<PAGE> 1
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): DECEMBER 16, 1998
SUMMIT PROPERTIES PARTNERSHIP, L.P.
(Exact name of Registrant as specified in charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-22411 56-1857809
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS employer
of incorporation) identification no.)
</TABLE>
212 SOUTH TRYON STREET, SUITE 500, CHARLOTTE, NC 28281
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 334-9905
--------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Summit Properties Partnership, L.P., a Delaware limited
partnership (the "Partnership"), is the entity through which
Summit Properties Inc., a Maryland corporation (together with the
Partnership, "Summit Properties") conducts substantially all of
its business and owns (either directly or through subsidiaries)
substantially all of its assets. On December 16, 1998, Summit
Properties (i) sold five communities (the " Sold Communities") to
Hollow Creek, L.L.C., a newly-formed North Carolina limited
liability company, and (ii) contributed two communities (together
with the Sold Communities, the "Communities") to Station Hill,
L.L.C., a newly-formed North Carolina limited liability company
(the "LLC"), for a total sales price of approximately $90 million.
On the same date, Hollow Creek, L.L.C. contributed the Sold
Communities to the LLC. The LLC is a joint venture limited
liability company, the membership of which is comprised of Summit
Properties and a wholly owned subsidiary of a major financial
services company (the "Joint Venture Member"). The disposition was
effected pursuant to a Real Estate Sale Agreement dated November
20, 1998 between the Partnership and the Joint Venture Member and
pursuant to the Operating Agreement of the LLC, also dated
November 20, 1998. Proceeds from the sale will be used to pay down
Summit Properties' unsecured line of credit and fund its ongoing
development efforts.
Summit Properties' net cash contribution to the LLC (approximately
$5 million) represents a 25 percent equity interest in the LLC. In
addition, Summit Properties is the managing member of the LLC and
will also retain management of the Communities through a
management agreement with the LLC. The cash flow of the LLC will
be distributed pro rata to each member based on its equity
contribution until certain economic benchmarks are achieved, at
which point Summit Properties will receive an escalated portion of
the cash flow and residual interest. The LLC has obtained five
separate mortgages totaling $70,150,000 from Fannie Mae. These
mortgages have a ten-year maturity and a 6.70% interest rate.
The Communities involved in the transaction were Summit Green in
Charlotte, North Carolina, Summit Hollow I and II in Charlotte,
North Carolina, Summit Creek in Charlotte, North Carolina, Summit
Hill I and II in Raleigh, North Carolina and Summit Station in
Tampa, Florida. In total, these Communities include 1,433
apartment homes, translating into an average sales price of
approximately $63,000 per home.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements under Rule 3-14 of Regulation S-X
Not Applicable
(b) Pro Forma Financial Information
Summit Properties Partnership, L.P.
Pro Forma Condensed Combined Balance Sheet as of
September 30, 1998 (Unaudited)
Pro Forma Condensed Combined Statement of Earnings for
the Nine Months Ended September 30, 1998 (Unaudited)
Pro Forma Condensed Combined Statement of Earnings for
the Year Ended December 31, 1997 (Unaudited)
<PAGE> 3
(c) Exhibits:
<TABLE>
<S> <C>
2.1 Real Estate Sale Agreement dated November 20, 1998 Between
Summit Properties Partnership, L.P. and Hollow Creek, L.L.C.
Exhibits to this Agreement which have been omitted shall be
supplementally furnished to the Commission upon request.
(filed herewith).
10.1 Operating Agreement dated November 20, 1998 Between Summit
Properties Partnership, L.P., Hollow Creek, L.L.C. and Station
Hill L.L.C. Exhibits to this Agreement which have been omitted
shall be supplementally furnished to the Commission upon
request. (filed herewith).
</TABLE>
<PAGE> 4
SUMMIT PROPERTIES PARTNERSHIP, L.P.
BASIS OF PRESENTATION TO PROFORMA CONDENSED
COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
The Pro Forma Condensed Combined Balance Sheet gives effect to (i) the sale of
five communities to Hollow Creek LLC (which were concurrently contributed by
Hollow Creek LLC to Station Hill LLC) and concurrent contribution of two
communities to Station Hill LLC, in which the Operating Partnership maintains a
25% ownership interest (the "Joint Venture Disposition"), (ii) the acquisition
of a portfolio of multifamily properties in Texas (the "Ewing Acquisition")
through a merger with Ewing Industries Inc. and affiliates thereof ("Ewing
Industries") on November 4, 1998 and (iii) the sale of communities formerly
known as Summit Springs and Summit Old Town. The Ewing Acquisition was funded
through (i) the issuance to Ewing Industries of 489,622 shares of common stock
("Shares") of Summit Properties Inc. and 141,921 units of limited partnership
interest ("Units") of the Operating Partnership with the Shares and Units valued
at Summit Properties' approximate market value of $18.00 on the consummation
date, (ii) the assumption of $79.9 million of debt, and (iii) the payment of
$50.6 million in cash. In addition, Summit Properties has committed to issue
519,365 Shares as a deposit for a property currently in lease-up, with respect
to which payment of the final consideration is contingent upon the property
reaching stabilization (the "Contingent Property"). The current estimate of
additional consideration to be paid at such time is (i) 1,030,009 Shares of
common stock and 36,629 Units (each Share and Unit valued at $18.00) and (ii)
cash in the amount of $1,314,144. The Joint Venture Disposition, the Ewing
Acquisition, excluding the Contingent Property, and the sale of Summit Springs
and Summit Old Town have been presented as if the transactions had occurred on
September 30, 1998. The Pro Forma Condensed Combined Balance Sheet gives effect
to the Ewing Acquisition under the purchase method of accounting in accordance
with Accounting Principles Board Opinion No. 16. In the opinion of management,
all significant adjustments necessary to reflect the effects of the Joint
Venture Disposition and the Ewing Acquisition have been made.
The Pro Forma Condensed Combined Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual combined
financial position resulting from the Joint Venture Disposition, the Ewing
Acquisition and the Operating Partnership at September 30, 1998 would be, nor
does it purport to represent the future combined financial position of Ewing
Industries and the Operating Partnership. This Pro Forma Condensed Combined
Balance Sheet should be read in conjunction with, and is qualified in its
entirety by, the historical financial statements and notes thereto of the
Operating Partnership as included in the Form 10-K for the year ended December
31, 1997 and the Operating Partnership's Form 10-Q for the nine months ended
September 30, 1998.
<PAGE> 5
SUMMIT PROPERTIES PARTNERSHIP, L.P.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
BALANCE
BEFORE
OTHER EWING JOINT VENTURE JOINT VENTURE PRO FORMA
HISTORICAL DISPOSITIONS ACQUISITION DISPOSITION DISPOSITION COMBINED
---------- ------------ ----------- ------------- ----------- --------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Real estate assets, net $964,476 $ (15,904) $147,692 $ 1,096,264 $ (63,078) $1,033,186
Cash 4,823 -- -- 4,823 12,736 17,559
Restricted cash 7,702 24,046 -- 31,748 67,718 99,466
Other assets 12,999 (15) 1,713 14,697 (71) 14,626
-------- --------- -------- ----------- --------- ----------
Total assets $990,000 $ 8,127 $149,405 $ 1,147,532 $ 17,305 $1,164,837
======== ========= ======== =========== ========= ==========
Liabilities:
Notes payable $601,872 $133,303 $735,175 $ (2,549) $ 732,626
Other liabilities 41,005 $ (282) 4,734 45,457 (1,143) 44,314
-------- --------- -------- ----------- --------- ----------
Total liabilities 642,877 (282) 138,037 780,632 (3,692) 776,940
Partners' equity 347,123 8,409 11,368 366,900 20,997 387,897
-------- --------- -------- ----------- --------- ----------
Total liabilities and
partners' equity $990,000 $ 8,127 $149,405 $ 1,147,532 $ 17,305 $1,164,837
======== ========= ======== =========== ========= ==========
</TABLE>
<PAGE> 6
SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO PRO FORMA CONDENSED COMBINED
BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Consolidated Balance
Sheet as of September 30, 1998.
B. Reflects the sale of Summit Springs and Summit Old Town on October 23,
1998 and November 12, 1998 respectively. The sales are summarized as
follows:
<TABLE>
<S> <C>
Net sales proceeds after disposition costs $ 24,046
Net book value of assets sold (15,904)
Cost of other assets sold (15)
Liabilities assumed by buyer 282
--------
Gain on sale $ 8,409
========
</TABLE>
Proceeds were put in escrow in accordance with Internal Revenue Service
like-kind exchange rules. Accordingly, proceeds are classified as
restricted cash.
C. Reflects the Ewing Acquisition which occurred on November 4, 1998. The
purchase is summarized as follows:
<TABLE>
<S> <C> <C>
Loan escrow acquired $ 1,713
Mortgage notes payable assumed $(79,852)
Borrowings on the Operating Partnership's unsecured credit facility (50,575)
Adjustment to mortgage notes assumed to reflect estimated fair value (2,876) (133,303)
--------
Other net liabilities assumed (4,734)
Issuance of Units to Summit Properties Inc. for issuance of
similar number of Shares to seller (489,622) (8,768)
Issuance of Units to seller (141,921) (2,600)
---------
Purchase price including acquisition costs $(147,692)
=========
</TABLE>
D. Reflects the Joint Venture Disposition. The sale of five communities
and the concurrent contribution of an additional two communities into
a new entity, in which the Operating Partnership has a 25% ownership
interest, is summarized below:
<TABLE>
<CAPTION>
Sale of Assets
--------------
<S> <C>
Net sales proceeds after disposition costs $ 88,625
Net book value of assets sold (63,078)
Cost of other assets sold (356)
Liabilities assumed by buyer 1,143
--------
Gross gain on sale 26,334
Operating Partnership's retained interest (25%) (6,584)
Cash received in excess of remaining basis 1,247
--------
Gain on sale $ 20,997
========
</TABLE>
<TABLE>
<CAPTION>
Investment Restricted
Formation of Joint Venture in JV Cash Cash
-------------------------- --------- -------- ----------
<S> <C> <C> <C>
Investment in joint venture $ 5,337 $ (5,337)
Operating Partnership's retained interest (25%) (6,584) --
Cash received in excess of remaining basis 1,247
Proceeds -- 20,622 $68,003
Restricted cash transferred to joint venture (285)
Payoff of mortgage in conjunction with sale -- (2,549) --
-------- -------- -------
$ -- $ 12,736 $67,718
======== ======== =======
</TABLE>
<PAGE> 7
SUMMIT PROPERTIES PARTNERSHIP, L.P.
BASIS OF PRESENTATION TO PRO FORMA CONDENSED
COMBINED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
The Pro Forma Condensed Combined Statements of Earnings for the nine months
ended September 30, 1998 and the year ended December 31, 1997 are presented as
if the following transactions had occurred on January 1, 1997:
(i) The sale of five communities to Hollow Creek LLC (which were
concurrently contributed by Hollow Creek LLC to Station Hill LLC) and
the concurrent contribution of two communities to Station Hill LLC, in
which the Operating Partnership maintains a 25% ownership interest
(the "Joint Venture Disposition").
(ii) The acquisition of Ewing Industries, as further described in the Basis
of Presentation to the Pro Forma Combined Condensed Balance Sheet.
Adjustments related to the Contingent Property are not included in the
pro forma statements as it was in construction in 1997 and a portion of
1998 and its operations are not material to the Pro Forma Condensed
Combined Statements of Earnings. In addition, the Operating Partnership
has a cash flow management contract with a surviving affiliate of Ewing
Industries to manage such property until the property reaches
stabilization. In consideration for managing the property, such
affiliates retain all net cash flows for the property. Certain of the
properties acquired in the Ewing Acquisition were in lease up in 1998
and/or 1997. The operations of such lease-up properties are not
reflective of fully stabilized properties.
(iii) The sale of Summit Old Town, Summit Springs, Summit Providence and
Summit Charleston on November 12, 1998, October 23, 1998, May 18, 1998
and May 14, 1997, respectively.
(iv) The purchase of Summit Lenox on July 8, 1998. The purchase of Summit
Club at Dunwoody and Summit St. Clair on May 22, 1998 and March 1,
1998, respectively, are shown as if they were acquired on January 1,
1998. These two properties were under construction during 1997 and
would not have had a material effect on 1997 operations.
(v) The purchase of Summit Fair Oaks, Summit Windsor II, Summit Sand Lake
and Summit Portofino ("1997 Acquisitions") on December 31, 1997, July
18, 1997, February 20, 1997 and January 6, 1997, respectively.
The Pro Forma Condensed Combined Statements of Earnings give effect to the
Ewing Acquisitions under the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of these transactions
have been made.
The Pro Forma Condensed Combined Statements of Earnings are presented for
comparative purposes only and are not necessarily indicative of what the actual
combined results of the above transactions and the Operating Partnership for the
nine months ended September 30, 1998, and the year ended December 31, 1997 would
be, nor do they purport to be indicative of the results of operations in future
periods. The Pro Forma Condensed Combined Statements of Earnings should be read
in conjunction with, and are qualified in their entirety by, the historical
financial statements and notes thereto of the Operating Partnership as included
in the Form 10-K for the year ended December 31, 1997 and the Operating
Partnership's Form 10-Q for the nine months ended September 30, 1998.
<PAGE> 8
SUMMIT PROPERTIES PARTNERSHIP, L.P.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
BALANCE
BEFORE
JOINT JOINT
OTHER OTHER EWING VENTURE VENTURE PRO FORMA
HISTORICAL ACQUISITIONS DISPOSITIONS ACQUISITION DISPOSITION DISPOSITION CONSOLIDATED
---------- ------------ ------------ ----------- ----------- ----------- ------------
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental $ 99,047 $4,006 ($3,974) $ 12,399 $111,478 ($8,475) $ 103,003
Other property income 5,733 162 (221) 590 6,264 (399) 5,865
Interest and other 1,286 -- -- -- 1,286 -- 1,286
----------- ------ ------- -------- -------- ------- -----------
Total revenues 106,066 4,168 (4,195) 12,989 119,028 (8,874) 110,154
----------- ------ ------- -------- -------- ------- -----------
Expenses:
Property operating and maintenance 26,948 1,485 (1,283) 3,345 30,495 (2,434) 28,061
Real estate taxes and insurance 10,251 316 (392) 2,227 12,402 (798) 11,604
Depreciation 20,774 885 (696) 3,068 24,031 (1,869) 22,162
Interest 23,351 2,178 (1,878) 7,166 30,817 (4,289)(F) 26,528
General and administrative expenses 2,726 -- -- -- 2,726 -- 2,726
Loss on equity investments 95 -- -- -- 95 27 (G) 122
----------- ------ ------- -------- -------- ------- -----------
Total expenses 84,145 4,864 (4,249) 15,806 100,566 (9,363) 91,203
----------- ------ ------- -------- -------- ------- -----------
Income before gain on real estate
assets and extraordinary item 21,921 (696) 54 (2,817) 18,462 489 18,951
Gain on sale of real estate assets 8,731 -- (8,731) -- -- -- --
----------- ------ ------- -------- -------- ------- -----------
Income before extraordinary item $ 30,652 ($696) ($8,677) ($2,817) $ 18,462 $ 489 $ 18,951
=========== ====== ======= ======== ======== ======= ===========
Per unit data:
Income before extraordinary
items -basic and diluted (H) $ 1.06 $ 0.64
=========== ===========
Weighted average units - basic 28,808,330 29,543,050
=========== ===========
Weighted average units - diluted 28,825,095 29,559,815
=========== ===========
</TABLE>
<PAGE> 9
SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Consolidated Statement of
Earnings for the nine months ended September 30, 1998.
B. Reflects the operations of Summit St. Clair acquired effective March 1,
1998, Summit Club at Dunwoody acquired May 22, 1998 and Summit Lenox
acquired July 8, 1998, from January 1, 1998 to date of acquisition.
C. Reflects the operations of Summit Providence sold on May 18, 1998 from
January 1, 1998 to date of sale. Reflects Summit Springs and Summit Old
Town sold on October 23, 1998 and on November 12, 1998, respectively, from
January 1, 1998 to September 30, 1998. In addition, the gain on sale of
real estate assets has been eliminated for pro forma presentation.
D. Reflects the operations of the communities acquired in the Ewing
Acquisition for the nine months ended September 30, 1998. Pro forma
effects of the Contingent Property have not been included in the Pro Forma
Condensed Combined Statement of Earnings as such property was substantially
under construction for the period presented and, therefore, its effect on
pro forma earnings is not significant.
E. Reflects the operations for the nine months ended September 30, 1998 of the
Joint Venture Disposition properties. Does not include the gain on sale of
real estate assets related to the Joint Venture Disposition.
F. Reflects the saving in interest costs of $4.1 million from using the net
proceeds of the sale to reduce the Operating Partnership's credit facility
outstanding balance at the weighted average interest rate for the nine
months ended September 30, 1998 of 6.73%. In addition, reflects savings in
interest expense of mortgage notes that did not transfer to the joint
venture of $195,000.
G. Reflects the Operating Partnership's equity loss in the joint venture for
the nine months ended September 30, 1998. The joint venture operations
include depreciation calculated based upon the joint ventures basis in the
assets. In addition, the mortgage note issued by the joint venture is
assumed to be outstanding for the nine months ended September 30, 1998 at
an interest rate of 6.70%.
H. Based upon 29,543,050 and 29,559,815 basic and diluted weighted average
Units issued and outstanding, respectively.
<PAGE> 10
SUMMIT PROPERTIES PARTNERSHIP, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION> BALANCE
BEFORE
JOINT JOINT
OTHER OTHER EWING VENTURE VENTURE PRO FORMA
HISTORICAL ACQUISITIONS DISPOSITIONS ACQUISITION DISPOSITION DISPOSITION CONSOLIDATED
---------- ------------ ------------ ----------- ----------- ----------- ------------
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental $ 109,827 $ 8,517 $(7,084) $ 14,322 $125,582 $(11,122) $ 114,460
Other property income 6,179 364 (409) 690 6,824 (438) 6,386
Interest and other 671 -- -- -- 671 -- 671
----------- ------- ------- -------- -------- -------- -----------
Total revenues 116,677 8,881 (7,493) 15,012 133,077 (11,560) 121,517
----------- ------- ------- -------- -------- -------- -----------
Expenses:
Property operating and maintenance 31,311 3,160 (2,282) 4,058 36,247 (3,133) 33,114
Real estate taxes and insurance 10,721 755 (758) 2,590 13,308 (874) 12,434
Depreciation 22,652 1,934 (1,404) 3,504 26,686 (2,437) 24,249
Interest 21,959 4,560 (3,725) 8,234 31,028 (5,820)(F) 25,208
General and administrative expenses 2,740 -- -- -- 2,740 -- 2,740
(Income) loss on equity investments (274) -- -- -- (274) 26 (G) (248)
----------- ------- ------- -------- -------- -------- -----------
Total expenses 89,109 10,409 (8,169) 18,386 109,735 (12,238) 97,497
----------- ------- ------- -------- -------- -------- -----------
Income before gain on real estate
assets and extraordinary item 27,568 (1,528) 676 (3,374) 23,342 678 24,020
Gain on sale of real estate assets 4,366 -- (4,366) -- -- -- --
----------- ------- ------- -------- -------- -------- -----------
Net income $ 31,934 $(1,528) $(3,690) $(3,374) $ 23,342 $ 678 $ 24,020
=========== ======= ======= ======== ======== ======== ===========
Per unit data:
Net income - basic and diluted (H) $ 1.17 $ 0.86
=========== ===========
Weighted average units - basic 27,257,637 $27,956,153
=========== ===========
Weighted average units - diluted 27,294,058 27,992,574
=========== ===========
</TABLE>
<PAGE> 11
SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Consolidated Statement of
Earnings for the year ended December 31, 1997.
B. Reflects the operations of the 1997 Acquisitions from January 1, 1997 to
date of acquisition. In addition, reflects the operations of Summit Lenox,
acquired July 8, 1998 for the year ended December 31, 1997. Does not
reflect the operations of Summit St. Clair and Summit Club at Dunwoody
acquired in 1998 as the properties were in construction in 1997 and their
operations for the year ended December 31, 1997 were not significant.
C. Reflects the operations for the year ended December 31, 1997 of Summit
Providence sold on May 18, 1998, Summit Springs sold on October 23, 1998
and Summit Old Town sold on November 12, 1998. Also reflects the
operations of Summit Charleston from January 1, 1997 to date of sale on May
14, 1997. In addition, the gain on sale of real estate assets has been
eliminated from the pro forma presentation.
D. Reflects the operations of the communities acquired in the Ewing
Acquisition for the year ended December 31, 1997. Pro forma affects of the
Contingent Property have not been included in the Pro Forma Condensed
Combined Statement of Earnings as such property was substantially under
construction for the period presented and, therefore, its effect on pro
forma earnings is not significant.
E. Reflects the operations for the nine months ended September 30, 1998 of the
Join Venture Disposition properties. Does not include the gain on sale of
real estate assets related to the Joint Venture Disposition.
F. Reflects the saving in interest costs of $5.4 million from using the net
proceeds of the sale to reduce the Operating Partnership's credit facility
outstanding balance at the weighted average interest rate for the year ended
December 31, 1997 of 6.73%. In addition, reflects savings in interest
expense on mortgage loans that did not transfer to the joint venture of
$386,000.
G. Reflects the Operating Partnership's equity loss in the joint venture for
the year ended December 31, 1997. The joint venture operations include
depreciation calculated based upon the joint ventures basis in the assets.
In addition, the mortgage note issued by the joint venture is assumed to be
outstanding for the year ended December 31, 1997 at an interest rate of
6.70%.
H. Based upon 27,956,153 and 27,992,574 basic and diluted weighted average
Units issued and outstanding, respectively.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following person in the capacity and on the date
indicated. The person set forth below has signed this report as an officer of
Summit Properties Inc., in its capacity as general partner of Summit Properties
Partnership, L.P.
SUMMIT PROPERTIES PARTNERSHIP, L.P.
By: Summit Properties Inc., its General Partner
Date: December 18, 1998 BY: /s/ William F. Paulsen
---------------------------------------------
William F. Paulsen
Chief Executive Officer
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<S> <C>
2.1 Real Estate Sale Agreement dated November 20, 1998 Between Summit
Properties Partnership, L.P. and Hollow Creek, L.L.C. (filed herewith).
10.1 Operating Agreement dated November 20, 1998 Between Summit Properties
Partnership, L.P., Hollow Creek, L.L.C. and Station Hill L.L.C. (filed
herewith).
</TABLE>
<PAGE> 1
EXHIBIT 2.1
REAL ESTATE SALE AGREEMENT
BETWEEN
SUMMIT PROPERTIES PARTNERSHIP, L.P., A DELAWARE LIMITED
PARTNERSHIP,
AND
HOLLOW CREEK, L.L.C.
A NORTH CAROLINA LIMITED LIABILITY COMPANY,
FOR
SUMMIT GREEN APARTMENTS
CHARLOTTE, NORTH CAROLINA
SUMMIT HOLLOW APARTMENTS - PHASE I
CHARLOTTE, NORTH CAROLINA
SUMMIT CREEK APARTMENTS
CHARLOTTE, NORTH CAROLINA
SUMMIT STATION APARTMENTS
TAMPA, FLORIDA
SUMMIT HILL APARTMENTS - PHASE I
DURHAM COUNTY, NORTH CAROLINA
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purchase and Sale.....................................................1
2. Purchase Price; Earnest Money.........................................3
3. Closing...............................................................3
4. Conditions to Closing.................................................6
5. Evidence of Title and Survey..........................................7
6. Seller's Representations and Warranties...............................8
7. Purchaser's Representations and Warranties...........................12
8. Seller's Covenants...................................................12
9. Prorations...........................................................13
10. Transfer Taxes; Title Charges........................................15
11. Risk of Loss.........................................................15
12. Condemnation.........................................................15
13. Default..............................................................16
14. Notice...............................................................17
15. Time of Essence......................................................18
16. Purchaser's Termination of Agreement.................................18
17. Governing Law........................................................18
18. Counterparts.........................................................18
19. Captions.............................................................18
20. Assignment...........................................................19
21. Binding Effect.......................................................19
22. Modifications; Waiver................................................19
23. Entire Agreement.....................................................19
24. Partial Invalidity...................................................19
25. Allocation of Purchase Price.........................................19
26. Broker...............................................................19
27. Confidentiality......................................................20
28. Recording............................................................20
29. Hart-Scott-Rodino Filing.............................................20
30. Termination of Contracts.............................................20
31. Counterparts.........................................................21
</TABLE>
i
<PAGE> 3
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT REFERENCE CONTENT
- ----------------- -------
<S> <C>
EXHIBIT "A" Legal Description
EXHIBIT "B" Inventory of Personal Property
EXHIBIT "C" Rent Rolls
EXHIBIT "D" Service Contracts
EXHIBIT "E" Assignment and Assumption of Intangible Property and Other
Rights
EXHIBIT "F" Escrow Trust Instructions
EXHIBIT "G" Permitted Encumbrances
EXHIBIT "H" Warranty Bill of Sale
EXHIBIT "I" Assignment and Assumption of Leases and Security Earnest Moneys
EXHIBIT "J" Seller's Disclosure Documentation
EXHIBIT "K" Form of Property Management Agreement
EXHIBIT "L" Schedule of Current Insurance
</TABLE>
ii
<PAGE> 4
REAL ESTATE SALE AGREEMENT
THIS AGREEMENT is entered into as of this 20th day of November, 1998,
between SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware limited partnership
("SELLER"), and HOLLOW CREEK, L.L.C., a North Carolina limited liability company
("PURCHASER").
1. PURCHASE AND SALE. In consideration of their mutual covenants
set forth in this Agreement, Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase from Seller, for the Purchase Price (as hereinafter defined)
and on the terms and conditions set forth herein, the following:
(a) All of the five (5) parcels of land described on EXHIBIT "A"
attached hereto and made a part hereof, including but not limited to the
apartment complexes commonly known individually as (i) "Summit Green Apartments"
in Charlotte, North Carolina, containing 300 apartment units, on-site parking
spaces, an office/clubhouse, tennis courts, a swimming pool and related
facilities ("SUMMIT GREEN APARTMENTS"); (ii) "Summit Hollow Apartments - Phase
I" in Charlotte, North Carolina, containing 232 apartment units, on-site parking
spaces, an office/clubhouse, tennis courts, a swimming pool and related
facilities ("SUMMIT HOLLOW APARTMENTS"); (iii) "Summit Creek Apartments" in
Charlotte, North Carolina, containing 260 apartment units, on-site parking
spaces, an office/clubhouse, tennis courts, a swimming pool and related
facilities ("SUMMIT CREEK APARTMENTS"); (iv) "Summit Station Apartments" in
Tampa, Florida, containing 230 apartment units, on-site parking spaces, an
office/clubhouse, tennis courts, a swimming pool and related facilities ("SUMMIT
STATION APARTMENTS"); and (v) "Summit Hill Apartments - Phase I" in Durham
County, North Carolina, containing 411 apartment units, on-site parking spaces,
an office/clubhouse, tennis courts, a swimming pool and related facilities
("SUMMIT HILL APARTMENTS"); together with all right, title and interest of
Seller in and to all open or proposed highways, streets, roads, avenues, alleys,
easements, strips, gores and rights-of-way in, on, across, in front of,
contiguous to, abutting or adjoining the land (Summit Green Apartments, Summit
Hollow Apartments, Summit Creek Apartments, Summit Station Apartments, and
Summit Hill Apartments are hereinafter referred to individually as a "COMPLEX"
and collectively as the "REAL ESTATE").
(b) All structures, buildings, and improvements located on the
Real Estate ("IMPROVEMENTS").
(c) All furniture, fixtures, equipment, appliances and other items
of personal property owned by Seller located on or in the Real Estate or
Improvements and used in connection with the operation and maintenance of the
Real Estate or Improvements including by way of example and not by way of
limitation, carpeting, light fixtures, heating and air conditioning units and
equipment, water heaters and equipment, shrubbery, office equipment and
maintenance equipment, and including, but not limited to, the property described
in the inventory attached hereto as EXHIBIT "B" ("PERSONAL PROPERTY").
(d) Seller's interest in all leases, licenses and other agreements
with respect to equipment and other personal property used by Seller in
connection with the operation of the Premises ("EQUIPMENT LEASES"), provided
that such Equipment Leases are assignable by Seller
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without the consent of any other party thereto and without the payment by Seller
of any fees, costs or expenses.
(e) Seller's interest in all leases, licenses, and other
agreements to occupy the Real Estate and/or the Improvements, or any portion
thereof, as amended from time to time, in effect on the Closing Date (as
hereinafter defined) (all such leases, licenses and other agreements being
sometimes collectively referred to herein as "LEASES"), including, but not
limited to, the leases listed on EXHIBIT "C" attached hereto, as well as all
security, pet and other deposits, if any, made by tenants under the Leases.
(f) All intangible property owned by Seller and used in connection
with the Real Estate, Improvements and Personal Property, but without any
warranty as to Seller's rights to use or transfer ownership therein and only to
the extent assignable without the consent of any other party and without the
payment by Seller of any fees, costs or expenses, including all trademarks and
trade names used in connection with any part of the Real Estate and Improvements
specifically including the names "Summit Green Apartments", "Summit Hollow
Apartments", "Summit Creek Apartments", "Summit Station Apartments", and "Summit
Hill Apartments", and all plans and specifications, if any, in the possession of
Seller or Seller's property manager, Summit Management Company ("PROPERTY
MANAGER"), which were prepared in connection with the construction of any of the
Improvements, all hereditaments, privileges, tenements and appurtenances
belonging to the Real Estate, all operating manuals, licenses, permits and
warranties now in effect with respect to the Real Estate, Improvements and
Personal Property, all written contracts listed on EXHIBIT "D" attached hereto
and made a part hereof ("SERVICE CONTRACTS") in effect at Closing (as
hereinafter defined) and which are not terminated as hereinafter provided, in
any way relating to the Premises (as hereinafter defined), which will survive
the Closing ("INTANGIBLE PROPERTY"), all of which shall be transferred to
Purchaser pursuant to an assignment in the form attached hereto as EXHIBIT "E"
("ASSIGNMENT AND ASSUMPTION OF INTANGIBLE PROPERTY AND OTHER RIGHTS").
The Real Estate, Improvements, Personal Property, Equipment Leases,
Leases and Intangible Property are sometimes collectively referred to herein as
"PREMISES".
Within five (5) business days after the Effective Date, Seller shall
deliver to Purchaser (i) the plans and specifications, if any, in the possession
of Seller or Property Manager, for the improvements in all of the Complex; (ii)
copies of all leases shown on EXHIBIT "C"; provided, however, that in lieu of
delivering copies of such Leases, Seller may elect to make the originals
available on site at each Complex for review and copy, at Seller's expense, by
Purchaser and provided further, that in the event an original lease cannot be
located by Seller, it may substitute a copy thereof certified by Seller to be
true, correct and complete in all respects; (iii) copies of certificates of
occupancy for each building within each Complex in the possession of Seller or
Property Manager; and (iv) copies of all title insurance policies and surveys in
Seller's possession.
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2. PURCHASE PRICE; EARNEST MONEY. The purchase price for the
Premises shall be SIXTY-EIGHT MILLION SIX HUNDRED TWENTY-FIVE THOUSAND AND
NO/100 DOLLARS ($68,625,000) ("PURCHASE PRICE"). The Purchase Price shall be
payable as follows:
(a) FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000) ("EARNEST
MONEY") shall be tendered to Seller as earnest money in the form of Purchaser's
cashier's check or certified check made payable jointly to Seller and the Title
Company (as hereinafter defined) or wire transfer to Title Company's escrow
account, within three (3) business days after the date of complete execution of
this Agreement by Seller and Purchaser ("EFFECTIVE DATE"). Unless otherwise
provided by this Agreement, the Earnest Money shall be applied to the Purchase
Price at Closing. Upon execution of this Agreement by Seller, the Earnest Money
shall be deposited with and held by Title Insurance Company of North Carolina,
Inc. at its offices located at 521 East Morehead Street, Suite 140, Charlotte,
North Carolina ("TITLE COMPANY") in accordance with Escrow Instructions
substantially in the form attached hereto as EXHIBIT "F" with such changes as
may be necessary to conform to the particulars of this Agreement, executed by
counsel for Seller and Purchaser ("ESCROW INSTRUCTIONS"). Except in the event of
termination of or failure to close this transaction by reason of Purchaser's
default, any interest earned on the Earnest Money shall belong to Purchaser and
may, at Purchaser's option, be applied to the Purchase Price at Closing. Except
in the event of the failure to close this transaction by reason of a default of
Seller or unless Purchaser is otherwise expressly entitled to the return of all
or a portion of the Earnest Money in accordance with the provisions of this
Agreement, in which case all or any such portion of the Earnest Money shall be
returned to Purchaser in accordance with the applicable terms hereof, the
Earnest Money shall be nonrefundable and shall be paid to Seller as set forth
herein.
(b) Not later than 10:00 a.m., EST, on the Closing Date (as
hereinafter defined), Purchaser shall deposit with the Title Company, in
immediately available funds, the sum necessary, along with the Earnest Money, to
make the total consideration paid to Seller at Closing equal to the Purchase
Price, plus or minus prorations as hereinafter provided.
3. CLOSING.
(a) The consummation of the purchase and sale of the Premises
("CLOSING") shall take place at the offices of Robinson, Bradshaw & Hinson, P.A.
in Charlotte, North Carolina, on a date mutually agreed upon by the parties, but
not later than December 31, 1998, unless such date is extended as expressly
provided in this Agreement or by written agreement of the parties. The date on
which the Closing occurs shall be the date referred to in this Agreement as the
"CLOSING DATE".
(b) The Purchase Price shall be paid and all documents necessary
for the consummation of this transaction shall be executed and delivered on the
Closing Date, and Seller shall deliver possession of the Premises to Purchaser
on the Closing Date.
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(c) At or prior to Closing, Seller shall execute, where necessary,
and deliver to Purchaser the following documents:
(1) Special Warranty Deeds (with respect to the Real
Estate located in the State of North Carolina, on the most current
North Carolina Bar Association form) in recordable form properly
executed on behalf of Seller, conveying to Purchaser the Real Estate
and Improvements in good and marketable fee simple title, free and
clear of all liens, charges and encumbrances, subject only to the lien
of ad valorem property taxes to be pro rated at Closing as provided
below, the title exceptions set forth on EXHIBIT "G" attached hereto
and incorporated herein by reference, and such other matters as may be
accepted by Buyer in writing (the "PERMITTED ENCUMBRANCES");
(2) A Warranty Bill of Sale in the form attached hereto
as EXHIBIT "H" executed by Seller, conveying to Purchaser the Personal
Property free and clear of all liens, charges and encumbrances except
the Permitted Encumbrances;
(3) A duly executed and acknowledged Assignment and
Assumption of Leases and Security Earnest Moneys assigning and
conveying to Purchaser the landlord's interest in, to and under the
Leases, and providing that Seller shall indemnify Purchaser against any
and all leasing commissions and similar compensation, claims, actions,
charges, expenses (including, without limitation, attorneys' fees and
court costs) and liabilities relating to the leases and arising prior
to the Closing Date, and containing an assumption by Purchaser of
Seller's obligations under the Leases accruing from and after the
Closing Date (including any obligations relating to security deposits),
all in the form attached hereto as EXHIBIT "I";
(4) Executed written notices of the sale, in form and
substance approved by Purchaser, addressed and directed to each tenant
of a Complex, giving each tenant notice of this sale and directing each
tenant to pay all rent due under the terms of its tenancy to such
person and at such place as Purchaser shall direct.
(5) Originals of all Leases listed on EXHIBIT "C";
provided, however, that in lieu of delivering the originals of such
Leases at Closing, Seller may elect to make the originals available on
site at each Complex and provided further, that in the event an
original lease cannot be located by Seller, it may substitute a copy
thereof certified by Seller to be true, correct and complete in all
respects. If any changes are made in the leases described on EXHIBIT
"C" between the Effective Date and the Closing Date, Seller shall
deliver to Purchaser a certified and updated rent roll on the Closing
Date, which shall be substituted as EXHIBIT "C". The security and pet
deposits, if any, listed on EXHIBIT "C" shall be sufficient to cover
the landlord's liability therefor under the leases assigned. Seller
shall indemnify, hold harmless and defend Purchaser against any damages
Purchaser may suffer as a result of any inaccuracy in the amount of
security and pet deposits as reflected in EXHIBIT "C", as amended at
closing. Purchaser shall receive a check at closing in the amount of
the security and pet deposits listed on EXHIBIT "C", as amended at
closing.
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(6) An affidavit sworn by an officer of Seller to the
effect that Seller is not a "foreign person" as that term is defined in
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended,
which affidavit shall be in such form as may be prescribed by federal
regulations;
(7) A duly executed and acknowledged Assignment and
Assumption of Intangible Property and Other Rights in the form attached
hereto as EXHIBIT "E" assigning and conveying to Purchaser the
Intangible Property and providing that Seller shall indemnify Purchaser
against any claims, actions, charges, expenses (including, without
limitation, attorneys' fees and court costs) and liabilities relating
to the Intangible Property and arising prior to the Closing Date
containing an assumption by Purchaser of Seller's obligations arising
out of Seller's ownership of the Intangible Property from and after the
Closing Date;
(8) Seller's Disclosure Documentation set forth on
EXHIBIT "J" attached hereto ("SELLER'S DISCLOSURE DOCUMENTATION");
(9) Counterparts of a closing statement;
(10) All documents and instruments reasonably required by
the Title Company to issue a title policy or policies on the Real
Estate and Improvements in accordance with SECTION 5 of this Agreement;
(11) An affidavit indicating that, as of the Closing Date,
there are no outstanding unsatisfied judgments, tax liens which would
constitute a lien against any of the Premises or bankruptcies against
Seller; and that there are no other unrecorded interests in the Real
Estate of any kind other than the leases listed on EXHIBIT "C".
(12) An affidavit to the title insurance company
sufficient for Purchaser to obtain title insurance without exception
for mechanic's or materialmen's liens.
(13) All other documents affecting title to and possession
of the Premises and necessary to transfer or assign the same to
Purchaser, free and clear of all liens, charges and encumbrances except
the Permitted Encumbrances.
(14) An opinion by counsel for Seller in form and
substance satisfactory to Purchaser that all of the above-described
instruments have been duly and validly authorized, executed and
delivered by Seller and its duly authorized officers, members, managers
or partners.
(15) A statement certifying that all of the
representations and warranties contained in SECTION 6 of this Agreement
are true and correct as of the Closing Date, which statement shall
survive closing.
(16) A termite inspection report prepared at the sole cost
and expense of Seller by an inspector reasonably acceptable to
Purchaser certifying that all buildings in the Complex are free from
termite or other wood-destroying organism damage or infestation as of
the Closing Date.
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(d) At or prior to Closing, Purchaser shall execute, where
necessary, and deliver to Seller the following documents:
(1) An Assignment and Assumption Agreement, pursuant to
which Purchaser shall assume the obligations of Seller under the leases
and tenancies listed on EXHIBIT "C" from and after the Closing Date and
shall indemnify Seller against any and all leasing commissions and
similar compensation, claims, actions, charges, expenses (including,
without limitation, attorney's fees and court costs) and liabilities
relating to the leases or the security or pet deposits assigned by
Seller to Purchaser, and arising in connection with acts or omissions
occurring after the Closing Date.
(2) An Assignment and Assumption Agreement, pursuant to
which Purchaser shall assume the obligations of Seller under the
service and other contracts set forth on EXHIBIT "D" that are being
assumed by Purchaser, and shall indemnify Seller against any and all
claims, actions, charges, expenses (including, without limitation,
attorney's fees and court costs) and liabilities relating to the
contracts arising in connection with acts or omissions occurring after
the Closing Date.
(3) The Property Management Agreement whereby Purchaser
hires the Property Manager to be the Property Manager for the Premises,
such Property Management Agreement to be in the form and upon the terms
attached hereto as "EXHIBIT K".
4. CONDITIONS TO CLOSING. In addition to all other conditions to
the completion of the transaction described in this Agreement, Seller and
Purchaser agree that the Closing is subject to satisfaction, approval or waiver
by Purchaser of the following conditions:
(a) On or before 5:00 p.m., EST, on November 15, 1998 ("DUE
DILIGENCE PERIOD"), inspection and approval of Seller's Disclosure
Documentation, which shall be or has been made available by Seller to Purchaser.
Purchaser acknowledges that the information supplied to or made available to
Purchaser by Seller as provided in this SECTION 4(a) shall not be released or
disclosed to any other parties unless and until this transaction has closed
without the prior written consent of Seller. Seller shall not withhold its
consent to disclosure of such information to Purchaser's attorney identified in
SECTION 14 of this Agreement, provided such attorney agrees in writing to keep
such information confidential. In the event that this transaction is not closed
for any reason, then Purchaser shall refrain, and shall cause its agents,
representatives and accountants to refrain, from disclosing all such information
to any other party.
If any of the conditions set forth in this SECTION 4(A) are not
satisfied or waived in writing by Purchaser before the expiration of the Due
Diligence Period, Purchaser shall notify Seller and the Title Company in writing
of the termination of this Agreement ("PURCHASER'S TERMINATION NOTICE") prior to
the expiration of the Due Diligence Period. Upon receipt of Purchaser's
Termination Notice, the Earnest Money shall be immediately returned to Purchaser
by the Title Company, both Seller and Purchaser shall be released and discharged
from all further obligations under this Agreement, and neither Seller nor
Purchaser shall be subject to any claim by the other for damages of any kind. If
Purchaser's Termination Notice has not been served upon Seller and Title Company
prior to the expiration of the Due Diligence Period, all conditions in this
SECTION
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4(a) shall be deemed to have been satisfied or waived and Purchaser's
obligations to close shall be firm with respect to the conditions of this
SECTION 4(a).
(b) On or before 5:00 p.m., EST, on the last day of the Due
Diligence Period, inspection and approval, in Purchaser's sole and absolute
discretion, of the physical condition and use of the Premises, at Purchaser's
sole cost, including without limitation, the availability of access, utility
services, zoning, environmental risks, engineering and soil conditions. For the
purpose of conducting physical inspections, Seller agrees to provide Purchaser
and its authorized agents reasonable access to the Premises at all reasonable
times on business days during the Due Diligence Period upon at least twenty-four
(24) hours prior written notice to Seller, and Purchaser shall conduct such
inspections in a manner not disruptive to tenants or to the operation of the
Premises. Such notice shall identify whether Purchaser wishes to have the
Property Manager in attendance at such site visit and shall detail the scope of
the due diligence Purchaser intends to conduct during its access to the
Premises. Purchaser shall not enter the Premises or contact any tenants or
Property Manager without Seller's prior written consent. Purchaser hereby agrees
to indemnify Seller and to hold Seller, Seller's agents and employees and the
Property harmless from and against any and all losses, costs, damages, claims
and liabilities including, but not limited to, mechanics' and materialmen's
liens and attorneys' fees, arising out of or in connection with Purchaser's
access to or entry upon the Premises under this SECTION 4(B). Purchaser's
indemnity and hold harmless pursuant to this SECTION 4(B) shall survive the
termination or expiration of this Agreement by Closing or otherwise.
If any of the conditions set forth in this SECTION 4(B) are not
satisfied or waived in writing by Purchaser before the expiration of the Due
Diligence Period, Purchaser shall notify Seller and the Title Company in writing
of the termination of this Agreement ("PURCHASER'S SECOND TERMINATION NOTICE")
prior to the expiration of the Due Diligence Period. Upon receipt of Purchaser's
Second Termination Notice, the Earnest Money shall be immediately returned to
Purchaser by the Title Company, both Seller and Purchaser shall be released and
discharged from all further obligations under this Agreement, and neither Seller
nor Purchaser shall be subject to any claim by the other for damages of any
kind. If Purchaser's Second Termination Notice has not been served upon Seller
and Title Company prior to the expiration of the Due Diligence Period, all
conditions in this SECTION 4(B) shall be deemed to have been satisfied or waived
and Purchaser's obligations to close shall be firm with respect to the
conditions of this SECTION 4(B).
5. EVIDENCE OF TITLE AND SURVEY.
(a) Title Commitment. On or before the expiration of the Due
Diligence Period, Purchaser shall cause its attorney to examine the title to the
Real Estate and advise Seller in writing of any objections to that title (which
objection shall not include any Permitted Encumbrances). If objections to title
are made as provided in this SECTION 5(A), Seller shall make a good faith effort
to remedy the objection to the reasonable satisfaction of Purchaser and its
attorney within fourteen (14) days from the date of notice of any objection.
Notwithstanding any provision to the contrary, Purchaser shall not be obligated
to object to any title encumbrance that can be removed solely by the payment of
money, such as mortgages or liens, and such encumbrances shall be satisfied or
cancelled of record by Seller at Closing. In the event any objection is not so
cured or remedied within the fourteen (14) day period, the Purchaser, at its
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election, shall have the right to: (a) accept such title subject to the
objection; or (b) terminate this Agreement and receive the return of the Earnest
Money. In the event no such objections are made within the Due Diligence Period,
Purchaser shall have no right to raise objections to title which arise prior to
the date of its examination of title made within the Due Diligence Period.
However, if any additional title objection arises after Purchaser's examination
of title made during the Due Diligence Period and prior to Closing Date,
Purchaser shall have the same rights and elections with respect to that
subsequent objection that it had with respect to objections arising during its
examination of title made within the Due Diligence Period. If any such
additional title objection is a lien or encumbrance which may be removed by the
payment of a definite and ascertainable amount, Seller shall, at its election,
either pay same or post a bond to cover such payment, and upon such payment or
the posting of a bond, as the case may be, Purchaser shall proceed to purchase
the Premises.
(b) Survey. On or before 5:00 p.m., EST, on December 11, 1998
("SURVEY PERIOD"), Purchaser shall cause to be prepared an accurate survey of
the Real Estate and Improvements associated with each Complex certified by a
registered land surveyor in the state in which the Complex is located. Each
survey shall show the boundaries and the acreage, to the nearest 1000th of an
acre, of the Complex, the location of all easements, buildings, improvements
and/or encroachments, if any, located thereon, together with a legal description
of the Real Estate that is associated with the Complex. If the legal description
in any survey differs from the applicable legal description attached hereto,
then, in addition to the deed to be delivered by Seller at Closing, Seller will
execute in favor of Purchaser a non-warranty deed which uses the legal
description from Purchaser's new survey. Seller shall execute any reasonable
affidavit which is customarily required by the Title Company providing the
owner's title insurance policy referred to in this section to issue the policy
to Purchaser without any survey exception.
If any survey of a Complex reveals an encroachment, a title defect or
other physical condition of a material nature, including without limitation that
any of the Improvements are non-conforming structures under either the
applicable zoning regulations or the applicable building codes, that are not
"legally non-conforming," and that was not revealed in connection with the title
examination conducted by Purchaser pursuant to SECTION 5(A) of this Agreement or
the physical inspection of the Premises conducted by Purchaser pursuant to
SECTION 4(B) of this Agreement, Purchaser shall advise Seller in writing of any
survey objections prior to the expiration of the Survey Period. If objections to
survey are made as provided in this SECTION 5(B), Seller shall make a good faith
effort to remedy the survey objection to the reasonable satisfaction of
Purchaser and its attorney within fourteen (14) days from the date of notice of
any objection In the event any survey objection is not so cured or remedied
within the fourteen (14) day period, the Purchaser, at its election, shall have
the right to: (a) accept the Premises subject to the survey objection; or (b)
terminate this Agreement and receive the return of the Earnest Money.
6. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants that as of the date of this Agreement and as of the Closing Date:
(a) Seller has all requisite power and authority to execute this
Agreement, the closing documents listed in SECTION 3 of this Agreement and all
other documents required to be delivered by Seller, and to assume and perform
all of its obligations under this Agreement; the execution
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<PAGE> 12
and delivery of this Agreement and the performance by Seller of its obligations
hereunder have been duly authorized by such action as may be required; the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder on the part of Seller do not and will not
violate the organizational documents of Seller and do not and will not conflict
with or result in the breach of any condition or provision of, or constitute a
default under, the terms of any contract, mortgage, lien, lease, agreement,
indenture, instrument or judgment to which Seller is a party or which affects
the Premises other than any "due-on-sale" or similar clause in a mortgage
instrument being satisfied at Closing;
(b) Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified or licensed to do business and is in good standing in North
Carolina and Florida. Seller has full power and authority to carry on its
business as now conducted and to own or lease and to operate its properties and
assets now owned or leased and operated by it;
(c) Attached hereto as EXHIBIT "C" is a true, correct, and
complete rent roll for each Complex, identifying each apartment unit; the name
of each tenant; the monthly rent paid by each tenant, including any rent or
other monetary concessions made by Seller; any delinquency in the payment of
such rents; the term and expiration date of each lease; a statement of any
defaults existing under each Lease; the amounts and terms of each tenant's
security and pet deposits, if any; and a list of all vacancies. To the best of
Seller's knowledge, the Leases are in full force and effect, have been validly
executed and there have been no written or oral modifications, alterations or
amendments of or to the leases, except as set forth on EXHIBIT "C". There are no
leasing commissions payable with respect to any of the Leases other than
customary apartment finders fees which have been paid in full by Seller for all
Leases currently in effect or which will become in effect prior to Closing. To
the best of Seller's knowledge, Seller has fulfilled all of its duties and
obligations in connection with the Leases, and Seller is not in default in any
material respect under any of the terms and provisions of the Leases. Seller has
not received any written notice from any tenant under any of the Leases claiming
a default by the landlord under a Lease other than as described on EXHIBIT "C".
All Leases comply with the requirements of the laws of the state in which the
apartment unit is located, including without limitation, requirements applicable
to security deposits. There are no occupants of any Complex except those listed
on EXHIBIT "C";
(d) On the Closing Date, Seller will own all of the properties and
assets being conveyed by this Agreement, free and clear of all liens, charges
and encumbrances except the Permitted Encumbrances;
(e) On the Closing Date, there will be no liabilities which
encumber the Premises, no obligations, direct or contingent, relating to the
Premises, and no service, maintenance, property management, leasing or other
contracts affecting the Premises which will be in existence as of the Closing
Date, other than those contracts described on EXHIBIT "D", each of which may be
assumed by Purchaser and each of which is terminable on not less than thirty
(30) days' written notice;
(f) A complete schedule of the current insurance policies covering
"all-risk" property damage, rent loss, business interruption, workers'
compensation, general commercial liability
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and all other insurance maintained by Seller with respect to the Premises is
attached as EXHIBIT "L". Seller will cause all such insurance policies to be
maintained in full force and effect through the Closing Date, and will assist
Purchaser, at Purchaser's election, in making application prior to Closing to
keep such policies in force;
(g) Seller has received no notice of administrative agency action,
litigation, condemnation proceeding or proceeding of any kind pending against
Seller which relates to or affects the Premises, including any requests for
public dedication, nor does Seller know of any basis for any such action;
(h) To the best of Seller's knowledge, (i) the Premises does not
contain any "HAZARDOUS MATERIALS" (as defined below) in violation of applicable
"ENVIRONMENTAL LAWS" (as defined below), (ii) the Premises is not subject to
federal, state or local regulations or liability because of the presence of
stored, leaked, spilled or disposed petroleum products, waste materials or
debris, underground storage tanks, "PCB's" or PCB items (as defined in 40 C.F.R.
ss. 761.3), "asbestos" (as defined in 40 C.F.R. ss. 763.63), or the past or
present accumulation, treatment, storage, disposal, spillage or leakage of any
Hazardous Materials; (iii) no portion of the Real Estate is filled land, or is
classified as a wetland or tidal water, as those terms are defined in 33 C.F.R.
ss.328.3; and (iv) no condition exists on the Premises which is or may be
characterized by any federal, state or local government or agency as an actual
or potential threat or danger to public health or the environment. Seller
further represents and warrants to Purchaser that the Premises shall be
maintained through the Closing Date in the condition represented and warranted
above. On or after the Effective Date and prior to the Closing Date, Purchaser
may, at its election and at its expense, have the Property investigated by an
engineer for the presence or suspected presence of the substances referenced
above. As used in this SECTION 6, the term "HAZARDOUS MATERIALS" shall mean any
hazardous wastes, hazardous substances, hazardous materials, toxic substances,
hazardous air pollutants or toxic pollutants, as those terms are defined in
Environmental Laws, and the term "ENVIRONMENTAL LAWS" shall mean the Resource
Conservation and Recovery Act (42 U.S.C.A. ss.ss. 6901 et seq.), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C.A. ss.ss. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C.A. ss.ss. 1801 et seq.), the Toxic Substances Control Act (15 U.S.C.A.
ss.ss. 2601 et seq.), the Clean Air Act (42 U.S.C.A. ss.ss. 7401 et seq.), and
the Clean Water Act (33 U.S.C.A. ss.ss. 1251 et seq.), or any amendments
thereto, or any regulations promulgated pursuant thereto, or any applicable
state or local law, regulation or ordinance relating to the foregoing matters;
(i) To the best of Seller's knowledge, all Improvements fully
conform with all applicable zoning regulations and building codes and
restrictions;
(j) To the best of Seller's knowledge, the Real Estate may be used
for the operation of an apartment complex without violating any federal, state,
local, or any other governmental building, zoning, health, safety, platting,
subdivision or other statute, ordinance or regulation, or any applicable private
restriction; and no notice of the violation of any of the same has been received
by Seller. Seller has obtained all licenses and permits necessary to operate
each Complex in the manner in which they are operated as of the Effective Date
except to the extent that failure to do so would not have a material adverse
effect on such operation;
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(k) To the best of Seller's knowledge, each Complex is currently
served by the public utility services sufficient for the safe and efficient
operation of such Complex. Seller will cooperate with Purchaser to assure that
those utility services will continue after the closing without action by or
expense to Purchaser, other than the payment of normal security deposits and the
bills for the period from and after the Closing Date;
(l) Seller has furnished Purchaser with accurate income and
expense statements of each Complex for calendar years 1996 and 1997, and for the
months of January through September of 1998. Since the date of the most recent
statement, no material changes have occurred which have adversely affected any
Complex;
(m) Seller has filed all sales, use or other excise tax returns
that it was required to file pertaining to the Premises and rents or other
income derived therefrom. Seller shall pay all sales and/or use taxes due on
rents and other revenues received and purchases pertaining to the Premises made
through the day before the Closing Date. Seller shall indemnify and hold
harmless Purchaser from and against, and reimburse Purchaser with respect to,
any and all claims, demands, causes of action, losses, damages, liabilities,
costs and expenses (including reasonable attorneys' fees and court costs)
asserted against or incurred by Purchaser by reason of or arising from any sales
and/or use taxes due on rents and other revenues received and purchases made
through the Closing Date or from a breach by Seller of any statutory provisions
relating to sales and use tax necessary for Purchaser to avoid transferee
liability for same. Purchaser shall, with respect to the Premises, indemnify and
hold harmless Seller from and against, and reimburse Seller with respect to, any
and all claims, demands, causes of action, losses, damages, liabilities, costs
and expenses (including reasonable attorneys' fees and court costs) asserted
against or incurred by Seller by reason of or arising from all sales and/or use
taxes due on rents and other revenues received and purchases made after Closing
Date;
(n) There are no taxes (existing or deferred), charges or
assessments of any nature or description arising out of the conduct of Seller's
business or the operation or ownership of the Premises, which would constitute a
lien against the Premises, that will be unpaid at the Closing Date, except for
the lien of ad valorem property taxes due for each Complex located in North
Carolina to be prorated and paid at Closing as provided below;
(o) On the Closing Date, Seller will have complied with all of its
obligations under this Agreement, unless such compliance has been waived in
writing by Purchaser, and all warranties made in this SECTION 6 shall be true
and correct on that date;
(p) To the best of Seller's knowledge, there are no legal actions
or proceedings pending or proceedings or threatened against the Premises which
are not covered by adequate insurance nor has Seller received any notices of any
violations of any zoning, land use, building codes or other statutes affecting
the use, occupancy and enjoyment of the Premises that have not been cured; and
(q) Seller has heretofore delivered to Purchaser true, complete,
and correct copies of the Service Contracts. Except as may be shown on EXHIBIT
"D", all of the Service Contracts are in full force and effect, Seller has not
sent or received any notices of default under the Service Contracts, and, to the
knowledge of Seller, there are no defaults or events which, with the
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<PAGE> 15
passage of time or giving of notice, or both, could become a default under the
Service Contracts. All charges under the Service Contracts have been paid
according to the terms of the Service Contracts, except as may be shown on
EXHIBIT "D".
Seller hereby agrees that the truthfulness of each of the foregoing
representations and warranties and of all other representations and warranties
made in this Agreement as of the Effective Date and as of the Closing Date is a
condition precedent to the performance by Purchaser of its obligations under
this Agreement, and all of the foregoing representations and warranties shall be
deemed to be repeated at Closing. Upon the material breach by Seller of any
representation or warranty made in this SECTION 6, Purchaser, may, prior to the
Closing Date, terminate this Agreement and receive the return of the Earnest
Money. The foregoing shall be considered an exclusive remedy of Purchaser unless
the breach resulted from the intentional action of the Seller.
7. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser
represents and warrants to Seller that Purchaser is a duly organized and validly
existing limited liability company under the laws of the State of North Carolina
and the execution and delivery of this Agreement and the transaction
contemplated hereby have been duly authorized by Purchaser.
8. SELLER'S COVENANTS. Between the date of the execution of this
Agreement and the Closing, Seller agrees to continue to maintain, operate and
manage the Premises in the same manner between the Effective Date and the
Closing Date as it currently is being managed and operated, making every
reasonable effort to do nothing which might damage the reputation of the
Premises or its relations with its tenants. Seller agrees to enter into no
material agreements or contracts and to incur no major expenses relating to the
Premises prior to the Closing Date except for material agreements and contracts
in replacement or extension of existing agreements and contracts and on terms
and provisions generally consistent with the existing contracts or current
market conditions and except for major expenses which are consistent with
existing operating or capital budgets for the Premises, without Purchaser's
prior written consent, which consent shall not be unreasonably withheld. Each
Complex shall be in the same condition on the Closing Date as on the Effective
Date, reasonable and ordinary wear and tear from normal use excepted.
Notwithstanding the foregoing, on the Closing Date, all apartments that have
been vacated at least five (5) business days prior to the Closing Date shall be
in rentable condition and prepared and ready for occupancy. As used in this
Agreement, the term "in rentable condition" shall mean that all mechanical,
electric and plumbing systems in that apartment unit are operational, and that
all decor items, such as paint, wall coverings and carpet, are in a clean and
presentable condition.
Purchaser and its representatives shall have the right from and after
the Effective Date to enter upon each Complex during normal business hours for
the purposes of examining the same and conducting such inspections, tests and
investigations of each Complex and the Premises as it may desire, so long as
Purchaser and its representatives do not unreasonably interfere with the
operation of the Premises. Purchaser agrees to indemnify and hold Seller
harmless from and against any liens, claims, actions, charges, damages, expenses
(including, without limitation, attorney's fees and court costs) and liabilities
incurred through the exercise by Purchaser of the privilege granted in the
preceding sentence.
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<PAGE> 16
At all reasonable times prior to and after the Closing Date, Seller
shall give Purchaser, and its counsel, accountants and representatives, full
access to all books and records with respect to the ownership, management and
operation of the Premises, shall permit them to copy the same and shall furnish
Purchaser with all such information concerning the same as Purchaser may
reasonably request. Upon request by Purchaser (which such request will be made
not more frequently than monthly) after the Effective Date and prior to the
Closing Date, Seller shall furnish Purchaser for each Complex with a cash flow
statement for the prior month, an updated rent roll and a schedule of vacant
apartment units and the current asking rents for each vacant unit. All such
information shall be kept confidential by Purchaser and shall be returned to
Seller, with all copies thereof, if the sale of the Premises does not close.
Seller shall continue in its normal course of business to use its best
efforts to avoid having any tenant delinquent in the payment of rent or
otherwise in default under the terms of its lease on the Closing Date. Seller
shall not permit the acceptance of any prepayment of rent more than one month
beyond the Closing Date and shall not permit the modification, alteration,
amendment, extension, renewal, termination or cancellation of any lease (except
in accordance with the terms of any such lease), without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld or
delayed in the case of a default by a tenant. If the leases of any tenants
expire before or within thirty (30) days after the Closing Date, Seller shall,
without cost or expense to Purchaser, up to the Closing Date, continue its
normal course of operations with respect to causing new leases to be obtained
with those tenants or causing new tenants to be obtained for those apartments;
and Seller shall, up to the Closing Date, continue its normal course of
operations with respect to causing tenants to be obtained for apartments which
are not rented on the Effective Date; provided, however, that all such leases
shall be drawn upon the form of lease presently used by Seller; shall be for a
term no longer than one (1) year; and shall include rents in amounts approved in
advance by Purchaser.
9. PRORATIONS. The following adjustments to the Purchase Price
paid hereunder shall be made between Seller and Purchaser:
(a) All real estate taxes, special assessments and personal
property taxes payable with respect to the Premises for the calendar or fiscal
year, as the case may be, in which the Closing Date occurs, accrued but to be
paid after the Closing Date, shall be prorated between Seller and Purchaser as
of the Closing Date. If the actual amount of taxes and assessments is not known
on the Closing Date, they shall be prorated on the basis of the amount of taxes
and assessments payable for 1997 and shall be adjusted between the parties when
the actual amount of taxes and assessments payable for 1998 is known to
Purchaser and Seller. If any special assessments exist or are levied on any
Complex prior to the Closing Date, Seller shall cause such assessments to be
paid in full at Closing. The ad valorem property taxes due for the each Complex
located in North Carolina shall be prorated between Seller and Purchaser and
paid as of the Closing Date. The provisions of this SECTION 9 shall survive
Closing.
(b) All income and expenses of the Premises shall be prorated on a
daily basis between Seller and Purchaser as of the Closing Date. Through the
Closing Date, Seller shall pay when due any payments of principal and interest
secured by any liens or encumbrances on any Complex. Seller shall be responsible
for all expenses of the Premises, and shall be entitled to all income from the
Premises, attributable to the period prior to the Closing Date. Seller agrees
that
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<PAGE> 17
all expenses, charges, bills, or trade accounts maintained or incurred by Seller
or its agents in connection with the management or operation of the Premises or
otherwise accrued for the period prior to the Closing Date shall be paid in full
on the Closing Date; provided, however, that all such expenses, charges, bills,
or trade accounts which have accrued but have not yet been billed shall be paid
in full by Seller at the time the bills are received. Seller shall have sole
responsibility for the payment of all sales taxes, excise taxes, payroll taxes,
withholding taxes or other taxes collected or payable by Seller or its agents in
connection with the management or operation of the Premises for or during that
period. Seller shall indemnify Purchaser against and shall hold Purchaser
harmless from any costs, expenses, penalties or damages, including reasonable
attorneys' fees, which may result from any failure by Seller to pay or cause to
be paid any of the items described in this SECTION 9. Purchaser shall indemnify
Seller against and shall hold Seller harmless from any costs, expenses,
penalties or damages, including reasonable attorneys' fees, which may result
from the failure of Purchaser to pay or cause to be paid any of the items
described in this SECTION 9 that are attributable to the period after the
Closing Date.
Without limiting the generality of the foregoing, the following items
shall be adjusted as of the Closing Date:
(1) Rents and other charges received for the calendar
month in which the Closing Date occurs. Purchaser shall use its best
efforts to assist Seller in collecting all rents and other accounts
receivable that are outstanding as of the Closing Date. If Purchaser
receives any payment from a debtor under any such account, the payment
shall first be applied by Purchaser to rent or other payments due from
that debtor from and after the Closing Date and the excess, if any,
shall be applied to the account receivable.
(2) All other gross receipts, including, without
limitation, net revenue from vending machines and laundry facilities.
(3) Any premium of coverage for the policy year in which
the Closing Date occurs under any policy of hazard, liability, rent
loss, business interruption and/or worker's compensation insurance
covering the Premises, in the event Purchaser elects to purchase or
assume any such policy now in force and effect and is permitted to do
so. If Purchaser elects to cancel and replace any such policy, Seller
shall be entitled to any refund of any prepaid premiums.
(4) Water and utility charges and sanitary sewer taxes,
if any.
(5) Charges under service, management or other
agreements, if any, which remain in effect after the Closing Date.
(6) Other operating expenses not covered by any of the
above subsections.
(7) Immediately after Closing, Seller shall make
available at the offices of Property Manager, or on site, all
contracts, Leases and leasing correspondence, receipts
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<PAGE> 18
for deposits, and unpaid bills which pertain to the Premises, together
with all advertising materials, booklets, and keys, if any, used in
the operation of the Premises other than those items delivered to
Purchaser on or before the Closing as provided for herein. The
foregoing shall not include the separate books, records,
correspondence and other documentation of Seller located at its
offices.
All prorations and adjustments under this SECTION 9 shall be made
against the cash sum otherwise payable by Purchaser to Seller pursuant to
SECTION 3 of this Agreement.
10. TRANSFER TAXES; TITLE CHARGES. Seller and Purchaser agree to
execute any real estate transfer declarations required by the state, county or
municipality in which the Real Estate is located. Seller shall pay the cost of
any state or county deed, documentary or transfer taxes. Purchaser shall pay the
cost of recording the instruments of conveyance, all mortgage registration
taxes, if any, the cost of any municipal transfer taxes, and all sales and
transfer taxes or other fees assessed by any governmental authority against the
Personal Property as the result of the sale and transfer of same as contemplated
hereby. If this transaction is terminated by Purchaser prior to the expiration
of the Due Diligence Period, Seller and Purchaser shall pay all escrow costs
billed by the Title Company on an equal basis. If this transaction is terminated
by either party on account of default by the other, the defaulting party shall
pay all escrow costs billed by the Title Company. If this transaction shall
close as provided in this Agreement, Closing escrow costs shall be divided
equally between Seller and Purchaser; provided, however, that Purchaser shall be
solely responsible for any escrow costs and other closing charges relating to
Purchaser's financing, if any. The obligations of Seller and Purchaser under
this SECTION 10 shall survive the Closing.
Each party shall pay its own attorneys' fees except as otherwise
provided in this Agreement.
11. RISK OF LOSS. If, prior to the Closing Date, any Complex or
any part thereof is damaged or destroyed by fire, the elements or any other
destructive force or cause to the extent that repairing such damage or
destruction is reasonably estimated to cost $250,000 per Complex or more, then,
within ten (10) days of any such damage or destruction, Seller shall give a
written notice to Purchaser specifying the insurance carrier's estimate of the
amount of insurance payable as the result of such damage or destruction. Within
ten (10) days after Purchaser has received the written notice described in the
preceding sentence, Purchaser may elect to terminate this Agreement by delivery
of written notice to Seller, in which case the Earnest Money and all interest,
if any, earned thereon shall be returned to Purchaser and this Agreement shall
be deemed null and void. If Purchaser elects to consummate the purchase despite
the damage or destruction, or if any lesser damage or destruction has occurred,
there shall be no reduction in or abatement of the Purchase Price except for an
amount equal to the deductible under Seller's insurance policy, and Seller shall
assign to Purchaser all of Seller's right, title and interest in and to all
insurance proceeds resulting from the damage or destruction.
12. CONDEMNATION. If, prior to the Closing Date, any judicial,
administrative, or other condemnation proceedings are instituted in which a
taking of any Complex is proposed which exceeds $250,000 per Complex in value,
including any consequential damages to the Complex, or which affects the zoning
of the Complex, renders it a non-conforming use, affects the income
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<PAGE> 19
producing potential of the Complex, or materially affects access to or parking
available on the Real Estate associated with the Complex, then within five (5)
days of receipt by it of notice of the institution of any judicial,
administrative, or other condemnation proceedings involving the Complex, Seller
shall give a written notice to Purchaser. Within ten (10) days after Purchaser
has received the written notice described in the preceding sentence, Purchaser
may elect to terminate this Agreement by delivery of written notice to Seller,
in which case the Earnest Money and all interest, if any, earned thereon shall
be returned to Purchaser and this Agreement shall be deemed null and void. If
Purchaser elects to consummate the purchase despite the institution of
condemnation proceedings, or if it appears that the value of the proposed
taking, including any consequential damages to the Complex, shall total $250,000
per Complex or less, there shall be no reduction in or abatement of the Purchase
Price, and Seller shall assign to the Purchaser all of Seller's right, title,
and interest in and to any award or settlement made or to be made in the
condemnation proceedings.
13. DEFAULT. Upon the breach by Seller of any of the
representations and warranties contained in SECTION 6 of this Agreement, which
is discovered by Purchaser prior to the Closing Date, or the default by Seller
in the performance of any other obligation of Seller set forth in this
Agreement, Purchaser may, as its sole remedies available to it (except to the
extent otherwise provided in SECTION 6 of this Agreement): (a) terminate this
Agreement by delivery of written notice to Seller, in which event Purchaser
shall be entitled to the return of the Earnest Money and all interest, if any,
earned thereon; or (b) institute proceedings in any court of competent
jurisdiction to specifically enforce the performance by Seller of the terms of
this Agreement. Upon the breach by Seller of any representations and warranties
contained in SECTION 6 of this Agreement which is not discovered by Purchaser
until after the Closing Date, then Purchaser may exercise all remedies available
to it at law or equity including asserting an action for money damages as a
result of Seller's default; provided however, with respect to a breach of any
representation or warranty contained in subsection (c), (e), (f), (g), (h), (i),
(j), (k), (l), (m), (n), or (o), of SECTION 6 of this Agreement, Seller must
have delivered to Purchaser in writing, a notice of any such alleged breach
specifying in detail the nature of said alleged breach on or before the first
anniversary of the Closing Date and must file an appropriate complaint or other
proceeding attempting to seek remedies for such alleged breach on or before the
end of the fifteenth (15th) calendar month commencing after the Closing Date or
be forever barred from alleging any such breach or seeking any remedy resulting
therefrom.
If Purchaser defaults in the performance of any of its
obligations under this Agreement, Seller shall be entitled to receive and retain
the Earnest Money and all interest, if any, earned thereon, and to receive from
Purchaser copies of all surveys, inspections, evaluations and other reports on
each Complex prepared by or for Purchaser, as Seller's liquidated damages and
sole remedy for Purchaser's breach, and neither party shall have any other claim
against the other (except for Purchaser's breach of SECTION 28 of this
Agreement, in which event Seller will be entitled to exercise all remedies
available to it, at law or in equity). The parties agree that the Earnest Money
is a fair and reasonable measure of the damages to be suffered by Seller in the
event of such default and that the exact amount of Seller's damages is incapable
of ascertainment.
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14. NOTICE. All notices required or permitted hereunder shall be
in writing and shall be served on the parties at the following address:
If to Seller: Summit Properties Partnership, L.P.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attention: Mr. Douglas E. Brout
Telephone No.: (704) 334-9905
Facsimile No.: (704) 333-8340
With Copies to:
Summit Properties Partnership, L.P.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attention: Mr. Michael G. Malone, Esq.
Telephone No.: (704) 334-9905
Facsimile No.: (704) 334-4496
and
David H. Jones, Esq.
Kennedy, Covington, Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202
Telephone No.: (704) 331-7481
Facsimile No.: (704) 441-7598
If to Purchaser: Hollow Creek, L.L.C.
One Tower Square - 9PB (for regular mail)
205 Columbus Boulevard - 9PBA (for express mail)
Hartford, CT 06183-2030
Attention: William P. Geary
Telephone No.: (860) 277-7637
Facsimile No: (860) 954-1186
With Copies to: The Travelers Insurance Company
One Tower Square - 9PB (for regular mail)
205 Columbus Boulevard - 9PBA (for express mail)
Hartford, CT 06183-2030
Attention: William P. Geary
Telephone No.: (860) 277-7637
Facsimile No: (860) 954-1186
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and
Caroline Wannamaker Sink, Esq.
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina
Telephone No: (704) 377-8302
Facsimile No: (704) 373-3902
Any such notices shall be either (a) sent by certified mail, return receipt
requested, in which case notice shall be deemed delivered (i) three (3) business
days after deposit, postage prepaid in the U.S. mail, or (ii) upon deposit if a
copy is also sent via facsimile to the above number at the time of deposit; or
(b) sent by a nationally recognized overnight courier, in which case notice
shall be deemed delivered one (1) business day after deposit with such courier.
The above addresses may be changed by written notice to the other party;
provided, however, that no notice of a change of address shall be effective
until actual receipt of such notice. Copies of notices are for informational
purposes only, and a failure to give or receive copies of any notice shall not
be deemed a failure to give notice.
15. TIME OF ESSENCE. Time is of the essence of this Agreement. If
the time period by which any right, option or election provided under this
Agreement must be exercised, or by which any act required under this Agreement
must be performed, or by which Closing must be held, expires on a Saturday,
Sunday or a holiday, then such time period shall be automatically extended to
the next business day.
16. PURCHASER'S TERMINATION OF AGREEMENT. Notwithstanding any of
the provisions of this Agreement to the contrary, this Agreement shall terminate
ten (10) days from the Effective Date unless within such time Purchaser shall
deliver to Seller (which delivery may be by facsimile transmission to Seller or
Seller's attorney) a letter stating that Purchaser's member, The Travelers
Insurance Company, corporate headquarters in Hartford, Connecticut has approved
Purchaser's purchase of the Premises pursuant to the provisions of this
Agreement. Purchaser may take such action for any reason whatsoever and is not
required to furnish Seller with any statement or explanation of such reason or
reasons. Thereupon, Seller will forthwith return the Earnest Money, with
interest, to Purchaser, and Seller and Purchaser will thereupon be released from
any further obligations hereunder.
17. GOVERNING LAW. The validity, meaning and effect of this
Agreement shall be determined in accordance with the laws of the State of North
Carolina.
18. COUNTERPARTS. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. CAPTIONS. The captions in this Agreement are inserted for
convenience of reference and in no way define, describe or limit the scope or
intent of this Agreement or any of the provisions hereof.
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<PAGE> 22
20. ASSIGNMENt. This Agreement may not be assigned by either party
without the express written consent of the other party hereto.
21. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
22. MODIFICATIONS; WAIVER. No waiver, modification amendment,
discharge or change of this Agreement shall be valid unless the same is in
writing and duly executed by both parties.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the transactions contemplated hereby and all
prior or contemporaneous agreements, understandings, representations or
statements, oral or written, are superseded hereby.
24. PARTIAL INVALIDITY. Any provision of this Agreement which is
unenforceable or invalid or the inclusion of which would adversely affect the
validity, legality or enforcement of this Agreement shall be of no effect, but
all the remaining provisions of this Agreement shall remain in full force and
effect.
25. ALLOCATION OF PURCHASE PRICE. Seller and Purchaser hereby
agree that, for all accounting and federal income tax reporting purposes, the
Purchase Price shall be allocated as follows:
<TABLE>
<S> <C>
Summit Green Apartments: $21,600,000
Summit Hollow Apartments - Phase I: $ 7,500,000
Summit Creek Apartments: $14,000,000
Summit Station Apartments: $11,000,000
Summit Hill Apartments - Phase I: $14,525,000
</TABLE>
Seller and Purchaser agree to work and cooperate with each other to
coordinate their completion of Form 8594, Asset Acquisition Statement ("FORM"),
under Section 1060 of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, or any successor form, so that the amounts
allocated as set forth on such Form will be consistent.
26. BROKER. Seller and Purchaser represent each to the other that
each has had no dealings with any broker, finder or other party concerning
Purchaser's purchase of the Premises. Seller and Purchaser each hereby agrees to
indemnify and hold the other harmless from all loss, cost, damage or expense
(including reasonable attorneys' fees) incurred by the other as a result of any
claim arising out of the acts of the indemnifying party (or others on its
behalf) for a commission, finder's fee or similar compensation made by any
broker, finder or any party who claims to have dealt with such party other than
Broker. The representations and warranties contained in this SECTION 26 shall
survive the Closing or the termination of this Agreement.
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<PAGE> 23
At Closing each party will deliver to the Title Company such
documentation as required by the Title Company to obtain the title insurance
policy to be obtained by Purchaser free of any exceptions relating to possible
liens for brokerage claims, and, in addition Seller will deliver a lien waiver
from the current leasing and management company for the Premises.
27. CONFIDENTIALITY. Seller and Purchaser agree to keep this
Agreement confidential and not make any public announcements or disclosures with
respect to the subject matter hereof without the written consent of the other
party except to the extent, if any, that such announcements or disclosures would
be required by law. Seller may, however, disclose the existence of this
Agreement to prospective purchasers during the Due Diligence Period.
28. RECORDING. Seller and Purchaser agree that neither this
Agreement nor any memorandum thereof may be recorded in any public registry.
29. HART-SCOTT-RODINO FILING. Seller and Purchaser agree to
cooperate in making any filing required by the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 ("HSR ACT"), as amended, and the regulations thereunder.
Each party shall make all filings required under the HSR Act within ten (10)
days after the execution of this Agreement, and upon the request of the Federal
Trade Commission and/or the Department of Justice, shall make any additional
filings and furnish all additional information required to comply with the
provisions of the HSR Act. If either the Justice Department, the Federal Trade
Commission, or any other governmental agency commences action to suspend or
prevent the transactions contemplated by this Agreement, and such action is not
finally dismissed prior to the Closing Date, then either party may by written
notice given to the other party prior to the Closing Date terminate this
Agreement, in which case this Agreement shall terminate and neither party shall
have any further rights or obligations hereunder.
30. TERMINATION OF CONTRACTS. On or before the expiration of the
Due Diligence Period, Purchaser shall advise Seller, in writing, which of the
Service Contracts it intends to assume and which Purchaser requests that Seller
terminate on or before the Closing Date. Within five (5) business days after
receipt of Purchaser's notice, Seller shall advise whether any Service Contracts
Purchaser has requested Seller to terminate cannot be terminated or can be
terminated only with the payment of a fee or penalty and:
(a) with respect to those Service Contracts which cannot be
terminated, Purchaser shall advise, within five (5) business days of receipt of
Seller's notice, that Purchaser has either agreed to assume such Service
Contracts or has elected to terminate this Agreement in which latter instance,
the Earnest Money and any interest accrued thereon shall be refunded to
Purchaser and neither Seller nor Purchaser shall have any further liability to
the other; and
(b) with respect to those Service Contracts which can be
terminated, but only with the payment of a fee or penalty, Purchaser shall
advise Seller, within five (5) business days of receipt of Seller's notice, that
Purchaser has either agreed to pay the termination fee or penalty or has elected
to terminate this Agreement, in which latter instance the Earnest Money and any
interest accrued thereon shall be refunded to Purchaser and neither party shall
have any further liability to the other.
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On or before the Closing Date, Seller shall terminate all contracts
related to the management and operation of the Premises (other than the Service
Contracts which Purchaser has elected to assume in the manner provided herein),
including, without limitation, any property management and leasing agreements,
and shall deliver evidence of such termination pursuant to documentation
reasonably acceptable to Purchaser. Seller shall defend, indemnify and hold
Purchaser harmless from any claims or damages arising from terminated Service
Contracts (unless pursuant to the terms of the Service Contract in question such
Service Contract may not be terminated or unless and to the extent Purchaser is
obligated to pay a termination fee or penalty in connection with the termination
of a Service Contract as set forth above) or from any claims of employees whose
employment was not continued after the Closing Date.
31. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, together
shall constitute but one and the same instrument
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IN WITNESS WHEREOF, the parties hereto have executed this Real Estate
Sale Agreement under seal as of the day and year first above written.
PURCHASER:
HOLLOW CREEK, L.L.C., a North Carolina
limited liability company (SEAL)
BY: THE TRAVELERS INSURANCE
COMPANY, a Connecticut corporation, its sole
member
By: /s/ B. Charles Milner
--------------------------------------
Its: Vice President
--------------------------------------
[CORPORATE SEAL]
SELLER:
SUMMIT PROPERTIES PARTNERSHIP, L.P.,
a Delaware limited partnership (SEAL)
BY: SUMMIT PROPERTIES INC., a Maryland
corporation, its sole general partner
By: /s/ Gregg D. Adzema
--------------------------------------
Its: Vice President
--------------------------------------
[CORPORATE SEAL]
(signatures continued on following page)
22
<PAGE> 26
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
This 11th day of December, 1998, personally came before me Gregg D.
Adzema, who being by me duly sworn, says that he/she is the Vice President of
SUMMIT PROPERTIES INC., a Maryland corporation, and sole general partner of
SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware limited partnership, and that
the seal affixed to the foregoing instrument in writing is the corporate seal of
the corporation, and that said writing was signed and sealed by him/her, in
behalf of said corporation acting in its capacity as general partner of the
limited partnership, by authority duly given. And the said Vice President
acknowledged the said writing to be the act and deed of said corporation in its
capacity as general partner of the limited partnership.
/s/Tamera M. Sanders
----------------------------------------
Notary Public
My Commission Expires: Printed: Tamera M. Sanders
-------------------------------
June 2, 2002
- -------------------------
[NOTARIAL SEAL]
23
<PAGE> 27
STATE OF CONNECTICUT
COUNTY OF HARTFORD
This 14th day of December, 1998, personally came before me B. Charles
Miller, who being by me duly sworn, says that he/she is the Vice President of
THE TRAVELERS INSURANCE COMPANY, a Connecticut corporation, and sole member of
HOLLOW CREEK, L.L.C., a North Carolina limited liability company, and that the
seal affixed to the foregoing instrument in writing is the corporate seal of the
corporation, and that said writing was signed and sealed by her, on behalf of
said corporation acting in its capacity as sole member of the limited liability
company, by authority duly given. And the said Vice President acknowledged the
said writing to be the act and deed of said corporation in its capacity as sole
member of the limited liability company.
/s/Cari B. Rich
----------------------------------------
Notary Public
My Commission Expires: Printed: Cari B. Rich
-------------------------------
September 30, 2002
- -------------------------
[NOTARIAL SEAL]
24
<PAGE> 1
EXHIBIT 10.1
STATE OF NORTH CAROLINA ) OPERATING AGREEMENT
) OF
COUNTY OF MECKLENBURG ) STATION HILL L.L.C.
OPERATING AGREEMENT (this "Agreement"), made and entered into as of the
20th day of November, 1998, by and between SUMMIT PROPERTIES PARTNERSHIP,
L.P. ("Summit"), HOLLOW CREEK, L.L.C. ("Hollow Creek", and referred to
jointly with Summit as the "Members"), and STATION HILL L.L.C.
W I T N E S S E T H:
WHEREAS, the Members enter into this Agreement for the purpose of
acquiring, owning and managing certain residential apartment properties
identified on Schedule I hereto (the "Properties") and engaging in such other
business activity or activities as the Members may determine are necessary or
appropriate to accomplish the foregoing;
WHEREAS, the Company was previously formed by Herman Spence III
("Spence"), and Spence hereby executes this Agreement solely to acknowledge his
withdrawal as a member of the Company; and
WHEREAS, for such purpose, the Members desire to operate a limited
liability company subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I.
GENERAL
1.1 FORMATION OF COMPANY. The Members agree to operate a limited liability
company (the "Company") in accordance with and pursuant to the North Carolina
Limited Liability Company Act (the "Act").
<PAGE> 2
1.2 PURPOSES AND SCOPE OF COMPANY.
1.2.1 PURPOSES. The purposes of the Company shall be limited
strictly to (a) accepting the contribution by Summit of the Summit
Properties pursuant to Section 3.2; (b) accepting the contribution by
Hollow Creek of the Hollow Creek Properties which shall be purchased by
Hollow Creek from Summit pursuant to the Purchase Agreement, (c) owning,
operating, financing, leasing, and disposing of the Properties, (d)
exercising or waiving, at any time and from time to time, any and all
rights, options and remedies of the Company as owner of all or any portion
of, or any interest in the Properties and any rights, easements and
appurtenances in anywise appertaining to any of the foregoing, and (e)
engaging in such other operations and businesses as the Members deem
necessary or appropriate to accomplish the foregoing purposes. The Company
shall not engage in any other business or activity.
1.2.2 NO INDIVIDUAL AUTHORITY. Except as otherwise expressly
provided in this Agreement, no Member, acting alone, shall have any
authority to act for, undertake, incur or assume any obligation, liability
or responsibility on behalf of the other Members or the Company. No real
or other property of the Company shall be deemed to be owned by any Member
individually, but shall be owned by, and title shall be vested solely in,
the Company. The interests of the Members in the Company shall constitute
personal property.
1.2.3 NO RESTRICTIONS. Except as provided in Section 1.2.4, nothing
contained in this Agreement shall be construed to prohibit any Member or
any of its Affiliates from owning, developing, operating, leasing,
financing or investing in any real estate, wherever located, not owned or
operated by the Company, or be deemed to restrict in any way the rights of
any Member, or of any Affiliate of any Member, to conduct any other
business or activity whatsoever. Each Member agrees that the other
Members, any Affiliate or any Person or entity related to such Member or
Affiliate may engage in or possess an interest in another business venture
or ventures of any nature and description, independently or with others,
including but not limited to the ownership, financing, leasing, operation,
management, syndication, brokerage or development of real property, and
neither the Company nor the Members shall have any rights by virtue of
this Agreement in and to said independent ventures or to the income,
profits or benefits derived therefrom. The organization of the Company
shall be without prejudice to the Member's
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<PAGE> 3
respective rights (or the rights of their respective Affiliates) to
maintain, expand or diversify such other interests and activities and to
receive and enjoy profits or compensation therefrom. Each Member waives
any rights such Member might otherwise have to share or participate in
such other interests or activities of any other Member or such other
Member's Affiliates.
1.2.4 SUMMIT NON-COMPETE; RIGHT OF FIRST OFFER FOR NEW DEVELOPMENT.
Notwithstanding anything contained in Section 1.2.3 or elsewhere in this
Agreement to the contrary, Summit agrees that until the second anniversary
of the Closing Date, neither Summit nor any of its Affiliates will engage
or propose to engage with a third-party equity investor in the new
development of a residential apartment property within the area within a
one-half mile radius of any Property (a "New Development") unless Hollow
Creek has been provided a right of first offer to participate in such
proposed development on the same terms as such third party. Summit shall
give Hollow Creek prompt written notice of the proposed terms of any New
Development and Hollow Creek shall have 20 days to determine whether to
participate in the New Development; if Hollow Creek shall not notify
Summit within such 20-day period that it wishes to participate in the New
Development, Summit shall be free to proceed with the New Development with
a third party substantially on the terms proposed to Hollow Creek. Any
substantial modification of the terms of the third party's participation
shall entitle Hollow Creek to an additional 10-day period to review such
modified terms and determine whether it wishes to exercise its right of
first offer to participate in the New Development on such modified terms.
1.2.5 NO RESPONSIBILITY FOR OTHER'S COMMITMENTS. Neither the Company
nor any Member shall be responsible or liable for any indebtedness or
obligation of another Member incurred either before or after the execution
of this Agreement, other than those joint responsibilities, liabilities,
indebtedness or obligations incurred pursuant to the terms of this
Agreement, and each Member indemnifies and agrees to defend, save and hold
the others harmless from such obligations and indebtedness except as
aforesaid. Without limiting the generality of the foregoing, neither the
Company nor Hollow Creek shall have any obligation whatsoever with respect
to the Properties which relates to any event, condition or activity
occurring prior to the Closing Date or any liability which was incurred
with respect to the Properties or their operation prior to the Closing
Date. Hollow Creek shall not be deemed to be or have been a partner or
joint venturer or shall have any obligation or liability whatsoever with
Summit with respect to
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<PAGE> 4
the acquisition of the Land, the construction of the Buildings or the
ownership of the Properties, the planning and other development work for
any Property, or the construction, ownership, operation or management of
any Property prior to the contribution of the Summit Properties to the
Company pursuant to Section 3.2 or the purchase by Hollow Creek of the
Hollow Creek Properties from Summit pursuant to the Purchase Agreement, as
applicable.
1.3 NAME. The business of the Company shall be conducted under the
"Station Hill L.L.C."
1.4 PRINCIPAL OFFICE. The principal office and registered office of the
Company shall be maintained at 212 South Tryon Street (Suite 500), Charlotte,
North Carolina 28281, or at such other place as may be designated by the
Members.
1.5 REPRESENTATIONS BY EACH MEMBER. By its execution and delivery of this
Agreement, each Member represents, and warrants to each other Member and agrees
that (a) all transactions contemplated by this Agreement to be performed by it
have been duly authorized by all necessary action of its partners or directors
and shareholders, as applicable; (b) the consummation of such transactions will
not result in a breach or violation of, or a default under, its constituent
documents, any agreement (other than those relating to debt being satisfied in
full on or before the consummation of such transaction) by which it or any of
its partners or shareholders (as applicable) or any of its properties is bound
or any statute, regulation, order or other law to which it or any of its
partners or shareholders (as applicable) is subject; (c) this Agreement is its
binding and enforceable agreement, enforceable against it in accordance with its
terms; (d) in the case of Summit, its sole general partner is Summit Properties
Inc.; (e) in the case of Hollow Creek, it is an indirect wholly owned limited
liability company of The Travelers Insurance Company ("TTIC"); (f) in the case
of Summit, as of the Closing Date, (i) the conditions described in Subsections
3.4.2, 3.4.5, 3.4.6, 3.4.8 and 3.4.9 are true and correct and will have been
duly satisfied as of the Closing Date, (ii) during the period from June 30,
1998, to the Closing Date, the management and operation of the Properties and of
Summit Properties Inc. (the "REIT") have been conducted in the ordinary course,
consistent with past practice with no material changes except to the extent
disclosed on Schedule IV hereto, (iii) during the period from June 30, 1998, to
the Closing Date, there have not been any new material agreements with respect
to the Properties which have not been approved in writing by Hollow Creek, (iv)
except as disclosed on Schedule IV, neither Summit nor the REIT have agreed to,
are subject to or is currently entertaining an offer from a third party to
4
<PAGE> 5
acquire Summit, the REIT or any material portion of the capital stock or assets
of Summit or the REIT and (v) all other representations and warranties made by
Summit to Hollow Creek or the Company in any other document or instrument
delivered by Summit with respect to the Properties (including the Purchase
Agreement), this Agreement and the transactions contemplated hereby will be true
and correct as of the Closing Date in all material respects (except to the
extent that a representation or warranty already includes a materiality
qualification, in which case such representation and warranty will be true and
correct as of the Closing Date in all respects); and (g) in the case of Hollow
Creek, as of the Closing Date, (i) the conditions described in Subsections
3.5.3, 3.5.4 and 3.5.5 are true and correct and will have been duly satisfied as
of the Closing Date, (ii) when contributed by Hollow Creek to the Company as
required by this Agreement, the Hollow Creek Properties will be free and clear
of any lien or encumbrance arising by, through or under Hollow Creek, and (iii)
all other representations and warranties made by Hollow Creek to Summit in any
other document or instrument delivered by Hollow Creek with respect to this
Agreement and the transactions contemplated hereby will be true and correct as
of the Closing Date in all material respects (except to the extent that a
representation or warranty already includes a materiality qualification, in
which case such representation and warranty will be true and correct as of the
Closing Date in all respects).
ARTICLE II.
ACCOUNTING; BANKING; REPORTS; CAPITAL ACCOUNTS
2.1 BOOKS OF ACCOUNT.
2.1.1 BOOKS AND RECORDS. The Company shall keep accurate, full and
complete books of account showing exclusively its assets and liabilities,
income, expenses, operations, transactions and financial condition in such
a manner as to enable the preparation of the Company's United States
Federal information tax return in compliance with Section 6031 of the
Code, and such other records as may be required in connection with the
preparation and filing of the Company's required United States Federal,
state and local income tax returns or other tax returns or reports of
foreign jurisdictions, including, without limitation, the records
reflecting the Capital Accounts and adjustments thereto specified in
Section 3. All such books and records shall at all times be made available
at the principal office of the Company and shall be open to the reasonable
inspection and examination of the Members
5
<PAGE> 6
or their duly authorized representatives during normal business hours upon
reasonable prior notice. All financial statements shall be accurate in all
material respects, shall present fairly the financial position and results
of the operation of the Company and shall be prepared in accordance with
generally accepted accounting principles consistently applied. Except
where specifically provided to the contrary in this Agreement, the Members
shall determine the methods to be used in the preparation of financial
statements. The books, accounts and records of the Company shall be at all
times maintained by the Manager at the Company's office set forth in
Section 1.4 or at such other office as the Members may from time to time
designate.
2.1.2 AUDITS. Any Member may, at its option and at its own expense,
conduct internal audits of the books, records and accounts of the Company
during normal business hours. Audits may be on either a continuous or a
periodic basis, or both, and may be conducted by employees of any Member,
or employees of an Affiliate, or by independent auditors, counsel or other
agents or consultants retained by the Company, any Member or an Affiliate
upon reasonable Notice to the Company at the offices of the Company set
forth in Section 1.4, or at any other location of the books, accounts and
records.
2.2 FISCAL YEAR. The Fiscal Year of the Company (the "Fiscal Year") shall
be the calendar year unless the Members (subject to obtaining the consent of the
Internal Revenue Service) shall hereafter agree in writing to a change of such
annual period for the Fiscal Year; provided, however, that any Fiscal Year in
which the respective Membership Interests of the Members are adjusted in
accordance with the terms of this Agreement, shall be divided into two or more
accounting periods each of which shall begin on the first day of such Fiscal
Year, or if the Fiscal Year is any Fiscal Year other than the first Fiscal Year
in a calendar year period, the date of such adjustment of the respective
Membership Interests of the Members, and shall end on the day immediately
preceding the date of such adjustment of the respective Membership Interests of
the Members or, if the Fiscal Year is the last Fiscal Year of the calendar year
period, on the last day of such Fiscal Year. In addition, if the first year of
the term of this Agreement shall begin on a date other than the first day of the
calendar year and the last year of the term of this Agreement shall end on a
date other than the last day of the calendar year, then such abbreviated
calendar years shall constitute Fiscal Years unless the Members shall have
agreed in writing to a change of the annual period for the Fiscal Year and the
Internal Revenue Service shall have consented to such change. Each of such
accounting periods shall be treated for purposes of this Agreement as
6
<PAGE> 7
a Fiscal Year and any Profit or Loss realized in any such accounting periods
shall be allocated to the Members in the manner provided in Section 4.1 as if
such Fiscal Years were annual Fiscal Years.
2.3 BANK ACCOUNTS. The Company will maintain bank accounts in such banks
as the Manager may designate from a list approved by Hollow Creek, exclusively
for the deposit and disbursement of all funds of the Company. All funds of the
Company shall be promptly deposited in such accounts. The initial signatories
for such accounts shall include the Manager and Hollow Creek; the Members may
from time to time designate different or additional signatories for such
accounts.
2.4 PERIODIC STATEMENTS. From and after the Closing Date, the Manager
shall prepare and distribute the following statements to each Member:
2.4.1 MONTHLY STATEMENT. A monthly statement for each month not
covered by the quarterly report referred to in Section 2.4.2, no later
than the 15th day after the end of each such calendar month during each
Fiscal Year of the term of this Agreement, setting forth in detail the
following items, accompanied by a certificate of the chief financial
officer of the Manager, stating that such items are true, correct,
accurate, and complete in all material respects and fairly present the
financial condition and results of the operations of the Company and are
prepared in accordance with generally accepted accounting principles,
consistently applied (subject to normal year-end adjustments): (i) monthly
and year to date operating statements noting Cash Flow, gross receipts and
expenses, a profit and loss statement and other information necessary and
sufficient under generally accepted accounting principles to fairly
represent the financial position and results of operation of each Property
during such calendar month, all in form satisfactory to Hollow Creek; (ii)
a Property balance sheet for each such month; (iii) a comparison of the
Budgeted income and expenses and the actual income and expenses for each
calendar month and year to date together with a detailed explanation of
any variances of 5% or more between budgeted and actual amounts of such
monthly periods and year to date, and (iv) such other reports and
financial information referred to in the Property Management Agreement.
2.4.2 QUARTERLY REPORT. A quarterly report, no later than the 15th
day of each January, April, July and October during each Fiscal Year of
the term of this Agreement, including the information on a quarterly basis
required by Section 2.4.1 as well as (i) a balance sheet prepared on an
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<PAGE> 8
accrual basis dated as of the last day of the calendar month preceding
such date, (ii) a profit and loss statement prepared on both an accrual
and cash basis for the three calendar month period preceding such date,
(iii) a cumulative calendar year profit and loss statement prepared on
both an accrual and a cash basis, (iv) a capital account statement for the
three calendar month period preceding such date setting forth in detail
the balance in the respective Member's capital account and the debits and
credits thereto, and (v) a statement setting forth any fees paid to any
Member or Affiliate;
2.4.3 ANNUAL STATEMENT AND AUDIT. A full, detailed and certified
statement on an accrual and cash basis and prepared as the result of a
general accounting and audit by the Accountants, and a full, complete and
certified report of the audit scope and audit findings in the form of a
management report with an internal controls memorandum, no later than the
90th day after the end of each Fiscal Year covering the assets,
properties, liabilities and net worth of the Company and its dealings,
transactions and operations during each such Fiscal Year and all matters
customarily included in such statements, accountings and audits including,
but not limited to (i) a cumulative statement for each Fiscal Year of each
of the statements required in Subsections 2.4.1 and 2.4.2, and (ii) a
statement setting forth each Member's allocable share of Profit, Loss,
deductions, credits and items of tax preference.
2.4.4 OBJECTIONS TO STATEMENTS. Any Member shall have the right to
object to the statements described in Subsections 2.4.1, 2.4.2 and 2.4.3
by giving Notice to the other Members indicating in reasonable detail the
objections of such Member and the basis for such objections within 45 days
after any statement is received by such Member. If the Members shall fail
to give such Notice within said 45 day period, such statement and the
contents thereof shall, in the absence of fraud or willful misconduct by
the Manager, another Member or the Accountants certifying the statements,
be deemed conclusive and binding upon each Member so failing to give such
Notice except to the extent such statement is subsequently revised as a
result of any audit conducted pursuant to Subsection 2.1.2 or Section
2.4.3. Objections to any statement and any disputes concerning the
findings of and questions raised as the result of audits of the books,
accounts and records of the Company shall be settled by the Members.
2.5 TAX POLICY. The Company shall make any and all tax accounting and
reporting elections and adopt such procedures as are determined by the Members;
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<PAGE> 9
provided, however, that depreciation on the Properties shall be taken over the
shortest period which may be allowed under applicable Federal, state and local
tax laws and regulations governing straight line depreciation. If as a result of
any distribution of Net Cash Flow or Capital Proceeds a Member is required to
recognize gain under Section 731 of the Code, the Company shall elect, in
accordance with the requirements of Section 754 of the Code, to adjust the
Company's basis in the Property or any other capital assets of the Company
pursuant to Section 734(b) of the Code. In addition, in connection with any
permitted assignment or transfer of a Member's interest in the Company, the
Company, at the request of the transferor or transferee of such interest in the
Company, at the time and in the manner provided in the Code, may make an
election to adjust the Company's basis in the Property or any other capital
assets of the Company pursuant to Section 743(b) of the Code. The Company shall
be reimbursed by the Member requesting any such tax election for any costs of
the Company related to the making of such election.
2.6 TAX RETURNS. The Company shall be treated and shall file its tax
returns as a partnership for Federal, state and municipal income tax and other
tax purposes. The Company shall not elect to be classified as a corporation for
tax purposes, and the Company shall not permit itself to be a publicly traded
partnership within the meaning of Section 7704 of the Code. The Manager shall
prepare or cause to be prepared, on an accrual basis, all Federal, state and
municipal Company tax returns required to be filed and shall submit such tax
returns to the Members for review and approval no later than 30 days prior to
the due date of such returns, but in any event not later than March l5th of each
calendar year. Each Member shall provide Notice to the other Members upon
receipt of any notice of tax examination of the Company by Federal, state or
local authorities. The Manager shall also be required to register the Company as
a "tax shelter Company" if the Company is required by the provisions of Section
6111 of the Code to register as a "tax shelter Company," as determined by the
Company's accountants or attorneys.
2.7 AGREED VALUE. Each Property that is contributed to the Company will
have an agreed fair market value on the Closing Date as set forth on Schedule
III hereto (the "Agreed Value"). The Agreed Value shall be unconditionally
binding throughout the life of the Company for purposes of establishing the fair
market value of such Property on the Closing Date.
2.8 TAX BASIS. The Members agree that, for Federal income tax purposes,
the adjusted basis to the Company of the Properties contributed by Summit may
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differ from the Agreed Value. Income, depreciation, gain or loss with respect to
such Properties shall be allocated to the Members so as to take into account, to
the full extent required or permitted by Section 704(c) of the Code, all of the
differences between the adjusted basis of such Properties to the Company for
Federal income tax purposes (determined at the time of contribution) and the
Agreed Value so that the income, depreciation, gain or loss with respect to such
Properties allocable to the Member or Members who did not make such contribution
shall be that amount which it would have been if the adjusted basis of such
Properties had been equal to its Agreed Value. For such purposes, the Company
shall utilize the remedial allocation method as described in Treas. Reg. ss.
1.704-3.
2.9 DESIGNATION OF TAX MATTERS MEMBER. Summit is hereby designated as the
"Tax Matters Member" under Section 6231(a)(7) of the Code, to manage
administrative tax proceedings conducted at the Company level by the Internal
Revenue Service with respect to Company matters. Summit shall take no action in
its capacity as Tax Matters Member in any audit, administrative proceeding or
judicial proceeding involving the potential adjustment or altering the character
of any material item on a tax return of the Company without the prior written
consent of Hollow Creek. Expenses of administrative proceedings relating to the
determination of Company items at the Company level undertaken by the Tax
Matters Member shall be expenses of the Company.
2.10 MAINTENANCE OF CAPITAL ACCOUNTS. Separate capital accounts shall be
maintained for the Members, and the following provisions shall apply in
maintaining the capital accounts and in allocating profits and losses:
2.10.1 MAINTENANCE OF CAPITAL ACCOUNTS. Company shall maintain a
capital account for each Member in accordance with the rules set forth in
Treasury Regulation ss. 1.704-1(b).
2.10.2 CREDITS AND DEBITS. In general, each Member's capital account
shall be increased (credited) by (a) the amount of money and the fair
market value of property contributed by such Member to the Company (net of
any liabilities to which the contributed property is subject), and (b) all
items of Profit, income and gain (including income and gain, if any,
exempt from tax and items allocated pursuant to Section 4.2) allocated to
such Member; and shall be decreased (debited) by (c) the amount of money
and the fair market value of property distributed to such Member (net of
any liabilities assumed by such Member and liabilities to which such
distributed property is subject, and
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after adjusting the Members' capital accounts by the Members' shares of
the unrealized income, gain, loss and deduction inherent in such property
and not reflected in such capital accounts previously, as if the property
had been sold for its then fair market value), (d) all items of deduction
and Loss (including any items allocated pursuant to Section 4.2) allocated
to such Member, and (e) allocations to such Member of expenditures of the
Company described in ss. 705(a)(2)(B) of the Code.
2.10.3 CONTRIBUTED PROPERTY. If the contributed property is
reflected on the books of the Company at a book value that differs from
the adjusted tax basis of the property, then the capital accounts will be
adjusted for allocations of income, gain, deduction and loss with respect
to such property as computed for book purposes, and the Members'
distributive shares of the corresponding tax items will not be
independently reflected in such capital accounts, all as set forth in
Treasury Regulation ss. 1.704-1(b). In determining each Members'
distributive share of the taxable income or loss of the Company for
Federal tax purposes, income, gain, loss or deduction with respect to the
contributed property shall be allocated to each Member in such a manner as
will take into account (as required by ss. 704(c) of the Code and any
applicable Treasury Regulations thereunder) the difference between the
adjusted basis for Federal income tax purposes of such property to the
Company and the agreed fair market value of such property at the time of
its contribution.
2.10.4 ADJUSTMENTS. If any Interest is transferred pursuant to the
terms of this Agreement, the transferee shall succeed to the capital
account of the transferor to the extent the capital account is
attributable to the transferred Interest. If the book value of Company
property is adjusted pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(f), the capital account of each Interest Holder shall be
adjusted to reflect the aggregate adjustment in the same manner as if the
Company had recognized gain or loss equal to the amount of such aggregate
adjustment. It is intended that the capital accounts for all Members shall
be maintained in compliance with the provisions of Treasury Regulation
Section 1.704-1(b), and all provisions of this Agreement relating to the
maintenance of capital accounts shall be interpreted and applied in a
manner consistent with that Treasury Regulation.
2.10.5 COMPUTATION DATES. In computing a Member's capital account as
of any given date in the manner provided above, any Profit or Loss
realized or incurred by the Company for any Fiscal Year ending on or prior
to
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such date shall be allocated to the Members and taken into account in
computing such Member's capital account as of such date.
2.10.6 NON-INTEREST BEARING. No interest shall be paid by the
Company on capital contributions or on balances in the Members' capital
accounts.
2.10.7 LIMIT ON WITHDRAWALS AND DISTRIBUTIONS. No Member shall be
entitled to withdraw any part of his capital contribution or his capital
account or to receive any distribution from the Company, except as
expressly provided herein.
2.11 LOANS FROM MEMBERS. No Member shall be obligated to lend any money to
the Company. Except as provided in Section 6.3.2 and in Section C(2) of Addendum
I, the Company shall not borrow any money without the approval of the Members as
set forth in Article V. If following approval by the Members pursuant to Section
5.1, any Member shall lend any money to the Company (herein referred to as a
"Loan" from the applicable Member(s) and collectively as the "Loans" of the
Members) such Loans shall bear interest at a rate (a) which is 4% above the
average of the prime rate prevailing and published from time to time at
NationsBank, N.A. while such Loans are outstanding, adjusted as of the date of
each prime rate change at said institution (such average NationsBank rate being
the "Base Rate"), or (b) the highest rate of interest permitted by law for the
lending Member which, if exceeded, could subject the lending Member to penalties
for usury, whichever is the lesser of the two amounts. If, following such
approval, any Member shall make a Loan to the Company, such Loan shall not
increase the capital account of such Member or entitle the Member to any
increase in its share of the distributions of the Company. Such Loan shall be an
obligation of the Company, no Member shall be personally obligated to repay the
Loan, and the Loan shall be payable or collectible only out of the assets of the
Company. If, at any time, the terms of several Loan documents require payment of
interest or of principal to be made in an identical manner and on the same
dates, and neither of the Loans has priority over the other pursuant to the
terms of such Loan documents, all payments of interest thereon shall be made pro
rata, in proportion to the total balance of interest then due and payable on
each of such Loans and thereafter, any repayments of the principal balance of
such Loans shall be made pro rata, in proportion to the remaining total
principal balance of each of such Loans.
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ARTICLE III.
CAPITAL CONTRIBUTIONS
3.1 CLOSING DATE. The date upon which the Lender funds the Mortgage,
Hollow Creek purchases the Hollow Creek Properties from Summit pursuant to the
Purchase Agreement and the Members contribute their Capital Contributions
required to be contributed at such time (subject, however, to the provisions of
Section 3.4 and 3.5), shall be referred to as the "Closing Date". Summit shall
give Hollow Creek at least five business days prior written Notice (the "Closing
Notice") of a proposed Closing Date, which proposed date shall occur no later
than December 31, 1998. Notwithstanding such Closing Notice, Hollow Creek shall
select the actual Closing Date by providing Notice to Summit, which Notice shall
be given after receipt of the Closing Notice from Summit and receipt of evidence
satisfactory to Hollow Creek demonstrating that Summit will be capable of
satisfying all of the Hollow Creek Closing Conditions. The actual Closing Date
selected by Hollow Creek shall occur within five business days of the date
proposed by Summit as set forth in Summit's Closing Notice.
3.2 CLOSING DATE TRANSACTIONS. On the Closing Date, (a) subject to the
Summit Closing Conditions set forth in Section 3.5, Summit shall convey the
Summit Properties to the Company pursuant to a special warranty deed
substantially in the form of Exhibit A hereto (the "Summit Deed") as its Initial
Capital Contribution, (b) subject to the closing conditions set forth in the
Purchase Agreement, Hollow Creek shall purchase the Hollow Creek Properties from
Summit pursuant to the Purchase Agreement, (c) subject to the Hollow Creek
Closing Conditions set forth in Section 3.4, Hollow Creek shall contribute the
Hollow Creek Properties to the Company pursuant to a special warranty deed
substantially in the form of Exhibit B hereto (the "Hollow Creek Deed") as its
Initial Capital Contribution, (d) Hollow Creek and Summit shall execute, where
necessary, and deliver to the Company, those documents relating to the Hollow
Creek Properties and Summit Properties, respectively, substantially in the same
form as provided in Section 3(c)(2)-(5),(7),(9)-(16) of the Purchase Agreement;
(e) the Company shall close the Mortgage transaction and execute assignment and
assumption agreements substantially in the same form as provided in Section 3(d)
of the Purchase Agreement, and (f) the Members shall make additional capital
contributions (the "Special Capital Contributions") in cash to the Company equal
to any additional amounts which are needed by the Company to pay closing costs
payable by the Company in connection with the foregoing transactions and are not
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financed by the Mortgage, such Special Capital Contributions to be made on a pro
rata basis based on the Members' Percentages.
3.3 REDEMPTION OF THE INTERESTS OF HOLLOW CREEK. In the event that (a)
Lender does not fund the Mortgage or Summit does not contribute all of its
Initial Capital Contribution and any Special Capital Contribution required to be
contributed on the Closing Date in full on the Closing Date, for any reason,
including but not limited to a failure by Summit to satisfy one or more of the
Hollow Creek Closing Conditions as required by Section 3.4, and (b) Hollow Creek
has made a Capital Contribution to the Company or purchased the Hollow Creek
Properties from Summit pursuant to the Purchase Agreement, Hollow Creek shall,
without waiver of any other rights and remedies which may be available to Hollow
Creek at law or in equity, have the right to cause the Company and Summit to (i)
redeem the entire interest in the Company of Hollow Creek for a purchase price
to Hollow Creek equal to the amount, if any, by which the sum of (w) all Capital
contributed prior to the date of withdrawal by Hollow Creek to the Company
(valuing any Hollow Creek Property contributed by Hollow Creek to the Company at
the agreed value set forth on Schedule III hereto) plus an amount equal to the
excess of (x) any Profit of the Company allocated to Hollow Creek under this
Agreement over the sum of (y) all cash distributions previously made to Hollow
Creek under this Agreement and (z) any Loss allocated to Hollow Creek under this
Agreement, and (ii) if any of the Hollow Creek Properties have been purchased by
Hollow Creek from Summit pursuant to the Purchase Agreement but not yet
contributed to the Company for any reason, an amount equal to all payments made
by Hollow Creek pursuant to the Purchase Agreement with respect to such Hollow
Creek Properties, whereupon Hollow Creek shall either contribute such Hollow
Creek Properties to the Company pursuant to a Hollow Creek Deed or reconvey them
by a similar deed to Summit, as directed by Summit. All expenses of any such
redemption and reconveyance shall be for the account of Summit. The withdrawal
of Hollow Creek and the redemption of its interest in the Company shall be
effective as of the date specified by Hollow Creek and shall be accomplished by
the termination of this Agreement as a result of the withdrawal of Hollow Creek
from the Company, the execution of a quitclaim deed to the Properties by the
Members and the distribution of the Properties to Summit. The Company and each
Member hereby acknowledge and agree that any distributions to Hollow Creek of
its entire interest in the Company in accordance with this Section 3.3 shall be
treated as a distribution to Hollow Creek pursuant to Section 736(b) of the
Code.
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3.4 HOLLOW CREEK CLOSING CONDITIONS. The following requirements and
obligations are and shall be conditions precedent to, and shall be satisfied by
Summit prior to the contribution of any Capital Contribution of Hollow Creek
required to be contributed on the Closing Date (herein referred to individually
as a "Hollow Creek Closing Condition" and collectively as the "Hollow Creek
Closing Conditions"). Time is of the essence of the Hollow Creek Closing
Conditions to enable closing in accordance with Section 3.2. Summit shall use
its best efforts to satisfy the Hollow Creek Closing Conditions within the
period established for the occurrence of the Closing Date. Hollow Creek shall
not have any obligation to make any Capital Contribution required to be
contributed on the Closing Date unless Summit has complied with each and every
one of the Hollow Creek Closing Conditions set forth herein. Hollow Creek,
however, shall have the right, in its sole discretion, to waive a Hollow Creek
Closing Condition, in the event of any failure by Summit to fulfill all of the
Hollow Creek Closing Conditions prior to the time period established for the
occurrence of the Closing Date in accordance with Section 3.1, or unilaterally
to extend the time for the occurrence of the Closing Date to allow Summit to
fulfill the Hollow Creek Closing Conditions. No such extension of the time
period for the occurrence of the Closing Date shall be effective unless
expressly given in writing signed by a duly authorized representative of Hollow
Creek. The waiver of any Hollow Creek Closing Condition shall not constitute a
waiver of any other Hollow Creek Closing Condition; nor shall the failure of
Hollow Creek to complain of the failure of any of the Hollow Creek Closing
Conditions or to declare Summit or the Company in default with respect to any
Hollow Creek Closing Condition constitute a waiver by Hollow Creek of such
Hollow Creek Closing Condition, so long as such failure by Hollow Creek has not
continued for a period of more than 30 days after the Closing Date.
3.4.1 CAPITAL CONTRIBUTIONS OF SUMMIT. Summit shall have contributed
its Initial Capital Contribution by conveyance of the Summit Properties
pursuant to the Summit Deed as set forth herein, as of the Closing Date,
and paid to the Company in cash any Special Capital Contribution which
Summit may be required to contribute on the Closing Date;
3.4.2 SUMMIT PROPERTIES. The conditions set forth in Schedule V
(which is hereby incorporated by reference herein as if set forth in full
herein) with respect to the Summit Properties shall be duly satisfied,
completed and fulfilled in all respects and all amounts required thereby
to be paid shall have been paid in full, and Summit shall have provided
Hollow Creek with evidence to such effect reasonably satisfactory to
Hollow Creek.
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3.4.3 ENVIRONMENTAL ASSESSMENT. Hollow Creek shall have completed
its due diligence investigation and analyses of the Properties and,
without limitation thereof, shall have received an environmental
assessment conducted on each Summit Property by an independent engineering
firm of Hollow Creek's choice and at the Company's cost prior to November
15, 1998. If it appears said assessment shall not be completed by such
date, the parties may agree to an extension of the due diligence period by
Hollow Creek giving Summit written Notice of the need for additional time
to complete said report at least 10 days prior to November 15, 1998,
setting out the length of the requested extension. Summit shall promptly
notify Hollow Creek of its consent or non-consent to said extension in
writing. If Summit does not notify Hollow Creek at least five days after
Hollow Creek's extension request of its consent or nonconsent to said
extension, Summit will be deemed to have consented to said extension.
Summit's contribution of the Summit Properties to the Company shall be
contingent on Hollow Creek's approval of the results of said environmental
assessment. If Hollow Creek does not approve said environmental assessment
results or if the assessment report is not completed within the allowed
time and Summit does not consent to an additional extension, Hollow Creek
may terminate this Agreement without liability to Summit by giving Summit
written Notice of its disapproval. Said written Notice of disapproval
shall be given within 10 days after expiration of the due diligence
period. Regardless of whether Hollow Creek approved the environmental
assessment report, Hollow Creek shall provide Summit with a copy of said
report within 10 days after it has been received by Hollow Creek in a
final completed form.
3.4.4 REPRESENTATIONS AND WARRANTIES OF SUMMIT. The representations
and warranties of Summit contained in Section 1.5 and the representations
and warranties set forth in Schedule VI with respect to the Summit
Properties (which is hereby incorporated by reference herein as if set
forth in full herein) shall each be true and correct and Hollow Creek
shall have received a certificate to that effect signed by the general
partner of Summit. All other representations and warranties made by Summit
to Hollow Creek in this Agreement or any other document or instrument
delivered by Summit with respect to the Properties shall be true and
correct as of the Closing Date in all respects.
3.4.5 BANKRUPTCY OR INSOLVENCY. Neither Summit nor the Company shall
have committed any act which would provide grounds for the entry of any
order for relief under the Federal Bankruptcy Code; and
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there shall not have been filed by Summit, the Company or any other Person
or entity in any court or with any governmental body pursuant to any
statute of the United States of America or of any State, a petition
seeking relief for bankruptcy or insolvency of Summit or the Company, or
seeking to effect any plan or other arrangement with or for the benefit of
creditors or seeking the appointment of a receiver, transfer or custodian
for all or a substantial portion of the assets of Summit or the Company;
3.4.6 NO LITIGATION. There shall not exist, either as of the date of
execution of this Agreement or as of the Closing Date, (x) any final
judgment or decree issued by any court or administrative agency of
competent jurisdiction, or (y) any pending suit, litigation or other
proceeding before any court, quasi-judicial body or administrative agency
brought by any Person or governmental agency:
(I) Against Summit or the Company with respect to any Property
or otherwise against or with respect to any Property (other than
suits filed by mechanics or materialmen furnishing labor, services
or materials with respect to the construction of such Property for
which bonds reasonably satisfactory to Hollow Creek have been
obtained); or
(II) Against any of Summit or the manager of the Properties if
such judgment decree, suit, litigation, or other proceeding could,
in the sole opinion of Hollow Creek, if adversely determined, impair
the ability of Summit, or the manager of the Properties, as the case
may be, to discharge its duties and obligations under or with
respect to this Agreement, under the Property Management Agreement
or otherwise with respect to the Properties.
3.4.7 APPROVAL OF AGREEMENTS WITH SUMMIT OR ITS AFFILIATES. If any
material, labor and/or services for, or with respect to, any Property are
to be furnished by any firm in which Summit (or any Affiliate of Summit or
any of the general or limited partners of Summit or any Affiliate of
Summit) has any present or contemplated interest, such interest must have
been expressly disclosed in writing to Hollow Creek at least five business
days before the Closing Date, and any dealings with any such firm
(including, without limitation, any written agreement therewith) must have
been expressly approved in advance of the Closing Date in writing by
Hollow Creek (for purposes of this Section 3.4.7, the Property Management
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Agreement to be entered into on the Closing Date pursuant to Section 5.3
shall be deemed to have been so approved by Hollow Creek).
3.4.8 NONFOREIGN AFFIDAVIT. Hollow Creek shall have received from
the general partner of Summit an affidavit by Summit stating, under
penalty of perjury, the United States taxpayer identification number of
Summit and that Summit is not a "foreign person" as defined in Section
1445 of the Code.
3.4.9 NO DEFAULT. There must be no default or condition, as of the
Closing Date, which constitutes or, with the passage of time or notice, or
both, would constitute, a default by the Company or Summit under (a) this
Agreement, the Purchase Agreement, the Mortgage Documents or the Property
Management Agreement, (b) more than 2% of the Approved Leases in effect on
the Closing Date or (c) any other agreement or instrument relating to the
Properties which default could reasonably be expected to have a material
adverse effect on the Company or its business or on the ability of the
Company or Summit to perform their obligations under this Agreement, the
Purchase Agreement, the Mortgage Documents or the Property Management
Agreement.
3.4.10 HOLLOW CREEK PROPERTIES. Subject only to payment of the
purchase price therefor by Hollow Creek, all closing conditions to the
Hollow Creek's purchase of the Hollow Creek Properties shall have been
satisfied in accordance with the Purchase Agreement.
3.4.11 MORTGAGE. Summit shall have obtained a non-recourse permanent
loan to the Company in an amount not less than $68,625,000, for a term of
at least ten years at an interest rate of not more than 7.2% per annum to
be secured only by a lien on, and cash flow generated from, the Property
owned by the Company on the Closing Date (the "Mortgage"). The documents
evidencing the Mortgage and creating a security interest in the Properties
and any other capital assets of the Company owned by the Company on the
Closing Date (the "Mortgage Documents") shall be approved by Hollow Creek
prior to the Closing Date. It is intended that the funds to be disbursed
from the Mortgage on the Closing Date shall be paid out to the Members as
Capital Proceeds.
3.4.12 PROPERTY MANAGEMENT AGREEMENT. The Property Management
Agreement shall have been executed and delivered by the Company and the
Property Manager substantially in the form of Exhibit E
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hereto and any previous management agreement with respect to the
Properties shall have been terminated in writing satisfactory in form and
substance to Hollow Creek.
3.4.13 REIT OPTION. Hollow Creek and the REIT shall have entered
into an Option Agreement and a Registration and Shareholder Rights
Agreement, each satisfactory in form and substance to Hollow Creek, giving
TTIC or one of its Affiliates the right to purchase up to 5% of the common
stock of the REIT on the terms set forth in the letter of intent dated
September 2, 1998, between TTIC and the REIT.
3.4.14 DOCUMENTS AND INSTRUMENTS: OPINIONS OF COUNSEL. Hollow Creek
shall have received and approved such documents and instruments as may be
reasonably deemed by Hollow Creek to be necessary or desirable in
connection with the transactions contemplated by this Agreement and such
certificates and opinions of counsel as Hollow Creek may reasonably
request to evidence or establish the foregoing matters, including the due
authorization, validity and enforceability in accordance with its terms of
each such document and instrument.
3.5 SUMMIT CLOSING CONDITIONS. The following requirements and obligations
are and shall be conditions precedent to, and shall be satisfied by Hollow Creek
prior to the contribution of any Capital Contribution of Summit (including the
contribution to the Company of the Summit Properties) required to be contributed
on the Closing Date (herein referred to individually as a "Summit Closing
Condition" and collectively as the "Summit Closing Conditions"). Time is of the
essence of the Summit Closing Conditions to enable closing in accordance with
Section 3.2. Hollow Creek shall use its best efforts to satisfy the Summit
Closing Conditions applicable to it within the period established for the
occurrence of the Closing Date. Summit shall not have any obligation to make any
Capital Contribution required to be contributed on the Closing Date unless
Hollow Creek has complied with each and every one of the Summit Closing
Conditions set forth in this Section 3.5. Summit, however, shall have the right,
in its sole discretion, to waive a Summit Closing Condition, in the event of any
failure by Hollow Creek to fulfill all of the Summit Closing Conditions prior to
the time period established for the occurrence of the Closing Date in accordance
with Section 3.1, or unilaterally to extend the time for the occurrence of the
Closing Date to allow Hollow Creek to fulfill the Summit Closing Conditions. No
such extension of the time period for the occurrence of the Closing Date shall
be effective unless expressly given in writing signed by a duly authorized
representative of Summit. The waiver of any Summit Closing Condition shall not
constitute a waiver of any other Summit Closing Condition; nor shall the failure
of Summit to complain of the failure of any of the Summit Closing Conditions or
to declare Hollow Creek in default with respect to any Summit Closing Condition
constitute a waiver by Summit of such Summit
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Closing Condition, so long as such failure by Summit has not continued for a
period of more than 30 days after the Closing Date.
3.5.1 CAPITAL CONTRIBUTIONS OF HOLLOW CREEK. As of the Closing Date,
Hollow Creek shall have (i) purchased the Hollow Creek Properties from
Summit pursuant to the Purchase Agreement, (ii) contributed its Initial
Capital Contribution by conveyance of the Hollow Creek Properties to the
Company, free and clear of any lien or encumbrance arising by, through or
under Hollow Creek, pursuant to the Hollow Creek Deed as set forth herein
and (iii) made any Special Capital Contribution to the Company which
Hollow Creek may be required to contribute on the Closing Date.
3.5.2 REPRESENTATIONS AND WARRANTIES OF HOLLOW CREEK. The
representations and warranties of Hollow Creek contained in Section 1.5
shall be true and correct and Summit shall have received a certificate to
such effect signed by the President or any Vice President of Hollow Creek.
All other representations and warranties made by Hollow Creek to Summit in
this Agreement or any other document or instrument delivered by Hollow
Creek in connection with this Agreement and the transactions contemplated
hereby shall be true and correct as of the Closing Date in all respects.
3.5.3 BANKRUPTCY OR INSOLVENCY. Hollow Creek shall not have
committed any act which would provide grounds for the entry of any order
for relief under the Federal Bankruptcy Code; and there shall not have
been filed by Hollow Creek or any other Person or entity in any court or
with any governmental body pursuant to any statute of the United States of
America or of any State, a petition seeking relief for bankruptcy or
insolvency of Hollow Creek or seeking to effect any plan or other
arrangement with or for the benefit of creditors or seeking the
appointment of a receiver, transfer or custodian for all or a substantial
portion of the assets of Hollow Creek.
3.5.4 NO LITIGATION. There shall not exist, either as of the date of
execution of this Agreement or as of the Closing Date, (x) any final
judgment or decree issued by any court or administrative agency of
competent jurisdiction, or (y) any pending suit, litigation or other
proceeding before any court, quasi-judicial body or administrative agency
brought by any Person or governmental agency against Hollow Creek if such
judgment decree, suit, litigation, or other proceeding could, in the sole
opinion of
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Summit, if adversely determined, impair the ability of Hollow Creek to
discharge its duties and obligations under or with respect to this
Agreement.
3.5.5 NO DEFAULT. There must be no default or condition, as of the
Closing Date, which constitutes or, with the passage of time or notice, or
both, would constitute, a default by Hollow Creek under this Agreement.
3.5.6 PROPERTY MANAGEMENT AGREEMENT. The Property Management
Agreement shall have been executed and delivered by the Company and the
Property Manager substantially in the form attached hereto as Exhibit E.
3.5.7 DOCUMENTS AND INSTRUMENTS: OPINIONS OF COUNSEL. Summit shall
have received and approved such documents and instruments as may be
reasonably deemed by Summit to be necessary or desirable in connection
with the transactions contemplated by this Agreement and such certificates
and opinions of counsel as Summit may reasonably request to evidence or
establish the foregoing matters, including the due authorization, validity
and enforceability in accordance with its terms of each such document and
instrument.
3.6 LIMITED ENVIRONMENTAL INDEMNIFICATION BY SUMMIT. Summit shall
indemnify Hollow Creek and the Company against all claims, costs, liabilities
and payments which may be imposed upon the Company by reason of any condition of
a Summit Property existing on the Closing Date, which (a) violates any
applicable environmental law, permit, or regulation, or (b) with respect to
toxic substances or hazardous wastes, as those terms are defined by applicable
Federal or state law, would on the Closing Date have placed Summit in violation
of any applicable environmental law, permit, or regulation if the existence of
the condition had been known by Summit and had been left uncorrected on the
Closing Date (hereinafter "Environmental Payments"), provided that such
indemnity shall terminate and cease to be of any effect on the fifth anniversary
of the Closing Date; provided that in the event that on or before on the fifth
anniversary of the Closing Date, the Company receives notice of a condition or
event reasonably calculated to require Environmental Payments, this indemnity
shall apply to such Environmental Payments even if actually made by the Company
after such anniversary of the Closing Date.
3.7 ADDITIONAL CAPITAL CONTRIBUTIONS. Upon the consent of all Members,
Interest Holders shall be required to make additional capital contributions
("Additional Capital Contributions") to the Company pro rata in accordance with
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their Percentages. At such time as the Members determines that the Company
requires Additional Capital Contributions, the Manager shall so notify each of
the Members by the issuance of a Notice which shall state (x) the amount of the
required additional funding which each Member receiving the Notice shall be
required to contribute as an Additional Capital Contribution determined by
multiplying the then existing Percentage Interest of each Member at the time of
the issuance of such Notice by the total amount of such required additional
funding, and (y) the reasons of the Members for requiring such Additional
Capital Contributions. Each Member shall contribute any required Additional
Capital Contribution in the amount specified in the Notice within 20 days of the
receipt of such Notice.
3.8 CAPITAL OF THE PARTNERSHIP. The capital of the Company shall be the
Initial Capital Contributions, the Special Capital Contributions and the
Additional Capital Contributions expressly required by this Article III (the
"Capital"). No Member shall have any obligation to make any contribution to the
Capital of the Company or to advance any funds thereto other than the
obligations of the Members to contribute the Initial Capital Contributions, the
Special Capital Contributions and the Additional Capital Contributions. No
Related Person shall be personally liable for the return of the Capital
Contributions of any other Member or any portion thereof and such return shall
be made solely from available Company assets, if any.
3.9 NO INTEREST PAYABLE. No Member shall receive any interest on its
contributions to the Capital of the Company.
3.10 NO WITHDRAWALS. No Member shall be entitled to withdraw all or
any portion of its contributions to the Capital of the Company.
3.11 HART-SCOTT-RODINO FILING. Summit, Hollow Creek and the Company agree
to cooperate in making any filing required by the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 ("HSR ACT"), as amended, and the regulations thereunder.
Each party shall make all filings required under the HSR Act within ten (10)
days after the execution of this Agreement, and upon the request of the Federal
Trade Commission and/or the Department of Justice, shall make any additional
filings and furnish all additional information required to comply with the
provisions of the HSR Act. If either the Justice Department, the Federal Trade
Commission, or any other governmental agency commences action to suspend or
prevent the transactions contemplated by this Agreement, and such action is not
finally dismissed prior to the Closing Date, then either Hollow Creek or Summit
may by written notice given to the other parties prior to the Closing Date
terminate
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this Agreement, in which case this Agreement shall terminate and no party shall
have any further rights or obligations hereunder.
3.12 SUMMIT NAME. The parties agree that the name "Summit" shall be used
with respect to the Properties in accordance with Summit's practices prior to
the Closing Date so long as either (x) Summit Management Company ("SMC") or
another affiliate of Summit acts as the Property Manager or (y) Summit or any of
its affiliates is a member of the Company. If at any time, either (i) neither
Summit nor any of its affiliates acts as the Property Manager or (ii) neither
Summit nor any of its affiliates is a member of the Company, then Summit may,
its sole option and discretion, require that the Company cease use of the name
"Summit" in connection with any of the Properties (including, without
limitation, in any logos, trade marks, service marks, brochures, or marketing
information). In the event that both (A) neither Summit nor any of its
affiliates acts as the Property Manager and (B) neither Summit nor any of its
affiliates is a member of the Company, then use of the name "Summit" in
connection with any of the Properties shall be prohibited (including, without
limitation, in any logos, trade marks, service marks, brochures or marketing
information). If use of the name "Summit" is no longer permitted pursuant to the
terms of this SECTION 3.12, the Company shall promptly remove from the
Properties any signage containing the name "Summit" and destroy or return to
Summit all brochures, printed material or marketing information containing the
name "Summit". The parties agree that this provision related to the use of the
name "Summit" shall survive the termination of this Agreement.
ARTICLE IV.
ALLOCATION OF PROFITS AND LOSSES;
DIVISION OF CASH FLOW
4.1 ALLOCATION OF PROFITS AND LOSSES.
4.1.1 PROFITS. Except as otherwise provided in Section 4.2, if the
Company has a Profit for any year or other period, such Profit shall be
allocated among the Members in the following priorities and amounts:
(A) First, to the Members pro rata based on, and to the extent
of, the amount of cumulative Losses allocated to each respective
Member pursuant to Section 4.1.2;
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(B) Second, to the Members pro rata based on, and to the
extent of, the difference between (i) the cumulative amount of
distributions each Member has received pursuant to Section 4.4
hereof and (ii) the cumulative amount of Profits that has been
allocated to each Member pursuant to this Section 4.1.1(b);
(C) Third, to the Members in such proportions and amounts as
necessary to cause each Member's capital account balance (after
being adjusted for all prior allocations of Profits and Losses and
all distributions pursuant to Sections 4.4 and 4.5 hereof) to equal
(i) in the case of the dissolution of the Company, the amount of
distributions it will receive pursuant to Section 4.6 hereof, and
(ii) in all other cases, the amount of distributions it would
receive pursuant to Section 4.6 hereof if all the Company's
remaining assets (i.e., the assets that are not being sold or
disposed of) were sold for their book values (as determined for
Section 704(b) capital account purposes), all of the Company's
liabilities were paid, and the net proceeds were distributed
pursuant to Section 4.6 hereof; and
(D) Fourth, to the Members in accordance with their respective
Percentages.
4.1.2 LOSSES. Except as otherwise provided in Section 4.2, if the
Company has a Loss for any year or other period, such Loss shall be
allocated among the Members in the following priorities and amounts:
(A) First, to the Members in accordance with their respective
positive capital account balances; and
(B) Thereafter, to the Members in accordance with their
respective Percentages.
4.2 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order and priority:
4.2.1 MINIMUM GAIN CHARGEBACK.
(A) COMPANY MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Section 1.704-2(f) of the Regulations, notwithstanding
any other provision of this Article IV, if there is a net
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decrease in Company minimum gain during any fiscal year, each Member
shall be specially allocated items of Company income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Member's share of the net decrease in Company
minimum gain, determined in accordance with 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 so
allocated shall be determined in accordance with Sections
1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Subsection
4.2.1(a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(f) of the Regulations and shall be
interpreted consistently therewith.
(B) MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Section 1.704-2(i)(4) of the Regulations,
notwithstanding any other provision of this Article IV, if there is
a net decrease in Member nonrecourse debt minimum gain attributable
to a Member nonrecourse debt during any Company fiscal year, each
Member who has a share of the Member nonrecourse debt minimum gain
attributable to such Member nonrecourse debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be
specially allocated items of Company income and gain for such fiscal
year (and, if necessary, subsequent fiscal years) in an amount equal
to such Member's share of the net decrease in Member nonrecourse
debt minimum gain attributable to such Member nonrecourse debt,
determined in accordance with 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 Sections 1.704-2(i)(4) and
1.704-2(j)(2) of the Regulations. This Subsection 4.2.1(b) is
intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith.
(C) MEMBER NONRECOURSE DEDUCTIONS. Any Member nonrecourse
deductions for any fiscal year shall be specially allocated to the
Member who bears the economic risk of loss with respect to the
Member nonrecourse debt to which such Member nonrecourse deductions
are attributable in accordance with Regulations Section
1.704-2(i)(1).
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4.2.2 QUALIFIED INCOME OFFSET. Any Member who unexpectedly receives
an adjustment, allocation or distribution described in Treasury Regulation
ss.1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or increases a negative
balance in its capital account shall be allocated items of income and gain
sufficient to eliminate such increase or negative balance caused thereby,
as quickly as possible, to the extent required by such Treasury
Regulation.
4.2.3 GROSS INCOME ALLOCATION. In the event any Member has a deficit
capital account at the end of any Company fiscal year which is in excess
of the sum of (i) the amount such Member is obligated to restore pursuant
to any provision of this Agreement and (ii) the amount such Member is
deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulation ss.ss.1.704-2(g)(1) and 1.704-2(i)(5), each such
Member shall be specially allocated items of Company income and gain in
the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Subsection 4.2.3 shall be made only if and to
the extent that such Member would have a deficit capital account in excess
of such sum after all other allocations provided for in this Article IV
have been made as if this Subsection 4.2.3 were not in this Agreement.
4.2.4 SECTION 704(B) LIMITATION. Notwithstanding any other provision
of this Agreement to the contrary, no allocation of any item of income or
loss shall be made to a Member if such allocation would not have "economic
effect" pursuant to Treasury Regulation ss.1.704-1(b)(2)(ii) or otherwise
be in accordance with its interest in the Company within the meaning of
Treasury Regulation ss.ss.1.704-1(b)(3) and 1.704-2. To the extent an
allocation cannot be made to a Member due to the application of this
Subsection 4.2.4, such allocation shall be made to the other Member(s)
entitled to receive such allocation hereunder.
4.2.5 CURATIVE ALLOCATIONS. Any allocations of items of income,
gain, or loss pursuant to Subsections 4.2.1 through 4.2.4 shall be taken
into account in computing subsequent allocations pursuant to this Article
IV, so that the net amount of any items so allocated and the income,
losses, and other items allocated to each Member pursuant to this Article
IV shall, to the extent possible, be equal to the net amount that would
have been allocated to each Member had no allocations ever been made
pursuant to Subsections 4.2.1 through 4.2.4.
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4.2.6 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain,
loss, and deduction with respect to any property contributed to the
capital of the Company shall, solely for tax purposes, be allocated among
the Members so as to take account of any variation between the adjusted
basis of such property to the Company for Federal income tax purposes and
its fair market value at the time of its contribution. For such purposes,
the Company shall utilize the remedial allocation method set forth in
Treas. Reg. ss. 1.704-3. Allocations pursuant to this Subsection 4.2.6 are
solely for purposes of Federal, state, and local taxes and shall not
affect, or in any way be taken into account in computing, any Member's
capital account or share of income, losses, other items, or distributions
pursuant to any provision of this Agreement.
4.3 GENERAL.
4.3.1 IN-KIND DISTRIBUTIONS. If any assets of the Company are
distributed in kind to the Members, those assets shall be valued on the
basis of their Fair Market Value. Unless the Members otherwise agree, the
fair market value of the assets shall be determined by an independent
appraiser who shall be selected by the Members. The Profit or Loss for
each unsold asset shall be determined as if the asset had been sold at its
Fair Market Value, and the Profit or Loss shall be allocated as provided
in this Article IV and shall be properly credited or charged to the
capital accounts of the Members.
4.3.2 PROFIT AND LOSS. All Profit and Loss shall be allocated, and
all distributions shall be made, to the Persons shown on the records of
the Company to have been Members as of the last day of the taxable year
for which the allocation or distribution is to be made. Notwithstanding
the foregoing, if there is a transfer of an interest in the Company during
the taxable year, the Profit and Loss shall be allocated between the
original Member and the successor on the basis of the Company's taxable
year, segregated into two or more segments in order to account for Profit,
Loss or proceeds attributable to any extraordinary non-recurring items of
the Company.
4.4 DISTRIBUTION OF CASH FLOW FROM OPERATIONS. Except as otherwise
provided in Sections 4.5 and 4.6, the Company's Net Cash Flow shall be
distributed to the Members, no less frequently than quarterly, in the following
priorities and amounts:
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(A) First, at any time that Hollow Creek has received less than a 10%
cumulative annually-compounded return on its investment (determined in
accordance with the provisions of Section 4.7):
(1) If Summit has previously received distributions pursuant to
Section 4.4(b)(2)(ii) and if the application of Section 4.4(a)(2) would not
result in Hollow Creek having received a cumulative annually-compounded return
on its investment of at least 10% (determined in accordance with the provisions
of Section 4.7), then
(A) First, until Hollow Creek has received a cumulative
annually-compounded return on its investment of 10%, 100% to Hollow Creek
in an amount not to exceed the product of the Percentage Reciprocal and
the Net Cumulative Priority Distributions; and
(B) Second, to the Members in accordance with their respective
Percentages;
(2) Otherwise, to the Members in accordance with their respective
Percentages;
(B) Second, at any time that Hollow Creek has received a cumulative
annually-compounded return on its investment between 10% and 15% (determined in
accordance with the provisions of Section 4.7):
(1) If Summit has previously received distributions pursuant to
Section 4.4(c)(2)(ii) and if the application of the provisions of Section
4.4(b)(2) would not result in Hollow Creek having received a cumulative
annually-compounded return on its investment of at least 15% (determined in
accordance with the provisions of Section 4.7), then
(A) First, until Hollow Creek has received a cumulative
annually-compounded return on its investment of 15%, 100% to Hollow Creek
in an amount not to exceed the product of the Percentage Reciprocal and
the Net Cumulative Second Tier Priority Distributions; and
(B) Second, to the Members in accordance with Section
4.4(b)(2);
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(2) Otherwise, (i) (100% minus the product of .4 and Summit's
Percentage) to the Members in accordance with their respective Percentages and
(ii) (the product of .4 and Summit's Percentage) to Summit;
(C) Third, at any time that Hollow Creek has received a cumulative
annually-compounded return on its investment between 15% and 20% (determined in
accordance with the provisions of Section 4.7):
(1) If Summit has previously received distributions pursuant to
Section 4.4(d)(ii) and if the application of the provisions of Section 4.4(c)(2)
would not result in Hollow Creek having received a cumulative
annually-compounded return on its investment of at least 20% (determined in
accordance with the provisions of Section 4.7), then
(A) First, until Hollow Creek has received a cumulative
annually-compounded return on its investment of 20%, 100% to Hollow Creek
in an amount not to exceed to the product of the Percentage Reciprocal and
the Net Cumulative Third Tier Priority Distributions; and
(B) Second, to the Members in accordance with Section
4.4(c)(2);
(2) Otherwise, (i) (100% minus the product of .8 and Summit's
Percentage) to the Members in accordance with their respective Percentages and
(ii) (the product of .8 and Summit's Percentage) to Summit; and
(D) Fourth, at any time that Hollow Creek has received a greater than 20%
cumulative annually-compounded return on its investment (determined in
accordance with the provisions of Section 4.7): (i) (100% minus the product of
1.2 and Summit's Percentage) to the Members in accordance with their respective
Percentages and (ii) (the product of 1.2 and Summit's Percentage) to Summit.
4.5 DISTRIBUTION OF PROCEEDS FROM INTERIM CAPITAL TRANSACTIONS. Except as
otherwise provided in Section 4.6, Capital Proceeds shall be distributed to the
Members, no less frequently than quarterly, in the following priorities and
amounts:
(A) First, until Hollow Creek has received a 15% cumulative
annually-compounded return on its investment plus the return of its investment
(determined
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in accordance with the provisions of Section 4.7), to the Members in accordance
with their respective Percentages; and
(B) Thereafter, (100% minus the product of 1.2 and Summit's Percentage) to
Hollow Creek and (the product of 1.2 and Summit's Percentage) to Summit.
4.6 DISTRIBUTION OF PROCEEDS ON LIQUIDATION. Upon the dissolution and
liquidation of the Company or upon the sale of all or substantially all of the
Company's assets, the net proceeds therefrom shall be distributed to the
Members, in the following priorities and amounts:
(A) If the application of Section 4.6(a)(1) would not result in Hollow
Creek receiving at least a 15% cumulative annually-compounded return on its
investment plus the return of its investment (determined in accordance with the
provisions of Section 4.7), then all distributions pursuant to this Section 4.6
shall be pursuant to Section 4.6(b); otherwise,
(3) First, until Hollow Creek has received a 15% cumulative
annually-compounded return on its investment plus the return of its investment
(determined in accordance with the provisions of Section 4.7), to the Members in
accordance with their respective Percentages; and
(4) Thereafter, (100% minus the product of 1.2 and Summit's
Percentage) to Hollow Creek and (the product of 1.2 and Summit's Percentage) to
Summit;
(B) If the application of Section 4.6(a)(1) would not result in Hollow
Creek receiving at least a 15% cumulative annually-compounded return on its
investment plus the return of its investment (determined in accordance with the
provisions of Section 4.7), then
(1) First, until Hollow Creek has received a 15% cumulative rate of
return on its investment plus the return of its investment (determined in
accordance with the provisions of Section 4.7) 100% to Hollow Creek in an amount
not to exceed the product of the Percentage Reciprocal and the Net Cumulative
Priority Distributions; and
(2) Thereafter, to the Members in accordance with the provisions of
Sections 4.6(a)(1) and 4.6(a)(2).
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4.7 DETERMINATION OF RETURN ON INVESTMENT. In applying the provisions of
Sections 4.4, 4.5, and 4.6, a particular return on Hollow Creek's investment
shall equal the amount of interest that would accrue on Hollow Creek's
investment, as it varies from time to time, with the return being applied as a
per annum rate of interest compounded annually. Hollow Creek's investment shall
be the total of its capital contributions minus distributions of capital as
provided in this Section 4.7. Distributions to Hollow Creek pursuant to Section
4.4 shall be treated as a return on its investment rather than a return of its
invested capital. Distributions to Hollow Creek pursuant to Sections 4.5 and 4.6
shall be treated as returns of Hollow Creek's invested capital to the extent
thereof.
4.8 DEFINITIONS.
(A) "Percentage Reciprocal" means a fraction the numerator of which is
Hollow Creek's Percentage and the denominator of which is Summit's Percentage.
(B) "Reverse Percentage Reciprocal" means a fraction the numerator of
which is Summit's Percentage and the denominator of which is Traveler's
Percentage.
(C) "Net Cumulative Priority Distributions" means (i) the sum of all
distributions to Summit pursuant to Sections 4.4(b)(2)(ii), 4.4(c)(2)(ii), and
4.4(d)(ii), minus (ii) the product of the Reverse Percentage Reciprocal and the
sum of all distributions to Hollow Creek pursuant to Sections 4.4(a)(1)(A),
4.4(b)(1)(A), and 4.4(c)(1)(A).
(D) "Net Cumulative Second Tier Priority Distributions" means (i) the sum
of all distributions to Summit pursuant to Sections 4.4(c)(2)(ii) and
4.4(d)(ii), minus (ii) the product of the Reverse Percentage Reciprocal and the
sum of all distributions to Hollow Creek pursuant to Sections 4.4(b)(1)(A) and
4.4(c)(1)(A), minus (iii) the product of the Reverse Percentage Reciprocal and
the sum of any distributions to Hollow Creek pursuant to Section 4.4(a)(1)(A)
that had the effect of reversing distributions described in clause (i) hereof.
(E) "Net Cumulative Third Tier Priority Distributions" means (i) the
amount of distributions to Summit pursuant to Section 4.4(d)(ii), minus (ii) the
product of the Reverse Percentage Reciprocal and the amount of distributions to
Hollow Creek pursuant to Section 4.4(c)(1)(A), minus (iii) the product of the
Reverse Percentage Reciprocal and the sum of any distributions to Hollow Creek
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pursuant to Sections 4.4(a)(1)(A) and 4.4(b)(1)(A) that had the effect of
reversing distributions described in clause (i) hereof.
ARTICLE V.
MANAGEMENT; POWERS, RIGHTS AND DUTIES OF THE MEMBERS
5.1 MANAGEMENT
5.1.1 MEMBERS' MANAGEMENT AUTHORITY. The Members reserve to
themselves overall management authority, including authority to:
(i) approve and authorize all Major Decisions, but the Members
shall not have responsibility for the day-to-day management of the
Company which is hereby delegated to the Manager as provided herein;
(ii) engage any counsel to commence, settle, defend or
otherwise deal with any lawsuit; and
(iii) institute proceedings to adjudicate the Company bankrupt,
or consent to the filing of a bankruptcy proceeding against the
Company, or file a petition or answer or consent seeking
reorganization of the Company under the Bankruptcy Code or any other
similar applicable Federal, state or foreign law, or consent to the
filing of any such petition against the Company, or consent to the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or of its property, or make
an assignment for the benefit of creditors of the Company, or admit
in writing the Company's inability to pay its debts generally as
they become due.
5.1.2 POWERS. The Members shall have, in addition to the powers
given to them by law, the authority to:
(A) CONTRACTS. Negotiate, enter into and execute contracts and
incur obligations for and on behalf of the Company in connection
with the business of the Company;
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(B) BORROWINGS. Borrow money for and on behalf of the Company
in connection with the Company's business upon such terms and
conditions as they deem advisable and proper and to pledge the
credit and property of the Company for such purposes; and no bank or
other lending institution to which application is made for a loan by
the Members shall be required to inquire as to the purposes for
which such loan is sought, and as between the Company and such bank
or other lending institution, it shall be conclusively presumed that
the proceeds of such loan are to be and will be used for purposes
authorized under this Agreement;
(C) MORTGAGES. Repay, in whole or in part, refinance, recast,
modify or extend any of the mortgages or pledges affecting any of
the property owned or leased by the Company, and in connection
therewith to execute for and on behalf of the Company any or all
extensions, renewals or modifications of such mortgages or to
execute new mortgages on the property in lieu of any or all of said
mortgages, and to execute any and all instruments necessary to carry
out the intentions and purposes thereof;
(D) DOCUMENTS. Execute on behalf of the Company any and all
documents or instruments of any kind or type that the Members may
deem appropriate in carrying out the purposes of the Company,
including, without limitation, contracts and agreements providing
for the purchase of assets, sales contracts and other documents or
instruments of any kind or character and amendments thereto;
(E) SALES AND LEASES. Negotiate, enter into, and execute
leases or sales contracts of such portions of the Company's assets
as the Members may deem appropriate to lease or sell, and execute,
seal and deliver such leases, deeds and other documents as may be
necessary to effect any such sales; and
(F) GENERAL AUTHORITY. Cause all things to be done on
behalf of the Company appropriate to accomplish the Company's
purposes.
5.1.3 DELEGATION OF AUTHORITY; OFFICERS. The Members may from time
to time delegate to one or more persons, including the Manager and/or the
officers of the Company, such authority, powers and duties as the Members
shall deem appropriate.
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5.1.4 AUTHORIZED REPRESENTATIVES. The Authorized Representatives of
a Member shall be those representatives designated by notice to all other
Members by such Member from time to time to represent such Member in
connection with the Company, unless and until replaced or removed by
notice from such Member to all Members. The initial Authorized
Representatives are (i) either of Joseph W. Sprouls or William P. Geary
for Hollow Creek and (ii) either of Douglas E. Brout or Michael L. Schwarz
for Summit. The written statement or representation of any Authorized
Representative of such Member shall be sufficient to bind such Member with
respect to all matters pertaining to the Company. The term "approved by"
or "consented to by" or "consent of" or "satisfactory to" with respect to
a Member means a decision or action which has been consented to in writing
by the Authorized Representative of such Member (except to the extent that
the Members have adopted a course of conduct for certain approvals that
are granted telephonically which, to the extent practicable, shall be
followed by written consent). In acting as aforesaid, each Authorized
Representative may act solely in the interests of the Member who appointed
such member and shall not be deemed to have any fiduciary duty to act in
the interests of any of the other Members with respect to responsibilities
and the exercise of rights and obligations as a Member. The Authorized
Representatives shall not be entitled to compensation or payment by the
Company for attendance at Member meetings, but shall be entitled to
reimbursement from the Company of reasonable out-of-pocket expenses
incurred for personal attendance at Member meetings.
5.1.5 MEETINGS. A meeting of the Members may be called at any time
by any Member. The Members shall meet at least once each quarter (unless
such meeting shall be waived in writing by an Authorized Representative of
each Member) or on the call of any Member upon not less than two business
days Notice (unless such Notice shall be waived in writing by each Member)
to all Members by telephone, facsimile or telegraph. An agenda for each
meeting shall be prepared in advance by the Manager in consultation with
the other Members. The Manager shall prepare written minutes of all action
taken by the Members and the Manager shall deliver a copy thereof to each
Member within seven days after the date of the meeting. Except as
otherwise agreed by the Members, meetings of the Members shall be held at
the offices of the Company; provided that any meeting of the Members may
be held (or one or more Authorized Representatives may participate in any
such meeting) by conference telephone call, televideo arrangement or
through similar communications equipment. Participation in a meeting via
telephone
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or televideo shall constitute presence in person at such meeting. An
Authorized Representative representing each of Summit and Hollow Creek
shall constitute a quorum. The Members may act without a meeting upon two
business days Notice (or such shorter period as shall be approved by each
Member) to all Members. Any action required or permitted to be taken at a
meeting may also be taken without a meeting if Members with the requisite
votes (including both Summit and Hollow Creek, to the extent required
hereby in the case of a Major Decision) consent thereto in writing. Such
consents shall be filed with the minutes of the Members.
5.1.6 VOTING. A Member may vote either in person through its
Authorized Representative or by written proxy signed by the Member or by
his Authorized Representative. The Members shall act by a majority vote,
based on their Membership Interests; provided that except as otherwise
expressly provided in this Agreement, each of the actions listed in
Sections A, B and C of Addendum I hereto (such actions collectively being
hereinafter referred to as "Major Decisions") shall be taken by or on
behalf of the Company only with the vote (or consent) of both Summit and
Hollow Creek, and none of the Company's officers, the Authorized
Representatives, the Manager nor any other Member shall have the authority
to take any such actions on behalf of the Company without the vote (or
consent) of both Summit and Hollow Creek to the extent so required. In the
event that required agreement cannot be reached between Summit and Hollow
Creek with respect to a Major Decision, (i) the moving party may request
mediation as provided in Section D of Addendum I with respect to any
deadlocked Major Decision other than a Major Decision described in clause
(2) of Section B of Addendum I, (ii) in the case of a Major Decision
described in Section B of Addendum I, either party may activate the
Buy-Sell provisions of Section E of Addendum I, without invoking the
mediation process in the case of a deadlocked Major Decision described in
clause (2) of Section B of Addendum I, or (iii) in the case of a Major
Decision described in Section C of Addendum I, either party may activate
the Arbitration provisions of Section E of Addendum I either after or in
lieu of the mediation process. Notwithstanding the terms of Section 5.1 or
Addendum I, in the event that at any time Summit Management Company (or
Summit or any other Affiliate of Summit) shall be terminated for "cause"
as the Property Manager under the terms of the Property Management
Agreement to be entered into pursuant to Section 5.3, Hollow Creek may
elect to (a) become (or have one of its Affiliates become) the Property
Manager on the terms of the Property Management Agreement, (b) become (or
have one of its Affiliates become) the Manager and/or (c)
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subject to the approval of Summit, such approval not to be unreasonably
withheld or delayed, appoint another Person which is not Hollow Creek or
one of its Affiliates as the Property Manager and/or Manager.
Notwithstanding the terms of Section 5.1 or 5.3, and unless Hollow Creek's
voting rights have been suspended under Section 6.5, without the prior
written direction or consent of Hollow Creek, neither the Manager or
Summit shall not take any of the following actions on behalf of the
Company and Hollow Creek at all times during the term hereof when Summit
or an Affiliate of Summit is the Property Manager shall have the sole and
exclusive right, power and authority on behalf of the Company to take or
decide not to take such actions and no consent of Summit shall be required
with respect hereto:
(i) the decision to terminate, cancel, pursue remedies under,
waive rights under, grant any consent required under, or requested
pursuant to and in accordance with the terms of the Property
Management Agreement; and
(ii) the decision to appoint a successor to the Property
Manager following a termination of the Property Management Agreement
(provided that Summit shall have reasonable approval over said
successor Property Manager) unless the Property Management
Agreement, as applicable, shall have been terminated for "cause"
under the terms thereof (in which event, Summit shall have no right
of approval of said successor). Notwithstanding the foregoing, in no
event will Hollow Creek have the right to appoint a successor
Property Manager that is an Affiliate of Hollow Creek.
5.1.7 OFFICERS. The Members may from time to time designate one or
more individuals as officers of the Company. An officer so designated
shall have such authority, powers and duties as the Members shall delegate
to him or her. Each officer shall hold office until such officer's death,
mental incapacity, resignation or removal or until the appointment of a
successor. Any officer may be removed as an officer by the Members at any
time with or without cause. An officer may resign as an officer at any
time by communicating his resignation to the Company, orally or in
writing.
5.1.8 NO FIDUCIARY DUTY TO OTHER MEMBERS. Notwithstanding anything
which is or may appear to be to the contrary contained in this Agreement
or at law, but without limiting the duty of the Members to act in
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good faith and in a commercially reasonable manner in the best interests
of the Company, the Members recognize and agree that:
(i) if a Member takes any action or fails to take any action
(which action or failure to act is not in breach of a specific
provision of this Agreement) pursuant to the terms of this
Agreement, including, without limitation, a failure to provide
discretionary capital or loans pursuant to the Agreement or
otherwise, even if such action or inaction is motivated solely by
what such Member perceives to be in its own best interest and not
necessarily in the best interest of the other Members, such Member's
taking or failing to take such action shall not be deemed a breach
of any of its duties or obligations, including without limitation,
fiduciary duties, owed to the other Members or to the Company; and
(ii) if a Member or an Affiliate of a Member has entered into a
contractual relationship with the Company (as a lender to the
Company, other creditor to the Company, supplier to the Company,
manager for the Company's activities, or on any other basis), and
such relationship is disclosed to the other Members, then such
Member or Affiliate of a Member may take or fail to take any and all
actions in its capacity as a party contracting with the Company,
even if such action or inaction is motivated solely by what such
Member or Affiliate of a Member perceives to be in its own best
interest as a party contracting with the Company and not as a Member
or Affiliate of a Member, and such actions or failure to act shall
not be deemed to be a breach of such Member's duties or obligations,
including without limitation, fiduciary duties, owed to the other
Members or the Company.
(g) Notwithstanding anything which is or may appear to be to the
contrary in law or contained in this Agreement, including without
limitation the Company's purpose as set forth in Section 1.2.1, but
without limiting the duty of the Members to act in good faith and in a
commercially reasonable manner in the best interests of the Company, the
Members recognize and agree that from time to time any Member has the
right to refuse to consent to or approve any act or decision to be made by
the Company (i) even if such refusal prevents the Company from pursuing
its stated purpose, (ii) whether or not such refusal to consent or approve
is motivated by what such Member perceives to be in its own best interest
and not necessarily in the best interest of the other Members, and (iii)
such refusal shall not be deemed to be a
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breach of such Member's duties or obligations, including fiduciary duties,
owed to the other Members or to the Company.
5.2 MANAGER. As of the Closing Date, Summit shall be appointed the manager
of the Company (the "Manager") to serve until Summit's resignation or removal as
provided in this Agreement. The Members shall be responsible for the appointment
of any successor Manager and if at any time the Company does not have a Manager,
the Members shall be responsible for all duties and actions for which the
Manager would otherwise be responsible. The Manager shall devote to the Company
such time as may be necessary for the proper performance of its duties
hereunder, but neither the Manager nor any of its Affiliates shall be expected
to devote their full time to the performance of such duties. The Manager agrees
to provide its services to the Company to the best of its ability and to
complete its obligations as Manager in a careful and prudent manner in
accordance with industry standards. The Manager shall perform or cause to be
performed, at the expense of the Company, the day-to-day management of the
Company, including the following responsibilities, subject to approval of the
Members with respect to Major Decisions as required by this Agreement:
5.2.1 OPERATING BUDGET. Preparation of the operating Budget
for the Company for approval by the Members;
5.2.2 TAX, ACCOUNTING, REPORTING AND CLERICAL FUNCTIONS. Performing
all tax, accounting, reporting and clerical functions for the Company
which are not required to be performed by the Property Manager pursuant to
the terms of the Property Management Agreement or any other Property
Management Agreement, including but not limited to preparation of all tax
returns, reports and related documents as detailed more specifically in
Article II and payment of all expenses of the Company, including but not
limited to payments of principal and interest on Mortgage and any other
loans and payment of real estate taxes, fidelity bonds and insurance
policies and the fees and reimbursable expenses of the Property Manager;
5.2.3 EMPLOYEES AND AGENTS. Retaining or employing, terminating,
supervising and compensating the Accountants and any attorneys, managers
of the Properties, leasing agents, sales agents or any other employees or
agents required to be employed or retained by the Company;
5.2.4 INSURANCE AND FIDELITY BONDS. Procuring and maintaining with
responsible companies, insurance and fidelity bonds in such amounts
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and covering such risks as are deemed appropriate by the Manager and as
are in compliance with the requirements of Section 5.5;
5.2.5 BANK ACCOUNTS. Establishing bank accounts for the Company as
required by Section 2.3 and as the Manager may determine and depositing
and withdrawing Company funds from such accounts as so required from time
to time;
5.2.6 LITIGATION. Commencing litigation or the defense of any
litigation involving the Company and the settling of such litigation;
5.2.7 FINANCING. Seeking and closing financing, refinancing or
Loans for the operation of the Company and for capital expenditures;
5.2.8 RECORDS AND MINUTES. Preparation and distribution to the
Members of the minutes of the meetings of the Members and maintenance of
such minutes and other records of the Company in a secure location;
5.2.9 NOTICES. Preparation and distribution of Notices to be
provided to the Members or any other party by the Company or the
Members;
5.2.10 CONTRACTS. Execution and delivery of contracts and
agreements on behalf of the Company; and
5.2.11 CONTRIBUTIONS AND DISTRIBUTIONS. Making distributions of cash
or other assets of the Company to the Members as required by the terms of
this Agreement and accepting contributions to the Capital of the Company.
If at any time the Company does not have a Manager, all decisions affecting the
business of the Company shall be made by Members holding a majority of the
Percentages then held by Members or, if a Major Decision, by the agreement of
Summit and Hollow Creek, subject to the applicable provisions of this Agreement,
including Addendum I hereto. Any person dealing with the Company, other than a
Member, may rely on the authority of the Manager without inquiry into the
provisions of this Agreement or compliance herewith, regardless of whether that
action is actually taken in accordance with the provisions of this Agreement.
Unless authorized to do so by this Agreement or by a writing signed by the
Manager, no Member, agent or employee of the Company shall have any power or
authority to bind the Company in any way. The Manager acting without authority
shall be liable to the Members for any damages arising out of its unauthorized
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actions. The Manager may resign at any time by giving at least 60 days' prior
written notice to the Members. The acceptance of the resignation shall not be
necessary to make it effective.
5.3 PROPERTY MANAGEMENT AGREEMENT. On the Closing Date, the Company will
enter into a property management agreement substantially in the form attached
hereto as Exhibit E (the "Property Management Agreement") with Summit Management
Company, an Affiliate of Summit (the "Property Manager"), providing that the
Property Manager will manage and lease the Properties as an independent
contractor for the compensation specified therein, which shall not exceed 3% of
the gross rentals received from the Properties. Should the Property Management
Agreement terminate for any reason, the Company will enter into agreements for
the management or leasing of the Properties with a manager or leasing agent
satisfactory to the Members and any Property Management Agreement or leasing
agreement entered into with such manager or leasing agent shall be subject to
the review and approval of the Members. The Property Management Agreement or any
subsequent management or leasing agreement will provide, among other things,
that all employees will be those of the manager or the leasing agent and not of
the Company. Upon the resignation of the Manager, the other Member or its
designee shall succeed to the position of Manager without the necessity for
further action. Notwithstanding the requirements set forth in Section 5.1 or
Addendum I, Hollow Creek or its nominees or assigns shall have the right, in
Hollow Creek's or such nominees' or assigns' sole discretion, unilaterally and
without obtaining any approval or consent from the Members or Summit, to act for
the Company in granting or withholding any approval sought by the Property
Manager under the Property Management Agreement or enforcing, waiving, pursuing
or settling any right, remedy, or claim thereunder against such manager or
leasing agent so long as the manager or the leasing agent of the Properties is
an Affiliate of Summit.
5.4 REIMBURSEMENT FOR COSTS AND EXPENSES. Summit shall not be entitled to
receive a fee for its services as Manager of the Company. The Members will fix
the amounts, if any, by which the Company will reimburse each Member or the
Manager for all other costs and expenses incurred by such Member or the Manager
on behalf of and for the benefit of the Company; provided, however, that no
overhead or general administrative expenses of anyone (including the Manager)
other than the Company itself shall be allocated to the operation of the
Company, and no salaries, fees, commissions or other compensation shall be paid
by the Company to any Member (including the Manager), or any Affiliate, or to
any Member, partner in, shareholder, director, officer, employee or relative of
any
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Member or any Affiliates or any of them, for any services rendered the Company
except as may be provided in this Section 5.4, the Property Management Agreement
or any subsequent Property Management Agreement or leasing agreement approved in
accordance with Article V and executed by the Company.
5.5 FIDELITY BONDS AND INSURANCE. The Company will obtain fidelity bonds
with reputable surety companies covering all persons having access to the
Company's funds, indemnifying the Company against loss resulting from fraud,
theft, dishonesty and all other wrongful acts of such persons. The Company shall
carry or cause to be carried on its behalf with companies acceptable to the
Members all property, boiler explosion, business interruption, public liability,
automobile liability, umbrella liability, employers liability, liability and
workers' compensation insurance as shall be required by law, under applicable
mortgages, leases, the Property Management Agreement, any other management or
leasing agreement and any other agreements or instruments related to the Company
or the Properties or as may be required by the Members, but never in amounts
less than those agreed upon by the Members.
5.6 EXCULPATION. No Member shall be liable, responsible or accountable,
whether directly or indirectly, in contract or tort or otherwise, to the Company
or to any other Member for any Damages asserted against, suffered or incurred by
the Company or such other Member arising out of, relating to or in connection
with any act or failure to act by such Member pursuant to this Agreement or
otherwise with respect to the business and affairs of the Company, except
Damages resulting from acts or omissions of such Member which (a) were taken or
omitted in bad faith, (b) constituted intentional misconduct, (c) constituted a
material breach of this Agreement, other than a failure to make any Additional
Capital Contributions which such failure shall be governed by the terms of
Article VI, after receipt of written notice thereof and the expiration of a
reasonable cure period, or (d) constituted a knowing violation of law. No Member
shall be liable to the Company or any other Member for any action taken or
omitted to be taken by any other Member. Any Member may consult with counsel in
respect of the affairs of the Company and each Member shall be deemed not to
have acted in bad faith or to have engaged in intentional misconduct with
respect to any action or failure to act and shall be fully protected and
justified in so acting or failing to act, if such action or failure to act is in
accordance with the written advice or opinion of such counsel, except that such
advice or opinion shall not protect or justify any actions or failures to act by
such Member which constitute a knowing violation of law or a knowing violation
of this Agreement (including, without limitation, either the implementation of
any material action or the incurring of any material obligation
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without the approval of the other Member as herein provided or the failure to
implement and take any material action approved by the Members). Further, no
Member is, or shall be, liable for any debts, obligations or liabilities of the
Company, whether arising in contract or tort or otherwise, solely by reason of
being a Member of the Company or participating in the conduct of the business of
the Company. This provision shall not be applicable to any Member (as defined in
the preceding sentence) that is providing services to the Company for
compensation in its capacity as such a service provider and the liability of a
Member with respect to such services shall be governed by the agreement relating
to the service being performed and by applicable law.
5.7 INDEMNITY. The Company shall, to the maximum extent permitted by
applicable law, indemnify and hold harmless all Related Persons, and the Company
and each Member shall release each Related Person, to the fullest extent
permitted by law, from and against any and all Damages, including, without
limitation, Damages incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from any
of the foregoing by or before any court or governmental, administrative or other
regulatory agency, body or commission, whether pending or threatened, whether or
not a Related Person is or may be a party thereto, which arises out of, relates
to or is in connection with this Agreement or the management or conduct of the
business or affairs of the Company, except for (i) any such Damages resulting
from the fraud, gross negligence, bad faith or intentional misconduct of, or
breach of this Agreement or knowing violation of law by, the Person seeking
indemnification or (ii) any such Damages which result solely from a failure to
make any Additional Capital Contributions which such failure shall be governed
by the terms of Article VI. The termination of any proceeding by settlement
shall not be deemed to create a presumption that the Related Person involved in
such settlement acted in a manner which constituted fraud, gross negligence, bad
faith, intentional misconduct or a knowing violation of law. All judgments
against a Related Person wherein such Related Person is entitled to
indemnification shall, to the extent available, be satisfied from Company
assets. The releases set forth in this Section 5.7 shall not operate, and shall
not be deemed to operate, as a release from liability under any other written
agreement entered into between the Company and any Member or Related Person
including, without limitation, a release from liability under any Loan
Documents. The Company may obtain insurance with respect to this indemnification
and such insurance shall be an operating expense of the Company.
5.8 SERVICES. No Member shall be required to perform services for the
Company solely by virtue of being a Member. Except as otherwise provided in this
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Agreement, the fact that a Member is directly or indirectly interested in or
connected with any Person, firm, or corporation employed by the Company to
render or perform a service, or from whom the Company may buy merchandise or
other property, shall not prohibit the Company from employing such Person, firm,
or corporation or otherwise dealing with him or it. In any of those cases, those
dealings and undertakings shall be at arm's length and on commercially
reasonable terms. It is understood that, if either Member or an Affiliate
thereof, leases space within a Property or purchases a Property from the
Company, no commissions shall be payable with respect to such transaction.
Summit hereby agrees that (i) Summit shall disclose to Hollow Creek in writing
any direct or indirect ownership or financial interest (other than an interest
arising by virtue of an arms length contractual relationship) existing among
Summit, Affiliates of Summit and any other Person (hereinafter an "Interested
Person") that Summit proposes to supply goods, services or materials to the
Company from time to time, (ii) except for the appointment of the Manager and
the Property Manager in accordance with the terms hereof, without the prior
written consent of Hollow Creek (which consent may be withheld in Hollow Creek's
sole discretion), Summit shall have no right to cause the Company to deal with
any Summit Affiliate or any Interested Person as buyer, seller, vendor,
supplier, subcontractor, lessor, lessee, broker, agent or otherwise, and (iii)
any discounts, rebates or other financial incentives based upon the business of
this company received from any Person shall be fully applied to the benefit of
the Company.
ARTICLE VI.
DEFAULT
6.1 DEFAULT BY SUMMIT PRIOR TO THE CLOSING DATE. If the Summit Closing
Conditions set forth in Section 3.4 or the Hollow Creek Closing Conditions set
forth in Section 3.5 have not been fully met and performed by Summit or Hollow
Creek, as applicable, in accordance with the dates specified in Section 3.2,
then such default may be treated by non-defaulting party, at its option, as a
termination of this Agreement without any liability upon the non-defaulting
party and if any Property has been contributed to the Company by Summit or
Hollow Creek, or if Hollow Creek has purchased the Hollow Creek Properties
pursuant to the Purchase Agreement, the termination shall occur in accordance
with the provisions set forth in Section 3.3.
6.2 EVENTS OF DEFAULT. After the Closing Date, if any Member (the
"Defaulting Member", which for purposes of this Article VI shall be deemed to
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include all of its Affiliates which are Members, whether or not any such
Affiliate Member is itself in default) fails to perform any of its obligations
hereunder or breaches any of the terms, conditions, or covenants of this
Agreement other than a failure of performance or a breach specified in Section
3.3, as set forth in Subsections 6.2.1 through 6.2.10 (an "Event of Default"),
the other party (which for purposes of this Article VI shall be deemed to be (x)
Summit and all of its Affiliate Members (acting collectively for all purposes of
this Article through Summit) if the defaulting party is Hollow Creek or a Member
which is an Affiliate of Hollow Creek, or (y) Hollow Creek and all of its
Affiliate Members (acting collectively for all purposes of this Article VI
through Hollow Creek) if the defaulting party is Summit or a Member which is an
Affiliate of Summit) shall become the "Non-defaulting Member" for purposes of
this Article VI and shall have the right to give the Defaulting Member a Notice
identifying the Event of Default which the Defaulting Member has not performed
(a "Notice of Default"). Each of the following shall be considered an Event of
Default pursuant to this Section:
6.2.1 DISSOLUTION, TERMINATION, MERGER, CONSOLIDATION OR SALE OF A
MEMBER. Any dissolution, termination, merger or consolidation into another
entity or a purchase of all or substantially all of the assets of any
Member, or any general partner of any Member, unless prior to or
simultaneously with such dissolution, termination, merger, consolidation
or sale, the entire interest of such Member, or such general partner of a
Member, in the Company or of the interest of such general partner in the
partnership of any member, shall have been, pursuant to a transfer
permitted by Article VII, or a transfer to an Affiliate, or by operation
of law assigned to and assumed by such entity with which it is merged into
or consolidated with or assigned to and assumed by the purchaser of all or
substantially all of the assets of such Member, or such general partner of
a Member; or
6.2.2 VOLUNTARY INSOLVENCY ACTION BY A MEMBER. The filing by any
Member, or any general partner of any Member, of a voluntary petition in
bankruptcy or the commencement of any case or proceeding under the present
or any future Federal Bankruptcy Code, or any other present or future
applicable Federal, state or other statute or law relative to bankruptcy,
insolvency or other relief for debtors of any case or proceeding under
such laws seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, termination or similar relief for
itself or such general partner, or the filing by such Member, or such
general partner of any Member, of an application for the appointment of a
trustee, receiver,
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conservator or liquidator of itself or such general partner or of
substantially all of its assets, or the assets of such general partner, or
its interest in the Company or the interest of such general partner in the
partnership of any Member; or
6.2.3 INVOLUNTARY INSOLVENCY ACTION AGAINST A MEMBER. The entry of
an order, judgment or decree by a court of competent jurisdiction
approving a petition or granting relief with respect to a petition filed
against any Member, or any general partner of any Member, seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, termination or similar relief under any present or future
Federal Bankruptcy Code or any other present or future applicable Federal,
State or other statute or law relating to bankruptcy, insolvency or other
relief for debtors and such Member, or such general partner of any Member,
shall acquiesce in the entry of such order, judgment or decree (the term
"acquiesce" as used in this Subsection 6.2.3, includes but is not limited
to the failure to file a petition or motion to vacate or discharge such
order, judgment or decree within 10 days of the entry of such order,
judgment or decree) or such order, judgment or decree shall remain
unvacated and unstayed for an aggregate of 60 days (whether or not
consecutive) from the date of entry of such order, judgment or decree, or
the appointment of any trustee, receiver, conservator or liquidator of
such Member, or such general partner of any Member, or of all or
substantially all of the assets of such Member, or such general partner of
any Member, or its interest in the Company, or the interest of such
general partner in the partnership of any Member, and without the consent
or acquiescence of such Member, or such general partner of any Member,
such appointment shall remain unvacated and unstayed for an aggregate of
60 days from the date of such appointment (whether or not consecutive); or
6.2.4 ACTION FOR THE BENEFIT OF CREDITORS BY A MEMBER. The making of
a general assignment by any Member, or any general partner of any Member,
for the benefit of creditors or the taking of any other action for the
protection or benefit of creditors; or
6.2.5 NOTICE TO OTHERS OF INSOLVENCY BY A MEMBER. The making of an
admission in writing by any Member, or any general partner of any Member,
in any court of record that it is unable to pay its debts as they become
due, or the providing notice by any Member, or any general partner of any
Member, to any governmental body of insolvency, or pending insolvency, or
suspension or pending suspension of operations; or
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6.2.6 ATTACHMENT OR EXECUTION AGAINST ASSETS OF A MEMBER. The levy
of any attachment or execution against any substantial portion of the
assets of any Member, or any general partner of any Member and, in the
case of a levy of attachment, such attachment is not discharged within 60
days of the date of the levy of such attachment; or
6.2.7 TRANSFER OF CONTROLLING INTEREST IN SUMMIT OR HOLLOW Creek. In
the case of Summit only, if Summit Properties Inc. ceases to be the sole
general partner of Summit or has less than a fully-diluted 50% equity
interest in Summit; or, in the case of Hollow Creek only, Hollow Creek
ceases to be a direct or indirect wholly owned subsidiary of CitiGroup; or
6.2.8 PROHIBITED TRANSFER BY A MEMBER. Any transfer or hypothecation
by a Member of any of its interests, rights, or obligations in the Company
or this Agreement without the written consent of all of the other Members
other than a transfer which is permitted by Article VII or pursuant to the
Buy-Sell provisions of Section F of Addendum I hereto; or
6.2.9 FAILURE TO MAKE A CONTRIBUTION BY A MEMBER. The failure of a
Member to contribute a Special Capital Contribution or Additional Capital
Contribution required to be contributed to the Company pursuant to
Sections 3.2(f) or 3.7, if such failure is not cured within 10 calendar
days after receipt by the Defaulting Member of a Notice of Default with
respect thereto from the Non-defaulting Member; or
6.2.10 FAILURE TO COMPLY WITH ANY OTHER PROVISION OF THIS AGREEMENT
BY A MEMBER. The failure of a Member to comply with any provision of this
Agreement, or the failure of a Member to pay any other sum of money
pursuant to the terms of this Agreement, if such failure is not cured
within 30 calendar days after receipt by the Defaulting Member of a Notice
of Default, with respect thereto from the Non-defaulting Member, provided
that if such failure is capable of cure but cannot be cured within 30 days
and the Defaulting Member continues to diligently pursue the cure for such
failure, then such 30 day period shall be deemed extended for an
additional 60 days.
6.3 ELECTION OF REMEDIES FOR DEFAULT. Upon the occurrence of an Event of
Default, the Non-defaulting Member may, at its election and within 60 days of
its issuance of a Notice of Default or their respective receipt of a copy of the
Notice of Default detailing the occurrence of an Event of Default described in
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Subsections 6.2.1 through 6.2.8, or within the later of 15 days from the date of
(a) receipt by the Non-defaulting Member of a copy of the Notice of Default or
(b) the expiration of the Notice to cure period upon which an Event of Default
pursuant to Subsections 6.2.9 or 6.2.10 becomes subject to an election of
remedies by the Non-defaulting Member pursuant to the terms of this Agreement:
(x) terminate the Company by providing Notice to the Defaulting Member in which
event the Company shall be dissolved and liquidated and the Non-defaulting
Member shall be the Liquidating Member, or (y) with respect to an Event of
Default pursuant to Subsection 6.2.9, elect to adjust and recompute the
Membership Interests of the Members pursuant to Section 6.4, and thereafter, if
elected by the Non-defaulting Member, provide the Defaulting Member with a
Buy-Sell Notice in accordance with Section F of Addendum I hereto, or (z) with
respect to Subsections 6.2.7 and 6.2.8, provide the Defaulting Member with a
Buy-Sell Notice in accordance with Section F of Addendum I hereto.
6.3.1 MEMBER LOANS. If the Defaulting Member fails to make all or
part of its Additional Contribution when due, the Non-defaulting Member
shall have the right upon 10 days' prior written notice, but shall not be
obligated to lend to the Defaulting Member for contribution to the Company
as an Additional Contribution of the Defaulting Partner all or any part of
the sum that the Defaulting Member failed to contribute (the "Shortfall
Amount"), which loan (a "Member Loan") shall (A) bear interest at the
lesser of (1) the Base Rate plus 6% per annum, compounded monthly and (2)
the maximum rate permitted by law, (B) be due and payable on demand after
90 days, and (C) be advanced by disbursing it directly to or at the
direction of the Company by notifying the Defaulting Member in writing of
its election. Any such Member Loan shall be repaid on a first priority
basis out of any subsequent distributions to which the Defaulting Member
would otherwise be entitled in accordance with Section 4.2 of this
Agreement, which distributed amounts shall be applied first to interest
and then to principal until such Member Loan is paid in full. For the
purposes of this Agreement, such repayment of principal and interest shall
be treated as a distribution to the Defaulting Member. Any such Member
Loan will not be treated as a loan to the Company and any interest
accruing on such Member Loan will not affect the income of the Company.
However, if for any reason any such Member Loan is characterized in a
manner that is inconsistent with the previous sentence, any tax item
attributable to the interest accruing on such Member Loan shall be
allocated solely to the Defaulting Member. As security for the repayment
of any such loan, the Non-defaulting Member making the Member Loan shall
have a security interest in the Defaulting
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Member's Membership Interest hereunder. While any such Member Loan is
outstanding, the Defaulting Member shall not be entitled to vote on any
Company matters as provided in Section 6.5.
6.3.2 SHORTFALL AMOUNTS. From and after the date the Non-defaulting
Member shall exercise its rights under Subsection 6.3.2, the Defaulting
Member hereby appoints the Non-defaulting Member making the Member Loan as
its attorney-in-fact for the purpose of executing any and all documents
related to the Member Loan such as promissory notes, security documents
and financing statements which the Non-defaulting Member in its reasonable
discretion deems necessary to confirm the provisions of this Section 6.3.
It is expressly agreed that the power of attorney granted herein is
coupled with an interest, and such power of attorney shall, to the extent
permitted by law, survive the withdrawal, retirement, removal, bankruptcy
or insolvency of the Defaulting Member. If the Defaulting Member fails to
make all or part of its Additional Contribution and the Non-defaulting
Member does not (i) lend to the Defaulting Member the sum that the
Defaulting Member failed to contribute, or (ii) elect to make an
Additional Equity Contribution in such amount, the Non-defaulting Member's
Additional Contribution shall be deemed to have been loaned by the
Non-defaulting Member to the Defaulting Member, shall be treated as a
"Shortfall Amount" and shall be subject to the provisions of this Section
6.3 and Section 6.4.
6.4 DEFAULTS RESULTING IN PERCENTAGE ADJUSTMENTS. In the event that the
Defaulting Member fails to repay such Member Loan together with accrued interest
thereon on or before the 90th day following the funding thereof by the
Non-defaulting Member (the "Computation Date"), the Non-defaulting Member shall,
at any time after the 90th day, have the right, but not the obligation, to
elect, by a written notice to the Defaulting Member to terminate such Member
Loan and to treat the amount of the unpaid principal balance of such Member Loan
and all accrued interest thereon as an additional equity contribution
("Additional Equity Contribution") by the Non-defaulting Member, in which event,
(i) the amount previously deemed contributed by the Defaulting Member as an
Additional Contribution pursuant to Section 6.3 shall be reduced (as of the date
of the Non-defaulting Member's election to terminate such Member Loan) by the
unpaid principal balance of such Member Loan and (ii) the Percentage Interests
of the Defaulting Member shall thereupon be recalculated as hereinafter provided
in Section 6.4.1 as of the applicable Computation Date. The Defaulting Member
hereby appoints the Non-defaulting Member as its attorney-in-fact for the
purpose
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of executing any and all documents and instruments necessary to confirm such
recalculation of the Membership Interest as herein provided. It is expressly
agreed that the power of attorney granted herein is coupled with an interest,
and such power shall, to the extent permitted by law, survive the withdrawal,
retirement, removal, bankruptcy or insolvency of the Defaulting Member.
6.4.1 DEFAULT ADJUSTMENT CALCULATION. As of the Computation Date,
the recalculation of the Percentage Interests of the Members shall be made
as follows: there shall be subtracted from each of the Defaulting Member's
Percentage Interests then in effect a percentage equal to (A) the product
of (i) 2.50 and (ii) the amount of the Non-defaulting Member's Additional
Equity Contribution, divided by (B) the aggregate amount of capital
contributed to the Company by the Members including all Additional Equity
Contributions multiplied by (C) 100. The Percentage Interests of the
Non-defaulting Member shall be increased as of the Computation Date by a
percentage equal to the percentage decrease in the Defaulting Member's
Percentage Interests.
6.4.2 TIME OF ADJUSTMENT; REQUIRED DOCUMENTS. The adjustments and
recomputations required pursuant to this Section 6.4 shall be made by the
Manager, with the assistance of the Accountants, if so required, and such
adjustments shall take effect as of the date that any such Default Amount
is contributed. The Defaulting Member shall execute and deliver, at the
request of any of the Non-defaulting Members, any documents which such
Non-defaulting Member(s) shall consider necessary or appropriate to
reflect or confirm such adjustment and recomputation of the Defaulting
Member's Membership Interest, including but not limited to, an appropriate
recomputation of such Membership Interest.
6.5 EFFECT OF AN EVENT OF DEFAULT ON MEMBERS' VOTES. If an Event of
Default has occurred with respect to any Member, and such Member has received a
Notice of Default or, in the case of an Event of Default pursuant to Subsections
6.2.9 or 6.2.10, the Defaulting Member has failed to cure such Event of Default
within the time period required pursuant to Subsection 6.2.9 or 6.2.10, the
Defaulting Members shall not have the right hereto during the continuance of any
Event of Default to vote on or approve any matter other than the Major Decisions
described in Section A of Addendum I.
6.6 NO WAIVER. A failure by the Non-defaulting Member to give any Notice
of Default as specified herein, or any failure to insist upon strict performance
of any of the terms of this Agreement, shall not constitute a waiver of
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any such breach or any of the terms of this Agreement and no breach shall be
waived nor shall any duty to be performed hereunder be altered or modified
except by written instrument executed by the Non-defaulting Member. One or more
waivers or failures to provide a Notice of Default shall not be construed as a
waiver of a subsequent or continuing breach of the same covenant.
6.7 NOT EXCLUSIVE REMEDY. The rights granted in Sections 6.1 through 6.6
shall not be deemed exclusive remedies of the Non-defaulting Member but are
merely cumulative and in addition to any other rights or remedies which the
Company and the Non-defaulting Member may have pursuant to this Agreement, at
law, in equity, or by statute, against or with respect to the Defaulting Member
upon the occurrence of an Event of Default under this Agreement.
ARTICLE VII.
WITHDRAWAL OF A MEMBER; TRANSFER OF AN INTEREST IN THE COMPANY
7.1 PROHIBITED TRANSFERS. Except as provided in Articles VI and VII and in
Section F of Addendum I hereto, no Member shall, without the prior written
consent of each of the other Members, (i) retire or withdraw from the Company,
or (ii) assign, gift, pledge, collaterally assign, encumber, sell or otherwise
dispose of or hypothecate (a "Transfer") all or any part of its interest in the
Company or any portion of its rights or obligations in the Company. Whether or
not otherwise permitted by this Agreement, no Member shall Transfer, directly or
indirectly, all or any portion of its Membership Interest, or any rights to
receive any distributions under this Agreement if, in the opinion of counsel to
the Company or, in the opinion of counsel to a non-transferring Member, the
Transfer would (a) cause the dissolution of the Company (except pursuant to the
buy-sell provisions of Section F of Addendum I hereto); (b) require registration
under the Securities Act of 1933, as amended, or under any other securities law
or result in the violation of any applicable state securities laws; (c) cause
the Company or any Member to be subject to any additional regulatory
requirements; or (d) cause the Company to be taxed as other than a partnership
for income tax purposes. Any purported retirement, withdrawal or Transfer by any
Member of all or any part of its interest in the Company or in any portion of
its rights or obligations in the Company which does not comply with the
provisions of Articles VI or VII or Section F of Addendum I hereto shall be null
and void and shall not bind the Company or any Member.
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7.2 CERTAIN PERMITTED TRANSFERS. Nothing contained in this Article VII
shall be deemed to prohibit a transfer by sale or otherwise by a Member of its
interest, or any part of its interest in the Company to an Affiliate of such
Member (including in the case of Hollow Creek, any subsidiary or Affiliate of
CitiGroup) or to a separate partnership or limited liability company as to which
that the transferring Member or an Affiliate of the transferring Member shall be
the sole general partner of such separate partnership or the sole manager of
such limited liability company, and such transferee may be a Member in lieu of
or in addition to the transferring Member. Additionally, each Member shall have
the right to pledge, collaterally assign or otherwise hypothecate its interest
in the Company, any part of its interest in the Company or any portion of its
rights or obligations in the Company or its interest in such a separate
Affiliate entity to which such Member transfers all or any part of its interest
in the Company. The foreclosure of a permitted pledge or security interest shall
be deemed to be an Event of Default under Section 6.2.8 entitling the
Non-defaulting Member to purchase the pledged interest of the Defaulting Member
for an amount equal to the lesser of (i) the amount secured by the pledged
interest and (ii) the fair market value of the pledged interest determined in
accordance with the procedures provided in Section F of Addendum I hereto.
Without limitation of the foregoing, foreclosure on any such permitted pledge
shall be effective to give the foreclosing party (or any purchaser in a
foreclosure sale) only the right to receive the share of income, losses and
distributions to which the pledgor would otherwise be entitled and shall not be
effective to constitute the foreclosing party (or any purchaser in a foreclosure
sale) as a "Substitute Member" without the prior written consent of the
Non-defaulting Member, which may be given or withheld in the sole discretion of
the Non-defaulting Member. Any pledgee of any interest in the Company shall be
required to provide the Company with an acknowledgement in writing of its
agreement to the foregoing as a condition to the validity of the pledgee's claim
against the pledged interest and the failure to provide such acknowledgement
shall be deemed to render any non-conforming pledge null and void and not
binding against the Company or any Member (other than the pledgor in its
individual capacity and not as a Member of the Company).
7.3 TRANSFERS. The transfer of an interest in the Company shall be subject
to all the terms, conditions, restrictions, and obligations of this Agreement,
including the provisions of this Article VII. Any assignment, other than one
described in Section 7.2, shall be effective to give the assignee only the right
to receive the share of income, losses and distributions to which the assignor
would otherwise be entitled and shall not be effective to constitute the
assignee as a "Substitute Member." An assignee who does not become a Substitute
Member shall have no voting rights, no
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right to examine Company books and records, and no other rights of any kind
whatsoever except as described in the preceding sentence. Any assignee of the
interest of a Member, other than one described in Section 7.2, shall be admitted
as a Substitute Member of the Company only after the following conditions are
satisfied:
(i) All Members consent in writing to the admission of the
assignee as a Substitute Member;
(ii) the duly executed and acknowledged written instrument of
assignment has been filed with the Company, setting forth the intention of
the assignor that the assignee become a Substitute Member;
(iii) the assignee has consented in writing in a form satisfactory to
the Members to be bound by all of the terms of this Agreement in the place
and stead of the assignor; and
(iv) the assignor and assignee have executed and acknowledged such
other instruments as the Members may deem necessary or desirable to effect
such admission.
Any assignee of an interest in Company who does not become a Substitute Member
and desires to make a further assignment of such interest shall be subject to
all the provisions of this Article VII to the same extent and in the same manner
as any Member desiring to make an assignment of his interest. Any sale or
transfer or purported sale or transfer of an interest in the Company shall be
null and void unless made strictly in accordance with the provisions of this
Article VII. The transferee of an interest in the Company, whether a Substitute
Member or not, shall itself be subject to all the terms, conditions,
restrictions, and obligations of this Article VII.
ARTICLE VIII.
TERM; TERMINATION; DISSOLUTION AND LIQUIDATION
8.1 TERM. The Company and the obligations of the Members hereunder shall
commence on the date of filing of the Articles of Organization and shall
continue until the first to occur of the following:
8.1.1 the Termination Date (as extended, if applicable) shall
occur; or
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8.1.2 Acquisition of all of the entire interests in the Company of
the other Members by any one Member, unless such one remaining Member
elects to continue the Company; or
8.1.3 An agreement by all of the Members to terminate the
Company; or
8.1.4 The sale or other disposition of all or substantially all of
the Properties and any other assets of the Company and receipt by the
Company of the sales price in full; or
8.1.5 Dissolution of the Company pursuant to the express provisions
of Section 6.3 or Section F.8 of Addendum I hereto.
The "Termination Date" shall be the seventh anniversary of the Closing Date,
provided that Hollow Creek may, in its sole discretion, extend the Termination
Date for up to three one-year periods by written Notice given to Summit at least
180 days prior to the scheduled Termination Date of the original term, of the
first extension or of the second extension, as the case may be.
8.2 WINDING-UP THE COMPANY.
8.2.1 TERMINATION DATE. Upon the Termination Date, Summit will have
the option either to (a) purchase the interests of Hollow Creek and its
Affiliates in the Company for an amount in cash equal to the greater of
(i) the Fair Market Value of such interests or (ii) the aggregate amount
of Hollow Creek's (and any such its Affiliates') Capital Contributions
(including any Special Capital Contributions or Additional Capital
Contributions) less any prior distributions to Hollow Creek and its
Affiliates pursuant to Section 4.5, or (b) elect to have all Properties
then owned by the Company sold as promptly as commercially reasonable with
the proceeds thereof distributed as provided in Article IV and Section
8.2.2. The sale of the assets of the Company and the discharge of
liabilities to creditors shall be effectuated on an orderly basis so as to
enable the Members to minimize the normal losses attendant upon a
liquidation.
8.2.2 LIQUIDATION PROCEEDS. The Members shall continue to share
profits, gains and losses during the liquidation in the same manner as
before dissolution. The proceeds from liquidation of Company assets shall
be applied as follows: (i) payment to creditors of the Company in the
order of priority provided by law, and the establishment of reserves for
any unforeseen
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liabilities or obligations; and (ii) payments to the Members in accordance
with Section 4.6 hereof.
8.2.3 DISSOLUTION FILING. Upon compliance with the foregoing
distribution plan, the Company shall cease to be such, and the Manager and
Members shall execute, acknowledge and cause to be filed with the
Secretary of State of the State of North Carolina articles of dissolution
of the Company.
ARTICLE IX.
MISCELLANEOUS
9.1 NOTICES.
(A) IN WRITING; ADDRESSES. All notices, elections, offers, acceptances,
demands, consents and reports provided for in this Agreement (herein
collectively referred to as "Notices" and individually as a "Notice"), including
any Notice of Default, shall be in writing and shall be given to the Company and
the Members at the addresses set forth below or at such other addresses as the
Company or any of the Members may hereafter specify in writing in the manner set
forth in this Section 9.1 for the providing of Notices.
If to Hollow Creek: In care of Travelers Investment Group
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183-2030
Attention: Joseph W. Sprouls and William P.
Geary
With a copy to: Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street (19th Floor)
Charlotte, NC 28246
Attention: Gibson L. Smith, Jr.
If to Summit: Summit Properties Partnership, L.P.
212 South Tryon Street
Charlotte, NC 28281
Attention: Douglas E. Brout
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With a copy to: Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center (Suite 4200)
100 North Tryon Street
Charlotte, NC 28202-4006
Attention: David H. Jones
A copy of any notice or any written communication from the Internal
Revenue Service to the Company shall be given to each Member at the address
provided for above.
(B) METHOD. Any Notice of Default or other communication required or
permitted to be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier or U.S. Mail and shall be deemed given: (a) if served in person, when
served; (b) if telecopied, on the date of transmission if before 3:00 p.m.
(Eastern standard time) on a business day or on the first business day after the
date of transmission if after 3:00 p.m. (Eastern standard time) or on a
non-business day; provided that a hard copy of such notice is also sent pursuant
to (c) or (d) below; (c) if by overnight courier, on the first business day
after delivery to the courier, or (d) if by U.S. Mail, certified or registered
mail, return receipt requested on the fourth day after deposit in the mail
postage prepaid. Such Notices or communications may also be delivered by hand
(provided hand receipt is obtained), by facsimile or by any other method or
means permitted by law.
(C) COPIES. A copy of any notice, service of process, or other document in
the nature thereof, received by any Member from anyone other than another Member
or the Company, shall be delivered by the receiving Member to the other Members
as soon as practicable.
9.2 WAIVER OF RIGHT OF PARTITION. Each of the Members does hereby agree to
and does hereby irrevocably waive any right it may have, whether by statute or
by rule of law, to cause any asset of the Company to be partitioned or to file a
complaint or to institute any proceeding at law, or in equity, to cause any such
asset to be partitioned, or to compel a sale of all or any of the Properties, or
any of the other assets of the Company, or any right to take any action which
otherwise may be available to such Member for the purpose of severing its
relationship with the Company or its interest in the assets of the Company from
the interest of the other Members other than any rights such Member may have
pursuant to the terms of this Agreement, throughout the term of the Company and
during the period of its liquidation following any dissolution.
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9.3 NO THIRD PARTY BENEFICIARIES. No provision of this Agreement shall (a)
be construed to create any rights or benefits in any individual or entity other
than the Members or (b) be enforceable by any third party.
9.4 ADDITIONAL DOCUMENTS AND ACTS. Subject to the provisions of this
Agreement, each party hereto agrees to execute, with acknowledgment or
affidavit, if required, any and all documents and writings which may be
necessary or expedient in connection with the creation of the Company and the
achievement of its purposes, specifically including (a) any amendments to this
Agreement and such certificates and other documents as the Members deem
necessary or appropriate to form, qualify or continue the Company as a limited
liability company in all jurisdictions in which the Company conducts or plans to
conduct business and (b) all such agreements, certificates, tax statements, tax
returns and other documents as may be required of the Company or its Members by
the laws of the United States of America or any jurisdiction in which the
Company conducts or plans to conduct business, or any political subdivision or
agency thereof.
9.5 INTERPRETATION. Regardless of the places where the Properties are
located, or the place of contracting or the place of performance of this
Agreement, or otherwise, this Agreement, all amendments, authorizations and
supplementations with respect hereto and the rights and obligations of the
Members hereunder shall be interpreted, construed and enforced in accordance
with the laws of the State of North Carolina without regard to principles of
conflict of laws.
9.6 GENDER AND NUMBER. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter, shall include all of the
other genders, and the use of the singular or the plural shall include the use
of the other as the identity of the person or persons may require.
9.7 ENTIRE AGREEMENT. This instrument, including the Exhibits, Schedules
and Addendum hereto and the other documents and agreements referred to herein
which are entered into in connection herewith, (a) contains the entire agreement
of whatsoever kind and nature existing between the Members with respect to this
Agreement and the rights, interests, understandings, agreements and obligations
of the respective Members pertaining to the Company, (b) supersedes all prior
agreements and understandings relating to the subject matter contained herein,
including but not limited to the non-binding letter of intent to form this
Company signed by Hollow Creek and Summit on September 2, 1998, and (c) all
previous understandings or agreements are hereby merged herein.
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9.8 REFERENCES TO THIS AGREEMENT. Numbered or lettered Articles, Sections,
Subsections, Exhibits, Schedules and Addendum herein contained or referred to
mean the Articles, Sections, Subsections Exhibits, Schedules and Addendum of
this Agreement unless otherwise expressly stated.
9.9 HEADINGS. All titles of Articles, Sections, Subsections, Exhibits,
Schedules and the Addendum are inserted only for convenience and ease of
reference and are not to be considered in the construction or interpretation of
any provision of this Agreement.
9.10 BINDING EFFECT. Except as otherwise expressly stipulated to the
contrary herein, this Agreement shall inure to the benefit of and be binding
upon the Members, and their respective heirs, executors, legal representatives,
nominees, successors and permitted assigns and any reference in this Agreement
to any Member shall be deemed to include a reference to the heirs, executors,
legal representatives, nominees, successors and permitted assigns of each such
Member.
9.11 COUNTERPARTS. For the convenience of the Members, this Agreement may
be executed in any number of counterparts, and provided each Member hereto has
executed and delivered at least one counterpart hereof (which need not be the
counterpart executed by another Member) each counterpart shall be deemed to be
an original instrument and all of such counterparts together shall constitute
one and the same Agreement.
9.12 AMENDMENTS; WAIVERS. This Agreement may not be amended, altered,
modified or terminated in any manner other than by a written instrument executed
by all of the Members. No provision of this Agreement shall be deemed to have
been waived unless such waiver is contained in a written notice given to the
party claiming such waiver has occurred, provided that no such waiver shall be
deemed to be a waiver of any other or further obligation or liability of the
party or parties in whose favor the waiver was given.
9.13 EXPENSES; FEES AND COMMISSIONS. Each of Summit, on the one hand, and
Hollow Creek, on the other hand, will each bear its own legal and other expenses
associated with negotiating and closing the transactions contemplated by this
Agreement, provided that Summit shall be solely responsible for (i) 25% of the
transaction and closing costs incurred by Hollow Creek under or in connection
with the Purchase Agreement and (ii) all costs of both Hollow Creek and Summit
incurred in effectuating the Capital Contributions of the Properties to the
Company. Notwithstanding the foregoing, Hollow Creek shall be responsible for
75% and Summit 25% of the costs incurred for title examinations, title
insurance,
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surveys, and environmental due diligence in connection with the Summit
Properties. Each Member hereby represents to each other Member that there are no
claims for brokerage or other commissions or finder's or other similar fees in
connection with the transactions contemplated by this Agreement based on
arrangements or agreements made by or on behalf of such Member, and each Member
hereby indemnifies and agrees to defend, save and hold each other Member
harmless from and against all liabilities, costs, damages and expenses from any
such claims (including but not limited to attorneys' fees, court costs and any
other expenses of litigation).
9.14 SEVERABILITY. If any provision of this Agreement, or the application
of such provision to any Person or circumstance, shall be held invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions of this Agreement, or the application of such
provision in jurisdictions or to Persons or circumstances other than those to
which it is held invalid, illegal or unenforceable shall not be affected
thereby.
9.15 POLITICAL CONTRIBUTIONS. Any provision herein to the contrary
notwithstanding, no money or property of the Company shall be paid or used or
offered, nor shall any Member or any manager directly or indirectly pay or use
or offer, consent or agree to pay or use any money or property of the Company,
for or in aid of any political party, committee or organization, or for, or in
aid of, any entity organized or maintained for political purposes, or for, or in
aid of, any candidate for political office or for nomination for such office, or
in connection with any election including referendum or constitutional
amendment, or for any political purpose whatever, or for lobbying in connection
with legislation or regulations thereunder, or for the reimbursement or
indemnification of any entity for moneys or property so used. The terms of the
Property Management Agreement referenced in Section 5.3 or in any subsequent
Property Management Agreement shall require that the manager agree to the
provisions of this Section 9.15.
9.16 FINANCIAL INFORMATION. Each Member shall, upon the written request of
any other Member, promptly furnish to the requesting Member a certified copy of
the most recent audited financial statements of such Member or its ultimate
parent, or any general partner of such Member, together with a copy of all other
information, if any, filed by such Member, or such general partner of such
Member, during the immediately preceding 12 calendar month period, with the
Securities and Exchange Commission.
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9.17 AGREEMENT DRAFTING. The parties have worked together to draft this
Agreement, and no consideration shall be given to the fact or presumption that
one party had a greater or lesser hand in drafting this Agreement. No provision
of this Agreement shall be construed against or interpreted to the disadvantage
of any Member by any court or other governmental or judicial authority by reason
of such Member having or being deemed to have structured or drafted such
provision.
9.18 DISCLOSURE OF INFORMATION; CONFIDENTIALITY. No formal press releases
or other similar information regarding the Company or the Property shall be
provided by any Member, Affiliate, or employee or agent of any Member or
Affiliate to any form of mass media communication entity, or employee thereof,
for dissemination to the general public until each Member has reviewed the
content of such information and has given its prior written consent for the
distribution of such information. Each Member agrees to keep confidential,
pursuant to its customary procedures for handling its own confidential
information of a similar nature, the terms of this Agreement and other
non-public information concerning the Properties and the business of the
Company; provided, however, that any Member may disclose such information (i) to
its directors, officers, employees and agents and to its auditors, counsel and
other professional advisors, (ii) at the demand or request of any regulatory
authority, court or other governmental authority having or asserting
jurisdiction over such Member, (iii) as may be required pursuant to subpoena or
other legal process, or otherwise in order to comply with any applicable
requirement of law, (iv) in connection with any proceeding to enforce its rights
hereunder or under any other document referred to in Article III or otherwise
entered into in connection with the transactions contemplated hereby or any
other litigation or proceeding related hereto or to which it is a party, and (v)
to the extent the same has become publicly available other than as a result of a
breach of this Agreement.
9.19 SPECIFIC PERFORMANCE. The parties recognized that irreparable injury
will result from a breach of any provision of this Agreement and that money
damages will be inadequate to fully remedy the injury. Accordingly, in the event
of a breach or threatened breach of one or more of the provisions of this
Agreement, any party who may be injured (in addition to any other remedies which
may be available to that party), shall be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
9.20 ORGANIZATIONAL AND FICTITIOUS NAME FILINGS. The Manager is hereby
authorized to execute and file the articles of organization pursuant to the
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Act and to execute or cause to be executed all other instruments, certificates,
notices and documents, and to do or cause to be done all such filing, recording,
publishing and other acts as may be deemed by the Manager to be necessary or
appropriate from time to time to comply with all applicable requirements for the
formation or operation or, when appropriate, termination of a limited liability
company in the State of North Carolina and all other jurisdictions where the
Company does or shall desire to conduct its business.
ARTICLE X.
DEFINED TERMS
10.1 DEFINITIONS. The following capitalized terms shall have the meanings
specified in this Article X. Other terms are defined in the text of this
Agreement and, throughout this Agreement, those terms shall have the meanings
respectively ascribed to them.
"AAA" has the meaning specified in Section E.1 of Addendum I hereto.
"ACT" has the meaning specified in Section 1.1.
"ACCOUNTANTS". The accounting firm which shall be selected by the Manager
and retained by the Company.
"ADDITIONAL CAPITAL CONTRIBUTION(S)" has the meaning specified in Section
3.7.
"ADDITIONAL EQUITY CONTRIBUTION" has the meaning specified in Section 6.4.
"AFFILIATE" means, with respect to each Member, any Person, firm,
corporation, partnership, association, trust or other entity which, directly or
indirectly, controls, or is under common control with such Member, and with
respect to each Member, any firm, corporation, partnership, association, trust
or other entity which is controlled by such Member. For purposes hereof, the
term "control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of any such
Member, whether through the ownership of voting securities, by contract, or
otherwise.
"AGREED VALUE" has the meaning specified in Section 2.7.
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"AGREEMENT" has the meaning specified in the first paragraph of this
Agreement.
"ALTERNATIVE LOAN PROPOSAL" has the meaning specified in Section C(2) of
Addendum I hereto.
"APPROVED LEASE(S)" means lease agreements with tenants for apartments in
the Buildings which are in a form approved by Hollow Creek.
"ARBITRATION" shall mean the arbitration procedure specified in Section E
of Addendum I hereto.
"AUTHORIZED REPRESENTATIVE" shall mean with respect to any Member, any
member or officer of such Member having the authority to take the applicable
action on behalf of such Member.
"BANKRUPTCY CODE" shall mean Title XI of the United States Code, 11 U.S.C.
Sections 101 et seq., as amended, or any corresponding provision of any
succeeding law.
"BASE RATE" has the meaning specified in Section 2.11.
"BUDGET" shall mean the annual budget for the Company adopted by the
Members, provided that if a Budget is not adopted for any year, the preceding
year's Budget shall continue in effect with (i) an increase in line items for
taxes, insurance and utilities to reflect the actual cost of such items in the
succeeding year and (ii) an increase in each other line item of 5%.
"BUILDING" shall mean each apartment building on the Properties.
"BUY-SELL" shall mean the buy-sell procedure specified in Section F of
Addendum I hereto.
"BUY-SELL NOTICE" has the meaning specified in Section F.1 of Addendum I
hereto.
"BUY-SELL PRICE" has the meaning specified in Section F.1 of Addendum I
hereto.
"CAPITAL" has the meaning specified in Section 3.8.
"CAPITAL PROCEEDS" means that portion of Cash Flow which constitutes the
amount by which any net cash proceeds (including but not limited to insurance
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proceeds) received or collected by the Company from a significant event of a
capital nature (a) from any sale or exchange (including any condemnation or
conveyance in lieu of condemnation) of any Property (including any payments and
interest income received by the Company from the collection or sale of any
promissory notes or other evidences of indebtedness derived from any such sale),
(b) from any financing or refinancing (including the Mortgage) which is secured
by the Property or any other capital assets of the Company, (c) as a result of
any damage or destruction of any Property and not connected with a liquidation
of the Company, and (d) from any policy of title insurance that exceeds any
closing or other costs incurred or required to be paid by the Company in
connection with any such sale, condemnation, financing, refinancing or casualty
(including, but not limited to any amount required to be paid by the Company in
reduction or satisfaction of any prior loans, financing or refinancing
[including the Mortgage] or other indebtedness other than Loans and any amounts
applied toward repair, restoration or replacement of a Property).
"CASH FLOW" means all cash received by the Company from whatever source,
including but not limited to (a) the gross receipts from the operation of all or
any portion of the Property or any other capital assets of the Company, (b) the
proceeds of the Mortgage and any other loans, financing or refinancing of the
Property, (c) Initial Capital Contributions, Special Capital Contributions and
Additional Capital Contributions, (d) the net proceeds from sales, condemnation
or damage of a part or parts of the Properties and not connected with a
liquidation of the Company, and (e) the proceeds of any rent interruption
insurance less (w) cash reserves in amounts as determined by the Manager
sufficient for payment of taxes, insurance, maintenance, repairs and other
operating expenses and for capital expenditure requirements of the Company, (x)
all operating expenditures for the operation of the Property or the Company in
excess of cash reserves maintained to pay for certain operating expenses of the
Property or the Company, (y) any amount paid for capital expenditures in excess
of cash reserves maintained to pay for capital expenditures of the Company, and
(z) the amount of payments made on account of interest and principal upon any
loans, financing or refinancing secured by the Property (including payment of
the Mortgage) or any other capital assets of the Company or any other loans to
the Company other than Loans. In computing Cash Flow no deductions shall be made
for depreciation or amortization (as such terms are used in the application of
generally accepted accounting principles). Cash Flow shall be computed monthly
on an estimated basis and shall be adjusted at the end of each 12 calendar month
period to reflect
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accurately the results of each Fiscal Year of the Company. The Manager may elect
to adjust the Cash Flow at the end of any Fiscal Year which is less than 12
calendar months to reflect accurately the results of each Fiscal Year of the
Company. Any distributions of Cash Flow shall be based on such monthly estimates
and shall be conditional distributions to the Members subject to such
reconciliations of Cash Flow. At such time as the Cash Flow of the Company is
finally determined at the end of any Fiscal Year or 12 calendar month period, as
the case may be, the Company shall distribute to the Members their respective,
remaining and undistributed shares of Cash Flow for such Fiscal Year or 12
calendar month period and the liability of the Members for the conditional
distributions of Cash Flow for such Fiscal Year or 12 calendar month period
shall terminate on the date of such distributions. If the conditional
distributions of Cash Flow for such Fiscal Year or 12 calendar month period, as
the case may be, exceeds a Member's distributive share of Cash Flow for such
period as finally determined, the Manager shall issue a Notice to Finance to the
Member and such Member shall, within 20 days of receipt of the Notice to Finance
by such Member, contribute such excess to the Company as an Additional Capital
Contribution.
"CLOSING DATE" has the meaning specified in Section 3.1.
"CLOSING NOTICE" has the meaning specified in Section 3.1.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
"COMPANY" shall mean Station Hill L.L.C.
"COMPANY VALUE" has the meaning specified in Section F.1 of Addendum I
hereto.
"COMPUTATION DATE" has the meaning specified in Section 6.4.
"DAMAGES" shall mean any and all damages, disbursements, suits, claims,
liabilities, obligations, judgments, fines, penalties, charges, amounts paid in
settlement, expenses, costs and expenses (including, without limitation,
attorneys' fees and expenses and interest on any or all of the foregoing).
"DEFAULT AMOUNT" has the meaning specified in Section 6.4.
"DEFAULTING MEMBER" has the meaning specified in Section 6.2.
"ENVIRONMENTAL PAYMENT" has the meaning specified in Section 3.6.
"EVENT OF DEFAULT" has the meaning specified in Section 6.2.
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"FISCAL YEAR" has the meaning specified in Section 2.2.
"HOLLOW CREEK CLOSING CONDITIONS" has the meaning specified in Section
3.4.
"HOLLOW CREEK DEED" has the meaning specified in Section 3.2.
"HOLLOW CREEK PROPERTIES" means the Properties identified on Schedule I
hereto as "Hollow Creek Properties", which Properties are on the Closing Date to
be purchased by Hollow Creek from Summit and contributed by Hollow Creek to the
Company as its Initial Capital Contribution.
"INITIAL CAPITAL CONTRIBUTION(S)" shall mean the capital contributions
specified as such in Section 3.2(a) and (b).
"INTEREST HOLDER" means any Person who holds an Interest, whether as a
Member or an unadmitted assignee of a Member.
"LAND" shall mean the Land constituting the Properties.
"LENDER" shall mean the financial institution making the loan secured by
the Mortgage, which financial institution shall be approved by Hollow Creek.
"LIQUIDATING MEMBER(S)" shall mean the Member(s) in sole charge of winding
up the Company and having the powers described in Article VIII.
"LOAN(S)" has the meaning specified in Section 2.11.
"LOAN PROPOSAL" has the meaning specified in Section C(2) of Addendum I
hereto.
"MAJOR DECISIONS" has the meaning specified in Section 5.1.6.
"MANAGER" has the meaning specified in Section 5.2.
"MEDIATION NOTICE" has the meaning specified in Section D(2) of Addendum I
hereto.
"MEDIATION PROCEDURE" has the meaning specified in Section D(2) of
Addendum I hereto.
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"MEMBER(S)" means Summit, Hollow Creek and their respective nominees or
assigns, collectively, and any of them when the reference is singular.
"MEMBER LOAN" has the meaning specified in Section 6.3.2.
"MEMBERSHIP INTEREST" means an Interest Holder's share of the Profits and
Losses of, and the right to receive distributions from, the Company.
"MORTGAGE" has the meaning specified in Section 3.4.11.
"MORTGAGE DOCUMENTS" has the meaning specified in Section 3.4.11.
"NET CASH FLOW" means Cash Flow other than Capital Proceeds.
"NEW LLC" has the meaning specified in Section F.5.5 of Addendum I hereto.
"NON-DEFAULTING MEMBER" has the meaning specified in Section 6.2.
"NOTICE(S)" has the meaning specified in Section 9.1.
"NOTICE OF DEFAULT" has the meaning specified in Section 6.2.
"OTHER PARTIES" has the meaning specified in Section F.1 of Addendum I
hereto.
"PARTY-APPOINTED ARBITRATOR" has the meaning specified in Section E.2(b)
of Addendum I hereto.
"PERCENTAGES" means, as to a Member, the percentage set forth after the
Member's name on Schedule II, as amended from time to time, and as to an
Interest Holder who is not a Member, the Percentage of the Member whose
Membership Interest has been acquired by such Interest Holder, to the extent the
Interest Holder has succeeded to that Member's Membership Interest.
"PERSON" means and includes an individual, corporation, partnership,
association, limited liability company, trust, estate, or other entity.
"PROFIT" and "LOSS" means, for each taxable year of the Company (or other
period for which Profit or Loss must be computed) the Company's taxable income
or loss determined in accordance with Code ss. 703(a), with the following
adjustments:
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(I) all items of income, gain, loss, deduction, or credit required
to be stated separately pursuant to Code Section 703(a)(1) shall be
included in computing taxable income or loss;
(II) any tax-exempt income of the Company, not otherwise taken into
account in computing Profit or Loss, shall be included in computing
taxable income or loss;
(III) any expenditures of the Company, described in Code Section
705(a)(2)(B) (or treated as such pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
Profit or Loss, shall be subtracted from taxable income or loss;
(IV) gain or loss resulting from any taxable disposition of Company
property shall be computed by reference to the adjusted book value of the
property disposed of, notwithstanding the fact that the adjusted book
value differs from the adjusted basis of the property for Federal income
tax purposes; and
(V) in lieu of the depreciation, amortization or cost recovery
deductions allowable in computing taxable income or loss, there shall be
taken into account the depreciation computed based upon the adjusted book
value of the asset.
"PROPERTY" means each of the Properties listed on Schedule I hereto and
Properties mean all of the Properties.
"PROPERTY MANAGEMENT AGREEMENT" has the meaning specified in Section 5.3.
"PROPERTY MANAGER" has the meaning specified in Section 5.3.
"PROPOSING MEMBER" has the meaning specified in Section C(2) of Addendum I
hereto.
"PURCHASE AGREEMENT" has the meaning specified in Section 3.2.
"RECEIVING MEMBER" has the meaning specified in Section C(2) of Addendum I
hereto.
"REIT" has the meaning specified in Section 1.5.
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"REPLY NOTICE" has the meaning specified in Section F.1 of Addendum I
hereto.
"REPLY PRICE" has the meaning specified in Section F.1 of Addendum I
hereto.
"RELATED PERSON" shall mean any Member of the Company, the Manager or any
officer, director, manager, member, stockholder, partner or employee of any
Member of the Company or the Manager.
"SHORTFALL AMOUNT" has the meaning specified in Section 6.3.2.
"SPECIAL CAPITAL CONTRIBUTION(S)" has the meaning specified in Section
3.2.
"SUMMIT CLOSING CONDITIONS" has the meaning specified in Section 3.5.
"SUMMIT DEED" has the meaning specified in Section 3.2.
"SUMMIT PROPERTIES" means the Properties identified on Schedule I hereto
as "Summit Properties", which Properties are to be contributed by Summit to the
Company on the Closing Date as its Initial Capital Contribution.
"TERMINATION DATE" has the meaning specified in Section 8.1.
"TRANSFER" has the meaning specified in Section 7.1.
"TREASURY REGULATION" or "REGULATIONS" means the United States Treasury
tax regulations, including any temporary regulations, from time to time
promulgated under the Code.
"TTIC" has the meaning specified in Section 1.5.
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<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement as of the day and year first above written.
HOLLOW CREEK, L.L.C., a North Carolina
limited liability company
BY: THE TRAVELERS INSURANCE COMPANY, a
Connecticut corporation, its sole
member
By: /s/ B. Charles Milner
--------------------------------------
Its: Vice President
SUMMIT PROPERTIES PARTNERSHIP, L.P., a
Delaware limited partnership
BY: SUMMIT PROPERTIES, INC., a Maryland
corporation, its sole general
partner
By: /s/ Doug Brout
--------------------------------------
Its: Vice President
The undersigned executes this Agreement
solely to evidence his withdrawal as a
member of the Company:
/s/H. Spence III
-----------------------------------------
Herman Spence III
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The undersigned hereby executes and delivers this Agreement to evidence its
agreement to be bound by the terms hereof, as of the date of first above
written:
STATION HILL L.L.C., a North Carolina
limited liability company
By: SUMMIT PROPERTIES PARTNERSHIP, L.P.,
a Delaware limited partnership, its
Managing Member
By: SUMMIT PROPERTIES INC., a Maryland
corporation, its sole general partner
BY: /s/ Gregg D. Adzema
--------------------------------------
Gregg D. Adzema, Vice President
68-A
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EXHIBIT INDEX
Exhibit Reference Content
- ----------------- -------
Exhibit "A" Summit Special Warranty Deeds
Exhibit "B" Hollow Creek Special Warranty Deeds
Exhibit "C" Rent Rolls
Exhibit "D" Service Contracts
Exhibit "E" Form of Property Management Agreement
Exhibit "F" Intentionally Deleted
Exhibit "G" Permitted Encumbrances
Exhibit "H" Intentionally Deleted
Exhibit "I" Intentionally Deleted
Exhibit "J" Intentionally Deleted
Exhibit "K" Intentionally Deleted
Exhibit "L" Schedule of Current Insurance
