other entities, to
enter into, perform and carry out contracts of any kind, borrow money and issue
evidences of indebtedness and guaranty indebtedness of the Managing Member and
other Affiliates (whether or not Funding Debt), whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, that notwithstanding any other provision in this Agreement,
the Managing Member may cause the
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Company not to take, or to refrain from taking, any action that, in the judgment
of the Managing Member, in its sole and absolute discretion, (i) could adversely
affect the ability of the Managing Member to continue to qualify as a REIT, (ii)
could subject the Managing Member to any additional taxes under Code Section 857
or Code Section 4981 or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Managing Member, its
securities or the Company, unless such action (or inaction) under clause (i),
clause (ii) or clause (iii) above shall have been specifically consented to by
the Managing Member in writing.
Section 3.3. Specified Purposes
The Company shall be a limited liability company only for the purposes
specified in Section 3.1 hereof, and this Agreement shall not be deemed to
create a joint venture or partnership between or among the Members with respect
to any activities whatsoever other than the activities within the purposes of
the Company as specified in Section 3.1 hereof. Except as otherwise provided in
this Agreement, no Member shall have any authority to act for, bind, commit or
assume any obligation or responsibility on behalf of the Company, its properties
or any other Member. No Member, in its capacity as a Member under this
Agreement, shall be responsible or liable for any indebtedness or obligation of
another Member, nor shall the Company be responsible or liable for any
indebtedness or obligation of any Member, incurred either before or after the
execution and delivery of this Agreement by such Member, except as to those
responsibilities, liabilities, indebtedness or obligations incurred pursuant to
and as limited by the terms of this Agreement and the Act.
Section 3.4. Representations and Warranties by the Members
A. Each Member that is an individual (including, without limitation,
each Additional Member or Substituted Member as a condition to becoming an
Additional Member or a Substituted Member) represents and warrants to the
Company, the Managing Member and each other Member that (i) such Member has the
legal capacity to enter into this Agreement and perform such Member's
obligations hereunder, (ii) the consummation of the transactions contemplated by
this Agreement to be performed by such Member will not result in a breach or
violation of, or a default under, any material agreement by which such Member or
any of such Member's property is bound, or any statute, regulation, order or
other law to which such Member is subject, (iii) such Member is neither a
"foreign person" within the meaning of Code Section 1445(f) nor a "foreign
partner" within the meaning of Code Section 1446(e), (iv) if the representation
hereunder is being made on or prior to December 31, 1997, such Member (other
than the Managing Member), except as disclosed in writing to the Managing
Member, does not own, directly or indirectly or by attribution under Code
Section 318 (as modified by Code Section
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856(d)(5)) any shares of stock of the Managing Member, (v) if the representation
hereunder is being made subsequent to December 31, 1997 and such Member has been
timely provided a Tenant Schedule, such Member (other than the Managing Member),
except as otherwise disclosed in writing to the Managing Member, either (A) does
not own, directly or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)) more than 25% of the interests in capital or
profits of the Company or (B) (1) does not own, directly or indirectly or by
attribution under Code Section 318 (as modified by Code Section 856(d)(5)) any
shares of stock of the Managing Member and (2) does not own directly or
indirectly or by attribution under Code Section 318 (as modified by Code Section
856(d)(5)) any interest in any entity that is listed on the Tenant Schedule, and
(vi) this Agreement is binding upon, and enforceable against, such Member in
accordance with its terms.
B. Each Member that is not an individual (including, without
limitation, each Additional Member or Substituted Member as a condition to
becoming an Additional Member or a Substituted Member) represents and warrants
to the Company, the Managing Member and each other Member that (i) all
transactions contemplated by this Agreement to be performed by it have been duly
authorized by all necessary action, including, without limitation, that of its
managing member(s) (or, if there is no managing member, a majority in interest
of all members), committee(s), trustee(s), general partner(s), beneficiaries,
directors and shareholder(s), as the case may be, as required, (ii) the
consummation of such transactions will not result in a breach or violation of,
or a default under, its partnership or operating agreement, trust agreement,
charter or bylaws, as the case may be, any material agreement by which such
Member or any of such Member's properties or any of its partners, members,
beneficiaries, trustees or shareholders, as the case may be, is or are bound, or
any statute, regulation, order or other law to which such Member or any of its
partners, members, trustees, beneficiaries or shareholders, as the case may be,
is or are subject, (iii) such Member is neither a "foreign person" within the
meaning of Code Section 1445(f) nor a "foreign partner" within the meaning of
Code Section 1446(e), (iv) if the representation hereunder is being made on or
prior to December 31, 1997, such Member (other than the Managing Member), except
as disclosed in writing to the Managing Member, does not own, directly or
indirectly or by attribution under Code Section 318 (as modified by Code Section
856(d)(5)) any shares of stock of the Managing Member, (v) if the representation
hereunder is being made subsequent to December 31, 1997 and such Member has been
timely provided a Tenant Schedule, such Member (other than the Managing Member),
except as otherwise disclosed in writing to the Managing Member, either (A) does
not own, directly or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)) more than 25% of the interests in capital or
profits of the Company or (B) (1) does not own, directly or indirectly or by
attribution under Code Section 318 (as modified by Code Section 856(d)(5)) and
shares of stock of the Managing Member and (2) does not own directly on
indirectly or by attribution under Code Section 318 (as modified by Code Section
856(d)(5)) any interest in any entity that is listed on the Tenant Schedule, and
(vi) this Agreement is binding upon, and enforceable against, such Member in
accordance with its terms.
C. Each Member (including, without limitation, each Substituted
Member as a condition to becoming a Substituted Member) represents, warrants and
agrees that it has acquired and continues to hold its interest in the Company
for its own account for investment only and not for the purpose of, or with a
view toward, the resale or distribution of all or any part thereof, nor with a
view toward selling or otherwise distributing such interest or any part thereof
at any particular time or under any predetermined circumstances without
prejudice, however, to each Member's right at all times to sell or otherwise
dispose of all or any part of such Member's REIT Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from
registration available under the Securities Act.. Each Member further
represents and warrants that it is an "accredited investor" as defined in Rule
501 promulgated under the
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Securities Act and is a sophisticated investor, able and accustomed to handling
sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds that it has invested in the Company in what it
understands to be a highly speculative and illiquid investment.
D. The representations and warranties contained in Sections 3.4.A,
3.4.B and 3.4.C hereof shall survive the execution and delivery of this
Agreement by each Member (and, in the case of an Additional Member or a
Substituted Member, the admission of such Additional Member or Substituted
Member as a Member in the Company) and the dissolution, liquidation and
termination of the Company. The Managing Member may, in its sole and absolute
discretion on behalf of the Company and its Members, grant waivers and
exceptions to the representations and warranties contained in Sections 3.4.A,
3.4.B and 3.4.C hereof, but any such waiver or exception must be in writing,
must refer to this Section 3.4.D and must describe with particularity the
representation or warranty as to which such waiver or exception shall apply.
E. Each Member (including, without limitation, each Substituted
Member as a condition to becoming a Substituted Member) hereby represents that
it has consulted and been advised by its legal counsel and tax advisor in
connection with, and acknowledges that no representations as to potential
profit, tax consequences of any sort (including, without limitation, the tax
consequences resulting from forming the Company, executing this Agreement,
consummating the transaction provided for in or contemplated by the Contribution
Agreement, making a Capital Contribution, being admitted to the Company or being
allocated Tax Items), cash flows, funds from operations or yield, if any, in
respect of the Company or the Managing Member have been made by any Member or
any employee or representative or Affiliate of any Member, and that projections
and any other information, including, without limitation, financial and
descriptive information and documentation, that may have been in any manner
submitted to such Member shall not constitute any representation or warranty of
any kind or nature, express or implied.
ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Initial Members
At the time of their respective execution of this Agreement, the
Members shall make Capital Contributions as set forth in Exhibit A to this
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Agreement. The Members shall own LLC Units in the amounts set forth in Exhibit
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A and shall have a Percentage Interest as set forth in Exhibit A, which
- - ---------
Percentage Interest shall be adjusted in Exhibit A from time to time by the
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Managing Member to the extent necessary to accurately reflect exchanges, Capital
Contributions, the issuance of additional LLC Units or similar events having an
effect on a Member's Percentage Interest. Except as required by law or as
otherwise provided in Sections 4.3 and 4.4, no Member shall be required or
permitted to make any additional Capital Contributions or loans to the Company.
Unless otherwise specified by the Managing Member at the time of the creation of
any class of Membership Interests, the corresponding class of capital stock for
any LLC Units issued shall be REIT Shares.
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Section 4.2. Additional Members
The Managing Member is authorized to admit one or more Additional
Members to the Company from time to time, on terms and conditions and for such
Capital Contributions as may be established by the Managing Member in its
reasonable discretion; provided that any Additional Members shall have no right
to receive distributions before all distributions required by clause (1) of
Section 5.1.A have been paid. No action or consent by the Non-Managing Member
shall be required in connection with the admission of any Additional Members.
In the sole and absolute discretion of the Managing Member, the Company may
acquire in the future additional Properties by means of Capital Contributions by
other Persons, which Capital Contributions shall be set forth in Exhibit A. As
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a condition to being admitted to the Company, each Additional Member shall
execute an agreement to be bound by the terms and conditions of this Agreement.
Notwithstanding the foregoing, (ii) no Affiliate of the Managing Member will be
permitted to make a Capital Contribution or to otherwise be admitted as an
Additional Member and accordingly no issuance of LLC Units will be made to any
Affiliate of the Managing Member and (ii) neither the Managing Member nor any
Affiliate of the Managing Member may have any interest in the Company as a Non-
Managing Member.
Section 4.3. Loans by Third Parties
Subject to the provisions of Section 4.4 and Section 7.3 hereof, the
Company may incur or assume Debt, or enter into other similar credit, guarantee,
financing or refinancing arrangements, for any purpose (including, without
limitation, in connection with any further acquisition of Properties from any
Person), upon such terms as the Managing Member determines appropriate;
provided, however, that the Company shall not incur or assume any Debt under
which a breach, violation or default would be deemed to occur by virtue of the
Transfer of any Membership Interest; provided, further, that any Debt shall be
nonrecourse to each Member unless the Member to whom any Debt would be recourse
otherwise agrees.
Section 4.4. Additional Funding and Capital Contributions
A. General. The Managing Member may, at any time and from time to
time, determine that the Company requires additional funds ("Additional Funds")
for the acquisition or development of additional Properties or for such purposes
as the Managing Member may determine. Additional Funds may be raised by the
Company, at the election of the Managing Member, in any manner provided in, and
in accordance with, the terms of this Section 4.4 or, alternatively, the terms
of Section 4.3 hereof. No Person, including, without limitation, any Member or
Assignee, shall have any preemptive, preferential, participation or similar
right or rights to subscribe for or acquire any Membership Interest.
B. Notice of Additional Funds Requirement. The Managing Member may,
but shall not be required to, give written notice (the "Funding Notice") to the
Members of the need for Additional Funds and the anticipated source(s) thereof.
C. Managing Member Loans. Whether or not a Funding Notice is given
to the Members, the Managing Member may enter into a Funding Debt and lend the
Additional
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Funds to the Company (a "Managing Member Loan"); provided, however, that the
Managing Member shall not be obligated to lend the net proceeds of any Funding
Debt to the Company in a manner that would be inconsistent with the Managing
Member's ability to remain qualified as a REIT. If the Managing Member enters
into such a Funding Debt, the Managing Member Loan will consist of the net
proceeds from such Funding Debt and, to the extent permitted by law, will be on
the same terms and conditions, including interest rate and repayment schedule,
and providing for the reimbursement of costs and expenses, as shall be
applicable with respect to or incurred in connection with such Funding Debt;
provided, however, that any repayments (including principal and interest) on a
Funding Debt or a Managing Member Loan will be subordinate to the payment of any
distributions pursuant to clause (1) of Section 5.1.A, and no repayments shall
be made unless at the time of repayment all distributions previously required to
be made pursuant to Section 5.1 have been made in full (i.e., no Preferred
Return Shortfall required Otherwise, all Managing Member Loans made pursuant to
this Section 4.4 shall be on terms and conditions no less favorable to the
Company than would be available to the Company from any third party.
D. Additional Managing Member Contributions; Additional Members.
Whether or not a Funding Notice is given to the Members, the Managing Member on
behalf of the Company may raise all or any portion of the Additional Funds by
making additional Capital Contributions or accepting additional Capital
Contributions from any other Members or third parties and either (a) in the case
of Members (including the Managing Member), increasing that Member's LLC Units
or (b) in the case of a third party, admitting that third party as an Additional
Member as contemplated by Section 4.2 of this Agreement. Subject to the terms
of this Section 4.4 and to the definition of "Gross Asset Value," the Managing
Member shall determine in good faith the amount, terms and conditions of such
additional Capital Contributions; provided, however, that, in the case of an
additional Capital Contribution by the Managing Member, the Company shall issue
to the Managing Member the number of LLC Units derived by dividing (1) the
amount of the additional Capital Contribution (net of any liabilities assumed or
taken subject to by the Company) by (2) the Value determined as of the date of
such Capital Contribution.
E. Certain Additional Capital Requirements. Notwithstanding the
foregoing provisions of this Section 4.4, if the Managing Member anticipates
that, based upon its projections of Available Cash or otherwise, the Available
Cash generated by the Company during a quarterly period will be insufficient to
enable the Company to distribute in full the amount specified in clause (1) of
the first sentence of Section 5.1.A, then the Managing Member shall finance any
(i) capital expenditures (including principal payments on any Debt to the extent
incurred to finance capital expenditures) made by the Company during that
quarterly period, (ii) shortages in Available Cash resulting from payments made
by the Company during that quarterly period with respect to any guaranty of the
obligations of the Managing Member or its Affiliates, or (iii) shortages in
Available Cash resulting from loans made during that quarterly period by the
Company to, or investments made by the Company during that quarterly period in,
the Managing Member or its Affiliates by making additional cash Capital
Contributions to the Company in an amount equal to the lesser of (a) the amount
necessary to enable the Company to distribute in full for that quarterly period
the amount specified in clause (1) of the first sentence of Section 5.1.A,
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or (b) the sum of any capital expenditures quarterly payments, loans and
investments made during that quarterly period as specified in clauses (i)
through (iii), of this Section 4.4.E.
F. Timing of Additional Capital Contributions. If additional Capital
Contributions are made by Members on any day other than the first day of a
Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of
income, gain, loss, deduction and credit allocable among Members and Assignees
for such Fiscal Year shall be allocated among such Members and Assignees by
taking into account their varying interests during the Fiscal Year in accordance
with Code Section 706(d), using the "interim closing of the books" or "daily
proration" method or another permissible method selected by the Managing Member.
Solely for purposes of making such allocations, each of such items for the
calendar month in which an admission of any Additional Member occurs shall be
allocated among all the Members and Assignees including such Additional Member,
in accordance with the principles described in Section 11.6.C hereof.
Section 4.5. No Interest; No Return
No Member shall be entitled to interest on its Capital Contribution or
on such Member's Capital Account. Except as provided herein or by law, no
Member shall have any right to demand or receive the return of its Capital
Contribution from the Company.
ARTICLE 5.
DISTRIBUTIONS
Section 5.1. Requirement and Characterization of Distributions
A. General. The Managing Member shall cause the Company to
distribute quarterly on the LLC Distribution Date all (or with respect to
amounts distributed pursuant to the following clauses (3), (4) and (5), such
portion as the Managing Member may in its discretion determine) Available Cash
generated by the Company during such quarter to the Members on the LLC Record
Date for such quarter as follows: (1) first, to the Non-Managing Member, until
the Preferred Return Shortfall for the Non-Managing Member is zero; (2) next, to
the Managing Member until the cumulative distributions to the Managing Member
under this Section 5.1.A(2) from the inception of the Company equal the Managing
Member's Capital Return, (3) next, to the Managing Member until the cumulative
distributions to the Managing Member under this Section 5.1.A(3) from the
inception of the Company equal the cumulative Capital Contributions made by the
Managing Member from the inception of the Company, (4) next, to the Non-Managing
Member until the cumulative distributions to the Non-Managing Member under this
Section 5.1.A(4) from the inception of the Company equal the cumulative Capital
Contributions made by the Non-Managing Member from the inception of the Company,
and (5) thereafter, 88% to the Managing Member and 12% to the Non-Managing
Member; provided, however, that if dividends are paid to holders of REIT Shares
more frequently than quarterly, then the LLC Distribution Date shall occur on
the date of the payment of the more frequent dividends and the period with
respect to which Available Cash is computed for purposes of this Section 5.1.A
shall be correspondingly adjusted. The Managing Member shall take such
reasonable efforts, as determined by it in its sole and absolute discretion and
consistent with its qualification as a
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REIT, to cause the Company to distribute sufficient amounts to enable the
Managing Member to pay stockholder dividends that will (a) satisfy the
requirements for qualifying as a REIT under the Code and Regulations ("REIT
Requirements"), and (b) avoid any federal income or excise tax liability of the
Managing Member.
B. Conduct of Company Operations to Maintain Level of Distributions.
The Managing Member intends to use reasonable efforts to cause the Company to
operate in a manner (including, without limitation, incurring Debt, establishing
and maintaining cash reserves, and undertaking and financing recurring and non-
recurring capital expenditures) that enables the Company to make the quarterly
distribution required pursuant to clause (1) of Section 5.1.A above. The
Managing Member shall act in good faith in attempting to accomplish the
foregoing objective, but there is no assurance that such objective will be
accomplished, and neither the Managing Member nor the Company shall have any
liability for the failure to achieve such objective so long as the Managing
Member acts in good faith.
C. Minimum Distributions if Managing Member Not Publicly Traded
Entity. In addition (and without regard to the amount of Available Cash) if the
REIT Shares of the Managing Member are not Publicly Traded, the Company shall
make cash distributions to the Members at least annually, in proportion to the
numbers of LLC Units owned by each Member, for each taxable year of the Company
beginning prior to the fifteenth (15th) anniversary of the Effective Date in an
aggregate amount with respect to each such taxable year at least equal to 95% of
the Company's taxable income for such year, with such distributions to be made
not later than 60 days after the end of such year; provided, however, neither
the Managing Member nor any of its Affiliates shall be obligated to make any
Capital Contributions, loans, advances or other funds available to the Company
(other than to repay any outstanding loans or advances from the Company to the
Managing Member or its Affiliates) in order to satisfy the distribution
requirement of this Section 5.1.C.
Section 5.2. Distributions in Kind
No right is given to any Member to demand and receive property other
than cash. The Managing Member may determine, in its sole and absolute
discretion, to make a distribution in kind to the Members of Company assets, and
such assets shall be distributed in such a fashion as to ensure that the fair
market value is distributed and allocated in accordance with Articles 5 and 6
----------------
hereof.
Section 5.3. Amounts Withheld
Each Member hereby authorizes the Company to withhold from or pay on
behalf of or with respect to such Member any amount of federal, state, local or
foreign taxes that the Managing Member determines that the Company is required
to withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Company pursuant to Code Section 1441,
Code Section 1442, Code Section 1445 or Code Section 1446; provided, however,
the Managing Member, on behalf of the Company, shall make such filings with
state and local authorities in accordance with customary business practices to
minimize or eliminate any
26
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withholding requirement. Any amount paid on behalf of or with respect to a
Member shall constitute a loan by the Company to such Member, which loan shall
be repaid by such Member within 15 days after notice from the Managing Member
that such payment must be made unless (i) the Company withholds such payment
from a distribution that would otherwise be made to the Member or (ii) the
Managing Member determines, in its sole and absolute discretion, that such
payment may be satisfied out of the Available Cash of the Company that would,
but for such payment, be distributed to the Member. Any amounts withheld
pursuant to the foregoing clauses (i) or (ii) shall be treated as having been
distributed to such Member. Each Member hereby unconditionally and irrevocably
grants to the Company a security interest in such Member's Membership Interest
to secure such Member's obligation to pay to the Company any amounts required to
be paid pursuant to this Section 5.3. In the event that a Member fails to pay
any amounts owed to the Company pursuant to this Section 5.3 when due, the
Managing Member may, in its sole and absolute discretion, elect to make the
payment to the Company on behalf of such defaulting Member, and in such event
shall be deemed to have loaned such amount to such defaulting Member and shall
succeed to all rights and remedies of the Company as against such defaulting
Member (including, without limitation, the right to receive distributions). Any
amounts payable by a Member hereunder shall bear interest at the Prime Rate plus
four (4) percentage points (but not higher than the maximum lawful rate) from
the date such amount is due (i.e., 15 days after demand) until such amount is
paid in full. Each Member shall take such actions as the Company or the Managing
Member shall request in order to perfect or enforce the security interest
created hereunder.
Section 5.4. Distributions Upon Liquidation
Notwithstanding the other provisions of this Article 5, net proceeds
---------
from a Terminating Capital Transaction and any other cash received or reductions
in reserves made after commencement of the liquidation of the Company shall be
distributed to the Members in accordance with Section 13.2 hereof.
Section 5.5. Restricted Distributions
Notwithstanding any provision to the contrary contained in this
Agreement, neither the Company nor the Managing Member, on behalf of the
Company, shall make a distribution to any Member on account of its Membership
Interest or interest in LLC Units if such distribution would violate Section 18-
607 of the Act or other applicable law.
ARTICLE 6.
ALLOCATIONS
Section 6.1. Timing and Amount of Allocations of Net Income and Net
Loss
Net Income and Net Loss of the Company shall be determined and
allocated with respect to each Fiscal Year of the Company as of the end of each
such year. Except as otherwise provided in this Article 6, an allocation to a
---------
Member of a share of Net Income or Net Loss shall
27
<PAGE>
be treated as an allocation of the same share of each item of income, gain, loss
or deduction that is taken into account in computing Net Income or Net Loss.
Section 6.2. General Allocations. Except as otherwise provided in
this Article 6:
---------
A. Net Income. Net Income for any Fiscal Year shall be allocated,
for purposes of adjusting the Capital Accounts of the Members, in accordance
with the following order of priority:
(1) First, to the Non-Managing Member until the cumulative amount
of Net Income allocated to the Non-Managing Member pursuant to this Section
6.2.A(1) for the current and all prior Fiscal Years is equal to the sum of
(a) the cumulative amount distributed to the Non-Managing Member pursuant
to Section 5.1.A(1) for the current and all prior Fiscal Years and (b) the
cumulative amount of Net Loss allocated to such Non-Managing Member for all
prior Fiscal Years;
(2) Second, to the Managing Member until the cumulative amount
allocated to the Managing Member pursuant to this Section 6.2.A(2) for the
current Fiscal Year and all prior Fiscal Years equals the Managing Member's
Capital Return; and
(3) Thereafter, 88% to the Managing Member and 12% to the Non-
Managing Members.
B. Net Loss. Net Loss for any Fiscal Year shall be allocated, for
purposes of adjusting the Capital Accounts of the Members, pro rata to each
Member in accordance with their relative positive Capital Account balances
(calculated for this purpose by adding to such Member's Capital Account such
Member's share of Company Minimum Gain and Member Minimum Gain).
Section 6.3. Additional Allocation Provisions
A. Regulatory Allocations
(1) Minimum Gain Chargeback. Except as otherwise provided in
-----------------------
Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2
hereof, or any other provision of this Article 6, if there is a net decrease in
---------
Company Minimum Gain during any Fiscal Year, each Member shall be specially
allocated items of Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member's share of the net decrease
in Company Minimum Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items to be allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.B(1) is intended to
qualify as a "minimum gain chargeback" within the meaning of Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
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(2) Member Minimum Gain Chargeback. Except as otherwise provided
------------------------------
in Regulations Section 1.704-2(i)(4) or in Section 6.3.A(1) hereof, if there is
a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt
during any Fiscal Year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Member's share of the net decrease in Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-
2(j)(2). This Section 6.3.A(2) is intended to qualify as a "chargeback of
partner nonrecourse debt minimum gain" within the meaning of Regulations Section
1.704-2(i) and shall be interpreted consistently therewith.
(3) Member Nonrecourse Deductions. Any Member Nonrecourse
-----------------------------
Deductions for any Fiscal Year shall be specially allocated to the Member(s) who
bears the economic risk of loss with respect to the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable, in accordance with
Regulations Section 1.704-2(i).
(4) Qualified Income Offset. If any Member unexpectedly receives
-----------------------
an adjustment, allocation or distribution described in Regulations Section 1.70
4-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be
allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such
Member in an amount and manner sufficient to eliminate, to the extent required
by such Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section
6.3.A(4) shall be made if and only to the extent that such Member would have an
Adjusted Capital Account Deficit after all other allocations provided in this
Article 6 have been tentatively made as if this Section 6.3.A(4) were not in the
Agreement. It is intended that this Section 6.3.A(4) qualify and be construed as
a "qualified income offset" within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(5) Limitation on Allocation of Net Loss. To the extent that any
------------------------------------
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Member, such allocation of Net Loss shall be reallocated among
the other Members in accordance with their respective LLC Units, subject to the
limitations of this Section 6.3.A(5).
(6) Section 754 Adjustment. To the extent that an adjustment to
----------------------
the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken
into account in determining Capital Accounts as the result of a distribution to
a Member in complete liquidation of its interest in the Company, the amount of
such adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Members in accordance with their LLC Units in the event
29
<PAGE>
that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to
whom such distribution was made in the event that Regulations Section 1.704-
1(b)(2)(iv)(m)(4) applies.
(7) Curative Allocations. The allocations set forth in Sections
--------------------
6.3.A(1) through (6) hereof (the "Regulatory Allocations") are intended to
comply with certain regulatory requirements, including the requirements of
Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of
Section 6.1 hereof, the Regulatory Allocations shall be taken into account in
allocating other items of income, gain, loss and deduction among the Members so
that, to the extent possible without violating the requirements giving rise to
the Regulatory Allocations, the net amount of such allocations of other items
and the Regulatory Allocations to each Member shall be equal to the net amount
that would have been allocated to each such Member if the Regulatory Allocations
had not occurred.
B. Allocation of Excess Nonrecourse Liabilities. Solely for purposes
of determining a Member's proportional share of the "excess nonrecourse
liabilities" of the Company within the meaning of Regulations Section 1.752-
3(a)(3), each Member's interest in Company profits shall be equal to such
Member's interest in the allocations provided in Section 6.2.A(3).
Section 6.4. Tax Allocations
A. In General. Except as otherwise provided in this Section 6.4, for
income tax purposes under the Code and the Regulations, each Company item of
income, gain, loss and deduction (collectively, "Tax Items") shall be allocated
among the Members in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c) Revaluations. Notwithstanding
Section 6.4.A hereof, Tax Items with respect to Property that is contributed to
the Company with a Gross Asset Value that varies from its basis in the hands of
the contributing Member immediately preceding the date of contribution shall be
allocated among the Members for income tax purposes pursuant to the "traditional
method" as described in Regulations Section 1.704-3(b). In the event that the
Gross Asset Value of any Company asset is adjusted pursuant to subsection (b) of
the definition of "Gross Asset Value" (provided in Article 1 hereof), subsequent
---------
allocations of Tax Items with respect to such asset shall take account of the
variation, if any, between the adjusted basis of such asset and its Gross Asset
Value in the same manner as under Code Section 704(c) and the applicable
Regulations and this Section 6.4.B.
Section 6.5. Other Provisions
A. Other Allocations. In the event that (i) any modifications are made
to the Code or any Regulations, (ii) any changes occur in any case law applying
or interpreting the Code or any Regulations, (iii) the IRS changes or clarifies
the manner in which it applies or interprets the Code or any Regulations or any
case law applying or interpreting the Code or any Regulations or (iv) the IRS
adjusts the reporting of any of the transactions contemplated by this Agreement
which, in each case, either (a) requires allocations of items of income, gain,
loss,
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<PAGE>
deduction or credit or (b) requires reporting of any of the transactions
contemplated by this Agreement in a manner different from that set forth in this
Article 6, the Managing Member is hereby authorized to make new allocations or
report any such transactions (as the case may be) in reliance of the foregoing,
and such new allocations and reporting shall be deemed to be made pursuant to
the fiduciary duty of the Managing Member to the Company and the other Members,
and no such new allocation or reporting shall give rise to any claim or cause of
action by any Member.
B. Consistent Tax Reporting. The Members acknowledge and are aware
of the income tax consequences of the allocations made by this Article 6 and
---------
hereby agree to be bound by the provisions of this Article 6 in reporting their
---------
shares of Net Income, Net Loss and other items of income, gain, loss, deduction
and credit for federal, state and local income tax purposes.
Section 6.6. Amendments to Allocation to Reflect Issuance of
Additional Membership Interests
In the event that the Company issues additional Membership Interests
to the Managing or any Additional Member pursuant to Article 4 hereof, the
---------
Managing Member shall make such revisions to this Article 6 as it determines are
---------
necessary to reflect the terms of the issuance of such additional Membership
Interests, including making preferential allocations to certain classes of
Membership Interests; provided, that no class of Membership Interest shall be
entitled to receive any distributions before all distributions required by
clause (1) of Section 5.1.A have been paid.
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1. Management
A. Except as otherwise expressly provided in this Agreement, the
Managing Member, in its capacity as a Member of the Company under the Act, shall
have sole and complete charge and management over the business and affairs of
the Company, in all respects and in all matters. The Managing Member shall be
an agent of the Company's business, and the actions of the Managing Member taken
in such capacity and in accordance with this Agreement shall bind the Company.
The Managing Member shall at all times be a Member of the Company. Except as
otherwise expressly provided in this Agreement or required by any non-waivable
provisions of applicable law, the Non-Managing Member shall not participate in
the control of the Company, shall have no right, power or authority to act for
or on behalf of, or otherwise bind, the Company and shall have no right to vote
on or consent to any other matter, act, decision or document involving the
Company or its business. The Managing Member may not be removed by the Members
with or without cause, except with the consent of the Managing Member. In
addition to the powers now or hereafter granted a manager of a limited liability
company under applicable law or that are granted to the Managing Member under
any other provision of this Agreement, the Managing Member, subject to the other
provisions hereof including the limitations on the authority of the Managing
Member set forth in Section 7.3, shall have full
31
<PAGE>
power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Company, to exercise all powers set forth in Section
3.2 hereof and to effectuate the purposes set forth in Section 3.1 hereof,
including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on loans and
borrowing money to permit the Company to make distributions to its Members
in such amounts as will permit the Managing Member (so long as the Managing
Member qualifies as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to Code Section 4981)
and to make distributions to its shareholders sufficient to permit the
Managing Member to maintain REIT status or otherwise to satisfy the REIT
Requirements), the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of any of the foregoing by deed to
secure debt, mortgage, deed of trust or other lien or encumbrance on the
Company's assets) and the incurring of any obligations that it deems
necessary for the conduct of the activities of the Company;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Company;
(3) except as restricted pursuant to Section 7.3.E(2) hereof,
the acquisition, sale, transfer, exchange or other disposition of any
assets of the Company (including, but not limited to, the exercise or grant
of any conversion, option, privilege or subscription right or any other
right available in connection with any assets at any time held by the
Company) or the merger, consolidation, reorganization or other combination
of the Company with or into another entity;
(4) except as restricted pursuant to Section 7.1.C hereof, the
mortgage, pledge, encumbrance or hypothecation of any assets of the Company
(including, without limitation, any Contributed Property), the use of the
assets of the Company (including, without limitation, cash on hand) for any
purpose consistent with the terms of this Agreement which the Managing
Member believes will directly benefit the Company and on any terms that the
Managing Member sees fit, including, without limitation, the financing of
the conduct or the operations of the Managing Member or the Company, the
lending of funds to other Persons (including, without limitation, the
Managing Member, if necessary to permit the financing or capitalization of
a subsidiary of the Managing Member or the Company) and the repayment of
obligations of the Company, any of its Subsidiaries and any other Person in
which it has an equity investment;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition, replacement or improvement of any Property,
including, without limitation, any Contributed Property, or other asset of
the Company or any Subsidiary;
(6) the negotiation, execution and performance of any
contracts, leases, conveyances or other instruments that the Managing
Member considers useful or
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necessary to the conduct of the Company's operations or the implementation
of the Managing Member's powers under this Agreement, including contracting
with property managers (including, without limitation, as to any
Contributed Property or other Property, contracting with the contributing
or any other Member or its Affiliates for property management services),
contractors, developers, consultants, accountants, legal counsel, other
professional advisors and other agents and the payment of their expenses
and compensation out of the Company's assets;
(7) the distribution of Company cash or other Company assets in
accordance with this Agreement, the holding, management, investment and
reinvestment of cash and other assets of the Company, and the collection
and receipt of revenues, rents and income of the Company;
(8) the selection and dismissal of employees of the Company or
the Managing Member (including, without limitation, employees having titles
or offices such as "president," "vice president," "secretary" and
"treasurer"), and agents, outside attorneys, accountants, consultants and
contractors of the Company or the Managing Member and the determination of
their compensation and other terms of employment or hiring;
(9) the maintenance of such insurance for the benefit of the
Company and the Members as it deems necessary or appropriate including
casualty, liability and other insurance on the Properties of the Company;
(10) the formation of, or acquisition of an interest in, and the
contribution of property to, any corporation, limited or general
partnerships, joint ventures, limited liability companies or other
relationships that it deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property to any
Subsidiary and any other Person in which it has an equity investment from
time to time); provided that, as long as the Managing Member has determined
to continue to qualify as a REIT, the Company may not engage in any such
formation, acquisition or contribution that would cause the Managing Member
to fail to qualify as a REIT;
(11) the control of any matters affecting the rights and
obligations of the Company, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment, of any claim, cause of action, liability, debt or damages, due
or owing to or from the Company, the commencement or defense of suits,
legal proceedings, administrative proceedings, arbitrations or other forms
of dispute resolution, and the representation of the Company in all suits
or legal proceedings, administrative proceedings, arbitrations or other
forms of dispute resolution, the incurring of legal expense, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(12) the undertaking of any action in connection with the
Company's direct or indirect investment in its Subsidiaries or any other
Person (including, without
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limitation, contributing or loaning Company funds to, incurring
indebtedness on behalf of, or guaranteeing the obligations of any such
Persons);
(13) the determination of the fair market value of any Company
property distributed in kind using such reasonable method of valuation as
it may adopt; provided that such methods are otherwise consistent with the
requirements of this Agreement;
(14) the enforcement of any rights against any Member pursuant
to representations, warranties, covenants and indemnities relating to such
Member's contribution of property or assets to the Company;
(15) the collection and receipt of revenues and income of the
Company;
(16) the exercise, directly or indirectly, through any attorney-
in-fact acting under a general or limited power of attorney, of any right,
including the right to vote, appurtenant to any asset or investment held by
the Company;
(17) the exercise of any of the powers of the Managing Member
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Company or any other Person in which the Company has a
direct or indirect interest, or jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the Managing Member
enumerated in this Agreement on behalf of any Person in which the Company
does not have an interest pursuant to contractual or other arrangements
with such Person;
(19) the maintenance of working capital and other reserves in
such amounts as the Managing Member, in its sole and absolute discretion,
deems appropriate and reasonable from time to time;
(20) after November 30, 1998 and upon notice to the Non-Managing
Member, effectuate the LLC Merger including the execution and filing of all
documents, certificates and other instrument deemed appropriate in the
judgment of the Managing Member for accomplishing the LLC Merger;
(21) the making, execution and delivery of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees (including, without
limitation, the Approved Guaranty), warranties, indemnities, waivers,
releases or legal instruments or agreements in writing necessary or
appropriate in the judgment of the Managing Member for the accomplishment
of any of the powers of the Managing Member enumerated in this Agreement;
and
(22) the amendment and restatement of Exhibit A hereto to
---------
reflect accurately at all times the Capital Accounts, LLC Units, and
Percentage Interests of the Members as the same are adjusted from time to
time to the extent necessary to reflect
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redemptions, Capital Contributions, the issuance of LLC Units, the
admission of any Additional Members or any Substituted Member or otherwise,
as long as the matter or event being reflected in Exhibit A hereto
---------
otherwise is authorized by this Agreement.
B. Each of the Non-Managing Members agrees that, except as provided
in Section 7.3 hereof, the Managing Member is authorized to execute, deliver and
perform the above-mentioned agreements and transactions on behalf of the
Company, and specifically, the LLC Merger, without any further act, approval or
vote of the Non-Managing Member, notwithstanding any other provision of this
Agreement (except as provided in Section 7.3 hereof), the Act or any applicable
law, rule or regulation. The execution, delivery or performance by the Managing
Member or the Company of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the Managing Member of any duty that
the Managing Member may owe the Company or the Members or any other Persons
under this Agreement or of any duty stated or implied by law or equity.
C. Prior to the expiration of the No Transfer Period, the Managing
Member shall either (1) (a) not permit the Company to refinance any loan (each
such loan, a "Loan") that is secured by the Real Property for an amount that is
less than the outstanding principal balance of such Loan immediately prior to
the Effective Date, reduced from time to time by scheduled payments of principal
pursuant to the documents governing the Loan; (b) not permit the Company to make
any prepayments of principal due under a Loan; and (c) not permit the Company to
guarantee or otherwise assume the economic risk of loss (within the meaning of
Sections 704 and 752 of the Code and the Regulations promulgated thereunder)
with respect to a Loan or (2) prior to taking any action described in (1) above,
first offering the No Transfer Member the opportunity to guarantee or otherwise
assume the economic risk of loss (within the meaning of Sections 704 and 752 of
the Code and the Regulations promulgated thereunder) with respect to any amount
of indebtedness (up to the full amount of the Loan) desired by the No Transfer
Member; provided, however, that (i) the No Transfer Member shall not be offered
the opportunity to guarantee or otherwise assume the economic risk of loss of an
amount of indebtedness that would result in an overall increase in the amount of
Company liabilities allocable to the No Transfer Member pursuant to Code Section
752, as compared with the amount of liabilities allocable to such Member prior
to the action described in (1) above.
D. At all times from and after the date hereof, the Managing Member
shall cause the Company to:
(1) maintain a ratio of secured indebtedness to the book value of
total assets of not more than 0.40 to 1;
(2) maintain a ratio of indebtedness to the sum of (i) the market
value of all real property and (ii) the book value of total assets (other
than real property) of not more than 0.55 to 1;
(3) maintain a ratio of (i) the market value of real property not
encumbered by a lien securing indebtedness for borrowed money to (ii)
unsecured indebtedness of more than 1.75 to 1;
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(4) maintain a ratio of EBITDA to debt service of not less than
1.80 to 1; and
(5) not incur indebtedness for borrowed money bearing interest at
a rate per annum in excess of the most favorable rate of interest that
could have been obtained by the Managing Member if indebtedness with the
same terms had been incurred at the same time by the Managing Member
rather than the Company.
For purposes of this Section 7.1.D, the term "indebtedness" shall not
include any indebtedness of the Managing Member guaranteed by the Company
including, without limitation, the Approved Guaranty.
E. At all times from and after the date hereof, the Managing Member
may cause the Company to obtain and maintain (i) casualty, liability and other
insurance on the properties of the Company and (ii) liability insurance for the
Indemnitees hereunder.
F. In exercising its authority under this Agreement, the Managing
Member may, but shall be under no obligation to, take into account the tax
consequences to any Member (including the Managing Member) of any action taken
by it. The Managing Member and the Company shall not have liability to a Member
under any circumstances as a result of an income tax liability incurred by such
Member as a result of an action (or inaction) by the Managing Member pursuant to
its authority under this Agreement so long as the action or inaction is taken in
good faith.
Section 7.2. Certificate of Formation
To the extent that such action is determined by the Managing Member to
be reasonable and necessary or appropriate, the Managing Member shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Company as a limited liability company under the laws of the State
of Delaware and each other state, the District of Columbia or any other
jurisdiction in which the Company may elect to do business or own property.
Subject to the terms of Section 8.5.A(4) hereof, the Managing Member shall not
be required, before or after filing, to deliver or mail a copy of the
Certificate or any amendment thereto to any Member. The Managing Member shall
use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited liability company in the
State of Delaware and any other state, or the District of Columbia or other
jurisdiction in which the Company may elect to do business or own property.
Section 7.3. Restrictions on Managing Member's Authority
A. The Managing Member may not take any action in contravention of
an express prohibition or limitation of this Agreement, including, without
limitation:
(1) take any action that would make it impossible to carry on the
ordinary business of the Company;
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(2) possess Company property, or assign any rights in specific
Company property, for other than a Company purpose except as otherwise
provided in this Agreement;
(3) admit a Person as a Member, except as otherwise provided in
this Agreement;
(4) perform any act that would subject a Non-Managing Member to
liability as a Managing Member in any jurisdiction or any other liability
except as provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other agreement
that expressly prohibits or restricts, or has the effect of prohibiting or
restricting, the ability of (a) the Managing Member or the Company from
satisfying its obligations under Section 5.1 or 8.6 hereof in full, (b) a
Member from exercising its rights to an Exchange in full, except, in either
case, with the written consent of such Member affected by the prohibition
or (c) the Non-Managing Member to exercise its right to require the
Managing Member to cause the Company to effectuate the LLC Merger as
provided in Section 8.5.D hereof.
B. The Managing Member shall not, without the prior Consent of the
Non-Managing Members undertake or have the authority to do or undertake, on
behalf of the Company, any of the following actions or enter into any
transaction which would have the effect of such transactions:
(1) except as provided in Section 7.3.C, amend, modify or
terminate this Agreement other than to reflect the admission, substitution,
termination or withdrawal of Members pursuant to Section 6.6 or Article 11
----------
or Article 12 hereof;
----------
(2) make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian, receiver or trustee
for all or any part of the assets of the Company;
(3) institute any proceeding for bankruptcy on behalf of the
Company;
(4) confess a judgment against the Company;
(5) approve or acquiesce to the Transfer of the Membership
Interest of the Managing Member to any Person other than the Company; or
(6) admit into the Company any Additional or Substitute Managing
Member.
C. Notwithstanding Section 7.3.B, the Managing Member shall have the
exclusive power to amend this Agreement as may be required to facilitate or
implement any of the following purposes:
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(1) to add to the obligations of the Managing Member or surrender
any right or power granted to the Managing Member or any Affiliate of the
Managing Member for the benefit of the Non-Managing Member;
(2) to reflect the issuance of additional Membership Interests
pursuant to Section 4.4.D or the admission, substitution, termination, or
withdrawal of Members in accordance with this Agreement and to amend
Exhibit A in connection with such admission, substitution or withdrawal;
---------
(3) to effectuate the LLC Merger in accordance with the terms of
this Agreement;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Non-Managing Member in any material respect,
or to cure any ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions, or make other
changes with respect to matters arising under this Agreement that will not
be inconsistent with law or with the provisions of this Agreement;
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive or regulation of a federal or state
agency or contained in federal or state law;
(6) to reflect such changes as are reasonably necessary for the
Managing Member to maintain its status as a REIT or to satisfy the REIT
Requirements; and
(7) to modify, as set forth in the definition of "Capital
Account," the manner in which Capital Accounts are computed; provided,
however, under no circumstances may any such modification change the amount
or the timing of any amount to be received by any Member under this
Agreement.
The Managing Member will provide notice to the Non-Managing Member when any
action under this Section 7.3.C is taken.
D. Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement
shall not be amended with respect to any Member adversely affected, and no
action may be taken by the Managing Member, without the Consent of such Member
adversely affected if such amendment or action would (i) convert a Non-Managing
Member's interest in the Company into a managing member's interest (except as
the result of the Managing Member acquiring such interest), (ii) modify the
limited liability of a Non-Managing Member, (iii) alter rights of the Member to
receive distributions pursuant to Article 5 or Section 13.2.A(4), or the
---------
allocations specified in Article 6 (except as permitted pursuant to Section 4.4
---------
and Section 7.3.C(3) hereof), (iv) materially alter or modify the rights to an
Exchange as set forth in Section 8.6, and related definitions hereof or (v)
amend this Section 7.3.D. Further, no amendment may alter the restrictions on
the Managing Member's authority set forth elsewhere in this Section 7.3 without
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the Consent specified in such section. Any such amendment or action consented
to by any Member shall be effective as to that Member, notwithstanding the
absence of such consent by any other Member.
E. The Managing Member shall not, on behalf of the Company, take any
of the following actions without the prior Consent of the Non-Managing Member:
(1) dissolve the Company, other than incident to a Termination
Transaction (as defined in Section 11.2); or
(2) except in connection with a tax-free transaction, sell,
dispose, convey or otherwise transfer the property commonly known as The
Overlook at Blue Ravine which the Company acquired in connection with the
transactions consummated pursuant to the Contribution Agreement (the "Real
Property") for (i) a period of eight years from the Effective Date, or (ii)
a period of one year from the Effective Date if the Managing Member
determines that the proceeds from the sale of the Real Property will be
less than or equal to the Non-Managing Member's tax basis in the Real
Property and the Managing Member so notifies the Non-Managing Member 45
days prior to consummating such sale. Nothing in this Section 7.3.E(2)
shall restrict the encumbrance of the Real Property of the Company.
Section 7.4. Reimbursement of the Managing Member
A. The Managing Member shall not be compensated for its services as
the Managing Member of the Company. Distributions, payments and allocations to
which the Managing Member may be entitled in its capacity as the Managing Member
shall not constitute compensation for services rendered by the Managing Member
as provided in this Agreement (including the provisions of Articles 5 and 6
----------------
hereof).
B. Subject to Sections 7.4.C and 15.12 hereof, the Company shall be
liable, and shall reimburse the Managing Member on a monthly basis (or such
other basis as the Managing Member may determine in its sole and absolute
discretion), for all sums expended in connection with the Company's business.
Any such reimbursements shall be in addition to any reimbursement of the
Managing Member as a result of indemnification pursuant to Section 7.7 hereof.
C. To the extent practicable, Company expenses shall be billed
directly to and paid by the Company. Subject to Sections 7.1.C and 15.12
hereof, reimbursements to the Managing Member or any of its Affiliates by the
Company shall be allowed, however, for the actual cost to the Managing Member or
any of its Affiliates of operating and other expenses of the Company, including,
without limitation, the actual cost of goods, materials and administrative
services related to (i) Company operations, (ii) Company accounting, (iii)
communications with Members, (iv) legal services, (v) tax services, (vi)
computer services, (vii) risk management, (viii) mileage and travel expenses and
(ix) such other related operational and administrative expenses as are necessary
for the prudent organization and operation of the Company. "Actual cost of
goods and materials" means the actual cost to the Managing Member
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or any of its Affiliates of goods and materials used for or by the Company
obtained from entities not affiliated with the Managing Member, and "actual cost
of administrative services" means the pro rata cost of personnel (as if such
persons were employees of the Company) providing administrative services to the
Company. The cost for such services to be reimbursed to the Managing Member or
any Affiliate thereof shall be the lesser of the Managing Member's or
Affiliate's actual cost, or the amount the Company would be required to pay to
independent parties for comparable administrative services in the same
geographic location.
D. The Managing Member shall also be reimbursed for all expenses it
incurs relating to any issuance of additional Membership Interests or Debt of
the Company (including, without limitation, all costs, expenses, damages and
other payments resulting from or arising in connection with litigation related
to the foregoing), all of which expenses are considered by the Members to
constitute expenses of, and for the benefit of, the Company.
To the extent that reimbursements to the Managing Member or any of its
Affiliates by the Company pursuant to this Section 7.4 would constitute gross
income to the Managing Member for purposes of Code Section 856(c)(2) or
856(c)(3), then such amounts shall be treated as "guaranteed payments" within
the meaning of Code Section 707(c).
Section 7.5. Other Business of Managing Member
The Managing Member shall devote to the Company such time as may be
necessary for the performance of its duties as Managing Member, but the Managing
Member is not required, and is not expected, to devote its full time to the
performance of such duties. The Managing Member may engage independently or
with others in other business ventures of every nature and description,
including, without limitation, the ownership of other properties and the making
or management of other investments. Nothing in this Agreement shall be deemed
to prohibit the Managing Member or any Affiliate of the Managing Member from
dealing, or otherwise engaging in business with, Persons transacting business
with the Company, or from providing services related to the purchase, sale,
financing, management, development or operation of real or personal property and
receiving compensation therefor, not involving any rebate or reciprocal
arrangement that would have the effect of circumventing any restriction set
forth herein upon dealings with the Managing Member or any Affiliate of the
Managing Member. Neither the Company nor any Member shall have any right by
virtue of this Agreement or the relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived therefrom, and the
pursuit of such ventures, even if competitive with the business of the Company,
shall not be deemed wrongful or improper.
Section 7.6. Contracts with Affiliates
A. Subject to Section 7.6.B below, the Company may lend or
contribute to Persons in which it has an equity investment, and such Persons may
borrow funds from the Company, on terms and conditions established in the sole
and absolute discretion of the Managing Member. The foregoing authority shall
not create any right or benefit in favor of any Person.
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B. Neither the Managing Member nor any of its Affiliates, directly
or indirectly, shall sell, transfer or convey any property to, or purchase any
property from, or borrow funds from, or lend funds to, the Company or engage in
any other transaction with the Company, except upon terms determined by the
Managing Member in good faith to be fair and reasonable and comparable to terms
that could be obtained from an unaffiliated party in an arm's length
transaction. Nothing contained in this Section 7.6.B or any other provision to
this Agreement shall be deemed to limit the authority of the Managing Member to
enter into the Approved Guaranty on behalf of the Company, or to consummate the
LLC Merger on behalf of the Company.
C. The Company may transfer assets to joint ventures, limited
liability companies, partnerships, corporations, business trusts or other
business entities in which it is or thereby becomes a participant upon such
terms and subject to such conditions consistent with this Agreement and
applicable law as the Managing Member, in its sole and absolute discretion, to
assume the Assumed Loan on behalf of the Company believes to be advisable.
D. The Managing Member in its sole and absolute discretion and
without the approval of the Non-Managing Member, may propose and adopt on behalf
of the Company employee benefit plans funded by the Company for the benefit of
employees of the Managing Member, the Company, Subsidiaries of the Company or
any Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Company or any of the Company's Subsidiaries.
E. The Managing Member is expressly authorized to enter into, in the
name and on behalf of the Company, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Company and
the Managing Member, on such terms as the Managing Member, in its sole and
absolute discretion, believes are advisable.
Section 7.7. Indemnification
A. To the fullest extent permitted by applicable law, the Company
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
attorney's fees and other legal fees and expenses), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, that
relate to the operations of the Company ("Actions") as set forth in this
Agreement in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise, for any indebtedness of the Company or any Subsidiary of the Company
(including, without limitation, any indebtedness which the Company or any
Subsidiary of the Company has assumed or taken
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<PAGE>
subject to), and the Managing Member is hereby authorized and empowered, on
behalf of the Company, to enter into one or more indemnity agreements consistent
with the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A. The termination of any proceeding by conviction or upon a plea of
nolo contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the Indemnitee acted in a manner
contrary to that specified in this Section 7.7.A with respect to the subject
matter of such proceeding. Any indemnification pursuant to this Section 7.7
shall be made only out of the assets of the Company and any insurance proceeds
from the liability policy covering the Managing Member and any Indemnitees, and
neither the Managing Member nor any Non-Managing Member shall have any
obligation to contribute to the capital of the Company or otherwise provide
funds to enable the Company to fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding or otherwise subject to or the focus of or is involved in any Action
shall be paid or reimbursed by the Company as incurred by the Indemnitee in
advance of the final disposition of the Action upon receipt by the Company of
(i) a written affirmation by the Indemnitee of the Indemnitee's good faith
belief that the standard of conduct necessary for indemnification by the Company
as authorized in Section 7.7.A has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Members, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written agreement with
such Indemnitee or in the writing pursuant to which such Indemnitee is
indemnified.
D. The Company may, but shall not be obligated to, purchase and
maintain insurance, on behalf of any of the Indemnitees and such other Persons
as the Managing Member shall determine, against any liability that may be
asserted against or expenses that may be incurred by such Person in connection
with the Company's activities, regardless of whether the Company would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.7, (i) the Company shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Company also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of this Section 7.7 and (iii) actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably
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<PAGE>
believed by it to be in the interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which is not opposed to the best
interests of the Company.
F. In no event may an Indemnitee subject any of the Members to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Company's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
I. If and to the extent any reimbursements to the Managing Member
pursuant to this Section 7.7 constitute gross income to the Managing Member (as
opposed to the repayment of advances made by the Managing Member on behalf of
the Company) such amounts shall constitute guaranteed payments within the
meaning of Code Section 707(c), shall be treated consistently therewith by the
Company and all Members, and shall not be treated as distributions for purposes
of computing the Members' Capital Accounts.
Section 7.8. Liability of the Managing Member
A. Notwithstanding anything to the contrary set forth in this
Agreement, neither the Managing Member nor any of its directors or officers
shall be liable or accountable in damages or otherwise to the Company, any
Members or any Assignees for losses sustained, liabilities incurred or benefits
not derived as a result of errors in judgment or mistakes of fact or law or of
any act or omission if the Managing Member or such director or officer acted in
good faith.
B. The Non-Managing Member expressly acknowledges that the Managing
Member is acting for the benefit of the Company, the Members and the Managing
Member's shareholders collectively, that the Managing Member is under no
obligation to give priority to the separate interests of the Members or the
Managing Member's shareholders (including, without limitation, the tax
consequences to Members, Assignees or the Managing Member's shareholders) in
deciding whether to cause the Company to take (or decline to take) any actions
and that the Managing Member shall not be liable to the Company or to any Member
for monetary damages for losses sustained, liabilities incurred, or benefits not
derived by the Non-Managing Member in connection with such decisions, provided
that the Managing Member has acted in good faith.
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C. Subject to its obligations and duties as Managing Member set
forth in Section 7.1.A hereof, the Managing Member may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its employees or agents. The
Managing Member shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the Managing Member's, and its officers' and directors',
liability to the Company and the Non-Managing Member under this Section 7.8 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
Section 7.9. Other Matters Concerning the Managing Member
A. The Managing Member may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it in good faith to be genuine and to have been signed
or presented by the proper party or parties.
B. The Managing Member may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters that the Managing Member reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
C. The Managing Member shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the Managing Member in the power of attorney,
have full power and authority to do and perform all and every act and duty that
is permitted or required to be done by the Managing Member hereunder.
D. Notwithstanding any other provisions of this Agreement or the
Act, any action of the Managing Member on behalf of the Company or any decision
of the Managing Member to refrain from acting on behalf of the Company
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Managing Member to continue
to qualify as a REIT, (ii) for the Managing Member otherwise to satisfy the REIT
Requirements or (iii) to allow the Managing Member to avoid incurring any
liability for taxes under Section 857 or Section 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by the Non-Managing
Member.
E. In connection with any pledge by Non-Managing Member of its LLC
Units to a lending institution pursuant to Section 11.3 hereof, the Managing
Member agrees to
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cooperate in providing to the Non-Managing Member the following documents as may
reasonably be requested by the lending institution from time to time and upon
ten (10) days prior notice from the requesting Non-Managing Member: (i) a
certificate from the Managing Member certifying that as of a specific date there
have been no amendments to its organizational documents or this Agreement; (ii)
certified copies of the Certificate and the organizational documents of the
Managing Member; (iii) good standing certificates for the Managing Member and
the Company; (iv) a letter from the Managing Member acknowledging the pledge by
the Non-Managing Member of its LLC Units; and (v) an opinion of counsel
regarding the transferability of the REIT Shares into which the LLC Units may be
exchanged. The Non-Managing Member requesting any of the foregoing shall pay the
reasonable expenses incurred by the Company and the Managing Member in providing
any of the foregoing.
Section 7.10. Title to Company Assets
Title to Company assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Company as an entity,
and no Member, individually or collectively with other Members or Persons, shall
have any ownership interest in such Company assets or any portion thereof.
Title to any or all of the Company assets may be held in the name of the
Company, the Managing Member or one or more nominees, as the Managing Member may
determine, including Affiliates of the Managing Member. The Managing Member
hereby declares and warrants that any Company assets for which legal title is
held in the name of the Managing Member or any nominee or Affiliate of the
Managing Member shall be held by the Managing Member for the use and benefit of
the Company in accordance with the provisions of this Agreement; provided,
however, that the Managing Member shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Company as soon as
reasonably practicable. All Company assets shall be recorded as the property of
the Company in its books and records, irrespective of the name in which legal
title to such Company assets is held.
Section 7.11. Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Company shall be entitled to assume that the Managing Member
has full power and authority, without the consent or approval of any other
Member or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Company and to enter into any contracts on behalf of the Company,
and take any and all actions on behalf of the Company, and such Person shall be
entitled to deal with the Managing Member as if it were the Company's sole party
in interest, both legally and beneficially. In no event shall any Person
dealing with the Managing Member or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expediency of any act or action of the Managing Member or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Company by the Managing Member or its representatives
shall be conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (ii) the Person executing and delivering
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such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Company and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Company.
ARTICLE 8.
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 8.1. Limitation of Liability
No Non-Managing Members shall have any liability under this Agreement
except as expressly provided in this Agreement or under the Act.
Section 8.2. Managing of Business
No Non-Managing Member or Assignee (other than the Managing Member,
any of its Affiliates or any officer, director, employee, partner, agent or
trustee of the Managing Member, the Company or any of their Affiliates, in their
capacity as such) shall take part in the operations, management or control
(within the meaning of the Act) of the Company's business, transact any business
in the Company's name or have the power to sign documents for or otherwise bind
the Company. The transaction of any such business by the Managing Member, any
of its Affiliates or any officer, director, employee, partner, agent or trustee
of the Managing Member, the Company or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Non-Managing Member or its Assignees under this Agreement.
Section 8.3. Outside Activities of Members
Subject to any agreements entered into pursuant to Section 7.6 hereof
and any other agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary (including, without limitation, any
employment agreement), any Member and any Assignee, officer, director, employee,
agent, trustee, Affiliate or shareholder of any Member shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Company, including business interests and activities that
are in direct or indirect competition with the Company or that are enhanced by
the activities of the Company. Neither the Company nor any Member shall have
any rights by virtue of this Agreement in any business ventures of any Member or
Assignee. Subject to such agreements, none of the Members nor any other Person
shall have any rights by virtue of this Agreement or the relationship
established hereby in any business ventures of any other Person (other than the
Managing Member, to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement, subject to Section 7.6 hereof and
any other agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary, to offer any interest in any such
business ventures to the Company, any Member or any such other Person, even if
such opportunity is of a character that, if presented to the Company, any Member
or such other Person, could be taken by such Person.
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Section 8.4. Return of Capital
Except pursuant to the rights of Exchange set forth in Section 8.6
hereof, no Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. Except as
otherwise expressly provided in this Agreement, no Member or Assignee shall have
priority over any other Member or Assignee either as to the return of Capital
Contributions or as to profits, losses, distributions or credits.
Section 8.5. Rights of Non-Managing Member Relating to the Company
A. In addition to other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, the Non-Managing Member
shall have the right, upon written demand with a statement of the purpose of
such demand and at such Non-Managing Member's own expense:
(1) to obtain a copy of (i) the most recent annual and
quarterly reports filed with the SEC by the Managing Member pursuant to the
Exchange Act and (ii) each report or other written communication sent to
the shareholders of the Managing Member;
(2) to obtain a copy of the Company's federal, state and
local income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Member;
(4) to obtain a copy of this Agreement and the Certificate
and all amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount
of cash and a description and statement of any other property or services
contributed by each Member and that each Member has agreed to contribute in
the future, and the date on which each became a Member.
B. The Company shall notify the Non-Managing Member of the then
current Adjustment Factor or any change made to the Adjustment Factor or to the
REIT Shares Amount each time such a change occurs.
C. Notwithstanding any other provision of this Section 8.5, the
Managing Member may keep confidential from the Non-Managing Member, for such
period of time as the Managing Member determines in its reasonable discretion,
any information that (i) the Managing Member reasonably believes to be in the
nature of trade secrets or other information the disclosure of which the
Managing Member in good faith believes is not in the best interests of
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the Company or could damage the Company or its business or (ii) the Company or
the Managing Member is required by law or by agreements with unaffiliated third
parties to keep confidential.
D. Unless the Managing Member has already exercised its right to
effectuate the LLC Merger as provided in Section 7.1.A(20) of this Agreement,
after November 30, 1998 the Non-Managing Member shall have the right upon
written demand to the Managing Member to cause the Managing Member to effectuate
the LLC Merger.
Section 8.6. Exchange Rights
A. On or after the date one year after the Effective Date, the Non-
Managing Member shall have the right (subject to the terms and conditions set
forth herein) to require the Managing Member to acquire all or a portion of the
LLC Units held by such Non-Managing Member (such LLC Units being hereafter
called "Tendered Units") in exchange (an "Exchange") for, at the election of and
in the sole and absolute discretion of the Managing Member, either the Cash
Amount or a number of REIT Shares equal to the REIT Shares Amount payable on the
Specified Exchange Date. Any Exchange shall be exercised pursuant to a Notice
of Exchange delivered to the Managing Member by the Non-Managing Member
exercising the Exchange right (the "Tendering Party"). On the Specified
Exchange Date, the Tendering Party shall sell the Tendered Units to the Managing
Member in exchange for, at the election of and in the sole and absolute
discretion of the Managing Member, either the Cash Amount or a number of REIT
Shares equal to the REIT Shares Amount in each case computed as of the Specified
Exchange Date. In addition, the Managing Member shall cause the Company to pay
the Tendering Party the amount of any Preferred Return Shortfall outstanding as
of the Specified Exchange Date with respect to the Tendered Units. The
Tendering Party shall submit (i) such information, certification or affidavit as
the Managing Member may reasonably require in connection with the application of
the Ownership Limit and the application of any restrictions and limitations of
the Charter to any such Exchange and (ii) such written representations,
investment letters, legal opinions or other instruments reasonably necessary, in
the Managing Member's view, to effect compliance with the Securities Act. If
applicable, the Cash Amount shall be delivered as a certified check payable to
the Tendering Party or, in the Managing Member's sole discretion, in immediately
available funds. If applicable, the REIT Shares Amount shall be delivered by
the Managing Member as duly authorized, validly issued, fully paid and
nonassessable REIT Shares and, if applicable, Rights, free of any pledge, lien,
encumbrance or restriction, other than the Ownership Limit and other
restrictions provided in the Charter, the Bylaws of the Managing Member, the
Securities Act and relevant state securities or "blue sky" laws. Neither any
Tendering Party whose Tendered Units are acquired by the Managing Member
pursuant to this Section 8.6.A, any other Member, any Assignee nor any other
interested Person shall have any right to require or cause the Managing Member
to register, qualify or list any REIT Shares owned or held by such Person,
whether or not such REIT Shares are issued pursuant to this Section 8.6.A, with
the SEC, with any state securities commissioner, department or agency, under the
Securities Act or the Exchange Act or with any stock exchange; provided,
however, that this limitation shall not be in derogation of any registration or
similar rights granted pursuant to any other written agreement between the
Managing Member and any such Person. Notwithstanding any delay in such
delivery, the Tendering Party shall be deemed
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the owner of such REIT Shares and Rights for all purposes, including, without
limitation, rights to vote or consent, receive dividends, and exercise rights,
as of the Specified Exchange Date. REIT Shares issued upon an acquisition of the
Tendered Units by the Managing Member pursuant to this Section 8.6.A may contain
such legends regarding restrictions under the Securities Act and applicable
state securities laws as the Managing Member in good faith determines to be
necessary or advisable in order to ensure compliance with such laws.
B. Notwithstanding the foregoing, until such time as the Managing
Member shall have obtained the shareholder approval to do so if required by and
in compliance with Section 312.03 of the New York Stock Exchange Listed Company
Manual (the "Manual"), the Managing Member will be prohibited from issuing REIT
Shares in exchange for LLC Units (and will be required, therefore, to pay cash
in lieu of REIT Shares) to the extent that the REIT Shares to be issued upon an
Exchange, when combined with (i) all REIT Shares previously issued in connection
with an Exchange of LLC Units, plus (ii) the number of REIT Shares issued or
issuable (other than in connection with an Exchange of LLC Units) in connection
with the transactions contemplated by the Contribution Agreement, either (A)
have or will have upon issuance voting power in excess of 19.9% of the voting
power of the Managing Member outstanding immediately prior to the Effective
Date, or (B) are or will be in excess of 19.9% of the number of REIT Shares
outstanding immediately prior to the Effective Date where (in each instance) the
meaning of "voting power" and "voting power outstanding" and the calculation of
"outstanding" shares are in compliance with the requirements of Section 312.03
of the Manual.
C. Notwithstanding the provisions of Section 8.6.A hereof, any
Excess LLC Units held by a Non-Managing Member which are tendered for Exchange
will be purchased by the Managing Member for the Cash Amount and such Non-
Managing Member will have no right to receive the REIT Shares Amount in exchange
for its tendered Excess LLC Units.
D. Notwithstanding anything herein to the contrary, with respect to
any Exchange pursuant to this Section 8.6:
(1) Without the Consent of the Managing Member, no Non-
Managing Member may effect an Exchange for less than 1,000 LLC Units or, if
the Non-Managing Member holds less than 1,000 LLC Units, less than all of
the LLC Units held by such Non-Managing Member.
(2) The consummation of any Exchange shall be subject to the
expiration or termination of the applicable waiting period, if any, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(3) Each Tendering Party shall continue to own all LLC Units
subject to any Exchange, and be treated as a Member with respect to such
LLC Units for all purposes of this Agreement, until such LLC Units are
transferred to the Managing Member and paid for or exchanged on the
Specified Exchange Date. Until a Specified Exchange Date and an acquisition
of the Tendered Units by the Managing Member pursuant to Section 8.6.A
hereof, the Tendering Party shall have no rights as a
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shareholder of the Managing Member with respect to the REIT Shares issuable
in connection with such acquisition.
E. In connection with an exercise of Exchange rights pursuant to
this Section 8.6, the Tendering Party shall submit the following to the Managing
Member, in addition to the Notice of Exchange:
(1) A written affidavit, dated the same date as, and
accompanying, the Notice of Exchange, (a) disclosing the actual and
constructive ownership, as determined for purposes of Code Sections
856(a)(6), 856(h), 856(d)(2)(B) and 856(d)(5), of REIT Shares by (i) such
Tendering Party and (ii) any Related Party and (b) representing that, after
giving effect to the Exchange, neither the Tendering Party nor any Related
Party will own REIT Shares in excess of the Ownership Limit based on the
number of shares outstanding as reported in the most recent filing made by
the Managing Member with the SEC;
(2) A written representation that neither the Tendering
Party nor any Related Party has any intention to acquire any additional
REIT Shares prior to the closing of the Exchange on the Specified Exchange
Date; and
(3) An undertaking to certify, at and as a condition to the
closing of the Exchange that either (a) the actual and constructive
ownership of REIT Shares by the Tendering Party and any Related Party
remain unchanged from that disclosed in the affidavit required by Section
8.6.E(1) or (b) after giving effect to the Exchange, neither the Tendering
Party nor any Related Party shall own REIT Shares in violation of the
Ownership Limit based on the number of shares outstanding as reported in
the most recent filing made by the Managing Member with the SEC.
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting
A. The Managing Member shall keep or cause to be kept at the
principal office of the Company those records and documents required to be
maintained by the Act and other books and records deemed by the Managing Member
to be appropriate with respect to the Company's business, including, without
limitation, all books and records necessary to provide to the Members any
information, lists and copies of documents required to be provided pursuant to
Section 8.5 and 9.3 hereof. Any records maintained by or on behalf of the
Company in the regular course of its business may be kept on, or be in the form
of, punch cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time.
B. The books of the Company shall be maintained, for financial and
tax reporting purposes, on an accrual basis in accordance with generally
accepted accounting principles, or on such other basis as the Managing Member
determines to be necessary or
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appropriate. To the extent permitted by sound accounting practices and
principles, the Company and the Managing Member may operate with integrated or
consolidated accounting records, operations and principles.
Section 9.2. Fiscal Year
The Fiscal Year of the Company shall be the calendar year.
Section 9.3. Reports
A. As soon as practicable, but in no event later than 105 days after
the close of each Fiscal Year, the Managing Member shall cause to be mailed to
each Member, of record as of the close of the Fiscal Year, an annual report
containing financial statements of the Company, or of the Managing Member if
such statements are prepared solely on a consolidated basis with the Managing
Member, for such Fiscal Year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally recognized
firm of independent public accountants selected by the Managing Member.
B. As soon as practicable, but in no event later than 60 days after
the close of each calendar quarter (except the last calendar quarter of each
year), the Managing Member shall cause to be mailed to each Member, of record as
of the last day of the calendar quarter, a report containing unaudited financial
statements of the Company, or of the Managing Member, if such statements are
prepared solely on a consolidated basis with the Managing Member, and such other
information as may be required by applicable law or regulation or as the
Managing Member determines to be appropriate.
ARTICLE 10.
TAX MATTERS
Section 10.1. Preparation of Tax Returns
The Managing Member shall arrange for the preparation and timely
filing of all returns with respect to Company income, gains, deductions, losses
and other items required of the Company for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within 90 days of the
close of each taxable year, the tax information reasonably required by Members
for federal and state income tax reporting purposes.
Section 10.2. Tax Elections
Except as otherwise provided herein, the Managing Member shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code, including, without limitation, the election under Section
754 of the Code. The Managing Member shall have the right to seek to revoke any
such election (including, without limitation, any election under Code Sections
754) upon the Managing Member's determination in its sole and absolute
discretion that such revocation is in the best interests of the Members.
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Section 10.3. Tax Matters Partner
A. The Managing Member shall be designated and shall operate as "Tax
Matters Partner" (as defined in Code Section 6231), to oversee or handle matters
relating to the taxation of the Company and shall notify each Member of any
material proposed adjustment to any income tax return of the Company.
B. The Member designated as "Tax Matters Partner" may make all
elections for federal income and all other tax purposes (including, without
limitation, pursuant to Code Section 754).
C. Income tax returns of the Company shall be prepared by such
certified public accountant(s) as the Managing Member shall retain at the
expense of the Company.
Section 10.4. Organizational Expenses
The Company shall elect to deduct expenses, if any, incurred by it in
organizing the Company ratably over a 60-month period as provided in Code
Section 709.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer
A. No part of the Membership Interest of a Member shall be subject
to the claims of any creditor, to any spouse for alimony or support, or to legal
process, and may not be voluntarily or involuntarily alienated or encumbered
except as may be specifically provided for in this Agreement.
B. No Membership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
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Any Transfer or purported Transfer of a Membership Interest not made in
accordance with this Article 11 shall be null and void ab initio.
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Section 11.2. Transfer of Managing Member's Membership Interest
A. Except in connection with a transaction described in Section
11.2.B, the Managing Member shall not withdraw from the Company and shall not
Transfer all or any portion of its interest in the Company without the Consent
of the Non-Managing Member, which may be given or withheld by the Non-Managing
Member in its sole and absolute discretion. Upon any transfer of the Membership
Interest of the Managing Member in accordance with the provisions of this
Section 11.2, the transferee shall become a Substitute Managing Member for all
purposes herein, and shall be vested with the powers and rights of the
transferor Managing Member, and shall be liable for all obligations and
responsible for all duties of the Managing Member, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
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provisions of this Agreement with respect to the Membership Interest so
acquired. It is a condition to any Transfer otherwise permitted hereunder that
the transferee assumes, by operation of law or express agreement, all of the
obligations of the transferor Managing Member under this Agreement with respect
to such Transferred Membership Interest, and such Transfer shall relieve the
transferor Managing Member of its obligations under this Agreement accruing
subsequent to the date of such Transfer. In the event the Managing Member
withdraws from the Company, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Incapacity of the Managing
Member, the Non-Managing Member may elect to continue the Company business by
selecting a Substitute Managing Member in accordance with the Act.
B. The Managing Member shall not engage in any merger, consolidation
or other combination with or into another person, sale of all or substantially
all of its assets or any reclassification, recapitalization or change of its
outstanding equity interests (a "Termination Transaction"), unless either (i)
the Termination Transaction has been approved by the Consent of the Non-Managing
Member or (ii) in connection with the Termination Transaction, all holders of
LLC Units (other than the Managing Member) either will receive, or will have the
right to elect to receive, for each LLC Unit an amount of cash, securities, or
other property equal to the amount that would have been paid to the holder had
the LLC Unit been Exchanged for REIT Shares pursuant to Section 8.6 hereof
immediately prior to the consummation of the Termination Transaction; provided,
however, that, if, in connection with the Termination Transaction, a purchase,
tender or exchange offer shall have been made to and accepted by the holders of
more than fifty percent (50%) of the outstanding REIT Shares, each Member shall
have the right to elect to receive in lieu of the consideration payable in such
Termination Transaction, the greatest amount of cash, securities, or other
property which such Member would have received had it exchanged its LLC Units
for REIT Shares pursuant to Section 8.6 immediately prior to the expiration of
such purchase, tender or exchange offer and had thereupon accepted such
purchase, tender or exchange offer.
Section 11.3. Non-Managing Member's Rights to Transfer
A. General. The Non-Managing Member shall not Transfer all or any
portion of its Membership Interest, or any of such Non-Managing Member economic
rights as a Non-Managing Member, to any transferee without the consent of the
Managing Member, which consent may be withheld in its sole and absolute
discretion; provided, however, that the Non-Managing Member may, at any time,
without the consent of the Managing Member, Transfer all or part of its
Membership Interest (i) in the case of a Member which is an individual, to any
Family Member, any trust (whether or not revocable) of which such Non-Managing
Member or such Non-Managing Member's Family Members are the sole beneficiaries,
(ii) in the case of a Member which is not an individual, to the persons who were
partners, stockholders or owners of the Member as of the Effective Date, (iii)
pursuant to a gift or other transfer without consideration, (iv) pursuant to the
applicable laws of descent or distribution, (v) to another Member, (vi) subject
to the provisions of Section 11.6, pursuant to a grant of a security interest,
pledge or other encumbrance effected in a bona fide transaction or as a result
of the exercise of remedies related to the security interest, pledge or other
encumbrance (other than, in each case, to a lender to the Company or a Person
who is related to a lender to the Company) or (vii) to any
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Affiliate, provided that the transferee is, in any such case, a Qualified
Transferee. Any Transfer permitted by this proviso is referred to as a
"Permitted Transfer." It is a condition to any Transfer otherwise permitted
hereunder that the transferee assume by operation of law or express agreement
all of the obligations of the transferor Member under this Agreement with
respect to such Transferred Membership Interest. Notwithstanding the foregoing,
any transferee of any Transferred Membership Interest shall be subject to the
Ownership Limits and any and all ownership limitations contained in the Charter.
Any transferee, whether or not admitted as a Substituted Member, shall take
subject to the obligations of the transferor hereunder. Unless admitted as a
Substituted Member, no transferee, whether by a voluntary Transfer, by operation
of law or otherwise, shall have any rights hereunder, other than the rights of
an Assignee as provided in Section 11.5 hereof.
B. Incapacity. If a Non-Managing Member is subject to Incapacity,
the executor, administrator, trustee, committee, guardian, conservator or
receiver of such Non-Managing Member's estate shall have all the rights of a
Non-Managing Member, but not more rights than those enjoyed by other Non-
Managing Members, for the purpose of settling or managing the estate, and such
power as the Incapacitated Non-Managing Member possessed to Transfer all or any
part of its interest in the Company. The Incapacity of a Non-Managing Member, in
and of itself, shall not dissolve or terminate the Company.
C. Opinion of Counsel. In connection with any Transfer of a
Membership Interest, the Managing Member shall have the right to receive an
opinion of counsel reasonably satisfactory to it to the effect that the proposed
Transfer may be effected without registration under the Securities Act and will
not otherwise violate any federal or state securities laws or regulations
applicable to the Company or the Membership Interests Transferred. If, in the
opinion of such counsel, such Transfer would require the filing of a
registration statement under the Securities Act or would otherwise violate any
federal or state securities laws or regulations applicable to the Company or the
LLC Units, the Managing Member may prohibit any Transfer by a Member of
Membership Interests otherwise permitted under this Section 11.3.
D. Adverse Tax Consequences. No Transfer by a Member of its
Membership Interests (including any Exchange or exchange for REIT Shares
pursuant to Section 8.6) may be made to any Person if (i) in the opinion of
legal counsel for the Company, it would result in the Company being treated as
an association taxable as a corporation for federal income tax or for state
income or franchise tax purposes, (ii) in the opinion of legal counsel for the
Company, it would adversely affect the ability of the Managing Member to
continue to qualify as a REIT or would subject the Managing Member to any
additional taxes under Code Section 857 or Code Section 4981 or (iii) such
Transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Code Section 7704.
E. Transfers to Lenders. No Transfer of any LLC Units may be made to
a lender to the Company or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Company whose loan
constitutes a Nonrecourse Liability, without the consent of the Managing Member,
in its sole and absolute discretion; provided that,
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as a condition to such consent, the lender will be required to enter into an
arrangement with the Company and the Managing Member to redeem or exchange for
the REIT Shares Amount any LLC Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a member
in the Company for purposes of allocating liabilities to such lender under Code
Section 752.
Section 11.4. Substituted Members
A. No Member shall have the right to substitute a transferee
(including any transferees pursuant to Transfers permitted by Section 11.3
hereof) as a Member in its place. The Managing Member shall, however, have the
right to consent to the admission of a transferee of the interest of a Member
pursuant to this Section 11.4 as a Substituted Member, which consent may be
given or withheld by the Managing Member in its sole and absolute discretion.
The Managing Member's failure or refusal to permit a transferee of any such
interests to become a Substituted Member shall not give rise to any cause of
action against the Company or any Member.
B. A transferee who has been admitted as a Substituted Member in
accordance with this Article 11 shall have all the rights and powers and be
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subject to all the restrictions and liabilities of a Member under this
Agreement. The admission of any transferee as a Substituted Member shall be
subject to the transferee executing and delivering to the Company an acceptance
of all of the terms and conditions of this Agreement (including without
limitation, the provisions of Section 2.4 and such other documents or
instruments as may be required to effect the admission).
C. Upon the admission of a Substituted Member, the Managing Member
shall amend Exhibit A to reflect the name, address, Capital Account, number of
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LLC Units and Percentage Interest of such Substituted Member and to eliminate or
adjust, if necessary, the name, address, Capital Account, number of LLC Units
and Percentage Interest of the predecessor of such Substituted Member (and any
other Member, as necessary).
Section 11.5. Assignees
If the Managing Member, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 hereof
as a Substituted Member, as described in Section 11.4 hereof, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited liability
company interest under the Act, including the right to receive distributions
from the Company and the share of Net Income, Net Losses and other items of
income, gain, loss, deduction and credit of the Company attributable to the LLC
Units assigned to such transferee, the rights to Transfer the LLC Units provided
in this Article 11, and the right of Exchange provided in Section 8.6, but shall
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not be deemed to be a holder of LLC Units for any other purpose under this
Agreement, and shall not be entitled to effect a Consent or vote with respect to
such LLC Units on any matter presented to the Members for approval (such right
to Consent or vote, to the extent provided in this Agreement or under the Act,
fully remaining with the transferor Member). In the event that any such
transferee desires to make a further assignment of any such LLC Units,
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such transferee shall be subject to all the provisions of this Article 11 to the
----------
same extent and in the same manner as any Members desiring to make an assignment
of LLC Units. The Managing Member shall have no liability under any circumstance
with respect to any Assignee as to which it does not have notice.
Section 11.6. General Provisions
A. The Non-Managing Member may not withdraw from the Company other
than as a result of (i) a permitted Transfer of all of such Non-Managing
Member's LLC Units in accordance with this Article 11 and the transferee(s) of
----------
such LLC Units being admitting to the Company as a Substituted Member or (ii)
pursuant to an Exchange by the Managing Member of all of its LLC Units under
Section 8.6 hereof.
B. Any Member who shall (i) Transfer all of its LLC Units in a
Transfer permitted pursuant to this Article 11 where such transferee was
----------
admitted as a Substituted Member or (ii) exercise its rights to effect an
Exchange of all of its LLC Units under Section 8.6 hereof, shall cease to be a
Member.
C. All distributions of Available Cash attributable to an LLC Unit
with respect to which the LLC Record Date is before the date of a Transfer or an
Exchange of the LLC Unit shall be made to the transferor Member or the
exchanging Member, as the case may be, and, in the case of a Transfer other than
an Exchange, all distributions of Available Cash thereafter attributable to such
LLC Unit shall be made to the transferee Member.
D. In addition to any other restrictions on Transfer herein
contained, in no event may any Transfer or assignment of a Membership Interest
by any Member (including any acquisition of LLC Units by the Company) be made:
(a) to any person or entity who lacks the legal right, power
or capacity to own a Membership Interest;
(b) in violation of applicable law;
(c) if such Transfer would, in the opinion of counsel to the
Company or the Managing Member, cause an increased tax liability to any
other Member or Assignee as a result of the termination of the Company, in
either case for federal or state income or franchise tax purposes (except
as a result of the Exchange of all LLC Units held by all Members);
(d) if such Transfer would, in the opinion of legal counsel
to the Company, cause the Company either (i) to cease to be classified as a
partnership or (ii) to be classified as a publicly traded partnership
treated as a corporation, in either case for federal or state income tax
purposes (except as a result of the Exchange of all LLC Units held by all
Members);
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<PAGE>
(e) if such Transfer would cause the Company to become, with
respect to any employee benefit plan subject to Title I of ERISA, a "party-
in-interest" (as defined in ERISA Section 3(14)) or a "disqualified person"
(as defined in Code Section 4975(c));
(f) if such Transfer would, in the opinion of legal counsel
to the Company, cause any portion of the assets of the Company to
constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101;
(g) if such Transfer causes the Company (as opposed to the
Managing Member) to become a reporting company under the Exchange Act; or
(h) if such Transfer subjects the Company to regulation
under the Investment Company Act of 1940, the Investment Advisors Act of
1940 or ERISA, each as amended.
ARTICLE 12.
ADMISSION OF MEMBERS
Section 12.1. Admission of Successor Managing Member
A successor to all of the Managing Member's Membership Interest
pursuant to Section 11.2 hereof who is proposed to be admitted as a successor
Managing Member shall be admitted to the Company as the Managing Member,
effective immediately upon such Transfer. Any such successor shall carry on the
business of the Company without dissolution. In each case, the admission shall
be subject to the successor Managing Member executing and delivering to the
Company an acceptance of all of the terms, conditions and applicable obligations
of this Agreement and such other documents or instruments as may be required to
effect the admission.
Section 12.2. Admission of Additional Members
A. A Person (other than an existing Member) who makes a Capital
Contribution to the Company in accordance with this Agreement shall be admitted
to the Company as an Additional Member, subject to the receipt of the Consent of
the Non-Managing Members required by Section 7.3.C, only upon furnishing to the
Managing Member (i) evidence of acceptance, in form and substance satisfactory
to the Managing Member, of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 2.4
hereof, and (ii) such other documents or instruments as may be required in the
sole and absolute discretion of the Managing Member in order to effect such
Person's admission as an Additional Member.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Member without the consent of the
Managing Member, which consent may not be unreasonably withheld. The admission
of any Person as an Additional Member shall become effective on the date upon
which the name of such Person is recorded on
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the books and records of the Company, following the consent of the Managing
Member to such admission.
C. All distributions of Available Cash with respect to which the LLC
Record Date is before the date of the admission of any Additional Members shall
be made solely to Members and Assignees other than the Additional Member, and
all distributions of Available Cash thereafter shall be made to all the Members
and Assignees including such Additional Member.
Section 12.3. Amendment of Agreement and Certificate of Membership
For the admission to the Company of any Member, the Managing Member
shall take all steps necessary and appropriate under the Act to amend the
records of the Company and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
---------
required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.
Section 12.4. Limitation on Admission of Members
No Person shall be admitted to the Company as a Substituted Member or
an Additional Member if, the in the opinion of legal counsel for the Company, it
would result in the Company being treated as a corporation for federal income
tax purposes or otherwise cause the Company to become a reporting company under
the Exchange Act.
ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1. Dissolution
The Company shall not be dissolved by the admission of Substituted
Members or Additional Members or by the admission of a successor Managing Member
in accordance with the terms of this Agreement. Upon the withdrawal of the
Managing Member, any successor Managing Member shall continue the business of
the Company without dissolution. However, the Company shall dissolve, and its
affairs shall be wound up, upon the first to occur of any of the following (each
a "Liquidating Event"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the Managing Member, as defined in the
Act (other than an event of bankruptcy), unless within 90 days after the
withdrawal, a Majority of Remaining Members agree in writing to continue the
business of the Company and to the appointment, effective as of the date of
withdrawal, of a substitute Managing Member;
C. after September 30, 2012, an election to dissolve the Company
made by the Managing Member, in its sole and absolute discretion;
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D. entry of a decree of judicial dissolution of the Company pursuant
to the provisions of the Act;
E. after September 30, 2012, the sale of all or substantially all of
the assets and properties of the Company for cash or marketable securities;
F. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the Managing Member is bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against the Managing Member, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in effect,
unless prior to or within ninety days after the entry of such order or judgment
the remaining Members Consent in writing to continue the business of the Company
and to the appointment, effective as of a date prior to the date of such order
or judgment, of a substitute Managing Member;
G. the Incapacity of the Managing Member, unless a Majority of
Remaining Members agree in writing to continue the business of the Company and
to the appointment, effective as of a date prior to the date of such Incapacity,
of a substitute Managing Member; or
H. the Exchange of all LLC Units (other than those of the Managing
Member).
Section 13.2. Winding Up
A. Upon the occurrence of a Liquidating Event, the Company shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its creditors and Members.
After the occurrence of a Liquidating Event, no Member shall take any action
that is inconsistent with, or not necessary to or appropriate for, the winding
up of the Company's business and affairs. The Managing Member (or, in the event
that there is no remaining Managing Member, any Person elected by a Majority in
Interest of the Non-Managing Members (the Managing Member or such other Person
being referred to herein as the "Liquidator")) shall be responsible for
overseeing the winding up and dissolution of the Company and shall take full
account of the Company's liabilities and property, and the Company property
shall be liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds therefrom (which may, to the extent determined by the
Managing Member, include shares of stock in the Managing Member) shall be
applied and distributed in the following order:
(1) First, to the satisfaction of all of the Company's debts
and liabilities to creditors other than the Members and their Assignees
(whether by payment or the making of reasonable provision for payment
thereof);
(2) Second, to the satisfaction of all of the Company's
debts and liabilities to the Managing Member (whether by payment or the
making of reasonable provision for payment thereof), including, but not
limited to, amounts due as reimbursements under Section 7.4 hereof;
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(3) Third, to the satisfaction of all of the Company's debts and
liabilities of the other Members and any Assignees (whether by payment or
the making of reasonable provision for payment thereof); and
(4) The balance, if any, to the Members and any Assignees in
accordance with and proportion to their positive Capital Account balances,
after giving effect to all contributions, distributions and allocations for
all periods.
The Managing Member shall not receive any additional compensation for any
services performed pursuant to this Article 13.
----------
B. Notwithstanding the provisions of Section 13.2.A hereof that
require liquidation of the assets of the Company, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Company the
Liquidator determines that an immediate sale of part of all of the Company's
assets would be impractical or would cause undue loss to the Members, the
Liquidator may, in its sole and absolute discretion, defer for a reasonable time
the liquidation of any assets except those necessary to satisfy liabilities of
the Company (including to those Members as creditors) and/or distribute to the
Members, in lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2.A hereof, undivided interests in such Company assets
as the Liquidator deems not suitable for liquidation. Any such distributions in
kind shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Members, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.
C. In the event that the Company is "liquidated" within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the Members and Assignees that have positive
----------
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2)
to the extent of, and in proportion to, their positive Capital Account balances.
If any Member has a deficit balance in its Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Member shall have
no obligation to make any contribution to the capital of the Company with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any purpose whatsoever. In the sole and
absolute discretion of the Managing Member or the Liquidator, a pro rata portion
of the distributions that would otherwise be made to the Members pursuant to
this Article 13 may be withheld or escrowed to provide a reasonable reserve for
----------
Company liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Company, provided that such
withheld or escrowed amounts shall be distributed to the Members in the manner
and order of priority set forth in Section 13.2.A hereof as soon as practicable.
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Section 13.3. Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13, in the event
----------
that the Company is liquidated within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Company's Property
shall not be liquidated, the Company's liabilities shall not be paid or
discharged and the Company's affairs shall not be wound up. Instead, for
federal and state income tax purposes, the Company shall be deemed to have
distributed its assets in kind to the Members, who shall be deemed to have
assumed and taken such assets subject to all Company liabilities, all in
accordance with their respective Capital Accounts. Immediately thereafter, the
Members shall be deemed to have recontributed the Company assets in kind to the
Company, which shall be deemed to have assumed and taken such assets subject to
all such liabilities.
Section 13.4. Rights of Members
Except as otherwise provided in this Agreement, (a) each Member shall
look solely to the assets of the Company for the return of its Capital
Contribution, (b) no Member shall have the right or power to demand or receive
property other than cash from the Company and (c) no Member shall have priority
over any other Member as to the return of its Capital Contributions,
distributions or allocations.
Section 13.5. Notice of Dissolution
In the event that a Liquidating Event occurs or an event occurs that
would, but for an election or objection by one or more Members pursuant to
Section 13.1 hereof, result in a dissolution of the Company, the Managing Member
shall, within 30 days thereafter, provide written notice thereof to each of the
Members and, in the Managing Member's sole and absolute discretion or as
required by the Act, to all other parties with whom the Company regularly
conducts business (as determined in the sole and absolute discretion of the
Managing Member), and the Managing Member may, or, if required by the Act,
shall, publish notice thereof in a newspaper of general circulation in each
place in which the Company regularly conduct business (as determined in the sole
and absolute discretion of the Managing Member).
Section 13.6. Cancellation of Certificate of Limited Partnership
Upon the completion of the liquidation of the Company cash and
property as provided in Section 13.2 hereof, the Company shall be terminated and
the Certificate and all qualifications of the Company as a foreign limited
liability company in jurisdictions other than the State of Delaware shall be
cancelled and such other actions as may be necessary to terminate the Company
shall be taken.
Section 13.7. Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Company and the liquidation of its assets pursuant
to Section 13.2 hereof, in order
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to minimize any losses otherwise attendant upon such winding-up, and the
provisions of this Agreement shall remain in effect between the Members during
the period of liquidation.
Section 13.8. Liability of Liquidator
The Liquidator shall be indemnified and held harmless by the Company
from and against any and all claims, liabilities, costs, damages, and causes of
action of any nature whatsoever arising out of or incidental to the Liquidator's
taking of any action authorized under or within the scope of this Agreement;
provided, however, that the Liquidator shall not be entitled to indemnification,
and shall not be held harmless, where the claim, demand, liability, cost, damage
or cause of action at issue arises out of (i) a matter entirely unrelated to the
Liquidator's action or conduct pursuant to the provisions of this Agreement or
(ii) the proven willful misconduct or gross negligence of the Liquidator.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS
Section 14.1. Procedures for Actions and Consents of Members
The actions requiring consent or approval of Non-Managing Member
pursuant to this Agreement, including Section 7.3 hereof, or otherwise pursuant
to applicable law, are subject to the procedures set forth in this Article 14.
----------
Section 14.2. Amendments
Amendments to this Agreement may be proposed by the Managing Member or
by a Majority in Interest of the Non-Managing Members. Following such proposal,
the Managing Member shall submit any proposed amendment to the Members. The
Managing Member shall seek the written Consent of the Members on the proposed
amendment or shall call a meeting to vote thereon and to transact any other
business that the Managing Member may deem appropriate. The affirmative vote or
consent, as applicable, of the Managing Member and a Majority in Interest of the
Non-Managing Members is required for the approval of a proposed amendment. For
purposes of obtaining a written consent, the Managing Member may require a
response within a reasonable specified time, but not less than 15 days, and
failure to respond in such time period shall constitute a consent that is
consistent with the Managing Member's recommendation with respect to the
proposal; provided, however, that an action shall become effective at such time
as requisite consents are received even if prior to such specified time.
Section 14.3. Meetings of the Members
A. Meetings of the Members may be called by the Managing Member and
shall be called upon the receipt by the Managing Member of a written request by
a Majority in Interest of the Non-Managing Members. The call shall state the
nature of the business to be transacted. Notice of any such meeting shall be
given to all Members not less than seven days nor more than 30 days prior to the
date of such meeting. Members may vote in person or by
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proxy at such meeting. Whenever the vote or Consent of Members is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
Members or may be given in accordance with the procedure prescribed in Section
14.3.B hereof.
B. Any action required or permitted to be taken at a meeting of the
Members may be taken without a meeting if a written consent setting forth the
action so taken is signed by Members holding a majority of the LLC Units (or
such other percentage as is expressly required by this Agreement for the action
in question). Such consent may be in one instrument or in several instruments,
and shall have the same force and effect as a vote of Members holding a majority
of the LLC Units (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the Managing Member. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Member may authorize any Person or Persons to act for it by
proxy on all matters in which a Member is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Member or its attorney-in-fact. No proxy shall be
valid after the expiration of 11 months from the date thereof unless otherwise
provided in the proxy (or there is receipt of a proxy authorizing a later date).
Every proxy shall be revocable at the pleasure of the Member executing it, such
revocation to be effective upon the Company's receipt of written notice of such
revocation from the Member executing such proxy.
D. Each meeting of Members shall be conducted by the Managing Member
or such other Person as the Managing Member may appoint pursuant to such rules
for the conduct of the meeting as the Managing Member or such other Person deems
appropriate in its sole and absolute discretion. Without limitation, meetings
of Members may be conducted in the same manner as meetings of the Managing
Member's shareholders and may be held at the same time as, and as part of, the
meetings of the Managing Member's shareholders.
ARTICLE 15.
GENERAL PROVISIONS
Section 15.1. Addresses and Notice
Any notice, demand, request or report required or permitted to be
given or made to a Member or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent by first
class United States mail or by other means of written communication (including
by telecopy, facsimile, or commercial courier service) (i) in the case of a
Member, to that Member at the address set forth in Exhibit A or such other
---------
address of which the Member shall notify the Managing Member in writing and (ii)
in the case of an Assignee, to the address of which such Assignee shall notify
the Managing Member in writing.
Section 15.2. Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe
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the scope or intent of any provisions hereof. Except as specifically provided
otherwise, references to "Articles" or "Sections" are to Articles and Sections
of this Agreement.
Section 15.3. Pronouns and Plurals
Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
Section 15.4. Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6. Creditors
Other than as expressly set forth herein with respect to Indemnitees,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Company.
Section 15.7. Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.8. Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart.
Section 15.9. Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law. In the event of a conflict between any provision of this
Agreement and any non-mandatory provision of the Act, the provisions of this
Agreement shall control and take precedence.
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Section 15.10. Entire Agreement
This Agreement together with the Contribution Agreement contains all
of the understandings and agreements between and among the Members with respect
to the subject matter of this Agreement and the rights, interests and
obligations of the Members with respect to the Company.
Section 15.11. Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.12. Limitation to Preserve REIT Status
Notwithstanding anything else in this Agreement, to the extent that
the amount paid, credited, distributed or reimbursed by the Company to, for or
with respect to any REIT Member or its officers, directors, employees or agents,
whether as a reimbursement, fee, expense or indemnity (a "REIT Payment"), would
constitute gross income to the REIT Member for purposes of Code Section
856(c)(2) or Code Section 856(c)(3), then, notwithstanding any other provision
of this Agreement, the amount of such REIT Payments, as selected by the Managing
Member in its discretion from among items of potential distribution,
reimbursement, fees, expenses and indemnities, shall be reduced for any Fiscal
Year so that the REIT Payments, as so reduced, to, for or with respect to such
REIT Member shall not exceed the lesser of:
(a) an amount equal to the excess, if any, of (i) four and nine-
tenths percent (4.9%) of the REIT Member's total gross income (but
excluding the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (H) of Code Section 856(c)(2) over
(ii) the amount of gross income (within the meaning of Code Section
856(c)(2)) derived by the REIT Member from sources other than those
described in subsections (A) through (H) of Code Section 856(c)(2) (but not
including the amount of any REIT Payments); or
(b) an amount equal to the excess, if any, of (i) 24% of the REIT
Member's total gross income (but excluding the amount of any REIT Payments)
for the Fiscal Year that is described in subsections (A) through (I) of
Code Section 856(c)(3) over (ii) the amount of gross income (within the
meaning of Code Section 856(c)(3)) derived by the REIT Member from sources
other than those described in subsections (A) through (I) of Code Section
856(c)(3) (but not including the amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts set forth in
clauses (a) and (b) above may be made if the Managing Member, as a condition
precedent, obtains an opinion of tax counsel that the receipt of such excess
amounts shall not adversely affect the REIT Member's ability to qualify as a
REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a
consequence of the limitations set forth in this Section 15.12, such REIT
Payments shall
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carry over and shall be treated as arising in the following Fiscal Year. The
purpose of the limitations contained in this Section 15.12 is to prevent any
REIT Member from failing to qualify as a REIT under the Code by reason of such
REIT Member's share of items, including distributions, reimbursements, fees,
expenses or indemnities, receivable directly or indirectly from the Company, and
this Section 15.12 shall be interpreted and applied to effectuate such purpose.
Section 15.13. No Partition
No Member nor any successor-in-interest to a Member shall have the
right while this Agreement remains in effect to have any property of the Company
partitioned, or to file a complaint or institute to any proceeding at law or in
equity to have such property of the Company partitioned, and each Member, on
behalf of itself and its successors and assigns hereby waives any such right.
It is the intention of the Members that the rights of the parties hereto and
their successors-in-interest to Company property, as among themselves, shall be
governed by the terms of this Agreement, and that the rights of the Members and
their successors-in-interest shall be subject to the limitations and
restrictions as set forth in this Agreement.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first written above.
MANAGING MEMBER:
BRE Properties Inc.,
a Maryland corporation
/s/ Frank C. McDowell
--------------------------
By: Frank C. McDowell
Its: Chief Executive Officer
NON-MANAGING MEMBER:
Blue Ravine Realty Partners
By: TCR #411 Blue Ravine Limited Partnership
its general partner
By: TCR North Bay 1990, Inc.
its general partner
By: /s/ Randy J. Pace
--------------------------
Name: Randy J. Pace
Title: Vice President
<PAGE>
EXHIBIT A
MEMBERS, CAPITAL CONTRIBUTIONS
AND PERCENTAGE INTERESTS
<TABLE>
<CAPTION>
Gross Asset
Value of
Cash Contributed LLC Percentage
Name of Member Contributions Property Units Interest
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Managing Member:
- -------------------------------------------------------------------------------------------------------------------
BRE Properties, Inc. $25,000,000 928,333 88.45%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Non-Managing Member:
- -------------------------------------------------------------------------------------------------------------------
Blue Ravine Realty Partners $3,263,243 121,175 11.55%
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Totals $25,000,000 $3,263,243 1,049,508 100.00%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
EXHIBIT B
NOTICE OF EXCHANGE
To: BRE Properties, Inc.
One Montgomery Street, Suite 2500
Telesis Tower
San Francisco, CA 94104
The undersigned Member or Assignee hereby irrevocably tenders for Exchange
__________ LLC Units in Blue Ravine Investors, LLC in accordance with the terms
of the Amended and Restated Limited Liability Company Agreement of Blue Ravine
Investors, LLC, dated as of November ___, 1997 (the "Agreement"), and the
Exchange rights referred to therein. The undersigned Member or Assignee:
(a) undertakes (i) to surrender such LLC Units and any
certificate therefor at the closing of the Exchange and (ii) to furnish to the
Managing Member, prior to the Specified Exchange Date, the documentation,
instruments and information required under Section 8.6.D of the Agreement;
(b) directs that, at the sole discretion of the Managing Member,
either (i) a certified check representing the Cash Amount deliverable upon
closing of the Exchange be delivered to the address specified below or (ii) a
certificate(s) representing the REIT Shares deliverable upon the closing of such
Exchange be delivered to the address specified below; and
(c) represents, warrants, certifies and agrees that: (1) the
undersigned Member or Assignee has, and at the closing of the Exchange will
have, good, marketable and unencumbered title to such LLC Units, free and clear
of the rights or interests of any other person or entity, (2) the undersigned
Member or Assignee has, and at the closing of the Exchange will have, the full
right, power and authority to tender and surrender such LLC Units as provided
herein, and (3) the undersigned Member or Assignee has obtained the consent or
approval of all persons and entities, if any, having the right to consent to or
approve such tender and surrender.
All capitalized terms used herein and not otherwise defined shall have the
same meaning ascribed to them respectively in the Agreement.
Dated:
----------------------------- Name of Member or Assignee:
-----------------------------------
-----------------------------------
(Signature of Member or Assignee)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip)
Signature Guaranteed by:
-----------------------------------
Issue REIT Shares in the name of:
--------------------------------------------
Please insert social security or identifying number:
--------------------------
B-1
<PAGE>
Exhibit 10.3
Loan Identification No.: F003
UNSECURED LINE OF CREDIT LOAN AGREEMENT
By and Between
BRE PROPERTIES, INC.,
as Borrower,
and
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Lender
Dated as of November 17, 1997
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN DEFINITIONS............................................................. 1
1. LINE OF CREDIT AMOUNT AND TERMS............................................ 9
1.1 Line of Credit Amount............................................. 9
---------------------
1.2 Availability Period............................................... 10
-------------------
1.3 Interest Rate..................................................... 10
-------------
1.4 Loan Documents.................................................... 10
--------------
2. FEES, EXPENSES............................................................. 11
2.1 Fees.............................................................. 11
----
2.2 Expenses and Costs................................................ 11
------------------
3. DISBURSEMENTS, PAYMENTS AND COSTS.......................................... 12
3.1 Requests for Credit............................................... 12
-------------------
3.2 Disbursement and Payment Record................................... 12
-------------------------------
3.3 Authorization..................................................... 12
-------------
3.4 Banking Days...................................................... 12
------------
4. CONDITIONS................................................................. 13
4.1 Documentary Conditions............................................ 13
----------------------
4.2 Non-Documentary Conditions........................................ 13
--------------------------
5. REPRESENTATIONS AND WARRANTIES............................................. 14
5.1 Organization of the Borrower; Good Standing....................... 14
-------------------------------------------
5.2 Authorization; Enforceable Agreement.............................. 14
------------------------------------
5.3 Financial Information............................................. 15
---------------------
5.4 Lawsuits.......................................................... 16
--------
5.5 Title to Assets................................................... 16
---------------
5.6 Permits, Franchises............................................... 16
-------------------
5.7 Income Tax Returns................................................ 16
------------------
5.8 ERISA Plans....................................................... 16
-----------
5.9 Other Obligations................................................. 17
-----------------
5.10 Event of Default.................................................. 17
----------------
5.11 Status as a REIT.................................................. 17
----------------
6. COVENANTS.................................................................. 17
6.1 Use of Proceeds................................................... 17
---------------
6.2 Financial Information............................................. 18
---------------------
6.3 Other Information................................................. 19
-----------------
6.4 Financial Covenants............................................... 19
-------------------
6.5 Taxes and Other Liabilities....................................... 21
---------------------------
6.6 Notices to the Bank............................................... 22
-------------------
6.7 Audits; Books and Records......................................... 22
-------------------------
6.8 Compliance with Laws.............................................. 22
--------------------
6.9 Preservation of Rights............................................ 23
----------------------
6.10 Maintenance of Properties......................................... 23
-------------------------
6.11 Insurance......................................................... 23
---------
6.12 ERISA Plans....................................................... 23
-----------
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.13 Indemnity of Guarantors........................................... 24
-----------------------
6.14 Additional Negative Covenants..................................... 24
-----------------------------
6.15 Continued Status as a REIT; Prohibited
Transactions..................................................... 25
------------
6.16 NYSE Listed Company.............................................. 25
-------------------
6.17 Conduct of Business............................................... 25
-------------------
6.18 Delivery of Guaranties............................................ 26
----------------------
6.19 Cooperation....................................................... 26
-----------
7. COLLATERAL; OTHER SPECIAL PROVISIONS....................................... 26
7.1 Collateral........................................................ 26
----------
7.2 Other Special Provisions.......................................... 26
------------------------
8. DEFAULT.................................................................... 27
8.1 Failure to Pay.................................................... 27
--------------
8.2 False Information................................................. 28
-----------------
8.3 Bankruptcy........................................................ 28
----------
8.4 Receivers; Dissolution............................................ 28
----------------------
8.5 Lawsuits.......................................................... 28
--------
8.6 Judgments......................................................... 28
---------
8.7 ERISA Plans....................................................... 28
-----------
8.8 Government Action................................................. 29
-----------------
8.9 Material Adverse Change........................................... 29
-----------------------
8.10 Other Breach Under This Agreement or Other Loan
Documents......................................................... 29
---------
8.11 Cross-Default..................................................... 29
-------------
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS.................................... 30
9.1 Remedies.......................................................... 30
--------
9.2 California Law.................................................... 30
--------------
9.3 Arbitration....................................................... 30
-----------
9.4 Presentment, Demands and Notice................................... 30
-------------------------------
9.5 Indemnification................................................... 31
---------------
9.6 Attorneys' Fees................................................... 31
---------------
9.7 Notices........................................................... 32
-------
9.8 Successors and Assigns............................................ 32
----------------------
9.9 No Third Parties Benefited........................................ 32
--------------------------
9.10 Integration; Relation to Any Loan Commitment;
Headings.......................................................... 32
--------
9.11 Interpretation.................................................... 33
--------------
9.12 Severability; Waivers; Amendments................................. 33
---------------------------------
9.13 Counterparts...................................................... 34
------------
</TABLE>
ii
<PAGE>
UNSECURED
LINE OF CREDIT LOAN AGREEMENT
This Unsecured Line of Credit Loan Agreement (the "Agreement"), dated as of
November 17, 1997 is between BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank") and BRE PROPERTIES, INC., a Maryland corporation (the
"Borrower").
A. The Bank, together with certain other lenders, has agreed to make
advances to the Borrower (the "Prior Facility") in accordance with an Amended
and Restated Unsecured Line of Credit Loan Agreement between the Borrower and
the Bank dated July 8, 1997, as amended by the Amended and Restatement
Modification Agreement to Syndicate Loan, dated as of July 8, 1997 (as so
amended, the "Prior Loan Agreement").
B. The Borrower desires to terminate the credit facilities provided for
in the Prior Loan Agreement, and has requested that the Bank agree to provide
the Borrower with the credit facility provided for hereunder, in the form of a
line of credit (the "Line of Credit") under which advances will be made
available to the Borrower in the maximum amount of $265,000,000. Subject to the
terms and conditions hereof and of the other Loan Documents (as defined below),
the Bank is willing to make the Line of Credit available to the Borrower.
NOW, THEREFORE, the parties hereto hereby agree as follows:
CERTAIN DEFINITIONS
-------------------
The following terms used in this Agreement shall have the following
meanings (such meanings to be applicable, except to the extent otherwise
indicated in a definition of a particular term, both to the singular and the
plural forms of the terms defined; other terms are defined elsewhere in the
Agreement):
"Accommodation Obligations", as applied to any Person, means any
-------------------------
Indebtedness or other Contractual Obligation or liability, contingent or
otherwise, of another Person in respect of which that Person is liable,
including, without limitation, any such indebtedness, obligation or liability
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including in respect of any partnership in which
that Person is a general partner, Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase or otherwise
acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
<PAGE>
"Affiliate" means, as to any Person, any other Person which, directly
---------
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Applicable Capitalization Rate" means (i) (a) 9.5% for a real
------------------------------
property asset improved with an apartment project, (b) 10.0% for a real property
asset improved with a shopping center or similar retail project, and (c) 10.5%
for a real property asset improved with an industrial or other commercial
project and for a real property asset (including apartment and retail projects)
that is subject to a land lease; or in each such case, such other rate as the
--
Bank may establish from time to time (taking into consideration such factors as
the location and type of such real estate asset), but no more often than once in
any calendar year, as the applicable capitalization rate for a real property
asset of that type. (All references in this Agreement to "apartment project"
shall be understood to mean multi-family residential properties held for
rental.)
"Applicable Facility Fee Percentage" means, as of any date of
----------------------------------
determination, (i) if no Rating is then in effect, 0.20%; or (ii) effective on
--
the first day of the fiscal quarter following the Borrower's obtaining a Rating
(or a change in the then-effective Rating) and giving written notice thereof to
the Bank, the Applicable Facility Fee Percentage set forth below in the
definition of "Applicable Margin" opposite the then Rating (as determined in
accordance with the definition of "Applicable Margin") of the Borrower. As of
the date of this Agreement, the Borrower has obtained Ratings of (x) BBB from
Standard & Poor's, (y) Baa2 from Moody's Investor's Service, and (z) BBB+ from
Duff & Phelps, Inc., and the Applicable Facility Fee Percentage for the current
calendar quarter is 0.15%.
"Applicable Margin" means, as of any date of determination, (i) if no
-----------------
Rating is then in effect, 1.35%; or (ii) effective on the first day of the
--
fiscal quarter following the Borrower's obtaining a Rating (or a change in the
then-effective Rating) and giving written notice thereof to the Bank, the
Applicable Margin set forth below opposite the then Rating (as hereinbelow
determined) of the Borrower:
<TABLE>
<CAPTION>
Applicable
Rating Facility Fee
(S&P/Moody's) Applicable Margin Percentage
------------- ------------------ -----------
<S> <C> <C>
A-/A3 or better 0.55% 0.10%
BBB+/Baal 0.60% 0.15%
BBB/Baa2 0.70% 0.15%
BBB-/Baa3 1.00% 0.20%
below BBB-/Baa3 1.35% 0.20%
</TABLE>
2
<PAGE>
As used herein, the term "Rating" shall mean the rating of the Borrower's senior
long-term unsecured debt obligations, as determined by one or more Rating
Agencies. If two Ratings are obtained by the Borrower, then the lower Rating
shall control for purposes of determining the Applicable Margin; provided,
however, that if the difference between the two Ratings is greater than two
levels, then the Bank shall reasonably determine the average of such Ratings,
which shall control (and, if such average is greater than one of the rating
levels specified in the foregoing table but less than the next higher rating
level, the lower of the two rating levels shall be deemed the average of the two
Ratings for purposes of determining the Applicable Margin). If three or more
Ratings are obtained by the Borrower, then all but the two highest Ratings shall
be disregarded, and the Applicable Margin shall be determined in accordance with
the preceding sentence as if such two highest Ratings were the only two Ratings
obtained. If the Borrower shall obtain a Rating from a Rating Agency other than
Standard & Poor's Corporation or Moody's Investor's Service, Inc., then the Bank
shall reasonably determine the rating-level equivalents of such other Rating
Agency for purposes of determining the Applicable Margin in accordance with the
matrix above. Based on the Borrower's current Ratings, the Applicable Margin
for the current calendar quarter is 0.70%.
"Borrower Entity" means each Person in which the Borrower, directly or
---------------
indirectly, has made an Investment, whether or not under GAAP the financial
results of such Person are reported on a consolidated basis with the results of
the Borrower.
"Contractual Obligation", as applied to any Person, means any
----------------------
provision of any securities issued by that Person or any indenture, mortgage,
deed of trust, lease, contract, undertaking, document or instrument to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject.
"CPA" means Ernst & Young, LLP, any other "big six" accounting firm or
---
another firm of certified public accountants of national standing selected by
the Borrower and acceptable to the Bank.
"Current Value Method" means, with respect to each real property asset
--------------------
as of any date: (i) if such real property has not been operated under the
Borrower's (or a Borrower-controlled Affiliate's) ownership for at least three
(3) months, on a cost basis, as reflected in the Borrower's books in accordance
with GAAP; and (ii) in any other case, capitalization of the Net Operating
Income for such real property for the four (4) most recent calendar quarters
(or, if the Borrower has owned a real property asset for less than such time
period, then the annualized Net Operating Income for such real property based on
3
<PAGE>
of of ownership by the Borrower), as certified by the Borrower to the
Bank, at an annual rate equal to the Applicable Capitalization Rate.
"Debt Service" means, for the most recent three (3) month period,
-------------
Interest Expense for such period plus scheduled or otherwise required principal
----
amortization (i.e., excluding any balloon payment due at maturity) for such
----
period on all of the Borrower's Indebtedness, determined on a consolidated
basis, plus all dividends accrued during such period in respect of any and all
----
outstanding preferred shares of the Borrower, whether or not declared or paid.
"EBITDA" means, for the most recent three (3) month period, (i) the
------
sum of (a) the Borrower's consolidated net income as determined in accordance
with GAAP, (b) depreciation and amortization expense and other non-cash items
deducted on the Borrower's consolidated financial statements in determining such
net income, (c) interest expense (as it appears on the Borrower's consolidated
income statement in accordance with GAAP), and (d) taxes imposed by any
jurisdiction upon the Borrower's or any consolidated Borrower Entity's net
income, absent the effect of extraordinary items or asset sales or write-ups or
forgiveness of Indebtedness; minus (ii) the sum of (a) $50 per apartment unit in
-----
the case of a real property asset, owned by the Borrower or any consolidated
Borrower Entity, that is improved with an apartment project, and (b) in the case
of any other real property asset owned by the Borrower or any consolidated
Borrower Entity, $0.125 for each rentable square foot of the improvements
thereon.
"Effective Date" means the date on which all conditions precedent set
--------------
forth in Section 4 are satisfied or waived by the Bank.
"Funds From Operations" means, for any period, the Borrower's
---------------------
consolidated net income (computed in accordance with GAAP), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. (Adjustments for unconsolidated partnerships and joint ventures shall
be calculated to reflect funds from operations on the same basis.)
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
4
<PAGE>
"Gross Offering Proceeds" means all cash proceeds received by the
-----------------------
Borrower as a result of the sale of common, preferred or other classes of stock
in the Borrower (if and only to the extent reflected in stockholders' equity on
the consolidated balance sheet of the Borrower prepared in accordance with
GAAP), without deduction for any costs and discounts of issuance paid by the
------- ---------
Borrower.
"Guaranty" means a guaranty of the Borrower's obligations under the
--------
Loan Documents, executed by one or more Material Borrower Entities, in
substantially the form of Exhibit B.
---------
"Guarantor" means each Borrower Entity that is a party to a Guaranty.
---------
"Indebtedness", as applied to any Person (and without duplication),
------------
means (i) all indebtedness, obligations or other liabilities for borrowed money,
(ii) all indebtedness, obligations or other liabilities evidenced by notes,
bonds, debentures or other similar instruments, (iii) all reimbursement
obligations and other liabilities with respect to letters of credit, banker's
acceptances, surety bonds or similar instruments issued for such Person's
account, (iv) all obligations to pay the deferred purchase price of property or
services, (v) all obligations in respect of capital leases, (vi) all
Accommodation Obligations, and (vii) all indebtedness, obligations or other
liabilities of such Person or others secured by a Lien on any asset of such
Person, whether or not such indebtedness, obligations or liabilities are assumed
by, or are a personal liability of, such Person (including, without limitation,
the principal amount of any assessment or similar indebtedness encumbering any
asset).
"Intangible Assets" means all assets that would be classified as
-----------------
intangible assets under GAAP, including, without limitation, goodwill, patents,
trademarks, trade names, copyrights and franchises, treasury stock held by the
Borrower or any consolidated Borrower Entity, and deferred charges (including
but not limited to unamortized debt discount and expense, organization expenses,
experimental and development expenses, but excluding prepaid expenses).
"Interest Expense" means, for any period, the total interest expense
----------------
of the Borrower, whether paid, accrued or capitalized (including the interest
component of capital leases), for such period, determined on a consolidated
basis.
"Investment" means in the case of each Borrower Entity, the Borrower's
----------
total investment therein determined on the basis of actual cost, including all
equity contributions, loans, advances and guaranties or other contractual
undertakings in the nature thereof, whether funded or committed.
5
<PAGE>
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, security interest, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including without limitation any conditional sale or other
title retention agreement, the interest of a lessor under a capital lease, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement or document having similar
effect (other than a financing statement filed by a "true" lessor pursuant to
Section 9408 of the Uniform Commercial Code) naming the owner of the asset to
which such Lien relates as debtor, under the Uniform Commercial Code or other
comparable law of any jurisdiction.
"Line of Credit" means the line of credit described in Section 1.1.
--------------
"Material Adverse Effect" means, with respect to a Person, a material
-----------------------
adverse effect upon the condition (financial or otherwise), operations,
performance or properties of such Person. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has resulted, or will or
could reasonably be anticipated to result, in a Material Adverse Effect", and
the phrase "has no (or does not have a) Material Adverse Effect" or "will not
result in a Material Adverse Effect" or words substantially similar thereto
shall in all cases be intended to mean "does not or will not or could not
reasonably be anticipated to result in a Material Adverse Effect".
"Material Borrower Entity" means a Borrower Entity as which either of
------------------------ ------
the following conditions exists: (i) the Borrower's pro rata share of the
assets of such Borrower Entity (as reflected on the GAAP-prepared financial
statements of the Borrower Entity) exceeds $30,000,000 at the end of any fiscal
quarter, with "pro rata" share being the Borrower's effective percentage
ownership of the Borrower Entity; or (ii) the Borrower's pro rata share of the
--
Borrower Entity's consolidated net income exceeds five percent (5%) of the
Borrower's consolidated net income for the immediately preceding four fiscal
quarters, determined in accordance with GAAP.
"Net Operating Income" means, at any time with respect to any real
--------------------
property asset, the cash-basis net operating income of such real property
determined on a basis consistent with the operating statements provided by the
Borrower to the Bank prior to the Effective Date, adjusted as follows: (i) by
deducting, in respect of capital reserves, on an annualized basis: (a) $200 per
apartment unit in the case of a real property asset improved with an apartment
project, and (b) in the case of any other real property asset, $0.50 for each
rentable square foot of the improvements thereon; and (ii) by deducting (to the
extent not already deducted in determining such net operating income) actual
6
<PAGE>
management fees paid in respect of the management of such real property asset
for the period in question.
"Person" means any natural person, employee, corporation, limited
------
partnership, general partnership, joint stock company, limited liability
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, or
any other non-governmental entity, or any governmental authority.
"Prudential Indebtedness" means the unsecured Indebtedness of the
-----------------------
Borrower to The Prudential Life Insurance Company of America in the original
principal amount of $73,000,000.
"Rating Agency" means each of Standard & Poor's Corporation, Moody's
-------------
Investor's Service, Inc., Duff and Phelps and Fitch Investors or such other
nationally recognized rating service or services as may be mutually agreed upon
by the Borrower and the Bank.
"Real Property" means all improved, income-producing real property (i)
-------------
owned in fee entirely by the Borrower or by a consolidated, controlled Borrower
Entity that has executed and delivered a Guaranty, and (ii) as to which at least
eighty-five percent (85%) of (a) the apartment units (in the case of real
property improved with an apartment project) or (b) the net rentable square
footage of the improvements thereon, in the case of all other real property, is
occupied by tenants, under written leases, who have commenced paying rent.
"Secured Indebtedness" means all Indebtedness of the Borrower
--------------------
(determined on a consolidated basis) that is secured by a Lien on any real
property asset of the Borrower or any Borrower Entity.
"Tangible Net Worth" means, at any time, (i) shareholders' equity, as
------------------
shown on the Borrower's consolidated financial statements prepared in accordance
with GAAP, exclusive of minority interests, minus (ii) all Intangible Assets.
-----
"Total Assets" means, at any time, the sum of (i) the aggregate value,
------------
as determined using the Current Value Method, of all real property assets
(including Real Property) wholly owned by the Borrower or any Borrower Entity
the financial results of which are reported on a consolidated basis with the
results of the Borrower and of which the Borrower is a general partner or
managing member or the holder of a majority of the outstanding equity interests,
plus (ii) the book value (net of any applicable reserves) of all other assets
(excluding Intangible Assets) of the Borrower as shown on its most recent
quarterly financial statements prepared in accordance with GAAP.
7
<PAGE>
"Total Liabilities" means (i) all Indebtedness of the Borrower,
-----------------
whether or not such Indebtedness would be included as a liability on the balance
sheet of the Borrower in accordance with GAAP, plus (ii) all other liabilities
----
of every nature and kind of the Borrower that would be included as liabilities
on the balance sheet of the Borrower in accordance with GAAP (other than
minority interests), in each case, determined on a consolidated basis.
"Total Real Property Market Value" means, at any time, the aggregate
--------------------------------
value of all Real Properties as determined using the Current Value Method.
"Total Real Property Market Value of Unencumbered Real Property"
--------------------------------------------------------------
means, at any time, the aggregate value of all Unencumbered Real Properties as
determined using the Current Value Method.
"Unencumbered Real Property" means all Real Property as to which (i)
--------------------------
neither such Real Property, nor any interest in the Person owning such Real
Property, is subject to any Lien (other than Liens in respect of nondelinquent
real estate taxes or assessments) or to any agreement (other than this Agreement
or any other Loan Document, and including any provision of such Person's charter
documents) that (A) prohibits the creation of any Lien thereon as security for
Indebtedness of the Person owning such Real Property; or (B) limits the
Indebtedness owed to the Bank in respect of which such Real Property may be
encumbered to less than the full market value (determined using the Current
Value Method) of such Real Property; and (ii) no event described in Section 8.3
or Section 8.4 has occurred and is continuing with respect to the Person that
owns such Real Property (and including, for purposes of this definition only,
any such event with respect to a Guarantor, whether or not it is a Material
Borrower Entity, other than a merger or liquidation of a Guarantor into a
Material Borrower Entity or the Borrower).
"Unsecured Indebtedness" means Indebtedness of the Borrower not
----------------------
secured by a Lien, determined on a consolidated basis.
"Unsecured Interest Expense" means, for any period, the greater of (i)
--------------------------
total interest expense of the Borrower, whether paid, accrued or capitalized, in
respect of Unsecured Indebtedness for such period, or (ii) such interest as
would have accrued for such period on the time-weighted average outstanding
principal of all Unsecured Indebtedness outstanding during such period at the
rate of nine percent (9%) per annum.
8
<PAGE>
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
--------------------
(a) During the Availability Period described below, the Bank will
provide a line of credit (also referred to as the "Loan") to the Borrower. The
amount of the Line of Credit is Two Hundred Sixty-Five Million Dollars
($265,000,000) (the "Commitment" or the "Maximum Loan Amount"); provided that
the Borrower shall have the right, upon each anniversary of the Effective Date,
to reduce the Commitment by up to $150,000,000 in the aggregate, in increments
of $10,000,000 or integral multiples of $10,000,000. Each such reduction shall
become effective on the date both of the following conditions have been
satisfied:
(i) The Borrower shall have given at least ten (10) Business Days'
prior written notice to the Bank irrevocably and unconditionally reducing
the Commitment, as of such anniversary, in an amount equal to $10,000,000
or an integral multiple of $10,000,000 that, together with all prior
reductions in the Commitment, does not exceed $150,000,000; and
---
(ii) if the aggregate principal balance of all advances under the Loan
Documents then outstanding exceeds the Commitment as so reduced, the
Borrower shall have made a voluntary prepayment of principal of such
advances, in accordance with the applicable provisions of the Note and the
Loan Documents, in an amount sufficient to reduce the aggregate outstanding
balance thereof to such reduced amount of the Commitment or less, together
with accrued and unpaid interest on the amount of such prepayment and any
applicable "Prepayment Premium" payable under the Note or any other Loan
Documents.
No such reduction of the Commitment shall relieve the Borrower of any obligation
in respect of any fees paid or accrued prior to the date of such reduction.
Upon the effectiveness of each such reduction, all references to the
"Commitment" or the "Maximum Loan Amount" shall be understood to mean and refer
to a loan facility of an amount equal to $265,000,000 less the aggregate amount
of the reductions in the Commitment that have been so effected (including by
reason of prior reductions, if any).
(b) This is a revolving line of credit. During the Availability
Period, the Borrower may from time to time repay principal amounts (subject to
the provisions of Exhibit B to the Note referred to below) and reborrow such
principal, subject to compliance with the terms and conditions of the Loan
Documents referenced in Section 1.4 below.
9
<PAGE>
(c) Each advance under the Line of Credit must be for at least Five
Hundred Thousand Dollars ($500,000), or for the amount of the remaining
available Line of Credit if less.
(d) The Borrower agrees not to permit the aggregate principal amount
of all advances under the Loan Documents outstanding at any time to exceed the
Commitment.
1.2 Availability Period.
-------------------
The Line of Credit is available (the "Availability Period") between
the date of this Agreement and the Maturity Date (as defined in the Note),
subject to the provisions of Section 3.1 below. If there is an Event of
Default, then, in addition to the Bank's other remedies, the Bank may terminate
the Availability Period and may require the Borrower to repay any amounts
outstanding under the Line of Credit, or any other credit facilities provided by
the Bank pursuant to the Loan Documents, immediately.
1.3 Interest Rate.
-------------
Borrower is executing a new promissory note (the "Note") in the amount
of the Commitment evidencing advances made under the Loan Documents and payable
to the Bank. The Note sets forth certain provisions regarding the interest rate
and certain other terms and conditions applicable to the credit facilities
provided pursuant to the Loan Documents. Promptly following the Effective Date,
the Bank shall mark the promissory note executed and delivered by the Borrower
pursuant to the Prior Loan Agreement "superseded" and return it to the Borrower.
1.4 Loan Documents.
--------------
The "Loan Documents" are the documents indicated below, each dated as
of the date of this Agreement unless indicated otherwise. A capitalized term
used in this Agreement but not defined herein has the meaning given to such term
in the other Loan Documents.
(a) This Agreement;
(b) The Note;
(c) A Guaranty from BRE Property Investors LLC and each other
Material Borrower Entity or other Borrower Entity owning any real property asset
to be included as Unencumbered Real Property as of the date of this Agreement;
(d) The supplemental letter executed by the Borrower in favor of the
Bank (the "Supplemental Letter");
10
<PAGE>
(e) Corporate Resolution to borrow, certified by the Corporate
Secretary of the corporation. The Corporate Resolution shall also contain a
Certificate of Incumbency for the authorized signing officers, containing their
specimen signatures and certified by the Corporate Secretary; and
(f) Resolutions, or other required action, by each Material Borrower
Entity or other Guarantor with respect to the execution and delivery of its
Guaranty, together with a Certificate of Incumbency for the authorized signing
officers, containing their specimen signatures and certified by such Material
Borrower Entity's or other Guarantor's Secretary (or the equivalent).
2. FEES, EXPENSES
2.1 Fees.
----
(a) Facility Fee. The Borrower agrees to pay, in quarterly
------------
installments, in arrears, a facility fee in an amount equal to one quarter of
the Applicable Facility Fee Percentage of the Commitment as of the first day of
each calendar quarter during the term hereof and as of the last day of the
Availability Period (prorated for partial quarters on the basis of a year of 360
days for the actual number of days elapsed). This fee shall be due and payable
not later than fifteen (15) days following the rendering of an invoice therefor
by the Bank.
(b) Other Fees. The Borrower agrees to pay such other fees as are
----------
provided for in the Supplemental Letter, at the times and in the amounts
provided for therein.
2.2 Expenses and Costs.
------------------
(a) Borrower shall pay all costs and expenses incurred by the Bank in
connection with the making, disbursement and administration of the Line of
Credit and other credit facilities, if any, made available pursuant to the Loan
Documents, and in the exercise of any of the Bank's rights or remedies under the
Loan Documents. Such costs and expenses include legal fees and expenses of the
Bank's counsel and any other reasonable fees and costs for services, regardless
of whether such services are furnished by the Bank's employees or by independent
contractors. The Borrower acknowledges that the other fees payable to the Bank
do not include amounts payable by the Borrower under this Section 2.2.
(b) The Borrower agrees to indemnify the Bank from and hold it
harmless against any transfer or documentary taxes, assessments or charges
imposed by any governmental authority by reason of the execution, delivery and
performance of the Loan Documents. The Borrower's obligations under this
Section 2.2 shall survive payment of the advances made pursuant to the Loan
11
<PAGE>
Documents and assignment of any rights hereunder.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 Requests for Credit.
-------------------
(a) Each request for an extension of credit shall be made in writing
in a manner acceptable to the Bank.
(b) Borrowing Notice. Except as otherwise provided in the Loan
----------------
Documents, each draw request shall be made upon the irrevocable written notice
of the Borrower (including notice via facsimile confirmed by a mailed copy)
pursuant to a Borrowing Notice in the form attached hereto as Exhibit A. Each
---------
Borrowing Notice shall be submitted to and received by the Bank prior to 9:00
a.m. (California time) at least two (2) Banking Days prior to the specified
borrowing date. The truth and accuracy of each statement made in the Borrowing
Notice shall be a condition precedent to the advance requested thereunder.
3.2 Disbursement and Payment Record.
-------------------------------
Each disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank.
3.3 Authorization.
-------------
(a) The Bank may honor facsimile instructions for advances or
repayments (or for the designation of any optional interest rates that may be
permitted by the Note) given by any one of the individuals authorized to sign
loan documents on behalf of the Borrower, or any other individual designated by
any one of such authorized signers.
(b) Advances will be deposited in the Borrower's account number 00333
02 305 at the Bank, or such other of the Borrower's accounts with the Bank as
designated in writing by the Borrower.
(c) The Borrower indemnifies and releases the Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from any instructions the Bank reasonably
believes are made by any individual authorized by the Borrower to give such
instructions. This indemnity and release shall survive this Agreement's
termination.
3.4 Banking Days.
------------
A Banking Day is defined in the Note. All payments and disbursements
which would be due on a day which is not a Banking Day will be due on the next
Banking Day. All payments received on a day which is not a Banking Day will be
applied to amounts due under the Loan Documents on the next Banking Day.
12
<PAGE>
4. CONDITIONS
4.1 Documentary Conditions.
----------------------
The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement or any other Loan Document:
(a) Authorizations. Evidence that the execution, delivery and
--------------
performance by the Borrower and each Material Borrower Entity or other Guarantor
(if any) each of the Loan Documents to which such Person is or is to become a
party have been duly authorized.
(b) Governing Documents; Good Standing Certificates. For the
-----------------------------------------------
Borrower, BRE Property Investors LLC and each other Material Borrower Entity or
Guarantor (if any):
(i) a copy of such Person's articles of incorporation and bylaws,
articles of organization, Form LLC-1 and operating agreement, Form LP-1 and
agreement of limited partnership or other charter documents, as the case may be,
and
(ii) a certificate of good standing for the Borrower and each
Material Borrower Entity or other Guarantor from the state where formed and, at
the Bank's request, from any other state in which the Borrower or such Material
Borrower Entity or other Guarantor is required to qualify to conduct its
business.
(c) Loan Documents. Duly executed Loan Documents.
--------------
(d) Payment of Fees. Payment of all accrued and unpaid fees and
---------------
expenses due the Bank as provided for by the Loan Documents and all other
accrued and unpaid fees and expenses provided for under the Prior Loan
Agreement.
(e) Legal Opinion. An opinion of legal counsel for the Borrower and
-------------
each Material Borrower Entity and other Guarantor addressing such matters as the
Bank may reasonably request.
(f) Other Items. Any other documents and other items the Bank may
-----------
reasonably require as conditions precedent to this Agreement or any advance.
4.2 Non-Documentary Conditions.
--------------------------
(a) Termination of Prior Facility. The Prior Facility shall have been
-----------------------------
terminated, and all amounts due and payable in respect thereof shall have been
paid to the Persons entitled thereto.
13
<PAGE>
(b) Closing of Acquisition.
----------------------
(i) The Borrower shall have consummated an issuance of equity
securities to The Prudential Life Insurance Company of America for an aggregate
issuance price equal to at least $100,000,000.
(ii) The closing under the Contribution Agreement dated as of
September 29, 1997, relating to the formation of BRE Property Investors LLC
shall have occurred, and the assets required to be contributed to BRE Property
Investors LLC pursuant thereto shall have been so contributed.
5. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a restatement of each such
representation and warranty.
5.1 Organization of the Borrower; Good Standing.
-------------------------------------------
(a) The Borrower, and each Material Borrower Entity, is duly formed
and existing under the laws of the state where organized. In each state in
which the Borrower or any Material Borrower Entity does business, it is properly
licensed, in good standing, and, where required, in compliance with any
fictitious name statute.
(b) Schedule 1 (if applicable, as updated pursuant to Section 6.18)
sets forth the members, general partners and limited partners, or other holders
of ownership interests in BRE Property Investors LLC and each other Material
Borrower Entity or Guarantor and their respective ownership percentages, and
there are no other membership, partnership or other ownership interests
outstanding. No membership, partnership or other ownership interest (or any
securities, instruments, warrants, option or purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for such interests) in any Material Borrower Entity or other
Guarantor is subject to issuance under any security, instrument, warrant, option
or purchase rights, conversion or exchange rights, call, commitment or claim of
any right, title or interest therein or thereto. All of the membership,
partnership or other ownership interests in Borrower and each Material Borrower
Entity and other Guarantor have been issued in compliance with all applicable
requirements of law.
5.2 Authorization; Enforceable Agreement.
------------------------------------
This Agreement and the other Loan Documents are within the powers of
Borrower or the Material Borrower Entity or other
14
<PAGE>
Guarantor party thereto, have been duly authorized and do not conflict with any
of its organizational documents. The Loan Documents do not conflict with any
law, agreement or obligation by which the Borrower or any Material Borrower
Entity or other Guarantor is bound. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or document required hereunder, when executed and
delivered by the Borrower or any Material Borrower Entity or other Guarantor,
will be similarly a legal, valid, binding and enforceable agreement of such
Person.
5.3 Financial Information.
---------------------
(a) All financial statements and data submitted in writing by the
Borrower to the Bank pursuant to the Loan Agreement are true and correct, and
all such financial statements present fairly the financial condition of the
Borrower as at the date thereof and the results of the operations of the
Borrower for the period(s) covered thereby, and have been prepared in accordance
with generally accepted accounting principles on a basis consistently applied.
The Borrower has no knowledge of any liabilities, contingent or otherwise, not
reflected in said financial statements, and neither the Borrower nor any
Borrower Entity has entered into any material commitments or material contracts
which are not reflected in said balance sheet which may have a Material Adverse
Effect on the Borrower or any Material Borrower Entity. Since said date there
have been no changes in the assets or liabilities or financial condition of the
Borrower or any Material Borrower Entity other than changes in the ordinary
course of business, and no such changes have been materially adverse changes.
(b) All financial and other information that has been or will be
supplied to the Bank, including the financial statements of the Borrower or any
other Person:
(i) is sufficiently complete to give the Bank accurate
knowledge of the subject's financial condition;
(ii) is in form and content as required by the Bank;
(iii) is in compliance with any government regulations that
apply; and
(iv) does not fail to state any material facts necessary to make
the information contained therein not misleading.
All such information (other than Funds From Operations) was and will be prepared
in accordance with GAAP, unless otherwise noted.
15
<PAGE>
5.4 Lawsuits.
--------
There is no lawsuit, arbitration, claim or other dispute pending or
threatened against the Borrower or any Borrower Entity which, if lost, would
impair the Borrower's or any Material Borrower Entity's financial condition or
ability to repay advances made, and other amounts due, under the Loan Documents,
except as has been previously disclosed in writing to the Bank.
5.5 Title to Assets.
---------------
The Borrower, and each Borrower Entity, has good and clear title to
its assets, and the same are not subject to any Liens other than those disclosed
to the Bank in writing.
5.6 Permits, Franchises.
-------------------
The Borrower, and each Material Borrower Entity, possesses all
permits, franchises, contracts and licenses required and all trademark rights,
trade name rights, and fictitious name rights necessary to enable it to conduct
the business in which it is now engaged.
5.7 Income Tax Returns.
------------------
Borrower, and each Material Borrower Entity, has filed all tax returns
and reports required to be filed and has paid all applicable federal, state and
local franchise, income and property taxes which are due and payable. The
Borrower has no knowledge of any pending assessments or adjustments of its
income taxes or property taxes (or those of any Material Borrower Entity) for
any year, except as have been disclosed in writing to the Bank. The Borrower is
not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
5.8 ERISA Plans.
-----------
(a) As used herein, (i) "ERISA" means the Employee Retirement Income
Act of 1974, as amended; (ii) "PBGC" means the Pension Benefit Guaranty
Corporation established pursuant to ERISA; and (iii) "Plan" means any employee
pension benefit plan maintained or contributed to by the Borrower or any
Borrower Entity and insured by the PBGC.
(b) The Borrower, and each Borrower Entity, has fulfilled its
obligations, if any, under the minimum funding standards of ERISA and the Code
with respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and has not incurred any
liability with respect to any Plan under Title IV of ERISA.
16
<PAGE>
(c) No reportable event has occurred under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice. No action by the Borrower or any
Borrower Entity to terminate or withdraw from any Plan has been taken and no
notice of intent to terminate a Plan has been filed under Section 4041 of ERISA.
No proceeding has been commenced with respect to a Plan under Section 4042 of
ERISA, and no event has occurred or condition exists which might constitute
grounds for the commencement of such a proceeding.
5.9 Other Obligations.
-----------------
Neither the Borrower nor any Material Borrower Entity is in default on
any Indebtedness or Contractual Obligation of the Borrower except as has been
previously disclosed in writing to the Bank.
5.10 Event of Default.
----------------
There is no event which is, or with notice or lapse of time or both
would be, an Event of Default hereunder.
5.11 Status as a REIT.
----------------
The Borrower (i) is a real estate investment trust as defined in
Section 856 of the Code (or any successor provision thereto), (ii) has not
revoked its election to be a real estate investment trust, (iii) has not engaged
in any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the
Code (or any successor provision thereto), and (iv) for its current "tax year"
(as defined in the Code) is and for all prior tax years subsequent to its
election to be a real estate investment trust has been entitled to a dividends
paid deduction which meets the requirements of Section 857 of the Code.
6. COVENANTS
The Borrower agrees, so long as credit is available under this
Agreement or any other Loan Document and until the Bank is repaid in full:
6.1 Use of Proceeds.
---------------
Borrower shall use, and shall permit the proceeds of the advances
under the Loan Documents to be used, only for (a) the funding of costs directly
related to the acquisition of apartment projects, or (b) general working capital
purposes of the Borrower, including (but subject to Section 6.4(g)), development
expenditures. In complying with the provisions of the foregoing clause (a), the
Borrower shall not be required to apply advances under the Loan Documents in
direct payment of acquisition costs, but shall be permitted to request and
obtain such advances by way of reimbursement of acquisition costs previously
incurred and funded out of the Borrower's cash
17
<PAGE>
reserves.
6.2 Financial Information.
---------------------
The Borrower shall provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:
(a) As soon as available but not later than ninety (90) days after the
Borrower's fiscal year end, a copy of the Borrower's Form 10-K Annual Report and
(to the extent not included in such Form 10-K) a copy of the Borrower's annual
financial statements for such fiscal year including balance sheet, income
statement, statement of cash flows and statement of shareholders' equity,
prepared on both a consolidated and a consolidating basis. All such financial
statements (whether or not included in the Borrower's Form 10-K) must be audited
(with an unqualified opinion) by the Borrower's CPA and certified by the
Borrower's Chief Financial Officer (or other officer acceptable to the Bank).
(b) As soon as available but not later than sixty (60) days after each
fiscal quarter end, the Borrower's Form 10-Q Quarterly Report and (to the extent
not included in such Form 10-Q) a copy of the Borrower's financial statements
for such fiscal quarter, including balance sheet, income statement, statement of
cash flows and statement of shareholders' equity, prepared on both a
consolidated and a consolidating basis. All such financial statements must be
certified by the Borrower's Chief Financial Officer (or other officer acceptable
to the Bank).
(c) As soon as available but not later than ninety (90) days after the
Borrower's fiscal year end, the Borrower's annual two-year financial projection,
including balance sheet and income statement, in a format and with such detail
as the Bank may require. These projections must be certified by the Borrower's
Chief Financial Officer (or other officer acceptable to the Bank).
(d) Copies of the Borrower's Form 8-K Current Reports and all other
filings within fifteen (15) days after the date of filing with the Securities
and Exchange Commission, and copies of all press releases made by the Borrower.
(e) As soon as available but not later than sixty (60) days after each
fiscal quarter end, the Borrower's quarterly internal management reports
(including (i) a schedule of all Debt Service for the prior quarter, (ii) a
schedule of Net Operating Income for each Real Property and other real property
asset for the preceding four (4) fiscal quarters, (iii) a schedule listing all
Indebtedness secured by a Lien on any real property assets of the Borrower or
any Borrower Entity, and (iv) a statement of the number of apartment units (by
project and location) under development (as defined in Section 6.4(g)) at fiscal
quarter-end.
18
<PAGE>
These reports must be certified by the Borrower's Chief Financial Officer (or
other officer acceptable to the Bank).
(f) At the time of the delivery of the financial statements provided
for in Sections 6.2(a) and (b), a certificate executed by the Chief Financial
Officer of the Borrower certifying compliance with all financial covenants
herein, including appropriate supporting schedules, and certifying that to the
best of the such officer's knowledge, no Event of Default has occurred and is
continuing or would result after notice or passage of time or both or, if any
Event of Default has occurred and is continuing or would result after notice or
passage of time or both, specifying the nature and extent thereof.
Notwithstanding anything to the contrary contained herein and without limiting
the Bank's other rights and remedies, if any certificate required under this
Section 6.2 is not provided on or before the due date therefor, the Borrower
shall be prohibited from any further borrowing under the Loan Documents until
such certificate is provided.
6.3 Other Information.
-----------------
The Borrower shall provide the Bank:
(a) Promptly upon, and in any event within forty-eight (48) hours
after the Borrower first has actual knowledge of (i) its failing to continue to
qualify as a real estate investment trust as defined in Section 856 of the Code
(or any successor provision thereof), (ii) any act by the Borrower causing its
election to be taxed as a real estate investment trust to be terminated, (iii)
any act causing the Borrower to be subject to the taxes imposed by Section
857(b)(6) of the Code (or any successor provision thereto), or (iv) the Borrower
failing to be entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Code, a notice of any such occurrence or
circumstance.
(b) Such additional financial and other information as the Bank may
reasonably request from time to time.
6.4 Financial Covenants.
-------------------
(a) Minimum Net Worth. The Borrower will maintain a Tangible Net
-----------------
Worth of not less than (i) Six Hundred Twelve Million Dollars ($612,000,000),
plus (ii) eighty-five percent (85%) of Gross Offering Proceeds received by the
Borrower after the Effective Date.
(b) Total Liabilities to Total Assets. The ratio of Total Liabilities
---------------------------------
to Total Assets shall not exceed 0.50:1.
(c) Secured Indebtedness to Total Assets. The ratio of Secured
------------------------------------
Indebtedness to Total Assets shall not exceed 0.30:1.
19
<PAGE>
(d) Unencumbered Real Property to Unsecured Indebtedness; Unencumbered
------------------------------------------------------------------
Real Property NOI to Unsecured Interest Expense.
- -----------------------------------------------
(i) The ratio of (a) Total Real Property Market Value of all
Unencumbered Real Property to (b) total outstandings under Unsecured
Indebtedness shall not be less than 2.00:1.
(ii) The ratio of (a) the aggregate Net Operating Income of all
Unencumbered Real Property to (b) Unsecured Interest Expense for any fiscal
quarter shall not be less than 2.00:1.
(e) EBITDA to Debt Service. The ratio of EBITDA to Debt Service shall
----------------------
not be less than 2.00:1.
(f) Distributions.
-------------
(i) Subject to subparagraph (ii) below, aggregate distributions
by the Borrower, determined on a consolidated basis, shall not exceed the
following, as reported in accordance with GAAP, for any period of four (4)
consecutive fiscal quarters of the Borrower ended on December 31 of any
calendar year: the greater of (A) ninety-five percent (95%) of Funds From
Operations for such period, or (B) an amount, but not in excess of one
hundred percent (100%) of Funds From Operations for such period, as
Borrower may be required to distribute to its shareholders in order to
maintain compliance with Section 6.14 below. For purposes of this Section
6.4(f), the term "distributions" shall mean and include all dividends and
other distributions to, and the repurchase of shares or other equity
interests from, the holder of any equity interests in the Borrower, BRE
Property Investors LLC or any other consolidated Borrower Entity.
(ii) No distributions shall be made during the continuance of any
Event of Default arising out of the Borrower's failure to pay any monetary
obligation when due under any Loan Document (a "Monetary Default").
Aggregate distributions during the continuance of any Event of Default
other than a Monetary Default (determined on a consolidated basis) shall
not exceed the lesser of (A) the aggregate amount permitted to be made
during the continuance thereof under subparagraph (i) above, or (B) the
minimum amount that the Borrower must distribute to its shareholders in
order to maintain compliance with Section 6.14 below.
(g) Development. At no time shall the Borrower, on a consolidated
-----------
basis, have under development apartment units totaling in excess of twenty
percent (20%) of the total number of apartment units (excluding such units under
development) then owned by the Borrower or any consolidated Borrower Entity.
For purposes of the foregoing covenant, "development" shall mean all units under
construction, at or beyond the foundation stage,
20
<PAGE>
within a particular apartment project, until the construction of all units (or
discreet phase(s) thereof, if applicable) shall have been completed,
certificates of occupancy shall have been issued with respect to such units, and
such units shall be available for immediate lease and occupancy in the normal
course of business.
(h) Maximum Unsecured Lines of Credit. The Borrower shall not permit,
---------------------------------
on a consolidated basis, total commitments (disbursed and undisbursed) with
respect to Unsecured Indebtedness under lines of credit to exceed the sum of (i)
the Commitment hereunder, plus (ii) Thirty-Five Million Dollars, plus (iii) the
total commitments (disbursed and undisbursed) made available to the Borrower
under any and all other lines of credit from time to time provided to the
Borrower by (A) the Bank or (B) a group of lenders, consisting of the Bank and
one or more other lenders, for whom the Bank serves as agent at the time such
line of credit is first made available. Further, the Borrower (on a
consolidated basis) shall not enter into any commitment for Unsecured
Indebtedness under lines of credit other than under (x) this Agreement, (y) any
other lines of credit from time to time provided to the Borrower by the Bank or
by a group of lenders, consisting of the Bank and one or more other lenders, for
whom the Bank serves as agent at the time such line of credit is first made
available, and (z) the existing line of credit established by Sanwa Bank in
favor of the Borrower in the maximum principal amount of Thirty-Five Million
Dollars ($35,000,000).
(i) Unsecured Indebtedness. The Borrower (on a consolidated basis)
----------------------
shall not incur any Unsecured Indebtedness other than (i) Indebtedness under
revolving lines of credit to the extent permitted under Section 6.4(h) above,
and (ii) non-revolving, non-amortizing Indebtedness with a maturity or call date
not earlier than two (2) years after the Maturity Date under the Note in effect
at the time such Indebtedness is incurred; provided, however, that the foregoing
amortization restriction shall not apply to amortization required, as of the
date of this Agreement, under the Prudential Indebtedness.
(j) Calculation. Each of the foregoing ratios and financial
-----------
requirements shall be calculated as of the last day of each fiscal quarter, but
shall be satisfied at all times.
6.5 Taxes and Other Liabilities.
---------------------------
The Borrower shall pay and discharge, and shall cause each Borrower
Entity under Borrower's control to pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by
21
<PAGE>
appropriate proceedings in such manner as not to cause any Material Adverse
Effect on the Borrower or any Material Borrower Entity or the loss of any right
of redemption from any sale thereunder; and
(b) The Borrower shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting principles)
adequate with respect thereto.
6.6 Notices to the Bank.
-------------------
The Borrower shall promptly notify the Bank in writing of:
(a) any Event of Default hereunder or any event which would become an
Event of Default hereunder upon the giving of notice, the lapse of time, or
both;
(b) any single lawsuit or arbitration claiming over Two Hundred Fifty
Thousand Dollars ($250,000), and lawsuits or arbitrations collectively claiming
over One Million Dollars ($1,000,000), against the Borrower or any Material
Borrower Entity;
(c) any significant dispute between the Borrower or any Material
Borrower Entity and any government authority;
(d) Borrower's receipt of any notice relating to (i) any change in or
reaffirmation of, or proposed change in or reaffirmation of, the rating of
Borrower's senior long-term unsecured debt obligations by any Rating Agency, or
(ii) the issuance of any Rating by a Rating Agency as to which no Rating is then
in effect; and
(e) any event, circumstance or condition which may have a Material
Adverse Effect on the Borrower or any Material Borrower Entity.
6.7 Audits; Books and Records.
-------------------------
The Borrower shall (i) maintain (and shall cause each Borrower Entity
under the Borrower's control to maintain) adequate books and records, and (ii)
allow the Bank and its agents (and cause Borrower Entities under the Borrower's
control to allow the Bank and its agents) to inspect the Borrower's and such
controlled Borrower Entities' properties and examine, audit and make copies of
books and records at any reasonable time. If any of the Borrower's properties,
books or records are in the possession of a third party, the Borrower hereby
authorizes that third party to permit the Bank or its agents to have access to
perform inspections or audits and to respond to the Bank's requests for
information concerning such properties, books and records.
22
<PAGE>
6.8 Compliance with Laws.
--------------------
The Borrower shall comply, and shall cause each Borrower Entity under
the Borrower's control to comply, with the laws (including any fictitious name
statute), regulations, and orders of any government body with authority over the
Borrower's or such Borrower Entity's business.
6.9 Preservation of Rights.
----------------------
The Borrower shall maintain and preserve, and shall cause each
Material Borrower Entity to maintain and preserve, all rights, privileges, and
franchises the Borrower or such Material Borrower Entity now has (or, if later,
as of the date such Person becomes a Material Borrower Entity).
6.10 Maintenance of Properties.
-------------------------
The Borrower shall make, and shall cause each Borrower Entity under
the Borrower's control to make, repairs, renewals, or replacements to keep the
Borrower's, or such Borrower Entity's, properties in good working condition.
6.11 Insurance.
---------
The Borrower shall maintain, or cause to be maintained, insurance in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar properties in the same general areas in
which the Borrower and each of its Affiliates operate and maintain such other
insurance and coverages as may be reasonably required by the Bank. All such
insurance shall be in form and amount and with companies satisfactory to the
Bank. Upon the Bank's request, the Borrower shall furnish the Bank with a copy
of the policy or binder of all such insurance and continuing evidence that such
insurance remains in force at applicable renewal dates.
6.12 ERISA Plans.
-----------
The Borrower shall give prompt written notice to the Bank of the
occurrence of any reportable event under Section 4043(b) of ERISA for which the
PBGC requires 30 day notice; any action by the Borrower or any Borrower Entity
to terminate or withdraw from a Plan or the filing of any notice of intent to
terminate under Section 4041 of ERISA; any notice of noncompliance made with
respect to a Plan under Section 4041(b) of ERISA; or the commencement of any
proceeding with respect to a Plan under Section 4042 of ERISA.
23
<PAGE>
6.13 Indemnity of Guarantors.
-----------------------
The Borrower shall indemnify and hold harmless each Guarantor from and
against any liability (in the form of indebtedness repaid to the Bank in respect
of the Borrower's obligations under the Loan Documents, including (if
applicable) by way of foreclosure on any collateral in which such Guarantor may
at any time hereafter grant to the Bank a security interest) in excess of the
benefit realized by such Guarantor from the proceeds of the Loan. As between
the Borrower and each Guarantor, the Borrower shall be responsible to reimburse
each Guarantor in respect of amounts paid by such Guarantor pursuant to its
Guaranty of the Borrower's obligations under the Loan Documents to the end that
the Borrower, and each Guarantor, ultimately bear the burden of their respective
shares of such obligations. The Borrower's obligations to the Guarantors under
this Section 6.13 shall be subordinated to its obligations to the Bank as
provided in the Guaranties.
6.14 Additional Negative Covenants.
-----------------------------
The Borrower shall not, without the Bank's written consent:
(a) Merge or dissolve into, or consolidate with, any Person, or
permit any Material Borrower Entity to do so, except in each case for mergers
and consolidations (i) which result in the Borrower or such Material Borrower
Entity, as the case may be, being the surviving entity (provided that the
Borrower shall be the surviving entity in any merger or consolidation with a
Material Borrower Entity), (ii) which do not have a Material Adverse Effect on
the Borrower or the affected Material Borrower Entity, and (iii) which do not
result in the Borrower, following the consummation of such merger or
consolidation, being in default under any term or condition of this Agreement.
Neither the Borrower nor any Material Borrower Entity shall sell, lease,
transfer, encumber or otherwise dispose of all or any substantial part of its
properties or assets, whether in a single transaction or series of transactions,
if such sale, lease, transfer, encumbrance or other disposition would cause a
Material Adverse Effect on the Borrower or such Material Borrower Entity;
(b) Except for any such amendment that is required under any
requirement of law imposed by any governmental authority or in order to maintain
compliance with Section 6.14, amend its articles of incorporation or by-laws, or
permit any Material Borrower Entity to amend any of its charter documents,
except in each case (i) upon at least ten (10) Banking Days' prior written
notice to the Bank, and (ii) if the Bank notifies the Borrower within such 10-
---
day period that such amendment is, in Bank's reasonable judgment, a material
amendment, with the prior written consent of the Bank;
(c) Suspend its business activity, or permit any
24
<PAGE>
Material Borrower Entity to suspend its business activity, in either case for
more than two days;
(d) Use any proceeds of any advance under the Loan Documents (or
permit such proceeds to be used), directly or indirectly, to purchase or carry,
or reduce or retire any loan incurred to purchase or carry any "Margin Stock"
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock;
(e) Permit the Borrower's aggregate Investments in Borrower Entities
that have not executed and delivered a Guaranty at any time to exceed ten
percent (10%) of the Borrower's consolidated total assets, determined in
accordance with GAAP; or
(f) Cease (i) to own at least a majority of the outstanding equity
interests of each other Material Borrower Entity, or (ii) to control any
Material Borrower Entity.
6.15 Continued Status as a REIT; Prohibited Transactions.
---------------------------------------------------
The Borrower (i) will continue to be a real estate investment trust as
defined in Section 856 of the Code (or any successor provision thereto), (ii)
will not revoke its election to be a real estate investment trust, (iii) will
not engage in any "prohibited transactions" as defined in Section 856(b)(6)(iii)
of the Code (or any successor provision thereto), and (iv) will continue to be
entitled to a dividend paid deduction meeting the requirements of Section 857 of
the Code.
6.16 NYSE Listed Company.
-------------------
The common stock of the Borrower shall at all times be listed for
trading and be traded on the New York Stock Exchange.
6.17 Conduct of Business.
-------------------
The Borrower shall engage primarily in the business of direct
ownership, operation and acquisition or development for its own account of
apartment projects located in the Western United States (which shall be
understood to mean Colorado and States westward); provided, however, that the
foregoing shall not restrict either the Borrower's continued ownership and
operation of assets owned as of the Effective Date or other business activities
of the Borrower or any Borrower Entity reasonably incidental to business
activities otherwise permitted under this Section 6.16.
25
<PAGE>
6.18 Delivery of Guaranties.
----------------------
Within fifteen (15) days after (a) any Borrower Entity becomes a
Material Borrower Entity, or (b) the Borrower forms or acquires, by merger or
otherwise, a Material Borrower Entity: the Borrower shall (x) give the Bank
written notice thereof, (y) cause such Material Borrower Entity to execute and
deliver to the Bank a Guaranty, and (z) deliver to the Bank (i) with respect to
such Material Borrower Entity, the documents described in each of Sections
1.4(f) and 4.1(b), and (ii) an updated Schedule 1, reflecting such information
with respect to such Material Borrower Entity as is required to be reflected on
Schedule 1 pursuant to Section 5.1(b). Upon the inclusion of any real property
asset owned by a Borrower Entity other than a Material Borrower Entity as
Unencumbered Real Property by virtue of the execution and delivery by such
Borrower Entity of a Guaranty (but without limiting the requirement that such
real property asset qualify in all respects as "Unencumbered Real Property" in
order to be included as such), the Borrower shall deliver to the Bank (1) with
respect to such Guarantor, the documents described in each of Sections 1.4(f)
and 4.1(b), and (2) an updated Schedule 1, reflecting such information with
respect to such Guarantor as is required to be reflected on Schedule 1 pursuant
to Section 5.1(b).
6.19 Cooperation.
-----------
The Borrower shall take any action reasonably requested by the Bank to
carry out the intent of the Loan Documents.
7. COLLATERAL; OTHER SPECIAL PROVISIONS
7.1 Collateral. This Line of Credit is unsecured.
----------
7.2 Other Special Provisions. For purposes of this Section 7.2,
------------------------
capitalized terms not otherwise defined in this Agreement have the definitions
given to them in Section 7.2(c).
Notwithstanding any other provision of this Agreement, effective as of the
date on which Blue Ravine Properties LLC executes and delivers to Bank a
Guaranty, together with the other documents required by Section 6.18:
(a) Until the Special Provisions Termination Date, the Blue Ravine
Property shall constitute "Unencumbered Real Property" for purposes of this
Agreement, notwithstanding that it is subject to the Borrower Lien (as defined
below); provided that, but for the existence of the Borrower Lien (and for that
-------- ----
reason alone), the Blue Ravine Property would constitute both "Real Property"
and "Unencumbered Real Property", within the meaning of those terms.
(b) The "value" of the Blue Ravine Property for all
26
<PAGE>
purposes of this Agreement (including, without limitation, for purposes of
determining "Total Real Property Market Value" and "Total Real Property Market
Value of Unencumbered Real Property"), at any time, shall be equal to (i) its
value, as determined using the "Current Value Method", minus (ii) the then-
-----
outstanding principal amount of the Borrower-Owned Debt.
(c) As used in this Section 7.2, the following terms have the
following meanings:
(i) "Borrower Lien" means the Lien, in existence as of the date
of this Agreement, in favor of the Borrower, securing the Borrower-Owned Debt
(and only the Borrower-Owned Debt).
(ii) "Borrower-Owned Debt" means the indebtedness of Blue Ravine
Properties LLC, in an original principal not exceeding $5,700,000, outstanding
as of the date on which Blue Ravine Properties LLC acquires the Blue Ravine
Property, as reduced from time to time by any repayment or prepayment of the
principal thereof; provided that such indebtedness is, and continues to be, held
-------- ----
by the Borrower free and clear of all Liens in favor of any other Person
whatsoever.
(iii) "Blue Ravine Property" means the Real Property owned by
Blue Ravine Properties LLC as of the date of the initial advance under the Line
of Credit or acquired thereon.
(iv) "Special Provisions Termination Date" means the earliest of
(A) December 31, 1998, (B) the date as of which (1) Blue Ravine Properties LLC
is liquidated or dissolved, or merged into BRE Property Investors LLC, or (2)
the Blue Ravine Property otherwise ceases to be owned by Blue Ravine Properties
LLC; or (C) the date on which the Blue Ravine Property otherwise fails to
constitute "Unencumbered Real Property" pursuant to Section 7.2(a).
8. DEFAULT
If any of the following events occurs (an "Event of Default"), the Bank may
declare the Borrower in default, stop making any additional credit available to
the Borrower, and require the Borrower to repay its entire debt immediately and
without prior notice. However, if a bankruptcy petition is filed with respect
to the Borrower, the entire debt outstanding under the Loan Documents shall
automatically be due immediately.
8.1 Failure to Pay.
--------------
The Borrower, or any Material Borrower Entity, fails to make any
payment due under the Loan Documents (i) within fifteen (15) days after the date
when due, or (ii) within such other period, or no period, as may expressly be
provided in any other
27
<PAGE>
Loan Document to constitute an Event of Default.
8.2 False Information.
-----------------
The Borrower, or any Material Borrower Entity, has given the Bank
false or misleading information or representations.
8.3 Bankruptcy.
----------
The Borrower, or any Material Borrower Entity, files a bankruptcy
petition or makes a general assignment for the benefit of creditors, or a
bankruptcy petition is filed against the Borrower. The default will be deemed
cured if any bankruptcy petition filed against the Borrower or any Material
Borrower Entity is dismissed within a period of forty-five (45) days after the
filing; provided, however, that the Bank will not be obligated to extend any
additional credit to the Borrower during that period.
8.4 Receivers; Dissolution.
----------------------
A receiver or similar official is appointed for the Borrower's, or any
Material Borrower Entity's, business, or the business is terminated; or any
order, judgment or decree is entered against the Borrower or any Material
Borrower decreeing its involuntary dissolution or split up and remains
undischarged and unstayed for a period in excess of thirty (30) days; the
directors or other managing body of, or the members, shareholders or other
holders of the equity interests in, the Borrower or any Material Borrower Entity
shall take any action authorizing the dissolution of the Borrower or any
Material Borrower Entity; or the Borrower or any Material Borrower Entity shall
otherwise dissolve or (except as the result of the merger of a Material Borrower
Entity into the Borrower) cease to exist.
8.5 Lawsuits.
--------
Any lawsuit(s) or arbitration(s) are initiated against the Borrower or
any Material Borrower Entity involving claims exceeding in the aggregate Fifty
Million Dollars ($50,000,000) or more at any one time in excess of any insurance
coverage.
8.6 Judgments.
---------
Any judgment or arbitration award is entered against the Borrower or
any Material Borrower Entity, or the Borrower, or any Material Borrower Entity,
enters into any settlement agreement with respect to any litigation, claim or
arbitration, in an aggregate amount of Ten Million Dollars ($10,000,000) or more
in excess of any insurance coverage.
8.7 ERISA Plans.
-----------
28
<PAGE>
The occurrence of any of the following event(s) with respect to the
Borrower or any Material Borrower Entity, provided such event(s) could
reasonably be expected, in the judgment of the Bank, to subject the Borrower or
such Material Borrower Entity to any tax, penalty or liability (or any
combination of the foregoing) which in the aggregate could have a Material
Adverse Effect on the Borrower or such Material Borrower Entity with respect to
a Plan:
(a) A reportable event occurs with respect to a Plan which in the
reasonable judgment of the Bank may result in the termination of such Plan for
purposes of ERISA.
(b) Any Plan termination (or commencement of proceedings to terminate
a Plan) or the Borrower's, or any Material Borrower Entity's, full or partial
withdrawal from a Plan.
8.8 Government Action.
-----------------
Any government authority takes action that the Bank believes could
have a Material Adverse Effect on the Borrower or any Material Borrower Entity.
8.9 Material Adverse Change.
-----------------------
Any event, circumstance or condition shall occur which the Bank
believes could have a Material Adverse Effect on the Borrower or any Material
Borrower Entity.
8.10 Other Breach Under This Agreement or Other Loan Documents.
---------------------------------------------------------
The Borrower, or any Material Borrower Entity, fails to meet the
conditions of or fails to perform any obligation under any term of this
Agreement or any other Loan Document not specifically referred to in this
Article 8. If, in the Bank's opinion, the breach is capable of being remedied,
the breach will not be considered an Event of Default under this Agreement for a
period of thirty (30) days after the date on which the Bank gives written notice
of the breach to the Borrower; provided, however, that the Bank will not be
obligated to extend any additional credit to the Borrower during that period.
8.11 Cross-Default.
-------------
Any default occurs under any agreement in connection with any credit
the Borrower, any Material Borrower Entity or any of the Borrower's other
related entities or Affiliates has obtained from the Bank or any other creditor,
or which the Borrower, any Material Borrower Entity or any of the Borrower's
other related entities or Affiliates has guaranteed, if the default consists of
a failure to make a payment when due or gives the creditor the right to
accelerate the obligation.
29
<PAGE>
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 Remedies.
--------
If an Event of Default occurs under the Loan Documents, the Bank may
exercise any right or remedy which it has under any of the Loan Documents or
which is otherwise available at law or in equity. All of Bank's rights and
remedies shall be cumulative. At Bank's option, exercisable in its sole
discretion, all of the Borrower's obligations under the Loan Documents will
become immediately due and payable without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind.
9.2 California Law.
--------------
This Agreement is governed by California law but without regard to the
choice of law rules of California.
9.3 Arbitration.
-----------
(a) Mandatory Arbitration. Except as provided below, any controversy
---------------------
or claim between or among the parties, including those arising out of or
relating to this Agreement or the other Loan Documents and any claim based on or
arising from an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.
(b) Provisional Remedies, Self-Help and Foreclosure. No provision of
-----------------------------------------------
this Agreement shall limit the right of any party to this Agreement to exercise
self-help remedies such as setoff, or obtaining provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration or other proceeding. The exercise of a remedy does
not waive the right of either party to resort to arbitration.
9.4 Presentment, Demands and Notice.
-------------------------------
30
<PAGE>
The Bank shall be under no duty or obligation to make or give any
presentment, demands for performances, notices of
nonperformance, protests, notices of protest or notices of dishonor in
connection with any obligation or indebtedness under the Loan Documents.
9.5 Indemnification.
---------------
The Borrower shall indemnify, save, and hold harmless the Bank and its
directors, officers, agents and employees (collectively the "Indemnitees") from
and against:
(a) Any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, charges, expenses or disbursements
(including attorneys' fees) of any kind with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and the other Loan
Documents, and the transactions contemplated hereby, and with respect to any
investigation, litigation or proceeding related to this Agreement, the other
Loan Documents, advances made pursuant to the Loan Documents or the use of the
proceeds thereof (including, without limitation, any investigation, litigation
or proceeding related to the acquisition by any Borrower Entity of all or any
portion of its assets), whether or not any Indemnitee is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities"); provided, that the
Borrower shall have no obligation hereunder to any Indemnitee with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of such Indemnitee.
(b) Any and all writs, subpoenas, claims, demands, actions, or causes
of action that are served on or asserted against any Indemnitee (if directly or
indirectly related to a writ, subpoena, claim, demand, action, or cause of
action against the Borrower or any Affiliate of the Borrower); and any and all
liabilities, losses, costs, or expenses (including attorneys' fees) that any
Indemnitee suffers or incurs as a result of any of said matters.
The obligations of the Borrower under this Section 9.5 shall survive
payment of the advances made pursuant to the Loan Documents and assignment of
any rights hereunder.
9.6 Attorneys' Fees.
---------------
In the event of a lawsuit or arbitration proceeding, including any
tort proceeding, between or among the parties hereto, the prevailing party is
entitled to recover costs and reasonable attorneys' fees (including any
allocated costs of in-house counsel) incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator.
31
<PAGE>
9.7 Notices.
-------
All notices required under this Agreement shall be personally
delivered, sent by facsimile or sent by first class mail, postage prepaid, to
the addresses on the signature page of this Agreement, or to such other
addresses as the Bank and the Borrower may specify from time to time in writing.
9.8 Successors and Assigns.
----------------------
This Agreement is binding on the Borrower's and the Bank's successors
and assignees. The Borrower agrees that it may not assign this Agreement or the
other Loan Documents without the Bank's prior consent. The Bank may sell
participations in or assign this Loan, and may provide financial information
about the Borrower to actual or potential participants or assignees, without
notice to or consent of the Borrower. Concurrent with any assignment or
participation by the Bank, the Borrower will, at the Bank's request, deliver an
opinion of counsel in form and substance reasonably satisfactory to the Bank.
9.9 No Third Parties Benefited.
--------------------------
This Agreement is made and entered into for the sole protection and
benefit of the Bank and the Borrower and their successors and assigns. No trust
fund is created by this Agreement and no other persons or entities shall have
any right of action under this Agreement or any right to the proceeds of
advances made pursuant to the Loan Documents.
9.10 Integration; Relation to Any Loan Commitment; Headings.
------------------------------------------------------
(a) The Loan Documents (i) integrate all the terms and conditions in
or incidental to this Agreement, (ii) supersede all oral negotiations and prior
writings with respect to their subject matter, including any loan commitment to
the Borrower, and (iii) are intended by the parties as the final expression of
the agreement with respect to the terms and conditions set forth in those
documents and as the complete and exclusive statement of the terms agreed to by
the parties. No representation, understanding, promise or condition shall be
enforceable against any party unless it is contained in the Loan Documents.
(b) If there is any conflict between the terms, conditions and
provisions of this Agreement and those of any other agreement or instrument,
including any other Loan Document, the terms, conditions and provisions of this
Agreement shall prevail.
(c) Headings and captions are for reference only and shall not affect
the interpretation or meaning of any provisions of this Agreement.
(d) The schedule(s) and exhibit(s) to this Agreement
32
<PAGE>
are hereby incorporated in this Agreement.
9.11 Interpretation.
--------------
(a) Time is of the essence in the performance of this Agreement by the
Borrower.
(b) The word "include(s)" means "include(s), without limitation," and
the word "including" means "including but not limited to." No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Agreement.
(c) Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP. All references herein to the Borrower or any other
Person, in connection with any financial or related covenant, representation or
calculation, shall be understood to mean and refer to the Borrower and such
other Person on a consolidated basis in accordance with GAAP, unless otherwise
specifically provided and subject in all events to any adjustments herein set
forth.
(d) Any time the phrase "to the best of the Borrower's knowledge" or a
phrase similar thereto is used herein, it means: "to the actual knowledge of
the then officers of the Borrower, after reasonable inquiry of those agents,
employees or contractors of the Borrower who could reasonably be anticipated to
have knowledge with respect to the subject matter or circumstances in question
and after review of those documents or instruments which could reasonably be
anticipated to be relevant to the subject matter or circumstances in question."
(e) In each case where the consent or approval of the Bank is
required, or Bank's non-obligatory action is requested by the Borrower, such
consent, approval or action shall be in the sole and absolute discretion of the
Bank, unless otherwise specifically indicated.
(f) Any time the word "or" is used herein, unless the context
otherwise clearly requires, it has the inclusive meaning represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement. Article, section, subsection, clause, exhibit and
schedule references are to this Agreement unless otherwise specified. Any
reference in this Agreement to this Agreement or to any other Loan Document
includes any and all amendments, modifications, supplements, renewals or
restatements thereto or thereof, as applicable.
33
<PAGE>
9.12 Severability; Waivers; Amendments.
---------------------------------
This Agreement may not be modified or amended except by a written
agreement signed by the parties. Any consent or waiver under this Agreement
must be in writing. If any part of this Agreement is not enforceable, the rest
of the Agreement may be enforced. If the Bank waives a default, it may enforce a
later default. No waiver shall be construed as a continuing waiver. No waiver
shall be implied from Bank's delay in exercising or failure to exercise any
right or remedy against the Borrower. Consent by the Bank to any act or omission
by the Borrower shall not be construed as a consent to any other or subsequent
act or omission or as a waiver of the requirement for Bank's consent to be
obtained in any future or other instance. The Bank retains all of its rights and
remedies, even if it makes an advance after a default.
9.13 Counterparts.
------------
This Agreement may be executed in counterparts each of which, when
executed, shall be deemed an original, and all such counterparts shall
constitute one and the same agreement.
34
<PAGE>
This Agreement is executed as of the date stated at the top of the first page.
Bank: Borrower:
BANK OF AMERICA NATIONAL BRE PROPERTIES, INC., a
TRUST AND SAVINGS ASSOCIATION Maryland corporation
By /s/ Janice Sears By /s/ LeRoy E. Carlson
-------------------------------- -------------------------------------
Janice Sears LeRoy E. Carlson
Vice President Executive Vice President and
Chief Financial Officer
By /s/ Jay W. Parly
-------------------------------------
Name: Jay W. Parly
Title: Sr. E.V.P
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
Bank of America National Trust BRE Properties, Inc.
and Savings Association One Montgomery Street
Commercial Real Estate Telesis Tower, Suite 2500
Services/National San Francisco, CA 94104
Accounts 9105 Attn: LeRoy E. Carlson
50 California Street Phone: (415) 445-6561
11th Floor Fax: (415) 445-6505
San Francisco, CA 94111
Attention: Laurence Hughes
Phone: (415) 445-4404
Fax: (415) 445-4154
35
<PAGE>
SCHEDULE 1
- ----------
MATERIAL BORROWER ENTITIES
- --------------------------
EXHIBIT A
- ---------
BORROWING NOTICE
- ----------------
Schedule 1 to Borrowing Notice (Requested Advance)
EXHIBIT B
- ---------
FORM OF GUARANTY
- ----------------
<PAGE>
SCHEDULE 1
----------
MATERIAL BORROWER ENTITIES
---------------------------
As of November 14, 1997
<TABLE>
<CAPTION>
Member of BRE Property Investors LLC Percentage of Ownership Interest
- ------------------------------------ --------------------------------
<S> <C>
BRE Properties, Inc. 99%
LeRoy E. Carlson 1%
--
Total 100%
</TABLE>
1
<PAGE>
EXHIBIT A
----------
BORROWING NOTICE
----------------
___________________, 199__
Bank of America National Trust
and Savings Association
Commercial Real Estate
Services Group 9105
50 California Street
11th Floor
San Francisco, CA 94111
Attention: Neeta Seletsky
Re: Unsecured Line of Credit Loan Agreement dated as of November 17, 1997 (the
"Agreement") between BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("Bank") and BRE PROPERTIES, INC. ("Borrower")
Dear _______________:
Reference is made to the Agreement. Capitalized terms used in this
Borrowing Notice without definition have the meanings specified in the
Agreement.
Pursuant to the Agreement, notice is hereby given that the Borrower
desires that the Bank make the advance described in attached Schedule 1 (the
----------
"Advance"). The Borrower and the undersigned Officer of the Borrower hereby
certify that:
(1) Commitment. The outstanding amount of the Line of Credit,
----------
together with any other amounts required by the Loan Documents to be charged
against the availability of advances under the Line of Credit, shall not, after
giving effect to the making of the Advance, exceed the Commitment;
(2) Representations and Warranties. All representations and
------------------------------
warranties of the Borrower or any Material Borrower Entity contained in the
Agreement and the other Loan Documents are true and correct as of the date
hereof and shall be true and correct on the date of the Advance, both before and
after giving effect to the Advance; provided, however, that the representations
and warranties of the Borrower set forth in the Agreement regarding financial
statements shall be deemed to be made with respect to the financial statements
most recently delivered to the Bank pursuant to the Agreement;
(3) No Event of Default. No Event of Default exists as of the date
-------------------
hereof or will result from the making of the Advance or would result after
notice or passage of time or both;
1
<PAGE>
(4) Use of Proceeds. The proceeds of the Advance will be used only as
---------------
permitted by the Agreement; and
(5) No Material Adverse Effect. No event, circumstance or condition,
--------------------------
which could have a Material Adverse Effect on the Borrower or any Material
Borrower Entity, has occurred since the date of the Agreement.
Enclosed are the documents and information, if any, requested by the
Bank with respect to use of proceeds as a condition to this Advance.
BRE PROPERTIES, INC., a
Maryland corporation
By: __________________________
Its: _________________________
2
<PAGE>
Schedule 1
----------
to Borrowing Notice
REQUESTED ADVANCE
-----------------
1. Amount of Requested Advance: $_______________
---------------------------
(must be $500,000 or more)
2. Purpose of Advance /1//:
------------------
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
3. Effective Date of Requested Advance: __________, ____
-----------------------------------
______________________
/1// See Section 6.1; specify acquisition costs for designated apartment
project or general working capital purposes.
<PAGE>
EXHIBIT B
PAYMENT GUARANTY
This Payment Guaranty ("Guaranty") is made as of________, 199 ____ by _____
______("Guarantor") in favor of Bank of America National Trust and Savings
Association ("Bank").
Factual Background
------------------
A. Guarantor is executing this Guaranty to induce Bank to make advances
(the "Loan") to BRE Properties, Inc., a Maryland corporation ("Borrower")in
accordance with an ______________ Agreement between the Borrower and the Bank
dated, 199_, in the principal amount of .
B. Advances under the Loan are currently evidenced by a Promissory Note
dated as of _______, 199_ ("the Note") made payable to Bank in the principal
amount of the Loan. The Loan includes a revolving and unsecured line of credit.
C. The Loan is guarantied by this Guaranty and is evidenced by the
documents referenced above. Those documents, together with this Guaranty, are
referred to here as the "Loan Documents".
Guaranty
--------
1. Guaranty of Loan. Guarantor unconditionally guaranties to Bank the
----------------
full payment of the Loan, and unconditionally agrees to pay Bank the full amount
of the Loan. This is a guaranty of payment, not of collection. If Borrower
defaults in the payment when due of the Loan or any part of it, Guarantor shall
in lawful money of the United States pay to Bank or order, on demand, all sums
due and owing on the Loan, including all interest, charges, fees and other sums,
costs and expenses.
2. Loan. In this Guaranty, the term "Loan" is broadly defined to mean
----
and include all primary, secondary, direct, indirect, fixed and contingent
obligations of Borrower to pay principal, interest, prepayment charges, late
charges, loan fees and any other fees, charges, sums, costs and expenses which
may be owing at any time under the Loan Documents, as any or all of them may
from time to time be modified, amended, extended or renewed. For purposes of
this Guaranty, the Loan includes any and all such obligations which may arise in
connection with (a) any environmental and other indemnities given by Borrower in
connection with the Loan, (b) any set aside letters, and (c) any advances made
before recording of any deed of trust given to secure the Loan. If the amount
outstanding under the Loan is determined by a court of competent jurisdiction,
that determination shall be conclusive and binding on Guarantor, regardless of
whether Guarantor was a party to the proceeding in which the determination was
made or not.
3. Rights of Bank. Guarantor authorizes Bank to perform any or all of
--------------
the following acts at any time in its sole discretion, all without notice to
Guarantor and without affecting Guarantor's obligations under this Guaranty:
(a) Bank may alter any terms of the Loan or any part of it, including
renewing, compromising, extending or accelerating, or otherwise changing the
time for payment of, or increasing or decreasing the rate of interest on, the
Loan or any part of it.
(b) Bank may take and hold security for the Loan or this Guaranty,
accept additional or substituted security for either, and subordinate, exchange,
1
<PAGE>
enforce, waive, release, compromise, fail to perfect and sell or otherwise
dispose of any such security.
(c) Bank may direct the order and manner of any sale of all or any
part of any security now or later to be held for the Loan or this Guaranty, and
Bank may also bid at any such sale.
(d) Bank may apply any payments or recoveries from Borrower, Guarantor
or any other source, and any proceeds of any security, to Borrower's obligations
under the Loan Documents in such manner, order and priority as Bank may elect,
whether or not those obligations are guarantied by this Guaranty or secured at
the time of the application.
(e) Bank may release Borrower of its liability for the Loan or any
part of it.
(f) Bank may substitute, add or release any one or more guarantors or
endorsers.
(g) In addition to the Loan, Bank may extend other credit to Borrower,
and may take and hold security for the credit so extended, all without affecting
Guarantor's liability under this Guaranty.
4. Guaranty to be Absolute. Guarantor expressly agrees that until the
-----------------------
Loan is paid and performed in full and each and every term, covenant and
condition of this Guaranty is fully performed, Guarantor shall not be released
by or because of:
(a) Any act or event which might otherwise discharge, reduce, limit or
modify Guarantor's obligations under this Guaranty;
(b) Any waiver, extension, modification, forbearance, delay or other
act or omission of Bank, or its failure to proceed promptly or otherwise as
against Borrower, Guarantor or any security;
(c) Any action, omission or circumstance which might increase the
likelihood that Guarantor may be called upon to perform under this Guaranty or
which might affect the rights or remedies of Guarantor as against Borrower;
(d) Any dealings occurring at any time between Borrower and Bank,
whether relating to the Loan or otherwise; or
(e) Any action of Bank described in Section 3 above.
Guarantor hereby acknowledges that absent this Section 4, Guarantor
might have a defense to the enforcement of this Guaranty as a result of one or
more of the foregoing acts, omissions, agreements, waivers or matters.
Guarantor hereby expressly waives and surrenders any defense to any liability
under this Guaranty based upon any of such acts, omissions, agreements, waivers
or matters. It is the express intent of Guarantor that Guarantor's obligations
under this Guaranty are and shall be absolute, unconditional and irrevocable.
5. Guarantor's Waivers. Guarantor waives:
-------------------
(a) All statutes of limitations as a defense to any action or
proceeding brought against Guarantor by Bank, to the fullest extent permitted by
law;
(b) Any right it may have to require Bank to proceed against Borrower,
proceed against or exhaust any security held from Borrower, or pursue any other
remedy in Bank's power to pursue;
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<PAGE>
(c) Any defense based on any claim that Guarantor's obligations exceed
or are more burdensome than those of Borrower;
(d) Any defense based on: (i) any legal disability of Borrower, (ii)
any release, discharge, modification, impairment or limitation of the liability
of Borrower to Bank from any cause, whether consented to by Bank or arising by
operation of law or from any bankruptcy or other voluntary or involuntary
proceeding, in or out of court, for the adjustment of debtor-creditor
relationships ("Insolvency Proceeding") and (iii) any rejection or disaffirmance
of the Loan, or any part of it, or any security held for it, in any such
Insolvency Proceeding;
(e) Any defense based on any action taken or omitted by Bank in any
Insolvency Proceeding involving Borrower, including any election to have Bank's
claim allowed as being secured, partially secured or unsecured, any extension of
credit by Bank to Borrower in any Insolvency Proceeding, and the taking and
holding by Bank of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices of
acceptance of this Guaranty and of the existence, creation, or incurring of new
or additional indebtedness, and demands and notices of every kind except for any
demand or notice by Bank to Guarantor expressly provided for in Section 1;
(g) Any defense based on or arising out of any defense that Borrower
may have to the payment or performance of the Loan or any part of it; and
(h) Any defense based on or arising out of any action of Bank
described in Sections 3 or 4 above.
6. Guarantor's Liability
---------------------
Notwithstanding any other provision of this Guaranty to the contrary,
Guarantor agrees with Bank that Guarantor's liability under this Guaranty shall
under all circumstances be limited to the greater of (1) the net benefit to
Guarantor from the Loan, or (2) the maximum amount that, if exceeded, would
cause the occurrence of a Limiting Event, as defined herein. For purposes of
this Guaranty, a "Limiting Event" shall occur if, as a result of Guarantor's
execution and delivery of this Guaranty, or its incurring of its obligations
hereunder, as of the date incurred (as determined (i) for purposes of Bankruptcy
Code (S)548(a) in a case involving Guarantor under the Bankruptcy Code, in
accordance with the Bankruptcy Code, and (ii) in any other case, in accordance
with the California Uniform Fraudulent Transfer Act): (a) the Guarantor is left
insolvent, (b) the Guarantor incurs debts beyond its ability to pay as they
mature, or (c) Guarantor is left with unreasonably small capital to carry on its
business and any other business in which it presently intends to engage.
7. Waivers of Subrogation and Other Rights and Defenses.
----------------------------------------------------
(a) Upon a default by Borrower, Bank in its sole discretion, without
prior notice to or consent of Guarantor, may elect to: (i) foreclose either
judicially or nonjudicially against any real or personal property security it
may hold for the Loan, (ii) accept a transfer of any such security in lieu of
foreclosure, (iii) compromise or adjust the Loan or any part of it or make any
other accommodation with Borrower or Guarantor, or (iv) exercise any other
remedy against Borrower or any security. No such action by Bank shall release
or limit the liability of Guarantor, who shall remain liable under this Guaranty
after the action, even if the effect of the action is to deprive Guarantor of
any subrogation rights, rights of indemnity, or other rights to collect
reimbursement from Borrower for any sums paid to Bank, whether contractual or
arising by operation of law or otherwise. Guarantor expressly agrees
3
<PAGE>
that under no circumstances shall it be deemed to have any right, title,
interest or claim in or to any real or personal property to be held by Bank or
any third party after any foreclosure or transfer in lieu of foreclosure of any
security for the Loan.
(b) Regardless of whether Guarantor may have made any payments to
Bank, Guarantor hereby waives: (i) all rights of subrogation, indemnification,
contribution and any other rights to collect reimbursement from Borrower or any
other party for any sums paid to Bank, whether contractual or arising by
operation of law (including the United States Bankruptcy Code or any successor
or similar statute) or otherwise, (ii) all rights to enforce any remedy that
Bank may have against Borrower, and (iii) all rights to participate in any
security now or later to be held by Bank for the Loan. The waivers given in
this subsection 7(b) shall be effective until the Loan has been paid and
performed in full.
(c) Guarantor understands and acknowledges that if Bank forecloses
judicially or nonjudicially against any real property security for the Loan,
that foreclosure could impair or destroy any ability that Guarantor may have to
seek reimbursement, contribution or indemnification from Borrower or others
based on any right Guarantor may have of subrogation, reimbursement,
contribution or indemnification for any amounts paid by Guarantor under this
Guaranty. Guarantor further understands and acknowledges that in the absence of
this Section 7, such potential impairment or destruction of Guarantor's rights,
if any, may entitle Guarantor to assert a defense to this Guaranty based on
Section 580d of the California Code of Civil Procedure as interpreted in Union
-----
Bank v. Gradsky, 265 Cal.App.2d 40 (1968). By executing this Guaranty,
- ---------------
Guarantor freely, irrevocably and unconditionally: (i) waives and relinquishes
that defense and agrees that Guarantor will be fully liable under this Guaranty
even though Bank may foreclose judicially or nonjudicially against any real
property security for the Loan; (ii) agrees that Guarantor will not assert that
defense in any action or proceeding which Bank may commence to enforce this
Guaranty; (iii) acknowledges and agrees that the rights and defenses waived by
Guarantor under this Guaranty include any right or defense that Guarantor may
have or be entitled to assert based upon or arising out of any one or more of
Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure or
Section 2848 of the California Civil Code; and (iv) acknowledges and agrees that
Bank is relying on this waiver in making the Loan, and that this waiver is a
material part of the consideration which Bank is receiving for making the Loan.
(d) Guarantor waives any rights and defenses that are or may become
available to Guarantor by reason of Sections 2787 to 2855, inclusive, of the
California Civil Code.
(e) Guarantor waives all rights and defenses that Guarantor may have
in the event that Borrower's Loan is secured by real property. This means,
among other things:
(i) Bank may collect from Guarantor without first foreclosing on
any real or personal property collateral pledged by Borrower.
(ii) If Bank forecloses on any real property collateral pledged
by Borrower:
(A) The amount of the Loan may be reduced only by the price
for which that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price.
(B) Bank may collect from Guarantor even if Bank, by
foreclosing on the real property collateral, has destroyed any right
Guarantor may have to collect from Borrower.
4
<PAGE>
This subsection 7(e) is an unconditional and irrevocable waiver of any
rights and defenses Guarantor may have in the event that Borrower's Loan is
secured by real property. These rights and defenses include, but are not
limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726
of the California Code of Civil Procedure.
(f) Guarantor waives any right or defense it may have at law or
equity, including California Code of Civil Procedure Section 580a, to a fair
market value hearing or action to determine a deficiency judgment after a
foreclosure.
(g) No provision or waiver in this Guaranty shall be construed as
limiting the generality of any other provision or waiver contained in this
Guaranty.
8. Revival and Reinstatement. If Bank is required to pay, return or
-------------------------
restore to Borrower or any other person any amounts previously paid on the Loan
because of any Insolvency Proceeding of Borrower, any stop notice or any other
reason, the obligations of Guarantor shall be reinstated and revived and the
rights of Bank shall continue with regard to such amounts, all as though they
had never been paid.
9. Information Regarding Borrower and Any Collateral. Before signing
-------------------------------------------------
this Guaranty, Guarantor investigated the financial condition and business
operations of Borrower, the present and former condition, uses and ownership of
any collateral, and such other matters as Guarantor deemed appropriate to assure
itself of Borrower's ability to discharge its obligations under the Loan
Documents. Guarantor assumes full responsibility for that due diligence, as
well as for keeping informed of all matters which may affect Borrower's ability
to pay and perform its obligations to Bank. Bank has no duty to disclose to
Guarantor any information which Bank may have or receive about Borrower's
financial condition or business operations, the condition or uses of any
collateral, or any other circumstances bearing on Borrower's ability to perform.
10. Subordination. Any rights of Guarantor, whether now existing or later
-------------
arising, to receive payment on account of any indebtedness (including interest)
owed to it by Borrower or any subsequent owner of any real property collateral
for the Loan, or to withdraw capital invested by it in Borrower, or to receive
distributions from Borrower, shall at all times be subordinate as to lien and
time of payment and in all other respects to the full and prior repayment to
Bank of the Loan. Should there be any event of default under either this
Guaranty or the Loan, Guarantor shall not, without the prior written consent of
Bank, be entitled to enforce or receive payment of any sums hereby subordinated
until the Loan has been paid and performed in full, and any such sums received
in violation of this Guaranty shall be received by Guarantor in trust for Bank.
11. Financial Information. Guarantor shall keep true and correct
---------------------
financial books and records, using generally accepted accounting principles
consistently applied, or such other accounting principles as Bank in its
reasonable judgment may find acceptable from time to time. Within one hundred
and twenty (120) days after the end of each fiscal year, Guarantor shall deliver
to Bank its balance sheet and income statement, together with a statement
showing all changes in its financial condition which occurred during the
preceding fiscal year. Guarantor shall also promptly deliver to Bank all
quarterly balance sheets and income statements if they become available or if
Bank requests them. Guarantor shall promptly provide Bank with any additional
audited financial information that Guarantor may obtain, as well as signed
copies of any tax returns and such other information concerning its affairs and
properties as Bank may reasonably request.
12. Guarantor's Representations and Warranties. Guarantor represents and
------------------------------------------
warrants that:
5
<PAGE>
(a) All financial statements and other financial information furnished
or to be furnished to Bank are or will be true and correct and do or will fairly
represent the financial condition of Guarantor (including all contingent
liabilities);
(b) All financial statements were or will be prepared in accordance
with generally accepted accounting principles, or such other accounting
principles as may be acceptable to Bank at the time of their preparation,
consistently applied; and
(c) There has been no material adverse change in Guarantor's financial
condition since the dates of the statements most recently furnished to Bank.
13. Events of Default. Bank may declare Guarantor to be in default under
-----------------
this Guaranty upon the occurrence of any of the following events ("Events of
Default"):
(a) Guarantor fails to perform any of its obligations under this
Guaranty; or
(b) Guarantor revokes this Guaranty or this Guaranty becomes
ineffective for any reason; or
(c) Any representation or warranty made or given by Guarantor to Bank
proves to be false or misleading in any material respect; or
(d) Guarantor becomes insolvent or the subject of any Insolvency
Proceeding; or
(e) Guarantor dies, dissolves or liquidates, or any of these events
happens to any of Guarantor's general partners, its chief executive, its
majority shareholder, any of its managing members, or any member that owns a
majority interest in Guarantor; or
(f) Guarantor's managing general partner, any of its managing members
or its chief executive ceases for any reason to act in that capacity.
14. Reference and Arbitration.
-------------------------
(a) Judicial Reference. This subsection 14(a) applies at any time
------------------
when there is real property collateral securing the Loan or this Guaranty. In
any judicial action between or among the parties, including any action or cause
of action arising out of or relating to this Guaranty or the Loan Documents or
based on or arising from an alleged tort, all decisions of fact and law shall at
the request of any party be referred to a referee in accordance with California
Code of Civil Procedure Sections 638 et seq. The parties shall designate to the
-- ---
court a referee or referees selected under the auspices of the American
Arbitration Association ("AAA") in the same manner as arbitrators are selected
in AAA-sponsored proceedings. The presiding referee of the panel, or the
referee if there is a single referee, shall be an active attorney or retired
judge. Judgment upon the award rendered by such referee or referees shall be
entered in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 644 and 645.
(b) Mandatory Arbitration. If there is no real property collateral
---------------------
securing the Loan or this Guaranty, or after any deed of trust securing the Loan
or this Guaranty has been released, fully reconveyed or extinguished, any
controversy or claim between or among the parties, including those arising out
of or relating to this Guaranty or the Loan Documents and any claim based on or
arising from an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Guaranty, and under the Commercial Rules of the AAA. The
arbitrator(s) shall give effect to statutes of limitation in
6
<PAGE>
determining any claim. Any controversy concerning whether an issue is arbitrable
shall be determined by the arbitrator(s). Judgment upon the arbitration award
may be entered in any court having jurisdiction. The institution and maintenance
of an action for judicial relief or pursuit of a provisional or ancillary remedy
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(c) Real Property Collateral. Notwithstanding the provisions of
------------------------
subsection 14(b), no controversy or claim shall be submitted to arbitration
without the consent of all parties if, at the time of the proposed submission,
such controversy or claim arises from or relates to an obligation by Guarantor
or Borrower to Bank which is secured by real property collateral. If all
parties do not consent to submission of such a controversy or claim to
arbitration, the controversy or claim shall be determined by reference as
provided in subsection 14(a).
(d) Provisional Remedies, Self-Help and Foreclosure. No provision of
-----------------------------------------------
this Section 14 shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies
from a court of competent jurisdiction before, after, or during the pendency of
any arbitration or other proceeding. The exercise of a remedy does not waive
the right of either party to resort to arbitration or reference. At Bank's
option, foreclosure under a deed of trust or mortgage may be accomplished either
by exercise of power of sale under the deed of trust or mortgage or by judicial
foreclosure.
15. Authorization; No Violation. Guarantor is authorized to execute,
---------------------------
deliver and perform under this Guaranty, which is a valid and binding obligation
of Guarantor. No provision or obligation of Guarantor contained in this
Guaranty violates any applicable law, regulation or ordinance, or any order or
ruling of any court or governmental agency. No such provision or obligation
conflicts with, or constitutes a breach or default under, any agreement to which
Guarantor is a party. No consent, approval or authorization of or notice to any
person or entity is required in connection with Guarantor's execution of and
obligations under this Guaranty.
16. Additional and Independent Obligations. Guarantor's obligations under
--------------------------------------
this Guaranty are in addition to its obligations under any other existing or
future guaranties, each of which shall remain in full force and effect until it
is expressly modified or released in a writing signed by Bank. Guarantor's
obligations under this Guaranty are independent of those of Borrower on the
Loan. Bank may bring a separate action, or commence a separate reference or
arbitration proceeding against Guarantor without first proceeding against
Borrower, any other person or any security that Bank may hold, and without
pursuing any other remedy. Bank's rights under this Guaranty shall not be
exhausted by any action by Bank until the Loan has been paid and performed in
full.
17. No Waiver; Consents; Cumulative Remedies. Each waiver by Bank must be
----------------------------------------
in writing, and no waiver shall be construed as a continuing waiver. No waiver
shall be implied from Bank's delay in exercising or failure to exercise any
right or remedy against Borrower, Guarantor or any security. Consent by Bank to
any act or omission by Borrower or Guarantor shall not be construed as a consent
to any other or subsequent act or omission, or as a waiver of the requirement
for Bank's consent to be obtained in any future or other instance. All remedies
of Bank against Borrower and Guarantor are cumulative.
18. No Release. Guarantor shall not be released from its obligations
----------
under this Guaranty except by a writing signed by Bank.
19. Heirs, Successors and Assigns; Participations. The terms of this
---------------------------------------------
Guaranty shall bind and benefit the heirs, legal representatives, successors and
assigns of Bank
7
<PAGE>
and Guarantor; provided, however, that Guarantor may not assign this Guaranty,
or assign or delegate any of its rights or obligations under this Guaranty,
without the prior written consent of Bank in each instance. Bank in its sole
discretion may sell or assign participations or other interests in the Loan and
this Guaranty, in whole or in part, all without notice to or the consent of
Guarantor and without affecting Guarantor's obligations under this Guaranty.
Also without notice to or the consent of Guarantor, Bank may disclose any and
all information in its possession concerning Guarantor, this Guaranty and any
security for this Guaranty to any actual or prospective purchaser of any
securities issued or to be issued by Bank, and to any actual or prospective
purchaser or assignee of any participation or other interest in the Loan and
this Guaranty.
20. Notices. All notices given under this Guaranty must be in writing and
-------
shall be effectively served upon delivery, or if mailed, upon the first to occur
of receipt or the expiration of forty-eight hours after deposit in certified
United States mail, postage prepaid, sent to the party at its address given at
the end of this Guaranty. Those addresses may be changed by Bank or Guarantor
by written notice to the other party. Service of any notice on any one
Guarantor signing this Guaranty shall be effective service on Guarantor for all
purposes.
21. Rules of Construction. In this Guaranty, the word "Borrower" includes
---------------------
both the named Borrower and any other person who at any time assumes or
otherwise becomes primarily liable for all or any part of the obligations of the
named Borrower on the Loan. The word "person" includes any individual, company,
trust or other legal entity of any kind. If this Guaranty is executed by more
than one person, the word "Guarantor" includes all such persons. The word
"include(s)" means "include(s), without limitation," and the word "including"
means "including, but not limited to." When the context and construction so
require, all words used in the singular shall be deemed to have been used in the
plural and vice versa. No listing of specific instances, items or matters in
any way limits the scope or generality of any language of this Guaranty. All
headings appearing in this Guaranty are for convenience only and shall be
disregarded in construing this Guaranty.
22. Governing Law. This Guaranty shall be governed by, and construed in
-------------
accordance with, the laws of the State of California.
23. Costs and Expenses. If any lawsuit, reference or arbitration is
------------------
commenced which arises out of, or which relates to this Guaranty, the Loan
Documents or the Loan, the prevailing party shall be entitled to recover from
each other party such sums as the court, referee or arbitrator may adjudge to be
reasonable attorneys' fees (including allocated costs for services of in-house
counsel) in the action or proceeding, in addition to costs and expenses
otherwise allowed by law. In all other situations, including any Insolvency
Proceeding, Guarantor agrees to pay all of Bank's costs and expenses, including
attorneys' fees (including allocated costs for services of Bank's in-house
counsel) which may be incurred in any effort to collect or enforce the Loan or
any part of it or any term of this Guaranty. From the time(s) incurred until
paid in full to Bank, all sums shall bear interest at the Default Rate, as
defined in the Loan Documents.
24. Consideration. Guarantor acknowledges that it expects to benefit from
-------------
Bank's extension of the Loan to Borrower because of its relationship to
Borrower, and that it is executing this Guaranty in consideration of that
anticipated benefit.
25. Integration; Modifications. This Guaranty (a) integrates all the
--------------------------
terms and conditions mentioned in or incidental to this Guaranty, (b) supersedes
all oral negotiations and prior writings with respect to its subject matter, and
(c) is intended by Guarantor and Bank as the final expression of the agreement
with respect to the terms and conditions set forth in this Guaranty and as the
complete and exclusive statement of the terms agreed to by Guarantor and Bank.
No representation, understanding, promise or
8
<PAGE>
condition shall be enforceable against any party hereto unless it is contained
in this Guaranty. This Guaranty may not be modified except in a writing signed
by both Bank and Guarantor. No course of prior dealing, usage of trade, parol or
extrinsic evidence of any nature shall be used to supplement, modify or vary any
of the terms hereof.
26. Miscellaneous. The death or legal incapacity of any Guarantor shall
-------------
not terminate the obligations of such Guarantor or any other Guarantor under
this Guaranty, including its obligations with regard to future advances under
the Loan Documents. The liability of all persons who are in any manner
obligated under this Guaranty shall be joint and several. The illegality or
unenforceability of one or more provisions of this Guaranty shall not affect any
other provision. Any Guarantor who is married agrees that Bank may look to all
of his or her community property and separate property to satisfy his or her
obligations under this Guaranty. Time is of the essence in the performance of
this Guaranty by Guarantor.
27. Counsel. Guarantor acknowledges that Guarantor has had adequate
-------
opportunity to carefully read this Guaranty and to consult with an attorney of
Guarantor's choice prior to signing it.
28. Address Where Notices to Guarantor are to be Sent:
--------------------------------------------------
c/o BRE Properties, Inc.
One Montgomery Street, Suite 2500
Telesis Tower
San Francisco, California 94104
Attention: LeRoy E. Carlson
Phone: (415) 445-6530
Fax: (415) 445-6599
Address Where Notices to Bank are to be Sent:
---------------------------------------------
Bank of America National Trust and Savings Association
Commercial Real Estate Services/National Accounts 9105
50 California Street, 11/th/ Floor
San Francisco, California 94111
Attention: Laurence Hughes
Phone: (415) 445-4404
Fax: (415) 445-4154
Guarantor:
___________________________
By: ______________________
Its:
___________________________
By:
Its:
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