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 reported) November 16, 1998
Cousins Properties Incorporated
(Exact name of registrant as specified in its charter)
Georgia 2-20111 58-086952
- ---------------------------- ----------------------- --------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2500 Windy Ridge Parkway, Atlanta, Georgia 30339
- ------------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
(770) 955-2200
----------------------
(Registrant's telephone number, including area code)
Not applicable
Former name or former address, if changes since last report)
<PAGE>
Item 5. Other Events
------------
On November 12, 1998 (the "Closing Date"), Cousins Properties Incorporated (the
"Company") entered into a venture arrangement (the "Venture") with The
Prudential Insurance Company of America ("Prudential"). On such date the Company
contributed its interests in 9 properties (the "Properties") to the Venture.
These properties are identified in Schedule "A." At the time of contribution,
these properties were valued by the Company and Prudential based on arms length
negotiations at a total gross value of $283,750,000, subject to mortgages in the
principal amount of $53,281,219. The values allocated to each property under the
Venture agreements are shown on Schedule "A."
Under the Venture arrangements, Prudential is contributing cash to the Venture
equal to the agreed upon net value of the Properties ($230,468,781). The dates
at which such amounts are to be contributed are shown below, although Prudential
may accelerate such funding if the Company so requests. Also shown below are the
percentages the Company and Prudential will have, respectively, in the economics
of the Properties following the cash contributions on the indicated dates:
Total Cumulative Cousins Prudential
Date Cash Contribution Percentage (1) Percentage
---- ----------------- -------------- ----------
Closing Date $40 million 84.64% 15.36%
12/31/98 $105 million 59.68% 40.32%
3/31/99 $155 million 40.48% 59.52%
6/30/99 $205 million 21.28% 78.72%
9/30/99 $230.469 million 11.5% 88.5%
(1) Includes direct and indirect interests.
The structure of the Venture is as follows: CP Venture LLC ("Parent") will be
the parent entity and will own a 99% interest in each of CP Venture Two LLC
("Property Activity LLC") and CP Venture Three LLC ("Development Activity LLC").
The Company will own a direct 1% interest in Property Activity LLC and
Prudential will own a direct 1% interest in Development Activity LLC. Parent,
Property Activity LLC and Development Activity LLC will elect to be taxed as
partnerships for tax purposes. The contributed properties will be owned and
operated by Property Activity LLC. Cousins will have a 10.6061% interest in the
Parent's 99% interest in Property Activity LLC, which, combined with its 1%
direct interest, will give it a net interest of 11.5% in the economics of
Property Activity LLC.
The cash contributed by Prudential will be contributed to Development Activity
LLC. To the extent such funds are not yet needed for development activity,
Development Activity LLC will temporarily invest such funds; such potential
investments may include temporary loans to the Company. Prudential will be
entitled to 10.6061% of the Parent's 99% share of the economics of Development
Activity LLC, which combined with its 1% direct interest will entitle it to an
overall net interest of 11.5% in the economics of Development Activity LLC. In
addition, Prudential will receive a priority current return of 9.5% per annum on
its share (11.5%) of the initial capital ($230.469 million) ("Initial Capital")
of Development Activity LLC. Prudential will also receive a liquidation
preference whereby it will first be entitled, subject to capital account
limitations, to sufficient proceeds to allow it to achieve an overall 11.5%
internal rate of return on its share of the Initial Capital of Development
Activity LLC. After these preferences to Prudential, the Company will have
certain preferences, with the residual interests in the development activity
being shared according to the interests of the parties.
Parent has appointed the Company to serve as Development Manager and in such
capacity to act for it in connection with its ownership of Development Activity
LLC. Parent has also appointed Prudential to serve as Property Manager and in
such capacity to act for it in connection with its ownership of Property
Activity LLC. The Company will also serve as Administrative Manager of Parent.
Property Activity LLC is expected to continue to operate the contributed
Properties. Development Activity LLC is expected to develop commercial real
estate projects over time, as selected by the Development Manager. Development
Activity LLC may also make acquisitions, which are anticipated to be
redevelopment or value-added opportunities. The parties anticipate that some of
the projects currently under consideration by the Company will be undertaken by
Development Activity LLC, although the Company has no obligation to make any
particular opportunity available to Development Activity LLC.
Unless both parties agree otherwise, Property Activity LLC may not sell the
contributed properties until the end of lock-out periods (generally 3 years for
retail properties and 4 years for office and medical office properties).
The Venture arrangements are more fully described and set forth in those Venture
documents filed as Exhibits.
Certain matters discussed in this filing are forward-looking statements within
the meaning of the Federal Securities laws and are subject to uncertainties and
risks, including, but not limited to, general economic conditions, local real
estate conditions, interest rates, Cousins' ability to obtain favorable
financing, and other risks detailed from time to time in the Company's filings
with the Securities and Exchange Commission, including risks mentioned in the
Form 10-Q for the quarter ended March 31, 1996.
<PAGE>
Schedule "A"
Contributed Property Schedule
<TABLE>
<CAPTION>
Rentable
Square Allocated
Feet Value Mortgage Net Value
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
Office Buildings
First Union Tower, Greensboro,
NC 319,000 $ 53,000,000 $ -- $ 53,000,000
Grandview II, Birmingham,
AL 150,000 23,000,000 -- 23,000,000
100 North Point Center East,
200 North Point Center East
Alpharetta, GA 258,000 46,050,000 24,581,670 21,468,330
-------- ------------ ----------- ------------
Total Office 727,000 $122,050,000 $24,581,670 $ 97,468,330
--------- ------------ ----------- ------------
Medical Office Building
Presbyterian Medical Plaza,
Charlotte, NC 69,000 8,600,000 -- 8,600,000
--------- ------------ ----------- ------------
Retail Projects
North Point MarketCenter,
Alpharetta, GA 401,000 56,750,000 28,699,549 28,050,451
Mansell Crossing II,
Alpharetta, GA 103,000 12,350,000 -- 12,350,000
Greenbrier MarketCenter,
Chesapeake, VA (1) 364,000 51,200,000 -- 51,200,000
Los Altos MarketCenter
Long Beach, CA 157,000 32,800,000 -- 32,800,000
--------- ------------ ----------- ------------
Total Retail 1,025,000 $153,100,000 $28,699,549 $124,400,451
--------- ------------ ----------- ------------
Totals 1,821,000 $283,750,000 $53,281,219 $230,468,781
========= ============ =========== ============
(1) Excludes Target ground lease (117,000 square feet) and excludes 12,000
square feet of expansion space to be completed in 1999.
</TABLE>
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of business acquired
Not applicable
(b) Pro Forma Financial Information
Not applicable
(c) Exhibits
Exhibit No. Description
- ----------- -----------
10.1 - Limited Liability Company Operating Agreement of
CP Venture LLC
10.2 - Limited Liability Company Operating Agreement of
CP Venture Two LLC
10.3 - Limited Liability Company Operating Agreement of
CP Venture Three LLC
10.4 - Contribution and Formation Agreement by and between
Cousins Properties Incorporated and The Prudential
Insurance Company of America
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cousins Properties Incorporated
(Registrant)
Date: November 16, 1998 By: /s/ Tom G. Charlesworth
---------------------------------
Tom G. Charlesworth
Senior Vice President, General
Counsel and Secretary
<PAGE>
Exhibit No. Description
- ----------- -----------
10.1 - Limited Liability Company Operating Agreement
of CP Venture LLC
10.2 - Limited Liability Company Operating Agreement of
CP Venture Two LLC
10.3 - Limited Liability Company Operating Agreement of
CP Venture Three LLC
10.4 - Contribution and Formation Agreement by and between
Cousins Properties Incorporated and The Prudential Insurance
Company of America
<PAGE>
Exhibit 10.1
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
CP VENTURE LLC
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS...................................................2
Section 1.1 Definitions........................................2
Section 1.2 Other Definitions.................................15
Section 1.3 Exhibits..........................................15
ARTICLE 2 FORMATION....................................................15
Section 2.1 Formation ofCompany...............................15
Section 2.2 Name..............................................15
Section 2.3 PrincipalPlace of Business; Resident Agent........15
Section 2.4 Purpose and Scope.................................15
Section 2.5 Certificate of Formation..........................16
Section 2.6 Ownership and Waiver of Partition.................16
Section 2.7 Limits of Company.................................16
Section 2.8 No Individual Authority...........................18
Section 2.9 Responsibility of Members.........................18
Section 2.10 Term.............................................18
Section 2.11 Investment Representations.......................18
ARTICLE 3 CAPITAL......................................................20
Section 3.1 Member Percentage Interests.......................20
Section 3.2 Capital Contributions.............................20
3.2.1 Initial Capital Contributions..................20
3.2.2 Balance of Prudential Contribution Amount.....20
3.2.3 Depreciable and Non-Depreciable Elements of
Contributions.................................22
Section 3.3 Pro Rations Related to Contributed Property.......22
Section 3.4 Investment of Development Activity Funds in
Venture Three.....................................23
3.4.1 Investment of Funds............................23
3.4.2 Special Terms Applicable to Period Prior to
Venture Three Real Estate Operations...........23
Section 3.5 Additional Capital.................................24
Section 3.6 No Interest on Capital............................25
Section 3.7 Reduction of Capital Accounts.....................25
Section 3.8 Capital Accounts..................................26
Section 3.9 Negative Capital Accounts.........................27
Section 3.10 Resignations; Withdrawals of Capital.............27
Section 3.11 Limit on Contributions and Obligations of
Members..........................................27
ARTICLE 4 PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS..............27
Section 4.1 Allocations.......................................27
4.1.1 Development Activity Profit...................27
4.1.2 Development Activity Loss.....................28
4.1.3 Operating Property Activity Profit............28
4.1.4 Operating Property Activity Loss..............28
4.1.5 Net Profit....................................29
4.1.6 Net Loss......................................29
Section 4.2 [Reserved]........................................29
Section 4.3 Limitation on Loss Allocations....................29
Section 4.4 Other Items.......................................29
Section 4.5 Special Allocations...............................29
Section 4.6 Curative Allocations..............................32
Section 4.7 Other Allocation Rules............................34
Section 4.8 Section 704(c) Allocation.........................34
Section 4.9 Distribution of Cash Flow.........................34
4.9.1 Development Activity Cash Flow.................34
4.9.2 Operating Property Activity Cash Flow..........35
4.9.3 Cash Flow......................................35
Section 4.10 Distribution of Capital Proceeds.................35
4.10.1 Development Activity Capital Proceeds........35
4.10.2 Operating Property Activity Capital Proceeds.36
4.10.3 Other Capital Proceeds.......................36
4.10.4 Insufficient Balance.........................37
Section 4.11 Loss on CPI Note and Venture Three Guaranty......37
Section 4.12 Allocation Example................................37
ARTICLE 5 COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS...............38
Section 5.1 Books and Records.................................38
Section 5.2 Tax Returns.......................................38
Section 5.3 Reports...........................................39
Section 5.4 Audits............................................39
Section 5.5 Bank Accounts.....................................40
Section 5.6 Tax Elections and Decisions.......................40
Section 5.7 Tax Matters Member................................40
ARTICLE 6 MANAGEMENT...................................................41
Section 6.1 Management of the Company.........................41
6.1.1 General.......................................41
6.1.2 Development Manager...........................41
6.1.3 Operating Property Manager....................42
6.1.4 Administrative Manager........................43
6.1.5 Management Committee..........................43
6.1.6 Actions By Management Committee...............44
Section 6.2 Meetings..........................................44
Section 6.3 The Managers......................................45
Section 6.4 Duties of Managers................................46
Section 6.5 Authorization for Expenditures....................46
Section 6.6 Rights Not Assignable.............................47
Section 6.7 Major Decisions...................................47
Section 6.8 Emergency Authority...............................47
Section 6.9 Operating Budget And Expenses.....................47
6.9.1 Company Expenses..............................47
6.9.2 Operating Budget..............................47
Section 6.10 Removal of Managers..............................48
Section 6.11 Actions to Maintain REIT Status..................49
Section 6.12 Action to Maintain VCOC and REOC Status..........49
Section 6.13 Management And Leasing Agreement.................50
Section 6.14 Development Agreement............................50
Section 6.15 Operating Agreements.............................50
6.15.1 Development Activity Agreement...............50
6.15.2 Operating Property Activity Agreement........50
Section 6.16 Liability for Conduct............................50
Section 6.17 Indemnity........................................51
ARTICLE 7 COMPENSATION, REIMBURSEMENTS, CONTRACTS WITH AFFILIATES......51
Section 7.1 Compensation, Reimbursements......................51
7.1.1 Compensation...................................51
7.1.2 Reimbursements.................................51
Section 7.2 No Contracts with Affiliates.......................51
ARTICLE 8 TRANSFER RESTRICTIONS AND REDEMPTION RIGHTS..................52
Section 8.1 General...........................................52
8.1.1 Required Consents..............................52
8.1.2 Indirect Transfers............................52
Section 8.2 Permitted Transfers by the Members................52
8.2.1 Transfers By Prudential.......................52
8.2.2 Transfers By CPI..............................52
8.2.3 Agreements with Transferees...................53
Section 8.3 Asset Restrictions.................................53
8.3.1 Assets Lock-Out Period.........................53
8.3.2 Interests Lock-Out Period......................54
8.3.3 Restrictions Relating to Mortgages.............54
8.3.4 Sale of Assets After Lock-Out Period...........55
8.3.5 CPI Redemption Rights..........................58
8.3.6 Prudential Redemption Rights...................60
8.3.7 Closing........................................61
8.3.8 Distribution Redemption........................62
8.3.9. Limitation on Manager's Authority............62
Section 8.4 Prudential Put....................................62
Section 8.5 First Offer Procedure..............................63
Section 8.6 Restraining Order.................................66
Section 8.7 No Termination....................................66
Section 8.8 CPI Redemption of Development Interest............66
Section 8.9 Prudential Redemption of Operating Property
Interest..........................................67
ARTICLE 9 DEFAULT AND DISSOLUTION......................................67
Section 9.1 Events of Default.................................67
9.1.1 Definitions and Cure Periods..................67
9.1.2 Act of Insolvency.............................68
Section 9.2 Causes of Dissolution and Termination.............69
Section 9.3 Election of Non-Defaulting Member.................69
Section 9.4 Procedure in Dissolution and Liquidation..........70
9.4.1 Winding Up....................................70
9.4.2 Management Rights During Winding Up...........70
9.4.3 [Intentionally Omitted].......................70
9.4.4 Distributions in Liquidation..................70
9.4.5 Non-Cash Assets...............................71
Section 9.5 Disposition of Documents and Records..............72
Section 9.6 Date of Termination...............................73
ARTICLE 10 APPRAISAL...................................................73
Section 10.1 General..........................................73
Section 10.2 Appraisal Procedure..............................74
Section 10.3 Appraisal of Non-Cash Assets.....................74
ARTICLE 11 GENERAL PROVISIONS..........................................74
Section 11.1 Notices..........................................74
Section 11.2 Entire Agreement.................................75
Section 11.3 Severability.....................................76
Section 11.4 Successors and Assigns...........................76
Section 11.5 Counterparts.....................................76
Section 11.6 Additional Documents and Acts....................76
Section 11.7 Interpretation...................................76
Section 11.8 Terms............................................76
Section 11.9 Amendment........................................77
Section 11.10 References to this Agreement....................77
Section 11.11 Headings........................................77
Section 11.12 No Third Party Beneficiary......................77
Section 11.13 No Waiver.......................................77
Section 11.14 Expenses No Brokers.............................77
Section 11.15 Time of Essence.................................78
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit A Assets
Exhibit B Mortgages
Exhibit C Lock-Out Periods
Exhibit D Major Decisions
Exhibit E Operating Budget
Exhibit F Allocation Example
Schedule 5.6 Tax Elections and Decisions
<PAGE>
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CP VENTURE LLC
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT is made as of the
12th day of November, 1998 (the "Effective Date"), by and between COUSINS
PROPERTIES INCORPORATED, a Georgia corporation ("CPI"), and THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Prudential").
W I T N E S S E T H T H A T :
------------------- ---------
WHEREAS, CPI and Prudential desire to form a limited liability company
under the laws of the State of Delaware, and in connection with the formation of
such limited liability company CPI and Prudential wish to set forth their
respective rights and obligations as members thereof;
WHEREAS, CPI is the owner of 100% of the member interests in "Venture
Two" (as hereinafter defined) and desires to transfer, assign and contribute to
the Company a 99% member interest in Venture Two and to retain a 1% member
interest in Venture Two; and
WHEREAS, the Company and Prudential will become the sole members of
"Venture Three" (as hereinafter defined); and
- --------------------------------------------------------------------------------
THE INTERESTS IN CP VENTURE LLC (THE "MEMBERSHIP INTERESTS") ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH
IN ARTICLE 8 OF THIS AGREEMENT. THE PERCENTAGE INTERESTS HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER (i) THE GEORGIA SECURITIES ACT OF
1973, AS AMENDED (THE "GEORGIA ACT") IN RELIANCE UPON THE EXEMPTION PROVIDED IN
SECTION 9(13) THEREOF, (ii) UNDER ANY OTHER STATE SECURITIES LAWS, OR (iii)
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL ACT").
NEITHER THE PERCENTAGE INTERESTS, NOR ANY PART THEREOF, MAY BE OFFERED FOR SALE,
PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF ARTICLE 8 OF THIS AGREEMENT AND
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE FEDERAL ACT, THE
GEORGIA ACT, AND ANY OTHER APPLICABLE STATE SECURITIES LAWS OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH SECURITIES LAWS OR WHICH IS
OTHERWISE IN COMPLIANCE WITH SUCH SECURITIES LAWS.
<PAGE>
WHEREAS, the Members desire to implement such transfer and set forth
certain terms and conditions applicable to the Company's ownership and
management of its interests in Venture Two and Venture Three;
NOW THEREFORE, in consideration of the premises, the mutual promises,
obligations and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of such consideration being hereby
acknowledged, CPI and Prudential, intending to be legally bound, do hereby agree
as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.
When used in this Agreement, the following terms will have the meanings
set forth below:
(1) "Act" shall mean the Delaware Limited Liability
Company Act, as the same may be amended from time to time.
(2) "Act of Insolvency" shall have the meaning specified
in Section 9.1.2.
(3) "Additional Capital Notice" shall mean a notice
described in Section 3.5.
(4) "Additional Capital Units" shall mean Additional
Capital Units issued by Venture Three pursuant to the Development Activity
Agreement.
(5) "Adjusted Capital Account Balance" shall mean with
respect to any Member, the balance in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) credit to such Capital Account any amounts
which such Member is obligated to restore, because of a promissory note to
the Company or otherwise, or is deemed to be obligated to restore pursuant to
the penultimate sentence in each of Regulations Sections 1.704-2(g)(1)(ii) and
1.704-2(i)(5) and pursuant to Sections 4.5(a) and 4.5(b) of this Agreement; and
(ii) debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
This definition of Adjusted Capital Account Balance is intended to comply with
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistent with such Regulations.
(6) "Administrative Manager" shall mean the Person designated
by the Management Committee as a manager (within the meaning of Section
18-101(10) of the Act) pursuant to Section 6.1.4 hereinbelow.
(7) "Affiliate Debt" shall have the meaning set forth in
Section 3.5.
(8) "Affiliate(s)" shall mean a CPI Affiliate or a Prudential
Affiliate, or a Person or Persons directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with the
Person(s) in question. The term "control", as used in the immediately preceding
sentence, means, with respect to a Person that is a corporation, the right to
exercise, directly or indirectly, more than 50% of the voting rights
attributable to the shares of the controlled corporation and, with respect to a
Person that is not a corporation, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of the
controlled Person.
(9) "Agreed Value" shall mean with respect to each Asset
listed on Exhibit A attached hereto, the gross fair
market value of such Asset as agreed by the Members and listed on such Exhibit.
(10) "Agreement" shall mean this Limited Liability Company
Operating Agreement, as amended from time to time.
(11) "Approved by the Members" or "Approval of the
Members" shall mean approval in writing by all of the Members acting through
their duly authorized representatives who may or may not be the same
representatives as are on the Management Committee.
(12) "Approved by the Management Committee" or "Approva
of the Management Committee" shall mean approval in writing by all of the
Members of the Company acting through their representatives on the Managemen
Committee who shall have been designated pursuant to Section 6.1.5.
(13) "Asset" shall mean any of the real property assets of
Venture Two listed on Exhibit A attached hereto, and "Assets" shall mean all
of such real property assets.
(14) "Bank" shall mean a banking or other financial
institution which from time to time is selected to serve as the Company's
principal funds depository; NationsBank, Wachovia and Merrill Lynch being
approved institutions.
(15) "Business Day" shall mean any day except a Saturday,
Sunday or other day on which commercial banks in Atlanta, Georgia are
authorized or required by law to close.
(16) "Capital Account" shall have the meaning specified in
Section 3.8.
(17) "Capital Proceeds" shall mean the net proceeds,
other than Development Activity Capital Proceeds and Operating Property
Activity Capital Proceeds, from:
(i) loans to the Company in excess of current or
reasonably anticipated Company needs as determined by the Members (including
reasonable reserves for Company debt obligations and working capital as
determined by the Members) or excess funds received from refinancing of any
Company indebtedness (x) after the payment of, or provision for the payment
of, all costs and expenses incurred by the Company in connection with such
refinancing, and (y) after deduction or retention of such sums as are deemed
necessary to be retained as a reserve for the conduct of the business of the
Company as determined by the Members; and
(ii) any sale, exchange, condemnation or other
disposition of any capital asset of the Company or from
claims on policies of insurance maintained by the Company for damage to or
destruction of capital assets of the Company or the loss of title thereto (to
the extent that such proceeds exceed the actual or estimated costs of repairing
or replacing the assets damaged or destroyed if, pursuant to this Agreement,
such assets are repaired or replaced) (x) after the payment of, or provision for
the payment of, all costs and expenses incurred by the Company in connection
with such sale or other disposition or the receipt of such insurance proceeds,
as the case may be, and (y) after deduction or retention of such sums as are
deemed necessary to be retained as a reserve for the conduct of the business of
the Company as determined by the Members.
(18) "Cash Flow" shall mean for any period the Gross
Receipts of the Company for such period less Operating Expenses of the
Company for such period.
(19) "Closing Proration Date" shall mean the "Closing
Proration Date" as defined in the Contribution Agreement.
(20) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor statute thereto.
(21) "Company" shall mean the limited liability company
formed pursuant to the terms hereof for the limited purposes and scope set
forth herein.
(22) "Contribution Agreement" shall mean the Contribution
Agreement dated as of even date herewith by and among CPI, Cousins/Daniel LLC, a
Georgia limited liability company, Cousins MarketCenters Inc., a Georgia
corporation and Prudential.
(23) "CPI" shall mean Cousins Properties Incorporated, a
Georgia corporation.
(24) "CPI Affiliate" shall mean (i) any successor to CPI in
connection with a bona fide reorganization, recapitalization, acquisition or
merger, (ii) Cousins Real Estate Corporation, a Georgia corporation ("CREC"),
(iii) any Person which acquires all or substantially all of the assets of CPI or
CREC and (iv) any other Person which, directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with CPI or CREC or any of the aforesaid specifically identified CPI Affiliates.
The term "control", as used in the immediately preceding sentence, means, with
respect to a Person that is a corporation, the right to the exercise, directly
or indirectly, of more than 50% of the voting rights attributable to the shares
of the controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of the controlled Person.
(25) "CPI Contribution Amount" shall mean the product of
(i) ninety-nine percent (99%) and (ii) the difference between the aggregate
Agreed Value of the Assets (i.e., $283,750,000.) and the outstanding principal
balances of the Mortgages as of the Effective Date.
(26) "CPI Current Return" shall mean as of any particular
date, an amount equal to nine and one-half percent (9.5%) per annum, compounded
quarterly until paid, determined on the basis of a 365 day year for the actual
number of days in the period for which the CPI Current Return is being
determined, cumulative to the extent not distributed pursuant to Section
4.9.1(c) or Section 4.10.1(d) herein, on the CPI Unreturned Contribution.
(27) "CPI Current Valuation Return" shall mean as of any
particular date, an amount equal to nine and one-half percent (9.5%) per annum,
compounded quarterly until paid, determined on the basis of a 365 day year for
the actual number of days in the period for which the CPI Current Valuation
Return is being determined, cumulative to the extent not distributed pursuant to
Section 4.9.1(d) or Section 4.10.1(e) herein, on an amount equal to the
Unreturned CPI Development Valuation Amount (to the extent outstanding from time
to time), commencing as of the Effective Date.
(28) "CPI Development Valuation Amount" shall mean Three
Million Dollars ($3,000,000).
(29) "CPI Redemption Notice" shall have the meaning
specified in Section 8.3.5.
(30) "CPI Redemption Rights" shall mean those rights of
CPI defined in Section 8.3.5 herein.
(31) "CPI Unreturned Contribution" shall mean as of any
particular date an amount equal to the excess, if any, of (x) the product of the
Member Development Percentage of CPI (expressed as a decimal) times the
Prudential Contribution Amount that has been contributed to the Company, less
(y) the aggregate distributions to CPI pursuant to Section 4.10.1(b) (excluding
therefrom any distribution amount attributable to the 2% annual compounded
increase on the contributions used for purposes of calculating the "Unreturned
Development Activity Contribution.")
(32) "Defaulter" shall have the meaning specified in
Section 9.1.1.
(33) "Depreciation" shall mean for each Fiscal Year or other
period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, however, that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Administrative Manager.
(34) "Developer Units" shall have the meaning ascribed to
such term in the Development Activity Agreement.
(35) "Development Activity" shall mean the business
activity of the Company of developing Projects which shall be carried out by
the Company's ownership of a managing member interest in Venture Three.
(36) "Development Activity Agreement" shall mean the
limited liability company operating agreement between the Company and Prudential
as the members of Venture Three entered into as of even date herewith.
(37) "Development Activity Capital Proceeds" shall mean
"Capital Proceeds" (as defined in the Development Activity Agreement) to
the extent distributed by Venture Three to the Company, plus amounts received
by the Company upon the sale, liquidation or other disposition of all or part of
its interest in Venture Three.
(38) "Development Activity Cash Flow" shall mean "Cash
Flow" (as defined in the Development Activity Agreement) to the extent
distributed by Venture Three to the Company, plus any amount received by the
Company attributable to Investment Income.
(39) "Development Activity Interest" shall mean the
Company's aggregate interest(s) in the profits, losses and distributions of
Venture Three from time to time.
(40) "Development Activity Nonrecourse Deductions" shall
mean the Company's distributive share of nonrecourse deductions of Venture Three
as allocated to the Company pursuant to the Development Activity Agreement.
(41) "Development Activity Profit or Loss" shall mean the sum
of (x) the Company's distributive share of net profit, net loss, or items of
gross income, gain, loss and deduction, allocated to the Company pursuant to the
Development Activity Agreement, plus (y) any Investment Income, plus (z) the
gain or loss realized by the Company upon the sale or other disposition of all
or part of its interest in Venture Three. The net amount of such items, if
positive, being referred to as Development Activity Profit or, if negative,
Development Activity Loss.
(42) "Development Manager" shall mean the Person
designated by the Management Committee as a manager (within the meaning of
Section 18-101(10) of the Act) pursuant to Section 6.1.2 hereinbelow.
(43) "Documents" shall have the meaning specified in
Section 5.1.
(44) "Effective Date" shall mean the effective date of
this Agreement as set forth on the first page hereof.
(45) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(46) "Excess Operating Property Activity Capital Proceeds"
shall have the meaning set forth in Section 8.3.4.
(47) "Excess Operating Property Activity Cash Flow" shall
have the meaning set forth in Section 8.3.4.
(48) "Event of Default" shall have the meaning specified
in Section 9.1.1.
(49) "Fair Market Value" shall have the meaning specified
in Section 10.1.
(50) "Federal Act" shall have the meaning specified in
Section 2.11.
(51) "Fiscal Year" shall mean the twelve month period ending
December 31 of each year; provided that the first Fiscal Year shall be the
period beginning on the Effective Date and ending on December 31, 1998, and the
last Fiscal Year shall be the period beginning on January 1 of the calendar year
in which the final liquidation and termination of the Company is completed and
ending on the date such final liquidation and termination is completed (to the
extent any computation or other provision hereof provides for an action to be
taken on a Fiscal Year basis, an appropriate proration or other adjustment shall
be made in respect of the first or final Fiscal Year to reflect that such period
is less than a full calendar year period).
(52) "Gross Asset Value" shall mean with respect to any
asset, the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value of
such asset, as Approved by the Members;
(ii) Except as otherwise provided in this Agreement,
the Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as Approved by the Members, at each of
the following times: (a) the acquisition of an additional interest in the
Company by any new or existing Member for more than a de minimis contribution;
(b) the distribution by the Company to a Member of more than a de minimis amount
of Company property as consideration for an interest in the Company; and (c) the
liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g)
of the Regulations; provided, however, that the adjustments pursuant to clauses
(a) and (b) above shall be made only if the Members reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of such asset on
the date of distribution as Approved by the Members; and
(iv) The Gross Asset Values of Company assets shall
be increased (or decreased) to reflect any adjustments to the adjusted basis
of such assets pursuant to Code Section 734(b) or Code Section 743(b), but
only to the extent that such adjustments are taken into account in determining
the Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and Section 4.5(g) hereof; provided, however, that Gross Asset Values shall
not be adjusted pursuant to this subsection to the extent the Members determine
that an adjustment pursuant to subsection (ii) of this definition is necessary
or appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to this subsection.
(v) If the Gross Asset Value of an asset has been
determined or adjusted pursuant to paragraphs (ii), (iii) or (iv) above,
such Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of computing Net Profits
and Net Losses.
If the Members are unable to agree regarding any Gross Asset Value,
such value shall be determined pursuant to the procedure of Section 10.2 herein.
(53) "Gross Receipts" shall mean receipts, calculated on
an accrual basis, from the conduct of the business of the Company from all
sources, excluding items of Development Activity Cash Flow, Development
Activity Capital Proceeds, Operating Property Activity Cash Flow and Operating
Property Activity Capital Proceeds.
(54) "Independent Accountants" shall mean Arthur Andersen
LLP or other nationally recognized accounting firm as Approved by the Members.
(55) "Internal Rate of Return" shall mean that percentage
return rate which, when used as a discount rate to determine a net present value
of a cash flow series (treating cash outflows as negative numbers and inflows a
positive numbers), results in a net present value of "0" for such cash flow
series. For quarterly cash flow series, the quarterly discount rate
equivalent to an annual rate of 11.5% shall be 2.7587%. For monthly cash flow
series, the monthly discount rate equivalent to an annual rate of 11.5%
shall be .91125%.
(56) "Investor Units" shall have the meaning ascribed to
such term in the Development Activity Agreement.
(57) "Investment Income" shall mean the income, if any, earned
by the short-term investment of any portion of the Prudential Contribution
Amount in accordance with Section 3.4, as well as income from the investment of
amounts Contributed by Prudential to the Company with respect to Prudential's
direct interest in Venture Three pursuant to Section 3.4.2.
(58) "Laws" shall mean federal, state and local statutes, case
law, rules, regulations, ordinances, codes and the like which are in full force
and effect from time to time and which affect the Company, Venture Two or
Venture Three.
(59) "Lock-Out Period" shall have the meaning specified in
Section 8.3.1.
(60) "Make-Whole Asset" shall have the meaning specified
in Section 6.1.3(c).
(61) "Make-Whole Option" shall have the meaning specified
in Section 8.3.4.
(62) "Major Decisions" shall have the meaning specified in
Section 6.7 and Exhibit D hereto.
(63) "Management and Leasing Agreement" shall have the
meaning specified in Section 6.13.
(64) "Management Committee" shall have the meaning
specified in Section 6.1.5.
(65) "Managers" shall mean the Development Manager,
Operating Property Manager and Administrative Manager.
(66) "Member" shall mean CPI, Prudential, or any permitted
transferee of an interest in the Company hereunder.
(67) "Member Development Percentage" shall mean a Member's
aggregate percentage share of the Company's profits, losses and distributions
from the Development Activity Interest. The respective Member Development
Percentages are 89.3939% for CPI, and 10.6061% for Prudential.
(68) "Member Interest" shall mean the aggregate interest
of a Member in the Company and in the capital, profits, losses, and
distributions of the Company.
(69) "Member Minimum Gain" shall mean an amount, with respect
to each Member Nonrecourse Debt, equal to the Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Section 1.704-2(i)(2) and (3) of the Regulations.
(70) "Member Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Regulations.
(71) "Member Nonrecourse Deductions" shall have the
meaning set forth in Section 1.704-2(i)(1) and (2) of the Regulations. The
amount of Nonrecourse Deductions with respect to a Member Nonrecourse Debt
for any Fiscal Year equals the excess, if any, of the net increase, if any, in
the amount of Member Minimum Gain attributable to such Member Nonrecourse
Debt during that Fiscal Year over the aggregate amount of any distributions
during that Fiscal Year to the Member that bears the economic risk of loss for
such Member Nonrecourse Debt to the extent such distributions are from the
proceeds of such Member Nonrecourse Debt and are allocable to an increase in
Member Minimum Gain attributable to such Member Nonrecourse Debt, determined
in accordance with Section 1.704-2(i)(2) of the Regulations and Section 4.7(b).
(72) "Member Property Percentage" shall mean a Member's
aggregate percentage share of the profits, losses and distributions from the
Operating Property Activity Interest. The initial Member Property Percentages
for purposes of applying the provisions of this Agreement are 100% for CPI and
0% for Prudential (subject to adjustment as provided herein). Upon payment by
Prudential of the Prudential Contribution Amount in full pursuant to Section
3.2.2 below and the Contribution Agreement, the Member Property Percentages
shall be 10.6061% for CPI and 89.3939% for Prudential. The initial Member
Property Percentages set forth above have been determined based on the value of
the initial contributions to the capital of the Company as set forth in Section
3.2.1. As further capital is contributed to the Company by Prudential pursuant
to Sections 3.2.1 and 3.2.2 and the Contribution Agreement, the Member Property
Percentages of Prudential and CPI shall be adjusted automatically based on the
amount of such contributions pursuant to the following formulas: (i)
Prudential's Member Property Percentage at a given time shall be equal to (x)
the amount of the Prudential Contribution Amount actually contributed by
Prudential at such time, divided by (y) the total amount of the Prudential
Contribution Amount, and multiplied by (z) 89.3939% (.893939) and (ii) CPI's
Member Property Percentage at a given time shall be equal to 100% less the
Prudential Member Property Percentage at such time. For any period in which the
Member Property Percentages are adjusted, allocations and distributions pursuant
to Article 4 for such period shall be made pro-rata based upon the number of
days in the period and the applicable Member Property Percentage for each day in
the period.
(73) "Minimum Gain" shall have the meaning set forth in
Regulations Sections 1.704-2(b)(2), 1.704-2(d) and 1.704-2(k).
(74) "Mortgages" shall mean the deeds to secure debt,
mortgages and deeds of trust encumbering certain of the Assets as set forth on
Exhibit B attached hereto.
(75) "Net Profit" or "Net Loss" shall mean for each Fiscal
Year the Company's taxable income or taxable loss for such Fiscal Year, as
determined under Section 703(a) of the Code, and Treasury Regulation Section
1.703-1, but with the following adjustments:
(i) Any tax exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Company during such Fiscal Year shall
be added to such taxable income or taxable loss;
(ii) Any expenditures of the Company described in
Section 705(a)(2)(B) of the Code for such Fiscal Year or treated as being so
described in Regulations Section 1.704-1(b)(2)(iv)(1) and not otherwise taken
into account in this subsection shall be subtracted from such taxable income or
taxable loss;
(iii) Any item of income, gain, loss or deduction
that is required to be allocated to the Members under Section 4.8 hereof shall
not be taken into account in computing such taxable income or taxable loss; and
(iv) The amount of any gain or loss required to be
recognized by the Company during such Fiscal Year by reason of a sale or other
disposition of Company property, and any depreciation or cost recovery
reductions with respect to Company property to which the Company is entitled for
any Fiscal Year, shall be computed as if the Company's adjusted basis in such
property for income tax purposes were equal to the Gross Asset Value, and any
adjustment to the Gross Asset Value shall be treated as a Net Profit or Net
Loss.
This definition is intended to comply with the Regulations and any and
all other items which must be included in Net Profit or Net Loss in order for
this Agreement to comply with said Regulations shall be included in such
concept. Notwithstanding any other provision of this definition, any items of
income, gain, deduction, loss or credit which are specially allocated, including
allocations of Development Activity Profit and Loss and Operating Property
Activity Profit and Loss, shall not be taken into account in computing Net
Profit or Net Loss. The intent of this definition is that no reference to Net
Profit or Net Loss include such specially allocated items.
(76) "Non-Defaulter" shall have the meaning specified in
Section 9.3.
(77) "Nonrecourse Deductions" shall have the meaning set
forth in Sections 1.704-2(b)(1) and 1.704-2(k) of the Regulations. The amount
of Nonrecourse Deductions for any of the Fiscal Years equals the excess, if
any, of the net increase, if any, in the amount of Minimum Gain during that
Fiscal Year over the aggregate amount of any distributions during that Fiscal
Year of proceeds of a Nonrecourse Liability that are allocable to an increase
in Minimum Gain, determined according to the provisions of Sections 1.704-2(c)
and 1.704-2(k) of the Regulations and Section 4.7(b).
(78) "Nonrecourse Liability" shall have the meaning set
forth in Section 1.704-2(b)(3) of the Regulations.
(79) "Offer Price" shall have the meaning specified in
Section 8.3.4.
(80) "Offer Price Notice" shall have the meaning specified
in Section 8.3.4.
(81) "Operating Budget," shall mean the annual budget of the
Company, estimating all receipts from and expenditures for the ownership,
management, maintenance and operation of the Company for each Fiscal Year,
provided, however, that such budget shall not include the operations of Venture
Two or Venture Three.
(82) "Operating Expenses" shall mean all expenditures of any
kind, determined on an accrual basis, made with respect to the operations of the
Company in the normal course of business, excluding items of Development
Activity Cash Flow, Development Activity Capital Proceeds, Operating Property
Activity Cash Flow and Operating Property Activity Capital Proceeds.
(83) "Operating Property Activity" shall mean the
business activity of the Company of investment in the Assets which shall be
carried out by the Company's ownership of a managing member interest in Venture
Two.
(84) "Operating Property Activity Agreement" shall
mean the limited liability company operating agreement between the Company
and CPI as the members of Venture Two entered into as of even date herewith.
(85) "Operating Property Activity Capital Proceeds" shall
mean "Capital Proceeds" (as defined in the Operating Property Activity
Agreement) to the extent distributed to the Company plus amounts received by the
Company upon the sale, liquidation or other disposition of all or any part of
its interest in Venture Two.
(86) "Operating Property Activity Cash Flow" shall mean
"Cash Flow" as defined in the Operating Property Activity Agreement, to the
extent distributed by Venture Two to the Company.
(87) "Operating Property Activity Interest" shall mean
the Company's aggregate percentage interest in the profits, losses and
distributions of Venture Two from time to time.
(88) "Operating Property Activity Nonrecourse Deductions"
shall mean the Company's distributive share of nonrecourse deductions of
Venture Two as allocated to the Company pursuant to the Operating Property
Activity Agreement.
(89) "Operating Property Activity Profit or Loss" shall mean
the sum of (x) Company's distributive share of net profit, net loss, or gross
items of income, gain, loss and deduction, allocated to the Company pursuant to
the Operating Property Activity Agreement and (y) the gain or loss realized by
the Company upon the sale or other disposition of all or part of its interest in
Venture Two. The net amount of such items, if positive, being referred to as
Operating Property Activity Profit or, if negative, Operating Property Activity
Loss.
(90) "Operating Property Manager" shall mean the Person
designated by the Management Committee as a manager (within the meaning of
Section 18-101(10) of the Act) pursuant to Section 6.1.3 hereinbelow.
(91) "Pension Investor" shall mean any investor with
respect to which Prudential or Prudential Real Estate Investor ("PREI") is
acting as a "Qualified Professional Asset Manager" as defined in Department
of Labor Prohibited Transaction Class Exemption 84-14. The initial Pension
Investor shall be the separate account for qualified pension trust investors
formed and maintained by Prudential pursuant to the provisions of Section
17B:28-7 N.J.S.A. and known as Prudential Property Investment Separate
Account ("PRISA").
(92) "Percentage Interest" shall mean a Member's
percentage interest in the profits and losses of the Company other than Venture
Two Profit or Loss and Venture Three Profit or Loss, as set forth in Section
3.1.
(93) "Person" shall mean an individual, partnership,
corporation, limited liability company, trust, unincorporated association,
joint stock company or other entity or association.
(94) "Plan Assets Regulations" shall mean C.F.Rss.
2510.3-101, promulgated under ERISA.
(95) "Plan Violation" shall mean a transaction, condition or
event that would (i) constitute a nonexempt (under Prohibited Transaction Class
Exemption 84-14, as it may be amended) or prohibited transaction under ERISA; or
(ii) be subject to state statutes regulating investments of and fiduciary
obligations with respect to any governmental Plan.
(96) "Prepayment Notice" shall have the meaning specified
in Section 8.3.3.
(97) "Project" shall have the meaning ascribed to such
term in the Development Activity Agreement.
(98) "Prudential" shall mean The Prudential Insurance
Company of America, a New Jersey corporation.
(99) "Prudential Affiliate" shall mean (i) any successor to
Prudential in connection with a bona fide reorganization, recapitalization,
acquisition or merger, (ii) any Person which acquires all or substantially all
of the assets of Prudential, (iii) the Pension Investor and (iv) any other
Person which, directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with Prudential or any
of the aforesaid specifically identified Prudential Affiliates. The term
"control", as used in the immediately preceding sentence, means, with respect to
a Person that is a corporation, the right to the exercise, directly or
indirectly, of more than 50% of the voting rights attributable to the shares of
the controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of the controlled Person.
(100) "Prudential Contribution Amount" shall mean an
amount of cash equal to the product of (i) ninety-nine percent (99%) and
(ii) the difference between $283,750,000 and the outstanding principal
balances of the Mortgages as of the Effective Date.
(101) "Prudential Current Return" shall mean as of any
particular date, an amount equal to nine and one-half percent (9.5%) per annum
compounded quarterly until paid, determined on the basis of a 365 day year for
the actual number of days in the period for which the Prudential Current Return
is being determined, cumulative to the extent not distributed pursuant to
Section 4.9.1(b), 4.9.2 or Section 4.10.1(c) herein, on the Prudential
Unreturned Contribution, for the period such Prudential Unreturned Contribution
amount is outstanding; provided, however, that in the event Prudential becomes a
Defaulter due to an Event of Default described in Section 9.1.1(a) with respect
to its obligation to pay any portion of the Prudential Contribution Amount
(after giving effect to the applicable 5 day grace period in Section 9.1.1), and
following CPI giving Prudential a second notice marked "Failure to Cure Will
Result In Reduction of Current Return" and if Prudential fails to cure such
default within five (5) days after receipt of such second notice, then the
Prudential Current Return shall be zero from and after and during the
continuance of any such Event of Default.
(102) "Prudential Development Contribution Amount"
shall mean an amount of cash equal to the product of (i) 1% and (ii) the
difference between $283,750,000 and the outstanding principal balance of the
Mortgages as of the Effective Date.
(103) "Prudential Redemption Notice" shall have the meaning
specified in Section 8.3.6.
(104) "Prudential Redemption Rights" shall have the meaning
specified in Section 8.3.6.
(105) "Prudential Unreturned Contribution" shall mean as of
any particular date, an amount equal to the excess, if any, of (x) the product
of the Member Development Percentage of Prudential (expressed as a decimal) and
the Prudential Contribution Amount that has been contributed to the Company,
less (y) the aggregate distributions to Prudential pursuant to Section 4.10.1(b)
(excluding therefrom any distribution amount attributable to the 2% annual
compounded increase on the contribution used for purposes of calculating the
"Unreturned Development Activity Contribution").
(106) "Put Notice" shall have meaning specified in Section
8.4.
(107) "Regulations" shall mean those regulations
promulgated under the Code.
(108) "Right of First Offer" shall mean the Right of First
Offer Agreement dated as of even date herewith by and
among CPI and Prudential.
(109) "Sale Notice" shall have the meaning specified in
Section 8.3.4.
(110) "Tax Matters Partner" shall have the meaning
specified in Section 5.7.
(111) "Term" shall have the meaning specified in Section
2.10.
(112) "Transfer" shall have the meaning specified in
Section 8.1.1.
(113) "Transferee" shall have the meaning specified in
Section 8.2.3.
(114) "Transferor" shall have the meaning specified in
Section 8.2.3.
(115) "Unreturned CPI Development Valuation Amount" shall mean
the CPI Development Valuation Amount minus amounts distributed to CPI under
Section 4.9.1(e) to the extent such amounts were otherwise distributable to
Prudential but were distributed to CPI in reduction of the Unreturned CPI
Development Valuation Amount and minus amounts of Unreturned CPI Development
Valuation Amount which have previously resulted in distributions under Section
4.10.1(f); with the net amount outstanding from time to time escalated at the
rate of 2% per annum (compounded annually) from the Effective Date.
(116) "Unreturned Development Activity Contribution" shall
mean an amount equal to the Prudential Contribution Amount actually contributed
from time to time, minus amounts distributed pursuant to Section 4.10.1(b), with
the net amount outstanding from time to time escalated at the rate of 2% per
annum (compounded annually).
(117) "Venture Two" shall mean CP Venture Two LLC, a
Delaware limited liability company.
(118) "Venture Three" shall mean CP Venture Three LLC, a
Delaware limited liability company.
Section 1.2 Other Definitions.
-----------------
In addition to the terms defined in Section 1.1, other terms will have
the definitions provided elsewhere in this Agreement.
Section 1.3 Exhibits.
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Attached hereto and forming an integral part of this Agreement are
various exhibits which are listed in the Table of Contents for this Agreement or
otherwise referenced in this Agreement, all of which are incorporated into this
Agreement as fully as if the content thereof were set out in full herein at each
point of reference thereto.
ARTICLE 2
---------
FORMATION
---------
Section 2.1 Formation of Company.
--------------------
CPI and Prudential do hereby form the Company as a limited liability
company for the limited purposes and scope set forth in Section 2.4 and upon the
terms, provisions and conditions set forth in this Agreement. The rights and
obligations of the Members shall be governed by this Agreement and by the Act.
If there is a conflict between the provisions of this Agreement and the Act, the
provisions of the Act shall control (it being understood, however, that if the
Act provides for a particular rule but allows the members of a limited liability
company to provide to the contrary in their limited liability company operating
agreement, and if the parties hereto have so provided hereunder, then such
provisions shall not be deemed to constitute a conflict for purposes of the
foregoing).
Section 2.2 Name.
----
The name of the Company shall be CP Venture LLC or such other name as
may be Approved by the Members under which all business and affairs of the
Company shall be conducted.
Section 2.3 Principal Place of Business; Resident Agent.
-------------------------------------------
The Company shall maintain a registered office in the State of Delaware
at CT Corporation System, Wilmington, Delaware, and the registered agent at such
address shall be CT Corporation System unless and until such registered office
and agent are changed by the Administrative Manager after giving prior written
notice to all Members. The principal place of business of the Company shall be
located at CPI's address set forth in Section 11.1 below or at such other place
of business of CPI in the State of Georgia as CPI may designate. The Company
shall maintain a registered office at such address in Georgia. The resident
agent for the Company in Georgia shall be CPI or such agent as may be designated
by CPI from time to time.
Section 2.4 Purpose and Scope.
-----------------
The purpose of the Company is to acquire, own and invest in Development
Activity and Operating Property Activity, including by means of investment in
and ownership of limited liability company interests in Venture Two and Venture
Three, to make short term investments, including short term loans, permitted for
"venture capital operating companies" under the Plan Asset Regulations pending
the commitment of Company funds to investments in Development Activity and
Operating Property Activity or distributions to the Members, to exercise in the
ordinary course of business rights and duties as the managing member under the
Development Activity Agreement and rights and duties as the managing member
under the Operating Property Activity Agreement, and to do any and all other
acts or things which may be incidental or ancillary thereto. In furtherance of
these purposes, the Company shall have all powers necessary, suitable or
convenient for the accomplishment thereof. It is the intent of the Members that
the Company shall be a "venture capital operating company" within the meaning of
the Plan Asset Regulations and that Venture Two and Venture Three shall each be
a "real estate operating company" within the meaning of the Plan Asset
Regulations.
Section 2.5 Certificate of Formation.
------------------------
The Company has filed a certificate of formation (the "Certificate")
with the Secretary of State of Delaware pursuant to the Act and shall also
execute and file such other certificates which may from time to time be
necessary or appropriate to file in connection with the continuation and
operation of the Company. The Members hereby agree to execute and file any
required amendments to the Certificate and shall do all other acts requisite for
the constitution of the Company as a limited liability company pursuant to the
Act or any other applicable law.
Section 2.6 Ownership and Waiver of Partition.
---------------------------------
The interest of each Member in the Company shall be personal property
for all purposes. All property and interests in property, real or personal,
owned by the Company shall be held in the name of the Company and deemed owned
by the Company as an entity, and no Member, individually, shall have any
ownership of or interest in such property or interest owned by the Company
except as a member of the Company. Each of the Members irrevocably waives,
during the term of the Company and during any period of its liquidation
following any dissolution, any right that it may have to seek or maintain any
action for partition with respect to any of the assets of the Company.
Section 2.7 Limits of Company.
-----------------
(a) The relationship between and among the Members shall
be limited to carrying on the business of the Company in accordance with the
terms of this Agreement.
(b) The Members shall each devote such time to the Company as
is reasonably necessary to carry out the provisions of this Agreement. Each of
the Members understands that the other Member or its Affiliates and any Manager
and its Affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Company, Development Activity or
Operating Property Activity. Each Member also understands that the conduct of
the business of the Company may involve business dealings with such other
businesses or undertakings. The Members hereby agree that the creation of the
Company and the assumption by each of the Members of their duties hereunder
shall be without prejudice to their rights (or the rights of their Affiliates)
to have such other interests and activities and to receive and enjoy profits or
compensation therefrom, and each Member waives any rights it might otherwise
have to share or participate in such other interests or activities of the other
Member or its Affiliates and of any Manager and its Affiliates. The Members and
Managers may engage in or possess any interest in any other business venture of
any nature or description independently or with others including, but not
limited to, the ownership, financing, leasing, operation, management or
development of real property and investments in real property. Such other
ventures and investments may compete with the business and assets of the
Company, Venture Two, and Venture Three, including, without limitation, the
Assets. Neither the Company nor any Member shall have any right by virtue of
this Agreement, the Development Activity Agreement or the Operating Property
Activity Agreement in or to any such other venture or investment or the income
or profits derived therefrom. Except as otherwise provided in the Contribution
Agreement, neither CPI nor Prudential shall have any obligation to offer or
contribute any particular business opportunity or investment to the Company, to
Venture Two or to Venture Three.
Section 2.8 No Individual Authority.
-----------------------
Neither Member shall, without the express, prior written consent of the
other Member, take any action for or on behalf of or in the name of the Company
or other Member, or assume, undertake or enter into any commitment, debt, duty
or obligation binding upon the Company except for (a) actions expressly provided
for in this Agreement, (b) actions by a Member within the scope of its authority
granted in this Agreement, and (c) actions Approved by the Members or Approved
by the Management Committee, and any action taken in violation of the foregoing
limitation shall be void. Each Member shall indemnify and hold harmless the
other Member and the Company and their respective Affiliates from and against
any and all claims, demands, losses, damages, liabilities, lawsuits and other
proceedings, judgments and awards, and costs and expenses (including, but not
limited to, reasonable attorneys' fees and all court costs) arising directly or
indirectly, in whole or in part, out of any breach of the foregoing provisions
by such Member, unless and to the extent such Member or Affiliate was acting in
good faith. This provision shall survive dissolution of the Company.
Section 2.9 Responsibility of Members.
-------------------------
(a) The Company and each Member shall not be responsible or
liable for any responsibility, indebtedness, or other obligation, including, but
not limited to, any tax liability, of any other Member incurred prior to, on the
date of or after the execution of this Agreement, except for those which are
undertaken or incurred expressly on behalf of the Company under or pursuant to
the terms of this Agreement or the Contribution Agreement, or assumed in writing
by both Members, and each Member hereby indemnifies and agrees to hold the other
Member and the Company harmless from all such obligations and indebtedness
except as aforesaid.
(b) Each Member will notify the other Member as quickly as
reasonably possible upon receipt of any notice (i) of the filing of any action
in law or in equity naming the Company, Venture Two or Venture Three or any
Member as a party relating in any way to the business of the Company, Venture
Two or Venture Three; (ii) of any actions to impose liens of any kind whatsoever
or of the imposition of any lien whatsoever against the Company, Venture Two,
Venture Three, or any assets owned by such entities, (iii) of any casualty,
damage or injury to persons or property owned by the Company, Venture Two, or
Venture Three; or (iv) of the default by the Company, Venture Two, or Venture
Three of any of its respective obligations to creditors or other third parties.
Each Member will endeavor to notify the other Member verbally promptly upon
learning of any of the foregoing actions, or the threat thereof, which, in such
Member's judgment, is material to the Company or the other Member.
Section 2.10 Term.
----
The term of the Company (the "Term") shall commence as of the date
first above written and continue until the first to occur of the following:
(a) December 31, 2028 unless extended by the Approval of
the Members; or
(b) The Company is dissolved and terminated as a result
of the dissolution and winding up of the Company in accordance with Article 9
hereof.
Section 2.11 Investment Representations
--------------------------
(a) Investment Intent. Each Member does hereby represent
and warrant to the other and to the Company, and to each of them, that it is
acquiring its interests in the Company for investment solely for its own
account or, in case of Prudential, solely on behalf of institutional clients for
whom Prudential makes discretionary real estate investments that are held in a
separate account of Prudential, with the intention of holding such interest for
investment purposes only, and not with a view to or for sale in connection with
any distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Federal Act").
(b) Unregistered Interests. Each Member does hereby
acknowledge that it is aware that its interest in the Company has not been
registered under the Federal Act or under any state securities laws. Each
Member further understands and acknowledges that its representations and
warranties contained in this Section 2.11 are being relied upon by the Company
and by the other Member as the basis for the exemption of the Members'
interests in the Company from the registration requirements of the
Federal Act and under all state securities laws. Each Member further
acknowledges that the Company will not and has no obligation to recognize any
sale, transfer, or assignment of a Member's interest in the Company to any
Person unless and until the provisions of Article 8 hereof have been fully
satisfied.
(c) Each Member represents and warrants that it is an
"accredited investor" as that term is defined in Rule 501 under the Federal Act,
and that subject to the Express Representations and Warranties of CPI and
Prudential, respectively, as set forth in the Contribution Agreement it has had
a full and adequate opportunity to review information regarding the Assets, the
Development Activity Interest and the Operating Property Activity Interest and,
in the case of Prudential, to meet with representatives of CPI and obtain such
information regarding the investment as it has required.
(d) Nature of Investment. Each Member does hereby
acknowledge and agree that a legend reflecting the restrictions imposed
upon the transfer of its interest in the Company under Article 8 hereof,
under the Federal Act and under state securities laws shall be placed on the
first page of this Agreement.
(e) Indemnification. Each Member shall and does hereby
agree to indemnify and save harmless the Company and the other Member, from
any liability, loss, cost, damage and expense (including, without limitation,
the costs of litigation and attorneys' fees) arising out of, resulting from, or
in any way related to the breach of any representation or warranty of such
Member set forth in this Section 2.11.
ARTICLE 3
---------
CAPITAL
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Section 3.1 Member Percentage Interests. The Percentage Interests of
the Members in the profits of the Company are as follows (subject to adjustment
as provided in this Agreement):
Member Percentage
------ ----------
Prudential 50%
CPI 50%
Section 3.2 Capital Contributions.
---------------------
3.2.1 Initial Capital Contributions.
(a) As of the Closing Proration Date, Prudential shall
contribute to the Company cash in an amount equal to $39.6 million as its
initial capital contribution and first installment of the Prudential
Contribution Amount.
(b) As of the Effective Date, CPI shall contribute as its
initial capital contribution a 99% membership interest in Venture Two to the
Company, free and clear of any liens, claims, security interests or encumbrances
(other than any encumbrances or restrictions on transfer set forth in this
Agreement and in the Operating Property Activity Agreement). Upon and
contemporaneously with such contribution, the Company shall be admitted as a
member of Venture Two and shall have a 99% percentage interest in Venture Two.
At the same time, Prudential and the Company shall enter into the Development
Activity Agreement in accordance with the Contribution Agreement. The Members
hereby approve an amendment of the Operating Property Activity Agreement to
reflect adding the Company as a member therein. The Members agree that the
initial Gross Asset Value of the Operating Property Activity Interest is equal
to the CPI Contribution Amount. CPI makes no representations or warranties to
Prudential or the Company of any kind regarding the Operating Property Activity
Interest, the Assets or the Development Activity Interest, except as expressly
set forth in the Contribution Agreement (or delivered in accordance therewith)
and in the Assignment of Operating Property Activity Interest between CPI and
the Company of even date herewith.
3.2.2 Balance of Prudential Contribution Amount. Prudential
shall contribute to the capital of the Company the balance of the Prudential
Contribution Amount remaining after its initial capital contribution described
in Section 3.2.1 above, pursuant to four (4) additional installments on the
dates specified below. In the event CPI desires for the Company or Venture Three
to receive any portion of the Prudential Contribution Amount or the Prudential
Development Contribution Amount in advance of the dates set forth below, upon
written request to Prudential from CPI specifying the amounts so requested,
which request may be made at any time, Prudential shall undertake good faith
efforts to secure such amounts from the Pension Investor for contribution on
such accelerated schedule proposed by CPI (it being acknowledged by CPI that
other obligations of the Pension Investor may render such accelerated schedule
proposed by CPI infeasible for Prudential and the Pension Investor), and if
Prudential determines that it shall be able to so secure such amounts on such
accelerated schedule as aforesaid, then, and only in such event, Prudential and
CPI shall enter into an amendment of the schedule of remaining installments of
the Prudential Contribution Amount and an amendment of the Development Activity
Agreement with respect to the remaining installments of the Prudential
Development Contribution Amount. The installments of the Prudential Contribution
Amounts shall be due and payable on the dates set forth below (unless amended as
aforesaid), and the amount of each additional installment shall be an amount
which, when added to the previous amounts contributed by Prudential to the
Company hereunder, equals or exceeds (in the case of any of the first three
installments) the minimum cumulative contribution amount set forth below:
Date Prudential Contribution
---- -----------------------
December 30, 1998 Minimum Cumulative Contribution
of $103,950,000
March 30, 1999 Minimum Cumulative Contribution
of $153,450,000
June 29, 1999 Minimum Cumulative Contribution
of $202,950,000
September 29, 1999 Minimum Cumulative Contribution equal
to the Prudential Contribution Amount
Prudential shall be unconditionally and irrevocably obligated to
contribute to the capital of the Company the minimum cumulative amount specified
above on each installment date, timely contribution being of the essence, and
irrespective of any claim of breach or default or right of offset by any party
arising under the Contribution Agreement or this Agreement or otherwise. All
installments of the Prudential Contribution Amount shall be paid by wire
transfer of immediately available federal funds to an account of the Company
designated by the Administrative Manager. In the event Prudential fails to pay
in full any installment of the Prudential Contribution Amount as and when due
and payable under this Section 3.2.2, which failure remains uncured after giving
effect to the grace period set forth in Section 9.1.1(a), CPI shall have all
rights and remedies available at law or in equity including, without limitation,
the right to pursue a suit for specific performance against Prudential, and the
right to enforce on behalf of the Company any and all rights and remedies of the
Company against Prudential. Upon the date of each contribution, the Member
Property Percentages of Prudential and CPI shall be adjusted as provided in the
definition of Member Property Percentage herein. Except at the request of CPI or
with the prior written consent of CPI, Prudential shall not be entitled to
prepay in advance of the applicable contribution date any installment of the
Prudential Contribution Amount without the consent of CPI. The Gross Asset
Values of Company assets shall not be adjusted upon the contribution of any part
of the Prudential Contribution Amount. No breach or failure at any time of
"Cousins' Express Representations and Warranties" or covenants under the
Contribution Agreement or any of CPI's representations or covenants under this
Agreement shall excuse Prudential's performance of its obligations to pay the
Prudential Contribution Amount in full. Prudential's liability to pay the
Prudential Contribution Amount in full shall not be subject to any limitation of
liability or recourse in the Contribution Agreement or any other agreement or
arising under law, nor shall Prudential's liability be subject to any claim or
right of offset against CPI, the Company, Venture Two or Venture Three. The
obligation of Prudential to pay the Prudential Contribution Amount is the full
faith and credit obligation of Prudential, provided, however, that liability for
any failure of Prudential to pay the Prudential Contribution Amount in full when
due shall be limited to an amount equal to the net asset value of those assets
which are maintained in the PRISA Account of Prudential at the time of any such
failure. Prudential represents to CPI that the PRISA Account is an open-end
commingled insurance company separate account of Prudential that has a net asset
value of not less than $2 billion as of the Effective Date. Prudential covenants
and agrees with CPI that it shall at all times hereunder maintain investments
(consisting of total investments in real estate assets and cash or cash
equivalents) in such PRISA Account having a net asset value (i.e., total value
of assets minus liabilities with respect thereto) not less than 200% of the
outstanding balance of the Prudential Contribution Amount, and such covenant and
agreement in this Section shall constitute the full faith and credit obligation
of Prudential. In the event Prudential becomes a Defaulter due to Prudential's
failure to pay the Prudential Contribution Amount in full as and when due, or,
unless Prudential shall agree that liability against it shall not be so limited,
should at any time the net asset value of the PRISA Account be an amount less
than 200% of the outstanding balance of the Prudential Contribution Amount, then
CPI shall have the right to acquire (a) the entire interest in the Company held
by Prudential (or any Prudential Affiliate) (including its entire Member
Development Percentage, Member Property Percentage, and Percentage Interest) and
(b) the entire interests in Venture Three and Venture Two (including any
Investor Units and Additional Capital Units) held directly by Prudential (or any
Prudential Affiliate), for an amount of cash (or wire transfer of immediately
available Federal funds) equal to 90% of the Prudential Contribution Amount
theretofore contributed, against delivery of transfer instruments with respect
to such interests in form acceptable to CPI and otherwise in accordance with
Section 8.3.7(b). Such right to purchase shall be exercisable by CPI upon
written notice to Prudential and shall be in addition to CPI's other rights and
remedies. The "Closing" of any such acquisition for which such notice is given
shall be consummated in accordance with Section 8.3.7, except that the place and
date of Closing shall be the place and date specified in any such notice of
election from CPI. Until the Prudential Contribution Amount is paid in full,
Prudential will provide CPI with quarterly and annual financial statements
certifying as to the net asset value of the PRISA Account. Such quarterly
financial statements will be provided not more than 45 days after the end of
each calendar quarter and such annual financial statement not more than 90 days
after the end of each calendar year.
3.2.3 Depreciable and Non-Depreciable Elements of
Contributions. The Company will allocate, upon request of any Member and by
separate document Approved by the Members, the Agreed Value of the Assets
(as set forth on Exhibit A) as between the various Assets and the depreciable
and non-depreciable elements thereof.
Section 3.3 Pro Rations Related to Contributed Property. The Members
agree that Venture Two shall allocate on a pro rata basis all "Operating
Expenses" and "Gross Receipts" (as such terms are defined in the Operating
Property Activity Agreement) attributable to the Assets of Venture Two as of the
Closing Proration Date. For each such Asset, except as set forth in the
Contribution Agreement, Venture Two shall be entitled to all such "Gross
Receipts" and responsible for all such "Operating Expenses" of the Assets
attributable to the period commencing on the Closing Proration Date, and CPI
shall be entitled to all such "Gross Receipts" of and be responsible for all
such "Operating Expenses" of the Assets attributable to the period ending
immediately prior to the Closing Proration Date. Percentage rents, if any,
collected by Venture Two from any tenant under such tenant's lease for the
percentage rent accounting period in which the Closing Proration Date occurs,
as, if, and when received by Venture Two, shall be prorated between Venture Two
and CPI, such that CPI's pro rata share shall be an amount equal to the total
percentage rentals paid for such percentage rent accounting period under the
applicable lease multiplied by a fraction, the numerator of which shall be the
number of days in such accounting period prior to the Closing Proration Date and
the denominator of which shall be the total number of days in such accounting
period; provided, however, that such proration shall be made only at such time
as such tenant is current or, after application of a portion of such payment,
will be current in the payment of all rental and other charges under such
tenant's lease that accrue and become due and payable from and after the Closing
Proration Date and in the payment of any other obligations of such tenant to
Venture Two then due and payable by such tenant. Similarly, except as set forth
in the Contribution Agreement, as of each date of contribution of additional
Prudential Contribution Amount, Venture Two shall allocate on a pro rata basis
all "Operating Expenses" and "Gross Receipts" attributable to the Assets of
Venture Two to the period before and the period after such date, so as to
properly determine amounts allocable and distributable to the Members in light
of the changing Member Property Percentages.
Section 3.4 Investment of Development Activity Funds in Venture Three.
---------------------------------------------------------
3.4.1 Investment of Funds. The Company shall contribute to
Venture Three the installments of the Prudential Contribution Amount as
contributed by Prudential under this Agreement. Such contributions to Venture
Three shall be made not later than the second Business Day following the date of
each contribution by Prudential to the Company, unless otherwise agreed by the
Members; provided, however, that with respect to the initial installment of the
Prudential Contribution Amount and each subsequent installment thereof under
this Agreement, the Company shall retain and invest such amounts in short term
investments of the Company pending long term commitment permitted for "venture
capital operating companies" under the Plan Asset Regulations until such time as
CPI and Prudential agree in writing that Venture Three qualifies, and as to such
subsequent installments, continues to qualify, as a "real estate operating
company" within the meaning of the Plan Asset Regulations, or in the absence of
such written agreement, as determined by special ERISA counsel to the Company
Approved by the Members. At such time as Development Manager believes that
Venture Three qualifies as a "real estate operating company" within the meaning
of the Plan Asset Regulations, Development Manager shall deliver to the Members
a certificate in the form attached as Exhibit C to the Development Activity
Agreement for signature by both Members, together with such supplemental
information as the Members may reasonably require in order to establish that
Venture Three qualifies as a "real estate operating company" within the meaning
of the Plan Asset Regulations. In the event of any dispute between CPI and
Prudential regarding the qualification of Venture Three as a "real estate
operating company" within the meaning of the Plan Assets Regulations and prior
to obtaining special ERISA counsel, each of CPI and Prudential shall meet with
each other and their respective counsel in order to determine the nature of any
issues relating to such dispute and determination, and in order to develop a
plan for compliance which shall be mutually agreeable to each Member.
3.4.2 Special Terms Applicable to Period Prior to Venture
Three Real Estate Operations. During the period prior to Venture Three
qualification as a "real estate operating company" within the meaning of the
Plan Assets Regulations, or thereafter if the Members are unable to agree in
writing that Venture Three continues to qualify as a "real estate operating
company" within the meaning of the Plan Assets Regulations, in addition to the
Company holding funds to be contributed to Venture Three pursuant to Section
3.4.1 above, (i) Prudential shall make any contributions required with respect
to its direct 1% interest in Venture Three directly to the Company as and when
such amounts are required to be contributed to Venture Three under the
Contribution Agreement; (ii) the Company shall invest such amounts in the same
manner as other funds held for contribution to Venture Three; (iii) for all
purposes of allocations in this Agreement, income earned by the Company with
respect to funds contributable to Venture Three shall be allocated to the
Members in the same manner as if such income had been earned by Venture Three
(including, for example, the income attributable to the 1% direct interest of
Prudential being allocated to Prudential); (iv) for all purposes of
distributions in this Agreement, amounts which would have been distributable
with respect to the funds held for contribution to Venture Three if they had
been contributed to Venture Three, shall be distributed to the Members in the
same manner as if such funds had been held by Venture Three (including, for
example, paying preferred returns with respect to capital invested); and (v) at
such time as Venture Three qualifies as a "real estate operating company" as
described above and determined by the Members pursuant to Section 3.4.1, the
Company shall contribute all amounts held for contribution to Venture Three to
Venture Three. With respect to any such additional capital contribution, at such
time as Development Manager believes that Venture Three qualifies as a "real
estate operating company" within the meaning of the Plan Asset Regulations,
Development Manager shall deliver to the Members a certificate in the form
attached as Exhibit C to the Development Activity Agreement for signature by
both Members, together with such supplemental information as the Members may
reasonably require in order to confirm that Venture Three continues to qualify
as a "real estate operating company" within the meaning of the Plan Asset
Regulations. For purposes of monitoring and implementing these provisions, the
funds held for contribution to Venture Three may be accounted for as if in a
separate "division" of the Company with the accounting reflecting the accounting
that would have been applicable if the funds had been held by Venture Three.
Section 3.5 Additional Capital.
------------------
(a) In the event a Manager determines at any time or from time
to time that either the Development Activity or the Operating Property Activity
needs funds or capital in addition to the original capital contributed by the
Members, the Manager of the activity requiring funds or capital shall have the
right, power and authority on behalf of the Company (in the Company's capacity
as the managing member of the applicable venture), to arrange debt financing for
the applicable venture from third party lenders and loans from the applicable
Manager or its Affiliates and to raise additional equity capital, subject to
this Section 3.5. Except as provided in paragraph (d) of this Section 3.5 with
respect to the Development Activity, if a Manager of Development Activity or
Operating Property Activity in its sole discretion determines to seek funds or
capital in addition to third party debt and the original equity capital
contributed by the Members, whether as debt from the applicable Manager or from
its Affiliates (collectively, "Affiliate Debt") or as equity capital, such
Manager shall send a notice (an "Additional Capital Notice") to the Members of
the Company setting forth (i) the purposes for which the additional funds are
needed, (ii) the amount sought for the activity, (iii) the Company's pro rata
share of such Affiliate Debt or additional capital, which pro rata share shall
be in the same proportion to the entire amount of equity or Affiliate Debt being
sought for the activity as the Development Activity Interest or, as applicable,
the Operating Property Activity Interest, bears to all interests in the
applicable venture, and (iv) the date when the funds will be required, which
date shall be not less than 20 Business Days after the date of the Additional
Capital Notice. Any additional equity contribution pursuant to this Section 3.5
shall not have any priority current return and shall be returned without
interest under the terms of Section 4.10, unless otherwise proposed in the
Additional Capital Notice. Equity contributed by the Company to Venture Three
pursuant to the above arrangements shall be in exchange for Additional Capital
Units in Venture Three or other interests specified in the Development Activity
Agreement. For purposes of this Agreement, such Additional Capital Units, and
all the rights attributable thereto, shall be treated as part of the Development
Activity. Any Affiliate Debt from either Development Manager or Operating
Property Manager, as applicable, or any Affiliate of either Development Manager
or Operating Property Manager, as applicable, shall bear interest at an interest
rate floating at 3% per annum over the monthly average of the Federal Funds rate
(as published from time to time in Federal Reserve Statistical Release H.15),
but in no event less than 10% per annum.
(b) Following delivery of an Additional Capital Notice from a
Manager, the Members shall have the right and option to elect to contribute or
loan, as the case may be, the amount of capital or debt required from the
Company pro rata in accordance with their respective Member Development
Percentages or, as applicable, Member Property Percentages. In order to be
valid, such election must be exercised by delivery of written notice of election
to the applicable Manager not later than the 10th Business Day after the date of
the Additional Capital Notice. Failure of a Member to deliver such notice of
election on or before the 10th Business Day after the date of the Additional
Capital Notice shall be deemed to be an election of such Member not to make such
contribution. Any election to make the contribution shall be binding and
irrevocable and obligate the Member making such election to contribute its pro
rata share of the requested equity or debt amount to the Company in cash or
immediately available funds on the date required by the Additional Capital
Notice.
(c) Notwithstanding anything to the contrary in this Section
3.5, if either Member does not elect to contribute its respective pro rata share
of the equity or debt required from the Company for the Development Activity or
the Operating Property Activity, the other Member shall not make its pro rata
share of such additional contribution of equity or debt to the Company and
instead shall be entitled (but not required) to make (or cause its Affiliates to
make) a capital contribution or loan, as the case may be, directly to Venture
Three or Venture Two, as applicable, (i) in the case of equity, in the amount of
the capital sought by Venture Three or Venture Two, as applicable, as specified
in the Additional Capital Notice, or such other amount as Development Manager or
Operating Property Manager, as applicable, may approve, in exchange for, as
applicable, Additional Capital Units in Venture Three (subject to the limitation
of such paragraph (e) of this Section 3.5) or other interests specified in the
Development Activity Agreement determined in accordance with the formula set
forth in the Development Activity Agreement, or such additional interests
specified in the Operating Property Activity Agreement determined in accordance
with the formula set forth in the Operating Property Activity Agreement, and
(ii) in the case of debt, an appropriate debt instrument. The Members
acknowledge and agree that in the event a Member (or an Affiliate thereof) makes
any such equity contribution to Venture Three or Venture Two, as applicable,
directly, the Development Activity Interest or Operating Property Activity
Interest, as applicable, shall be reduced or diluted in accordance with the
Development Activity Agreement or Operating Property Activity Agreement, as
applicable. The Development Manager or Operating Property Manager, as
applicable, shall have the right to admit such Member (or its Affiliate) as a
member of Venture Three or Venture Two, as applicable, and the right to amend
the Development Activity Agreement or Operating Property Activity Agreement, as
applicable, to reflect the admission of such Member (or its Affiliate) to
Venture Three or Venture Two, as applicable.
(d) Notwithstanding anything to the contrary in Sections
3.5(a) or (b), Development Manager or an Affiliate thereof may at any time loan
funds as Affiliate Debt to Venture Three without any obligation to deliver an
Additional Capital Notice to the Members.
(e) Notwithstanding anything to the contrary in this
Section 3.5, without the Approval of the Members in no event shall more than
$50 million of additional equity be raised for Venture Three for which
Additional Capital Units in Venture Three are issued.
Section 3.6 No Interest on Capital.
----------------------
Interest earned on Company funds shall inure solely to the benefit of
the Company, and except as specifically provided hereinabove, no interest shall
be paid upon any contributions or advances to the capital of the Company nor
upon any undistributed or reinvested income or profits of the Company.
Section 3.7 Reduction of Capital Accounts.
-----------------------------
Any distribution to a Member, whether pursuant to Sections 4.9 or 4.10
or any other Section of this Agreement, shall reduce the amount of such Member's
Capital Account in accordance with Section 3.8, but no adjustment in the
Percentage Interest, Member Development Percentage or Member Property Percentage
of any Member shall be made on account of any such distribution, except as
otherwise specifically provided in this Agreement.
Section 3.8 Capital Accounts.
----------------
(a) "Capital Account" means an account that shall be
maintained for each Member and which, as of any given date, shall be an amount
equal to the sum of the following:
(i) The aggregate amount of cash that has been
contributed to the capital of the Company as of such date by or on behalf of
such Member; plus
(ii) The agreed upon Gross Asset Value (as of
the date of contribution) of any property other than cash that has been
contributed to the capital of the Company as of such date by such Member
and the amount of liabilities assumed by any such Member under Regulations
Section 1.752 or which is secured by any Company property distributed to such
Member; plus
(iii) The aggregate amount of the Company's Net
Profit, Development Activity Profit, or Operating Property Activity Profit that
has been allocated to such Member as of such date pursuant to the provisions
of Section 4.1 or any items of income or gain which are specially allocated to
such Member or other positive adjustment required by the Regulations and which
have not been previously taken into account in determining Capital Accounts;
minus
(iv) The aggregate amount of the Company's Net Loss,
Development Activity Loss or Operating Property Activity Loss that has been
allocated to such Member as of such date pursuant to Sections 4.1 and 4.3 and
the amount of any item of expense deduction or loss which is specially
allocated to such Member; and minus
(v) he aggregate amount of cash and the agreed
upon Gross Asset Value of all other property (as of the date of distribution)
that has been distributed to or on behalf of such Member and the amount of any
liabilities of such Member assumed by the Company under Regulations Section
1.752 or which are secured by any property contributed by such Member to the
Company.
(b) Upon the sale, transfer, assignment or other disposition
of an interest in the Company after the Effective Date, the Capital Account of
the transferor Member that is attributable to the transferred interest will be
carried over to the transferee Member.
(c) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the Administrative Manager
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities that are secured by contributed or
distributed property or that are assumed by the Company or the Members), are
computed in order to comply with such Regulations, the Administrative Manager
may make such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Member pursuant to Section 9.4 hereof
upon the dissolution or liquidation of the Company.
(d) In accordance with Section 5.1, each Member and its
authorized representatives shall have the right at all reasonable times to have
access to, inspect, audit and copy the books and records of the Company for the
purpose of reviewing the allocations to and maintenance of Capital Accounts and
ascertaining the correctness thereof and Administrative Manager will cooperate
in any such examination. In the event that at any time a Member discovers an
error in the allocations to or computation of the Capital Accounts from that
intended by the provisions of this Agreement, it shall promptly notify
Administrative Manager of such error and the Members shall work together to
correct any such error in allocations or computations in a manner having the
least adverse effect on the Members. Each Fiscal Year, in conjunction with the
preparation of the Company's annual federal income tax return, the Independent
Accountants shall prepare a report detailing all adjustments to and the ending
balances of the Capital Accounts of the Members for all Fiscal Years (a "Capital
Account Report"). The cost of preparing the Capital Account Report shall be
allocated between Venture Two and Venture Three based upon the relative time and
effort expended with respect to Capital Account adjustments relating to each of
Venture Two and Venture Three. The Independent Accountants will deliver to the
Members for their review the Capital Account Report at the same time the
Company's tax or information returns are delivered to the Members pursuant to
Section 5.2. Any Member shall raise any objection to the allocations and
computations detailed in a Capital Account Report no later than sixty (60) days
prior to the expiration of the period for filing an amended federal income tax
return or information return with respect to any Fiscal Year for which an error
may have occurred.
Section 3.9 Negative Capital Accounts.
-------------------------
Any Member having a deficit or negative balance in its Capital Account
shall not be required to restore such deficit capital amount or otherwise to
contribute capital to the Company to restore its Capital Account.
Section 3.10 Resignations; Withdrawals of Capital.
------------------------------------
No Member shall have the right to resign or withdraw from the Company
or to withdraw any portion of the capital of the Company at any time. Upon
termination of the Company, the Members' capital shall be distributed pursuant
to Section 9.4 hereof.
Section 3.11 Limit on Contributions and Obligations of Members
-------------------------------------------------
Except as expressly provided in this Agreement and the Contribution
Agreement, the Members shall have no liability or obligation to the Company or
to the other Members to make additional capital contributions to the Company, or
to make any loans to the Company.
ARTICLE 4
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PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS
-----------------------------------------------
Section 4.1 Allocations.
-----------
Section 4.1.1 Development Activity Profit. Except as otherwise
provided in this Article 4, all Development Activity Profit remaining after the
application of Section 4.5 for each Fiscal Year shall be specially allocated to
the Members as follows:
(a) First, to each Member, pro rata in accordance with its
respective Member Development Percentage, until the cumulative Development
Activity Profit allocated to each Member pursuant to this clause (a) is equal to
the cumulative Development Activity Loss allocated to such Member pursuant to
Section 4.1.2 and Section 4.3 (such Development Activity Profit to be allocated
first with respect to Development Activity Loss allocated pursuant to Section
4.3 and thereafter in reverse chronological order of the allocation of the
Development Activity Loss which has not been previously offset by an allocation
under this Section 4.1.1(a));
(b) Second, (1) except as provided in subclause (2) of this
Section 4.1.1(b) with respect to allocations to adjust the Capital Accounts of
the Members immediately prior to liquidating distributions pursuant to Section
9.4.4 and allocations upon the receipt and distribution of Capital Proceeds
attributable to the liquidation of Venture Three, to CPI to the extent of the
sum of (A) the CPI Current Return distributions, the CPI Current Valuation
Return distributions, the CPI Development Valuation Amount distributions and the
residual distribution of Cash Flow, if any, that CPI has received pursuant to
Sections 4.9.1(c), 4.9.1(d), 4.9.1(e), 4.10.1(d), 4.10.1(e) and 4.10.1(f) from
the Effective Date to a date thirty (30) days after the end of such Fiscal
Year), and (B) the product of the Member Development Percentage of CPI and the
cumulative 2% annual escalated amount on the Unreturned Development Activity
Contribution, less the cumulative Development Activity Profit allocated to CPI
pursuant to this Section 4.1.1(b)(1) for all prior Fiscal Years; and (2) for
purposes of adjusting Capital Accounts of the Members immediately prior to
liquidating distributions and in connection with the distribution of Capital
Proceeds received upon liquidation of Venture Three, to CPI to the extent of the
positive difference, if any, between (A) the sum of all distributions to CPI,
including deemed distributions to CPI pursuant to Section 9.4, with respect to
its Member Development Percentage and excluding amounts attributable to
Additional Capital Units, from the Effective Date and (B) the sum of (x) the
product of the Prudential Contribution Amount and the Member Development
Percentage of CPI and (y) the aggregate net Development Profit or Loss
(excluding amounts attributable to Additional Capital Units), allocated to CPI
for all Fiscal Years, including the current Fiscal Year pursuant to Section
4.1.1(a)-(b)(1).
(c) Thereafter, to the Members in accordance with their then
respective Member Development Percentages.
Section 4.1.2 Development Activity Loss. Except as otherwise provided
in this Agreement, all Development Activity Loss remaining after the application
of Section 4.5 for each Fiscal Year shall be specially allocated to the Members
in accordance with their then respective Member Development Percentages.
Section 4.1.3 Operating Property Activity Profit. Except as otherwise
provided in this Article 4, all Operating Property Activity Profit of the
Company for each Fiscal Year shall be specially allocated to the Members as
follows:
(a) First, to each Member, pro rata in accordance with its
respective Member Property Percentage, until the cumulative Operating Property
Activity Profit allocated to each Member pursuant to this clause (a) is equal to
the cumulative Operating Property Activity Loss allocated to such Member
pursuant to Section 4.1.4 and Section 4.3 (such Operating Property Activity
Profit to be allocated first with respect to Operating Property Activity Loss
allocated pursuant to Section 4.3 and thereafter in reverse chronological order
of the allocation of the Operating Property Activity Loss which has not been
previously offset by an allocation under this Section 4.1.3(a)); and
(b) Thereafter, to the Members in accordance with their then
respective Member Property Percentages.
Section 4.1.4 Operating Property Activity Loss. Except as otherwise
provided in this Agreement, all Operating Property Activity Loss of the Company
for each Fiscal Year shall be specially allocated to the Members in accordance
with their then respective Member Property Percentages.
Section 4.1.5 Net Profit. Except as otherwise provided in this Article
4, all Net Profit of the Company for each Fiscal Year shall be allocated to the
Members as follows:
(a) First, to each Member, pro rata in accordance with their
respective Percentage Interests, until the cumulative Net Profit allocated to
each Member pursuant to this clause (a) is equal to the cumulative Net Loss
allocated to such Member pursuant to Section 4.1.6 and Section 4.3 (such Net
Profit to be allocated first with respect to Net Loss allocated pursuant to
Section 4.3 and thereafter in reverse chronological order of the allocation of
the Net Loss which has not been previously offset by an allocation under this
Section 4.1.5(a)); and
(b) Thereafter, to the Members in accordance with their then
respective Percentage Interests.
Section 4.1.6 Net Loss Except as otherwise provided in this Article 4,
all Net Loss of the Company for each year shall be allocated to the Members in
accordance with their Percentage Interests.
Section 4.2 [Reserved]
----------
Section 4.3 Limitation on Loss Allocations. Notwithstanding any
provision of this Agreement to the contrary, except as otherwise specifically
provided in this Section 4.3, in no event shall Net Loss, Development Activity
Loss or Operating Property Activity Loss be allocated to a Member if such
allocation would result in such Member's having a negative Adjusted Capital
Account Balance at the end of any year. All Net Loss, Development Activity Loss
or Operating Property Activity Loss in excess of the limitation set forth in
this Section 4.3 shall be allocated to any remaining Member with a positive
Adjusted Capital Account Balance, and if all such Adjusted Capital Account
Balances are zero or negative, to the Members pursuant to the applicable
provision of Section 4.1 above.
Section 4.4 Other Items. Except as provided herein, for tax purposes,
all items of income, gain, loss, deduction or credit shall be allocated in the
same manner as are Development Activity Profit, Operating Property Activity
Profit, Net Profit, Development Activity Loss, Operating Property Activity Loss,
and Net Loss.
Section 4.5 Special Allocations.
-------------------
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 4, if there is a net decrease in Minimum Gain during
any Fiscal Year, each Member shall be specially allocated items of Company gross
income and gain for such year (and, if necessary, subsequent years) in an amoun
equal to such Member's share of the net decrease in Minimum Gain,
determined in accordance with Regulations Sections 1.704-2(g)(2) and 1.704-2(k).
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 Section 4.5(a) is
intended to comply with the minimum gain chargeback requirement in the
Regulations and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 4 except Section 4.5(a), if there is a net decrease
in Member Minimum Gain attributable to a Member Nonrecourse Debt during any
Fiscal Year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of
Company gross income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Member's share of the net decrease in Member
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5). 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 Section 4.5(b) is intended to comply
with the Member Nonrecourse Debt Minimum Gain chargeback requirement in
such Sections of the Regulations and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company gross income and gain shall be
specially allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the negative Adjusted
Capital Account Balance of such Member as quickly as possible, provided that an
allocation pursuant to this Section 4.5(c) shall be made if and only to the
extent that such Member would have a negative Adjusted Capital Account
Balance after all other allocations provided for in this Article have been
tentatively made as if this Section 4.5(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year that is in excess of the
sum of (i) the amount such Member is obligated to restore (pursuant to the terms
of a promissory note to the Company or otherwise), and (ii) the amount such
Member is deemed to be obligated to restore pursuant to the penultimate
sentence of each of Regulations Sections 1.704-2(g)(1)(ii) and 1.704-2(i)(5)
each such Member shall be specially allocated items of Company gross income and
gain in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 4.5(d) shall be made if and only 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 4 have been
tentatively made as if Section 4.5(c) and this Section 4.5(d) were not in the
Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year or other period shall be specially allocated as follows:
(i) Operating Property Activity Nonrecourse
Deductions shall be specially allocated to the Members pro-rata in proportion to
their respective Member Property Percentages;
(ii) Development Activity Nonrecourse
Deductions shall be specially allocated to the Members pro-rata in proportion to
their Member Development Percentages; and,
(iii) Any remaining nonrecourse deductions that
are not Operating Property Activity Nonrecourse Deductions or Development
Activity Nonrecourse Deductions shall be specially allocated to the Members
in accordance with their Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-1(i).
(g) 754 Elections. In the event any Member is required to
recognize any gain for income tax purposes with respect to an actual or
constructive distribution of property by the Company and in the event the
Company increases the tax basis of any of its assets under Sections 754, 734
and 755 of the Code by reason of such gain recognition by such Member, then
any tax benefit to which the Company is entitled in any Fiscal Year as a
result of such basis increase, whether in the form of a deduction for
depreciation or amortization of any asset of the Company, a reduction in the
gain to be recognized by the Company upon the sale of any asset of the Company,
or otherwise, shall be allocated for income tax purposes to the Member who
recognized such gain.
(h) Make-Whole Allocations. All or part of the Development
Activity Profit or the Operating Property Activity Profit, or items of income
and gain thereof, remaining after the application of Sections 4.5(a) - (g) shal
be specially allocated to Prudential to the extent of any amount otherwise
distributable to CPI that is actually distributed to Prudential pursuant to
Section 8.3.4(a)(iii); all or part of the Development Activity Loss or
Operating Property Activity Loss, or items of loss or deduction thereof,
remaining after the application of Sections 4.5(a)-(g) shall be specially
allocated to CPI to the extent of any amount otherwise distributable to CPI that
is actually distributed to Prudential pursuant to Section 8.3.4(a)(iii).
Items of income, gain, loss or deduction shall be allocated from items of
Development Activity Profit or Loss or Operating Property Activity Profit or
Loss in the same proportion as the source of the distributions made to
Prudential.
(i) Development Activity Additional Capital Priority
Allocations. All or part of the Development Activity Profit or items of gross
income and gain thereof remaining after the application of Section 4.5(a)
through (h), if any, shall be specially allocated to the Members, pro rata in
proportion to their respective Member Development Percentages, in an amount
equal to, in total, the aggregate items allocated to the Company pursuant to
Section 4.5(h) of the Development Activity Agreement with regard to the
Company's Additional Capital Units and the income or gain realized by the
Company upon the sale or other disposition of all or part of its Additional
Capital Units.
(j) Gain or Loss Upon Exercise of Redemption Rights.
All of the gain or loss realized by the Company upon exercise of the CPI
Redemption Rights or the Prudential Redemption Rights shall be specially
allocated to Prudential to the extent attributable to the acquisition by CPI
of any of the Company's Investor Units and Additional Capital Units pursuan
to Section 8.3.5(b)(ii) or Section 8.3.6(b)(iii). All of the gain or loss
realized by the Company upon exercise of the CPI Redemption Rights or the
Prudential Redemption Rights shall be specially allocated to CPI to the
extent attributable to the acquisition by Prudential of the Company's Operating
Property Activity Interest pursuant to Section 8.3.6(b)(ii).
(1) Except as provided in subparagraph (2)
of this Section 4.5(k) with respect to allocations to adjust the Capital
Accounts of the Members immediately prior to liquidating distributions pursuant
to Section 9.4.4 and allocations upon the receipt and distribution of Capital
Proceeds attributable to the liquidation of Venture Three, all or part of
the Development Activity Profit or items of gross income and gain thereof
remaining after the application of Sections 4.5(a)-(j), if any, shall be
specially allocated to Prudential to the extent of the sum of the (A) Prudential
Current Return distributions, Operating Property Activity Cash Flow
distributions (but only to the extent distributable to CPI but actually
distributed to Prudential to pay Prudential Current Return), and the residual
distributions of Development Activity Cash Flow, if any, that Prudential has
received pursuant to Sections 4.9.1(b), 4.9.1(e), 4.9.2 (but only to the extent
distributable to CPI but actually distributed to Prudential to pay Prudential
Current Return), and 4.10.1(c) hereof from the Effective Date to a date thirty
(30) days after the end of such Fiscal Year and (B) the product of the Member
Development Percentage of Prudential and the cumulative 2% annual escalated
amount on the Unreturned Development Activity Contribution, less the cumulative
Development Activity Profit or items of gross income and gain thereof allocated
to Prudential pursuant to this subparagraph (k)(1) for all prior Fiscal Years.
(2) For purposes of adjusting Capital Accounts
of the Members immediately prior to liquidating distributions and in
connection with the distribution of Capital Proceeds received upon liquidation
of Venture Three, all or part of the Development Activity Profit or items of
gross income and gain thereof remaining after the application of Sections
4.5(a)-(k)(1) shall be specially allocated to Prudential to the extent of the
positive difference, if any, between (A) the sum of all distributions to
Prudential, excluding amounts attributable to Additional Capital Units,
including deemed distributions to Prudential pursuant to Section 9.4 with
respect to its Member Development Percentage (including, without limitation,
all Prudential Current Return distributions from whatever source) from the
Effective Date, and (B) the sum of (x) the product of the Prudential
Contribution Amount and the Member Development Percentage of Prudential and
(y) the aggregate net Development Profit or Loss, or items of gross income,
gain or loss thereof (excluding amounts attributable to Additional Capital
Units), allocated to Prudential for all Fiscal Years, including the current
Fiscal Year pursuant to Section 4.5(a)-(k)(1).
(l) CPI Priority Allocation. All or part of the Development
Activity Loss or items of loss or deduction thereof remaining after the
applications of Sections 4.5(a) - (k), if any, shall be specially allocated to
CPI to the extent of Operating Property Activity Cash Flow that was otherwise
distributable to CPI but actually distributed to Prudential to pay Prudential
Current Return pursuant to Section 4.9.2 from the Effective Date to a date
thirty (30) days after the end of such Fiscal Year less the cumulative
Development Activity Loss or items of loss or deduction thereof allocated to
such CPI pursuant to this Section 4.5(l) for all prior Fiscal Years.
(m) Special Allocation of Venture Two Depreciation and Gain
Chargeback. All of the Company's allocable share of depreciation, amortization
and similar items or deductions of Venture Two shall be specially allocated to
the Members in accordance with their respective Member Property Percentages.
Upon the sale, transfer, or other disposition of any asset of Venture Two, any
gain allocated to the Company from Venture Two shall be specially allocated
among the Members to the extent of and in proportion to the excess, if any, of
(A) the aggregate amount allocated to each Member pursuant to this Section
4.5(m) hereof for the current and all prior Fiscal Years, over (B) the aggregate
gain allocated to such Member pursuant to this Section 4.5(m) for all prior
Fiscal Years.
(n) Excess Proceeds Allocations. All or part of the Operating
Property Activity Profit, or items of gross income and gain thereof, remaining
after the application of Sections 4.5(a) - (m), if any, shall be specially
allocated to the Members to the extent of and in proportion to the Excess
Operating Property Activity Cash Flow and Excess Operating Property Activity
Capital Proceeds distributed 90% to CPI and 10% to Prudential pursuant to the
provisions of Sections 4.9.2, 4.10.2 and 8.3.4.
Section 4.6 Curative Allocations.
--------------------
The allocations set forth in Sections 4.5(a) through 4.5(f) (the
"Regulatory Allocations") are intended to comply with certain requirements of
Regulations Sections 1.704-1(b) and 1.704-2(b). Notwithstanding any other
provisions of this Agreement, other than the Regulatory Allocations, the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other items and the Regulatory
Allocations to each Member shall be equal to the net amount that would have been
allocated to such Member if the Regulatory Allocations had not occurred. The
Administrative Manager shall have reasonable discretion, with respect to each
Fiscal Year, to apply the provisions of this Section 4.6 in whatever manner is
likely to minimize the economic distortions that might otherwise result from the
Regulatory Allocations, it being the basic economic understanding of the Members
that they shall be returned their capital contributions (reduced, if at all, by
their pro rata share of Net Loss, Development Activity Loss and Operating
Property Activity Loss as in effect at the time or times such losses were
allocated) plus their pro rata share (as adjusted from time to time) of Net
Profit, Development Activity Profit and Operating Property Activity Profit
allocated to the Members (as reduced by losses allocated in the inverse order of
prior profits).
Section 4.7 Other Allocation Rules.
-----------------------
The following rules shall apply for purposes of making tax allocations:
(a) "Excess nonrecourse liabilities" of the Company within
the meaning of Regulations Section 1.752-3(a)(3), shall be allocated among
the Members in accordance with the manner in which it is reasonably expected
that the deductions attributable to those nonrecourse liabilities will be
allocated.
(b) To the extent permitted by Section 1.704-2(h) of the
Regulations, the Administrative Manager shall have complete discretion in
determining whether a distribution shall be treated as being attributable to a
Nonrecourse Liability or a Member Nonrecourse Liability and the increase in the
Minimum Gain or Member Minimum Gain attributable to such liabilities. The
Members recognize that such decision may affect the tax treatment of certain
deductions for a Fiscal Year and might offset after-tax returns of the Members.
Section 4.8 Section 704(c) Allocation.
-----------------------
Notwithstanding any other provision of this Agreement to the contrary,
any gain or loss and any depreciation and cost recovery deductions recognized by
the Company for income tax purposes in any Fiscal Year with respect to all or
any part of the Company's property that is required or permitted to be allocated
among the Members in accordance with Section 704(c) of the Code and any
Regulations promulgated thereunder so as to take into account the variation, if
any, between the adjusted tax basis of such property at the time of its
contribution and the Gross Asset Value of such property at the time of its
contribution, shall be allocated to the Members for income tax purposes using
the traditional method described in Section 1.704-3 of the Regulations. If and
when the Capital Accounts of the Members are required to be adjusted pursuant to
Regulation Sections 1.704-1(b)(2)(iv)(f) or (g) with respect to a revaluation of
any asset of the Company, then subsequent allocations of income, gain, loss, and
deduction, including without limitation depreciation or deductions for cost
recovery with respect to such asset, shall take into account any variation
between the then existing adjusted basis of such asset for federal income tax
purposes and the agreed value of such asset, as such computations may be
required under Sections 704(b) and 704(c) of the Code and Regulation Section
1.704-1(b)(4)(i). Any elections or other decisions relating to such allocations
shall be made on behalf of the Company by CPI in its sole discretion.
Section 4.9 Distribution of Cash Flow.
-------------------------
4.9.1 Development Activity Cash Flow. Except as provided in Section
9.4, Section 8.3.4 or Section 4.11, the Company shall distribute Development
Activity Cash Flow to the Members as and when determined by the Development
Manager, but not less frequently than quarterly, in the following order of
priority:
(a) First, to the Members, pro rata in proportion to their
respective Member Development Percentages, in an amount equal to, in total, the
"Cash Flow" as defined in the Development Activity Agreement received from
Venture Three with respect to its Additional Capital Units;
(b) Second, to Prudential in an amount, together with
all amounts previously distributed to Prudential under this Section 4.9.1(b),
Section 4.9.2 and Section 4.10.1(c) below, equal to the Prudential Current
Return;
(c) Third, to CPI in an amount, together with all
amounts previously distributed to CPI under this Section 4.9.1(c) and Section
4.10.1(d) below, equal to the CPI Current Return;
(d) Fourth, to CPI in an amount, together with all
amounts previously distributed to CPI under this Section 4.9.1(d) and Section
4.10.1(e) below, equal to the CPI Current Valuation Return; and
(e) Fifth, to the Members in proportion to their then
respective Member Development Percentages, provided that amounts otherwise
distributable to Prudential shall be distributed to CPI to the extent of any
Unreturned CPI Development Valuation Amount.
4.9.2 Operating Property Activity Cash Flow. Except as provided in
Section 4.11, Section 9.4 or Section 8.3.4, the Company shall distribute
Operating Property Activity Cash Flow to the Members as and when determined by
the Operating Property Manager, but not less frequently than quarterly, to the
Members pro rata in accordance otherwise with their then respective Member
Property Percentages; provided, however, that amounts distributable to CPI under
this Section 4.9.2 shall instead be distributed to Prudential to the extent that
the amounts distributed to Prudential under Section 4.9.1(b) and 4.10.1(c) are
less than the Prudential Current Return, until an amount equal to such
Prudential Current Return has been distributed to Prudential under Sections
4.9.1(b), 4.10.1(c) and from amounts otherwise distributable to CPI under this
Section 4.9.2.
4.9.3 Cash Flow. Except as provided in Section 3.4.2, Section 4.11
and Section 9.4, the Company shall distribute Cash Flow of the Company that is
not Development Activity Cash Flow or Operating Property Activity Cash Flow to
the Members as and when determined by the Administrative Manager, but not less
frequently than quarterly, to the Members in accordance with their Percentage
Interests.
Section 4.10 Distribution of Capital Proceeds.
--------------------------------
4.10.1 Development Activity Capital Proceeds. Except as provided in
Section 9.4 and Section 4.11, the Company shall distribute to the Members
Development Activity Capital Proceeds received by the Company within thirty (30)
calendar days after receipt in the following order of priority:
(a) First, to the Members, pro rata in proportion to their
respective Member Development Percentages, in an amount equal to the sum of (i)
an amount equal to, in total, the "Capital Proceeds" (as defined in the
Development Activity Agreement) received by the Company with respect to its
Additional Capital Units and (ii) an amount equal to Capital Proceeds arising
from any sale or other disposition of the Company's Additional Capital Units;
(b) Second, to the Members, pro rata in accordance with
their then respective Member Development Percentages,
in an amount which equals the Unreturned Development Activity Contribution;
(c) Third, to Prudential in an amount which, together
with all amounts previously distributed to Prudential under this Section
4.10.1(c), Section 4.9.1(b) and Section 4.9.2, is equal to the Prudential
Current Return;
(d) Fourth, to CPI in an amount which, together with
all amounts previously distributed to CPI under this Section 4.10.1 (d) and
Section 4.9.1(c), is equal to the CPI Current Return;
(e) Fifth, to CPI in an amount which, together with
all amounts previously distributed to CPI under this Section 4.10.1(e) and
Section 4.9.1(d), is equal to the CPI Current Valuation Return;
(f) Sixth, to CPI in an amount which, is equal to the
quotient of (i) the Unreturned CPI Development Valuation Amount divided by (ii)
the Member Development Percentage of Prudential (expressed as a decimal); and
(g) Seventh, the balance, if any, of Development
Activity Capital Proceeds shall be distributed to the Members pro rata in
proportion to their then respective Member Development Percentages.
Provided, however, that notwithstanding the foregoing, if any
Development Activity Capital Proceeds are received upon liquidation of Venture
Three then such liquidation proceeds shall be distributed pursuant to this
Section 4.10.1 as if modified by the provisions of Section 9.4.6.
4.10.2 Operating Property Activity Capital Proceeds. Except as provided
in Section 4.11, Section 9.4 or Section 8.3.4, the Company shall distribute
Operating Property Activity Capital Proceeds received by the Company within
thirty (30) calendar days after receipt to the Members pro rata in proportion to
their then respective Member Property Percentages.
4.10.3 Other Capital Proceeds. Except as provided in Section 4.11 and
Section 9.4, in the event the Company has any Capital Proceeds to distribute
which are not Development Activity Capital Proceeds or Operating Property
Activity Capital Proceeds, such Capital Proceeds shall be distributed to the
Members in accordance with their Percentage Interests.
4.10.4 Insufficient Balance. If Development Activity Capital Proceeds
or Operating Property Activity Capital Proceeds are insufficient to pay the
total amount payable under any priority level in this Section, Development
Activity Capital Proceeds or Operating Property Activity Capital Proceeds shall
be distributed within such priority level to the Members in proportion to their
claims under such priority level.
Section 4.11 Loss on CPI Note and Venture Three Guaranty.
-------------------------------------------
In the event (i) any asset (including cash) of Venture Three is
transferred or paid to a creditor of CPI or any CPI Affiliate as a result of any
guaranty, pledge, mortgage, deed of trust, deed to secure debt, assignment or
other instrument given by Venture Three to secure an obligation of CPI or a CPI
Affiliate to the extent that the proceeds of such obligation (1) were not
incurred to pay, finance or re-finance an obligation, "Operating Expense" or
"Total Project Cost" of Venture Three (as those terms are defined in the
Development Activity Operating Agreement) or other asset of Venture Three, or
(2) were not distributed by Venture Three to its members, or (ii) any note from
CPI to the Company that is pledged as collateral for any obligation of CPI or
any CPI Affiliate is transferred to the pledgee; then such transfer or payment
shall be treated as if such asset or note, as the case may be, had been sold by
Venture Three at its fair market value (but in the case of a Project or other
asset, in no event less than the cost of such Project or asset (as reflected by
the "Total Project Costs" incurred in connection therewith), and in the case of
any note from CPI or an Affiliate of CPI, in no event less than the outstanding
amount of such note) and the proceeds of sale (net of liabilities encumbering
such asset) distributed pursuant to the Development Activity Agreement and
Section 4.10.1 herein; provided, however, to the extent such amounts, had they
actually been received by Venture Three as aforesaid, should have been
distributed to Prudential under this Agreement (and for the purpose of this
Section 4.11 it shall be deemed that such entire amount determined above should
have been distributed without any deduction, retention, reserve or set-aside to
other purposes which would have been permitted in the event of a voluntary
disposition of such asset), Prudential shall be entitled to a distribution of
all future amounts otherwise distributable to CPI under this Agreement and under
the Development Activity Agreement and the Operating Property Activity
Agreement, until Prudential has received the amounts that should have been
distributed to it from the sale of such asset or note out of such amounts
otherwise distributable to CPI had such sale occurred as aforesaid. For purposes
of this Section 4.11, fair market value shall be Agreed by the Members and if
they are unable to agree such value shall be determined pursuant to the
procedure of Section 10.2 herein.
Section 4.12 Allocation Example
------------------
The Members agree that the allocation and distribution provisions of
this Agreement contained in this Article 4 and in Section 9.4, and the
allocation and distribution provisions of the Development Activity Agreement and
the Operating Property Activity Agreement, are intended to set forth the
economic understanding and agreement of the Members with respect to their
investments in the Company, Venture Two and Venture Three, but that such
provisions are complex and could be erroneously applied. Accordingly, attached
hereto as Exhibit F is an example of the allocation and distribution provisions
of this Agreement based upon certain hypothetical results from operation of the
Company. Exhibit F is intended for illustration only and does not represent any
representation of one Member to the other of anticipated actual results.
ARTICLE 5
---------
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS
----------------------------------------------
Section 5.1 Books and Records.
-----------------
The Administrative Manager shall keep books and records at the
Company's principal place of business which are usually maintained by Persons
engaged in similar businesses setting forth a true, accurate and complete
account of the Company's business and affairs including a fair presentation of
all income, expenditures, assets and liabilities thereof. Such books and records
shall be maintained, and its income, gain, losses and deductions shall be
determined and accounted for on the accrual basis in accordance with generally
accepted accounting principles consistently applied. Separate financial
statements shall be maintained for Venture Two, Venture Three and the activity
of the Company not reflected in such financial statements. Each Member and its
authorized representatives shall have the right at all reasonable times to have
access to, inspect, audit and copy the Company's books, records, files,
securities, vouchers, canceled checks, employment records, bank statements, bank
deposit slips, bank reconciliations, cash receipts and disbursement records, and
other documents (the "Documents"). Each Member and its authorized
representatives shall also have the right, in connection with an examination and
audit of the Documents, to question, upon at least 3 days' notice, the
employees, if any, of the Company and to question during normal business hours,
any other Person and the employees of such other Person having custody or
control of any Documents, or responsibility for preparing the same. Each Member
shall be entitled to any additional information necessary for the Member to
adjust its financial basis statement to a tax basis as the Member's individual
needs may dictate.
Section 5.2 Tax Returns.
-----------
The Independent Accountants shall either prepare or review and sign, as
requested by the Members, the initial federal, state and local income tax
returns of the Company, and thereafter the Administrative Manager may prepare
such tax returns or cause the Independent Accountants to prepare such returns,
unless a Member requests that the Independent Accountants prepare such returns.
The Administrative Manager shall cause such tax and information returns that the
Company may be required to file to be filed on a timely basis at Company expense
with the appropriate governmental authorities. No tax or information return
shall be filed unless Approved by the Members. The Company's accountants are (i)
to deliver all tax and information returns to the Members for their review,
comment and reasonable approval at least thirty (30) days in advance of the
required filing date therefor taking into account any extensions thereof, and
(ii) furnish Members who so request with a projection of the Company's taxable
income or loss for each Fiscal Year of the Company by December 1 of each such
year to assist in year-end tax planning, all at Company expense.
Section 5.3 Reports.
-------
(a) Development Manager shall prepare and send to each Member
the following unaudited statements and reports with respect to Venture Three,
and the Operating Property Manager shall prepare and send to each Member the
following unaudited statements and reports with respect to Venture Two:
(i) within thirty (30) calendar days after the last
day of each calendar month during the Term, a
statement of income and expense (x) showing the actual results of the operations
of Venture Three or Venture Two, as the case may be, for the calendar month then
ended and cumulatively to date for the then elapsed portion of the current
Fiscal Year and (y) comparing on an itemized basis, all costs and expenses
incurred during such month and for such Fiscal Year with the Development
Operating Budget (as defined in the Development Activity Agreement) or the
Property Operating Budget (as defined in the Operating Property Activity
Agreement) for such month and such Fiscal Year, with a narrative explanation of
any variations which are material to such budgets;
(ii) within thirty (30) calendar days after the last
day of each calendar month during the Term, a balance sheet showing the
financial position of Venture Two or Venture Three as of such last day; and
(iii) within forty-five (45) calendar days after the
last day of each calendar quarter, a report on the development activities of
Venture Three in narrative form for such quarter period, including, but
not limited to, information on the status of acquisitions, zoning and
permitting, construction and development, leasing, financing and sales..
(b) Administrative Manager shall also prepare and send to each
Member unaudited statements and reports of the kind described in Section 5.3(a)
with respect to all income and expense and results of operation of the Company,
other than with respect to Venture Two and Venture Three, within thirty (30)
calendar days after the last day of each calendar month during the Term.
(c) Each monthly report furnished to the Members by the
Development Manager, the Operating Property Manager or the Administrative
Manager, as the case may be, shall also state, to the best knowledge of the
Development Manager, the Operating Property Manager or the Administrative
Manager, as the case may be, whether any default exists with respect to any
material obligation of the Company and whether any litigation is pending against
Venture Two, Venture Three or the Company.
Section 5.4 Audits.
------
After the end of each Fiscal Year the Administrative Manager shall
cause an audit to be made by the Independent Accountants covering the assets,
liabilities and net worth of the Company and its operations during such Fiscal
Year, and all other matters customarily included in such audits. Separate audit
reports shall be provided for Venture Two and Venture Three. The Members shall
cooperate in good faith with each other and the Independent Accountants in the
preparation of such audits. By April 30 of the subsequent Fiscal Year, the
Administrative Manager shall direct the Independent Accountants to deliver the
following financial statements with respect to each audit: a balance sheet and
statement of income and expense, statement of cash flows, and the capital
position as of the end of and for such Fiscal Year, together with the report of
the Independent Accountants covering the results of such audit and certifying
such financial statements as having been prepared in accordance with generally
accepted accounting principles consistently applied. A copy of such financial
statements shall be provided to each Member.
Section 5.5 Bank Accounts.
-------------
All funds of the Company shall be deposited in its name in an account
or accounts maintained with the Bank or other financial institution Approved by
the Members. Funds of the Company shall not be commingled with funds of any
other Person. Checks shall be drawn upon the Company account or accounts only
for the purposes of the Company and shall be signed by respective duly
authorized representatives of the Members.
Section 5.6 Tax Elections and Decisions.
---------------------------
Any and all federal, state and local tax elections and decisions for
the Company and Venture Three shall be made by CPI in its sole discretion, and
such elections and decisions for Venture Two shall be made jointly by the
Members except for those matters set forth on Schedule 5.6 hereto, which shall
be made as indicated on Schedule 5.6. In making such elections, however, the
appropriate Manager or Member shall take into account tax matters with respect
to the Company, Venture Two or Venture Three that would adversely affect a
Member and shall use its good faith efforts to consult with such member and to
make elections that have the least adverse effect on all of the Members. Except
as specifically provided in Section 6.1.2(d), the Company, Venture Two and
Venture Three shall elect to be treated as and shall qualify as partnerships for
federal income tax purposes.
Section 5.7 Tax Matters Member.
------------------
If required under any provision of the Code, the Administrative Manager
shall designate CPI as the Company's "Tax Matters Partner" as and when so
required. If and when so appointed, the "Tax Matters Partner" shall serve as
such at the expense of the Company with all powers granted to a tax matters
partner under the Code. Each Member shall give prompt notice to each other
Member of any and all notices it receives from the Internal Revenue Service
concerning the Company, including any notice of audit, any notice of action with
respect to a revenue agent's report, any notice of a 30-day appeal letter and
any notice of a deficiency in tax concerning the Company's federal income tax
return.
ARTICLE 6
---------
MANAGEMENT
----------
Section 6.1 Management of the Company.
-------------------------
6.1.1 General. The overall management and control of the business and
affairs of the Company shall be vested in the Members. Pursuant to the
delegation set forth in Sections 6.1.2, 6.1.3 and 6.1.4 hereinbelow, except for
those matters specifically required to be Approved by the "Management Committee"
or the Members, (i) the Development Manager shall have the authority to manage
and administer the affairs, rights and responsibilities of the Company with
respect to Development Activity , (ii) the Operating Property Manager shall have
the authority to manage and administer the affairs, rights and responsibilities
of the Company with respect to Operating Property Activity, and (iii) the
Administrative Manager shall have the authority to manage and administer record
keeping, financial statement preparation and related administrative affairs of
the Company as well as implement the provisions of Section 6.11 below and any
other matters that are approved by the Management Committee to be managed by the
Administrative Manager, subject in each case to the restrictions contained in
Section 6.7 and Section 8.3 hereinbelow. Subject to the foregoing, all decisions
with respect to the management of the Company that are approved by the
Development Manager pursuant to the authority granted under this Section 6.1.1
and Section 6.1.2 or by the Operating Property Manager pursuant to be authority
granted under this Section 6.1.1 and Section 6.1.3, shall be binding on the
Company and the Members. All decisions with respect to the management of the
Company that are Approved by the Management Committee pursuant to the applicable
provision of Section 6.7 shall be binding on the Company, each of the Members,
and the Managers. Each Member in its capacity as Development Manager or
Operating Property Manager or as a member will comply with the terms of the
Development Activity Agreement or the Operating Property Activity Agreement, as
the case may be.
6.1.2 Development Manager.
-------------------
(a) Subject to the provisions of Sections 6.7 and 8.3, all
decisions to be made by the Company with respect to its interest in Venture
Three, whether as the managing member of Venture Three or otherwise shall be
made in the sole discretion of the Development Manager appointed by the Members
under this Section 6.1.2. For purposes hereof, the Members hereby appoint CPI as
the Development Manager. As such, CPI shall be a "manager" under the Act and,
subject to the provisions of Sections 6.7 and 8.3, shall have authority to act
on behalf of the Company with regard to any decision of the Company as the
managing member of Venture Three and to execute on behalf of the Company, as a
member of Venture Three, any document or agreement binding on Venture Three as
it deems necessary or advisable; provided, however, the Development Manager
shall not, without the Approval of the Management Committee or all Members, have
the authority or right (1) to sell, transfer or otherwise dispose of the
Development Activity Interest or part thereof other than as provided in Section
8.3 or Section 8.4, or (2) to cause the Company to execute or deliver any
guarantee or indemnity from the Company in favor of any Person on behalf of
Venture Three or any other Person. All guarantees and indemnities in favor of
mortgage lenders or others with respect to liabilities or obligations of Venture
Three shall be provided solely by Venture Three, or by CPI or its Affiliates
directly, and not by the Company.
(b) The Members acknowledge and agree that the primary
business of Venture Three will be real estate development, value-added real
estate acquisitions and real estate acquisitions which are associated with a
development opportunity, as well as the ownership and operation of developed and
acquired properties. CPI, as Development Manager having authority under this
Section 6.1.2, will determine in its sole discretion which opportunities are to
be pursued by Venture Three. Prudential acknowledges and agrees that CPI and it
Affiliates are independently in the business of real estate development and
ownership and that CPI may be involved in activities that are competitive with
Venture Three. In that regard, neither CPI nor any of its Affiliates shall have
any duty or obligation (including but not limited to, any fiduciary duty) to
offer or contribute any particular business opportunity to Venture Three. The
Members acknowledge and agree that Venture Three may incur unrecovered
pre-development and pre-acquisition costs or losses in connection with
transactions that are not consummated.
(c) The Members acknowledge and agree that in its capacity as
Development Manager, CPI may cause Venture Three to guarantee CPI's line of
credit financing and that CPI or a CPI Affiliate may temporarily borrow amounts
from the Company or Venture Three on an arms' length basis to the extent such a
loan is not inconsistent with the capital needs of Venture Three. For this
purpose, the interest rate charged on CPI's line of credit from time to time
shall be deemed to be arms' length. Any note evidencing such a loan may be
pledged by the Development Manager, on behalf of the Company or Venture Three as
collateral for any purpose, including, without limitation, CPI's line of credit.
Any such transactions are expressly authorized hereby and shall not be a
violation of any duty or obligation to the Company (including, but not limited
to, any fiduciary duty).
(d) The Members acknowledge and agree that Development Manager
shall have the right from time to time to select or change the form of entity
for Venture Three (e.g. partnership, corporation or trust, including a real
estate investment trust as defined in the Code) for tax and legal purposes,
provided no change shall be made to the form of entity without the consent of
Prudential if such change would have a material adverse economic impact on
Prudential as reasonably determined by Prudential. In the event of any dispute
between CPI and Prudential regarding whether such change would have a material
adverse economic impact on Prudential, each of CPI and Prudential shall meet
with each other and their respective counsel in order to determine the nature of
any issues relating to such dispute and determination, and in order to develop a
plan for avoidance of such material adverse economic impact which shall be
mutually agreeable to each Member. CPI shall upon demand reimburse Prudential
for all of Prudential's costs reasonably incurred (including, but not limited
to, the actual and reasonable costs of Prudential's attorneys and accountants,
including in-house attorneys and accountants provided that the costs of such
in-house attorneys and accountants is not in excess of $5,000.00 in the
aggregate based on actual time and cost) in connection with any proposal of
Development Manger under this Section 6.1.2(d).
6.1.3 Operating Property Manager.
--------------------------
(a) Subject to the provisions of Sections 5.6, 6.7 and 8.3,
all decisions to be made by the Company with respect to its interest in Venture
Two, whether as the managing member of Venture Two or otherwise, shall be made
in the sole discretion of the Operating Property Manager appointed by the
Members under this Section 6.1.3. For purposes hereof, the Members hereby
appoint Prudential as the Operating Property Manager. As such, Prudential shall
be a "manager" under the Act and, subject to the provisions of Sections 5.6, 6.7
and 8.3, shall have authority to act on behalf of the Company with regard to any
decision of the Company as the managing member of Venture Two and to execute on
behalf of the Company as a member of Venture Two any document or agreement
binding on Venture Two as it deems necessary or advisable; provided, however,
the Operating Property Manager shall not without the Approval of the Management
Committee or Members, have the authority or right (1) to sell, transfer or
otherwise dispose of the Operating Property Activity Interest or part thereof
other than as provided in Section 8.3 or 8.4, or (2) to cause the Company to
execute or deliver any guarantee or indemnity in favor of any Person on behalf
of Venture Two or any other Person. All guarantees and indemnities in favor of
mortgage lenders or others with respect to liabilities or obligations of Venture
Two shall be provided solely by Venture Two, or by Prudential or its Affiliates
directly, and not by the Company.
(b) The Members acknowledge and agree that the business of
Venture Two will be the ownership and operation of developed and acquired
properties. Prudential, as Operating Property Manager having authority under
this Section 6.1.3, will determine in its discretion which opportunities are to
be pursued by Venture Two. CPI acknowledges and agrees that Prudential and it
Affiliates are independently in the business of real estate operation and
ownership and that Prudential may be involved in activities that are competitive
with Venture Two. In that regard, neither Prudential nor any of its Affiliates
shall have any duty or obligation (including, but not limited to, any fiduciary
duty) to offer or contribute any particular business opportunity to Venture Two.
(c) Notwithstanding the foregoing provisions of this Section
6.1.3 or 6.1.1 above, the Members agree that in the event CPI shall exercise the
"Make-Whole Option" described in Section 8.3.4 below with respect to an Asset (a
"Make-Whole Asset"), Prudential agrees that CPI shall be and become a manager of
Venture Two and CPI (and not Operating Property Manager) shall have the right to
take and exercise all actions, approvals, agreements and decisions on behalf of
Venture Two with respect to such Asset, so long as CPI is not a Defaulter
hereunder with respect to any Make-Whole Amount for such Asset. From and after
such date, the Operating Property Manager, as such term is used herein and in
the Operating Property Activity Agreement, shall be deemed to be Prudential as
to all of the Assets except the Make-Whole Assets, so long as CPI is not a
Defaulter hereunder with respect to any Make-Whole Amount for such Make-Whole
Asset, and CPI as to the Make-Whole Assets, so long as CPI is not a Defaulter
hereunder with respect to any Make-Whole Amount for such Make-Whole Asset. All
such actions of CPI shall be subject to any and all terms, conditions and
provisions hereof and in the Operating Property Activity Agreement with respect
to the responsibilities, obligations and rights of the "Operating Property
Manager" as such term is used herein with respect to such Assets. Without
limiting the generality of the foregoing, in such case, CPI shall have the right
to segregate cash receipts and operating expenses attributable to the applicable
Make-Whole Asset and maintain a segregated bank account therefore with such
financial institution as CPI may select in its sole discretion. Without limiting
the generality of the foregoing, in the event CPI shall become an Operating
Property Manager with respect to a Make-Whole Asset as aforesaid, CPI shall
prepare separate financial statements and reports for such Make-Whole Asset in
accordance with Section 5.3, and CPI shall determine amounts of "cash flow" and
"capital proceeds" (both computed in a manner consistent with the definition of
"Cash Flow" and "Capital Proceeds" as defined in the Operating Property Activity
Agreement) to be distributed with respect to such Make-Whole Asset. In such
event the authority of Prudential as Operating Property Manager hereunder shall
be limited to exclude the right to take any actions or exclude any approvals or
decisions on behalf of Venture Two with respect to such Make-Whole Asset.
6.1.4 Administrative Manager. The Members hereby appoint CPI as the
"Administrative Manager." As such the Administrative Manager shall be a
"Manager" under the Act and have the authority to act on behalf of the Company
with respect to administrative and related matters of the Company, as set forth
herein.
6.1.5 Management Committee. The "Management Committee" of the Company
shall be comprised of one representative from each Member (subject to the
requirements of Section 8.2.3(a)), and each Member shall designate in writing
from time to time its representative on the Management Committee plus an
alternate. Each representative shall be fully authorized to provide, on behalf
of the Member which he or she represents, any consent or approval which may be
required hereunder of the Management Committee, and any action or decision so
taken by a representative shall be binding upon the Member which he or she
represents. The initial authorized representative of CPI shall be Daniel M.
DuPree, and in the event of the unavailability of Daniel M. DuPree, Tom G.
Charlesworth shall be the alternate authorized representative of CPI. The
initial authorized representative of Prudential shall be Dale H. Tayson, and in
the event of the unavailability of Dale H. Tayson, Mark Seedorff shall be the
alternate authorized representative of Prudential. Each Member may change its
authorized representative or alternate at any time by written notice to the
other Member.
6.1.6 Actions By Management Committee.
-------------------------------
(a) Either Member may initiate a request that the Management
Committee approve any matter or take any other action respecting the business
and affairs of the Company which is required for Approval by the Management
Committee pursuant to this Agreement. Any such request may be made at a
regularly scheduled meeting of the Management Committee or in writing. Any
written request must be labeled "REQUEST FOR ACTION BY MANAGEMENT COMMITTEE" and
must include a narrative explanation of the approval or action which is being
requested. If pursuant to such a request the Member desires to schedule a
special meeting of the Management Committee, such request must be received by
the other Member at least ten (10) calendar days prior to the proposed date for
such special meeting. Conversely, a Member receiving a request for approval or
action by the Management Committee which does not request that a special meeting
be held may then request a special meeting by written notice to the other Member
which must be received at least five (5) calendar days before the date proposed
for such special meeting. Each Member shall use its best efforts to comply with
a request by the other Member that a special meeting of the Management Committee
be held.
(b) If there is a need for any approval or action by the
Management Committee and no special meeting therefor is requested by either
Member, the representatives of the Members on the Management Committee shall use
their best efforts to respond within ten (10) days after the date the
representatives are notified of the need for such approval or other action
either in writing or at a regularly scheduled meeting of the Management
Committee. If a representative has not responded within said ten (10) day period
or if a special meeting has been properly requested with respect to such
proposed approval or other action but has not been held within ten (10) days
after the date requested for such special meeting, then the Member requesting
such approval or other action may at any time thereafter notify the other Member
that failure of such other Member's representative to respond within fourteen
(14) calendar days after such notice shall be deemed to be approval by such
other Member of the matter or action requested. Such notice must be labeled
"FAILURE TO ACT BY MANAGEMENT COMMITTEE REPRESENTATIVE" and must include a
narrative explanation of the approval or action which is being requested. If the
other Member's representatives fail to respond within said 14-day period, such
matter or action requested shall be Approved.
Section 6.2 Meetings.
--------
Regular meetings of the Management Committee shall be held at the
Company's principal place of business or at such other place as shall be
Approved by the Members and at intervals as may be Approved by the Members.
Dates, times and places of such regular meetings shall be Approved by the
Members. No meeting of the Management Committee shall be held unless each Member
is represented. Both regular and special meetings may be held by means of a
conference telephone or similar equipment if all persons participating in the
meeting can hear each other at the same time. At such meetings the Development
Manager shall provide an operations report on Venture Three and such other
information related to Venture Three as any Member of the Management Committee
may reasonably request, and Operating Property Manager shall provide an
operations report on Venture Two and such other information related to Venture
Two as any Member of the Management Committee may reasonably request. At such
meeting the Management Committee Members shall have the opportunity to provide
advice to and consult with the Development Manager and Operating Property
Manager regarding the activities of Venture Two and Venture Three, respectively.
Section 6.3 The Managers.
------------
(a) Subject to the provisions of Sections 6.1.2, 6.1.3,6.7 and
8.3 of this Agreement, and notwithstanding delegation of certain obligations and
responsibilities pursuant to Section 6.4(b) below, the operation of the Company
and management of the Company's business and affairs with respect to Venture
Three shall rest with and remain the obligation and responsibility of
Development Manager, and with respect to Venture Two shall rest with and remain
the obligation of Operating Property Manager.
(b) Subject to the provisions of Sections 6.1, 6.5 and 6.7 of
this Agreement, the Administrative Manager shall have the following rights and
powers, which it may exercise at the cost, expense and risk of the Company:
(i) To protect and preserve the assets of the
Company;
(iii) To pay costs and expenses of Company
operations;
(iv) To prepare (or have prepared) and file all tax
returns for and on behalf of the Company (but not the
tax returns or other reports of the Members);
(v) To acquire such tangible personal property and
intangible personal property as may be necessary or desirable to carry on the
business of the Company and sell, exchange or otherwise dispose of such
personal properties in the ordinary course of business;
(vi) To keep all books of account and other records
of the Company;
(vii) To pay all debts and other obligations of the
Company;
(viii) To distribute in accordance with this
Agreement all sums distributed to the Company from Venture
Three and Venture Two and otherwise enforce the rights of the Company under the
Development Activity Agreement and the Operating Property Activity Agreement;
(ix) To pay all taxes, levies, assessments, rents and
other impositions applicable to the Company, using
its good faith efforts to pay same before delinquency and prior to the addition
thereto of interest or penalties and undertake when appropriate any action or
proceeding seeking to reduce such taxes, assessments, rents or other
impositions; and
(xvi) To deposit all monies received for or on behalf
of the Company in the Bank or such financial
institutions as may be Approved by the Members, to invest any excess funds and
to disburse and pay all funds on deposit on behalf of and in the name of the
Company in such amounts and at such times as the same are required in connection
with the business of the Company.
(c) Documents to which the Company is a party shall be
executed and performed on behalf of the Company by Development Manager with
respect to Venture Three, by Operating Property Manager with respect to Venture
Two and otherwise by the Administrative Manager. No person, firm, partnership,
corporation or other entity shall be required to inquire into said authority of
the Managers to execute and perform any document on behalf of the Company.
(d) Each of the Managers shall devote itself to the business
and purposes of the Company, as set forth in Section 2.4 above, to the extent
reasonably necessary for the efficient carrying on thereof, without compensation
except as otherwise provided herein. Whenever requested by a Member, the
applicable Manager shall render a just and faithful account of all dealings and
transactions relating to the business of the Company. The acts of the Managers
shall bind the Members and the Company when within the scope of the Manager's
authority expressly granted hereunder.
Section 6.4 Duties of Managers.
------------------
(a) The Managers, at the expense of and on behalf of the
Company, shall implement or cause to be implemented all decisions Approved by
the Management Committee and delegated to the Managers in writing by the
Management Committee, and shall conduct or cause to be conducted the management
of the business and affairs of the Company in accordance with and as limited by
this Agreement.
(b) Subject to Sections 6.3, 6.5 and 6.7 hereof, a Manager may
delegate all or any of its duties hereunder to such other Person as it deems
necessary or desirable for the transaction of the business of the Company, and,
in furtherance of any such delegation, a Manager shall have the right on behalf
of the Company, to appoint, employ, or contract with any such Person, but in
such an event the Manager will not be released from its responsibilities
hereunder and the expense of such Person shall be borne by Venture Three, where
such Person is appointed by Development Manager, by Venture Two, where such
Person is appointed by Operating Property Manager, and by the Company, where
such Person is appointed by the Administrative Manager. Such Persons may
administer or assist in the administration of the routine day-to-day management
of the Company and its business and affairs; may serve as a Manager's advisors
and consultants in connection with decisions made by the Manager; may act as
consultants, accountants, correspondents, attorneys, brokers, escrow agents, or
in any other capacity; and may perform such other acts or services for the
Company as such Manager may reasonably and prudently approve.
Section 6.5 Authorization for Expenditures.
------------------------------
The Administrative Manager shall not make any expenditure or incur any
obligation on behalf of the Company unless such amount is included in an
Operating Budget previously Approved by the Management Committee or unless such
amount has been otherwise previously Approved by the Management Committee or
unless such amount is for non-discretionary expenditures such as government
charges and fees or bank charges or any other item so long as the total of such
other items for any calendar year does not exceed $5,000.00. The Administrative
Manager will be reimbursed for out of pocket expenses incurred on behalf of the
Company by the Members pro rata in accordance with their Percentage Interests.
The Administrative Manager may from time to time seek broader fiscal authority
from the Management Committee when in its reasonable opinion it is appropriate
to do so in connection with the performance of its duties hereunder. In any
event, the Administrative Manager shall not expend more than the amount in good
faith believes to be the fair and reasonable market value at the time and place
of contracting for any goods purchased or services engaged on behalf of the
Company.
Section 6.6 Rights Not Assignable.
---------------------
Except as provided in Section 8.2, the rights and obligations of the
Managers under this Agreement shall not be assignable voluntarily or by
operation of law by any Manager without the express prior written Approval of
the Management Committee, and any attempted assignment without such Approval
shall be void.
Section 6.7 Major Decisions.
---------------
All Major Decisions, as such term is defined in Exhibit D hereto, with
respect to the Company's business and operations shall require the Approval of
the Members or Approval of the Management Committee. Accordingly, no Member or
Manager shall have the right or the power to make any commitment or engage in
any undertaking on behalf of the Company with respect to a Major Decision unless
and until the same has been authorized by Approval of the Members or through
Approval of the Management Committee.
Section 6.8 Emergency Authority.
-------------------
Notwithstanding the provisions of Sections 6.5 or 6.7 hereof, the
Administrative Manager shall have the right to take such actions and make such
emergency expenditures as it, in its reasonable judgment, deems necessary for
the protection of life or health or the preservation of Company assets if, under
the circumstances, in the good faith estimation of the Administrative Manager,
there is insufficient time to allow the Administrative Manager to obtain the
Approval of the Members or Approval of the Management Committee of such action
and any delay would materially increase the risk to life or health or materially
increase the magnitude or likelihood of property damage or other potential loss
involved; provided, however, that the Administrative Manager shall notify the
Members of such action contemporaneously therewith or as soon as reasonably
practicable thereafter.
Section 6.9 Operating Budget And Expenses.
-----------------------------
6.9.1 Company Expenses. The Operating Expenses of the Company
shall be apportioned to and be paid by or reimbursed by the Members pro rata in
accordance with their Percentage Interests.
6.9.2 Operating Budget.
(a) The Members hereby approve the Operating Budget for the
first Fiscal Year of the Company attached hereto as Exhibit E.
(b) No later than thirty (30) days prior to the commencement
of each Fiscal Year, the Administrative Manager shall prepare a proposed
Operating Budget for such Fiscal Year for the Company.
(c) Within thirty (30) calendar days after the proposed
Operating Budget is submitted to the Management Committee, if the Members shall
not approve such proposed Operating Budget, any Member may notify the
Administrative Manager of any proposed revisions therein that it deems
necessary. If any Member fails to approve or to reject the proposed Operating
Budget or to make proposed revisions thereto within thirty (30) calendar days
after it is submitted to the Management Committee, such proposed Operating
Budget shall be deemed approved and shall thereafter constitute the Operating
Budget for the Fiscal Year in question for all purposes hereof. Any objections
to the proposed Operating Budget must be made on a line item basis, and any line
items not objected to shall be deemed approved.
(d) If the Management Committee approves a proposed Operating
Budget, or a Member makes proposed revisions thereto and the Administrative
Manager does not make reasonable objections to such proposed revisions within
ten (10) calendar days after it receives them, such proposed Operating Budget,
and revisions if any, shall be deemed approved and shall be deemed thereafter to
constitute the Operating Budget for the Fiscal Year in question for all purposes
hereof.
(e) If the Administrative Manager makes any reasonable
objection to any proposed revisions to any proposed Operating Budget, the
Members shall cooperate with each other to resolve any questions with respect to
such proposed revisions and shall use their best efforts to agree upon such
Operating Budget for the Fiscal Year in question prior to the beginning of the
Fiscal Year to which such Operating Budget relates. If the Members fail to agree
upon an Operating Budget for any Fiscal Year prior to the commencement thereof,
then, pending final resolution of any dispute in the manner provided herein, the
Administrative Manager shall continue to manage, maintain, supervise, direct,
and operate the activities for which such Operating Budget was proposed in
accordance with the approved Operating Budget for such activities or asset(s),
if any, for the previous Fiscal Year until a new Operating Budget is approved;
except that the Administrative Manager shall be authorized during any interim
period to reasonably exceed the prior year's budgeted amounts for taxes, utility
charges, insurance and other items not within the reasonable control of the
Company as well as for increases in contract services and personnel costs to the
extent required to maintain the same level of service provided during the
previous Fiscal Year.
(f) The Administrative Manager may from time to time during
each Fiscal Year submit to the Management Committee revisions to an approved
Operating Budget for its approval. The Management Committee shall endeavor
promptly to reject or approve the same or to make such changes to the proposal
as it may deem reasonably necessary and proper. The proposal, as approved or
changed by the Management Committee, shall be incorporated into and become part
of such Operating Budget for the remaining period of the Fiscal Year in
question.
Section 6.10 Removal of Managers.
-------------------
(a) The Management Committee shall have the right, to be
exercised by written notice to a Manager, to remove such Manager and to appoint
a new Manager in the event the Manager commits fraud in the performance of its
duties or suffers an Act of Insolvency.
(b) CPI shall have the right, to be exercised by written
notice to Prudential, to remove Prudential as Operating Property Manager and to
appoint a new Operating Property Manager (which may be CPI or a CPI Affiliate)
in the event Prudential becomes a Defaulter due to an Event of Default described
Section 9.1.1(a) with respect to any failure to pay any portion of the
Prudential Contribution Amount. (after giving effect to the applicable five day
grace period therein) and CPI provides Prudential with a second notice marked
"Failure to Cure May Result in Removal of Prudential as Operating Property
Manager" and Prudential fails to cure such default within five (5) days after
receipt of such second notice.
Section 6.11 Actions to Maintain REIT Status. Notwithstanding any other
provisions of this Agreement or the Act, during the period commencing on the
Effective Date and ending on the seventh anniversary of the Effective Date, no
Manager or Member shall take any action on behalf of the Company, Venture Two or
Venture Three if such action could reasonably be expected to jeopardize CPI's
status as a real estate investment trust ("REIT") under the Code. CPI is hereby
authorized on behalf of the Company, Venture Two and Venture Three to take any
action in good faith that it believes is necessary or advisable in order to
protect the ability of CPI to continue to qualify as a "REIT," or to avoid CPI
incurring any taxes under Section 857 or Section 4981 of the Code. For example,
no Manager or Member may cause the Company, Venture Two or Venture Three,
without the express written consent of CPI, to (i) enter into any lease that
provides for rental payments based upon the net profits of the tenant, (ii)
purchase stock of another corporation, (iii) enter into a loan that provides for
a participating interest in the net profits of the borrower, (iv) provide any
services to tenants other than "customary services" as defined by the Code, or
(v) become a dealer in property. CPI agrees to discuss with Prudential any
decision regarding CPI's "REIT" status and, with respect to any decision
affecting Venture Two or its Assets, upon the request of Prudential will provide
it with an opinion of counsel reasonably satisfactory to Prudential that failure
to take such actions reasonably could be expected to jeopardize CPI's status as
a REIT prior to taking any such action. In the event such an opinion is
provided, CPI shall take any such action, while using is good faith efforts to
avoid taking any action that is adverse to Prudential. In the event of any
dispute between CPI and Prudential regarding any decision regarding CPI's "REIT"
status as referenced in this Section 6.11 which involves action which affects
the status of the Company as a "venture capital operating company" or the status
of Venture Three and Venture Two as "real estate operating companies" under the
Plan Asset Regulations or compliance with ERISA as set forth in Section 6.12,
each of CPI and Prudential shall meet with each other and their respective
counsel in order to determine the nature of any issues relating to such dispute
and determination, and in order to develop a plan for compliance which shall be
mutually agreeable to each Member.
Section 6.12 Action to Maintain VCOC and REOC Status. Notwithstanding
any other provisions of this Agreement or the Act, no Manager or Member shall
take any action on behalf of the Company, Venture Two or Venture Three if (a)
such action would reasonably be expected to jeopardize the status of the Company
as a "venture capital operating company," and the status of Venture Three and
Venture Two as "real estate operating companies," under the Plan Asset
Regulations, or (b) such action would constitute a Plan Violation under ERISA.
In addition, the Members and Managers shall take any action (and refrain from
taking any action) reasonably requested by any Member that such Member in good
faith believes is necessary or advisable in order to protect the status of the
Company as a "venture capital operating company," and the status of Venture
Three and Venture Two as "real estate operating companies," under the Plan Asset
Regulations, or if such Member in good faith believes is necessary or advisable
in order to avoid a Plan Violation under ERISA. Without limiting the foregoing,
on or before thirty (30) days prior to the end of the "annual valuation period"
of Venture Three as defined in the Plan Asset Regulations (such date is referred
to as the "Compliance Deadline") of each year during the term of this Agreement
in order to demonstrate compliance with the Plan Asset Regulations, CPI shall
deliver to the Members a certificate in the form attached as Exhibit C to the
Development Activity Agreement, for signature by both Members, together with
such supplemental information as the Members may reasonably require, in order to
confirm that Venture Three continues to qualify as a "real estate operating
company" within the meaning of the Plan Asset Regulations, and together with,
subject to the Approval of the Members, such supplemental covenants and
guidelines (with respect to pending transactions and/or any guidelines for the
release of funds then held by the Company to Venture Three) as the Member may
reasonably require in order to confirm that Venture Three continues to qualify
as a "real estate operating company" within the meaning of the Plan Asset
Regulations. Each Member agrees to discuss with the other Member any decision
regarding such status prior to taking or requesting any such action. The Members
agree to discuss with each other any proposed decision regarding such status and
upon the request of a Member the Company shall obtain an opinion of counsel
reasonably satisfactory to the Members that failure to take such actions
reasonably could be expected to adversely affect such status prior to taking or
requesting such action. In the event such an opinion is provided, the applicable
Manager shall take any appropriate action, while using its good faith efforts to
avoid taking any action that is adverse to any Member. In the event of any
dispute between CPI and Prudential regarding any decision regarding the status
of the Company as a venture capital operating company or the status of Venture
Three and Venture Two as "real estate operating companies" under the Plan Asset
Regulations or compliance with ERISA as set forth in this Section 6.12 which
involves action which affects CPI's "REIT" status as referenced in Section 6.11,
each of CPI and Prudential shall meet with each other and their respective
counsel in order to determine the nature of any issues relating to such dispute
and determination, and in order to develop a plan for compliance which shall be
mutually agreeable to each Member. In addition, each of Prudential and CPI makes
the following representations and warranties, and shall reaffirm the following
representations and warranties at the time of any additional capital
contribution by Prudential: (i) as to Prudential, Prudential has heretofore
provided to CPI a list of the employee benefit plans whose assets are 10% or
more of the total assets in the pooled separate account which will be invested
in the Assets and the plan sponsors of such employee benefit plans; Prudential
represents and warrants that such schedule is true, correct and complete as of
the date hereof; and (ii) as to CPI, CPI represents and warrants to Prudential
that CPI is not a party in interest (as defined in Section 3(14) of ERISA) to
any of the 10% plans disclosed by Prudential on such list.
Section 6.13 Management And Leasing Agreement. The Members hereby
consent and agree that CPI (or its Affiliate) shall enter into management and
leasing agreements with Venture Two and with Venture Three on terms consistent
with those described in the Development Activity Agreement and the Property
Activity Agreement. CPI shall have the right from time to time during the term
of such agreement to designate the manager and leasing agent from among the
group of CPI and its Affiliates (provided that such representation and warranty
is given to CPI's best knowledge with respect to the plan of Prudential
disclosed on such list).
Section 6.14 Development Agreement. The Members hereby agree that CPI
(or its Affiliate) shall enter into a development agreement with Venture Three
on terms consistent with those described in the Development Activity Agreement.
CPI shall have the right from time to time during the term of such agreements to
designate the developer from among the group of CPI and its Affiliates.
Section 6.15 Operating Agreements.
--------------------
6.15.1 Development Activity Agreement. The Members hereby approve the
Development Activity Agreement adopted as of even date herewith.
6.15.2 Operating Property Activity Agreement. The Members hereby
approve the Operating Property Activity Agreement adopted as of even date
herewith.
Section 6.16 Liability for Conduct.
---------------------
No Member or Manager (nor any director, shareholder, officer or
employee of such Member or Manager) shall be personally liable or personally
accountable to the Company or to any of the Members, in damages or otherwise,
for any error of judgment, for any mistake of fact or of law, or for any other
act or thing which it may do or refrain from doing in connection with the
business and affairs of the Company, except for claims and damages resulting
from fraud, willful misconduct, bad faith, gross negligence or material breach
of this Agreement.
Section 6.17 Indemnity.
--------
The Company (to the extent of its assets) does hereby agree to
indemnify and to hold each Member and Manager harmless from and against any
loss, claim, liability, expense, or damage (including reasonable attorneys' fees
and court costs) suffered by such Member or Manager by reason of anything the
Company may do or refrain from doing or such Member or Manager may do or refrain
from doing for and on behalf of the Company and in furtherance of its interests
or by reason of such Member's or Manager's status as a Member or Manager of the
Company; provided, however, that the Company shall not indemnify such Member or
Manager for any loss, claim, liability, expense, or damage which such Member or
Manager may suffer as a result of any act or omission of such Member or Manager
for which such Member or Manager would be liable under Section 6.16 above.
ARTICLE 7
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COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES
-------------------------------------------------------
Section 7.1 Compensation, Reimbursements.
----------------------------
7.1.1 Compensation. Except as may be expressly provided for in
this Agreement, including Sections 6.13, 6.14 and 7.2, or in another written
agreement Approved by the Members or Approved by the Management Committee, no
payment will be made by the Company to any Member or Manager for the services of
such Member or Manager or any member, shareholder, director, employee, or
Affiliate of such Member.
7.1.2 Reimbursements. Subject to the provisions of this
Agreement, each of the Members and Managers shall be reimbursed promptly by the
Company for all reasonable out-of-pocket costs and expenses incurred by each in
connection with the performance of its respective duties to the Company during
the Term, provided that such amounts are contained in an Approved Operating
Budget or are otherwise Approved by the Management Committee.
Section 7.2 No Contracts with Affiliates.
----------------------------
No Member or Manager shall enter into any agreement or other
arrangement for the furnishing to or by the Company of goods or services with
any Person who is an Affiliate of such Member or Manager unless such agreement
or arrangement has been approved by the Management Committee after the nature of
the relationship or affiliation has been disclosed. If an Affiliate of a Member
or Manager is in the business of providing services of a kind needed by the
Member or Manager, such Affiliate will have the right to provide those services
to the Company at market terms and conditions approved the Management Committee.
Notwithstanding the foregoing, this provision and Section 7.1.1 above shall not
prevent or limit the right of Venture Two or Venture Three to engage CPI or any
CPI Affiliate, or Prudential or any Prudential Affiliate, to provide
development, property management, leasing or administrative services to Venture
Two or Venture Three or to any Asset or property of Venture Two or Venture
Three, and to be compensated for such services at reasonable market rates.
Further, Venture Three may at any time enter into a partnership, limited
liability company, or other venture with CPI or any CPI Affiliate; provided that
the relative interests of Venture Three and CPI (and/or the CPI Affiliate) in
such venture are based upon the relative Fair Market Values of their respective
capital contributions to the venture.
ARTICLE 8
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TRANSFER RESTRICTIONS AND REDEMPTION RIGHTS
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Section 8.1 General.
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8.1.1 Required Consents. Except as expressly permitted in this
Agreement including without limitation Section 8.2, 8.3.4(c) and Section 8.5,
neither Member shall sell, assign, transfer, mortgage, convey, charge or
otherwise encumber or contract to do or permit any of the foregoing, whether
voluntarily or by operation of law (herein sometimes collectively called a
"Transfer"), or suffer any Affiliate or other third party to Transfer, any part
or all of its Member Interest or its share of capital, profits, losses,
allocations or distributions under this Agreement without the express prior
written consent of the other Member, which consent may be withheld for any or no
reason whatsoever. Any attempt to Transfer in violation of this Article 8 shall
be null and void. The giving of consent in any one or more instances of Transfer
shall not limit or waive the need for such consent in any other or subsequent
instances.
8.1.2 Indirect Transfers. In order to effectuate the purpose
of this Section 8.1, each Member agrees that to the extent it desires that its
Member Interest in the Company be at any time held by any other Person, such
Member will Transfer its Member Interest, or part thereof, to such Person only
through a direct Transfer in the manner contemplated in this Article 8, and
that, except as expressly authorized in Section 8.2, Section 8.3.4(c) or Section
8.5, no Transfer or other disposition of any stock, partnership or other
beneficial interest in any Member or other such Person which holds any part of a
Member Interest will be effected, directly or indirectly, unless Approved by the
Members, provided that (i) an initial issuance of shares in an underwritten
public offering, (ii) transactions involving contributions of cash into, and
withdrawals from, a Pension Investor, (iii) transactions involving transfers of
beneficial interest in a Pension Investor or Prudential, and (iv) transactions
in or transfers of shares of any Member whose shares are publicly traded shall
be permitted and will be deemed not to violate the provisions of this Article 8.
The Members acknowledge that neither of their Member Interests is now held by
any other Person and agree that any subsequent Transfer of its Member Interest,
or part thereof, to a Person which it desires to make shall, except as expressly
authorized in this Section 8.1.2, Section 8.2, Section 8.3.4(c) or Section 8.5,
require the express, prior written consent of the other Member.
Section 8.2 Permitted Transfers by the Members.
----------------------------------
8.2.1 Transfers By Prudential. Without the consent of CPI,
Prudential may from time to time Transfer its Member Interest, in whole or in
part, (a) to a Prudential Affiliate or (b) from a Prudential Affiliate to
another Prudential Affiliate. Any such Transfer to a Prudential Affiliate shall
not relieve Prudential of its obligations under this Agreement.
8.2.2 Transfers By CPI. Without the consent of Prudential, CPI
may from time to time Transfer its Member Interest, in whole or in part, (a) to
a CPI Affiliate, or (b) from a CPI Affiliate to another CPI Affiliate. Any
Transfer pursuant to this Section 8.2.2 shall not relieve CPI of its obligations
under this Agreement.
8.2.3 Agreements with Transferees.
(a) If pursuant to the provisions of this Section 8.2, any
Member (the "Transferor") shall purport to make a Transfer of any part of its
Member Interest to any Person ("Transferee"), no such Transfer shall entitle the
Transferee to any benefits or rights hereunder until:
(i) the Transferee agrees in writing to assume and
be bound by all the obligations of the Transferor and be subject to all the
restrictions to which the Transferor is subject under the terms of this
Agreement; and
(ii) the Transferor and Transferee enter into a
written agreement with the other Member and the Company
which provides (x) that the Transferor is irrevocably designated the proxy of
the Transferee to exercise all voting and other approval rights appurtenant to
the Member Interest acquired by the Transferee, (y) that the Transferor shall
remain liable for all obligations arising under this Agreement prior to and
after such Transfer in respect of the Member Interest so transferred; and (z)
that the Transferee shall indemnify the Members from and against all claims,
losses, liabilities, damages, costs and expenses (including reasonable
attorneys' fees and court costs) which may arise as a result of any breach by
the Transferee of its obligations hereunder.
(iii) the Transferee of such transfer complies with
ERISA to the satisfaction of the Members.
(b) No Transferee of any Member Interest shall make any
further disposition except in accordance with the terms and conditions hereof.
(c) All costs and expenses incurred by the Company, or the
non-transferring Member, in connection with any Transfer of a Member Interest,
including any filing or recording costs and the fees and disbursements of
counsel, shall be paid by the Transferor.
Section 8.3 Asset Restrictions.
------------------
8.3.1 Assets Lock-Out Period.
(a) During the applicable "Lock-Out Period" (as defined below)
with respect to an Asset, the Company and Operating Property Manager shall not
authorize a sale, exchange or other disposition of such Asset, and Venture Two
shall not sell, exchange or otherwise dispose of such Asset, except in a
tax-free transaction that does not trigger any taxable gain for federal income
tax purposes (directly or indirectly) to CPI. Prior to entering into, or
permitting Venture Two to enter into, any contract or commitment with respect to
any sale, exchange or other disposition of an Asset during the applicable
Lock-Out Period, Operating Property Manager shall first provide written notice
of such proposed transaction to CPI in order for CPI to determine whether the
transaction, if consummated, would trigger taxable gain to CPI. If CPI shall
notify Operating Property Manager within a period of thirty (30) days after
receipt of such notice that the proposed transaction would trigger taxable gain
to CPI for federal income tax purposes, such transaction shall not be allowed
without the Approval of the Members. If CPI shall fail to provide such notice to
Operating Property Manager within said period of thirty (30) days after receipt
of such notice, and Prudential provides CPI with a second notice marked
"Inaction May Result In Asset Sale" and CPI fails to object to such proposed
transaction within 10 days after receipt of such second notice, such transaction
shall be allowed without the Approval of the Members. CPI shall upon request
explain to Operating Property Manager any such determination by CPI under this
Section 8.3.1(a), and upon the request of Prudential will provide Prudential
with an opinion of counsel or an accountant reasonably satisfactory to
Prudential to the effect that the proposed transaction would trigger taxable
gain to CPI for federal income tax purposes.
(b) The Lock-Out Period shall mean (i) with respect to the
"retail" Assets (as so designated on Exhibit C), the period commencing on the
Effective Date and ending on the third anniversary of the Effective Date, and
(ii) with respect to the "office" Assets (as so designated on Exhibit C), the
period commencing on the Effective Date and ending on the fourth anniversary of
the Effective Date; provided, however, upon any Transfer of the Member Interest
of Prudential pursuant to the provisions of Section 8.5, the applicable Lock-Out
Period shall be extended or, if expired, re-invoked anew, for a period of two
years following the date of the Transfer, but in no event shall any applicable
Lock-Out Period end earlier than the expiration date of the original Lock-Out
Period as set forth in this subsection (b)(i) or (b)(ii)(as the case may be) or
continue beyond the seventh anniversary of the Effective Date; provided further,
however, that in accordance with the Right of First Offer, if CPI enters into a
"Venture Contribution" or "Disposition" (as defined in the Right of First Offer)
for which Prudential was not afforded an opportunity to participate through the
procedure set forth in the Right of First Offer, then the Lock-Out Period with
respect to the assets known as 100/200 North Point Center East shall expire
immediately upon such Venture Contribution or Disposition. Notwithstanding any
expiration of the Lock-Out Period for 100/200 North Point Center East, the
procedures of this Agreement relating to disposition of Assets, including those
contained in Section 8.3.4, shall continue to apply in accordance with their
terms.
8.3.2 Interests Lock-Out Period. The Company will not sell,
exchange or otherwise dispose of all or any part of the Operating Property
Activity Interest or the Development Activity Interest during the Term except as
may be Approved by the Members or pursuant to the provisions of Sections 8.3.5,
8.3.6 or 8.4 of this Agreement.
8.3.3 Restrictions Relating to Mortgages.
(a) The Members agree that until the earlier to occur of (i)
the seventh anniversary of the Effective Date, and (ii) with respect to a
Mortgage secured by a particular Asset, the date that a taxable sale, exchange
or other disposition of such Asset is permitted under Section 8.3.4(a)(vii)
hereof, (1) the level of indebtedness existing on the Effective Date shall be
maintained, except that regularly scheduled amortization payments required under
the terms of a Mortgage may be paid when due and any "bullet" maturity amount
may be paid down from proceeds of third party debt or equity raised pro rata
from Venture Two's members or equity or Affiliate Debt from Prudential or any
Prudential Affiliate, with such equity or Affiliate Debt from Prudential or a
Prudential Affiliate being provided pursuant to Section 3.5 after CPI has been
provided the right to contribute its pro rata share of any such additional
equity contribution or Affiliate Debt under Section 3.5), and (2) neither
Prudential nor any Prudential Affiliate shall acquire any Mortgage without the
prior written consent of CPI. CPI (or any CPI Affiliate) may guarantee or
otherwise endorse any debt or other obligation of the Company or Venture Two.
(b) Following the seventh anniversary of the Effective Date,
the then outstanding principal balance of any Mortgage may be reduced or prepaid
in amounts other than (or in addition to) such principal reductions as would
result from the payment of scheduled debt service payments under the terms of
such Mortgage that exist on the Effective Date; provided, however, that prior to
any such reduction or prepayment CPI shall first be afforded the opportunity (as
hereinafter described) to exercise the CPI Redemption Rights provided in Section
8.3.5 hereof. Operating Property Manager shall give CPI at least thirty (30)
days prior written notice (each such notice being herein called a "Prepayment
Notice") of the proposed reduction or prepayment of any Mortgage, and CPI shall
have a period of thirty (30) days following receipt of such Prepayment Notice to
elect any of the CPI Redemption Rights set forth in Section 8.3.5 below by
giving written notice of election to Prudential. If CPI elects to exercise any
CPI Redemption Rights, the reduction or prepayment of the Mortgage specified in
the Prepayment Notice shall not be permitted until 10 Business Days after the
"Closing" (in accordance with Section 8.3.7) of the redemption transaction
elected by CPI in the exercise of the CPI Redemption Rights. If CPI fails to
exercise such CPI Redemption Rights prior to the end of the 30-day period,
Operating Property Manager shall be permitted to proceed with the prepayment or
principal reduction proposed in the Prepayment Notice. The procedures set forth
in this Section 8.3.3(b) shall continue to apply to the Mortgage after any
partial prepayment or principal reduction is implemented, and to all other
Mortgages.
8.3.4 Sale of Assets After Lock-Out Period. Following the Lock-Out
Period which is applicable to an Asset, the Operating Property Manager, pursuant
to the authority granted to it under Section 6.1.3, may cause Venture Two to
sell or dispose of such Asset or a material portion thereof, subject to the
following conditions precedent:
(a) If the proposed sale or disposition is to occur
prior to or on the seventh anniversary of the Effective Date:
(i) Prudential will provide CPI with written
notice of the proposed Asset sale or disposition (any such notice being
herein called a "Sale Notice").
(ii) For a period of 90 days following delivery
of the Sale Notice the Members will attempt to identify replacement property
which could be acquired by Venture Two through a tax-free, like-kind exchange
that would not trigger recognition of any taxable gain for federal income
tax purposes (directly or indirectly) to CPI and which replacement
property is consistent with Prudential's then current investment acquisition
plans for its PRISA fund portfolio. If the Members agree upon and identify
acceptable replacement property within 90 days of the Sale Notice to CPI, the
Operating Property Manager may cause Venture Two to effectuate the exchange
of the properties, either directly or through a qualified intermediary. The
replacement property in any such exchange shall be and become an "Asset" for
purposes of this Agreement and the Operating Property Activity Agreement.
(iii) If the Members do not agree upon and
identify acceptable replacement property for a
tax-fee exchange of such Asset within 90 days of the Sale Notice, Prudential
will provide a further notice to CPI (any such further notice being herein
called an "Offer Price Notice") in which Prudential shall identify the offer
price for the Asset ("Offer Price") that Prudential would have Venture Two
accept in a sale or other disposition of the Asset. CPI shall have a period of
30 Business Days following receipt of the Offer Price Notice to elect by giving
written notice to Prudential to exercise an option (herein called the
"Make-Whole Option") with respect to such Asset. If CPI exercises the Make-Whole
Option, (x) the Asset shall be retained by Venture Two as a Make-Whole Asset and
shall not be sold or otherwise disposed of by Venture Two unless and until CPI
shall elect to sell or dispose of such Make-Whole Asset in its sole discretion
(and CPI shall have sole authority to make such sale decision); (y) CPI shall be
deemed appointed by the Company (in its capacity as a member of Venture Two) as
a manager of Venture Two within the meaning of Section 18-101(10) of the Act for
the purpose of having full authority over all operational and sale (or exchange
or other disposition) decisions with respect to such Make-Whole Asset, subject
to the terms of Section 6.1.3(c) hereof; and (z) Operating Property Manager's
authority with respect to such matters (as Operating Property Manager or within
the definition of Operating Property Manager) shall cease and be of no further
force or effect with respect to such Make-Whole Asset. Upon exercising the
Make-Whole Option with respect to such Make-Whole Asset and until such
Make-Whole Asset is disposed of by Venture Two or Venture Two is liquidated or
dissolved, (1) the Company shall distribute to Prudential on a monthly basis
from amounts otherwise distributable to CPI under this Agreement, under the
Development Activity Agreement and under the Operating Property Activity
Agreement an amount equal to the positive difference, if any, between (A) an
amount equal to 9% per annum (for such month) of the share of the Offer Price,
net of any applicable mortgage debt or other encumbrances, that would have been
distributable to Prudential under this Agreement based on its Member Property
Percentage had the Make-Whole Asset been sold by Venture Two at the Offer Price
(and any related mortgage debt or other encumbrance repaid) on the first day of
the next calendar month commencing after the date of the exercise of the
Make-Whole Option, less (B) the amount of Operating Property Activity Cash Flow
actually distributed, and of "Cash Flow Deemed Distributed" (as hereinafter
defined), to Prudential under this Agreement for such month based on its Member
Property Percentage attributable to the Make-Whole Asset for the period
commencing with the first calendar month after the date of exercise of the
Make-Whole Option (it being agreed that the amount of any "cash flow" [i.e., the
excess of gross revenues minus operating expenses for a period] attributable to
such Make-Whole Asset that is applied to an obligation or expense of Venture Two
that is not an obligation or expense incurred for any Make-Whole Asset, and thus
not distributed, shall be deemed distributed ("Cash Flow Deemed Distributed") to
Prudential to the extent of the amount thereof multiplied by the Member Property
Percentage of Prudential), and (2) the Company shall distribute to Prudential
from amounts otherwise distributable to CPI under this Agreement, under the
Development Activity Agreement and under the Operating Property Activity
Agreement upon sale or other disposition of the Make-Whole Asset by Venture Two
an amount equal to the positive difference, if any, between (A) the amount that
would have been distributable to Prudential under this Agreement based on its
Member Property Percentage of Operating Property Activity Capital Proceeds
attributable to a sale or other disposition of the Make-Whole Asset at the Offer
Price after payment of any applicable mortgage debt or other encumbrance less
(B) the amount actually distributed, and of "Capital Proceeds Deemed
Distributed" (as hereinafter defined), to Prudential under this Agreement based
on its Member Property Percentage of Operating Property Activity Capital
Proceeds attributable to the sale or other disposition of the Make-Whole Asset
after payment of any applicable mortgage debt attributable to such Make-Whole
Asset or other encumbrance (it being agreed that the amount of any such
Operating Property Capital Proceeds that is applied to meet an obligation or
expense of Venture Two that is not an obligation or expense incurred for any
Make-Whole Asset, and thus not distributed, shall be deemed distributed
("Capital Proceeds Deemed Distributed") to Prudential to the extent of the
amount thereof multiplied by the Member Property Percentage of Prudential). Any
make-whole amounts paid to Prudential shall be in addition to the other
distributions to Prudential under this Agreement.
(iv)(1) If CPI shall exercise the Make-Whole ption,
upon sale or other disposition of the Make-Whole Asset, CPI shall receive a
distribution of Operating Property Activity Capital Proceeds equal to 90% of
the excess, if any, of (A) the amount that would be distributable to Prudential
under this Agreement (but for the operation of this subsection (iv)(1)) based
on its Member Property Percentage, from Operating Property Activity Capital
Proceeds attributable to the sale or other disposition of the Make-Whole Asset
after payment of any applicable mortgage debt or other encumbrance, over (B)
the amount that would have been distributable to Prudential under this
Agreement based on its Member Property Percentage of Operating Property
Activity Capital Proceeds attributable to a sale or other disposition of the
Make-Whole Asset at the Offer Price after payment of any applicable mortgage
debt or other encumbrance (such excess being herein called "Excess Operating
Property Activity Capital Proceeds"). Prudential shall receive a distribution of
Operating Property Activity Capital Proceeds equal to 10% of such excess.
(2) If CPI exercises the Make-Whole Option, CPI
shall also receive on a monthly basis for the period commencing with the first
calendar month after the date of exercise of the Make-Whole Option and
ending on sale or disposition of the Make-Whole Asset, a distribution of
Operating Property Activity Cash Flow equal to 90% of the excess, if any, of
(A) the amount of Operating Property Activity Cash Flow that would be
distributable to Prudential (based on its Member Property Percentage) under
this Agreement for such month (but for the operation of this sub-section
(iv)(2)) attributable to the Make-Whole Asset, over (B) an amount equal to 9%
per annum (for such month) of the share of the Offer Price that would have been
distributed to Prudential under this Agreement based on its Member Property
Percentage had the Make-Whole Asset been sold by Venture Two at the Offer Price
(and any related mortgage debt or other encumbrance repaid) (such excess being
herein called "Excess Operating Property Activity Cash Flow"). Prudential shall
receive a distribution of Operating Property Activity Cash Flow equal to 10% of
such excess.
(v) The provision of Section 4.9.2 and 4.10.2 shall
be applied to effectuate subsection (iv) above.
(vi) If Prudential initiates the sale or disposition
(commencing with the Sale Notice) process for any
Make-Whole Asset and CPI exercises the Make-Whole Option, CPI shall be permitted
to invoke the CPI Redemption Rights set forth in Section 8.3.5 below at any time
after the seventh anniversary of the Effective Date.
(vii) If CPI does not elect to exercise the Make-
Whole Option within the 30 Business Days as set forth in subsection (iii)
above, the Operating Property Manager, acting under the authority granted
in Section 6.1.3, may cause Venture Two to sell or dispose of the Make-Whole
Asset at any time during a period of 365 days after the date of the Sale Notice
at a price equal to 97% of the Offer Price, and CPI shall be permitted to
invoke the CPI Redemption Rights set forth in Section 8.3.5 below at any time
after the seventh anniversary of the Effective Date. If Operating Property
Manager is unable to sell or dispose of the Make-Whole Asset at any time
during a period of 365 days after the date of the Sale Notice at a price
equal to 97% of the Offer Price, and Operating Property Manager still desires to
cause Venture Two to sell or dispose of such Make-Whole Asset or a material
portion thereof, and if the proposed sale or disposition is to occur prior to or
on the seventh anniversary of the Effective Date, then such sale shall be
subject to renewed compliance with the foregoing conditions precedent set forth
in this Section 8.3.4(a).
(b) If the proposed sale or disposition is to occur after the
seventh anniversary of the Effective Date, the provisions of Section 8.3.5 below
shall apply and the provisions of Section 8.3.4(a) shall not apply.
(c) Notwithstanding the provisions of Section 8.1 and 8.5,
without the consent of CPI, Prudential shall be entitled to assign as security,
pledge or grant a security interest in its right to receive distributions with
respect to any Make-Whole Asset as well as Prudential's right to receive
Make-Whole distributions under this Section 8.3.4.
8.3.5 CPI Redemption Rights.
(a) In the event that at any time after the seventh
anniversary of the Effective Date, Operating Property Manager, pursuant to its
authority under Section 6.1.3, desires to have Venture Two sell or dispose of
any Asset or material portion of any Asset (including, for purposes of this
Section 8.3.5, any replacement Asset obtained in a like-kind exchange), or
reduce or prepay any Mortgage (other than any payment that would not have an
adverse tax impact on CPI or its shareholders (as determined by the tax advisors
to CPI)), it shall first provide CPI with a Sale Notice or Prepayment Notice
regarding the proposed sale or other disposition and the Offer Price at which
the Asset would be sold, or the proposed reduction or prepayment, as the case
may be.
(b) For a period of thirty (30) days following receipt of a
Sale Notice or Prepayment Notice given pursuant to Section 8.3.5 (a) or Section
8.3.3(b), or at any time following the seventh anniversary of the Effective Date
in the event CPI has exercised a Make-Whole Option, an Asset has been sold or
otherwise disposed of, or Operating Property Manager has at any time issued a
notice to CPI that it intends to issue equity on a non-pro rata basis in Venture
Two pursuant to Section 3.5.2 above, or in response to a notice from Prudential
given under Section 8.4, CPI shall have the right exercisable by written notice
to Prudential (any such notice being herein called a "CPI Redemption Notice"),
to object to the proposed sale or other disposition described in the Sale
Notice, or prepayment or reduction described in the Prepayment Notice, and to
exercise one or more of the following rights (herein called the "CPI Redemption
Rights"):
(i) CPI shall be entitled to give notice to
Prudential that CPI will redeem the Member Development Percentage of CPI and
CPI's Affiliates in the Company in exchange for a distribution from the
Company of the Developer Units held by the Company and a number of the Company's
Additional Capital Units equal to the product of (A) the total number of such
units owned by the Company and (B) CPI's (and CPI's Affiliates') Member
Development Percentage. As an example of the impact of this election, if CPI
shall exercise this redemption option alone (and without any other election of
CPI Redemption Rights or Prudential Redemption Rights), then, if at such time
Prudential had made all of the scheduled Prudential Cash Contribution
Amounts and the respective Percentage Interests of Prudential and CPI in the
Company shall be 50/50, and the Company owns 1000 Additional Capital Units,
then CPI shall upon such redemption hold directly all 885 Developer Units
previously owned by the Company and 893.939 Additional Capital Units previously
owned by the Company, and Prudential shall upon such redemption hold all of the
Member Development Percentage of the Company, which would entitle Prudential to
distributions from Venture Three with respect to 105 Investor Units and 106.061
Additional Capital Units still owned by the Company. The Member Property
Percentages and Percentage Interest of the Members would remain unchanged.
(ii) CPI shall be entitled to give notice to
Prudential that CPI will acquire (1) the Company's Investor Units in Venture
Three and a number of Additional Capital Units equal to the product of (A) the
total number of such Units owned by the Company and (B) Prudential's (and any
Prudential Affiliate's) Member Development Percentage and (2) any Investor
Units or Additional Capital Units held directly by Prudential (or any
Prudential Affiliate) in Venture Three, for an amount of cash (or wire transfer
of immediately available Federal funds) equal to the Fair Market Value of
such interests and any such member interest, with the cash paid for such
interests to be distributed or paid to Prudential notwithstanding any other
provision of this Agreement, whereupon Prudential's (or its
Affiliates')Member Development Percentage shall be zero; provided, however, that
the amount to be distributed or paid with respect to all such Investor Units
shall be not less than such amount as is required to produce an 11.5% Internal
Rate of Return to Prudential on its investment in the Investor Units (both the
Company's Investor Units and any Investor Units held directly by Prudential (w)
using as its initial investment in the Investor Units an amount equal to the sum
of (1) the amounts contributed by Prudential to Venture Three in exchange for
the Investor Units owned directly by it plus (2) an amount equal to the product
of its (and its Affiliates') Member Development Percentage and the Prudential
Contribution Amount, (x) with the amounts contributed under the immediately
foregoing item "(w)" being treated as contributed at the times such amounts were
in fact contributed by Prudential, (y) taking into account all cash
distributions and receipts received by Prudential (or any Transferee thereof) in
connection with such interests, including, without limitation, amounts received
under Section 4.9.1(b), Section 4.9.1(e), Section 4.10.1(b), Section 4.10.1(c)
and Section 4.10.1(g), as well as any Operating Property Activity Cash Flow
otherwise distributable to CPI but actually distributed to Prudential (or any
Transferee thereof) under Section 4.9.2 to pay Prudential Current Return and (z)
disregarding any changes in ownership of the Units, treating the investment as
having commenced on the date of the first contribution by Prudential (or its
Affiliates) and ending on the date of the closing referred to in Section 8.3.7.
(iii) CPI shall be entitled to give notice to
Prudential that CPI will require Prudential to acquire (or
to cause the Company to acquire) (1) the Member Property Percentage of CPI (and
any CPI Affiliate) in the Company and (2) any member interest held directly by
CPI (and any CPI Affiliate) in Venture Two for an amount of cash (or wire
transfer of immediately available Federal funds) equal to the Fair Market Value
of such interests. Following such acquisition, Prudential's Member Property
Percentage shall be 100% and CPI's Member Property Percentage shall be 0%, and
the Percentage Interest of each of CPI and Prudential shall be 50%.
(c) In the event CPI provides a CPI Redemption Notice to
Prudential within the 30 day period set forth in Section 8.3.5(b), the proposed
sale or other disposition of the Asset described in the Sale Notice, or the
reduction or prepayment of the Mortgage described in the Prepayment Notice,
shall be prohibited until ten (10) Business Days after consummation of the
transactions for which notice of exercise to Prudential has been given in the
CPI Redemption Notice or the failure of such consummation of the transactions
(other than due to action or inaction of Prudential) within the time period
required by Section 8.3.7.
(d) In the event CPI has not given a CPI Redemption Notice to
Prudential prior to the expiration of the 30 day period described in sub-section
(b), Operating Property Manager shall be authorized to cause Venture Two to sell
or otherwise dispose of the Asset at any time during the period ending 365 days
after the date of the Sale Notice, at a price equal to or greater than 97% of
the Offer Price contained in the Sale Notice.
(e) In the event (i) CPI has exercised a Make-Whole Option
with respect to an Asset, (ii) an Asset has been sold or otherwise disposed of
pursuant to Section 8.3.4, (iii) Venture Two has at any time issued equity on a
non-pro rata basis pursuant to Section 3.5.2 and the Operating Property Activity
Agreement, (iv) Prudential has given a Put Notice under Section 8.4, or (v) the
outstanding principal balance of any Mortgage has been paid down with Affiliate
Debt from Prudential (or a Prudential Affiliate) prior to the seventh
anniversary of the Effective Date, CPI shall be entitled to exercise any one or
more of the CPI Redemption Rights at any time after the seventh anniversary of
the Exercise Date by giving a CPI Redemption Notice to Prudential. Following
delivery of any such CPI Redemption Notice, Venture Two shall be prohibited from
consummation of the transaction of selling or otherwise disposing of any other
Asset (and Operating Property Manager shall have no authority to sell or
otherwise dispose of any Asset) until ten (10) Business Days after consummation
of the transactions for which notice of exercise to Prudential has been given in
such CPI Redemption Notice, but Venture Two shall be permitted to market, list
for sale, negotiate and enter into any purchase contract or loan commitment and
take other actions preliminary to the consummation of such transactions.
(f) In the event CPI does not exercise any CPI Redemption
Rights following receipt of a Sale Notice or Prepayment Notice, the provisions
of this Section 8.3.5 shall continue to apply to the other Assets and Mortgages
of Venture Two which were not the subject of such Sale Notice or Prepayment
Notice.
(g) If after seven years from the Effective Date, Prudential
desires to take any action related to CPI's REIT status that would have been
prohibited under Section 6.11 during such seven year period, Prudential shall
first provide CPI Notice of the action that Prudential desires to take, and CPI
shall have a period of sixty (60) days after the receipt of such Notice to elect
(by means of a CPI Redemption Notice) to exercise any one or more of the CPI
Redemption Rights. In the event CPI elects to exercise the CPI Redemption
Rights, such actions of Prudential shall not be taken until ten (10) Business
Days after the "Closing" (in accordance with Section 8.3.7) of the redemption
transactions elected by CPI.
(h) Upon the exercise of any of the Prudential Redemption
Rights, CPI may elect (by means of a CPI Redemption Notice) to exercise any one
or more of the CPI Redemption Rights, to the extent not rendered inapplicable by
exercise of the Prudential Redemption Rights.
8.3.6 Prudential Redemption Rights.
(a) In the event that at any time after the Effective Date,
Development Manager, pursuant to its authority under Section 6.1.2, desires to
have Venture Three sell or dispose of any property of Venture Three, it may do
so.
(b) In the event that Development Manager causes Venture Three
to sell a Project, then, after the seventh anniversary of the Effective Date,
Prudential shall have the right exercisable by written notice to CPI (any such
notice being herein called a "Prudential Redemption Notice"), to exercise one or
more of the following rights (herein called the "Prudential Redemption Rights"):
(i) After the seventh anniversary of the
Effective Date, Prudential shall be entitled to give notice to CPI that
Prudential will redeem its (and its Affiliates') Member Property Percentage
in the Company in exchange for a distribution from the Company of the same
percentage (as the Prudential Member Property Percentage) of the Company's
Operating Property Activity Interest, and upon such redemption and distribution
the Company's Operating Property Activity Interest shall be reduced accordingly;
(ii) After the seventh anniversary of the Effective
Date, Prudential shall be entitled to give notice
to CPI that Prudential will acquire (1) the Operating Property Activity Interest
of the Company which will remain after giving effect to any redemption and
distribution described in sub-section (b)(i) above and (2) any member interest
held directly by CPI (or any CPI Affiliate) in Venture Two, for an amount of
cash (or wire transfer of immediately available Federal funds) equal to the Fair
Market Value of such remaining Operating Property Activity Interest and any such
member interest, with the cash paid for such interests to be distributed or paid
to CPI, notwithstanding any other provision of this Agreement;
(iii) After the seventh anniversary of the Effective
Date, Prudential shall be entitled to give notice
to CPI that Prudential will require CPI to acquire (1) the Company's Investor
Units in Venture Three and (2) any Investor Units held directly by Prudential
(or any Prudential Affiliate) in Venture Three as defined in the Development
Activity Agreement for an amount of cash (or wire transfer of immediately
available Federal funds) equal to the Fair Market Value of such interests with
the cash paid for such interests to be distributed or paid to Prudential
notwithstanding any other provision of this Agreement, whereupon Prudential's
Member Development Percentage shall be zero.
(c) Upon the exercise of any of the CPI Redemption Rights (but
less than all), Prudential may elect (by means of a Prudential Redemption
Notice) to exercise any one or more of the Prudential Redemption Rights, to the
extent not rendered inapplicable by exercise of the CPI Redemption Rights.
8.3.7 Closing.
(a) The consummation of the transactions contemplated by a CPI
Redemption Notice or Prudential Redemption Notice (herein called the "Closing")
shall be held at the office where the principal place of business of the Company
is located in the metropolitan Atlanta, Georgia area, at 10:00 a.m. on the 30th
day (i) after the election by CPI to exercise the CPI Redemption Rights or (ii)
after the election by Prudential to exercise the Prudential Redemption Rights
(or, if such 30th day is not a Business Day, on the next succeeding Business
Day), subject to extension until three (3) Business Days after resolution of the
"Fair Market Value" pursuant to any arbitration proceeding held to determine
such Fair Market Value. On the Business Day immediately prior to Closing, there
shall be a preliminary closing at which CPI and Prudential shall act diligently
and in good faith to agree upon the form and substance of all documents
necessary to effectuate the Closing.
(b) At the Closing, the Company, CPI and Prudential (and their
respective Affiliates, as the case may be) shall deliver assignments and bills
of sale (both with covenants against grantor's acts) to the acquiror or its
designee, of the interests to be conveyed, together with such other instruments
and documents as may be reasonably necessary to effectuate the redemption,
distribution and acquisition for which the redemption rights have been exercised
and legally sufficient to convey all of the subject interests to the acquirer
(or its designee), free and clear of all liens, claims, security interests and
encumbrances, other than encumbrances, if any, which may have been created with
the consent of all Members. The cash purchase price for interests acquired shall
be paid at the Closing by cash or federal wire transfer of immediately available
funds to an account designated in writing by the transferor. In the event there
are conveyance, transfer or similar taxes payable as an incidence to the
conveyances at the Closing, such taxes shall be expenses of the Member which had
given notice of exercise of the redemption rights.
(c) The Company, CPI and Prudential shall each have the right,
within its sole and absolute discretion, to cause its nominee(s) or designee(s)
to acquire all or part of the subject interests to be acquired by it at the
Closing, but nothing contained herein shall relieve a party of its obligations
hereunder.
(d) The parties acknowledge and agree that their respective
obligations to consummate the redemption, distribution and acquisition of
interests following proper exercise of the CPI Redemption Rights or Prudential
Redemption Rights shall be absolute and irrevocable and shall not be conditioned
in any way on the condition of any Asset or property of Venture Two or Venture
Three. The CPI Redemption Rights or Prudential Redemption Rights shall be
exercisable under this Agreement regardless of the occurrence of any Event of
Default under this Agreement.
(e) Each party will bear its own attorney fees and related
costs in connection with consummating any redemption and distribution of
interests hereunder.
8.3.8 Distribution Redemption. At any time following the seventh
anniversary of the Effective Date, either Member may propose to redeem all or
part of its Member Development Percentage or Member Property Percentage in the
Company for distributions of a portion of the Development Activity Interest or
the Operating Property Activity Interest of the Company as may be Approved by
the Members. Nothing in this Section 8.3.8 shall obligate any Member to approve
any such proposed redemption.
8.3.9. Limitation on Manager's Authority. The Operating Property
Manager and Development Manager shall not have any right, power or authority to
take any action on behalf of the Company, Venture Two or Venture Three in
contravention of the restrictions and provisions set forth in this Section 8.3.
Section 8.4 Prudential Put. At any time following the eighth
anniversary of the Effective Date, Prudential shall have the right to give
written notice (such notice being herein called a "Put Notice") to CPI,
regardless of whether a Sale Notice has been given under Section 8.3.5 or
Section 8.3.6, that, unless CPI exercises all the CPI Redemption Rights
described in Section 8.3.5(b)(i), (ii) and (iii) within thirty (30) days
following delivery of such Put Notice to CPI, Prudential will require CPI to
purchase, or to cause the Company to redeem, Prudential's (and any Prudential
Affiliates') Member Development Percentage and any member interest directly held
by Prudential (or any Prudential Affiliate) in Venture Three for cash in an
amount equal to the Fair Market Value of such interests. If CPI shall exercise
the CPI Redemption Rights by giving a CPI Redemption Notice to Prudential prior
to the end of such 30-day period, the provisions of Sections 8.3.5 and 8.3.7
shall apply. If CPI does not give such CPI Redemption Notice to Prudential, the
provisions of Sections 8.3.6 and 8.3.7 shall apply as if Prudential's Put Notice
were a Prudential Redemption Notice to exercise the redemption rights set forth
in Section 8.3.6(b)(iii).
Section 8.5 First Offer Procedure.
---------------------
8.5.1 First Offer Notice. At any time after the Effective Date, except
as provided in Sections 8.1.2, 8.2.1, 8.2.2 and 8.3.4(c), if either CPI or
Prudential desires to sell or transfer, directly or indirectly, all, and not
less than all, of its Member Interest in the Company (including, without
limitation, all of its Member Development Percentage and Member Property
Percentage it being agreed that partial transactions are not permitted except as
provided in this Section 8.5.1) and any direct interest in Venture Two or
Venture Three (it being agreed that all of the foregoing interests in the
Company, Venture Two and Venture Three must be transferred together), it shall
give written notice (the "First Offer Notice") of such intention to the other
Member (the Member issuing the First Offer notice is hereinafter called the
"Offeror" and the Member receiving the First Offer Notice is hereinafter called
the "Offeree"). The First Offer Notice must set forth the price (the "Offering
Price") and terms pursuant to which the Offeror is willing to sell such Member
Interest and any direct interests in Venture Two or Venture Three (the Member
Interest in the Company and any direct interest in Venture Two or Venture Three
which are subject to the First Offer Notice is hereinafter called the "Subject
Interest"), and the Offering Price set forth therein must be payable with cash
consideration only, although, at the Offeror's election, payment of portions of
such cash consideration may be deferred and paid, with interest, in one or more
installments after closing. Moreover, in furtherance of Section 8.7 below,
notwithstanding the prohibition on partial transfers, so as to avoid a
termination of the Company as a partnership for federal income tax purposes
pursuant to Section 708(b)(1)(B) of the Code, the First Offer Notice must
propose a structure for the sale of the Subject Interest so that the sale when
combined with previous sales will not cause there to be a sale or exchange of
more than a forty-nine percent (49%) interest in the net profits or capital of
the Company in any 12-month period. Any First Offer Notice providing for
non-cash consideration, in whole or in part (except as permitted in this Section
8.5.1) or a sale that would cause a combined sale or exchange of more than a
forty-nine percent (49%) interest in any 12-month period shall not be effective
to institute the First Offer procedures. If the First Offer Notice provides that
payment of a portion of the Offering Price is to be deferred, then the required
collateral for such deferred payment shall be, at the option of the Offeree, the
Subject Interest to be purchased and/or a certificate of deposit, irrevocable
stand-by letter of credit, or other type of collateral which is generally
available, liquid, and not unique. Such First Offer Notice shall constitute an
offer by the Offeror to sell to the Offeree the Subject Interest specified in
the First Offer Notice for such price and terms, exclusive of any brokerage or
similar commission provided for therein.
8.5.2 Election by Offeree. For a period of one hundred twenty (120)
days following the date of the First Offer Notice (the "First Offer Period"),
the Offeree shall have the option to purchase all, but not less than all, of the
Subject Interest specified in the First Offer Notice for the price and on the
terms stated in the First Offer Notice. If the Offeree elects to purchase the
Subject Interest it must so notify the Offeror in writing (the "First Offer
Exercise Notice") within said First Offer Period, which notice must be
accompanied by a First Offer Deposit (defined below). If the Offeree fails to
send a First Offer Exercise Notice or to deliver a First Offer Deposit within
said First Offer Period it shall be deemed to have elected not to purchase.
8.5.3 Closing.
(a) If the Offeree elects to so purchase the Subject Interest,
the transfer of the Subject Interest specified in the First Offer Notice from
the Offeror to the Offeree shall be closed and consummated in the principal
office of the Company at 11:00 a.m., local time, on the sixtieth (60th) day
following the date of the First Offer Exercise Notice (or if such date is not a
Business Day, the Business Day next following such day), or on such earlier day
as may be selected by the Offeree. At the closing, the Offeree shall deliver to
the Offeror (i) all or such portion of the Offering Price which is payable at
closing in accordance with the terms of the First Offer Notice in cash (U.S.
dollars) by wire transfer representing immediately available Federal Reserve
System funds and (ii) the promissory note and the applicable security
instruments, if any, required by the First Offer Notice. Simultaneously with the
receipt of such payment, the Offeror shall deliver the Subject Interest to the
Offeree free and clear of all liens, security interests and competing claims and
shall deliver to the Offeree such instruments of transfer and such evidence of
due authorization, execution and delivery and of the absence of any such liens,
security interests or competing claims as the Offeree shall reasonably request.
(b) If, by virtue of the election of the Offeree to purchase
any Subject Interest in accordance with the provisions of this Section 8.5, the
holder of any loan to the Company, Venture Two or Venture Three under which the
Offeror has personal liability has the right to, and notifies the Company of its
intent to accelerate the loan, it shall be a condition to the closing that the
Offeree obtain the release of such personal liability of Offeror, if necessary
through repayment of such loan (plus any deferred and accrued and unpaid
interest thereon and any required prepayment premium and/or yield maintenance
fees) at the closing of the sale of such Subject Interest.
8.5.4 Sale to Third Parties.
(a) If the Offeree fails to exercise its right to purchase the
Subject Interest, or if the Offeree exercises its right to purchase but through
no fault of the Offeror subsequently fails to purchase the Subject Interest
within the time specified, then the Offeror shall have the right, for one (1)
year after the expiration of the First Offer Period, to obtain a bona fide,
binding contract for the sale of such Subject Interest to any third party which
is not an Affiliate of the Offeror (a "Purchaser") for a price and on terms and
conditions which are no less favorable to the Offeror than those stated in the
First Offer Notice, except that any such contract must provide for a closing of
the purchase and sale of such Subject Interest within one hundred twenty (120)
days after the date of such contract; provided, that if the Offeree fails to
purchase the Offeror's Subject Interest in breach of a commitment by Offeree to
do so the Offeror shall have all of its rights or remedies at law or in equity,
and in addition thereto the above one-year limitation on the Offeror's rights to
obtain a binding contract with a third party shall not apply for a period of two
(2) years thereafter.
(b) At any time during the First Offer Period or during the
period that the Offeror has the right to offer the Subject Interest to a
purchaser pursuant to Section 8.5.4(a) above, the Offeror may provide the
Offeree from time to time with a list of prospects to whom the Offeror proposes
to offer the Subject Interest. The Offeree shall have fifteen (15) Business Days
in which to respond to any prospect list which it receives from the Offeror by
approving or disapproving any or all of the listed prospects, and any failure by
the Offeree to respond with respect to one or more listed prospects within said
15-day period shall be deemed to be an approval by the Offeree of such prospects
for purposes of this Section 8.5.4(b). The Offeree may only withhold approval of
a listed prospect if such prospect (A) has a net worth or market capitalization
(if publicly traded) of less than $50 million, (B) is known to have committed a
felony or act of moral turpitude, or (C) is engaged (or its Affiliate is
engaged) in litigation with the Company or the Offeree or any Affiliate of the
Offeree. If the Offeror obtains a binding commitment from a Purchaser who is not
pre-approved by the Offeree, the Offeror shall so advise the Offeree who shall
then have fifteen (15) Business Days in which to approve or disapprove of such
Purchaser. If such Purchaser is disapproved, no sale shall be made to such
Purchaser.
(c) If by virtue of the Offeror electing to sell the Subject
Interest to a third party pursuant to this Section 8.5.4, the holder of any loan
to the Company, Venture Two or Venture Three has the right to, and notifies the
Company of its intent to accelerate such loan, it shall be a condition to
closing that the Offeror or the Purchaser repay such loan (including any
required prepayment premium and/or yield maintenance fee) through new financing
replacing such loan on equivalent terms and in equivalent amounts at the closing
of the sale of such Subject Interest.
(d) In the event the Offeror proposes to consummate a sale of
the Subject Interest to a Purchaser within the time specified and in a manner
otherwise consistent with the requirements of Sections 8.5.4(a) and (b) above,
the Purchaser shall not be entitled to any benefits or rights under this
Agreement or the Operating Property Activity Agreement or the Development
Activity Agreement unless and until:
(i) The Offeree shall reasonably approve the
form and content of the instruments of transfer for legal adequacy thereof
within thirty (30) days after the delivery to the Offeree of such forms of
instruments of transfer (and shall provide detailed objections with respect
thereto if Offeree finds such forms inadequate);
(ii) The Purchaser in writing accepts and adopts all
of the terms and conditions of this Agreement and,
if applicable, the Operating Property Activity Agreement and the Development
Activity Agreement, as the same may have been amended, including, without
limitation, the restrictions on transfer set forth in Section 8.1 hereof, and
acknowledges that the Offeror's rights under this Section 8.5 are transferable,
but shall not be available for a period of one (1) year, to such Purchaser;
(iii) The Offeror or the Purchaser, as the case may
be, pays all debts of the Offeror then due and
payable to the Company, Venture Two, Venture Three or to the Offeree (including
interest accrued thereon) and all capital contributions then due and payable by
the Offeror to the Company, Venture Two and Venture Three;
(iv) The Offeror or the Purchaser pays all reasonable
expenses incurred by the Offeree from the date
the Offeree last declines to purchase the Subject Interest through the date on
which the Subject Interest is transferred to the Purchaser, including, without
limitation, legal and accounting fees, and pays all costs incurred by the
Company, Venture Two and Venture Three, as the result of such transfer,
including, without limitation, the cost of preparing and filing any and all tax
returns which are required to be filed as a result of such sale;
(v) If required by the Offeree, the Purchaser
delivers an opinion of counsel to the Company, which
counsel and opinion are satisfactory to the Offeree, that an exemption from
registration or qualification under the Securities Act of 1933, as amended, and
under all applicable statutes, rules or laws of any state which may be
applicable thereto is available; and
(vi) The Offeree takes any action required to comply
with ERISA.
(e) In the event the Offeror proposes to consummate a sale of
the Subject Interest to a Purchaser within the time specified and in a manner
otherwise consistent with the requirements of Section 8.5.4(a) and (b) above,
the Offeree shall deliver to the Offeror and Purchaser an estoppel certificate
which shall certify (i) a true, correct and complete copy of this Agreement, the
Development Activity Agreement and the Operating Property Activity Agreement,
together with any and all amendments thereto; and (ii) whether to its knowledge
any event of default exists under this Agreement, the Development Activity
Agreement and the Operating Property Activity Agreement. Offeree may request
that Offeror provide to Offeree a counterpart of such estoppel certificate
executed by Offeror as a condition to its delivery thereof.
8.5.5. Reinstatement of First Offer Procedure. In the event the Offeror
fails within the time specified in Section 8.5.4 to consummate such proposed
sale, the Offeror shall nonetheless reimburse the Offeree for its
above-described costs and shall, prior to any subsequent proposed sale of the
Subject Interest be required to extend to the Offeree, and the Offeree shall
have, the rights of first offer set forth in this Section 8.5. Except as
otherwise permitted by this Agreement, any sale, assignment or other transfer by
either Member of its Member Interest or any portion thereof in violation of the
restrictions and procedures set forth in this Section 8.5 shall be void.
8.5.6. No Release of Liability. No Transfer by Prudential of its Member
Interest shall relieve Prudential of its unconditional obligation to contribute
the Prudential Contribution Amount in full, and Prudential shall remain
unconditionally and primarily liable for the obligation to contribute the entire
Prudential Contribution Amount to the Company in accordance with the terms of
this Agreement as if such Transfer had never occurred.
Section 8.6 Restraining Order.
-----------------
If either Member shall at any time Transfer or attempt to Transfer its
Member Interest or part thereof in violation of the provisions of this Agreement
and any rights hereby granted, then the other Member shall, in addition to all
rights and remedies at law and in equity, be entitled to a decree or order
restraining and enjoining such Transfer and the offending Member shall not plead
in defense thereto that there would be an adequate remedy at law; it being
hereby expressly acknowledged and agreed that damages at law will be an
inadequate remedy for a breach or threatened breach of the violation of the
provisions concerning Transfer set forth in this Agreement.
Section 8.7 No Termination.
--------------
Neither Member shall Transfer all or any part of its Member Interest to
any Person other than the other Member, whether or not the Transfer would
otherwise be permitted hereunder, if the Transfer would result in a termination
of the Company under the Code. At the request of the other Member and as a
condition of the consummation of any Transfer of all or any part of a Member
Interest to any Person other than the other Member, the Member proposing to
Transfer all or any part of its Member Interest shall at its cost provide an
unqualified opinion of counsel, which must be reasonably satisfactory to the
other Member, that the Transfer would not result in such a termination and, in
addition to the other Member's rights under Section 8.6, the Member proposing to
Transfer all or any part of its Member Interest to any party other than the
other Member shall indemnify and hold harmless the other Member from and against
any and all loss, cost, liability or expense (including, but not limited to,
reasonable attorneys' fees and court costs) which such other Member may suffer
if the Transfer would, either by itself or together with any other prior
Transfer of a Member Interest in the Company of which the transferring Member
has knowledge at the time of the Transfer, cause such a termination.
Section 8.8 CPI Redemption of Development Interest.
--------------------------------------
At any time after the Effective Date, CPI shall have the right to cause
the Company to redeem a portion of its Member Development Percentage in exchange
for a number of Developer Units which would entitle the holder of such Units to
an overall 1% interest in Venture Three. The Member Development Percentages
shall be adjusted following such redemption so as to fairly and equitably
reflect the remaining interests of the Members (and, if the Company owns
Additional Capital Units, the Member Development Percentages may be different
with respect to the Additional Capital Units). The Development Manager shall
have the right to admit CPI as a member of Venture Three and the right to amend
the Development Activity Agreement to reflect the admission of CPI to Venture
Three in accordance with this Section 8.8.
Section 8.9 Prudential Redemption of Operating Property Interest.
----------------------------------------------------
At any time after the Effective Date, Prudential shall have the right
to cause the Company to redeem a portion of its Member Property Percentage in
the Company in exchange for the distribution from the Company of an Operating
Property Activity Interest in Venture Two which entitles Prudential to a 1%
interest in Venture Two. The Member Property Percentages shall be adjusted
following such redemption so as to fairly and equitably reflect the remaining
interests of the Members. Operating Property Manager shall have the right to
admit Prudential as a member of Venture Two and the right to amend the Operating
Property Activity Agreement to reflect the admission of Prudential to Venture
Two in accordance with this Section 8.9.
ARTICLE 9
---------
DEFAULT AND DISSOLUTION
-----------------------
Section 9.1 Events of Default.
-----------------
9.1.1 Definitions and Cure Periods. The occurrence of any of
the following events shall constitute an event of default ("Event of Default")
hereunder on the part of the Member with respect to whom such event occurs
("Defaulter") if within thirty (30) calendar days following notice of any
non-monetary default and if within five (5) calendar days following notice of
the non-payment of monies, the Defaulter fails to pay such monies or in the case
of non-monetary defaults which can be cured, fails to commence substantial
efforts to cure such default or, having commenced to cure, thereafter fails
within a reasonable time to prosecute to completion with diligence and
continuity the curing of such default; provided, however, that the occurrence of
any of the events described in subparagraphs (c)-(j) and (l) below shall
constitute an Event of Default immediately upon such occurrence without any
requirement of notice or passage of time except as specifically set forth in any
such subparagraph:
(a) the failure by a Member to make any capital
contribution as required pursuant to the provisions of Article 3.
(b) the violation by a Member of any of the restrictions
set forth in Article 8 of this Agreement upon the right of a Member to Transfer
its Member Interest;
(c) institution by a Member of proceedings of any nature under
any Laws of the United States or of any state, whether now existing or
subsequently enacted or amended, for the relief of debtors wherein such Member
is seeking relief as a debtor;
(d) a general assignment by a Member for the benefit of
creditors;
(e) the institution by a Member of a case or other proceeding
under any section or chapter of the Federal Bankruptcy Code as now existing or
hereafter amended or becoming effective;
(f) the institution against a Member of a case or other
proceeding under any section or chapter of the Federal Bankruptcy Code as now
existing or hereafter amended or becoming effective, which proceeding is not
dismissed, stayed or discharged within a period of sixty (60) calendar days
after the filing thereof or if stayed, which stay is thereafter lifted without a
contemporaneous discharge or dismissal of such proceeding;
(g) a proposed plan of arrangement or other action by a
Member's creditors taken as a result of a general meeting of the creditors of
such Member;
(h) the appointment of a receiver, custodian, trustee or like
officer, to take possession of assets having a value in excess of $100,000 of a
Member if the pendency of said receivership would reasonably tend to have a
materially adverse effect upon the performance by said Member of its obligations
under this Agreement, which receivership remains undischarged for a period of
ninety (90) calendar days from the date of its imposition;
(i) admission by a Member in writing of its inability to
pay its debts as they mature;
(j) attachment, execution or other judicial seizure of all or
any substantial part of a Member's assets or of a Member's Member Interest, or
any part thereof, such attachment, execution or seizure being with respect to an
amount not less than $100,000 and remaining undismissed or undischarged for a
period of fifteen (15) calendar days after the levy thereof, if the occurrence
of such attachment, execution or other judicial seizure would reasonably tend to
have a materially adverse effect upon the performance by said Member of its
obligations under this Agreement; provided, however, that said attachment,
execution or seizure shall not constitute an Event of Default hereunder if said
Member posts a bond sufficient to fully satisfy the amount of such claim or
judgment within fifteen (15) calendar days after the levy thereof and the
Member's assets are thereby released from the lien of such attachment;
(k) material default in the performance of or failure to
comply with any other material agreements, obligations or undertakings of a
Member herein contained;
(l) fraud committed by a Member; and
(m) material breach of fiduciary duty or material
misrepresentation by a Member (other than any misrepresentation which would
constitute a breach under the Contribution Agreement) by a Member.
In determining what is "material" under this Agreement the standard of
materiality and "Materiality Thresholds" under the Contribution Agreement shall
not be of any relevance. In addition, notwithstanding the exception in
subsection (m) of any misrepresentation which would constitute a breach under
the Contribution Agreement, CPI and Prudential confirm that as to any such
misrepresentation which would constitute a breach under the Contribution
Agreement, each Member shall have their respective rights and remedies as
therein set forth, subject to the limitations therein set forth.
9.1.2 Act of Insolvency. The occurrence of any events
described in subparagraphs (c)-(j) of Section 9.1.1 shall also constitute an
"Act of Insolvency," as said term is used in this Agreement.
Section 9.2 Causes of Dissolution and Termination.
--------------------------------------------------
Notwithstanding any contrary provision of the Act, except as set forth
in this Article 9 and Article 8, neither Member shall have the right and each
Member hereby agrees not to withdraw from the Company, nor to dissolve,
terminate or liquidate, or to petition a court for the dissolution, termination
or liquidation of the Company, except as provided in this Agreement, and neither
Member at any time shall have the right to petition or to take any action to
subject the Company's assets or any part thereof, to the authority of any court
of bankruptcy, insolvency, receivership or similar proceeding. The Company shall
be dissolved and terminated only upon the earlier occurrence of any of the
following dates or events:
(a) December 31, 2028 or such later date as Approved by
the Members;
(b) a dissolution of the Company is Approved by the
Members;
(c) the sale or other disposition by the Company of all its
interest in Venture Two and Venture Three.
Section 9.3 Election of Non-Defaulting Member.
---------------------------------
Upon the occurrence of an Event of Default, the non-defaulting
Member (a "Non-Defaulter") shall be entitled to exercise all rights and remedies
against the Defaulter available at law and equity. In addition, the
Non-Defaulter at any time following an Event of Default described in
subparagraphs (b)-(j) or (l) of Section 9.1.1, and at any time after the seventh
anniversary of the Effective Date following any Event of Default, may exercise
such Non-Defaulter's Redemption Rights under Section 8.3.5 or 8.3.6, as the case
may be, regardless of whether a Sale Notice has been given under Section 8.3.5
(in the event Prudential is the Defaulter) or Section 8.3.6 (in the event CPI is
the Defaulter); provided, however, that in the event of any Event of Default at
any time prior to the seventh anniversary of the Effective Date, the
Non-Defaulter may exercise such Non-Defaulter's Redemption Rights under Section
8.3.5 or 8.3.6, as the case may be, only:
(a) if the Non-Defaulter is CPI or a CPI Affiliate or
Prudential or a Prudential Affiliate (it being agreed that no Transferee other
than such an Affiliate shall be entitled to exercise such right);
(b) after providing the Defaulter (after expiration of any
applicable grace or cure periods provided in Section 9.1.1) with a written
notice (the "Redemption Warning Notice") marked "Failure to Cure May Result In
Exercise of Redemption Rights" in which the Non-Defaulter specifies the amount
of damages it has suffered from the Event of Default and the basis therefore;
and
(c) if the Defaulter fails to either:
(i) provide an adequate remedy to such default
within thirty (30) days after receipt of the Redemption Warning Notice to the
reasonable satisfaction of the Non-Defaulter, or
(ii) tender to the Non-Defaulter a proposal to remedy
such default by the payment of money to the
Defaulter to cover damages actually suffered as a result of such Event of
Default or such other tender as shall constitute a reasonably adequate remedy
for such Event of Default (a "Remedy Proposal"); and thereafter, if a Remedy
Proposal is tendered but the Non-Defaulter reasonably determines in good faith
that the Remedy Proposal is insufficient, and the Defaulter and Non-Defaulter
are not able to agree on an appropriate remedy within 30 days after such
determination, the Non-Defaulter shall only have the right to exercise such
Non-Defaulter's Redemption Rights under Section 8.3.5 or 8.3.6 if (x) the
Non-Defaulter first brings an action at law and/or in equity against the
Defaulter for such default and the Non-Defaulter receives final judgment (from
which no further appeal may be taken) against the Defaulter for an amount of
compensatory damages or, as applicable, other remedy, at least 10% in excess of
the Remedy Proposal, and (y) the Defaulter fails to pay a penalty to the
Non-Defaulter of 50% of the amount of such judgment, together with the judgment
itself within ten (10) days after the date the Non-Defaulter receives final
judgment (from which no further appeal may be taken). If pursuant to the
foregoing the Non-Defaulter is not entitled to exercise such Non-Defaulter's
Redemption Rights under Section 8.3.5 or 8.3.6, such determination shall not
alter or impair the Non-Defaulter's other rights and remedies hereunder. In the
event there is a litigation that results in the payment when due of such penalty
and judgment by the Defaulter, and subsequent thereto there is another
litigation against the same Defaulter over a Remedy Proposal arising out of a
subsequent Event of Default by the Defaulter and a final judgment (from which no
further appeal may be taken) is entered against the Defaulter that is at least
10% in excess of such subsequent Remedy Proposal, the Non-Defaulter shall have
the option to reject the penalty payment described hereinabove and to elect to
exercise its Redemption Rights. The right of the Non-Defaulter to institute the
redemption procedures shall be exercisable by the giving of a redemption notice
in accordance with Section 8.3.5 or 8.3.6, as the case may be. The "Closing" of
any transactions for which such notice is given shall be consummated in
accordance with Section 8.3.7. Further, the Non-Defaulter shall be entitled to
recover on its own behalf and on behalf of the Company in enforcing the rights
and remedies against the Defaulter reasonable attorneys fees and costs;
provided, that in any litigation under this paragraph, the prevailing party
shall be entitled to recover its reasonable attorney fees.
Section 9.4 Procedure in Dissolution and Liquidation.
----------------------------------------
9.4.1 Winding Up. Upon dissolution of the Company pursuant to
Section 9.2 hereof, the Company shall immediately commence to wind up its
affairs and the Members shall proceed with reasonable promptness to liquidate
the business of the Company and (at least to the extent necessary to pay any
debts and liabilities of the Company) to convert the Company's assets into cash.
A reasonable time shall be allowed for the orderly liquidation of the business
and assets of the Company in order to reduce any risk of loss that might
otherwise be attendant upon such a liquidation.
9.4.2 Management Rights During Winding Up. During the period
of the winding up of the affairs of the Company, the Members shall jointly
manage the Company and shall make with due diligence and in good faith all
decisions relating to the conduct of any business or operations during the
winding up period and to the sale or other disposition of Company assets. Each
Member hereby waives any claims it may have against the other that may arise out
of the management of the Company by the other, pursuant to this Section 9.4.2,
so long as such other Member and its representatives act in good faith.
9.4.3 [Intentionally Omitted].
9.4.4 Distributions in Liquidation. The assets of Company
shall be applied or distributed in liquidation in the following manner and in
the following order of priority:
(a) First, in payment of debts and obligations of the Company
owed to third parties, which shall include either Member as the holder of any
secured loan, and to the expenses of liquidation in the order of priority as
provided by law; then
(b) Second, to the setting up of any reserves for a period of
up to twelve (12) months which the Management Committee may deem necessary for
any contingent or unforeseen liabilities or obligations of the Company; then
(c) Third, in payment of any unsecured debts or obligations of
the Company to either Member;
(d) Fourth, to the Members pro rata in proportion to the
positive balances in their respective Capital Accounts (after such Capital
Accounts have been adjusted to reflect any Net Profit, Development Activity
Profit, Operating Property Activity Profit, Net Loss, Development Activity Loss
or Operating Property Activity Loss, or items of income, gain or loss of the
forgoing, to be allocated to the Members in connection with the dissolution and
liquidation of the Company pursuant to Article 4 hereof, applied as if all the
assets of the Company were sold at Fair Market Value and the proceeds thereof
were distributed in accordance with Section 4.10, as modified by Section 9.4.6).
Losses attributable to the expenditure of funds held under the reserve
in Section 9.4.4(b) shall be allocated to each Member to the extent such
expenditure will reduce the amount of cash eventually distributed to each
Member.
9.4.5 Non-Cash Assets. Subject to the Approval of the Members,
every reasonable effort shall be made to dispose of the assets of the Company,
Venture Two and Venture Three so that the distribution may be made to the
Members in cash. If at the time of the termination of the Company, the Company,
Venture Two or Venture Three owns any assets in the form of work in progress,
notes, mortgages, deeds of trust, deeds to secure debt or other non-cash assets,
such assets, if any, shall be distributed in kind to the Members, in lieu of
cash, proportionately to their right to receive the assets of the Company on an
equitable basis reflecting the fair market value of the assets so distributed,
which fair market value shall be determined by the applicable Manager, as
Approved by the Members (and if not so Approved, by appraisal in the manner
described in Section 10.3). In the alternative, the Members may cause the
Company to distribute some or all of its non-cash assets to the Members as
tenants-in-common, or in such other entity as the Member may agree, subject to
such terms, covenants and conditions as the Members may adopt. Each Member's
Capital Account shall be charged or credited, as the case may be, as if each
non-cash asset of the Company had been sold for cash at its fair market value
(as determined above) and the net gain or loss recognized thereby had been
allocated to and among the Members in accordance with Article 4 hereof (as if
the proceeds had been distributed in accordance with Section 4.10 as modified by
Section 9.4.6).
9.4.6. Allocation Upon Liquidation. For purposes of the hypothetical
sale of assets and distribution of proceeds described in Section 9.4.5 and for
the purposes of Section 9.4.4(d), Section 4.10.1 shall be deemed to be modified
to delete subsections (b), (c) and (d) thereof and to insert in lieu thereof the
following:
"(b) Second, to Prudential, in an amount which would result in
Prudential (and any successors and assigns to whom any portion of Prudential's
Member Development Percentage has been assigned pursuant to Section 8.2.1 and
Section 8.5) having received an Internal Rate of Return of 11.5% on its
investment in the Member Development Percentage of Prudential (exclusive of the
portion of its interests related to Additional Capital Units) (w) using as its
initial investment an amount equal to the product of its Member Development
Percentage and the Prudential Contribution Amount, (x) with the amounts
contributed under the immediately foregoing item "(w)" being treated as
contributed at the times such amounts are in fact contributed by Prudential, (y)
taking into account all cash distributions and receipts received by Prudential
(or any Transferee thereof) in connection with such interest, including, without
limitation, any amounts received prior to liquidating distributions under
Section 4.9.1(b), 4.9.1(e), 4.10.1(b), 4.10.1(c) and 4.10.1(g), as well as
Operating Property Activity Cash Flow otherwise distributable to CPI but
actually distributed to Prudential (or any Transferee thereof) under 4.9.2 and
(z) disregarding any changes in ownership of the interest, treating the
investment as having commenced on the date of the first contribution by
Prudential and ending on the date of the last distribution from the Company;
(c) Third, to CPI, in an amount which would result in CPI (and
any successors and assigns to whom any portion of CPI's Member Development
Percentage has been assigned pursuant to Sections 8.2.2 and Section 8.5) having
received an Internal Rate of Return of 11.5% on its investment in the Member
Development Percentage (exclusive of the portion of its interests related to
Additional Capital Units), (x) using as its initial investment an amount equal
to the product of its Member Development Percentage and the CPI Contribution
Amount, (y) taking into account all cash distributions and receipts received by
CPI (or any Transferees thereof) in connection with such interest, including
without limitation, any amounts received prior to liquidating distributions
under Section 4.9.1(c), Section 4.9.1(e) (excluding amounts otherwise
distributable to Prudential but actually distributed to CPI as Unreturned CPI
Development Valuation Amount), Section 4.10.1(b), Section 4.10.1(d) and Section
4.10.1(g) (but not any amounts received under Section 4.9.1(d), Section 4.9.1(e)
(to the extent otherwise distributable to Prudential but actually distributed to
CPI as Unreturned CPI Development Valuation Amount), Section 4.10.1(e) or
Section 4.10.1(f)), and (z) disregarding any changes in ownership of the
interest, treating the investment as having commenced on the Effective Date and
ending on the date of the last distribution from the Company.
(d) [Intentionally Omitted]"
Section 9.5 Disposition of Documents and Records.
------------------------------------
All Documents of the Company shall be retained by a party mutually
acceptable to the Members upon termination of the Company for a period of not
less than three (3) years after filing of the Company's final income tax return
with the Internal Revenue Service. The costs and expenses of personnel and
storage costs associated therewith shall be shared by the Members equally. The
Documents shall be available during normal business hours to all Members for
inspection and copying at such Member's cost and expense. If either Member for
any reason ceases as provided herein to be a Member at any time prior to
termination of the Company ("Non-Surviving Member"), and the Company is
continued without the Non-Surviving Member, the other Member ("Surviving
Member") agrees that the Documents of the Company up to the date of the
termination of the Non-Surviving Member's interest shall be maintained by the
Surviving Member, its successors and assigns, for a period of not less than
three (3) years after the filing of the annual income tax return with the
Internal Revenue Service for the last period that allocations of Company Net
Profit or Loss are made to such Member; provided, however, that if there is an
Internal Revenue Service examination or audit or any audit or examination under
ERISA or under the New Jersey Commissioner of Insurance or other applicable
governmental authority, or notice thereof, which requires access to the
Documents, the Documents shall be retained until the examination or audit is
completed and any tax liability finally determined, and provided further, the
Non-Surviving Member shall reimburse the Surviving Member for one-half of
personnel and storage costs associated herewith. The Documents shall be
available for inspection, examination and copying by the Non-Surviving Member or
its representatives upon reasonable notice in the same manner as herein provided
during said three (3) year period.
Section 9.6 Date of Termination.
-------------------
The Company shall be terminated when its cash and other assets have
been applied and distributed in accordance with the provisions of Section 9.4.4.
The establishment of any reserves in accordance with the provisions of Section
9.4.4 shall not have the effect of extending the Term of the Company, but any
unexpended reserve amount shall be distributed in the order and priority
provided in such Section upon expiration of the period of such reserves.
ARTICLE 10
----------
APPRAISAL
---------
Section 10.1 General.
-------
Whenever this Agreement provides either (i) for the valuation of a
Member's interest in the Company, Venture Two or Venture Three to be purchased
or sold or (ii) for the Company's assets or those of Venture Two or Venture
Three to be valued at fair market value, the value of such interest or assets
shall be determined as follows. The parties shall first attempt to agree upon
such Fair Market Value, and if the Fair Market Value is not Approved by the
Members within thirty (30) days, then either Member may require by written
notice to the other Member that each Member obtain and deliver to the other
Member an appraisal of the Fair Market Value of such Asset, Project or other
asset prepared by an MAI appraiser, investment banker, or other Person who shall
have substantial experience in valuing commercial real estate and interests
therein within thirty (30) days after such written request. Thereafter, if
within thirty (30) days after the receipt of each Member's appraisal of such
Asset, Project or other asset the Fair Market Value has not been Approved by the
Members, the Fair Market Value shall be determined as set forth in Section 10.2.
The "Fair Market Value" of the Company or all its assets shall mean the cash
price which a purchaser would pay on the effective date of the appraisal for all
assets of the Company in excess of the debts and liabilities of the Company,
such valuation to be made on the assumption that such assets are subject to any
applicable agreements relating to the assets, including leases and development,
management and service agreements then in effect. The "Fair Market Value" of
Venture Two or Venture Three or all of their respective assets shall mean the
cash price which a purchaser would pay on the effective date of the appraisal
for all assets of the particular entity in excess of the debts and liabilities
of such entity, such valuation to be made on the assumption that such assets are
subject to any applicable agreements relating to the assets, including leases
and development, management and service agreements, then in effect. In any such
process to determine "fair market value" or "Fair Market Value" by the Members,
each Member shall provide to the other Member upon request, copies of or access
to (including the right to make copies of), all such information in the
possession or control of such Member or the Company, with respect to such
matters as the other Member may reasonably request. The "Fair Market Value" of
an interest in the Company, including any Investor Units, Developer Units,
Additional Capital Units and any interest in Venture Two or Venture Three, shall
mean the amount which would be distributed by the Company and/or Venture Two or
Venture Three, as applicable, to the Member holding such interest pursuant to
Section 9.4.4 of this Agreement, and/or Section 9.4.4 of the Operating Property
Activity Agreement or Development Activity Agreement, as applicable, were the
Company and/or Venture Two or Venture Three, as applicable, dissolved,
liquidated and terminated as of the effective date of the determination based
upon the Fair Market Value of the Company and/or Venture Two or Venture Three,
as applicable, using such appraised Fair Market Value of the Company, and of the
Assets or Projects of Venture Two or Venture Three, as applicable, as the amount
available for distribution pursuant to said Section 9.4.4 of the applicable
agreement. For purposes of implementing the provisions of Sections 8.3.5, 8.3.6
or 8.4, the Fair Market Value of an interest directly held in Venture Two or
Venture Three shall be determined using the same methodology.
Section 10.2 Appraisal Procedure.
-------------------
If the Members are unable to mutually agree upon Fair Market Value
within thirty (30) calendar days after the expiration of the time periods set
forth in Section 10.1, such value shall be settled by arbitration in Atlanta,
Georgia in accordance with the Real Estate Valuation Arbitration Rules of the
American Arbitration Association. The arbitration shall be conducted by a single
arbitrator who shall be mutually selected by CPI and Prudential and who shall be
an MAI appraiser, investment banker, or other Person who shall have substantial
experience in valuing commercial real estate and interests therein. Each Member
shall be required as part of the arbitration of Fair Market Value to present its
proposed Fair Market Value to the arbitrator, who, in making his decision, shall
be required to select that proposal which is the closest to the arbitrator's
view of Fair Market Value. If the Members are unable to agree upon an arbitrator
within 30 days of notice by either party to the other, then at the written
request of either party, the Members shall each select one arbitrator within 30
days of receipt of such request, and the two arbitrators so selected shall
appoint the arbitrator to make the determination under this Section 10.2 within
thirty (30) calendar days after so being appointed. In the event a party fails
to appoint its arbitrator in accordance with the preceding sentence, the
arbitrator appointed by the other party shall be the arbitrator for purposes of
settling the dispute which is the subject of such arbitration. The determination
by the arbitrator shall be final and binding on the Members and may be entered
in any court having jurisdiction thereof. All fees and expenses of the
arbitrators and all other expenses of the arbitration shall be paid by the party
whose proposed Fair Market Value was not selected in such arbitration.
Section 10.3 Appraisal of Non-Cash Assets.
----------------------------
The procedures set forth in Sections 10.1 and 10.2 for determining the
Fair Market Value of the Company shall also be followed in determining the Fair
Market Value of non-cash assets of the Company as described in Section 9.4.5;
provided, however, that all references in Sections 10.1 and 10.2 to the Fair
Market Value of the Company shall, for purposes of this Section 10.3, be deemed
to be references to the Fair Market Value of such non-cash assets.
ARTICLE 11
----------
GENERAL PROVISIONS
------------------
Section 11.1 Notices.
-------
Any notice, consent, approval, or other communication which is provided
for or required by this Agreement must be in writing and may be delivered in
person to any party, or may be sent by Federal Express, UPS, or other reputable
national courier service regularly providing evidence of delivery. Any such
notice or other written communications shall be deemed received by the party to
whom it is sent (i) in the case of personal delivery, on the date of delivery to
the party to whom such notice is addressed as evidenced by a written receipt
signed on behalf of such party, and (ii) in the case of courier delivery, the
date receipt is acknowledged by the party to whom such notice is addressed as
evidenced by a written receipt signed on behalf of such party. For purposes of
notices, the addresses of the parties hereto shall be as follows, which
addresses may be changed at any time by written notice given in accordance with
this provision:
If to Prudential: The Prudential Insurance Company of America
- ----------------
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Managing Director, Transactions
(Dale H. Taysom)
With a copy to: The Prudential Insurance Company of America
- -------------- Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Principal, Asset Management
(Charles Miller)
With a copy to: The Prudential Insurance Company of America
- --------------- PAMG-RE Law Department
Arbor Circle South, 8 Campus Drive, 4th Floor
Parsippany, New Jersey 07054-4493
Attention: Assistant General Counsel
(Ellen Towey Kendall, Esq.)
With a copy to: Alston & Bird LLP
- -------------- One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Albert E. Bender, Jr.
If to CPI: Cousins Properties Incorporated
- --------- 2500 Windy Ridge Parkway
Suite 1600
Atlanta, Georgia 30339-5683
Attention: Corporate Secretary
With a copy to: Troutman Sanders LLP
- -------------- NationsBank Plaza
600 Peachtree Street N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Richard H. Brody
Failure of, or delay in delivery of any copy of a notice or other written
communication shall not impair the effectiveness of such notice or written
communication given to any party to this Agreement as specified herein.
Section 11.2 Entire Agreement.
----------------
This Agreement (including all Exhibits referred to herein and attached
hereto, which Exhibits are part of this Agreement for all purposes), the
Development Activity Agreement, the Operating Property Activity Agreement, the
Contribution Agreement and related written agreements contemporaneously entered
into by the Members, the Company, Venture Two and Venture Three, contains the
entire understanding between the Members and supersedes any prior understanding
and agreements between them respecting the within subject matter. There are no
representations, agreements, arrangements or understandings, oral or written,
between the Members relating to the subject of this Agreement which are not
fully expressed herein or in such agreements.
Section 11.3 Severability.
------------
This Agreement is intended to be performed in accordance with, and only
to the extent permitted by, all applicable Laws of the State of Delaware. If any
provision of this Agreement, or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law; provided,
however, that the above-described invalidity or unenforceability does not
diminish in any material respect the ability of the Members to achieve the
purposes for which this Company was formed.
Section 11.4 Successors and Assigns.
----------------------
Subject to the restrictions on Transfer set forth in Article 8, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto.
Section 11.5 Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
Section 11.6 Additional Documents and Acts.
-----------------------------
In connection with this Agreement, as well as all transactions
contemplated by this Agreement, each Member agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be necessary or appropriate to effectuate, carry out and perform all of the
terms, provisions and conditions of this Agreement, and all such transactions.
Section 11.7 Interpretation.
--------------
This Agreement and the rights and obligations of the respective parties
hereunder shall be governed by and interpreted and enforced in accordance with
the Laws of the State of Delaware.
Section 11.8 Terms.
-----
Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the person or
persons, firm or corporation may in the context require. Any reference to the
Code or Laws shall include all amendments, modifications, or replacements of the
specific sections and provisions concerned.
Section 11.9 Amendment.
---------
This Agreement may not be amended, altered or modified except by
instrument in writing and signed by all of the Members.
Section 11.10 References to this Agreement.
----------------------------
Numbered or lettered articles, sections and subsections herein
contained refer to articles, sections and subsections of this Agreement unless
otherwise expressly stated. The words "herein," "hereof," "hereunder," "hereby,"
"this Agreement" and other similar references shall be construed to mean and
include this Agreement and all amendments thereof and Exhibits thereto unless
the context shall clearly indicate or require otherwise.
Section 11.11 Headings.
--------
All headings herein 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.
Section 11.12 No Third Party Beneficiary.
--------------------------
This Agreement is made solely and specifically between and for the
benefit of the parties hereto, and their respective successors and assigns
subject to the express provisions hereof relating to successors and assigns, and
no other Person whatsoever shall have any rights, interest, or claims hereunder
or be entitled to any benefits under or on account of this Agreement as a third
party beneficiary or otherwise.
Section 11.13 No Waiver.
---------
No consent or waiver, either expressed or implied, by any Member to or
of any breach or default by any other Member in the performance by such other
Member of the obligations thereof under this Agreement shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other Member of the same or any other obligations of such
other Member under this Agreement. Failure on the part of any Member to complain
of any act or failure to act of any other Member, failure on the part of any
complaining Member to continue to complain or to pursue complaints with respect
to any act or failure to act of any other Member, or failure on the part of any
Member to declare any other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of the rights
and remedies thereof under this Agreement or otherwise at law or in equity.
Section 11.14 Expenses; No Brokers.
--------------------
(a) Each Member shall pay for its own professional fees and
due diligence expenditures in connection with this Agreement and the
transactions contemplated hereby, including attorneys, accountants, advisors and
engineers. CPI shall pay for any investment banking fees due Morgan Stanley Dean
Witter and Lazard Freres. Closing and related costs shall be borne by the
Members pursuant to the terms of the Contribution Agreement.
(b) Except as expressly provided herein, each of the Members
hereto represents and warrants to each other Member that there are no brokerage
commissions or finders' fees (or any basis therefor) resulting from any action
taken by such Member or any Person acting or purporting to act on such Member's
behalf upon entering into this Agreement or any transaction contemplated hereby.
Each Member hereby indemnifies the other from and against any and all loss,
cost, cost and expense (including reasonable attorneys' fees) arising from or
related to claims for brokerage or similar fees by any Person claiming to have
dealt with the indemnifying Member.
Section 11.15 Time of Essence.
---------------
Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized corporate offices, each on the day
and year first above written.
PRUDENTIAL:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: _____________________________
Title: __________________________
[CORPORATE SEAL]
CPI: ____________________________
COUSINS PROPERTIES INCORPORATED
By:
Title: Senior Vice President
[CORPORATE SEAL]
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF CP VENTURE TWO LLC
November 12, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS....................................................2
Section 1.1 Definitions........................................2
Section 1.2 Other Definitions.................................11
Section 1.3 Exhibits..........................................11
ARTICLE 2 FORMATION.....................................................11
Section 2.1 Formation of Company..............................11
Section 2.2 Name..............................................11
Section 2.3 Principal Place of Business; Resident Agent.......12
Section 2.4 Purposes and Scope................................12
Section 2.5 Certificate of Formation..........................12
Section 2.6 Ownership and Waiver of Partition.................14
Section 2.7 Limits of Company.................................14
Section 2.8 No Individual Authority...........................15
Section 2.9 Responsibility of Members.........................15
Section 2.10 Term.............................................15
Section 2.11 Investment Representations.......................16
ARTICLE 3 CAPITAL.......................................................17
Section 3.1 Members' Percentage Interests.....................17
Section 3.2 Capital Contributions..............................17
3.2.1 Debt Financing and Equity Capital..............17
3.2.2. Additional Capital Notice......................17
Section 3.3 Dilution..........................................18
Section 3.4 No Interest on Capital............................20
Section 3.5 Reduction of Capital Accounts.....................20
Section 3.6 Capital Accounts..................................20
Section 3.7 Negative Capital Accounts.........................21
Section 3.8 Resignations Withdrawals of Capital...............23
Section 3.9 Limit on Contributions and Obligations of.........23
Section 3.10 Pro Rations Related to Assets.....................23
ARTICLE 4 PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS...............24
Section 4.1 Net Profit........................................24
Section 4.2 Net Loss..........................................24
Section 4.3 Limitation on Net Loss Allocations................24
Section 4.4 Other Items.......................................24
Section 4.5 Special Allocations...............................25
Section 4.6 Curative Allocations..............................27
Section 4.7 Other Allocation Rules............................27
Section 4.8 Section 704(c) Allocation.........................27
Section 4.9 Distribution of Cash Flow.........................28
Section 4.10 Distribution of Capital Proceeds.................28
ARTICLE 5 COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS................29
Section 5.1 Books and Records.................................29
Section 5.2 Tax Returns.......................................29
Section 5.3 Reports...........................................30
Section 5.4 Audits............................................30
Section 5.5 Bank Accounts.....................................31
Section 5.6 Tax Elections.....................................31
Section 5.7 Tax Matters Member................................31
ARTICLE 6 MANAGEMENT OF THE COMPANY.....................................32
Section 6.1 Management of the Company.........................32
6.1.1 General........................................32
6.1.2 Initial Managing Member........................32
6.1.3 Actions of Non-Managing Member..................32
6.1.4 CPI As Manager..................................32
Section 6.2 Required Approval by Non-Managing Members.........33
6.2.1 Generally Not Required.........................33
6.2.2 Required Approval by Non-Managing Members......33
Section 6.3 Powers and Duties of Managing Member..............35
Section 6.4 Authorization for Expenditures....................37
Section 6.5 Rights Not Assignable.............................38
Section 6.6 Emergency Authority...............................38
Section 6.7 Budgets...........................................38
Section 6.8 Management and Leasing Agreement..................38
Section 6.9 Actions to Maintain REIT Status...................39
Section 6.10 Actions to Maintain REOC Status..................40
Section 6.11 Liability of a Member for Conduct................41
Section 6.12 Indemnity........................................41
ARTICLE 7 COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES.......41
Section 7.1 Compensation, Reimbursements......................41
7.1.1 Compensation....................................41
7.1.2 Reimbursements..................................41
Section 7.2 No Contracts with Affiliates.......................42
ARTICLE 8 TRANSFER AND SALE RESTRICTIONS................................42
Section 8.1 General...........................................42
8.1.1 Required Consents...............................42
8.1.2 Indirect Transfers.............................42
Section 8.2 Permitted Transfers by the Members................43
8.2.1 Transfers By CPI................................43
8.2.2 Transfers by CP Venture .......................43
8.2.3 Agreements with Transferees....................43
Section 8.3 Right of First Offer..............................44
Section 8.3 Restraining Order.................................44
Section 8.4 Asset and Mortgage Restrictions...................44
ARTICLE 9 DEFAULT AND DISSOLUTION.......................................45
Section 9.1 Events of Default.................................45
9.1.1 Definitions and Cure Periods...................45
9.1.2 Act of Insolvency..............................46
Section 9.2 Causes of Dissolution and Termination.............47
Section 9.3 Remedies..........................................48
Section 9.4 Procedure in Dissolution and Liquidation..........48
9.4.1 Winding Up.....................................48
9.4.2 Management Rights During Winding Up............48
9.4.3 Work in Progress...............................48
9.4.4 Distributions in Liquidation...................48
9.4.5 Non-Cash Assets................................49
Section 9.5 Disposition of Documents and Records..............49
Section 9.6 Date of Termination...............................50
Section 9.7 Fair Market Value.................................50
ARTICLE 10 GENERAL PROVISIONS...........................................51
Section 10.1 Notices..........................................51
Section 10.2 Entire Agreement.................................53
Section 10.3 Severability.....................................53
Section 10.4 Successors and Assigns...........................53
Section 10.5 Counterparts.....................................53
Section 10.6 Additional Documents and Acts....................53
Section 10.7 Interpretation...................................54
Section 10.8 Terms............................................54
Section 10.9 Amendment........................................54
Section 10.10 References to this Agreement....................54
Section 10.11 Headings........................................54
Section 10.12 No Third Party Beneficiary......................54
Section 10.13 No Waiver.......................................54
Section 10.14 Time of Essence.................................55
INDEX OF EXHIBITS
-----------------
Exhibit A Assets
Exhibit B Mortgages
Exhibit C Management and Leasing Agreement
Exhibit D ERISA Certificate
Schedule 5.6 Tax Elections and Decisions
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CP VENTURE TWO LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT
is made as of the 12th day of October, 1998 (the "Effective Date") by and
between COUSINS PROPERTIES INCORPORATED, a Georgia corporation ("CPI"), and
CP VENTURE LLC, a Delaware limited liability company ("CP Venture").
W I T N E S S E T H T H A T
:
WHEREAS, CPI formed the Company on October 28, 1998, pursuant to a
Limited Liability Operating Agreement and by filing a Certificate of Formation
with the Secretary of State of Delaware;
WHEREAS, as of the Effective Date, CPI shall transfer to CP Venture a
99% interest in the Company capital and profits;
WHEREAS, as of the Effective Date, CP Venture shall become a member of
the Company;
WHEREAS, in connection with CP Venture becoming a Member of the
Company, CPI and CP Venture wish to amend and restate the limited liability
company operating agreement of the Company and set forth their respective rights
and obligations as members thereof;
- --------------------------------------------------------------------------------
THE INTERESTS IN CP VENTURE TWO LLC (THE "PERCENTAGE INTERESTS") ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS
SET FORTH IN ARTICLE 8 OF THIS AGREEMENT. THE PERCENTAGE INTERESTS HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER (i) THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED (THE "GEORGIA ACT") IN
RELIANCE UPON THE EXEMPTION PROVIDED IN SECTION 9(13) THEREOF, (ii)
UNDER ANY OTHER STATE SECURITIES LAWS, OR (iii) UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "FEDERAL ACT"). NEITHER THE
PERCENTAGE INTERESTS, NOR ANY PART THEREOF, MAY BE OFFERED FOR SALE,
PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT
IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF ARTICLE 8 OF THIS
AGREEMENT AND PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
FEDERAL ACT, THE GEORGIA ACT, AND ANY OTHER APPLICABLE STATE SECURITIES
LAWS OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH
SECURITIES LAWS OR WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH
SECURITIES LAWS.
<PAGE>
NOW, THEREFORE, in consideration of the premises, the mutual promises,
obligations and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of such consideration being hereby
acknowledged, CPI and CP Venture, intending to be legally bound, do hereby amend
and restate the limited liability company operating agreement of the Company in
its entirety and agree as follows:
ARTICLE 1
---------
DEFINITIONS
-----------
Section 1.1 Definitions.
------------------------
When used in this Agreement, the following terms will have the meanings
set forth below:
(1) "Act" shall mean the Delaware Limited Liability
Company Act, as the same may be amended from time to time.
(2) "Act of Insolvency" shall have the meaning specified in
Section 9.1.2.
(3) "Adjusted Capital Account Balance" shall mean with respect
to any Member, the balance in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) credit to such Capital Account any amounts which
such Member is obligated to restore, because of a promissory
note to the Company or otherwise, or is deemed to be obligated
to restore pursuant to the penultimate sentence in each of
Regulations Sections 1.704-2(g)(1)(ii) and 1.704-2(i)(5) and
pursuant to Sections 4.5(a) and 4.5(b) of this Agreement; and
(ii) debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
This definition of Adjusted Capital Account Balance is intended to
comply with Section 1.704-1(b)(2)(ii)(d) of the regulations and shall
be interpreted consistent with such Regulations.
(4) "Affiliate(s)" shall mean CPI, a CPI Affiliate,
Prudential, a Prudential Affiliate, or a Person or Persons directly or
indirectly, through one or more intermediaries, controlling, controlled
by or under common control with the Person(s) in question. The term
"control", as used in the immediately preceding sentence, means, with
respect to a Person that is a corporation, the right to exercise,
directly or indirectly, more than 50% of the voting rights attributable
to the shares of the controlled corporation and, with respect to a
Person that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of the controlled Person.
(5) "Affiliate Debt" shall mean a loan to the Company from a
Member, or an Affiliate thereof pursuant to Section 3.2.1.
(6) "Agreed Value" shall mean with respect to each Asset
listed on Exhibit A attached hereto, the gross fair market value of
such Asset as listed on such Exhibit A.
(7) "Agreement" shall mean this Limited Liability Company
Operating Agreement, as amended from time to time.
(8) "Approved by the Members" or "Approval of the Members"
shall mean approval in writing by all of the Members acting through
their duly authorized representatives.
(9) "Asset" shall mean any of the real property assets listed
on Exhibit A attached hereto, and "Assets" shall mean all such real
property.
(10) "Asset Operating Budget" shall have the meaning
specified in (12) below.
(11) "Bank" shall mean a banking or other financial
institution which from time to time are selected by the Managing Member
to serve as the Company's principal funds depository.
(12) "Budgets" shall mean the following budgets of the Company
from time to time:
(i) "Asset Operating Budget," which shall mean the
annual budget for each Asset of the Company as prepared by the
Managing Member and which shall be comprised of: (A) an
estimate of all receipts from and expenditures for the
ownership, management, maintenance and operation of each Asset
for each Fiscal Year and (B) an estimate of all capital
replacements, substitutions and/or additions to any Asset, or
any component thereof, which are to be accomplished during
such Fiscal Year; and
(ii) "Company Operating Budget," which shall mean the
annual budget for the Company as prepared by the Managing
Member and which shall be comprised of an estimate of all
receipts from and expenditures for all activities of the
Company other than matters covered by Asset Operating Budgets.
(13) "Capital Account" shall have the meaning specified in
Section 3.6.
(14) "Capital Proceeds" shall mean the net proceeds from:
(i) loans to the Company in excess of current or
reasonably anticipated Company needs (including reasonable
reserves for Company debt obligations and working capital as
determined by the Managing Member) or excess funds received
from refinancing of any Company indebtedness (x) after the
payment of, or provision for the payment of, all costs and
expenses incurred by the Company in connection with such
refinancing, and (y) after deduction or retention of such sums
as are deemed necessary to be retained as a reserve for the
conduct of the business of the Company; and
(ii) any sale, exchange, condemnation or other
disposition of any Asset, or any portion thereof or any
interest therein, any equipment used thereon, or any other
capital asset of the Company or from claims on policies of
insurance maintained by the Company for damage to or
destruction of capital assets of the Company or the loss of
title thereto (to the extent that such proceeds exceed the
actual or estimated costs of repairing or replacing the assets
damaged or destroyed if, pursuant to this Agreement, such
assets are repaired or replaced) (x) after the payment of, or
provision for the payment of, all costs and expenses incurred
by the Company in connection with such sale or other
disposition or the receipt of such insurance proceeds, as the
case may be, and (y) after deduction or retention of such sums
as are deemed necessary to be retained as a reserve for the
conduct of the business of the Company.
(15) "Cash Flow" shall mean for any period the Gross Receipts
of the Company for such period less Operating Expenses for such period.
(16) "Closing Proration Date" shall have the meaning set forth
in the Contribution Agreement.
(17) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor statute thereto.
(18) "Company" shall mean the limited liability company formed
pursuant to the terms hereof for the limited purposes and scope set
forth herein.
(19) "Computation Date" shall have the meaning specified in
Section 3.3.
(20) "Company Operating Budget" shall have the meaning
specified in (12) above.
(21) "Contribution Agreement" shall mean the Contribution
Agreement dated as of even date herewith by and among CPI,
Cousins/Daniel, LLC, a Georgia limited liability company, Cousins
MarketCenters Inc., a Georgia corporation, and Prudential.
(22) "CP Venture" shall mean CP Venture LLC, a Delaware
limited liability company.
(23) "CP Venture Affiliate" shall mean, (i) any successor to
CP Venture in connection with a bona fide reorganization,
recapitalization, acquisition or merger, (ii) any Person which acquires
all or substantially all of the assets of CP Venture and (iii) any
other Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common
control with any of the aforesaid specifically identified CP Venture
Affiliates. The term "control", as used in the immediately preceding
sentence, means, with respect to a Person that is a corporation, the
right to the exercise, directly or indirectly, of more than 50% of the
voting rights attributable to the shares of the controlled corporation
and, with respect to a Person that is not a corporation, the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of the controlled Person.
(24) "CP Venture Operating Agreement" means the operating
agreement of CP Venture LLC between CPI and Prudential of even date
herewith.
(25) "CPI" shall mean Cousins Properties Incorporated, a
Georgia corporation
(26) "CPI Affiliate" shall mean (i) any successor to CPI in
connection with a bona fide reorganization, recapitalization,
acquisition or merger, (ii) Cousins Real Estate Corporation, a Georgia
corporation ("CREC"), (iii) any Person which acquires all or
substantially all of the assets of CPI or CREC and (iv) any other
Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with CPI or CREC or any of the aforesaid specifically identified CPI
Affiliates. The term "control", as used in the immediately preceding
sentence, means, with respect to a Person that is a corporation,
the right to the exercise, directly or indirectly, of more than
50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the
controlled Person.
(27) "Defaulter" shall have the meaning specified in Section
9.1.1.
(28) "Depreciation" shall mean for each Fiscal Year or other
period, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable with respect to an asset for such
year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery
deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Managing Member.
(29) "Documents" shall have the meaning specified in Section
5.1.
(30) "Effective Date" means the effective date of this
Agreement as set forth on the first page hereof.
(31) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended
(32) "Event of Default" shall have the meaning specified in
Section 9.1.1.
(33) "Fiscal Year" shall mean the twelve month period ending
December 31 of each year; provided that the first Fiscal Year shall be
the period beginning on the Effective Date and ending on December 31,
1998, and the last Fiscal Year shall be the period beginning on
January 1 of the calendar year in which the final liquidation and
termination of the Company is completed and ending on the date such
final liquidation and termination is completed (to the extent any
computation or other provision hereof provides for an action to be
taken on a Fiscal Year basis, an appropriate proration or other
adjustment shall be made in respect of the first or final Fiscal Year
to reflect that such period is less than a full calendar year period).
(34) "Gross Asset Value" shall mean with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair
market value of such asset, as Approved by the Members;
(ii) Except as otherwise provided in this Agreement,
the Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as
Approved by the Members, at each of the following times: (a)
the acquisition of an additional interest in the Company by
any new or existing Member for more than a de minimis
contribution; (b) the distribution by the Company to a Member
of more than a de minimis amount of Company property as
consideration for an interest in the Company; and (c) the
liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations; provided, however,
that the adjustments pursuant to clauses (a) and (b) above
shall be made only if the Members reasonably determine that
such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value
of such asset on the date of distribution as Approved by the
Members; and
(iv) The Gross Asset Values of Company assets shall
be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining the Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and Section 4.5(g) hereof; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subsection to
the extent the Members determine that an adjustment pursuant
to subsection (ii) of this definition is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subsection.
(v) If the Gross Asset Value of an asset has been
determined or adjusted pursuant to paragraphs (ii), (iii) or
(iv) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Net Profit and Net
Loss.
If the Members are unable to agree regarding any Gross Asset Value,
such value shall be determined pursuant to the procedure of Section
9.7.
(35) "Gross Receipts" shall mean all receipts (other than
Capital Proceeds), calculated on an accrual basis, from the conduct o
the business of the Company from all sources, including, without
limitation, all rent and other income and payments received by the
Company.
(36) "Independent Accountants" shall mean the "Independent
Accountants" so designated in the CP Venture Operating Agreement.
(37) "Laws" shall mean federal, state and local statutes, case
law, rules, regulations, ordinances, codes and the like which are in
full force and effect from time to time and which affect any Asset or
the ownership or operation thereof.
(38) "Lock-Out Period" shall have the meaning specified in
Section 8.3.1 of the CP Venture Operating Agreement.
(39) "Management and Leasing Agreement" shall have the meaning
specified in Section 6.8.
(40) "Managing Member" shall mean CP Venture as designated in
Section 6.1.2.
(41) "Member" shall mean CPI, CP Venture or any other
Person from time to time owning a Percentage Interest.
(42) "Member Minimum Gain" shall mean an amount, with respect
to each Member Nonrecourse Debt, equal to the Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(2) and (3)
of the Regulations.
(43) "Member Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Regulations.
(44) "Member Nonrecourse Deductions" shall have the meaning
set forth in Section 1.704-2(i)(1) and (2) of the Regulations. The
amount of Nonrecourse Deductions with respect to a Member Nonrecourse
Debt for any Fiscal Year equals the excess, if any, of the net
increase, if any, in the amount of Member Minimum Gain attributable to
such Member Nonrecourse Debt during that Fiscal Year over the aggregate
amount of any distributions during that Fiscal Year to the Member that
bears the economic risk of loss for such Member Nonrecourse Debt to the
extent such distributions are from the proceeds of such Member
Nonrecourse Debt and are allocable to an increase in Member Minimu
Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(2) of the Regulations and Section
4.7(b).
(45) "Members" shall mean, collectively, CPI, CP Venture and
any other Person from time to time owning a Percentage Interest.
(46) "Minimum Gain" shall have the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
(47) "Mortgages" shall mean the deeds to secure debt,
mortgages and deeds of trust encumbering certain of the Assets as set
forth in Exhibit B.
(48) "Net Profit" or "Net Loss" shall mean for each Fiscal
Year the Company's taxable income or taxable loss for such Fiscal Year,
as determined under Section 703(a) of the Code, and Treasury Regulation
Section 1.703-1, but with the following adjustments:
(i) Any tax exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Company during such
Fiscal Year shall be added to such taxable income or taxable
loss;
(ii) Any expenditures of the Company described in
Section 705(a)(2)(B) of the Code for such Fiscal Year or
treated as being so described in Regulations Section
1.704-1(b)(2)(iv)(1) and not otherwise taken into account in
this subsection shall be subtracted from such taxable income
or taxable loss;
(iii) Any item of income, gain, loss or deduction
that is required to be allocated to the Members under Section
4.8 hereof shall not be taken into account in computing such
taxable income or taxable loss; and
(iv) The amount of any gain or loss required to be
recognized by the Company during such Fiscal Year by reason of
a sale or other disposition of Company property, and any
depreciation or cost recovery reductions with respect to
Company property to which the Company is entitled for any
Fiscal Year, shall be computed as if the Company's adjusted
basis in such property for income tax purposes were equal to
the Gross Asset Value, and any adjustment to the Gross Asset
Value shall be treated as a Net Profit or Net Loss.
This definition is intended to comply with the Regulations and any and
all other items which must be included in Net Profit or Net Loss
in order for this Agreement to comply with said Regulations shall
be included in such concept. Notwithstanding any other provision of
this definition, any items of income, gain, deduction, loss or credit
which are specially allocated shall not be taken into account in
computing Net Profit or Net Loss. The intent of this definition is
that no reference to Net Profit or Net Loss include such specially
allocated items.
(49) "Non-Defaulter" shall have the meaning specified in
Section 9.3.
(50) "Non-Managing Member" shall mean any Member which is not
the Managing Member. The initial Non-Managing Member shall be CPI.
(51) "Nonrecourse Deductions" shall have the meaning set forth
in Section 1.704-2(b)(1) of the Regulations. The amount of Nonrecourse
Deductions for any of the Fiscal Years equals the excess, if any, of
the net increase, if any, in the amount of Minimum Gain during that
Fiscal Year over the aggregate amount of any distributions during that
Fiscal Year of proceeds of a Nonrecourse Liability that are allocable
to an increase in Minimum Gain, determined according to the provisions
of Section 1.704-2(c) of the Regulations and Section 4.7(b).
(52) "Nonrecourse Liability" shall have the meaning set forth
in Section 1.704-2(b)(3) of the Regulations.
(53) "Operating Expenses" shall mean all expenditures of any
kind made with respect to the operations of the Company in the normal
course of business including, but not limited to, debt service
(principal and interest) payable on indebtedness of the Company, ad
valorem taxes, insurance premiums, repair and maintenance expense,
capital expenditures related to any Asset which is operational,
management fees or salaries, advertising expenses, professional fees,
wages, and utility costs, plus such sums as are deemed reasonably
necessary as a reserve to be retained for the conduct of the business
of the Company, and capital expenditures and investments in other
assets. Such expenses shall be determined on the accrual basis but
shall not include any non-cash items such as depreciation or
amortization.
(54) "Operating Property Manager" shall mean the Person
designated as the "Operating Property Manager" pursuant to Section
6.1.3 of the CP Venture Operating Agreement.
(55) "Percentage Interest" shall mean the aggregate percentage
interest(s) in the profits of the Company owned by each Member. The
initial Percentage Interests are set forth opposite the name of each
Member in Section 3.1.
(56) "Pension Investor" shall mean any investor with
respect to which Prudential or Prudential Real Estate Investor ("PREI")
is acting as a "Qualified Professional Asset Manager" as defined in
Department of Labor Prohibited Transaction Class Exemptions 84-14;
initially, the Pension Investor is the separate account for qualified
pension trust investors formed and maintained by Prudential pursuant to
the provisions of Section 17B:28-7 N.J.S.A. and known as Prudential
Property Investment Separate Account ("PRISA").
(57) "Person" shall mean an individual, partnership,
corporation, trust, unincorporated association, joint stock company or
other entity or association.
(58) "Plan Asset Regulations" shall mean C.F.R. 82510.3-101,
promulgated under ERISA.
(59) "Plan Violation" shall mean a transaction, condition or
event that would (i) constitute a nonexempt (under Prohibited
Transaction Class Exemption 84-14, as it may be amended) or prohibited
transaction under ERISA; or (ii) be subject to state statutes
regulating investments of and fiduciary obligations with respect to any
governmental Plan.
(60) "Prudential" shall mean The Prudential Insurance Company
of America, a New Jersey corporation.
(61) "Prudential Affiliate" shall mean (i) any successor to
Prudential in connection with a bona fide reorganization,
recapitalization, acquisition or merger, (ii) any Person which acquires
all or substantially all of the assets of Prudential, (iii) a Pension
Investor, and (iv) any other Person which, directly or indirectly,
through one or more intermediaries, controls or is controlled by or is
under common control with any of the aforesaid specifically
identified Prudential Affiliates. The term "control," as used in the
immediately preceding sentence, means, with respect to a Person that
is a corporation, the right to the exercise, directly or indirectly,
of more than 50% of the voting rights attributable to the shares of
the controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the
controlled Person.
(62) "Regulations" shall mean those regulations promulgated
under the Code.
(63) "Tax Matters Partner" shall have the meaning specified in
Section 5.7.
(64) "Term" shall have the meaning specified in Section 2.10.
(65) "Transfer" shall have the meaning specified in Section
8.1.1.
(66) "Transferee" shall have the meaning specified in Section
8.2.3.
(67) "Transferor" shall have the meaning specified in Section
8.2.3.
Section 1.2 Other Definitions.
------------------------------
In addition to the terms defined in Section 1.1, other terms will have
the definitions provided elsewhere in this Agreement.
Section 1.3 Exhibits.
---------------------
Attached hereto and forming an integral part of this Agreement are
various exhibits which are listed in the Table of Contents for this Agreement or
otherwise referenced in this Agreement, all of which are incorporated into this
Agreement as fully as if the content thereof were set out in full herein at each
point of reference thereto.
ARTICLE 2
---------
FORMATION
---------
Section 2.1 Formation of Company.
---------------------------------
CPI and CP Venture do hereby continue the Company as a limited
liability company for the limited purposes and scope set forth in Section 2.4
and upon the terms, provisions and conditions set forth in this Agreement. The
rights and obligations of the Members shall be governed by this Agreement and by
the Act. If there is a conflict between the provisions of this Agreement and the
Act, the provisions of the Act shall control (it being understood, however, that
if the Act provides for a particular rule but allows the members of a limited
liability company to provide to the contrary in their limited liability company
operating agreement, and if the parties hereto have so provided hereunder, then
such provisions shall not be deemed to constitute a conflict for purposes of the
foregoing).
Section 2.2 Name.
-----------------
The name of the Company shall be CP VENTURE TWO LLC or such other name
as may be selected by the Managing Member under which all business and affairs
of the Company shall be conducted.
Section 2.3 Principal Place of Business; Resident Agent.
--------------------------------------------------------
The Company shall maintain a registered office in the State of Delaware
at CT Corporation System, Wilmington, Delaware, and the registered agent at such
address shall be CT Corporation System unless and until such registered office
and agent are changed by the Managing Member, but only after prior written
notice to all the Members. The principal place of business of the Company shall
be located at CP Venture's address in Atlanta, Georgia set forth in Section 10.1
below or at such other place of business as the Managing Member may designate.
The resident agent for the Company in Georgia shall be the Managing Member or
such agent as may be designated by the Managing Member from time to time.
Section 2.4 Purposes and Scope.
------------------------------
Subject to the provisions of this Agreement and the CP Venture
Operating Agreement, the purposes of the Company are limited and include only
the following: (i) evaluating, selecting, acquiring or investing in, holding,
owning, operating, maintaining, improving, leasing, selling as a means of
recovering the Members' investment and a profit thereon, exchanging and
otherwise using the Assets and such other properties as may be agreed upon by
the Members; (ii) borrowing money in furtherance of the business of the Company,
including issuing promissory notes or other evidences of indebtedness in
connection therewith and securing the same by deeds to secure debt, mortgages,
deeds of trust or other appropriate liens or security interests; (iii)
conducting any other activity which is permissible for a "real estate operating
company" within the meaning of the Plan Asset Regulations; and (iv) doing any
and all other acts or things which may be incidental or necessary to carry on
the business of the Company as herein contemplated. In furtherance of these
purposes, the Company shall have all powers necessary, suitable or convenient
for the accomplishment thereof. It is the intent of the Members that the Company
be a "real estate operating company" within the meaning of the Plan Asset
Regulations and the Managing Member shall have all power necessary to effectuate
such intent.
Section 2.5 Certificate of Formation.
-------------------------------------
The Company has filed a certificate of formation (the "Certificate")
with the Secretary of State of Delaware pursuant to the Act and shall also
execute and file such other certificates which may from time to time be
necessary or appropriate to file in connection with the continuation and
operation of the Company. The Members hereby agree to execute and file any
required amendments to the Certificate and shall do all other acts requisite for
the constitution of the Company as a limited liability company pursuant to the
Act or any other applicable law.
Section 2.6 Ownership and Waiver of Partition.
----------------------------------------------
The interest of each Member in the Company shall be personal property
for all purposes. All property and interests in property, real or personal,
owned by the Company shall be held in the name of the Company and deemed owned
by the Company as an entity, and no Member, individually, shall have any
ownership of or interest in such property or interest owned by the Company
except as a member of the Company. Each of the Members irrevocably waives,
during the term of the Company and during any period of its liquidation
following any dissolution, any right that it may have to seek or maintain any
action for partition with respect to any of the assets of the Company.
Section 2.7 Limits of Company.
------------------------------
(a) The relationship between and among the Members shall be
limited to carrying on the business of the Company in accordance with
the terms of this Agreement.
(b) The Members shall each devote such time to the Company as
is reasonably necessary to carry out the provisions of this Agreement.
Each of the Members understands that the other Member or its Affiliates
and any Manager and its Affiliates, including the Managing Member and
the Operating Property Manager, may be interested, directly or
indirectly, in various other businesses and undertakings not included
in the Company. Each Member also understands that the conduct of the
business of the Company may involve business dealings with such other
businesses or undertakings. The Members hereby agree that the creation
of the Company and the assumption by each of the Members of their
duties hereunder shall be without prejudice to their rights (or the
rights of their members and Affiliates) to have such other interests
and activities and to receive and enjoy profits or compensation
therefrom, and each Member waives any rights it might otherwise have to
share or participate in such other interests or activities of the other
Member or its Affiliates and of the Managing Member, its members and
its Affiliates. The Members and Managing Member, its members, and their
Affiliates, may engage in or possess any interest in any other business
venture of any nature or description independently or with others
including, but not limited to, the ownership, financing, leasing,
operation, management or development of real property and investments
in real property. Such other ventures and investments may compete with
the business and assets of the Company. Neither the Company nor any
Member shall have any right by virtue of this Agreement in or to any
such other venture or investment or the income or profits derived
therefrom. Except as provided in the Contribution Agreement, none of CP
Venture, Prudential and CPI shall have any obligation to offer or
contribute any particular business opportunity or investment to the
Company.
Section 2.8 No Individual Authority.
------------------------------------
Neither Member shall, without the express, prior written consent of the
other Member, take any action for or on behalf of or in the name of the Company
or other Member, or assume, undertake or enter into any commitment, debt, duty
or obligation binding upon the Company except for (a) actions expressly provided
for in this Agreement, (b) actions by a Member within the scope of its authority
granted in this Agreement, and (c) actions Approved by the Members and any
action taken in violation of the foregoing limitation shall be void. Each Member
shall indemnify and hold harmless the other Member and the Company and their
respective Affiliates from and against any and all claims, demands, losses,
damages, liabilities, lawsuits and other proceedings, judgments and awards, and
costs and expenses (including, but not limited to, reasonable attorneys' fees
and all court costs) arising directly or indirectly, in whole or in part, out of
any breach of the foregoing provisions by such Member, unless and to the extent
such Member or Affiliate was acting in good faith. This provision shall survive
dissolution of the Company.
Section 2.9 Responsibility of Members.
--------------------------------------
(a) The Company and each Member shall not be responsible or
liable for any responsibility, indebtedness, or other obligation of any
other Member incurred prior to, on the date of or after the execution
of this Agreement, except for those which are undertaken or incurred
expressly on behalf of the Company under or pursuant to the terms of
this Agreement or the Contribution Agreement or assumed in writing by
both Members, and each Member hereby indemnifies and agrees to hold the
other Member and the Company harmless from all such obligations and
indebtedness except as aforesaid.
(b) Each Member will notify the other Member as quickly as
reasonably possible upon receipt of any notice (i) of the filing of any
action in law or in equity naming the Company or any Member as a party
relating in any way to the business of the Company; (ii) of any actions
to impose liens of any kind whatsoever or of the imposition of any lien
whatsoever against the Company; (iii) of any casualty, damage or injury
to persons or property owned by the Company; or (iv) of the default by
the Company of any of its respective obligations to creditors or other
third parties. Each Member will endeavor to notify the other Member
verbally promptly upon learning of any of the foregoing actions, or the
threat thereof, which, in such Member's judgment, is material to the
Company or the other Member.
Section 2.10 Term.
------------------
The term of the Company (the "Term") shall commence as of the date
first above written and continue until the first to occur of the following:
(a) December 31, 2028 unless extended by the Approval of the
Members; or
(b) The Company is dissolved and terminated as a result of the
dissolution and winding up of the Company in accordance with Article 9
hereof.
Section 2.11 Investment Representations.
-----------------------------------------
(a) Investment Intent. Each Member does hereby represent and
warrant to the other and to the Company, and to each of them, that it has
acquired its interest in the Company for investment solely for its own account
with the intention of holding such interest for investment purposes only and
not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Federal
Act").
(b) Unregistered Interests. Each Member does hereby
acknowledge that it is aware that its interest in the Company has not been
registered under the Federal Act or under any state securities laws. Each
Member further understands and acknowledges that its representations and
warranties contained in this Section 2.11 are being relied upon by the Company
and by the other Member as the basis for the exemption of the Members'
interests in the Company from the registration requirements of the Federal
Act and under all state securities laws. Each Member further acknowledges that
the Company will not and has no obligation to recognize any sale,
transfer, or assignment of a Member's interest in the Company to any person
unless and until the provisions of Article 8 hereof have been fully satisfied.
(c) Nature of Investment. Each Member does hereby acknowledge
and agree that a legend reflecting the restrictions imposed upon the transfer
of its interest in the Company under Article 8 hereof, under the Federal Act
and under state securities laws shall be placed on the first page of this
Agreement.
(d) Indemnification. Each Member shall and does hereby agree
to indemnify and save harmless the Company and the other Member, from any
liability, loss, cost, damage and expense (including, without limitation,
the costs of litigation and attorneys' fees) arising out of, resulting from,
or in any way related to the breach of any representation or warranty
of such Member set forth in this Section 2.11.
ARTICLE 3
---------
CAPITAL
-------
Section 3.1 Members' Percentage Interests.
------------------------------------------
The Percentage Interests of the Members for purposes of applying the
provisions of this Agreement are set forth below (subject to adjustment as
provided herein):
Member Percentage Interests
------ --------------------
CPI 1%
CP Venture 99%
Section 3.2 Capital Contributions.
----------------------------------
3.2.1 Debt Financing and Equity Capital. In the event the
Managing Member determines at any time or from time to time that the
Company needs additional capital for any reason, the Managing Member
shall have the right, power and authority on behalf of the Company to
arrange debt financing for the Company, including loans from third
party institutional lenders, and, subject to Section 3.2.2, loans from
the Operating Property Manager or its Affiliates ("Affiliate Debt"),
and, subject to Section 3.2.2, to raise additional equity capital. Any
Affiliate Debt shall bear interest at an interest rate floating at 3%
per annum over the monthly average of the Federal Funds rate published
from time to time in Federal Reserve Statistical Release H.15, but in
no event less than 10% per annum. The other terms and conditions of
any Affiliate Debt shall be determined by the Manager Member in its
sole discretion. Any personal guarantees or indemnities, required
in connection with any financin shall be provided solely by the Company
or the Operating Property Manager or an Affiliate thereof.
3.2.2 Additional Capital Notice.
---------------------------------
(a) If the Managing Member in its sole discretion
determines to seek equity capital or Affiliate Debt for the Company, it
shall have the right to do so, subject to compliance with the terms of
this Section 3.2.2. In the event the Managing Member determines to seek
equity capital and/or Affiliate Debt, the Managing Member shall send a
notice (a "Additional Capital Notice") to the Members setting forth (i)
the purposes for which the additional equity or Affiliate Debt is
needed, (ii) the amount of equity or Affiliate Debt sought by the
Company, (iii) each Member's pro rata share of such additional equity
or Affiliate Debt, which pro rata share shall be in the same proportion
to the entire amount of equity or Affiliate Debt being sought by the
Company as each Member's respective Percentage Interest bears to all
Percentage Interests in the Company, and (iv) the date when the equity
contribution or Affiliate Debt will be required, which date shall be
not less than 20 Business Days after the date of the Additional Capital
Notice.
(b) Following delivery of a Additional Capital Notice
from the Managing Member, the Members shall have the right and option
to elect to contribute the amount of equity or Affiliate Debt required
from the Company pro rata in accordance with their respective
Percentage Interests. In order to be valid, such election must be
exercised by delivery of written notice of election to the Managing
Member not later than the 10th Business Day after the date of the
Additional Capital Notice. Failure of a Member to deliver such notice
of election on or before the 10th Business Day after the date of the
Additional Capital Notice shall be deemed to be an election of such
Member not to make such contribution. Any election to make the equity
contributions or Affiliate Debt shall be binding and irrevocable and
obligate the Member making such election to contribute its pro rata
share of the requested equity or Affiliate Debt amount to the Company
in cash or immediately available funds on the date required by the
Additional Capital Notice; provided, however, if CP Venture (as a
result of CPI's refusal to fund its pro rata share of CP Venture debt
or equity, as the case may be) and/or CPI does not elect to fund its
pro rata share of the equity or Affiliate Debt sought by the Company,
then Prudential, as Operating Property Manager, shall be entitled (but
not required) to make (or cause its Affiliates to make) a capital
contribution or lend Affiliate Debt directly to the Company in an
amount equal to the Affiliate Debt or equity sought by the Company as
specified in the Additional Capital Notice or such other amount as the
Managing Member may approve. The Members acknowledge and agree that in
the event Prudential (or a Prudential Affiliate) makes such equity
contribution to the Company directly, the Percentage Interests shall be
reduced or diluted in accordance with Section 3.3. Upon any such
contribution the Managing Member shall have the right to amend this
Agreement to reflect the admission of Prudential (or such Prudential
Affiliate) to the Company.
Section 3.3 Dilution.
----------------------
(a) If CPI does not elect to fund its pro rata share of additional
equity capital and equity capital is provided by Prudential or a Prudential
Affiliate (the "Funding Member") pursuant to Section 3.2.2, the Percentage
Interest of each Member shall thereupon be recalculated as of the effective date
of such funding (the "Computation Date"). The Managing Member is hereby
constituted and appointed as attorney-in-fact, such appointment being coupled
with an interest, to execute, acknowledge and deliver all instruments and
documents necessary to effect such recalculation of Percentage Interests as
herein provided.
(b) The recalculation of the Percentage Interests of the Members shall
be made by first calculating the Percentage Interest of the Funding Member. Such
Member's Percentage Interest (expressed as a decimal) shall be equal to a
fraction, the numerator of which shall be the additional equity capital
contributed by the Funding Member and the denominator of which shall be the sum
of the Fair Market Value of the assets of the Company on the Computation Date
net of all liabilities of the Company on the Computation Date, plus the amount
of new equity contributed by the Funding Member. The remaining Percentage
Interest (being equal to 1 minus the Funding Member's Percentage Interest (as so
recalculated), all expressed as a decimal) shall be allocated among the
remaining Members pro rata in accordance with their Percentage Interests just
prior to the contribution of the new equity to fund the additional equity
capital.
Section 3.4 No Interest on Capital.
------------------------------------
Interest earned on Company funds shall inure solely to the benefit of
the Company, and except as specifically provided hereinabove, no interest shall
be paid upon any contributions or advances to the capital of the Company nor
upon any undistributed or reinvested income or profits of the Company.
Section 3.5 Reduction of Capital Accounts.
-------------------------------------------
Any distribution to a Member, whether pursuant to Sections 4.9 or 4.10
or any other Section of this Agreement, shall reduce the amount of such Member's
Capital Account in accordance with Section 3.6, but no adjustment in the
Percentage Interest of any Member shall be made on account of any such
distribution, except as otherwise specifically provided in this Agreement.
Section 3.6 Capital Accounts.
------------------------------
(a) "Capital Account" means an account that shall be maintained for
each Member and which, as of any given date, shall be an amount equal to the sum
of the following:
(i) The aggregate amount of cash that has been
contributed to the capital of the Company as of such date by or on
behalf of such Member; plus
(ii) The agreed upon Gross Asset Value (as of the
date of contribution) of any property other than cash that has been
contributed to the capital of the Company as of such date by such
Member and the amount of liabilities assumed by any such Member under
Regulations Section 1.752 or which is secured by any Company property
distributed to such Member; plus
(iii) The aggregate amount of the Company's Net
Profit that has been allocated to such Member as of such date pursuant
to the provisions of Section 4.1 and any items of income or gain which
are specially allocated to such Member or other positive adjustment
required by the Regulations and which have not been previously taken
into account in determining Capital Accounts; minus
(iv) The aggregate amount of the Company's Net Loss
that has been allocated to such Member as of such date pursuant to
Sections 4.2 and 4.3 and the amount of any item of expense deduction or
loss which is specially allocated to such Member; and minus
(v) The aggregate amount of cash and the agreed upon
Gross Asset Value of all other property (as of the date of
distribution) that has been distributed to or on behalf of such Member
and the amount of any liabilities of such Member assumed by the Company
under Regulations Section 1.752 or which are secured by any property
contributed by such Member to the Company.
(b) Upon the sale, transfer, assignment or other disposition of an
interest in the Company after the date of this Agreement, the Capital Account of
the transferor Member that is attributable to the transferred interest will be
carried over to the transferee Member.
(c) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Members shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or that are
assumed by the Company or the Members), are computed in order to comply with
such Regulations, the Members may make such modification, provided that it is
not likely to have a material effect on the amounts distributable to any Member
pursuant to Section 9.4 hereof upon the dissolution of the Company.
(d) In accordance with Section 5.1, each Member and its authorized
representatives shall have the right at all reasonable times to have access to,
inspect, audit and copy the books and records of the Company for the purpose of
reviewing the allocations to and maintenance of Capital Accounts and
ascertaining the correctness thereof and the Managing Member will cooperate in
any such examination. In the event that at any time a Member discovers an error
in the allocations to or computation of the Capital Accounts from that intended
by the provisions of this Agreement, it shall promptly notify the Managing
Member of such error and the Members shall work together to correct any such
error in allocations or computations in a manner having the least adverse effect
on the Members. Each Fiscal Year, in conjunction with the preparation of the
Company's annual federal income tax return, the Independent Accountants shall
prepare a report detailing all adjustments to and the ending balances of the
Capital Accounts of the Members for all Fiscal Years (a "Capital Account
Report"). The Independent Accountants will deliver to the Members for their
review the Capital Account Report at the same time the Company's tax or
information returns are delivered to the Members pursuant to Section 5.2. Any
Member shall raise any objection to the allocations and computations detailed in
a Capital Account Report no later than sixty (60) days prior to the expiration
of the period for filing an amended federal income tax return or information
return with respect to any Fiscal Year for which an error may have occurred.
Section 3.7 Negative Capital Accounts.
---------------------------------------
Any Member having a deficit or negative balance in its Capital Account
shall not be required to restore such deficit capital amount or otherwise to
contribute capital to the Company to restore its Capital Account.
Section 3.8 Resignations Withdrawals of Capital.
-------------------------------------------------
No Member shall have the right to resign or withdraw from the Company
or to withdraw any portion of the capital of the Company at any time. Upon
termination of the Company, the Members' capital shall be distributed pursuant
to Section 9.4 hereof.
Section 3.9 Limit on Contributions and Obligations of Members.
---------------------------------------------------------------
Except as expressly provided in Sections 3.2 the Members shall have no
liability or obligation to the Company or to the other Members (i) to make
additional capital contributions to the Company, (ii) to make any loans to the
Company or (iii) to endorse or guarantee the payment of any loan to the Company.
Section 3.10 Pro Rations Related to Assets.
--------------------------------------------
Except as provided in the Contribution Agreement, the Members agree
that the Company shall allocate on a pro rata basis all Operating Expenses and
Gross Receipts attributable to the Assets as of the Closing Proration Date. For
each such Asset, except as set forth in the Contribution Agreement, the Company
shall be entitled to all such Gross Receipts and responsible for all such
Operating Expenses of the Assets attributable to the period commencing on the
Closing Proration Date, and CPI shall be entitled to all such Gross Receipts of
and be responsible for all such Operating Expenses of the Assets attributable to
the period ending immediately prior to the Closing Proration Date. Percentage
rents, if any, collected by the Company from any tenant under such tenant's
lease for the percentage rent accounting period in which the Closing Proration
Date occurs, as, if, and when received by the Company, shall be prorated between
the Company and CPI, such that CPI's pro rata share shall be an amount equal to
the total percentage rentals paid for such percentage rent accounting period
under the applicable lease multiplied by a fraction, the numerator of which
shall be the number of days in such accounting period prior to the Closing
Proration Date and the denominator of which shall be the total number of days in
such accounting period; provided, however, that such proration shall be made
only at such time as such tenant is current or, after application of a portion
of such payment, will be current in the payment of all rental and other charges
under such tenant's lease that accrue and become due and payable from and after
the Closing Proration Date and in the payment of any other obligations of such
tenant to the Company then due and payable by such tenant. Similarly, except as
set forth in the Contribution Agreement as of each date of contribution of
additional "Prudential Contribution Amount" (as defined in the CP Venture
Operating Agreement), the Company shall allocate on a pro rata basis all
Operating Expenses and Gross Receipts attributable to the Assets of the Company
to the period before and the period after such date (so as to properly determine
amounts allocable and distributable to the members of CP Venture in light of the
changing "Member Property Percentages" (as such term is defined in the CP
Venture Operating Agreement).
ARTICLE 4
---------
PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS
-----------------------------------------------
Section 4.1 Net Profit.
------------------------
Except as otherwise provided in this Article 4, all Net Profit of the
Company for each year shall be allocated to the Members as follows:
(i) First, to each Member, pro rata in accordance with their
then respective Percentage Interests, until the cumulative Net Profit
allocated to each Member pursuant to this clause (i) is equal to the
cumulative Net Loss allocated to such Member pursuant to Section 4.2
and Section 4.3 (such Net Profit to be allocated first with respect to
Net Loss allocated pursuant to Section 4.3 and thereafter in reverse
chronological order of the allocation of the Net Loss which has not
been previously offset by an allocation under this Section 4.1(i)); and
(ii) Thereafter, to the Members in accordance with their then
respective Percentage Interests.
Section 4.2 Net Loss.
----------------------
Except as otherwise provided in this Agreement, all Net Loss of the
Company for each year shall be allocated to the Members in accordance with their
then respective Percentage Interests.
Section 4.3 Limitation on Net Loss Allocations.
------------------------------------------------
Notwithstanding any provision of this Agreement to the contrary, except
as otherwise specifically provided in this Section 4.3, in no event shall Net
Loss be allocated to a Member if such allocation would result in such Member's
having a negative Adjusted Capital Account Balance at the end of any year. All
Net Loss in excess of the limitation set forth in this Section 4.3 shall be
allocated to any remaining Member with a positive Adjusted Capital Account
Balance, and if all such Adjusted Capital Account Balances are zero or negative,
to the Members pursuant to Section 4.2 above.
Section 4.4 Other Items.
-------------------------
Except as provided herein, for tax purposes, all items of income, gain,
loss, deduction or credit shall be allocated in the same manner as are Net
Profit and Net Loss.
Section 4.5 Special Allocations.
---------------------------------
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other provision
of this Article 4, if there is a net decrease in Minimum Gain during
any Fiscal Year, each Member shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Member's share of the net decrease in
Minimum Gain, determined in accordance with Regulations Section
1.704-2(g)(2). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items 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 Section 4.5(a) is intended to comply with the
minimum gain chargeback requirement in the Regulations and shall be
interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 4 except Section 4.5(a), if there is a net
decrease in Member Minimum Gain attributable to a Member Nonrecourse
Debt during any Fiscal Year, each Member who has a share of the Member
Minimum Gain attributable to such Member Nonrecourse Debt, determined
in accordance with Section 1.704-2(i)(5) of the Regulations, shall be
specially allocated items of Company income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5). 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 Section 4.5(b) is intended
to comply with the Member Nonrecourse Debt Minimum Gain chargeback
requirement in such Sections of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be
specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the
negative Adjusted Capital Account Balance of such Member as quickly as
possible, provided that an allocation pursuant to this Section 4.5(c)
shall be made if and only to the extent that such Member would have a
negative Adjusted Capital Account Balance after all other allocations
provided for in this Article have been tentatively made as if this
Section 4.5(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year that is in excess
of the sum of (i) the amount such Member is obligated to restore
(pursuant to the terms of a promissory note to the Company or
otherwise), and (ii) the amount such Member is deemed to be obligated
to restore pursuant to the penultimate sentence of each of Regulations
Sections 1.704-2(g)(1)(ii) 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 Section 4.5(d) shall be made if and only 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 4 have
been tentatively made as if Section 4.5(c) and this Section 4.5(d) were
not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year or other period shall be specially allocated to the Members in
proportion to their then respective Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially
allocated to the Member who bears the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Regulations Section
1.704-1(i).
(g) 754 Elections. In the event any Member is required to
recognize any gain for income tax purposes with respect to an actual or
constructive distribution of property by the Company and in the event
the Company increases the tax basis of any of its assets under Sections
754, 734 and 755 of the Code by reason of such gain recognition by such
Member, then any tax benefit to which the Company is entitled in any
Fiscal Year as a result of such basis increase, whether in the form of
a deduction for depreciation or amortization of any asset of the
Company, a reduction in the gain to be recognized by the Company upon
the sale of any asset of the Company, or otherwise, shall be allocated
for income tax purposes to the Member who recognized such gain.
(h) Make-Whole Allocations. All or part of the Net Profit, or
items of gross income and gain thereof, remaining after application at
Sections 4.5(a) - (g) shall be specially allocated to CP Venture to the
extent of any amount otherwise distributable to CPI under this
Agreement that is actually distributed to CP Venture pursuant to
Section 8.3.4 of the CP Venture Operating Agreement; all of part of the
Net Loss, or items of loss or deduction thereof, remaining after the
application of Section 4.5(a) - (g) shall be specially allocated to CPI
to the extent of any amount otherwise distributable to CPI under this
Agreement that is actually distributed to CP Venture pursuant to
Section 8.3.4 of the CP Venture Operating Agreement.
(i) Special Allocation of Depreciation and Chargeback. All of
the Company's depreciation, amortization and similar items or
deductions shall be specially allocated to the Members in accordance
with their respective Percentage Interests. Any gain realized by the
Company upon the sale, transfer, or other disposition of any asset of
the Company shall be specially allocated among the Members to the
extent of and in proportion to the excess, if any, of (A) the aggregate
amount of depreciation, amortization and similar items allocated to
each Member pursuant to this Section 4.5(i) hereof for the current and
all prior Fiscal Years, over (B) the aggregate gain allocated to such
Member pursuant to this Section 4.5(i) for all prior Fiscal Years.
Section 4.6 Curative Allocations.
----------------------------------
The allocations set forth in Sections 4.5(a) through 4.5(f) (the
"Regulatory Allocations") are intended to comply with certain requirements of
Regulations Sections 1.704-1(b) and 1.704-2(b). Notwithstanding any other
provisions of this Agreement, other than the Regulatory Allocations, the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other items and the Regulatory
Allocations to each Member shall be equal to the net amount that would have been
allocated to such Member if the Regulatory Allocations had not occurred. CPI
shall have reasonable discretion, with respect to each Fiscal Year, to apply the
provisions of this Section 4.6 in whatever manner is likely to minimize the
economic distortions that might otherwise result from the Regulatory
Allocations, it being the basic economic understanding of the Members that they
shall be returned their capital contributions (reduced, if at all, by their pro
rata share of Net Loss as in effect at the time or times such Net Loss was
allocated) plus their pro rata share (as adjusted from time to time) of Net
Profit allocated to the Members (as reduced by Net Loss allocated in the inverse
order of prior Net Profit).
Section 4.7 Other Allocation Rules.
------------------------------------
The following rules shall apply for purposes of making tax allocations:
(a) "Excess nonrecourse liabilities" of the Company within the
meaning of Regulations Section 1.752-3(a)(3) shall be allocated among
the Members in accordance with the manner in which it is reasonably
expected that the deductions attributable to those nonrecourse
liabilities will be allocated.
(b) To the extent permitted by Section 1.704-2(h) of the
Regulations, CPI shall have complete discretion in determining whether
a distribution shall be treated as being attributable to a Nonrecourse
Liability or a Member Nonrecourse Liability and the increase in the
Minimum Gain or Member Minimum Gain attributable to such liabilities.
Section 4.8 Section 704(c) Allocation.
---------------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
any gain or loss and any depreciation and cost recovery deductions recognized by
the Company for income tax purposes in any Fiscal Year with respect to all or
any part of the Company's property that is required or permitted to be allocated
among the Members in accordance with Section 704(c) of the Code and any
Regulations promulgated thereunder so as to take into account the variation, if
any, between the adjusted tax basis of such property at the time of its
contribution and the Gross Asset Value of such property at the time of its
contribution, shall be allocated to the Members for income tax purposes using
the traditional method described in Section 1.704-3(b) of the Regulations. If
and when the Capital Accounts of the Members are required to be adjusted
pursuant to Regulation Sections 1.704-1(b)(2)(iv)(f) or (g) with respect to a
revaluation of any asset of the Company, then subsequent allocations of income,
gain, loss, and deduction, including without limitation depreciation or
deductions for cost recovery with respect to such asset, shall take into account
any variation between the then existing adjusted basis of such asset for federal
income tax purposes and the agreed value of such asset, as such computations may
be required under Sections 704(b) and 704(c) of the Code and Regulation Section
1.704-1(b)(4)(i). Any elections or other decisions relating to such allocations,
other than those specified in this Agreement or Schedule 5.6, shall be made by
CPI, provided that CPI shall not make any election that would have a material
adverse impact on either Member.
Section 4.9 Distribution of Cash Flow.
---------------------------------------
Except as provided in Section 9.4.4, the Managing Member shall
distribute Cash Flow, as and when determined by the Managing Member, but not
less frequently than quarterly, to the Members pro rata in proportion to their
then respective Percentage Interests; provided, however, that amounts
distributable to CPI under this Section 4.9 shall instead be distributed to CP
Venture to the extent that the amounts distributed to Prudential under Section
4.9.1(b), Section 4.9.2 and Section 4.10.1(c) of the CP Venture Operating
Agreement are less than the "Prudential Current Return" (as defined in the CP
Venture Operating Agreement) until an amount equal to such Prudential Current
Return has been distributed to Prudential pursuant to Section 4.9.1(b), Section
4.9.2 and Section 4.10.1(c) therein and from amounts otherwise distributable to
CPI under this Section 4.9.; provided, further, distributions to CPI under this
Section 4.9 shall be subject to Section 8.3.4 of the CP Venture Operating
Agreement and to the extent required thereunder distributed to CP Venture for
distribution to Prudential.
Section 4.10 Distribution of Capital Proceeds.
-----------------------------------------------
Except as provided in Section 9.4.4, the Managing Member shall
distribute to the Members Capital Proceeds received by the Company within thirty
(30) calendar days after receipt to the Members pro rata in proportion to their
then respective Percentage Interests provided, however, distributions to CPI
under this Section 4.10 shall be subject to Section 8.3.4 of the CP Venture
Operating Agreement and to the extent required thereunder distributed to CP
Venture for distribution to Prudential.
ARTICLE 5
---------
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS
----------------------------------------------
Section 5.1 Books and Records.
-------------------------------
The Managing Member shall keep books and records at the Company's
principal place of business which are usually maintained by persons engaged in
similar businesses setting forth a true, accurate and complete account of the
Company's business and affairs including a fair presentation of all income,
expenditures, assets and liabilities thereof. Such books and records shall be
maintained, and its income, gain, losses and deductions shall be determined and
accounted for on the accrual basis in accordance with generally accepted
accounting principles consistently applied. Each Member and its authorized
representatives shall have the right at all reasonable times to have access to,
inspect, audit and copy the Company's books, records, files, securities,
vouchers, canceled checks, employment records, bank statements, bank deposit
slips, bank reconciliations, cash receipts and disbursement records, and other
documents (the "Documents"). Each Member and its authorized representatives
shall also have the right, in connection with an examination and audit of the
Documents, to question, upon at least three (3) days' notice, the employees, if
any, of the Company and to question during normal business hours, any other
Person and the employees of such other Person having custody or control of any
Documents, or responsibility for preparing the same. Each Member shall be
entitled to any additional information necessary for the Member to adjust its
financial basis statement to a tax basis as the Member's individual needs may
dictate.
Section 5.2 Tax Returns.
-------------------------
The Independent Accountants shall either prepare or review and sign, as
requested by the Members, the initial federal, state and local income tax
returns of the Company, and thereafter the Managing Member may prepare such tax
returns or cause the Independent Accountants to prepare such returns, unless the
Non-Managing Member requests that the Independent Accountants prepare such
returns. The Managing Member shall cause such tax and information returns that
the Company may be required to file to be filed on a timely basis at Company
expense with the appropriate governmental authorities. No tax or information
return shall be filed unless Approved by the Members. The Company's accountants
are (i) to deliver all tax and information returns to the Members for their
review, comment and reasonable approval at least thirty (30) days in advance of
the required filing date therefor taking into account any extensions thereof,
and (ii) upon the request of a Member, furnish such Member with a projection of
the Company's taxable income or loss for a particular Fiscal Year of the Company
by December 1 of such year to assist in year-end tax planning, all at Company
expense.
Section 5.3 Reports.
---------------------
(a) The Managing Member shall prepare and send to each Member the
following unaudited statements and reports (and Managing Member may
require the property manager under the Management and Leasing Agreement
to prepare and send such statements and reports):
(i) within thirty (30) calendar days after the last
day of each calendar month during the Term, a statement of income
and expense (x) showing the actual results of the operations of
the Company for the calendar month then ended and cumulatively to
date for the then elapsed portion of the current Fiscal Year and
(y) comparing on an itemized basis, all costs and expenses
incurred during such month and for such Fiscal Year with the
Budgets for such month and such Fiscal Year, with a narrative
explanation of any variations which are material to such Budgets;
and
(ii) within thirty (30) calendar days after the last
day of each calendar month during the Term, a balance sheet
showing the financial position of the Company as of such last
day.
(b) Each monthly report furnished to the Members by the Managing
Member shall also state, to the best knowledge of the Managing Member,
whether any default exists with respect to any material obligation of
the Company and whether any litigation is pending against the Company
or any Asset.
(c) No later than ninety days prior to the commencement of each
Fiscal Year, the Managing Member shall prepare and send to each Member
(and Managing Member may require the property manager under the
Management and Leasing Agreement to prepare and send such statements
and reports): (i) an Asset Operating Budget for the Next Fiscal Year
for each Asset in accordance with Section 6.7 and (ii) a Company
Operating Budget for the Next Fiscal Year in accordance with Section
6.7.
Section 5.4 Audits.
--------------------
After the end of each Fiscal Year the Managing Member at the request of
either Member or as required to comply with leases or loans, shall cause an
audit to be made by the Independent Accountants covering the assets, liabilities
and net worth of the Company and its operations during such Fiscal Year, and all
other matters customarily included in such audits. In the event of such request
for audited statements, by April 30 of the subsequent Fiscal Year, the Managing
Member shall direct the Independent Accountants to deliver the following
financial statements with respect to the Company: a balance sheet and statement
of income and expense, statement of cash flows of the Company, and the Company's
capital position as of the end of and for such Fiscal Year, together with the
report of the Independent Accountants covering the results of such audit and
certifying such financial statements as having been prepared in accordance with
generally accepted accounting principles consistently applied. A copy of such
financial statements shall be provided to each Member.
Section 5.5 Bank Accounts.
---------------------------
All funds of the Company shall be deposited in its name in an account
or accounts maintained with the Bank or other financial institution approved by
the Managing Member. Funds of the Company shall not be commingled with funds of
any other Person. Checks shall be drawn upon the Company account or accounts
only for the purposes of the Company and shall be signed by respective duly
authorized representatives of the Members.
Section 5.6 Tax Elections.
---------------------------
Any and all federal, state or local tax elections for the Company shall
be made jointly by the Members except for those matters set forth on Schedule
5.6 hereto, which shall be made as indicated on Schedule 5.6. In making such
elections, however, the appropriate Manager or Member shall take into account
tax matters with respect to the Company that would adversely affect a Member and
shall use its good faith efforts to consult with such Member and to make
elections that have the least adverse effect on all of the Members. The Company
shall elect to be treated as and shall qualify as a partnership for federal
income tax purposes.
Section 5.7 Tax Matters Member.
--------------------------------
Pursuant to Section 6231(a)(7)(A) of the Code, the Members hereby
designate CPI as the Company's "Tax Matters Partner", and it shall serve as such
at the expense of the Company with all powers granted to a tax matters partner
under the Code. The Tax Matters Partner shall not enter into any settlement with
any taxing authority (federal, state or local), or extend the statute of
limitations, on behalf of the Company or the Members without the Approval of the
Members.
ARTICLE 6
---------
MANAGEMENT OF THE COMPANY
-------------------------
Section 6.1 Management of the Company.
--------------------------------------
6.1.1 General. Except as otherwise specifically set forth in
this Agreement, the Managing Member (without the consent or approval of any
other Member) shall have the sole and exclusive right, authority and power to
control, direct, manage and administer the business and affairs of the Company
and to do all things necessary to carry on the business and purposes of the
Company. The Managing Member, at the expense of and on behalf of the Company
shall conduct or cause to be conducted the management of the business and
affairs of the Company in accordance with and as limited by this Agreement. The
Managing Member is hereby authorized by all Members to execute and deliver on
behalf of the Company any and all documents, contracts, certificates,
agreements, promissory notes, guarantees, mortgages, deeds, and instruments, and
to take any action of any kind and to do anything and everything the Managing
Member deems necessary or appropriate in order to carry out the business of the
Company in accordance with the provisions of this Agreement and applicable law.
No person, firm, partnership, corporation or other entity shall be required to
inquire into said authority of the Managing Member to execute and perform any
document on behalf of the Company.
6.1.2 Managing Member. The Managing Member of the Company
shall be CP Venture.
6.1.3 Actions of Non-Managing Member. Except as otherwise
expressly provided in this Agreement, the Non-Managing Member shall not (and
shall not have authority to), without the prior written approval of the Managing
Member, bind or take any action on behalf of or in the name of the Company, or
enter into any commitment or obligation binding upon the Company. Each Member
covenants and agrees that it will comply in all respects with any contract or
agreement approved by the Managing Member as permitted under this Agreement.
6.1.4 CPI As Manager. Pursuant to Section 6.1.3 of the CP
Venture Operating Agreement, CPI shall be and become a Manager of the Company
with respect to any "Make-Whole Asset" as defined in the CP Venture Operating
Agreement, with the right and authority to take and exercise all actions,
approvals, agreements and decisions on behalf of the Company with respect to
such "Make-Whole Asset" so long as CPI is not a "Defaulter" under the CP Venture
Operating Agreement with respect to any "Make-Whole Amount" for such Asset. As a
Manager, CPI shall have the rights and responsibilities with respect to such
"Make-Whole Asset" as provided in Section 6.1.3 and Section 8.3.4 of the CP
Venture Operating Agreement. CPI shall remain a Manager of the Company with
respect to such "Make-Whole Asset" until such Asset is disposed of by the
Company.
Section 6.2 Required Approval by Non-Managing Members.
-------------------------------------------------------
6.2.1 Generally Not Required. Except as set forth in Section
6.2.2, the Managing Member shall be authorized to take (or permit an
Affiliate of such Member to take) any action on behalf of the Company
which it deems in good faith to be appropriate or advisable without the
necessity of obtaining any consent or approval of any Non-Managing
Member, notwithstanding any other provision of this Agreement, the Act
or any applicable law, rule or regulation. The execution, delivery or
performance by the Managing Member or the Company of any agreement
authorized or permitted under this Agreement shall not constitute a
breach by the Managing Member of any duty that the Managing Member may
owe the Company or the Members or any other Persons under this
Agreement or of any duty stated or implied by law or equity.
6.2.2 Required Approval by Non-Managing Members.
(a) The Managing Member shall not take (or permit to be taken
by an Affiliate of such Member) any action on behalf of the Company
within the scope of the following matters without the prior written
direction or consent of all the Members:
(1) dissolve and wind-up the Company, except that the
written direction or consent of the Non-Managing Member shall
not be required if the Non-Managing Member is a Defaulter
under any of Subparagraphs 9.1.1(c)-(j) or (l) at such time
and such dissolution is conducted in accordance with Article 9
hereof;
(2) institute proceedings to adjudicate the Company a
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;
(3) change the nature of the business of the
Company;
(4) permit the Transfer by either Member of its
Percentage Interest or other right or interest which was
derived by it under the Agreement, or any part thereof or any
interest therein, except as expressly permitted in the
Agreement including, without limitation, Section 8.2;
(5) make any income tax election or choice of method
for tax purposes or to take such other action as may affect or
alter the federal income tax treatment of the Company as a
partnership;
(6) acquire or invest in, directly or indirectly, any
real property, real estate project or venture other than the
Assets or any asset acquired pursuant to a like-kind exchange
of an Asset permitted under Article 8 of the CP Venture
Operating Agreement; and
(7) terminate the Management and Leasing Agreement
prior to the second anniversary of the Effective Date except
due to "cause."
(b) The Managing Member may initiate a request that the
Non-Managing Members consent to or approve any matter or take any other
action respecting the business and affairs of the Company which is
required for consent or approval of all of the Members pursuant to this
Agreement. Such request shall be labeled "REQUEST FOR CONSENT OR
APPROVAL" and must include a narrative explanation of the consent or
action which is being requested. If pursuant to such a request the
Managing Member desires to schedule a special meeting of the Members,
such request must be received by the Non-Managing Members at least ten
(10) calendar days prior to the proposed date for such special meeting.
(c) If there is a need for any consent or approval and no
special meeting therefor is requested by the Managing Member, the
Non-Managing Members shall use best efforts to respond within ten (10)
days after the date notified of the need for such consent or approval.
If such Members have not responded within said ten (10) day period, or
if a special meeting has been properly requested with respect to such
proposed consent or approval but has not been held within ten (10) days
after the date requested for such special meeting, then the Managing
Member may at any time thereafter notify the Non-Managing Members that
failure of such Non-Managing Members to respond within fourteen (14)
calendar days after such notice shall be deemed to be consent to and
approval by such Non-Managing Member of the matter or action requested.
Such notice must be labeled "FAILURE TO ACT ON REQUEST FOR CONSENT OR
APPROVAL" and must include a narrative explanation of the consent or
approval which is being requested. If such Non-Managing Member fails to
respond within said 14-day period, such matter or action requested
shall be deemed consented to and approved by such Non-Managing Member.
(d) Meetings of the Members may be held at the Company's
principal place of business or at such other place as shall be selected
by the Managing Member. Both regular and special meetings may be held
by means of a conference telephone or similar equipment if all persons
participating in the meeting can hear each other at the same time.
Section 6.3 Powers and Duties of Managing Member.
--------------------------------------------------
(a) Without limiting the generality of the foregoing, the
Managing Member shall have the following rights and powers, which it
may exercise at the cost, expense and risk of the Company:
(i) To perform all acts necessary to operate, manage, protect,
improve, sell, exchange or otherwise dispose of any Asset;
(ii) To incur liabilities in the ordinary course of business
of the Company;
(iii) To name any Asset or change the name of any Asset,
provided, that no Members name shall be used in such project name
without the consent of such Member;
(iv) To cause the Company to (a) to enter into contracts or
agreements with any Person relating to the operation, management
and financing of any Asset or other investment, and (b) to become
a party to other related contracts, agreements and documents, and
to exercise all rights, privileges and elections granted the
Company under such documents;
(v) To borrow money, or commit to borrow money, from third
parties, whether on a secured or unsecured basis, for any purpose
and to modify, amend, prepay, increase, renew, extend or
consolidate any borrowing (or loan document evidencing or
securing the borrowing), and to refinance or otherwise replace or
repay, in part or in full, any borrowing; and to place liens,
mortgages and other security deeds, upon the Company's assets in
connection with any of the foregoing;
(vi) To administer all matters pertaining to insurance with
respect to any Asset, or other asset of the Company, including
obtaining and paying for policies of insurance insuring against
(1) loss or damage by fire, windstorm, tornado and hail, and
against loss or damage by such other, further and additional
risks as now are or hereafter may be embraced by the standard
extended coverage forms of endorsements, as may be required by
the Company's lenders, and (2) liability to the public, tenants
or any other person and risk to its properties incident to the
operation of any Asset in such amounts and upon such terms as are
customary for the protection against such risks of liability and
loss;
(vii) To employ, terminate the employment of, supervise and
compensate such persons, firms or corporations for and in
connection with the business of the Company as it may deem
necessary or desirable;
(viii) To approve and implement any change, improvements,
repairs, alterations or changes or addition to or alteration of
any Asset;
(ix) To acquire such tangible personal property and intangible
personal property as may be necessary or desirable to carry on
the business of the Company and sell, exchange or otherwise
dispose of such personal properties in the ordinary course of
business;
(x) To adopt leasing guidelines for any Asset and to negotiate
and enter into leases or other arrangements involving the rental,
use or occupancy of space in any Asset with prospective tenants;
(xi) To keep all books of account and other records of the
Company;
(xii) To negotiate and contract with all utility companies
servicing any Asset and to grant utility easements in the
ordinary course;
(xiii) To pay all debts and other obligations of the Company,
including amounts due under the financing and other loans to the
Company and costs of formation of the Company and of ownership,
improvement, construction, operation and maintenance of any
Asset;
(xiv) To determine whether to repair, rebuild or restore any
Asset, or any part thereof, which has suffered damage as a result
of fire or other casualty or the exercise of eminent domain,
subject to the requirements of any loan, lease, or other
agreement binding upon the Company and to determine whether to
borrow or commit to borrow, from a third party, whether on a
secured or unsecured basis, necessary financing for the repair or
rebuilding of any part of any Asset which has been damaged by
fire or other casualty or for the restoration of any part of any
Asset which is required as a result of the exercise of the power
of eminent domain;
(xv) Subject to the Non-Managing Member's approval (which
approval shall not be unreasonably withheld), to prepare (or have
prepared) and filed all tax returns for and on behalf of the
Company (but not the tax returns or other reports of the
individual Members) and to pay all taxes, levies, assessments,
rents and other impositions applicable to the Company, using its
good faith efforts to pay same before delinquency and prior to
the addition thereto of interest or penalties and to undertake
when appropriate any action or proceeding seeking to reduce such
taxes, assessments, rents or other impositions;
(xvi) To deposit all monies received for or on behalf of the
Company in the Bank or financial institution as may be selected
by the Managing Member as a depository for the Company and to
invest any excess funds and to disburse and pay all funds on
deposit on behalf of and in the name of the Company in such
amounts and at such times as the same are required in connection
with the business of the Company;
(xvii) To establish the amount of cash reserves to be retained
when calculating Cash Flow or Capital Proceeds;
(xviii) To defend, adjust, settle, compromise or pay any
claim, obligation, debt, demand, suit, litigation or judgment by
or against the Company, and to assert or initiate any claim,
suit, litigation or other proceeding against any Person or any
federal, state or local government, or agency or official
thereof;
(xix) To prepare Asset and Company Operating Budgets and to
incur any costs in connection with the operation of any Asset and
the Company; and
(xx) To admit Prudential (or any Prudential Affiliate) as a
Member pursuant to Section 3.2.2 hereof.
(b) The Managing Member, at the expense of and on behalf of the Company
shall conduct or cause to be conducted the management of the business and
affairs of the Company in accordance with and as limited by this Agreement.
(c) The Managing Member may delegate all or any of its duties hereunder
to such other Person as it deems necessary or desirable for the transaction of
the business of the Company, and in furtherance of any such delegation, shall
have the right, on behalf of and at the expense of the Company, to appoint,
employ or contract with and compensate any other Person, but in such event the
Managing Member will not be released from its responsibilities hereunder. Such
Persons may, under the supervision of the Managing Member, administer, or assist
in the administration of the routine day-to-day management of the Company and
its business and affairs; may serve as the Managing Member's advisors and
consultants in connection with decisions made by the Managing Member; may act as
consultants, accountants, correspondents, attorneys, brokers, escrow agents, or
in any other capacity; and may perform such other acts or services for the
Company as the Managing Member may reasonably and prudently approve.
(d) The Managing Member shall prepare and deliver to the Members the
Company Operating Budget for each Fiscal Year. The Managing Member will also
make available on reasonable notice and during normal business hours such
additional information pertaining to any Asset as may reasonably be requested
from time to time by the Non-Managing Members.
Section 6.4 Authorization for Expenditures. Without limitation of the
rights of the Managing Member to manage the Company, the Managing Member shall
be authorized to make any expenditure or incur any obligation on behalf of the
Company that the Managing Member determines is in the best interest of the
Company. In any event, the Managing Member shall not expend more than the amount
that the Managing Member in good faith believes to be the fair and reasonable
market value at the time and place of contracting for any goods purchased or
services engaged on behalf of the Company.
Section 6.5 Rights Not Assignable.
-----------------------------------
Except as provided in Article 8, the rights and obligations of the
Managing Member under this Agreement shall not be assignable voluntarily or by
operation of law by the Managing Member without the express prior written
Approval of the Members, and any attempted assignment without such Approval
shall be void.
Section 6.6 Emergency Authority.
---------------------------------
Notwithstanding the provisions of Sections 6.4 hereof, the Managing
Member shall have the right to take such actions and make such emergency
expenditures as it, in its reasonable judgment, deems necessary for the
protection of life or health or the preservation of Company assets if, under the
circumstances, in the good faith estimation of the Managing Member, there is
insufficient time to allow the Managing Member to obtain any required Approval
of the Members of such action and any delay would materially increase the risk
to life or health or materially increase the magnitude or likelihood of property
damage or other potential loss involved.
Section 6.7 Budgets.
---------------------
(a) No later than ninety (90) days prior to the commencement of
each Fiscal Year, the Managing Member shall prepare an Asset Operating
Budget for each Asset. Each Asset Operating Budget shall be provided to
the Non-Managing Member as provided in Section 5.3(a). Each Asset
Operating Budget may be modified by the Managing Member at any time and
that the modifications thereof shall be delivered to the Non-Managing
Member together with the next succeeding monthly report to be delivered
pursuant to Section 5.3(a)(iii).
(b) No later than ninety (90) days prior to the commencement of
each Fiscal year, the Managing Member shall prepare a Company Operating
Budget for the Next Fiscal Year. The Company Operating Budget shall be
provided to the Non-Managing Member as provided in Section 5.3(a). Each
Company Operating Budget may be modified by the managing Member at any
time and the modifications thereof shall be delivered to the
Non-Managing Member together with the next succeeding monthly report
pursuant to Section 5.3(a)(iii).
Section 6.8 Management and Leasing Agreement.
----------------------------------------------
On the date hereof, the Company and CPI (or a CPI Affiliate) shall
enter into the Alliance Management Agreement and the Alliance Leasing Agreement
in the forms attached hereto as Exhibit C. Upon termination thereof, Managing
Member shall determine the selection of any replacement manager and leasing
agent and, as applicable, the terms of engagement for such manager and leasing
agent. The agreements set forth on Exhibit C, together with any amendments
thereto or replacement thereof, shall be referred to herein as the "Management
and Leasing Agreement." CPI agrees to perform, or cause a CPI Affiliate to
perform, the services required under the Management and Leasing Agreement for a
period of 2 years from the Effective Date subject to the rights of the manager
or leasing agent to terminate for cause under such agreement (in which case CPI
shall have no obligation to perform, or cause a CPI Affiliate to perform, any
management or leasing services). Provided that the property manager or leasing
agent, as the case may be, is not in default under its respective agreement, CPI
shall have the right from time to time for a period of two years from the
Effective Date, and any time thereafter if CPI or a CPI Affiliate has not been
terminated as property manager or leasing agent by the Company, to appoint and
reappoint the manager or leasing agent, as the case may be, from among the group
of CPI and its Affiliates so long as (a) the actual individuals, independent
contractors or employees working with or for the manager and leasing agent are
capable of and do in fact perform the relevant services to "Cousins" standards,
(b) such appointment or reappointment shall be at the sole cost and expense of
CPI, (c) the terminated manager or leasing agent waives any claim for
post-termination expenses in connection with such appointment or reappointment,
and (d) the Company and the applicable manager or leasing agent enter into a
contract on the same terms as the Management and Leasing Agreement.
Section 6.9 Actions to Maintain REIT Status.
---------------------------------------------
Notwithstanding any other provisions of this Agreement or the Act,
during the period commencing on the Effective Date and ending on the seventh
anniversary of the Effective Date, neither the Managing Member nor any other
Member shall take any action on behalf of the Company if such action could
reasonably be expected to jeopardize CPI's status as a real estate investment
trust ("REIT") under the Code. The Managing Member shall take any action
reasonably requested by any Member that such Member in good faith reasonably
believes is necessary or advisable in order to protect the ability of CPI to
continue to qualify as a "REIT," or to avoid CPI incurring any taxes under
Section 857 or Section 4981 of the Code. For example, no Manager or Member may
cause the Company, without the express written consent of CPI, to (i) enter into
any lease that provides for rental payments based upon the net profits of the
tenant, (ii) purchase stock of another corporation, (iii) enter into a loan that
provides for a participating interest in the net profits of the borrower, (iv)
provide any services to tenants other than "customary services" as defined by
the Code, or (v) become a dealer in property. The Managing Member and CPI agree
to discuss any decision that could adversely impact CPI's "REIT" status prior to
making a definitive determination and, upon the request of Prudential, CPI will
provide the Company with an opinion of counsel reasonably satisfactory to
Prudential that failure to take such actions reasonably could be expected to
jeopardize CPI's status as a REIT prior to taking any such action. In the event
such an opinion is provided, the Managing Member and the Company shall take any
such action, while using its good faith efforts to avoid taking any action that
is adverse to Prudential. In the event of any dispute between CPI and Prudential
regarding any decision regarding CPI's "REIT" status as referenced in this
Section 6.9 which involves action which affects the status of the Company as a
"real estate operating company" under the Plan Asset Regulations or compliance
with ERISA as set forth in Section 6.10, each of CPI an Prudential shall meet
with each other and their respective counsel in order to determine the nature of
any issues relating to such dispute and determination, and in order to develop a
plan for compliance which shall be mutually agreeable to each Member.
Section 6.10 Actions to Maintain REOC Status.
----------------------------------------------
Notwithstanding any other provisions of this Agreement or the Act,
neither the Managing Member nor any other Member shall take any action on behalf
of the Company if (a) such action would reasonably be expected to jeopardize the
status of the Company as a "real estate operating company" under the Plan Asset
Regulations, or (b) such action would constitute a Plan Violation under ERISA.
In addition, the Managing Member shall take any action (and refrain from taking
any action) reasonably requested by any Member that such Member in good faith
believes is necessary or advisable in order to protect the status of the Company
as a "real estate operating company" under the Plan Asset Regulations, or if
such Member in good faith believes is necessary or advisable in order to avoid a
Plan Violation under ERISA. Without limiting the foregoing, on or before thirty
(30) days prior to the end of the "annual valuation period" of the Company as
defined in the Plan Asset Regulations (such date is referred to as the
"Compliance Deadline") of each year during the term of this Agreement, in order
to demonstrate compliance with the Plan Asset Regulations, Prudential shall
deliver to the Members a certificate in the form attached as Exhibit D, for
signature by both Members, together with such supplemental information as the
Members may reasonably require, in order to establish that that the Company
continues to qualify as a "real estate operating company" within the meaning of
the Plan Asset Regulations and together with, subject to the Approval of the
Members, such supplemental covenants and guidelines (with respect to pending
transactions and/or any guidelines for the release of funds then held by CP
Venture to the Company) as the Members may reasonably require in order to
confirm that the Company continues to qualify as a "real estate operating
company" within the meaning of the Plan Asset Regulations. Each Member agrees to
discuss with the other Member any decision regarding such status prior to taking
or requesting any such action. The Members agree to discuss with each other any
proposed decision regarding such status and upon the request of a Member the
Company shall obtain an opinion of counsel reasonably satisfactory to the
Members that failure to take such actions reasonably could be expected to
adversely affect such status prior to taking or requesting such action. In the
event such an opinion is provided, the Managing Member shall take any
appropriate action, while using its good faith efforts to avoid taking any
action that is adverse to any Member. In the event of any dispute between CPI
and Prudential regarding any decision regarding the status of the Company as a
"real estate operating company" under the Plan Asset Regulations or compliance
with ERISA as set forth in this Section 6.10 which involves action which affects
CPI's "REIT" status as referenced in Section 6.9, each of CPI and Prudential
shall meet with each other and their respective counsel in order to determine
the nature of any issues relating to such dispute and determination, and in
order to develop a plan for compliance which shall be mutually agreeable to each
Member.
Section 6.11 Liability of a Member for Conduct.
-----------------------------------------------
No Member (nor any director, shareholder, member, officer or employee
of such Member, direct or indirect) shall be personally liable or personally
accountable to the Company or to any of the Members, in damages or otherwise,
for any error of judgment, for any mistake of fact or of law, or for any other
act or thing which it may do or refrain from doing in connection with the
business and affairs of the Company, except for claims and damages resulting
from fraud, willful misconduct, bad faith, gross negligence or material breach
of this Agreement.
Section 6.12 Indemnity.
------------------------
The Company (to the extent of its assets) does hereby agree to
indemnify and to hold each Member and each member of the Members harmless from
any loss, expense, or damage (including reasonable attorneys' fees and court
costs) suffered by such Member by reason of anything the Company may do or
refrain from doing or such Member may do or refrain from doing hereafter for and
on behalf of the Company and in furtherance of its interests or by reason of
such Member's status as a Member of the Company; provided, however, that the
Company shall not indemnify such Member for any loss, expense, or damage which
such Member may suffer as a result of any act or omission of such Member for
which such Member would be liable under Section 6.11 hereinabove.
ARTICLE 7
---------
COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES
-------------------------------------------------------
Section 7.1 Compensation, Reimbursements.
------------------------------------------
7.1.1 Compensation. Except as may be expressly provided for in
this Agreement, including without limitation, Sections 6.8 and 7.2, or in
another written agreement Approved by the Members, no payment will be made by
the Company to either Member for the services of such Member or any member,
shareholder, director or employee, or Affiliate of such Member.
7.1.2 Reimbursements. Subject to the provisions of this
Agreement, each of the Members shall be reimbursed promptly by the Company for
all reasonable out-of-pocket costs and expenses incurred by each in connection
with the performance of its respective duties to the Company during the Term.
Section 7.2 No Contracts with Affiliates.
----------------------------------------------
Except as provided in this Section 7.2 and Section 6.8, neither Member
shall enter into any agreement or other arrangement for the furnishing to or by
the Company of goods or services with any Person who is an Affiliate of the
Managing Member unless such agreement or arrangement has been approved by the
other Member after the nature of the relationship or affiliation has been
disclosed. If an Affiliate of a Member is in the business of providing services
of a kind needed by the Member, such Affiliate will have the right to provide
those services to the Company at market terms and conditions approved by both
Members. Notwithstanding anything to the contrary in this Section 7.2 or Section
7.1.1 nothing herein shall prevent or limit the right of the Company to engage
CPI or any CPI Affiliate, or Prudential or any Prudential Affiliate to provide
development, property management, leasing or administrative services to the
Company or to any Asset or other asset of the Company, and to be compensated for
such services at reasonable market rates.
ARTICLE 8
---------
TRANSFER AND SALE RESTRICTIONS
------------------------------
Section 8.1 General.
---------------------
8.1.1 Required Consents. Except as expressly permitted in this
Agreement, neither Member shall directly or indirectly sell, assign, transfer,
mortgage, convey, charge or otherwise encumber or contract to do or permit any
of the foregoing, whether voluntarily or by operation of law (herein sometimes
collectively called a "Transfer"), or suffer any Affiliate or other third party
to Transfer, any part or all of its Percentage Interest or its share of capital,
profits, losses, allocations or distributions hereunder without the express
prior written consent of the other Members, which consent may be withheld for
any or no reason whatsoever. Any attempt to Transfer in violation of this
Article 8 shall be null and void. The giving of consent in any one or more
instances of Transfer shall not limit or waive the need for such consent in any
other or subsequent instances.
8.1.2 Indirect Transfers. In order to effectuate the purpose of
this Section 8.1, each Member agrees that to the extent it desires that its
Percentage Interest in the Company be at any time held by any other Person, such
Member will Transfer its Percentage Interest, or part thereof, to such Person
only through a direct Transfer in the manner contemplated in this Article 8, and
that, except as expressly authorized in Section 8.2, no Transfer or other
disposition of any stock, partnership or other beneficial interest in any Member
or other such Person which holds any part of a Percentage Interest will be
effected, directly or indirectly, unless Approved by the Members, provided that
(i) an initial issuance of shares in an underwritten public offering, (ii)
transactions involving contributions of cash into, and withdrawals from, a
Pension Investor, (iii) transactions involving the transfers of beneficial
interest in a Pension Investor, and (iv) transactions in or transfers of shares
of any Member whose shares are publicly traded shall be permitted and will not
be deemed to violate the provisions of this Article 8. The Members acknowledge
that neither of their Percentage Interests is now held by any other Person and
agree that any subsequent Transfer of its Percentage Interest, or part thereof,
to a Person which it desires to make shall, except as expressly authorized in
Section 8.2, require the express, prior written consent of the other Member.
Section 8.2 Permitted Transfers by the Members.
-----------------------------------------------------
8.2.1 Transfers by CPI. Without the consent of CP Venture, CPI
may from time to time Transfer its Percentage Interest, in whole or in part (a)
to a CPI Affiliate, (b) from a CPI Affiliate to another Affiliate or (c) to
Prudential or to CP Venture upon exercise of the "CPI Redemption Rights", the
"Prudential Redemption Rights" or the "Prudential Put" pursuant to Sections
8.3.5, 8.3.6 and 8.4 of the CP Venture Operating Agreement. Any Transfer
pursuant to this Section 8.2.1, other than a transfer to Prudential or to CP
Venture, shall not relieve CPI of its obligations under this Agreement.
8.2.2 Transfers by CP Venture. Without the consent of CPI, CP
Venture may from time to time Transfer its Percentage Interest in the Company in
whole or in part to Prudential or a Prudential Affiliate upon liquidation of CP
Venture or upon exercise of the "Prudential Redemption Rights" or the
"Prudential Put" pursuant to Sections 8.3.6 and 8.4 of the CP Venture Operating
Agreement or upon exercise of the rights granted under Section 8.9 of the CP
Venture Operating Agreement. Any Transfer pursuant to this Section 8.2.2, other
than a transfer to Prudential or a Prudential Affiliate, shall not relieve CP
Venture of its obligations under this Agreement.
8.2.3 Agreements with Transferees.
(a) If pursuant to the provisions of this Section 8.2, any
Member (the "Transferor") shall purport to make a Transfer of any part
of its Percentage Interest to any Person ("Transferee"), no such
Transfer shall entitle the Transferee to any benefits or rights
hereunder until:
(i) the Transferee agrees in writing to assume and
be bound by all the obligations of the Transferor and be subject
to all the restrictions to which the Transferor is subject under
the terms of this Agreement and any agreements with respect to
any Asset to which the Transferor is then subject or is then
required to be a party;
(ii) except with respect to Transfers to Prudential
or any Prudential Affiliate, the Transferor and Transferee enter
into a written agreement with the other Member and the Company
which provides (x) that the Transferor is irrevocably designated
the proxy of the Transferee to exercise all voting and other
approval rights appurtenant to the Percentage Interest acquired
by the Transferee, (y) that the Transferor shall remain liable
for all obligations arising under this Agreement prior to, and
shall be liable for all obligations arising under this Agreement
and any agreements with respect to any Asset to which the
Transferor is then subject or is then required to be a party from
and after, such Transfer in respect of the Percentage Interest so
transferred; and (z) that the Transferee shall indemnify the
Members from and against all claims, losses, liabilities,
damages, costs and expenses (including reasonable attorneys' fees
and court costs) which may arise as a result of any breach by the
Transferee of its obligations hereunder;
(iii) the Transferee of such transfer complies with
ERISA to the satisfaction of the Members.
(b) No Transferee of any Percentage Interest shall make any
further disposition except in accordance with the terms and conditions
hereof.
(c) All costs and expenses incurred by the Company, or the
non-transferring Member, in connection with any Transfer of a
Percentage Interest, including any filing or recording costs and the
fees and disbursements of counsel, shall be paid by the Transferor.
8.2.4 Right of First Offer.
The Members hereby agree and consent to the transfers of
interests in the Company contemplated by and made in accordance with Section 8.5
of the CP Venture Operating Agreement.
Section 8.3 Restraining Order.
-------------------------------
If either Member shall at any time Transfer or attempt to Transfer its
Percentage Interest or part thereof in violation of the provisions of this
Agreement and any rights hereby granted, then the other Member shall, in
addition to all rights and remedies at law and in equity, be entitled to a
decree or order restraining and enjoining such Transfer and the offending Member
shall not plead in defense thereto that there would be an adequate remedy at
law; it being hereby expressly acknowledged and agreed that damages at law will
be an inadequate remedy for a breach or threatened breach of the violation of
the provisions concerning Transfer set forth in this Agreement.
Section 8.4 Asset and Mortgage Restrictions.
---------------------------------------------
Notwithstanding anything to the contrary in this Agreement, the sale,
transfer or other disposition of any Asset and the payment of any Mortgage shall
be subject to the restrictions and conditions imposed by Section 8.3 of the CP
Venture Operating Agreement.
ARTICLE 9
---------
DEFAULT AND DISSOLUTION
-----------------------
Section 9.1 Events of Default.
-------------------------------
9.1.1 Definitions and Cure Periods. The occurrence of any of the
following events shall constitute an event of default ("Event of Default")
hereunder on the part of the Member with respect to whom such event occurs
("Defaulter") if within thirty (30) calendar days following notice of any
non-monetary default and if within five (5) calendar days following notice of
the non-payment of monies, the Defaulter fails to pay such monies, or in the
case of non-monetary defaults which can be cured, fails to commence substantial
efforts to cure such default or, having commenced to cure, thereafter fails
within a reasonable time to prosecute to completion with diligence and
continuity the curing of such default; provided, however, that the occurrence of
any of the events described in subparagraphs (c)-(j) and (l) below shall
constitute an Event of Default immediately upon such occurrence without any
requirement of notice or passage of time except as specifically set forth in any
such subparagraph:
(a) the failure by a Member to make any capital contribution
required pursuant to the provisions of Article 3;
(b) the violation by a Member of any of the restrictions set
forth in Article 8 of this Agreement upon the right of a Member to
Transfer its Percentage Interest;
(c) institution by a Member of proceedings of any nature under
any Laws of the United States or of any state, whether now existing or
subsequently enacted or amended, for the relief of debtors wherein such
Member is seeking relief as a debtor;
(d) a general assignment by a Member for the benefit of
creditors;
(e) the institution by a Member of a case or other proceeding
under any section or chapter of the Federal Bankruptcy Code as now
existing or hereafter amended or becoming effective;
(f) the institution against a Member of a case or other
proceeding under any section or chapter of the Federal Bankruptcy Code
as now existing or hereafter amended or becoming effective, which
proceeding is not dismissed, stayed or discharged within a period of
sixty (60) calendar days after the filing thereof or if stayed, which
stay is thereafter lifted without a contemporaneous discharge or
dismissal of such proceeding;
(g) a proposed plan of arrangement or other action by a
Member's creditors taken as a result of a general meeting of the
creditors of such Member;
(h) the appointment of a receiver, custodian, trustee or like
officer, to take possession of assets having a value in excess of
$100,000 of a Member if the pendency of said receivership would
reasonably tend to have a materially adverse effect upon the
performance by said Member of its obligations under this Agreement,
which receivership remains undischarged for a period of ninety (90)
calendar days from the date of its imposition;
(i) admission by a Member in writing of its inability to pay
its debts as they mature;
(j) attachment, execution or other judicial seizure of all or
any substantial part of a Member's assets or of a Member's Percentage
Interest, or any part thereof, such attachment, execution or seizure
being with respect to an amount not less than $100,000 and remaining
undismissed or undischarged for a period of fifteen (15) calendar days
after the levy thereof, if the occurrence of such attachment, execution
or other judicial seizure would reasonably tend to have a materially
adverse effect upon the performance by said Member of its obligations
under this Agreement; provided, however, that said attachment,
execution or seizure shall not constitute an Event of Default hereunder
if said Member posts a bond sufficient to fully satisfy the amount of
such claim or judgment within fifteen (15) calendar days after the levy
thereof and the Member's assets are thereby released from the lien of
such attachment;
(k) material default in the performance of or failure to
comply with any other material agreements, obligations or undertakings
of a Member herein contained;
(l) fraud committed by a Member; and
(m) material breach of fiduciary duty or material
misrepresentation (other than a misrepresentation which would
constitute a breach under the Contribution Agreement) by a Member.
In determining what is "material" under this Agreement the standard of
materiality and "Materiality Threshold" under the Contribution Agreement shall
not be of any relevance.
9.1.2 Act of Insolvency. The occurrence of any events described
in subparagraphs (c)-(j) of Section 9.1.1 shall also constitute an "Act of
Insolvency," as said term is used in this Agreement.
Section 9.2 Causes of Dissolution and Termination.
---------------------------------------------------
Except as set forth in this Article 9 and Article 8, neither Member
shall have the right and each Member hereby agrees not to withdraw from the
Company, nor to dissolve, terminate or liquidate, or to petition a court for the
dissolution, termination or liquidation of the Company, except as provided in
this Agreement, and neither Member at any time shall have the right to petition
or to take any action to subject the Company's assets or any part thereof,
including any Asset, or any part thereof, to the authority of any court of
bankruptcy, insolvency, receivership or similar proceeding. The Company shall be
dissolved and terminated only upon the earlier occurrence of any of the
following dates or events:
(a) December 31, 2028 or such later date as Approved by the
Members;
(b) a dissolution of the Company is Approved by the Members; or
(c) the sale or other disposition (exclusive of an exchange for
other real property or the granting of a lien or security interest in
any Asset) by the Company of all or substantially all of the Assets and
other assets of the Company.
Section 9.3 Remedies.
----------------------
Upon the occurrence of an Event of Default, the non-defaulting Member
shall be entitled to exercise all rights and remedies available at law and
equity. Further, the non-defaulting Member shall be entitled to recover on its
own behalf and on behalf of the Company in enforcing the rights and remedies
against the Defaulter reasonable attorney fees and costs incurred in connection
therewith.
Section 9.4 Procedure in Dissolution and Liquidation.
------------------------------------------------------
9.4.1 Winding Up. Upon dissolution of the Company pursuant to
Section 9.2 hereof, the Company shall immediately commence to wind up its
affairs and the Members shall proceed with reasonable promptness to liquidate
the business of the Company and (at least to the extent necessary to pay any
debts and liabilities of the Company) to convert the Company's assets into cash.
A reasonable time shall be allowed for the orderly liquidation of the business
and assets of the Company in order to reduce any risk of loss that might
otherwise be attendant upon such a liquidation.
9.4.2 Management Rights During Winding Up. During the period of
the winding up of the affairs of the Company, the Managing Member shall manage
the Company and shall make with due diligence and in good faith all decisions
relating to the conduct of any business or operations during the winding up
period and to the sale or other disposition of Company assets. Each Member
hereby waives any claims it may have against the other that may arise out of the
management of the Company by the other, pursuant to this Section 9.4.2, except
to the extent provided in Section 6.12 so long as such other Member and its
representatives act in good faith.
9.4.3 Work in Progress. If the Company is dissolved for any
reason while there is development or construction work in progress, winding up
of the affairs and termination of the business of the Company may include
completion of the work in progress to the extent the Managing Member may
determine the same to be necessary to permit a sale or other disposition of any
Asset or asset which is most beneficial to the Members.
9.4.4 Distributions in Liquidation. The assets of Company shall
be applied or distributed in liquidation in the following manner and in the
following order of priority:
(a) First, in payment of debts and obligations of the Company
owed to third parties, which shall include either Member as the holder
of any secured loan, and to the expenses of liquidation in the order of
priority as provided by law; then
(b) Second, to the setting up of any reserves for a period of up
to twelve (12) months which the Managing Member may deem reasonably
necessary for any contingent or unforeseen liabilities or obligations
of the Company; then
(c) Third, in payment of any unsecured debts or obligations of
the Company to either Member or an Affiliate thereof, and then
(d) Fourth, to the Members pro rata in proportion to the positive
balances in their respective Capital Accounts (after such Capital
Accounts have been adjusted to reflect any Net Profit or Net Loss, or
items of income given or loss thereof, to be allocated to the Members
in connection with the dissolution and liquidation of the Company
pursuant to Article 4 hereof taking into account the provisions of
Section 9.4.5).
Losses attributable to the expenditure of funds held under the reserve
in Section 9.4.4(b) shall be allocated to each Member to the extent such
expenditure will reduce the amount of cash eventually distributed to each
Member.
9.4.5 Non-Cash Assets. Every reasonable effort shall be made
to dispose of the assets of the Company so that the distribution may be made to
the Members in cash. If at the time of the termination of the Company, the
Company owns any assets in the form of work in progress, notes, deeds to secure
debt or other non-cash assets, such assets, if any, shall be distributed in kind
to the Members, in lieu of cash, proportionately to their right to receive the
assets of the Company on an equitable basis reflecting the fair market value of
the assets so distributed, which fair market value shall be determined by the
Managing Member, as Approved by the Members (and if not so Approved, by
appraisal in accordance with Section 9.7). In the alternative, the Members may
cause the Company to distribute some or all of its non-cash assets to the
Members as tenants-in-common (or such other entity as the Members may select)
subject to such terms, covenants and conditions as the Members may adopt. Each
Member's Capital Account shall be charged or credited, as the case may be, as if
each non-cash asset had been sold for cash at a fair market value (determined as
above) and the net gain or loss recognized thereby had been allocated to and
among the Members in accordance with Article 4 hereof.
Section 9.5 Disposition of Documents and Records.
--------------------------------------------------
All Documents of the Company shall be retained by a party mutually
acceptable to the Members upon termination of the Company for a period of not
less than three (3) years following the filing of the Company's final federal
income tax return with the Internal Revenue Service. The costs and expenses of
personnel and storage costs associated therewith shall be shared by the Members
pro rata based upon their Percentage Interests. The Documents shall be available
during normal business hours to all Members for inspection and copying at such
Member's cost and expense. If either Member for any reason ceases as provided
herein to be a Member at any time prior to termination of the Company
("Non-Surviving Member"), and the Company is continued without the Non-Surviving
Member, the other Member ("Surviving Member") agrees that the Documents of the
Company up to the date of the termination of the Non-Surviving Member's interest
shall be maintained by the Surviving Member, its successors and assigns, for a
period of not less than three (3) years following the filing of the federal
income tax return with the Internal Revenue Service for the last period during
which income or loss is allocated to the Non-Surviving Member; provided,
however, that if there is an Internal Revenue Service examination or audit, or
notice thereof, which requires access to the Documents, the Documents shall be
retained until the examination or audit is completed and any tax liability
finally determined, and provided, further, the Non-Surviving Member shall
reimburse the Surviving Member for its pro rata share of personnel and storage
costs associated herewith. The Documents shall be available for inspection,
examination and copying by the Non-Surviving Member or its representatives upon
reasonable notice in the same manner as herein provided during said three (3)
year period.
Section 9.6 Date of Termination.
---------------------------------
The Company shall be terminated when its cash and other assets have
been applied and distributed in accordance with the provisions of Section 9.4.4.
The establishment of any reserves in accordance with the provisions of Section
9.4.4 shall not have the effect of extending the Term of the Company, but any
unexpended reserve amount shall be distributed in the order and priority
provided in such Section upon expiration of the period of such reserves.
Section 9.7 Fair Market Value.
-------------------------------
(a) Whenever this Agreement provides the Company's assets to be valued
at Fair Market Value, the value of such assets shall be determined as follows.
The parties shall first attempt to agree upon such Fair Market Value, and if the
Fair Market Value is not Approved by the Members within thirty (30) days, then
either Member may require by written notice to the other Member that each Member
obtain and deliver to the other Member an appraisal of the Fair Market Value
prepared by an MAI appraiser, investment banker, or other Person who shall have
substantial experience in valuing commercial real estate and interests therein
within thirty (30) days after such written request. Thereafter, if within thirty
(30) days after the receipt of each Member's appraisal the Fair Market Value has
not been Approved by the Members, the Fair Market Value shall be determined as
set forth in this Section 9.7. "Fair Market Value" of the Company or all of its
assets shall mean the cash price which a purchaser would pay on the effective
date of the appraisal for all such assets in excess of the liabilities of the
Company then encumbering such assets, such valuation to be made on the
assumption that such assets are subject to any applicable agreements relating to
such assets including leases and development, management and service agreements,
then in effect (and each Member shall provide to the other Member all such
information in the possession or control of such Member or the Company,
including copies of all such documentation, with respect to such matters as the
other Member may reasonably request). The "Fair Market Value" of an entire
interest in the Company shall mean the amount which would be distributed by the
Company to the Member holding such interest pursuant to Section 9.4.4 were the
Company dissolved, liquidated and terminated as of the effective date of the
determination based upon the Fair Market Value of the Company, using such Fair
Market Value of the Company as the amount available for distribution to said
Section 9.4.4.
(b) If the Members are unable to mutually agree upon the Fair Market
Value within thirty (30) calendar days after the expiration of the time periods
set forth in Section 9.7(a), such value shall be settled by arbitration in
Atlanta, Georgia in accordance with the Real Estate Valuation Arbitration Rules
of the American Arbitration Association. The arbitration shall be conducted by a
single arbitrator who shall be mutually selected by the Members and who shall be
an MAI appraiser, investment banker, or other Person who shall have substantial
experience in valuing commercial real estate and interests therein. Each Member
shall be required as part of the arbitration of Fair Market Value to present its
proposed Fair Market Value to the arbitrator, who, in making his decision, shall
be required to select that proposal which is the closest to the arbitrator's
view of Fair Market Value. If the Members are unable to agree upon an arbitrator
within 30 days of notice by either party to the other, then at the written
request of either party, the Members shall each select one arbitrator within 30
days of receipt of such request, and the two arbitrators so selected shall
appoint the arbitrator to make the determination under this Section 9.7(b)
within thirty (30) calendar days after so being appointed. In the event a party
fails to appoint its arbitrator in accordance with the preceding sentence, the
arbitrator appointed by the other party shall be the arbitrator for purposes of
settling the dispute which is the subject of such arbitration. The determination
by the arbitrator shall be final and binding on the Members and may be entered
in any court having jurisdiction thereof. All fees and expenses of the
arbitrator and all other expenses of the arbitration shall be paid by the party
whose proposed Fair Market Value was not selected in such arbitration.
ARTICLE 10
----------
GENERAL PROVISIONS
------------------
Section 10.1 Notices.
----------------------
Any notice, consent, approval, or other communication which is provided
for or required by this Agreement must be in writing and may be delivered in
person to any party or may be sent by Federal Express, UPS or other reputable
national courier service regularly providing evidence of delivery. Any such
notice or other written communications shall be deemed received by the party to
whom it is sent (i) in the case of personal delivery, on the date of delivery to
the party to whom such notice is addressed as evidenced by a written receipt
signed on behalf of such party, and (ii) in the case of courier delivery, the
date receipt is acknowledged by the party to whom such notice is addressed as
evidenced by a written receipt signed on behalf of such party. For purposes of
notices, the addresses of the parties hereto shall be as follows, which
addresses may be changed at any time by written notice given in accordance with
this provision:
If to CP Venture: c/o The Prudential Insurance Company of America
- ---------------- Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Managing Director, Transactions
(Dale H. Taysom)
With a copy to: The Prudential Insurance Company of America
-------------- Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Principal, Asset Management
(Charles Miller)
With a copy to: The Prudential Insurance Company of America
-------------- PAMG-RE Law Department
Arbor Circle South, 8 Campus Drive, 4th Floor
Parsippany, New Jersey 07054-4493
Attention: Assistant General Counsel
(Ellen Towey Kendall, Esq.)
With a copy to: Alston & Bird LLP
-------------- One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Albert E. Bender, Jr.
If to CPI: Cousins Properties Incorporated
- --------- 2500 Windy Ridge Parkway
Suite 1600
Atlanta, Georgia 30339
Attention: Corporate Secretary
With a copy to: Troutman Sanders LLP
-------------- Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Richard H. Brody
Failure of, or delay in delivery of any copy of a notice or other written
communication shall not impair the effectiveness of such notice or written
communication given to any party to this Agreement as specified herein.
Section 10.2 Entire Agreement.
-------------------------------
This Agreement (including all Exhibits referred to herein and attached
hereto, which Exhibits are part of this Agreement for all purposes), the CP
Venture Operating Agreement, the Contribution Agreement and related written
agreements contemporaneously entered into by the Members and their members
contain the entire understanding between the Members and supersedes any prior
understanding and agreements between them respecting the within subject matter.
There are no representations, agreements, arrangements or understandings, oral
or written, between the Members relating to the subject of this Agreement which
are not fully expressed in the foregoing agreements. This Agreement amends and
restates in its entirety the limited liability company operating agreement of
the Company.
Section 10.3 Severability.
---------------------------
This Agreement is intended to be performed in accordance with, and only
to the extent permitted by, all applicable Laws of the state of Delaware. If any
provision of this Agreement, or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law; provided,
however, that the above-described invalidity or unenforceability does not
diminish in any material respect the ability of the Members to achieve the
purposes for which this Company was formed.
Section 10.4 Successors and Assigns.
-------------------------------------
Subject to the restrictions on Transfer set forth in Article 8, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto.
Section 10.5 Counterparts.
---------------------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
Section 10.6 Additional Documents and Acts.
--------------------------------------------
In connection with this Agreement, as well as all transactions
contemplated by this Agreement, each Member agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be necessary or appropriate to effectuate, carry out and perform all of the
terms, provisions and conditions of this Agreement, and all such transactions.
Section 10.7 Interpretation.
-----------------------------
This Agreement and the rights and obligations of the respective parties
hereunder shall be governed by and interpreted and enforced in accordance with
the Laws of the State of Delaware.
Section 10.8 Terms.
--------------------
Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the person or
persons, firm or corporation may in the context require. Any reference to the
Code or Laws shall include all amendments, modifications, or replacements of the
specific sections and provisions concerned.
Section 10.9 Amendment.
------------------------
This Agreement may not be amended, altered or modified except by
instrument in writing and signed by all of the Members.
Section 10.10 References to this Agreement.
-------------------------------------------
Numbered or lettered articles, sections and subsections herein
contained refer to articles, sections and subsections of this Agreement unless
otherwise expressly stated. The words "herein," "hereof," "hereunder," "hereby,"
"this Agreement" and other similar references shall be construed to mean and
include this Agreement and all amendments thereof and Exhibits thereto unless
the context shall clearly indicate or require otherwise.
Section 10.11 Headings.
------------------------
All headings herein 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.
Section 10.12 No Third Party Beneficiary.
------------------------------------------
This Agreement is made solely and specifically between and for the
benefit of the parties hereto, and their respective members, successors and
assigns subject to the express provisions hereof relating to successors and
assigns, and no other Person whatsoever shall have any rights, interest, or
claims hereunder or be entitled to any benefits under or on account of this
Agreement as a third party beneficiary or otherwise.
Section 10.13 No Waiver.
-------------------------
No consent or waiver, either expressed or implied, by any Member to or
of any breach or default by any other Member in the performance by such other
Member of the obligations thereof under this Agreement shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other Member of the same or any other obligations of such
other Member under this Agreement. Failure on the part of any Member to complain
of any act or failure to act of any other Member, failure on the part of any
complaining Member to continue to complain or to pursue complaints with respect
to any act or failure to act of any other Member, or failure on the part of any
Member to declare any other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of the rights
and remedies thereof under this Agreement or otherwise at law or in equity.
Section 10.14 Time of Essence.
-------------------------------
Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized corporate offices, each on the day
and year first above written.
CP VENTURE:
-----------
CP VENTURE LLC
By: THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, as a manager
By: _______________________________
Title: _____________________________
[CORPORATE SEAL]
CPI:
----
COUSINS PROPERTIES INCORPORATED
By: _______________________________
Title: Senior Vice President
[CORPORATE SEAL]
<PAGE>
Exhibit 10.3
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF CP VENTURE THREE LLC
November 12, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.....................................................2
Section 1.1 Definitions.........................................14
Section 1.2 Other Definitions...................................14
Section 1.3 Exhibits............................................14
ARTICLE 2 FORMATION......................................................14
Section 2.1 Formation of Company................................14
Section 2.2 Name................................................14
Section 2.3 Principal Place of Business; Resident Agent.........14
Section 2.4 Purposes and Scope..................................15
Section 2.5 Certificate of Formation............................15
Section 2.6 Ownership and Waiver of Partition...................15
Section 2.7 Limits of Company...................................15
Section 2.8 No Individual Authority.............................16
Section 2.9 Responsibility of Members...........................16
Section 2.10 Term...............................................17
Section 2.11 Investment Representations.........................17
ARTICLE 3 CAPITAL........................................................18
Section 3.1 Original Capital Contributions......................18
3.1.1 Contributions...................................18
3.1.2 Balance of CP Venture Cash Contribution
Amount, Pro rata Prudential Contribution.......19
Section 3.2 Additional Capital..................................22
3.2.1 Debt Financing and Equity Capital...............22
3.2.2 Additional Capital Notice.......................22
Section 3.3 Intentionally Omitted...............................24
Section 3.4 No Interest on Capital..............................24
Section 3.5 Reduction of Capital Accounts.......................24
Section 3.6 Capital Accounts....................................24
Section 3.7 Negative Capital Accounts...........................25
Section 3.8 Resignations Withdrawals of Capital.................26
Section 3.9 Limit on Contributions and Obligations of...........26
ARTICLE 4 PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS................26
Section 4.1 Net Profit..........................................26
Section 4.2 Net Loss............................................27
Section 4.3 Limitation on Net Loss Allocations..................27
Section 4.4 Other Items.........................................27
Section 4.5 Special Allocations.................................27
Section 4.6 Curative Allocations................................30
Section 4.7 Other Allocation Rules..............................30
Section 4.8 Section 704(c) Allocation...........................31
Section 4.9 Distribution of Cash Flow...........................31
Section 4.10 Distribution of Capital Proceeds...................32
4.10.1 Order of Priority..............................32
4.10.2 Insufficient Balance...........................33
Section 4.11 Loss on CPI Note or Company Guaranty...............33
ARTICLE 5 COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS.................33
Section 5.1 Books and Records...................................33
Section 5.2 Tax Returns.........................................34
Section 5.3 Reports.............................................34
Section 5.4 Audits..............................................35
Section 5.5 Bank Accounts.......................................35
Section 5.6 Tax Elections.......................................37
Section 5.7 Tax Matters Member..................................37
ARTICLE 6 MANAGEMENT OF THE COMPANY......................................37
Section 6.1 Management of the Company...........................37
6.1.1 General.........................................37
6.1.2 Managing Member.................................38
6.1.3 Actions of Non-Managing Member..................38
Section 6.2 Required Approval by Non-Managing Members...........38
6.2.1 Generally Not Required..........................38
6.2.2 Required Approval by Non-Managing Members.......38
Section 6.3 Powers and Duties of Managing Member................39
Section 6.4 Authorization for Expenditures......................43
Section 6.5 Rights Not Assignable...............................43
Section 6.6 Emergency Authority.................................44
Section 6.7 Budgets.............................................44
Section 6.8 Development Agreement...............................45
Section 6.9 Management and Leasing Agreement....................45
Section 6.10 Actions to Maintain REIT Status....................45
Section 6.11 Actions to Maintain REOC Status....................45
Section 6.12 Liability of a Member for Conduct..................46
Section 6.13 Indemnity..........................................46
ARTICLE 7 COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES........47
7.1.1 Compensation....................................47
7.1.2 Reimbursements..................................47
Section 7.2 No Contracts with Affiliates........................47
ARTICLE 8 TRANSFER AND SALE RESTRICTIONS.................................48
Section 8.1 General.............................................48
8.1.1 Required Consents...............................48
8.1.2 Indirect Transfers..............................48
Section 8.2 Permitted Transfers by the Members..................48
8.2.1 Transfers By Prudential..........................48
8.2.2 Transfers by CP Venture ........................49
8.2.3 Agreements with Transferees.....................49
Section 8.3 Right of First Offer................................50
Section 8.4 Restraining Order...................................50
ARTICLE 9 DEFAULT AND DISSOLUTION........................................50
Section 9.1 Events of Default...................................50
9.1.1 Definitions and Cure Periods....................50
9.1.2 Act of Insolvency...............................52
Section 9.2 Causes of Dissolution and Termination...............52
Section 9.3 Remedies............................................52
Section 9.4 Procedure in Dissolution and Liquidation............52
9.4.1 Winding Up......................................52
9.4.2 Management Rights During Winding Up.............53
9.4.3 Work in Progress................................53
9.4.4 Distributions in Liquidation....................53
9.4.5 Non-Cash Assets.................................54
9.4.6. Allocation Upon Liquidation......................54
Section 9.5 Disposition of Documents and Records................55
Section 9.6 Date of Termination.................................55
Section 9.7 Fair Market Value...................................56
ARTICLE 10 GENERAL PROVISIONS...........................................57
Section 10.1 Notices...........................................57
Section 10.2 Entire Agreement..................................58
Section 10.3 Severability......................................58
Section 10.4 Successors and Assigns............................58
Section 10.5 Counterparts......................................59
Section 10.6 Additional Documents and Acts.....................59
Section 10.7 Interpretation....................................59
Section 10.8 Terms.............................................59
Section 10.9 Amendment.........................................59
Section 10.10 References to this Agreement.....................59
Section 10.11 Headings.........................................59
Section 10.12 No Third Party Beneficiary.......................60
Section 10.13 No Waiver........................................60
Section 10.14 Time of Essence..................................60
INDEX OF EXHIBITS
-----------------
Exhibit A Development Agreement Terms
Exhibit B Management and Leasing Agreement Terms
Exhibit C ERISA Certificate
<PAGE>
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
CP VENTURE THREE LLC
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT is made as of the 12th
day of November, 1998 (the "Effective Date") by and between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Prudential"), and CP
VENTURE LLC, a Delaware limited liability company ("CP Venture").
W I T N E S S E T H T H A T :
------------------- ---------
WHEREAS, Prudential and CP Venture desire to form a limited liability
company under the laws of the State of Delaware for the purposes of acquiring,
developing, owning and operating, directly and indirectly, interests in real
property;
WHEREAS, in connection with the formation of such limited liability
company, Prudential and CP Venture wish to set forth their respective rights and
obligations as members thereof;
- --------------------------------------------------------------------------------
THE INTERESTS IN CP VENTURE THREE LLC (THE "INTERESTS") ARE SUBJECT TO
THE RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH
IN ARTICLE 8 OF THIS AGREEMENT. THE INTERESTS HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER (i) THE GEORGIA
SECURITIES ACT OF 1973, AS AMENDED (THE "GEORGIA ACT") IN RELIANCE UPON
THE EXEMPTION PROVIDED IN SECTION 9(13) THEREOF, (ii) UNDER ANY OTHER
STATE SECURITIES LAWS, OR (iii) UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "FEDERAL ACT"). NEITHER THE INTERESTS, NOR ANY
PART THEREOF, MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH THE TERMS
AND CONDITIONS OF ARTICLE 8 OF THIS AGREEMENT AND PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE FEDERAL ACT, THE GEORGIA
ACT, AND ANY OTHER APPLICABLE STATE SECURITIES LAWS OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH SECURITIES LAWS OR WHICH
IS OTHERWISE IN COMPLIANCE WITH SUCH SECURITIES LAWS.
<PAGE>
NOW THEREFORE, in consideration of the premises, the mutual promises,
obligations and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of such consideration being hereby
acknowledged, Prudential and CP Venture, intending to be legally bound, do
hereby agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Definitions.
-------------------------
When used in this Agreement, the following terms will have the meanings
set forth below:
(1) "Act" shall mean the Delaware Limited Liability
Company Act, as the same may be amended from time to time.
(2) "Act of Insolvency" shall have the meaning specified in
Section 9.1.2.
(3) "Additional Capital" shall mean the aggregate capital
contributed by the Members to the Company pursuant to Section 3.2.
(4) "Additional Capital Member" shall mean those Members who
contributed capital to the Company pursuant to Section 3.2 in exchange
for Additional Capital Units.
(5) "Additional Capital Notice" shall have the meaning
specified in Section 3.2.2.
(6) "Additional Capital Percentage," as determined upon any
contribution, shall mean a percentage which, when expressed as a
decimal, is equal to a fraction the numerator of which is the number of
Additional Capital Units, and the denominator of which is the total
number of Units.
(7) "Additional Capital Unit" shall mean an interest in the
Company issued pursuant to Section 3.2 as an Additional Capital Unit
which has the rights to vote, to receive distributions and allocations,
and other rights which are specified in this Agreement.
(8) "Adjusted Capital Account Balance" shall mean with respect
to any Member, the balance in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) credit to such Capital Account any amounts which
such Member is obligated to restore, because of a promissory
note to the Company or otherwise, or is deemed to be obligated
to restore pursuant to the penultimate sentence in each of
Regulations Sections 1.704-2(g)(1)(ii) and 1.704-2(i)(5) and
pursuant to Sections 4.5(a) and 4.5(b) of this Agreement; and
(ii) debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
This definition of Adjusted Capital Account Balance is intended to
comply with Section 1.704-1(b)(2)(ii)(d) of the regulations and shall
be interpreted consistent with such Regulations.
(9) "Affiliate(s)" shall mean CPI, a CPI Affiliate,
Prudential, a Prudential Affiliate, or a Person or Persons directly or
indirectly, through one or more intermediaries, controlling, controlled
by or under common control with the Person(s) in question. The term
"control", as used in the immediately preceding sentence, means, with
respect to a Person that is a corporation, the right to exercise,
directly or indirectly, more than 50% of the voting rights attributable
to the shares of the controlled corporation and, with respect to a
Person that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of the controlled Person.
(10) "Affiliate Debt" shall mean a loan to the Company from
the Development Manager, or an Affiliate thereof pursuant to Section
3.2.1.
(11) "Agreement" shall mean this Limited Liability Company
Operating Agreement, as amended from time to time.
(12) "Approved by the Members" or "Approval of the Members"
shall mean approval in writing by all of the Members acting through
their duly authorized representatives.
(13) "Bank" shall mean a banking or other financial
institution which from time to time are selected by the Managing Member
to serve as the Company's principal funds depository.
(14) "Budgets" shall mean the following budgets of the Company
from time to time:
(i) "Development Budget," which shall mean the budget
of Total Project Costs estimated by the Managing Member to be
incurred with respect to a Project;
(ii) "Project Operating Budget," which shall mean the
annual budget for each Project of the Company as prepared by
the Managing Member and which shall be comprised of: (A) an
estimate of all receipts from and expenditures for the
ownership, management, maintenance and operation of each
Project for each Fiscal Year and (B) an estimate of all
capital replacements, substitutions and/or additions to any
Project, or any component thereof, which are to be
accomplished during such Fiscal Year; and
(iii) "Company Operating Budget," which shall mean
the annual budget for the Company as prepared by the Managing
Member and which shall be comprised of an estimate of all
receipts from and expenditures for all activities of the
Company other than matters covered by Development and Project
Operating Budgets.
(15) "CP Venture" shall mean CP Venture LLC, a Delaware
limited liability company.
(16) "CP Venture Affiliate" shall mean, (i) any successor to
CP Venture in connection with a bona fide reorganization,
recapitalization, acquisition or merger, (ii) any Person which acquires
all or substantially all of the assets of CP Venture and (iii) any
other Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with any of the aforesaid specifically identified CP Venture
Affiliates. The term "control", as used in the immediately preceding
sentence, means, with respect to a Person that is a corporation, the
right to the exercise, directly or indirectly, of more than 50% of the
voting rights attributable to the shares of the controlled corporation
and, with respect to a Person that is not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the controlled Person.
(17) "CP Venture Development Contribution Amount" shall mean
an amount equal to the "Prudential Contribution Amount" as defined in
the CP Venture Operating Agreement.
(18) "CP Venture Operating Agreement" means the operating
agreement of CP Venture LLC between CPI and Prudential of even date
herewith.
(19) "Capital Account" shall have the meaning specified in
Section 3.6.
(20) "Capital Proceeds" shall mean the net proceeds from:
(i) loans to the Company in excess of current or
reasonably anticipated Company needs (including reasonable
reserves for Company debt obligations and working capital as
determined by the Managing Members) or excess funds received
from refinancing of any Company indebtedness (x) after the
payment of, or provision for the payment of, all costs and
expenses incurred by the Company in connection with such
refinancing, and (y) after deduction or retention of such sums
as are deemed necessary to be retained as a reserve for the
conduct of the business of the Company; and
(ii) any sale, exchange, condemnation or other
disposition of any Project, or any portion thereof or any
interest therein, any equipment used thereon, or any other
capital asset of the Company or from claims on policies of
insurance maintained by the Company for damage to or
destruction of capital assets of the Company or the loss of
title thereto (to the extent that such proceeds exceed the
actual or estimated costs of repairing or replacing the assets
damaged or destroyed if such assets are repaired or replaced)
(x) after the payment of, or provision for the payment of, all
costs and expenses incurred by the Company in connection with
such sale or other disposition or the receipt of such
insurance proceeds, as the case may be, and (y) after
deduction or retention of such sums as are deemed necessary to
be retained as a reserve for the conduct of the business of
the Company.
(21) "Cash Flow" shall mean for any period the Gross Receipts
of the Company for such period less Operating Expenses for such period.
(22) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor statute thereto.
(23) "Company" shall mean the limited liability company formed
pursuant to the terms hereof for the limited purposes and scope set
forth herein.
(24) "Company Operating Budget" shall have the meaning
specified in (13) above.
(25) "Contribution Agreement" shall mean the Contribution
Agreement dated as of even date herewith by and among CPI,
Cousins/Daniel LLC, a Georgia limited liability company, Cousins
MarketCenters Inc., a Georgia corporation and Prudential.
(26) "CPI" shall mean Cousins Properties Incorporated, a
Georgia corporation
(27) "CPI Affiliate" shall mean (i) any successor to CPI in
connection with a bona fide reorganization, recapitalization,
acquisition or merger, (ii) Cousins Real Estate Corporation, a Georgia
corporation ("CREC"), (iii) any Person which acquires all or
substantially all of the assets of CPI or CREC and (iv) any other
Person which, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control
with CPI or CREC or any of the aforesaid specifically identified CPI
Affiliates. The term "control", as used in the immediately preceding
sentence, means, with respect to a Person that is a corporation, the
right to the exercise, directly or indirectly, of more than 50% of the
voting rights attributable to the shares of the controlled corporation
and, with respect to a Person that is not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the controlled Person.
(28) "Defaulter" shall have the meaning specified in Section
9.1.1.
(29) "Depreciation" shall mean for each Fiscal Year or other
period, an amount equal to the depreciation, amortization, or other
cost recovery deduction allowable with respect to an asset for such
year or other period, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery
deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Managing Member.
(30) "Developer Current Return" shall mean as of any
particular date, an amount equal to nine and one-half percent (9.5%)
per annum, compounded quarterly until paid, determined on the basis of
a 365 day year for the actual number of days in the period for which
the Developer Current Return is being determined, cumulative to the
extent not distributed pursuant to Section 4.9(c) or Section 4.10.1(d)
herein, on the Developer Unreturned Development Contribution (to the
extent outstanding from time to time), commencing as of the Effective
Date.
(31) "Developer Current Valuation Return" shall mean as of any
particular date, an amount equal to nine and one-half percent (9.5%)
per annum, compounded quarterly until paid, determined on the basis of
a 365 day year for the actual number of days in the period for which
the Developer Current Valuation Return is being determined, cumulative
to the extent not distributed pursuant to Section 4.9(d) or Section
4.10.1(e) herein, on an amount equal to the Unreturned Developer
Development Valuation Amount (to the extent outstanding from time to
time), commencing as of the Effective Date.
(32) "Developer Development Valuation Amount" shall mean
Three Million Dollars ($3,000,000).
(33) "Developer Member" shall mean CP Venture, to the extent
of its Developer Units, or any permitted transferee of CP Venture's
Developer Units.
(34) "Developer Unit" shall mean an interest in the Company
issued as a Developer Unit pursuant to Section 3.1 hereof which has the
right to vote, to receive distributions and allocations, and other
rights which are specified in this Agreement.
(35) "Developer Unreturned Development Contribution" as to
each Developer Member, shall mean an amount equal to the excess, if
any, of (x) the amount contributed to the Company by the Developer
Member with respect to the Developer Units pursuant to Section 3.1,
less (y) the aggregate distributions to the Developer Member pursuant
to Section 4.10.1(b) (excluding herefrom any distribution amount
attributable to the 2% annual compounded increase).
(36) "Development Agreement" shall have the meaning specified
in Section 6.8.
(37) "Development Budget" shall have the meaning specified
in (14) above.
(38) "Development Manager" shall mean the Person designated as
the "Development Manager" pursuant to Section 6.1.2 of the CP Venture
Operating Agreement.
(39) "Documents" shall have the meaning specified in Section
5.1.
(40) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended
(41) "Event of Default" shall have the meaning specified in
Section 9.1.1.
(42) "Fiscal Year" shall mean the twelve month period ending
December 31 of each year; provided that the first Fiscal Year shall be
the period beginning on the Effective Date and ending on December 31,
1998, and the last Fiscal Year shall be the period beginning on January
1 of the calendar year in which the final liquidation and termination
of the Company is completed and ending on the date such final
liquidation and termination is completed (to the extent any computation
or other provision hereof provides for an action to be taken on a
Fiscal Year basis, an appropriate proration or other adjustment shall
be made in respect of the first or final Fiscal Year to reflect that
such period is less than a full calendar year period).
(43) "Gross Asset Value" shall mean with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair
market value of such asset, as Approved by Members;
(ii) Except as otherwise provided in this Agreement,
the Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as
Approved by the Members at each of the following times: (a)
the acquisition of an additional interest in the Company by
any new or existing Member for more than a de minimis
contribution; (b) the distribution by the Company to a Member
of more than a de minimis amount of Company property as
consideration for an interest in the Company; and (c) the
liquidation of the Company within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations; provided, however,
that the adjustments pursuant to clauses (a) and (b) above
shall be made only if the Members reasonably determines that
such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value
of such asset on the date of distribution as Approved by the
Members; and
(iv) The Gross Asset Values of Company assets shall
be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining the Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and Section 4.5(g) hereof; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subsection to
the extent the Members determines that an adjustment pursuant
to subsection (ii) of this definition is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this subsection.
(v) If the Gross Asset Value of an asset has been
determined or adjusted pursuant to paragraphs (ii), (iii) or
(iv) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Net Profit and Net
Loss.
If the Members are unable to agree regarding any Gross Asset Value,
such value shall be determined pursuant to the procedure of Section
9.7.
(44) "Gross Receipts" shall mean all receipts (other than
Capital Proceeds), calculated on an accrual basis, from the conduct of
the business of the Company from all sources including without
limitation all rent and other income and payments received by the
Company. Gross Receipts shall not include revenues received in
connection with the development and construction of a Project,
including without limitation revenues collected during the operating
deficit period of a Project, to the extent taken into account in
determining Total Project Costs, as reasonably determined by the
Managing Member.
(45) "Independent Accountants" shall mean the "Independent
Accountants" as so designated in the CP Venture Operating Agreement.
(46) "Investor Current Return" shall mean as of any particular
date, an amount equal to nine and one-half percent (9.5%) per annum,
compounded quarterly until paid, determined on the basis of a 365 day
year for the actual number of days in the period for which the Investor
Current Return is being determined, cumulative to the extent not
distributed pursuant to Section 4.9(b) or Section 4.10.1(c) herein (or
otherwise paid by CP Venture from other sources), on the Investor
Unreturned Development Contribution; provided, however, that in the
event an Investor Member becomes a Defaulter due to an Event of Default
described in Section 9.1.1(a) (after giving effect to the applicable
five (5) day grace period in Section 9.1.1) with respect to payment of
the Prudential Development Contribution Amount or that portion of the
Prudential Contribution Amount to be contributed by CP Venture in
exchange for Investor Units and following the Managing Member giving
the Investor Member a second notice marked "Failure to Cure will Result
In Reduction of Current Return" and if an Investor Member fails to cure
such default within five (5) days after receipt of such second notice,
then the Investor Current Return shall be zero from and after and
during the continuance of any such Event of Default.
(47) "Investor Members" shall mean Prudential and CP Venture,
to the extent of their Investor Units, or any transferee of
Prudential's or CP Venture's Investor Units permitted hereunder.
(48) "Investor Unit" means an interest in the Company issued
pursuant to Section 3.1 hereof as an Investor Unit which has the rights
to vote, to receive distributions and allocations, and other rights
which are specified in this Agreement.
(49) "Investor Unreturned Development Contribution", as to
each Investor Member, shall mean an amount equal to the excess, if any,
of (x) the amount contributed to the Company by the Investor Member
with respect to their Investor Units pursuant to Section 3.1, less (y)
the aggregate distributions to the Investor Member pursuant to Section
4.10.1(b) (excluding therefrom any distribution amount attributable to
the 2% annual compounded increase).
(50) "Laws" shall mean federal, state and local statutes, case
law, rules, regulations, ordinances, codes and the like which are in
full force and effect from time to time and which affect any Project or
the ownership or operation thereof.
(51) "Management and Leasing Agreement" shall have the meaning
specified in Section 6.9.
(52) "Managing Member" shall mean CP Venture as designated in
Section 6.1.2.
(53) "Member" shall mean an Investor Member, Developer Member
or an Additional Capital Member, or any other Person from time to time
owning a Unit in the Company.
(54) "Member Minimum Gain" shall mean an amount, with respect
to each Member Nonrecourse Debt, equal to the Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(2) and (3)
of the Regulations.
(55) "Member Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Regulations.
(56) "Member Nonrecourse Deductions" shall have the meaning
set forth in Section 1.704-2(i)(1) and (2) of the Regulations. The
amount of Nonrecourse Deductions with respect to a Member Nonrecourse
Debt for any Fiscal Year equals the excess, if any, of the net
increase, if any, in the amount of Member Minimum Gain attributable to
such Member Nonrecourse Debt during that Fiscal Year over the aggregate
amount of any distributions during that Fiscal Year to the Member that
bears the economic risk of loss for such Member Nonrecourse Debt to the
extent such distributions are from the proceeds of such Member
Nonrecourse Debt and are allocable to an increase in Member Minimum
Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(2) of the Regulations and Section
4.7(b).
(57) "Members" shall mean, collectively, Prudential, CP
Venture and any other Person from time to time owning a Unit in the
Company.
(58) "Minimum Gain" shall have the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
(59) "Mortgages" shall have the meaning set forth in the CP
Venture Operating Agreement.
(60) "Net Profit" or "Net Loss" shall mean for each Fiscal
Year the Company's taxable income or taxable loss for such Fiscal Year,
as determined under Section 703(a) of the Code, and Treasury Regulation
Section 1.703-1, but with the following adjustments:
(i) Any tax exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Company during such
Fiscal Year shall be added to such taxable income or taxable
loss;
(ii) Any expenditures of the Company described in
Section 705(a)(2)(B) of the Code for such Fiscal Year or
treated as being so described in Regulations Section
1.704-1(b)(2)(iv)(1) and not otherwise taken into account in
this subsection shall be subtracted from such taxable income
or taxable loss;
(iii) Any item of income, gain, loss or deduction
that is required to be allocated to the Members under Section
4.8 hereof shall not be taken into account in computing such
taxable income or taxable loss; and
(iv) The amount of any gain or loss required to be
recognized by the Company during such Fiscal Year by reason of
a sale or other disposition of Company property, and any
depreciation or cost recovery reductions with respect to
Company property to which the Company is entitled for any
Fiscal Year, shall be computed as if the Company's adjusted
basis in such property for income tax purposes were equal to
the Gross Asset Value, and any adjustment to the Gross Asset
Value shall be treated as a Net Profit or Net Loss.
This definition is intended to comply with the Regulations and any and
all other items which must be included in Net Profit or Net Loss in
order for this Agreement to comply with said Regulations shall be
included in such concept. Notwithstanding any other provision of this
definition, any items of income, gain, deduction, loss or credit which
are specially allocated shall not be taken into account in computing
Net Profit or Net Loss. The intent of this definition is that no
reference to Net Profit or Net Loss include such specially allocated
items.
(61) "Non-Managing Member" shall mean any Member which is not
the Managing Member. The initial Non-Managing Member shall be
Prudential.
(62) "Nonrecourse Deductions" shall have the meaning set forth
in Section 1.704-2(b)(1) of the Regulations. The amount of Nonrecourse
Deductions for any of the Fiscal Years equals the excess, if any, of
the net increase, if any, in the amount of Minimum Gain during that
Fiscal Year over the aggregate amount of any distributions during that
Fiscal Year of proceeds of a Nonrecourse Liability that are allocable
to an increase in Minimum Gain, determined according to the provisions
of Section 1.704-2(c) of the Regulations and Section 4.7(b).
(63) "Nonrecourse Liability" shall have the meaning set forth
in Section 1.704-2(b)(3) of the Regulations.
(64) "Operating Expenses" shall mean all expenditures of any
kind made with respect to the operations of the Company in the normal
course of business including, but not limited to, debt service
(principal and interest) payable on indebtedness of the Company
(whether to a third party or to a Member, including without limitation,
any Affiliate Debt), ad valorem taxes, insurance premiums, indemnities
given with respect to Projects or other assets of the Company or in the
financing of the same (but only to the extent that proceeds of such
financing were used to pay Operating Expenses or Total Project Costs,
or otherwise transferred to and retained by the Company for use by the
Company, or distributed to the Members), repair and maintenance
expense, predevelopment, investigatory and other pre-acquisition costs
incurred with respect to transactions that are not consummated, capital
expenditures related to any Project which is operational, management
fees or salaries, advertising expenses, professional fees, wages, and
utility costs, plus such sums as are deemed reasonably necessary as a
reserve to be retained for the conduct of the business of the Company,
and capital expenditures and investments in other assets. Such expenses
shall be determined on the accrual basis but shall not include any
non-cash items such as depreciation or amortization. Operating Expenses
shall not include costs incurred in connection with the construction
and development of a Project (including operating expenses, to the
extent taken into account in determining Total Project Costs), as
reasonably determined by the Managing Member, such costs typically
being of the type shown in the Development Budget for a Project.
(65) "Original Capital" shall mean the aggregate capital
contributed by the Members to the Company pursuant to Section 3.1.
(66) "Original Capital Percentage" (expressed as a decimal)
shall be one (1) minus the Additional Capital Percentage (expressed as
decimal).
(67) "Pension Investor" shall mean any investor with respect
to which Prudential or Prudential Real Estate Investors ("PREI") is
acting as a "Qualified Professional Asset Manager" as defined in
Department of Labor Prohibited Transaction Class Exemption 84-14;
initially, the Pension Investor is the separate account for qualified
pension trust investors formed and maintained by Prudential pursuant to
the provisions of Section 17B:28-7 N.J.S.A. and known as Prudential
Property Investment Separate Account ("PRISA").
(68) "Person" shall mean an individual, partnership
corporation, trust, unincorporated association, joint stock company or
other entity or association.
(69) "Plan Asset Regulations" shall mean C.F.R. 82510.3-101,
promulgated under ERISA.
(70) "Plan Violation" shall mean a transaction, condition or
event that would (i) constitute a nonexempt (under Prohibited
Transaction Class Exemption 84-14, as it may be amended) or prohibited
transaction under ERISA; or (ii) be subject to state statutes
regulating investments of and fiduciary obligations with respect to any
governmental Plan.
(71) "Project" shall mean each real estate investment or
property developed, acquired, managed or undertaken by the Company,
including an interest in another Person.
(72) "Project Operating Budget" shall have the meaning
specified in (14) above.
(73) "Prudential" shall mean The Prudential Insurance Company
of America, a New Jersey corporation.
(74) "Prudential Affiliate" shall mean (i) any successor to
Prudential in connection with a bona fide reorganization,
recapitalization, acquisition or merger, (ii) any Person which acquires
all or substantially all of the assets of Prudential, (iii) a Pension
Investor and (iv) any other Person which, directly or indirectly,
through one or more intermediaries, controls or is controlled by or is
under common control with any of the aforesaid specifically identified
Prudential Affiliates. The term "control," as used in the immediately
preceding sentence, means, with respect to a Person that is a
corporation, the right to the exercise, directly or indirectly, of more
than 50% of the voting rights attributable to the shares of the
controlled corporation and, with respect to a Person that is not a
corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the
controlled Person.
(75) "Prudential Development Contribution Amount" shall having
the meaning ascribed to such term in the CP Venture Operating
Agreement.
(76) "Regulations" shall mean those regulations promulgated
under the Code.
(77) "Tax Matters Partner" shall have the meaning specified in
Section 5.7.
(78) "Term" shall have the meaning specified in Section 2.10.
(79) "Total Project Costs" shall mean all costs which have
been or are estimated by the Managing Member to be incurred by the
Company with respect to the acquisition, design, development,
construction, debt financing, leasing, and completion of any Project,
less revenues received during the operating deficit period and plus
expenses incurred during the operating deficit period in connection
with the development and construction of the Project and which are
therefore excluded from the definition of Gross Receipts and Operating
Expenses, respectively.
(80) "Transfer" shall have the meaning specified in Section
8.1.1.
(81) "Transferee" shall have the meaning specified in Section
8.2.3.
(82) "Transferor" shall have the meaning specified in Section
8.2.3.
(83) "Units" shall mean the aggregate Investor Units,
Developer Units and Additional Capital Units of the Company outstanding
at any given time.
(84) "Unreturned Developer Development Valuation Amount" shall
mean the Developer Development Valuation Amount minus amounts
distributable to Developer Members pursuant to Section 4.9(e), to the
extent such amounts were otherwise distributable to Investor Members
but were distributed to Developer Members in reduction of the
Unreturned Developer Development Valuation Amount and minus amounts of
Unreturned Developer Development Valuation Amount which have previously
resulted in distributions under Section 4.10.1(f), with the net amount
outstanding from time to time escalated at the rate of 2% per annum
(compounded annually) from the Effective Date.
(85) "Unreturned Original Capital" shall mean, as to each
Member, an amount equal to the cash contributed to the capital of the
Company by a Member with respect to the Investor Units and Developer
Units of such Member pursuant to Section 3.1 minus amounts distributed
pursuant to Section 4.10.1(b), with the net amount outstanding from
time to time escalated at the rate of 2% per annum (compounded
annually).
Section 1.2 Other Definitions.
-------------------------------
In addition to the terms defined in Section 1.1, other terms will have
the definitions provided elsewhere in this Agreement.
Section 1.3 Exhibits.
----------------------
Attached hereto and forming an integral part of this Agreement are
various exhibits which are listed in the Table of Contents for this Agreement or
otherwise referenced in this Agreement, all of which are incorporated into this
Agreement as fully as if the content thereof were set out in full herein at each
point of reference thereto.
ARTICLE 2
FORMATION
---------
Section 2.1 Formation of Company.
----------------------------------
Prudential and CP Venture do hereby form the Company as a limited
liability company for the limited purposes and scope set forth in Section 2.4
and upon the terms, provisions and conditions set forth in this Agreement. The
rights and obligations of the Members shall be governed by this Agreement and by
the Act. If there is a conflict between the provisions of this Agreement and the
Act, the provisions of the Act shall control (it being understood, however, that
if the Act provides for a particular rule but allows the members of a limited
liability company to provide to the contrary in their limited liability company
operating agreement, and if the parties hereto have so provided hereunder, then
such provisions shall not be deemed to constitute a conflict for purposes of the
foregoing).
Section 2.2 Name.
------------------
The name of the Company shall be CP VENTURE THREE LLC or such other
name as may be selected by the Managing Member under which all business and
affairs of the Company shall be conducted.
Section 2.3 Principal Place of Business; Resident Agent.
---------------------------------------------------------
The Company shall maintain a registered office in the State of Delaware
at CT Corporation System, Wilmington, Delaware, and the registered agent at such
address shall be CT Corporation System unless and until such registered office
and agent are changed by the Managing Member, but only after prior written
notice to all the Members. The principal place of business of the Company shall
be located at CP Venture's address set forth in Section 10.1 below or at such
other place of business as the Managing Member may designate. The resident agent
for the Company in Georgia shall be the Managing Member or such agent as may be
designated by the Managing Member from time to time.
Section 2.4 Purposes and Scope.
--------------------------------
Subject to the provisions of this Agreement and the CP Venture
Operating Agreement, the purposes of the Company are limited and include only
the following: (i) evaluating, selecting, acquiring or investing in, holding,
owning, developing, operating, maintaining, improving, leasing, selling as a
means of recovering the Members' investment and a profit thereon, exchanging and
otherwise using any real estate development, value added real estate acquisition
or real estate acquisition that is associated with a development opportunity, as
determined by the Managing Member; (ii) investigating or otherwise evaluating
real estate investment opportunities and incurring predevelopment and
pre-acquisition costs in connection with transactions that are not consummated;
(iii) borrowing money in furtherance of the business of the Company, including
issuing promissory notes or other evidences of indebtedness in connection
therewith and securing the same by deeds to secure debt, mortgages, deeds of
trust or other appropriate liens or security interests; (iv) loaning excess
capital to the extent consistent with the capital needs of the Company and not
immediately necessary to carry on the business of the Company; (v) guarantee any
line of credit financing of CPI (or any CPI Affiliate thereof); (vi) conducting
any other activity which is permissible for a "real estate operating company"
(within the meaning of the Plan Asset Regulation); and (vii) doing any and all
other acts or things which may be incidental or necessary to carry on the
business of the Company as herein contemplated. In furtherance of these
purposes, the Company shall have all powers necessary, suitable or convenient
for the accomplishment thereof. It is the intent of the Members that the Company
be a "real estate operating company" within the meaning of the Plan Asset
Regulations and the Managing Member shall have all power necessary to effectuate
such intent.
Section 2.5 Certificate of Formation.
--------------------------------------
The Company has filed a certificate of formation (the "Certificate")
with the Secretary of State of Delaware pursuant to the Act and shall also
execute and file such other certificates which may from time to time be
necessary or appropriate to file in connection with the continuation and
operation of the Company. The Members hereby agree to execute and file any
required amendments to the Certificate and shall do all other acts requisite for
the constitution of the Company as a limited liability company pursuant to the
Act or any other applicable law.
Section 2.6 Ownership and Waiver of Partition.
-----------------------------------------------
The interest of each Member in the Company shall be personal property
for all purposes. All property and interests in property, real or personal,
owned by the Company shall be held in the name of the Company and deemed owned
by the Company as an entity, and no Member, individually, shall have any
ownership of or interest in such property or interest owned by the Company
except as a member of the Company. Each of the Members irrevocably waives,
during the term of the Company and during any period of its liquidation
following any dissolution, any right that it may have to seek or maintain any
action for partition with respect to any of the assets of the Company.
Section 2.7 Limits of Company.
-------------------------------
(a) The relationship between and among the Members shall be
limited to carrying on the business of the Company in accordance with
the terms of this Agreement.
(b) The Members shall each devote such time to the Company as
is reasonably necessary to carry out the provisions of this Agreement.
Each of the Members understands that the other Member or its Affiliates
and any Manager and its Affiliates, including the Managing Member and
the Development Manager, may be interested, directly or indirectly, in
various other businesses and undertakings not included in the Company.
Each Member also understands that the conduct of the business of the
Company may involve business dealings with such other businesses or
undertakings. The Members hereby agree that the creation of the Company
and the assumption by each of the Members of their duties hereunder
shall be without prejudice to their rights (or the rights of their
members or Affiliates) to have such other interests and activities and
to receive and enjoy profits or compensation therefrom, and each Member
waives any rights it might otherwise have to share or participate in
such other interests or activities of the other Member or its
Affiliates and of the Managing Member, its members and their
Affiliates. The Members and Managing Member, its members and their
Affiliates, may engage in or possess any interest in any other business
venture of any nature or description independently or with others
including, but not limited to, the ownership, financing, leasing,
operation, management or development of real property and investments
in real property. Such other ventures and investments may compete with
the business and assets of the Company. Neither the Company nor any
Member shall have any right by virtue of this Agreement in or to any
such other venture or investment or the income or profits derived
therefrom. Except as provided in the Contribution Agreement, none of CP
Venture, Prudential and CPI shall have any obligation to offer or
contribute any particular business opportunity or investment to the
Company.
Section 2.8 No individual Authority.
-------------------------------------
Neither Member shall, without the express, prior written consent of the
other Member, take any action for or on behalf of or in the name of the Company
or other Member, or assume, undertake or enter into any commitment, debt, duty
or obligation binding upon the Company except for (a) actions expressly provided
for in this Agreement, (b) actions by a Member within the scope of its authority
granted in this Agreement, and (c) actions Approved by the Members and any
action taken in violation of the foregoing limitation shall be void. Each Member
shall indemnify and hold harmless the other Member and the Company and their
respective Affiliates from and against any and all claims, demands, losses,
damages, liabilities, lawsuits and other proceedings, judgments and awards, and
costs and expenses (including, but not limited to, reasonable attorneys' fees
and all court costs) arising directly or indirectly, in whole or in part, out of
any breach of the foregoing provisions by such Member, unless and to the extent
such Member or Affiliate was acting in good faith. This provision shall survive
dissolution of the Company.
Section 2.9 Responsibility of Members.
---------------------------------------
(a) The Company and each Member shall not be responsible or
liable for any responsibility, indebtedness, or other obligation of any
other Member incurred prior to, on the date of or after the execution
of this Agreement, except for those which are undertaken or incurred
expressly on behalf of the Company under or pursuant to the terms of
this Agreement or assumed in writing by both Members, and each Member
hereby indemnifies and agrees to hold the other Member and the Company
harmless from all such obligations and indebtedness except as
aforesaid.
(b) Each Member will notify the other Member as quickly as
reasonably possible upon receipt of any notice (i) of the filing of any
action in law or in equity naming the Company or any Member as a party
relating in any way to the business of the Company; (ii) of any actions
to impose liens of any kind whatsoever or of the imposition of any lien
whatsoever against the Company; (iii) of any casualty, damage or injury
to persons or property owned by the Company; or (iv) of the default by
the Company of any of its respective obligations to creditors or other
third parties. Each Member will endeavor to notify the other Member
verbally promptly upon learning of any of the foregoing actions, or the
threat thereof, which, in such Member's judgment, is material to the
Company or the other Member.
Section 2.10 Term.
-------------------
The term of the Company (the "Term") shall commence as of the date
first above written and continue until the first to occur of the following:
(a) December 31, 2028 unless extended by the Approval of
the Members; or
(b) The Company is dissolved and terminated as a result of the
dissolution and winding up of the Company in accordance with Article 9
hereof.
Section 2.11 Investment Representations.
-----------------------------------------
(a) Investment Intent. Each Member does hereby represent and
warrant to the other and to the Company, and to each of them, that it
has acquired its interest in the Company for investment solely for its
own account or, in the case of Prudential, solely on behalf of
institutional clients for whom Prudential makes discretionary real
estate investments that are held in a separate account of Prudential,
with the intention of holding such interest for investment purposes
only and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act of 1933,
as amended (the "Federal Act").
(b) Unregistered Interests. Each Member does hereby
acknowledge that it is aware that its interest in the Company has not
been registered under the Federal Act or under any state securities
laws. Each Member further understands and acknowledges that its
representations and warranties contained in this Section 2.11 are being
relied upon by the Company and by the other Member as the basis for the
exemption of the Members' interests in the Company from the
registration requirements of the Federal Act and under all state
securities laws. Each Member further acknowledges that the Company will
not and has no obligation to recognize any sale, transfer, or
assignment of a Member's interest in the Company to any person unless
and until the provisions of Article 8 hereof have been fully satisfied.
(c) Nature of Investment. Each Member does hereby acknowledge
and agree that a legend reflecting the restrictions imposed upon the
transfer of its interest in the Company under Article 8 hereof, under
the Federal Act and under state securities laws shall be placed on the
first page of this Agreement.
(d) Indemnification. Each Member shall and does hereby agree
to indemnify and save harmless the Company and the other Member, from
any liability, loss, cost, damage and expense (including, without
limitation, the costs of litigation and attorneys' fees) arising out
of, resulting from, or in any way related to the breach of any
representation or warranty of such Member set forth in this Section
2.11.
ARTICLE 3
CAPITAL
-------
Section 3.1 Original Capital Contributions.
--------------------------------------------
3.1.1 Contributions. As of the "Closing Proration Date", as
defined in the Contribution Agreement, the Members shall contribute the
following sums to the Company in cash:
Prudential $ 400,000
CP Venture $39,600,000
Provided, however, in accordance with Section 3.4 of the CP Venture
Operating Agreement and the Contribution Agreement, Prudential may make
such capital contribution to CP Venture, and CP Venture shall retain
and invest such amounts in short term investments pending long term
commitment permitted for "venture capital operating companies" under
the Plan Asset Regulations until such time as CPI and Prudential agree
in writing that the Company qualifies as a "real estate operating
company" within the meaning of the Plan Asset Regulations. At such time
as Managing Member believes that the Company qualifies as a "real
estate operating company" within the meaning of the Plan Asset
Regulations, it shall deliver to the Members a certificate in the form
attached hereto as Exhibit C, together with such supplemental
information as the Members may reasonably require in order to establish
that that the Company qualifies as a "real estate operating company"
within the meaning of the Plan Asset Regulations. Further, CP Venture
shall retain and invest its capital contribution in short term
investments until such time as CPI and Prudential agree in writing that
the Company qualifies as a "real estate operating company" within the
meaning of the Plan Asset Regulations with respect to such initial
capital contribution and with respect to all succeeding capital
contributions. Following such agreement and with respect to each
capital contribution, in accordance with the CP Venture Operating
Agreement, CP Venture will contribute such amounts, and the accrued
income earned thereon, to the Company. Upon contribution to the
Company, such amounts, shall be treated as capital contributed by
Prudential and CP Venture as of the dates actually contributed to CP
Venture for all purposes of this Agreement. In addition, upon
contribution to the Company, the Company shall retain and invest such
amounts in short term investments pending long term commitment
permitted for "real estate operating companies" under the Plan Asset
Regulations until such time as such amounts are applied to pay Total
Project Costs or other costs or expenditures permitted for "real estate
operating companies" under such Plan Asset Regulations. In exchange for
its contribution, CP Venture shall receive 105 Investor Units and 885
Developer Units. In exchange for its contribution, Prudential shall
receive 10 Investor Units. All initial contributions shall be deemed
contributed pro rata among the Units: $400,000 with respect to
Prudential's 10 Investor Units; $4,200,000 with respect to CP Venture's
105 Investor Units; and $35,400,000 with respect to CP Venture's 885
Developer Units.
3.1.2 Balance of CP Venture Cash Contribution Amount, Pro
----------------------------------------------------------
rata Prudential Contribution.
-----------------------------
(a) CP Venture shall contribute to the Company the balance of
the CP Venture Development Contribution Amount after its initial
capital contribution described in Section 3.1.1 above, as and when it
receives installments from Prudential of the "Prudential Contribution
Amount" as defined in the CP Venture Operating Agreement. Such
contributions to the Company shall be made not later than the second
Business Day following the date of each contribution by Prudential to
CP Venture, unless otherwise Agreed by the Members; provided, however,
that CP Venture shall retain and invest such amount in short term
investments pending long term commitment permitted for "real estate
operating companies" under the Plan Asset Regulations until such time
as CPI and Prudential agree in writing that the Company qualifies as a
"real estate operating company" within the meaning of the Plan Asset
Regulations. With respect to any such additional capital contribution,
at such time as the Managing Member believes that the Company qualifies
as a "real estate operating company" within the meaning of the Plan
Asset Regulations, it shall deliver to the Members for signature a
certificate in the form attached hereto as Exhibit C, together with
such supplemental information as the Members may require in order to
establish that that the Company qualifies as a "real estate operating
company" within the meaning of the Plan Asset Regulations. Upon
contribution to the Company, such amounts shall be treated as capital
contributed by CP Venture as of the dates such amounts were actually
received by CP Venture for all purposes of this Agreement. In addition,
upon contribution to the Company, the Company shall retain and invest
such amounts in short term investments pending long term commitment
permitted for "real estate operating companies" under the Plan Asset
Regulations until such time as such amounts are applied to pay Total
Project Costs or other costs or expenditures permitted for "real estate
operating companies" under such regulations. The total amounts
contributed by CP Venture under Sections 3.1.1 and 3.1.2 shall be equal
to the CP Venture Development Contribution Amount and the only Units
issued for such contributions shall be the Units described in Section
3.1.1. The Gross Asset Value of the Company assets shall not be
adjusted upon the contribution of any part of the CP Venture
Development Contribution Amount.
(b) Prudential shall contribute to the capital of the Company
the balance of the Prudential Development Contribution Amount remaining
after its initial capital contribution described in Section 3.1.1
above, pursuant to four (4) additional installments that shall be due
and payable as of the dates specified below, or such earlier dates as
may be Agreed by the Members, timely contribution being of the essence.
Each additional installment shall be an amount which, when added to the
previous amounts contributed by Prudential to the Company hereunder,
equals the minimum cumulative contribution amount set forth below, or,
if agreed in writing by CP Venture and Prudential with respect to any
of the first three installment dates, exceeds such minimum cumulative
contribution amount:
Date Prudential Contribution
---- -----------------------
December 30, 1998 Minimum Cumulative Contribution of $ 1,050,000
March 30, 1998 Minimum Cumulative Contribution of $ 1,550,000
June 29, 1999 Minimum Cumulative Contribution of $ 2,050,000
September 29, 1999 Minimum Cumulative Contribution equal to the
Prudential Development Contribution Amount
Prudential shall be unconditionally and irrevocably obligated
to contribute to the capital of the Company the minimum cumulative
amount specified on each installment date, timely contribution being of
the essence, and irrespective of any claim or breach or default or
right of offset by any party arising under the Contribution Agreement
or this Agreement or otherwise. All installments of the Prudential
Development Contribution Amount shall be paid by wire transfer or
immediately available federal funds to an account of the Company
designated by the Managing Member.
In the event Prudential fails to pay in full any installment
of the Prudential Development Contribution Amount as and when due and
payable under this Section 3.1.2, which failure remains uncured after
giving effect to the grace period set forth in Section 9.1.1(a), the
Managing Member shall have all rights and remedies available at law or
in equity including, without limitation, the right to pursue a suit for
specific performance against Prudential, and the right to enforce on
behalf of the Company any and all rights and remedies of the Company
against Prudential. Prudential shall not be entitled to prepay in
advance of the applicable contribution date any installment of the
Prudential Development Contribution Amount without the consent of the
Development Manager of CP Venture.
In accordance with Section 3.4.2 of the CP Venture Operating
Agreement, Prudential may make any capital contribution required by
this paragraph (b) to CP Venture until such time as CPI and Prudential
agree that the Company is then a "real estate operating company" within
the meaning of the Plan Asset Regulations. Following such agreement, in
accordance with the CP Venture Operating Agreement, CP Venture shall
contribute such amounts, and the accrued income earned thereon, to the
Company on behalf of Prudential. Upon contribution to the Company, such
amounts shall be treated as capital contributed by Prudential as of the
dates actually contributed to CP Venture for all purposes of this
Agreement. The total amounts contributed by Prudential under Sections
3.1.1 and 3.1.2 shall be equal to the Prudential Development
Contribution Amount and the only Units issued for such contributions
shall be the Units described in Section 3.1.1. The Gross Asset Value of
Company assets shall not be adjusted upon the contribution of any part
of the Prudential Development Contribution Amount.
(c) No breach or failure at any time of "Cousins' Express
Representations and Warranties" or covenants under the Contribution Agreement or
any of CPI's representations or covenants under the CP Venture Operating
Agreement shall excuse Prudential's performance of its obligations to pay the
Prudential Development Contribution Amount in full. Prudential's liability to
pay the Prudential Development Contribution Amount in full shall not be subject
to any limitation of liability or recourse in the Contribution Agreement or any
other agreement or arising under law, nor shall Prudential's liability be
subject to any claim or right of offset against CPI, the Company, Venture Two or
CP Venture. The obligation of Prudential to pay the Prudential Development
Contribution Amount is the full faith and credit obligation of Prudential,
provided, however, that liability for any failure of Prudential to pay the
Prudential Development Contribution Amount in full when due shall be limited to
an amount equal to the net asset value of those assets which are maintained in
the PRISA Account of Prudential at the time of any such failure. Prudential
represents to CPI and CP Venture that the PRISA Account is an open-end
commingled insurance company separate account of Prudential that has a net asset
value of not less than $2 billion as of the Effective Date. Prudential covenants
and agrees with CPI and CP Venture that it shall at all times hereunder maintain
investments (consisting of total investments in real estate assets and cash or
cash equivalents) in such PRISA Account having a net asset value (i.e., total
value of assets minus liabilities with respect thereto) not less than 200% of
the outstanding balance of the sum of the Prudential Development Contribution
Amount and the "Prudential Contribution Amount" as defined in the CP Venture
Agreement, and such covenant and agreement in this Section shall constitute the
full faith and credit obligation of Prudential. In the event Prudential becomes
a Defaulter due to Prudential's failure to pay the Prudential Development
Contribution Amount in full as and when due, or, unless Prudential shall agree
that liability against it shall not be so limited, should at any time the net
asset value of the PRISA Account be an amount less than 200% of the outstanding
balance of the sum of the Prudential Development Contribution Amount and the
"Prudential Contribution Amount" as defined in the CP Venture Operating
Agreement, then CPI shall have the right to acquire the entire interest in the
Company (including any Investor Units and Additional Capital Units) held by
Prudential (or any Prudential Affiliate), for an amount of cash (or wire
transfer of immediately available Federal funds) equal to 90% of the Prudential
Development Contribution Amount theretofore contributed, against delivery of
transfer instruments with respect to such interests in form acceptable to CPI
and otherwise in accordance with Section 8.3.7(b) of the CP Venture Operating
Agreement. Such right to purchase shall be exercisable by CPI upon written
notice to Prudential and shall be in addition to CPI's other rights and
remedies. The "Closing" of any such acquisition for which such notice is given
shall be consummated in accordance with Section 8.3.7 of the CP Venture
Operating Agreement, except that the place and date of Closing shall be the
place and date specified in any such notice of election from CPI. Until the
Prudential Development Contribution Amount is paid in full, Prudential will
provide CPI with quarterly and annual financial statements certifying as to the
net asset value of the PRISA Account. Such quarterly financial statements will
be provided not more than 45 days after the end of each calendar quarter and
such annual financial statement not more than 90 days after the end of each
calendar year.
Section 3.2 Additional Capital.
--------------------------------
3.2.1 Debt Financing and Equity Capital. In the event the
Managing Member determines at any time or from time to time that the Company
needs additional capital for any reason, the Managing Member shall have the
right, power and authority on behalf of the Company to arrange debt financing
for the Company, including loans from third party institutional lenders and
loans from the Development Manager or its Affiliates ("Affiliate Debt"), and,
subject to Section 3.2.2 below, to raise additional equity capital. Any
Affiliate Debt from the Development Manager or any Affiliate of the Development
Manger shall bear interest at an interest rate floating at 3% per annum over the
monthly average of the Federal Funds rate published from time to time in Federal
Reserve Statistical Release H.15, but in no event less than 10% per annum. The
other terms and conditions of any Affiliate Debt shall be determined by the
Managing Member in its sole discretion. Any personal guarantees or indemnities,
required in connection with any financing shall be provided solely by the
Company or the Development Manager or an Affiliate thereof.
3.2.2 Additional Capital Notice.
---------------------------------
(a) If the Managing Member in its sole discretion
determines to seek equity capital for the Company ("Additional
Capital"), in lieu of or in addition to Affiliate Debt, it shall have
the right to do so, subject to compliance with the terms or this
Section and subject to an overall aggregate limit of $50 million of
additional equity that may be contributed to the Company in exchange
for Additional Capital Units without the approval of the Members. In
the event the Managing Member determines to seek equity capital for the
Company, the Managing Member shall send a notice (an "Additional
Capital Notice") to the Members setting forth (i) the purposes for
which the additional equity funds are needed, (ii) the amount of equity
sought by the Company, (iii) each Member's pro rata share of such
additional equity, which pro rata share shall be in the same proportion
to the entire amount of equity being sought by the Company as each
Member's respective Units bears to all Units in the Company, and (iv)
the date when the equity contribution will be required, which date
shall be not less than 20 Business Days after the date of the
Additional Capital Notice.
(b) Following delivery of a Additional Capital Notice
from the Managing Member, the Members shall have the right and option
to elect to contribute the amount of equity required from the Company
pro rata in accordance with their respective Units. In order to be
valid, such election must be exercised by delivery of written notice of
election to the Managing Member not later than the 10th Business Day
after the date of the Additional Capital Notice. Failure of a Member to
deliver such notice of election on or before the 10th Business Day
after the date of the Additional Capital Notice shall be deemed to be
an irrevocable election of such Member not to make such contribution.
Any election to make the equity contributions shall be binding and
irrevocable and obligate the Member making such election to contribute
its pro rata share of the requested equity amount to the Company in
cash or immediately available funds on the date required by the
Additional Capital Notice; provided, however, if CP Venture and/or
Prudential does not elect to fund its pro rata share of the equity
sought by the Company then CPI, as Development Manager, shall be
entitled (but not required) to make (or cause its Affiliates to make) a
capital contribution directly to the Company in an amount equal to CP
Venture's and/or Prudential's (as the case may be) pro rata share of
the equity sought by the Company as specified in the Additional Capital
Notice or such other amount as the Managing Member may approve. All
equity capital raised under this Section 3.2 shall be in exchange for
Additional Capital Units in the Company. The Members acknowledge and
agree that in the event CPI, as Development Manager, (or any CPI
Affiliate) makes such equity contribution to the Company directly, the
Members' Original Capital interests in the Company shall be diluted as
a result of the issuance of Additional Capital Units in the Company as
set forth below. Upon any such contribution by CPI or a CPI Affiliate,
CPI or the CPI Affiliate shall be admitted as a Member of the Company.
The contributors of Additional Capital shall receive that number of
Additional Capital Units which results in the ratio of such new
Additional Capital Units to the total Units, including new Additional
Capital Units, equaling the ratio of (x) new Additional Capital to (y)
the adjusted Fair Market Value of all Company Projects and other assets
(as Approved by the Members or determined under Section 9.7 if the
Members do not agree), net of Company liabilities, plus the total of
such new Additional Capital less liabilities of the Company. The
Managing Member is hereby constituted and appointed as
attorney-in-fact, such appointment being coupled with an interest, to
execute, acknowledge and deliver all instruments and documents
necessary to effect any admission of CPI (or the CPI Affiliate) as
Member of the Company and the issuance of the Additional Capital Units.
Section 3.3 Intentionally Omitted.
-----------------------------------
Section 3.4 No Interest on Capital.
------------------------------------
Interest earned on Company funds shall inure solely to the benefit of
the Company, and except as specifically provided hereinabove, no interest shall
be paid upon any contributions or advances to the capital of the Company nor
upon any undistributed or reinvested income or profits of the Company.
Section 3.5 Reduction of Capital Accounts.
-------------------------------------------
Any distribution to a Member, whether pursuant to Sections 4.9 or 4.10
or any other Section of this Agreement, shall reduce the amount of such Member's
Capital Account in accordance with Section 3.6, but no adjustment in the Units
of any Member shall be made on account of any such distribution, except as
otherwise specifically provided in this Agreement.
Section 3.6 Capital Accounts.
------------------------------
(a) "Capital Account" means an account that shall be maintained for
each Member and which, as of any given date, shall be an amount equal to the sum
of the following:
(i) The aggregate amount of cash that has been
contributed to the capital of the Company as of such date by or on
behalf of such Member; plus
(ii) The agreed upon Gross Asset Value (as of the
date of contribution) of any property other than cash that has been
contributed to the capital of the Company as of such date by such
Member and the amount of liabilities assumed by any such Member under
Regulations Section 1.752 or which is secured by any Company property
distributed to such Member; plus
(iii) The aggregate amount of the Company's Net
Profit that has been allocated to such Member as of such date pursuant
to the provisions of Section 4.1 and any items of income or gain which
are specially allocated to such Member or other positive adjustment
required by the Regulations and which have not been previously taken
into account in determining Capital Accounts; minus
(iv) The aggregate amount of the Company's Net Loss
that has been allocated to such Member as of such date pursuant to
Sections 4.2 and 4.3 and the amount of any item of expense deduction or
loss which is specially allocated to such Member; and minus
(v) The aggregate amount of cash and the agreed upon
Gross Asset Value of all other property (as of the date of
distribution) that has been distributed to or on behalf of such Member
and the amount of any liabilities of such Member assumed by the Company
under Regulations Section 1.752 or which are secured by any property
contributed by such Member to the Company.
(b) Upon the sale, transfer, assignment or other disposition of an
interest in the Company after the date of this Agreement, the Capital Account of
the transferor Member that is attributable to the transferred interest will be
carried over to the transferee Member.
(c) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Managing Member shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities that are secured by contributed or distributed
property or that are assumed by the Company or the Members), are computed in
order to comply with such Regulations, the Managing Member may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Member pursuant to Section 9.4 hereof upon the
dissolution of the Company.
(d) In accordance with Section 5.1, each Member and its authorized
representatives shall have the right at all reasonable times to have access to,
inspect, audit and copy the books and records of the Company for the purpose of
reviewing the allocations to and maintenance of Capital Accounts and
ascertaining the correctness thereof and the Managing Member will cooperate in
any such examination. In the event that at any time a Member discovers an error
in the allocations to or computation of the Capital Accounts from that intended
by the provisions of this Agreement, it shall promptly notify the Managing
Member of such error and the Members shall work together to correct any such
error in allocations or computations in a manner having the least adverse effect
on the Members. Each Fiscal Year, in conjunction with the preparation of the
Company's annual federal income tax return, the Independent Accountants shall
prepare a report detailing all adjustments to and the ending balances of the
Capital Accounts of the Members for all Fiscal Years (a "Capital Account
Report"). The Independent Accountants will deliver to the Members for their
review the Capital Account Report at the same time the Company's tax or
information returns are delivered to the Members pursuant to Section 5.2. Any
Member shall raise any objection to the allocations and computations detailed in
a Capital Account Report no later than sixty (60) days prior to the expiration
of the period for filing an amended federal income tax return or information
return with respect to any Fiscal Year for which an error may have occurred.
Section 3.7 Negative Capital Accounts.
---------------------------------------
Any Member having a deficit or negative balance in its Capital Account
shall not be required to restore such deficit capital amount or otherwise to
contribute capital to the Company to restore its Capital Account.
Section 3.8 Resignations Withdrawals of Capital.
-------------------------------------------------
No Member shall have the right to resign or withdraw from the Company
or to withdraw any portion of the capital of the Company at any time. Upon
termination of the Company, the Members' capital shall be distributed pursuant
to Section 9.4 hereof.
Section 3.9 Limit on Contributions and Obligations of Members.
---------------------------------------------------------------
Except as expressly provided in Sections 3.1 and 3.2 the Members shall
have no liability or obligation to the Company or to the other Members (i) to
make additional capital contributions to the Company, (ii) to make any loans to
the Company or (iii) to endorse or guarantee the payment of any loan to the
Company.
ARTICLE 4
PROFITS, LOSSES, DISTRIBUTIONS, AND ALLOCATIONS
-----------------------------------------------
Section 4.1 Net Profit. Except as otherwise provided in this Article 4,
all Net Profit of the Company for each year shall be allocated to the Members as
follows:
(i) First, to the Additional Capital Members, pro rata
in proportion to their respective Additional Capital Units in an
amount equal to, in total, the Additional Capital Percentage multiplied
by Net Profit of the Company remaining after application of Sections
4.5(a)-(g), if any;
(ii) Second, to each Member, pro rata in accordance
with their then respective Units, until the cumulative Net Profit
allocated to each Member pursuant to this clause (ii) is equal to the
cumulative Net Loss allocated to such Member pursuant to Section 4.2
and Section 4.3 (such Net Profit to be allocated first with respect
to Net Loss allocated pursuant to Section 4.3 and thereafter in reverse
chronological order of the allocation of the Net Loss which has not
been previously offset by an allocation under this Section 4.1(ii));
(iii) Third, (A) except as provided in subparagraph (B) of
this Section 4.1(iii) with respect to allocations to adjust the Capital
Accounts of the Members immediately prior to liquidating distributions,
to the Developer Members, pro rata in proportion to their respective
Developer Units, to the extent of the sum of (x) the Developer Current
Return distributions, the Developer Current Valuation Return
distributions, the Developer Development Valuation Amount distributions
and the residual distributions of Cash Flow, if any, that the Developer
Members have received pursuant to Sections 4.9(c), 4.9(d), 4.9(e),
4.10.1(d), 4.10.1(e) and 4.10.1(f) hereof from the Effective Date to a
date thirty (30) days after the end of such Fiscal Year and (y) the 2%
escalation amount on the Developer Members' Unreturned Original Capital
for all Fiscal Years, less the cumulative Company Net Profit allocated
to the Developer Members pursuant to this paragraph (iii) for all prior
Fiscal Years; and (B), for purposes of adjusting the Capital Accounts
of the Members immediately prior to liquidating distributions, to the
Developer Members, pro rata in proportion to their respective Developer
Units, to the extent of the positive difference, if any, between (1)
the sum of all distributions to the Developer Members under this
Agreement with respect to Developer Units, including deemed
distributions to the Developer Members pursuant to Section 9.4 from the
Effective Date, and (2) the sum of (x) the amounts contributed with
respect to their Developer Units and (y) the aggregate Net Profit or
Loss, allocated to the Developer Members with respect to its Developer
Units for all Fiscal Years, including the current Fiscal Year pursuant
to Sections 4.1(i)-(iii)(A); and,
(iv) Thereafter, to the Investor Members and the Developer
Members, pro rata in accordance with their then respective Investor and
Developer Units.
Section 4.2 Net Loss. Except as otherwise provided in this Agreement,
all Net Loss of the Company for each year shall be allocated to the Members, pro
rata in accordance with their then respective Units.
Section 4.3 Limitation on Net Loss Allocations. Notwithstanding any
provision of this Agreement to the contrary, except as otherwise specifically
provided in this Section 4.3, in no event shall Net Loss be allocated to a
Member if such allocation would result in such Member's having a negative
Adjusted Capital Account Balance at the end of any year. All Net Loss in excess
of the limitation set forth in this Section 4.3 shall be allocated to any
remaining Member with a positive Adjusted Capital Account Balance, and if all
such Adjusted Capital Account Balances are zero or negative, to the Members
pursuant to Section 4.2 above.
Section 4.4 Other Items. Except as provided herein, for tax purposes,
all items of income, gain, loss, deduction or credit shall be allocated in the
same manner as are Net Profit and Net Loss.
Section 4.5 Special Allocations.
---------------------------------
The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Notwithstanding any other provision
of this Article 4, if there is a net decrease in Minimum Gain during
any Fiscal Year, each Member shall be specially allocated items of
Company gross income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member's share of the net
decrease in Minimum Gain, determined in accordance with Regulations
Section 1.704-2(g)(2). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items 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 Section 4.5(a) is intended to
comply with the minimum gain chargeback requirement in the Regulations
and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 4 except Section 4.5(a), if there is a net
decrease in Member Minimum Gain attributable to a Member Nonrecourse
Debt during any Fiscal Year, each Member who has a share of the Member
Minimum Gain attributable to such Member Nonrecourse Debt, determined
in accordance with Section 1.704-2(i)(5) of the Regulations, shall be
specially allocated items of Company gross income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5). 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 Section 4.5(b) is intended
to comply with the Member Nonrecourse Debt Minimum Gain chargeback
requirement in such Sections of the Regulations and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
or 1.704-1(b)(2)(ii)(d)(6), items of Company gross income and gain
shall be specially allocated to each such Member in an amount and
manner sufficient to eliminate, to the extent required by the
Regulations, the negative Adjusted Capital Account Balance of such
Member as quickly as possible, provided that an allocation pursuant to
this Section 4.5(c) shall be made if and only to the extent that such
Member would have a negative Adjusted Capital Account Balance after all
other allocations provided for in this Article have been tentatively
made as if this Section 4.5(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year that is in excess
of the sum of (i) the amount such Member is obligated to restore
(pursuant to the terms of a promissory note to the Company or
otherwise), and (ii) the amount such Member is deemed to be obligated
to restore pursuant to the penultimate sentence of each of Regulations
Sections 1.704-2(g)(1)(ii) and 1.704-2(i)(5) each such Member shall be
specially allocated items of Company gross income and gain in the
amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 4.5(d) shall be made if and only 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 4 have been tentatively made as if Section 4.5(c) and this
Section 4.5(d) were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year or other period shall be specially allocated to the Members pro
rata in proportion to their relative respective Units.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially
allocated to the Member who bears the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Regulations Section
1.704-1(i).
(g) 754 Elections. In the event any Member is required to
recognize any gain for income tax purposes with respect to an actual or
constructive distribution of property by the Company and in the event
the Company increases the tax basis of any of its assets under Sections
754, 734 and 755 of the Code by reason of such gain recognition by such
Member, then any tax benefit to which the Company is entitled in any
Fiscal Year as a result of such basis increase, whether in the form of
a deduction for depreciation or amortization of any asset of the
Company, a reduction in the gain to be recognized by the Company upon
the sale of any asset of the Company, or otherwise, shall be allocated
for income tax purposes to the Member who recognized such gain.
(h) Investor Priority Allocation.
(1) Except as provided in subparagraph (2)
of this Section 4.5(h) with respect to allocations to adjust the
Capital Accounts of the Members immediately prior to liquidating
distributions pursuant to Section 9.4.4, all or part of the Company Net
Profit or items of gross income and gain thereof for the Fiscal Year
remaining after the application of Sections 4.5(a)-(g), if any, shall
be specially allocated to the Investor Members, pro rata in proportion
to their respective Investor Units, to the extent of the sum of (x) the
Investor Current Return distributions and the residual distributions
of Cash Flow, if any, that the Investor Members have received pursuant
to Sections 4.9(b), 4.9(e) and 4.10.1(c) hereof from the Effective
Date to a date thirty (30) days after the end of such Fiscal Year and
(y) the 2% escalation amount on the Investor Member's Unreturned
Original Capital for all Fiscal Years, less the cumulative Company Net
Profit or items of gross income and gain thereof allocated to the
Investor Members pursuant to this Section 4.5(h)(1) for all prior
Fiscal Years; provided, however, the aggregate amount allocated to the
Investor Members pursuant to this paragraph (h) cannot exceed the
product of (A) the Company Net Profit remaining after application of
Section 4.5(a) - (g), if any, multiplied by (B) the Original Capital
Percentage.
(2) For purposes of adjusting Capital
Accounts of the Members immediately prior to liquidating distributions,
all or part of the Company Net Profit or items of gross income or gain
thereof for the Fiscal Year remaining after the application of
Section 4.5(a)-(h)(1), if any, shall be specially allocated to the
Investor Members, pro rata in proportion to their respective
Investor Units, to the extent of the positive difference, if any,
between (A) the sum of all distributions to Investor Members under this
Agreement with respect to Investor Units, including deemed
distributions to Investor Members pursuant to Sections 9.4, from the
Effective Date, and (B) the sum of (x), the amounts contributed with
respect to their Investor Units and (y) the aggregate Net Profit or
Loss, or items of gross income, gain or loss thereof, allocated to the
Investor Members with respect to their Investor Units for all Fiscal
Years, including the current Fiscal Year pursuant to Sections
4.5(a)-(h)(1); provided, however, the aggregate amount allocated to the
Investor Members pursuant to this paragraph (h) cannot exceed the
product of (A) Net Profit remaining after application of Section
4.5(a)-(g), if any, multiplied by (B) the Original Capital Percentage.
Section 4.6 Curative Allocations.
----------------------------------
The allocations set forth in Sections 4.5(a) through 4.5(f) (the
"Regulatory Allocations") are intended to comply with certain requirements of
Regulations Sections 1.704-1(b) and 1.704-2(b). Notwithstanding any other
provisions of this Agreement, other than the Regulatory Allocations, the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other items and the Regulatory
Allocations to each Member shall be equal to the net amount that would have been
allocated to such Member if the Regulatory Allocations had not occurred. The
Managing Member shall have reasonable discretion, with respect to each Fiscal
Year, to apply the provisions of this Section 4.6 in whatever manner is likely
to minimize the economic distortions that might otherwise result from the
Regulatory Allocations, it being the basic economic understanding of the Members
that they shall be returned their capital contributions (reduced, if at all, by
their pro rata share of Net Loss as in effect at the time or times such Net Loss
was allocated) plus their pro rata share (as adjusted from time to time) of Net
Profit allocated to the Members (as reduced by Net Loss allocated in the inverse
order of prior Net Profit).
Section 4.7 Other Allocation Rules.
------------------------------------
The following rules shall apply for purposes of making tax allocations:
(a) "Excess nonrecourse liabilities" of the Company within the
meaning of Regulations Section 1.752-3(a)(3) shall be allocated among
the Members in accordance with the manner in which its is reasonably
expected that the deductions attributable to those nonrecourse
liabilities will be allocated.
(b) To the extent permitted by Section 1.704-2(h) of the
Regulations, the Managing Member shall have complete discretion in
determining whether a distribution shall be treated as being
attributable to a Nonrecourse Liability or a Member Nonrecourse
Liability and the increase in the Minimum Gain or Member Minimum Gain
attributable to such liabilities. The Non-Managing Member recognizes
that such decision may affect the tax treatment of certain deductions
for a Fiscal Year and might offset after tax-returns of the Members.
Section 4.8 Section 704(c) Allocation.
---------------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
any gain or loss and any depreciation and cost recovery deductions recognized by
the Company for income tax purposes in any Fiscal Year with respect to all or
any part of the Company's property that is required or permitted to be allocated
among the Members in accordance with Section 704(c) of the Code and any
Regulations promulgated thereunder so as to take into account the variation, if
any, between the adjusted tax basis of such property at the time of its
contribution and the Gross Asset Value of such property at the time of its
contribution, shall be allocated to the Members for income tax purposes using
any method described in Section 1.704-3 of the Regulations as selected by the
Managing Member in its sole discretion. If and when the Capital Accounts of the
Members are required to be adjusted pursuant to Regulation Sections
1.704-1(b)(2)(iv)(f) or (g) with respect to a revaluation of any asset of the
Company, then subsequent allocations of income, gain, loss, and deduction,
including without limitation depreciation or deductions for cost recovery with
respect to such asset, shall take into account any variation between the then
existing adjusted basis of such asset for federal income tax purposes and the
agreed value of such asset, as such computations may be required under Sections
704(b) and 704(c) of the Code and Regulation Section 1.704-1(b)(4)(i). Any
elections or other decisions relating to such allocations shall be made by the
Managing Member in its sole discretion.
Section 4.9 Distribution of Cash Flow. Except as provided in Section
4.11 and Section 9.4.4, the Managing Member shall distribute Cash Flow to the
Members as and when determined by the Managing Member, but not less frequently
than quarterly, in the following order of priority:
(a) First, to the Additional Capital Members, pro rata in
proportion to their relative Additional Capital Units, an amount equal
to the product of (x) Cash Flow and (y) the Additional Capital
Percentage;
(b) Second, to the Investor Members, pro rata in proportion to
their respective Investor Units, in an amount, together with all
amounts previously distributed to the Investor Members under this
Section 4.9(b) and Section 4.10.1(c) below or otherwise paid from other
sources by CP Venture, is equal to the Investor Current Return;
(c) Third, to the Developer Members, pro rata in proportion to
their respective Developer Units, an amount together with all amounts
previously distributed to the Developer Members under this Section
4.9(c) and Section 4.10.1(d) below, is equal to the Developer Current
Return;
(d) Fourth, to the Developer Members, pro rata in proportion
to their relative Developer Units, in an amount, together with all
amounts previously distributed to the Developer Members under this
Section 4.9(d) and Section 4.10.1(e) below, is equal to the Developer
Current Valuation Return; and
(e) Fifth, to the Investor Members and the Developer Members,
pro rata in proportion to their then respective relative Developer and
Investor Units in the Company, provided that amounts otherwise
distributable to the Investor Members shall be distributed to the
Developer Members, pro rata in proportion to their respective Developer
Units, to the extent of any Unreturned Developer Development Valuation
Amount.
Section 4.10 Distribution of Capital Proceeds.
-----------------------------------------------
4.10.1 Order of Priority. Except as provided in Section 4.11 and
Section 9.4.4, the Managing Member shall distribute to the Members Capital
Proceeds received by the Company within thirty (30) calendar days after receipt
in the following order of priority:
(a) First, to the Additional Capital Members, pro rata in
proportion to their relative Additional Capital Units, in an amount
equal to the product of (x) Capital Proceeds and (y) the Additional
Capital Percentage.
(b) Second, to the Investor Members and the Developer Members,
pro rata in proportion to their respective Investor and Developer Units
in the Company, in an amount equal to the total of the Investor
Members' and the Developer Members' Unreturned Original Capital.
(c) Third, to the Investor Members, pro rata in proportion to
their respective Investor Units, in an amount which, together with all
amounts previously distributed to the Investor Members under this
Section 4.10.1(c) and Section 4.9(b) or otherwise paid from other
sources by CP Venture, is equal to the Investor Current Return;
(d) Fourth, to the Developer Members, pro rata in proportion
to their Developer Units, in an amount which, together with all amounts
previously distributed to the Developer Members under this Section
4.10.1(d) and Section 4.9(c), is equal to the Developer Current Return;
(e) Fifth, to the Developer Members, pro rata in proportion to
their Developer Units, in an amount which, together with all amounts
previously distributed to the Developer Members under this Section
4.10.1(e) and Section 4.9(d), is equal to the Developer Current
Valuation Return;
(f) Sixth, to the Developer Members, pro rata in proportion to
their Developer Units, in an amount which is equal to the quotient of
(i) the Unreturned Developer Development Valuation Amount divided by
(ii) a fraction, the numerator of which shall be the aggregate Investor
Units of all Investor Members, and the denominator of which shall be
the aggregate Units of all Investor Members and all Developer Members;
and
(g) Seventh, the balance, if any, of Capital Proceeds shall be
distributed to the Investor Members and Developer Members pro rata in
proportion to their respective Investor and Developer Units in the
Company.
4.10.2 Insufficient Balance. If Capital Proceeds are insufficient
to pay the total amount payable under any priority level in this Section,
Capital Proceeds shall be distributed within such priority level to the Members
in proportion to their claims under such priority level.
Section 4.11 Loss on CPI Note or Company Guaranty.
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In the event (i) any asset of the Company (including cash) is
transferred or paid to a creditor of CPI or any CPI Affiliate as a result of any
guaranty pledge, mortgage, deed of trust, deed to secure debt, assignment, or
other instrument given by the Company to secure an obligation of CPI or a CPI
Affiliate to the extent that the proceeds of such obligation (1) were not
incurred to pay, finance or re-finance an obligation, Operating Expense or Total
Project Cost or asset of the Company or (2) were not distributed by the Company
to the Members, or (ii) any note from CPI to the Company that is pledged as
collateral for any obligation of CPI or any CPI Affiliate is transferred to the
pledgee; then such transfer or payment shall be treated as if such asset or
note, as the case may be, had been sold by the Company at its fair market value,
(but in the case of a Project or other asset, in no event less than the cost of
such Project or asset, as reflected by the Total Project Costs incurred in
connection therewith), and in the case of any note from CPI or an Affiliate of
CPI, in no event less than the outstanding amount of such note, and the proceeds
of sale (net of liabilities encumbering such asset) distributed pursuant to
Section 4.10.1 of this Agreement; provided, however, to the extent such amounts,
had they actually been received by the Company as aforesaid, should have been
distributed to Prudential under this Agreement (and for purposes of this Section
4.11 it shall be deemed that such entire amount determined above should have
been distributed without any deduction, retention, reserve or set-aside to other
purposes which would have been permitted in the event of a voluntary disposition
of such asset), Prudential shall be entitled to a distribution of all future
amounts otherwise distributable with respect to the Developer Member Units under
this Agreement until Prudential has received the amounts that should have been
distributed to it from the sale of such asset or note out of such amounts
otherwise distributable to the Developer Members had such sale occurred as
aforesaid. For purposes of this Section 4.11, fair market value shall be Agreed
by the Members and if they are unable to agree such value shall be determined
pursuant to the procedure of Section 9.7 herein.
ARTICLE 5
COMPANY BOOKS; ACCOUNTING/FINANCIAL STATEMENTS
----------------------------------------------
Section 5.1 Books and Records.
-------------------------------
The Managing Member shall keep books and records at the Company's
principal place of business which are usually maintained by persons engaged in
similar businesses setting forth a true, accurate and complete account of the
Company's business and affairs including a fair presentation of all income,
expenditures, assets and liabilities thereof. Such books and records shall be
maintained, and its income, gain, losses and deductions shall be determined and
accounted for on the accrual basis in accordance with generally accepted
accounting principles consistently applied. Each Member and its authorized
representatives shall have the right at all reasonable times to have access to,
inspect, audit and copy the Company's books, records, files, securities,
vouchers, canceled checks, employment records, bank statements, bank deposit
slips, bank reconciliations, cash receipts and disbursement records, and other
documents (the "Documents"). Each Member and its authorized representatives
shall also have the right, in connection with an examination and audit of the
Documents, to question, upon at least three (3) days' notice, the employees, if
any, of the Company and to question during normal business hours, any other
Person and the employees of such other Person having custody or control of any
Documents, or responsibility for preparing the same. Each Member shall be
entitled to any additional information necessary for the Member to adjust its
financial basis statement to a tax basis as the Member's individual needs may
dictate.
Section 5.2 Tax Returns.
-------------------------
The Independent Accountants shall either prepare or review and sign, as
requested by the Managing Member, the initial federal, state and local income
tax returns of the Company, and thereafter the Managing Member may prepare such
tax returns or cause the Independent Accountants to prepare such returns, unless
the Non-Managing Member requests that the Independent Accountants prepare such
returns. The Managing Member shall cause such tax and information returns that
the Company may be required to file to be filed on a timely basis at Company
expense with the appropriate governmental authorities. No tax or information
return shall be filed unless Approved by the Members (which approval will not be
unreasonably withheld). The Company's accountants are (i) to deliver all tax and
information returns to the Members for their review, comment and reasonable
approval at least thirty (30) days in advance of the required filing date
therefor taking into account any extensions thereof, and (ii) upon the request
of a Member, furnish such Member with a projection of the Company's taxable
income or loss for a particular Fiscal Year of the Company by December 1 of such
year to assist in year-end tax planning, all at Company expense.
Section 5.3 Reports.
---------------------
(a) The Managing Member shall prepare and send to each Member the
following unaudited statements and reports:
(i) within thirty (30) calendar days after the last
day of each calendar month during the Term, a statement of income
and expense (x) showing the actual results of the operations of
the Company for the calendar month then ended and cumulatively to
date for the then elapsed portion of the current Fiscal Year and
(y) comparing on an itemized basis, all costs and expenses
incurred during such month and for such Fiscal Year with the
Budgets for such month and such Fiscal Year, with a narrative
explanation of any variations which are material to such Budgets;
(ii) within thirty (30) calendar days after the last
day of each calendar month during the Term, a balance sheet
showing the financial position of the Company as of such last
day; and
(iii) within forty-five (45) calendar days after the
last day of each calendar quarter, a report on the development
activities of the Company in narrative form for such quarter
period, including, but not limited to, information on the status
of acquisitions, zoning and permitting, construction and
development, leasing, financing and sales, and together with any
new (or modified) Development Budgets prepared in accordance with
Section 6.7.
(b) Each monthly report furnished to the Members by the Managing
Member shall also state, to the best knowledge of the Managing Member,
whether any default exists with respect to any material obligation of
the Company and whether any litigation is pending against the Company
or any Project.
(c) No later than ninety days prior to the commencement of each
Fiscal Year, the Managing Member shall prepare and send to each Member
(and Managing Member may require the property manager under any
Management and Leasing Agreement to prepare and send such statements
and reports): (i) a Project Operating Budget for the next Fiscal Year
for each Project in accordance with Section 6.7 (provided that there
shall be no requirement for a Project Operating Budget for any project
until thirty (30) days prior to the rent commencement date for such
Project), and (ii) a Company Operating Budget for the Next Fiscal Year
in accordance with Section 6.7.
Section 5.4 Audits.
--------------------
After the end of each Fiscal Year the Managing Member at the request of
either Member or as required to comply with leases or loans, shall cause an
audit to be made by the Independent Accountants covering the assets, liabilities
and net worth of the Company and its operations during such Fiscal Year, and all
other matters customarily included in such audits. In the event of such request
for audited statements, by April 30 of the subsequent Fiscal Year, the Managing
Member shall direct the Independent Accountants to deliver the following
financial statements with respect to the Company: a balance sheet and statement
of income and expense, statement of cash flows of the Company, and the Company's
capital position as of the end of and for such Fiscal Year, together with the
report of the Independent Accountants covering the results of such audit and
certifying such financial statements as having been prepared in accordance with
generally accepted accounting principles consistently applied. A copy of such
financial statements shall be provided to each Member.
Section 5.5 Bank Accounts.
---------------------------
All funds of the Company shall be deposited in its name in an account
or accounts maintained with the Bank or other financial institution selected by
the Managing Member. Funds of the Company shall not be commingled with funds of
any other Person. Checks shall be drawn upon the Company account or accounts
only for the purposes of the Company and shall be signed by respective duly
authorized representatives of the Members.
Section 5.6 Tax Elections.
---------------------------
Any and all federal, state or local tax elections for the Company shall
made by the Managing Member in its sole discretion. In making such elections,
however, the Managing Member shall take into account tax matters with respect to
the Company that would adversely affect a Member and shall use its good faith
efforts to consult with such Member and to make elections that have the least
adverse effect on all of the Members. Except as specifically provided in Section
6.3(f), the Company shall elect to be treated as and shall qualify as a
partnership for federal income tax purposes. Without limiting the generality of
the foregoing, the Managing Member shall specifically have the authority to make
any election that is permitted to classify the Company as a "partnership" or,
subject to section 6.3(f), as "corporation" for federal income tax purposes.
Section 5.7 Tax Matters Member.
--------------------------------
Pursuant to Section 6231(a)(7)(A) of the Code, the Members hereby
designate the Managing Member as the Company's "Tax Matters Partner", and it
shall serve as such at the expense of the Company with all powers granted to a
tax matters partner under the Code. Each Member shall give prompt notice to each
other Member of any and all notices it receives from the Internal Revenue
Service concerning the Company, including any notice of audit, any notice of a
deficiency in tax concerning the Company's federal income tax return.
ARTICLE 6
MANAGEMENT OF THE COMPANY
-------------------------
Section 6.1 Management of the Company.
--------------------------------------
6.1.1 General. Except as otherwise specifically set forth in
this Agreement, the Managing Member (without the consent or approval of any
other Member) shall have the sole and exclusive right, authority and power to
control, direct, manage and administer the business and affairs of the Company
and to do all things necessary to carry on the business and purposes of the
Company. The Managing Member, at the expense of and on behalf of the Company
shall conduct or cause to be conducted the management of the business and
affairs of the Company in accordance with and as limited by this Agreement. The
Managing Member is hereby authorized by all Members to execute and deliver on
behalf of the Company any and all documents, contracts, certificates,
agreements, promissory notes, guarantees, mortgages, deeds, and instruments, and
to take any action of any kind and to do anything and everything the Managing
Member deems necessary or appropriate in order to carry out the business of the
Company in accordance with the provisions of this Agreement and applicable law.
No person, firm, partnership, corporation or other entity shall be required to
inquire into said authority of the Managing Member to execute and perform any
document on behalf of the Company.
6.1.2 Managing Member. The Managing Member of the Company
shall be CP Venture.
6.1.3 Actions of Non-Managing Member. The Non-Managing Members
shall not (and shall not have authority to), without the prior written approval
of the Managing Member, bind or take any action on behalf of or in the name of
the Company, or enter into any commitment or obligation binding upon the
Company. Each Member covenants and agrees that it will comply in all respects
with any contract or agreement approved by the Managing Member as permitted
under this Agreement.
Section 6.2 Required Approval by Non-Managing Members.
-------------------------------------------------------
6.2.1 Generally Not Required. Except as set forth in Section
6.2.2, the Managing Member shall be authorized to take (or permit an
Affiliate of such Member to take) any action on behalf of the Company
which it deems in good faith to be appropriate or advisable without the
necessity of obtaining any consent or approval of any Non-Managing
Member, notwithstanding any other provision of this Agreement, the Act
or any applicable law, rule or regulation. The execution, delivery or
performance by the Managing Member or the Company of any agreement
authorized or permitted under this Agreement shall not constitute a
breach by the Managing Member of any duty that the Managing Member may
owe the Company or the Members or any other Persons under this
Agreement or of any duty stated or implied by law or equity.
6.2.2 Required Approval by Non-Managing Members.
-------------------------------------------------
(a) The Managing Member shall not take (or permit to be taken
by an Affiliate of such Member) any action on behalf of the Company
within the scope of the following matters without the prior written
direction or consent of all of the Members:
(1) dissolve and wind-up the Company, except that the
written direction or consent of the Non-Managing Member shall
not be required if the Non-Managing Member is a Defaulter
under any of subparagraphs 9.1.1(c)-(j) or (l) at such time
and such dissolution is conducted in accordance with Article 9
hereof;
(2) institute proceedings to adjudicate the Company a
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;
(3) change the nature of the business of the
Company;
(4) permit the Transfer by either Member of any Units
or other right or interest which was derived by it under the
Agreement, or any part thereof or any interest therein, except
as expressly permitted in the Agreement including, without
limitation, Article 8.
(b) The Managing Member may initiate a request that the
Non-Managing Members consent to or approve any matter or take any other
action respecting the business and affairs of the Company which is
required for consent or approval of all of the Non-Managing Members
pursuant to this Agreement. Such request shall be labeled "REQUEST FOR
CONSENT OR APPROVAL" and must include a narrative explanation of the
consent or action which is being requested. If pursuant to such a
request the Managing Member desires to schedule a special meeting of
the Members, such request must be received by the Non-Managing Members
at least ten (10) calendar days prior to the proposed date for such
special meeting.
(c) If there is a need for any consent or approval and no
special meeting therefor is requested by the Managing Member, the
Non-Managing Members shall use best efforts to respond within ten (10)
days after the date notified of the need for such consent or approval.
If such Members have not responded within said ten (10) day period, or
if a special meeting has been properly requested with respect to such
proposed consent or approval but has not been held within ten (10) days
after the date requested for such special meeting, then the Managing
Member may at any time thereafter notify the Non-Managing Members that
failure of such Non-Managing Members to respond within fourteen (14)
calendar days after such notice shall be deemed to be consent to and
approval by such Non-Managing Member of the matter or action requested.
Such notice must be labeled "FAILURE TO ACT ON REQUEST FOR CONSENT OR
APPROVAL" and must include a narrative explanation of the consent or
approval which is being requested. If such Non-Managing Member fails to
respond within said 14-day period, such matter or action requested
shall be deemed consented to and approved by such Non-Managing Member.
(d) Meetings of the Members may be held at the Company's
principal place of business or at such other place as shall be selected
by the Managing Member. Both regular and special meetings may be held
by means of a conference telephone or similar equipment if all persons
participating in the meeting can hear each other at the same time.
Section 6.3 Powers and Duties of Managing Member.
--------------------------------------------------
(a) Without limiting the generality of the foregoing, the
Managing Member shall have the following rights and powers, which it
may exercise at the cost, expense and risk of the Company:
(i) To perform all acts necessary to evaluate, select,
acquire, improve, develop, operate, manage, protect, sell,
exchange or otherwise dispose of any Project or Company asset;
(ii) To incur liabilities in the ordinary course of business
of the Company and to acquire other Projects and assets on behalf
of the Company;
(iii) To name any Project or change the name of any Project,
provided that no Member's name shall be used in such Project name
without the consent of such Member;
(iv) To cause the Company to (a) become a general partner,
joint venture, shareholder or holder of any other beneficial
interest in any partnership or other venture entered into in
connection with the ownership, development or financing of any
Project or other investment, (b) to enter into contracts or
agreements with any Person relating to the development,
improvement, operation, management and financing of any Project
or other investment, and (c) to become a party to other related
contracts, agreements and documents, and to exercise all rights,
privileges and elections granted the Company under such
documents;
(v) To borrow money, or commit to borrow money, whether on a
secured or unsecured basis, for any purpose and to modify, amend,
prepay, increase, renew, extend or consolidate any borrowing (or
loan document evidencing or securing the borrowing), and to
refinance or otherwise replace or repay, in part or in full, any
borrowing; and to place liens, mortgages and other security
deeds, upon the Company's assets in connection with any of the
foregoing;
(vi) To administer all matters pertaining to insurance with
respect to any Project, or other asset of the Company, including
obtaining and paying for policies of insurance insuring against
(1) loss or damage by fire, windstorm, tornado and hail, and
against loss or damage by such other, further and additional
risks as now are or hereafter may be embraced by the standard
extended coverage forms of endorsements, as may be required by
the Company's lenders (including the Managing Member or an
Affiliate thereof, or the Development Manager, as a lender), and
(2) liability to the public, tenants or any other person and risk
to its properties incident to the operation of any Project in
such amounts and upon such terms as are customary for the
protection against such risks of liability and loss;
(vii) To employ, terminate the employment of, supervise and
compensate such persons, firms or corporations for and in
connection with the business of the Company as it may deem
necessary or desirable;
(viii) To approve and implement any change, improvements,
repairs, alterations or changes or addition to or alteration of
any Project or other asset of the Company;
(ix) To acquire such tangible personal property and intangible
personal property as may be necessary or desirable to carry on
the business of the Company and sell, exchange or otherwise
dispose of such personal properties in the ordinary course of
business;
(x) To adopt leasing guidelines for any Project and to
negotiate and enter into leases or other arrangements involving
the rental, use or occupancy of space in any Project with
prospective tenants;
(xi) To keep all books of account and other records of th
Company;
(xii) To negotiate and contract with all utility companies
servicing any Project and to grant utility easements in the
ordinary course;
(xiii) To pay all debts and other obligations of the Company,
including amounts due under the financing and other loans to the
Company and costs of formation of the Company and of ownership,
improvement, construction, operation and maintenance of any
Project;
(xiv) To determine whether to repair, rebuild or restore any
Project, or any part thereof, which has suffered damage as a
result of fire or other casualty or the exercise of eminent
domain, subject to the requirements of any loan, lease, or other
agreement binding upon the Company and to determine whether to
borrow or commit to borrow, whether on a secured or unsecured
basis, necessary financing for the repair or rebuilding of any
part of any Project which has been damaged by fire or other
casualty or for the restoration of any part of any Project which
is required as a result of the exercise of the power of eminent
domain;
(xv) To prepare (or have prepared) and filed all tax returns
for and on behalf of the Company (but not the tax returns or
other reports of the individual Members) and to pay all taxes,
levies, assessments, rents and other impositions applicable to
the Company, using its good faith efforts to pay same before
delinquency and prior to the addition thereto of interest or
penalties and to undertake when appropriate any action or
proceeding seeking to reduce such taxes, assessments, rents or
other impositions;
(xvi) To deposit all monies received for or on behalf of the
Company in the Bank or financial institution as may be selected
by the Managing Member as a depository for the Company and to
invest any excess funds and to disburse and pay all funds on
deposit on behalf of and in the name of the Company in such
amounts and at such times as the same are required in connection
with the business of the Company;
(xvii) To establish the amount of cash reserves to be retained
when calculating Cash Flow or Capital Proceeds;
(xviii) To temporally invest excess Company funds, including
temporarily loaning such funds on an arms length basis to any
Member, member of a Member or Affiliate thereof;
(xix) To defend, adjust, settle, compromise or pay any claim,
obligation, debt, demand, suit, litigation or judgment by or
against the Company, and to assert or initiate any claim, suit,
litigation or other proceeding against any Person or any federal,
state or local government, or agency or official thereof;
(xx) To guarantee any line of credit financing of CPI or any
CPI Affiliate;
(xxi) To incur costs in connection with predevelopment and
pre-acquisition investigations of potential Projects and to
write-off any such costs incurred with respect to any such
Projects which are abandoned;
(xxii) To prepare Development Budgets for Projects and to
incur costs with respect to Projects;
(xxiii) To prepare Project and Company Operating Budgets and
to incur any costs in connection with the operation of any
Project and the Company; and
(xxiv) To admit CPI (or any CPI Affiliate) as a Member
pursuant to Section 3.2.2 hereof.
(b) The Managing Member, at the expense of and on behalf of
the Company shall conduct or cause to be conducted the management of
the business and affairs of the Company in accordance with and as
limited by this Agreement.
(c) The Managing Member may delegate all or any of its duties
hereunder to such other Person as it deems necessary or desirable for
the transaction of the business of the Company, and in furtherance of
any such delegation, shall have the right, on behalf of and at the
expense of the Company, to appoint, employ or contract with and
compensate any other Person, but in such event the Managing Member will
not be released from its responsibilities hereunder. Such Persons may,
under the supervision of the Managing Member, administer, or assist in
the administration of the routine day-to-day management of the Company
and its business and affairs; may serve as the Managing Member's
advisors and consultants in connection with decisions made by the
Managing Member; may act as consultants, accountants, correspondents,
attorneys, brokers, escrow agents, or in any other capacity; and may
perform such other acts or services for the Company as the Managing
Member may reasonably and prudently approve.
(d) The Managing Member shall prepare and deliver to the
Members the Company Operating Budget for each Fiscal Year. The Managing
Member will also make available on reasonable notice and during normal
business hours such additional information pertaining to any Project as
may reasonably be requested from time to time by the Non-Managing
Members.
(e) The Members acknowledge and agree that the Managing Member
may cause the Company to guarantee CPI's line of credit financing and
that CPI or a CPI Affiliate may temporarily borrow amounts from the
Company on an arms' length basis (as a short term investment pending
long term commitment permitted for "real estate operating companies"
under the Plan Asset Regulations) to the extent such a loan is not
inconsistent with the capital needs of the Company. For this purpose,
the interest rate charged on CPI's line of credit from time to time
shall be deemed to be arms' length. Any such transactions are expressly
authorized hereby and shall not be a violation of any duty or
obligation to the Company (including, but not limited to, any fiduciary
duty).
(f) The Managing Member shall have the right from time to time
to select or change the form of entity for the Company (e.g., a
partnership, corporation or trust, including a real estate investment
trust as defined in the Code) for tax and legal purposes, provided no
change shall be made to the form of entity without the consent of
Prudential if such change would have a material adverse economic impact
on Prudential, as reasonably determined by Prudential. In the event of
any dispute between the Managing Member and Prudential regarding
whether such change would have a material adverse economic impact on
Prudential, each of the Managing Member and Prudential shall meet with
each other and their respective counsel in order to determine the
nature of any issues relating to such dispute and determination, and in
order to develop a plan for avoidance of such material adverse economic
impact which shall be mutually agreeable to each Member. Pursuant to
the CP Venture Operating Agreement, CPI shall upon demand reimburse
Prudential for all of Prudential's reasonably incurred costs
(including, but not limited to, the actual and reasonable costs of
Prudential's attorneys and accountants, including in-house attorneys
and accountants provided that the costs of such in-house attorneys and
accountants is not in excess of $5,000.00 in the aggregate based on
actual time and cost) in connection with any proposal of the Managing
Member under this Section 6.3(f).
Section 6.4 Authorization for Expenditures. Without limitation of the
rights of the Managing Member to manage the Company, the Managing Member shall
be authorized to make any expenditure or incur any obligation on behalf of the
Company that the Managing Member determines is in the best interest of the
Company. In any event, the Managing Member shall not expend more than the amount
that the Managing Member in good faith believes to be the fair and reasonable
market value at the time and place of contracting for any goods purchased or
services engaged on behalf of the Company.
Section 6.5 Rights Not Assignable.
-----------------------------------
Except as provided in Article 8, the rights and obligations of the
Managing Member under this Agreement shall not be assignable voluntarily or by
operation of law by the Managing Member without the express prior written
Approval of the Members, and any attempted assignment without such Approval
shall be void.
Section 6.6 Emergency Authority.
---------------------------------
Notwithstanding the provisions of Sections 6.4 hereof, the Managing
Member shall have the right to take such actions and make such emergency
expenditures as it, in its reasonable judgment, deems necessary for the
protection of life or health or the preservation of Company assets if, under the
circumstances, in the good faith estimation of the Managing Member, there is
insufficient time to allow the Managing Member to obtain any required Approval
of the Members of such action and any delay would materially increase the risk
to life or health or materially increase the magnitude or likelihood of property
damage or other potential loss involved.
Section 6.7 Budgets.
---------------------
(a) Prior to undertaking any Project, the Managing Member shall
prepare a Development Budget for such Project (a "Development Budget").
Each Development Budget shall be provided to the Non-Managing Member
together with the next succeeding report on the development activities
of the Company to be delivered pursuant to Section 5.3(a)(iii). Each
Development Budget may be modified by the Managing Member from time to
time and the modifications thereof shall be delivered to the
Non-Managing Member together with the next succeeding report on the
development activities of the Company to be delivered pursuant to
Section 5.3(a)(iii).
(b) No later than thirty (30) calendar days prior to the rent
commencement date of a Project, the Managing Member shall prepare an
Project Operating Budget for such Project for the then remaining Fiscal
Year covering anticipated expenses of the Company in owning, operating
and maintaining the Project. No later than ninety days prior to the
commencement of each Fiscal Year, the Managing Member shall prepare a
Project Operating Budget for each Project. Each Project Operating
Budget shall be provided to the Non-Managing Member as provided in
Section 5.3(a). Each Project Operating Budget may be modified by the
Managing Member at any time, and the modifications thereof shall be
delivered to the Non-Managing Member together with the next succeeding
monthly report to be delivered pursuant to Section 5.3(a)(iii).
(c) No later than ninety (90) days prior to the commencement of
each Fiscal year, the Managing Member shall prepare a Company Operating
Budget for the Next Fiscal Year. The Company Operating Budget shall be
provided to the Non-Managing Member as provided in Section 5.3(a). Each
Company Operating Budget may be modified by the managing Member at any
time, and the modifications thereof shall be delivered to the
Non-Managing Member together with the next succeeding monthly report to
be delivered pursuant to Section 5.3(a)(iii).
Section 6.8 Development Agreement.
-----------------------------------
The Members hereby consent and agree that the Company and CPI (or a CPI
Affiliate) may enter into Development Agreements with terms consistent with
those enumerated in Exhibit A. CPI shall have the right from time to time during
the term of such agreement to designate the developer from among the group of
CPI and its Affiliates.
Section 6.9 Management and Leasing Agreement.
----------------------------------------------
The Members hereby consent and agree that the Company and CPI (or a CPI
Affiliate) may enter into Management and Leasing Agreements with terms
consistent with those enumerated in Exhibit B and provided that the compensation
for such services shall be at reasonable market rates. CPI shall have the right
from time to time during the term of such agreement to designate the manager and
leasing agent from among the group of CPI and its Affiliates.
Section 6.10 Actions to Maintain REIT Status.
----------------------------------------------
Notwithstanding any other provisions of this Agreement or the Act,
during the period commencing on the Effective Date and ending on the seventh
anniversary of the Effective Date, neither the Managing Member nor any other
Member shall take any action on behalf of the Company if such action could
reasonably be expected to jeopardize CPI's status as a real estate investment
trust ("REIT") under the Code. The Managing Member is hereby authorized on
behalf of the Company to take any action in good faith that it believes is
necessary or advisable in order to protect the ability of CPI to continue to
qualify as a "REIT," or to avoid CPI incurring any taxes under Section 857 or
Section 4981 of the Code. If the Managing Member is not otherwise authorized to
take a particular action under this Agreement, the Managing Member agrees to
discuss with the Non-Managing Member such action regarding CPI's REIT status
prior to making a definitive determination. In the event of any dispute between
the Managing Member and the Non-Managing Member regarding any decision regarding
CPI's "REIT" status as referenced in this Section 6.10 which involves action
which affects the status of the Company as a "real estate operating company"
under the Plan Asset Regulations or compliance with ERISA as set forth in
Section 6.11 each of the Managing Member and the Non-Managing Member shall meet
with each other and their respective counsel in order to determine the nature of
any issues relating to such dispute and determination, and in order to develop a
plan for compliance which shall be mutually agreeable to each Member.
Section 6.11 Actions to Maintain REOC Status.
----------------------------------------------
Notwithstanding any other provisions of this Agreement or the Act,
neither the Managing Member nor any other Member shall take any action on behalf
of the Company if (a) such action would reasonably be expected to jeopardize the
status of the Company as a "real estate operating company" under the Plan Asset
Regulations, or (b) such action would constitute a Plan Violation under ERISA.
In addition, the Managing Member shall take any action (and refrain from taking
any action) reasonably requested by any Member that such Member in good faith
believes is necessary or advisable in order to protect the status of the Company
as a "real estate operating company" under the Plan Asset Regulations, or if
such Member in good faith believes is necessary or advisable in order to avoid a
Plan Violation under ERISA. Without limiting the foregoing, on or before thirty
(30) days prior to the end of the "annual valuation period" of the Company as
defined in the Plan Asset Regulations (such date is referred to as the
"Compliance Deadline") of each year during the term of this Agreement, in order
to demonstrate compliance with the Plan Asset Regulations, the Managing Member
shall deliver to the Members a certificate in the form attached as Exhibit C,
for signature by both Members, together with such supplemental information as
the Members may require, in order to establish that that the Company qualifies
as a "real estate operating company" within the meaning of the Plan Asset
Regulations, and together with, subject to the Approval of the Members, such
supplemental covenants and guidelines (with respect to pending transactions
and/or any guidelines for the release of funds then held by CP Venture to the
Company) as the Members may reasonably require in order to confirm that the
Company continues to qualify as a "real estate operating company" within the
meaning of the Plan Asset Regulations. Each Member agrees to discuss with the
other Member any decision regarding such status prior to taking or requesting
any such action. The Members agree to discuss with each other any proposed
decision regarding such status and upon the request of a Member the Company
shall obtain an opinion of counsel reasonably satisfactory to the Members that
failure to take such actions reasonably could be expected to adversely affect
such status prior to taking or requesting such action. In the event such an
opinion is provided, the Managing Member shall take any appropriate action,
while using its good faith efforts to avoid taking any action that is adverse to
any Member. In the event of any dispute between the Members regarding any
decision regarding the status of the Company as a "real estate operating
company" under the Plan Asset Regulations or compliance with ERISA as set forth
in this Section 6.11 which involves action which affects CPI's "REIT" status as
referenced in Section 6.10, the Members shall meet with each other and their
respective counsel in order to determine the nature of any issues relating to
such dispute and determination, and in order to develop a plan for compliance
which shall be mutually agreeable to each Member.
Section 6.12 Liability of a Member for Conduct.
-----------------------------------------------
No Member (nor any director, shareholder, member, officer or employee
of such Member, direct or indirect) shall be personally liable or personally
accountable to the Company or to any of the Members, in damages or otherwise,
for any error of judgment, for any mistake of fact or of law, or for any other
act or thing which it may do or refrain from doing in connection with the
business and affairs of the Company, except for claims and damages resulting
from fraud, willful misconduct, bad faith, gross negligence or material breach
of this Agreement.
Section 6.13 Indemnity.
------------------------
The Company (to the extent of its assets) does hereby agree to
indemnify and to hold each Member and each member of the Members harmless from
any loss, expense, or damage (including reasonable attorneys' fees and court
costs) suffered by such Member by reason of anything the Company may do or
refrain from doing or such Member may do or refrain from doing hereafter for and
on behalf of the Company and in furtherance of its interests or by reason of
such Member's status as a Member of the Company; provided, however, that the
Company shall not indemnify such Member for any loss, expense, or damage which
such Member may suffer as a result of any act or omission of such Member for
which such Member would be liable under Section 6.12 hereinabove.
ARTICLE 7
COMPENSATION; REIMBURSEMENTS; CONTRACTS WITH AFFILIATES
-------------------------------------------------------
7.1.1 Compensation. Except as may be expressly provided for in
this Agreement, including without limitation, Sections 6.8, 6.9 and 7.2, or in
another written agreement Approved by the Members, no payment will be made by
the Company to either Member for the services of such Member or any member,
shareholder, director or employee, or Affiliate of such Member.
7.1.2 Reimbursements. Subject to the provisions of this
Agreement, each of the Members shall be reimbursed promptly by the Company for
all reasonable out-of-pocket costs and expenses incurred by each in connection
with the performance of its respective duties to the Company during the Term.
Section 7.2 No Contracts with Affiliates.
----------------------------------------------
Except as provided in this Section 7.2 and Sections 6.8 and 6.9,
neither Member shall enter into any agreement or other arrangement for the
furnishing to or by the Company of goods or services with any Person who is an
Affiliate of the Managing Member unless such agreement or arrangement has been
approved by the other Member after the nature of the relationship or affiliation
has been disclosed. If an Affiliate of a Member is in the business of providing
services of a kind needed by the Member, such Affiliate will have the right to
provide those services to the Company at market terms and conditions approved by
both Members. Notwithstanding anything to the contrary in this Section 7.2 or
Section 7.1.1 nothing herein shall prevent or limit the right of the Company to
engage CPI or any CPI Affiliate to provide development, property management,
leasing or administrative services to the Company or to any Project or other
asset of the Company, and to be compensated for such services at reasonable
market rates. Further, the Company may at any time enter into a partnership,
limited liability company or other joint venture with CPI or any CPI Affiliate,
provided that the relative interests of the Company and CPI (and/or the CPI
Affiliate) in such venture are based upon the relative fair market values of
their respective capital contributions to the venture.
ARTICLE 8
TRANSFER AND SALE RESTRICTIONS
------------------------------
Section 8.1 General.
---------------------
8.1.1 Required Consents. Except as expressly permitted in this
Agreement, neither Member shall directly or indirectly sell, assign, transfer,
mortgage, convey, charge or otherwise encumber or contract to do or permit any
of the foregoing, whether voluntarily or by operation of law (herein sometimes
collectively called a "Transfer"), or suffer any Affiliate or other third party
to Transfer, any part or all of its Units or its share of capital, profits,
losses, allocations or distributions hereunder without the express prior written
consent of the other Members, which consent may be withheld for any or no reason
whatsoever. Any attempt to Transfer in violation of this Article 8 shall be null
and void. The giving of consent in any one or more instances of Transfer shall
not limit or waive the need for such consent in any other or subsequent
instances.
8.1.2 Indirect Transfers. In order to effectuate the purpose of
this Section 8.1, each Member agrees that to the extent it desires that its
Units in the Company be at any time held by any other Person, such Member will
Transfer its Units, or part thereof, to such Person only through a direct
Transfer in the manner contemplated in this Article 8, and that, except as
expressly authorized in Section 8.2, no Transfer or other disposition of any
stock, partnership or other beneficial interest in any Member or other such
Person which holds any part of a Unit will be effected, directly or indirectly,
unless Approved by the Members, provided that (i) an initial issuance of shares
in an underwritten public offering, (ii) transactions involving contributions of
cash into, and withdrawals from, a Pension Investor, (iii) transactions
involving transfers of beneficial interest in a Pension Investor or Prudential,
and (iv) transactions in or transfers of shares of any Member whose shares are
publicly traded shall be permitted and will not be deemed to violate the
provisions of this Article 8. The Members acknowledge that none of their Units
are now held by any other Person and agree that any subsequent Transfer of any
of its Units to a Person which it desires to make shall, except as expressly
authorized in Section 8.2, require the express, prior written consent of the
other Member.
Section 8.2 Permitted Transfers by the Members.
-----------------------------------------------------
8.2.1 Transfers by Prudential. Without the consent of CP Venture,
Prudential may from time to time Transfer its Investor Units or its Additional
Capital Units in whole or in part (a) to a Prudential Affiliate, (b) from a
Prudential Affiliate to another Prudential Affiliate, or (c) to CP Venture or to
CPI or a CPI Affiliate upon exercise of the "Prudential Redemption Rights", the
"Prudential Put" or the "CPI Redemption Rights" described in Sections 8.3.5,
8.3.6 and 8.5 of the CP Venture Operating Agreement. Any Transfer pursuant to
this Section 8.2.1, other than a transfer to CPI or to CP Venture, shall not
relieve Prudential of its obligations under this Agreement.
8.2.2 Transfers by CP Venture. Without the consent of Prudential,
CP Venture may from time to time Transfer its Investor Units, its Developer
Units or its Additional Capital Units in whole or in part to CPI or a CPI
Affiliate upon liquidation of CP Venture, upon exercise of the "CPI Redemption
Rights," the "Prudential Redemption Rights" and the "Prudential Put" as
described in Section 8.3.5, 8.3.6 and 8.5 of the CP Venture Operating Agreement
or upon exercise of the rights granted under Section 8.8 of the CP Venture
Operating Agreement. Any Transfer pursuant to this Section 8.2.2, other than a
transfer to CPI or a CPI Affiliate, shall not relieve CP Venture of its
obligations under this Agreement.
8.2.3 Agreements with Transferees.
----------------------------------------
(a) If pursuant to the provisions of this Section 8.2, any
Member (the "Transferor") shall purport to make a Transfer of any of
its Units to any Person ("Transferee"), no such Transfer shall entitle
the Transferee to any benefits or rights hereunder until:
(i) the Transferee agrees in writing to assume and
be bound by all the obligations of the Transferor and be subject
to all the restrictions to which the Transferor is subject under
the terms of this Agreement and any agreements with respect to
any Project to which the Transferor is then subject or is then
required to be a party; and
(ii) except with respect to Transfers to CPI or any
CPI Affiliate, the Transferor and Transferee enter into a written
agreement with the other Member and the Company which provides
(x) that the Transferor is irrevocably designated the proxy of
the Transferee to exercise all voting and other approval rights
appurtenant to the Units acquired by the Transferee, (y) that the
Transferor shall remain liable for all obligations arising under
this Agreement prior to, and shall be liable for all obligations
arising under this Agreement and any agreements with respect to
any Project to which the Transferor is then subject or is then
required to be a party from and after, such Transfer in respect
of the Units so transferred; and (z) that the Transferee shall
indemnify the Members from and against all claims, losses,
liabilities, damages, costs and expenses (including reasonable
attorneys' fees and court costs) which may arise as a result of
any breach by the Transferee of its obligations hereunder; and
(iii) the Transferee of such transfer complies with
ERISA to the satisfaction of the Members
(b) No Transferee of any Unit shall make any further
disposition except in accordance with the terms and conditions hereof.
(c) All costs and expenses incurred by the Company, or the
non-transferring Member, in connection with any Transfer of a Unit,
including any filing or recording costs and the fees and disbursements
of counsel, shall be paid by the Transferor.
8.2.4 Right of First Offer.
The Members hereby agree and consent to the transfers of interests in
the Company contemplated by and made in accordance with Section 8.5 of the CP
Venture Operating Agreement.
Section 8.3 Restraining Order.
-------------------------------
If either Member shall at any time Transfer or attempt to Transfer any
of its Units in violation of the provisions of this Agreement and any rights
hereby granted, then the other Member shall, in addition to all rights and
remedies at law and in equity, be entitled to a decree or order restraining and
enjoining such Transfer and the offending Member shall not plead in defense
thereto that there would be an adequate remedy at law; it being hereby expressly
acknowledged and agreed that damages at law will be an inadequate remedy for a
breach or threatened breach of the violation of the provisions concerning
Transfer set forth in this Agreement.
ARTICLE 9
DEFAULT AND DISSOLUTION
-----------------------
Section 9.1 Events of Default.
-------------------------------
9.1.1 Definitions and Cure Periods. The occurrence of any of the
following events shall constitute an event of default ("Event of Default")
hereunder on the part of the Member with respect to whom such event occurs
("Defaulter") if within thirty (30) calendar days following notice of any
non-monetary default and if within five (5) calendar days following notice of
the non-payment of monies, the Defaulter fails to pay such monies, or in the
case of non-monetary defaults which can be cured, fails to commence substantial
efforts to cure such default or, having commenced to cure, thereafter fails
within a reasonable time to prosecute to completion with diligence and
continuity the curing of such default; provided, however, that the occurrence of
any of the events described in subparagraphs (c)-(j) and (l) below shall
constitute an Event of Default immediately upon such occurrence without any
requirement of notice or passage of time except as specifically set forth in any
such subparagraph:
(a) the failure by a Member to make any capital
contribution as required pursuant to the provisions of Article 3;
(b) the violation by a Member of any of the
restrictions set forth in Article 8 of this Agreement upon the right
of a Member to Transfer its Units;
(c) institution by a Member of proceedings of any nature under
any Laws of the United States or of any state, whether now existing or
subsequently enacted or amended, for the relief of debtors wherein such
Member is seeking relief as a debtor;
(d) a general assignment by a Member for the benefit of
creditors;
(e) the institution by a Member of a case or other proceeding
under any section or chapter of the Federal Bankruptcy Code as now
existing or hereafter amended or becoming effective;
(f) the institution against a Member of a case or other
proceeding under any section or chapter of the Federal Bankruptcy Code
as now existing or hereafter amended or becoming effective, which
proceeding is not dismissed, stayed or discharged within a period of
sixty (60) calendar days after the filing thereof or if stayed, which
stay is thereafter lifted without a contemporaneous discharge or
dismissal of such proceeding;
(g) a proposed plan of arrangement or other action by a
Member's creditors taken as a result of a general meeting of the
creditors of such Member;
(h) the appointment of a receiver, custodian, trustee or like
officer, to take possession of assets having a value in excess of
$100,000 of a Member if the pendency of said receivership would
reasonably tend to have a materially adverse effect upon the
performance by said Member of its obligations under this Agreement,
which receivership remains undischarged for a period of ninety (90)
calendar days from the date of its imposition;
(i) admission by a Member in writing of its inability to
pay its debts as they mature;
(j) attachment, execution or other judicial seizure of all or
any substantial part of a Member's assets or of a Member's Units, or
any part thereof, such attachment, execution or seizure being with
respect to an amount not less than $100,000 and remaining undismissed
or undischarged for a period of fifteen (15) calendar days after the
levy thereof, if the occurrence of such attachment, execution or other
judicial seizure would reasonably tend to have a materially adverse
effect upon the performance by said Member of its obligations under
this Agreement; provided, however, that said attachment, execution or
seizure shall not constitute an Event of Default hereunder if said
Member posts a bond sufficient to fully satisfy the amount of such
claim or judgment within fifteen (15) calendar days after the levy
thereof and the Member's assets are thereby released from the lien of
such attachment;
(k) material default in the performance of or failure to
comply with any other material agreements, obligations or undertakings
of a Member herein contained;
(l) fraud committed by a Member; and
(m) material breach of fiduciary duty or a material
misrepresentation (other than a misrepresentation by a Member which
would constitute a breach under the Contribution Agreement) by a
Member.
In determining what is "material" under this Agreement the standard of
materiality and "Materiality Threshold" under the Contribution Agreement shall
not be of any relevance.
9.1.2 Act of Insolvency. The occurrence of any events described
in subparagraphs (c)-(j) of Section 9.1.1 shall also constitute an "Act of
Insolvency," as said term is used in this Agreement.
Section 9.2 Causes of Dissolution and Termination.
---------------------------------------------------
Except as set forth in this Article 9 and Article 8, neither Member
shall have the right and each Member hereby agrees not to withdraw from the
Company, nor to dissolve, terminate or liquidate, or to petition a court for the
dissolution, termination or liquidation of the Company, except as provided in
this Agreement, and neither Member at any time shall have the right to petition
or to take any action to subject the Company's assets or any part thereof,
including any Project, or any part thereof, to the authority of any court of
bankruptcy, insolvency, receivership or similar proceeding. The Company shall be
dissolved and terminated only upon the earlier occurrence of any of the
following dates or events:
(a) December 31, 2028 or such later date as Approved by the
Members;
(b) a dissolution of the Company is Approved by the Members; or
(c) the sale or other disposition (exclusive of an exchange for
other real property or the granting of a lien or security interest in
any Project) by the Company of all or substantially all of the Projects
and other assets of the Company.
Section 9.3 Remedies.
----------------------
Upon the occurrence of an Event of Default, the non-defaulting Member
shall be entitled to exercise all rights and remedies available at law and
equity. Further, the non-defaulting Member shall be entitled to recover on its
own behalf and on behalf of the Company in enforcing the rights and remedies
against the Defaulter reasonable attorneys fees and costs incurred in connection
therewith.
Section 9.4 Procedure in Dissolution and Liquidation.
------------------------------------------------------
9.4.1 Winding Up. Upon dissolution of the Company pursuant to
Section 9.2 hereof, the Company shall immediately commence to wind up its
affairs and the Members shall proceed with reasonable promptness to liquidate
the business of the Company and (at least to the extent necessary to pay any
debts and liabilities of the Company) to convert the Company's assets into cash.
A reasonable time shall be allowed for the orderly liquidation of the business
and assets of the Company in order to reduce any risk of loss that might
otherwise be attendant upon such a liquidation.
9.4.2 Management Rights During Winding Up. During the period of
the winding up of the affairs of the Company, the Managing Member shall manage
the Company and shall make with due diligence and in good faith all decisions
relating to the conduct of any business or operations during the winding up
period and to the sale or other disposition of Company assets. Each Member
hereby waives any claims it may have against the other that may arise out of the
management of the Company by the other, pursuant to this Section 9.4.2, except
to the extent provided in Section 6.12 so long as such other Member and its
representatives act in good faith.
9.4.3 Work in Progress. If the Company is dissolved for any
reason while there is development or construction work in progress, winding up
of the affairs and termination of the business of the Company may include
completion of the work in progress to the extent the Managing Member may
determine the same to be necessary to permit a sale or other disposition of any
Project or asset which is most beneficial to the Members.
9.4.4 Distributions in Liquidation. The assets of Company shall
be applied or distributed in liquidation in the following manner and in the
following order of priority:
(a) First, in payment of debts and obligations of the Company
owed to third parties, which shall include either Member as the holder
of any secured loan, and to the expenses of liquidation in the order of
priority as provided by law; then
(b) Second, to the setting up of any reserves for a period of up
to twelve (12) months which the Managing Member may deem necessary for
any contingent or unforeseen liabilities or obligations of the Company;
then
(c) Third, in payment of any unsecured debts or obligations of
the Company to either Member or an Affiliate thereof, and then
(d) Fourth, to the Members pro rata in proportion to the positive
balances in their respective Capital Accounts (after such Capital
Accounts have been adjusted to reflect any Net Profit or Net Loss, or
items of income gain or loss thereof, to be allocated to the Members in
connection with the dissolution and liquidation of the Company pursuant
to Article 4 hereof, applied as if all the assets of the Company were
sold at Fair Market Value and the proceeds thereof were distributed in
accordance with Section 4.10, as modified by Section 9.4.6.
Losses attributable to the expenditure of funds held under the reserve
in Section 9.4.4(b) shall be allocated to each Member to the extent such
expenditure will reduce the amount of cash eventually distributed to each
Member.
9.4.5 Non-Cash Assets. Subject to the Approval of the Members,
every reasonable effort shall be made to dispose of the assets of the Company so
that the distribution may be made to the Members in cash. If at the time of the
termination of the Company, the Company owns any assets in the form of work in
progress, notes, deeds to secure debt or other non-cash assets, such assets, if
any, shall be distributed in kind to the Members, in lieu of cash,
proportionately to their right to receive the assets of the Company on an
equitable basis reflecting the fair market value of the assets so distributed,
which fair market value shall be determined by the Managing Member, as Approved
by the Members (and if not so Approved, by appraisal in the manner described in
Section 9.7). In the alternative, the Members may cause the Company to
distribute some or all of its non-cash assets to the Members as
tenants-in-common (or such other entity as the Members may select) subject to
such terms, covenants and conditions as the Members may adopt. Each Member's
Capital Account shall be charged or credited, as the case may be, as if each
non-cash asset had been sold for cash at fair market value as described above
and the net gain or loss recognized thereby had been allocated to and among the
Members in accordance with Article 4 hereof (applied as if the proceeds had been
distributed in accordance with Section 4.10.1, as modified by Section 9.4.6).
9.4.6. Allocation Upon Liquidation. For purposes of the
hypothetical sale of assets and distribution described in Section 9.4.5 and for
purposes of Section 9.4.4(d), Section 4.10.1 shall be treated as if subsections
(b), (c) and (d) thereof were deleted and the following were substituted in lieu
thereof:
"(b) Second, to the Investor Members, pro rata in proportion to
their respective Investor Units, in an amount which would result in the
Investor Members (and any successors and assigns to whom any Investor
Units have been assigned pursuant to Article 8) having received an
internal rate of return of 11.5% per annum on their investment in the
Units, (w) using as their initial investments the amounts contributed
with respect to such Units pursuant to Section 3.1, (x) with the
amounts contributed under the immediately foregoing item "(w)" being
treated as contributed at the times such amounts were in fact
contributed by the Members, (y) taking into account all cash
distributions and receipts received by them (or their successors or
assigns) with respect to such Units including, without limitation, any
amounts received prior to liquidating distributions, under Section
4.9(b), 4.9(e), 4.10.1(b), 4.10.1(c) and 4.10.1(g), as well as amounts
paid with respect to the Investor Current Return by CP Venture from
other sources, and (z) disregarding any changes in ownership of the
Units, treating the investment as having commenced on the date of the
first contribution to the Company by the Member with respect to such
Units and ending on the date of the last distribution from the Company
with respect to such Units.
(c) Third, to the Developer Members, pro rata in proportion to
their respective Developer Units, in an amount which would result in
the Developer Members (and any successors and assigns to whom any
Developer Units have been assigned pursuant to Article 8) having
received an internal rate of return of 11.5% per annum on their
investments in the Units, (x) using as their initial investments the
amounts contributed with respect to such Units pursuant to Section 3.1,
(y) taking into account all cash distributions and receipts received by
them (or their successors or assigns) with respect to such Units
including, without limitation, any amounts received prior to
liquidating distributions, under Section 4.9(c), 4.9(e) (but excluding
amounts otherwise distributable to the Investor Members but distributed
to the Developer Members as Unreturned Developer Development Valuation
Amount), Section 4.10.1(b), Section 4.10.1(d) and Section 4.10.1(g),
but not any amounts received under Section 4.9(d), Section 4.9(e) (to
the extent otherwise distributable to Investor Members but actually
distributed to Developer Members as Unreturned Developer Development
Valuation Amount), Section 4.10.1(e) or Section 4.10.1(f), and (z)
disregarding any changes in ownership of the Units, treating the
investment as having commenced on the Effective Date and ending on the
date of the last distribution from the Company with respect to such
Units.
(d)[Intentionally Omitted]"
Section 9.5 Disposition of Documents and Records.
--------------------------------------------------
All Documents of the Company shall be retained by a party mutually
acceptable to the Members upon termination of the Company for a period of not
less than three (3) years following the filing of the Company's final federal
income tax return with the Internal Revenue Service. The costs and expenses of
personnel and storage costs associated therewith shall be shared by the Members
pro rata, based upon respective Units owned. The Documents shall be available
during normal business hours to all Members for inspection and copying at such
Member's cost and expense. If either Member for any reason ceases as provided
herein to be a Member at any time prior to termination of the Company
("Non-Surviving Member"), and the Company is continued without the Non-Surviving
Member, the other Member ("Surviving Member") agrees that the Documents of the
Company up to the date of the termination of the Non-Surviving Member's interest
shall be maintained by the Surviving Member, its successors and assigns, for a
period of not less than three (3) years following the filing of the federal
income tax return with the Internal Revenue Service for the last period during
which allocations of Company Net Profit or Loss are made to such Member;
provided, however, that if there is an Internal Revenue Service examination or
audit, or notice thereof, which requires access to the Documents, the Documents
shall be retained until the examination or audit is completed and any tax
liability finally determined, and provided, further, the Non-Surviving Member
shall reimburse the Surviving Member for its pro rata share of personnel and
storage costs associated herewith. The Documents shall be available for
inspection, examination and copying by the Non-Surviving Member or its
representatives upon reasonable notice in the same manner as herein provided
during said three (3) year period.
Section 9.6 Date of Termination.
---------------------------------
The Company shall be terminated when its cash and other assets have
been applied and distributed in accordance with the provisions of Section 9.4.4.
The establishment of any reserves in accordance with the provisions of Section
9.4.4 shall not have the effect of extending the Term of the Company, but any
unexpended reserve amount shall be distributed in the order and priority
provided in such Section upon expiration of the period of such reserves.
Section 9.7 Fair Market Value.
-------------------------------
(a) Whenever this Agreement provides that the Company's assets shall be
valued at Fair Market Value, the value of such assets shall be determined as
follows. The parties shall first attempt to agree upon such Fair Market Value,
and if the Fair Market Value is not Approved by the Members within thirty (30)
days, then either Member may require by written notice to the other Member that
each Member obtain and deliver to the other Member an appraisal of the Fair
Market Value prepared by an MAI appraiser, investment banker, or other Person
who shall have substantial experience in valuing commercial real estate and
interests therein within thirty (30) days after such written request.
Thereafter, if within thirty (30) days after the receipt of each Member's
appraisal the Fair Market Value has not been Approved by the Members, the Fair
Market Value shall be determined as set forth in this Section 9.7. The "Fair
Market Value" of the Company or all of its assets shall mean the cash price
which a purchaser would pay on the effective date of the appraisal for all such
assets in excess of the liabilities of the Company, such valuation to be made on
the assumption that such assets are subject to any applicable agreements
relating to such assets including leases and development, management and service
agreements, then in effect (and each Member shall provide to the other Member
all such information in the possession or control of such Member or the Company,
including copies of all such documentation, with respect to such matters as the
other Member may reasonably request). The "Fair Market Value" of an interest in
the Company shall mean the amount which would be distributed by the Company to
the Member holding such interest pursuant to Section 9.4 were the Company
dissolved, liquidated and terminated as of the effective date of the
determination based upon the Fair Market Value of the Company, using such
appraised Fair Market Value of the Company as the amount available for
distribution under said Section 9.4.
(b) If the Members are unable to mutually agree upon the Fair Market
Value within thirty (30) calendar days after the expiration of the time periods
set forth in Section 9.7(a), such value shall be settled by arbitration in
Atlanta, Georgia in accordance with the Real Estate Valuation Arbitration Rules
of the American Arbitration Association. The arbitration shall be conducted by a
single arbitrator who shall be mutually selected by the Members and who shall be
an MAI appraiser, investment banker, or other Person who shall have substantial
experience in valuing commercial real estate and interests therein. Each Member
shall be required as part of the arbitration of Fair Market Value to present its
proposed Fair Market Value to the arbitrator, who, in making his decision, shall
be required to select that proposal which is the closest to the arbitrator's
view of Fair Market Value. If the Members are unable to agree upon an arbitrator
within 30 days of notice by either party to the other, then at the written
request of either party, the Members shall each select one arbitrator within 30
days of receipt of such request, and the two arbitrators so selected shall
appoint the arbitrator to make the determination under this Section 9.7(b)
within thirty (30) calendar days after so being appointed. In the event a party
fails to appoint its arbitrator in accordance with the preceding sentence, the
arbitrator appointed by the other party shall be the arbitrator for purposes of
settling the dispute which is the subject of such arbitration. The determination
by the arbitrator shall be final and binding on the Members and may be entered
in any court having jurisdiction thereof. All fees and expenses of the
arbitrators and all other expenses of the arbitration shall be paid by the party
whose proposed Fair Market Value was not selected in such arbitration.
ARTICLE 10
GENERAL PROVISIONS
------------------
Section 10.1 Notices.
----------------------
Any notice, consent, approval, or other communication which is provided
for or required by this Agreement must be in writing and may be delivered in
person to any party or may be sent by Federal Express, UPS or other reputable
national courier service regularly providing evidence of delivery. Any such
notice or other written communications shall be deemed received by the party to
whom it is sent (i) in the case of personal delivery, on the date of delivery to
the party to whom such notice is addressed as evidenced by a written receipt
signed on behalf of such party and (ii) in the case of courier delivery, the
date receipt is acknowledged by the party to whom such notice is addressed as
evidenced by a written receipt signed on behalf of such party. For purposes of
notices, the addresses of the parties hereto shall be as follows, which
addresses may be changed at any time by written notice given in accordance with
this provision:
If to Prudential: The Prudential Insurance Company of
- ---------------- America
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Managing Director, T
ransactions (Dale H. Taysom)
With a copy to: The Prudential Insurance Company of
-------------- America
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Principal, Asset Management
(Charles Miller)
With a copy to: The Prudential Insurance Company of
-------------- America
PAMG-RE Law Department
Arbor Circle South, 8 Campus Drive,
4th Floor
Parsippany, New Jersey 07054-4493
Attention: Assistant General Counsel
(Ellen Towey Kendall, Esq.)
With a copy to: Alston & Bird LLP
-------------- One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Albert E. Bender, Jr.
If to CP Venture LLC: c/o Cousins Properties Incorporated
- -------------------- 2500 Windy Ridge Parkway
Suite 1600
Atlanta, Georgia 30339-5683
Attention: Corporate Secretary
With a copy to: Troutman Sanders LLP
--------------- NationsBank Plaza
600 Peachtree Street N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Richard H. Brody
Failure of, or delay in delivery of any copy of a notice or other written
communication shall not impair the effectiveness of such notice or written
communication given to any party to this Agreement as specified herein.
Section 10.2 Entire Agreement.
-------------------------------
This Agreement (including all Exhibits referred to herein and attached
hereto, which Exhibits are part of this Agreement for all purposes), the CP
Venture Operating Agreement and the Contribution Agreement and all other written
agreements contemporaneously entered into by and among the Members and CPI
contain the entire understanding between the Members and supersedes any prior
understanding and agreements between them respecting the within subject matter.
There are no representations, agreements, arrangements or understandings, oral
or written, between the Members relating to the subject of this Agreement which
are not fully expressed in the foregoing agreements.
Section 10.3 Severability.
---------------------------
This Agreement is intended to be performed in accordance with, and only
to the extent permitted by, all applicable Laws of the state of Delaware. If any
provision of this Agreement, or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law; provided,
however, that the above-described invalidity or unenforceability does not
diminish in any material respect the ability of the Members to achieve the
purposes for which this Company was formed.
Section 10.4 Successors and Assigns.
-------------------------------------
Subject to the restrictions on Transfer set forth in Article 8, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto.
Section 10.5 Counterparts.
---------------------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall constitute one
and the same agreement.
Section 10.6 Additional Documents and Acts.
--------------------------------------------
In connection with this Agreement, as well as all transactions
contemplated by this Agreement, each Member agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may
be necessary or appropriate to effectuate, carry out and perform all of the
terms, provisions and conditions of this Agreement, and all such transactions.
Section 10.7 Interpretation.
-----------------------------
This Agreement and the rights and obligations of the respective parties
hereunder shall be governed by and interpreted and enforced in accordance with
the Laws of the State of Delaware.
Section 10.8 Terms.
--------------------
Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the person or
persons, firm or corporation may in the context require. Any reference to the
Code or Laws shall include all amendments, modifications, or replacements of the
specific sections and provisions concerned.
Section 10.9 Amendment.
------------------------
This Agreement may not be amended, altered or modified except by
instrument in writing and signed by all of the Members.
Section 10.10 References to this Agreement.
-------------------------------------------
Numbered or lettered articles, sections and subsections herein
contained refer to articles, sections and subsections of this Agreement unless
otherwise expressly stated. The words "herein," "hereof," "hereunder," "hereby,"
"this Agreement" and other similar references shall be construed to mean and
include this Agreement and all amendments thereof and Exhibits thereto unless
the context shall clearly indicate or require otherwise.
Section 10.11 Headings.
------------------------
All headings herein 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.
Section 10.12 No Third Party Beneficiary.
------------------------------------------
This Agreement is made solely and specifically between and for the
benefit of the parties hereto, and their respective members, successors and
assigns subject to the express provisions hereof relating to successors and
assigns, and no other Person whatsoever shall have any rights, interest, or
claims hereunder or be entitled to any benefits under or on account of this
Agreement as a third party beneficiary or otherwise.
Section 10.13 No Waiver.
-------------------------
No consent or waiver, either expressed or implied, by any Member to or
of any breach or default by any other Member in the performance by such other
Member of the obligations thereof under this Agreement shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other Member of the same or any other obligations of such
other Member under this Agreement. Failure on the part of any Member to complain
of any act or failure to act of any other Member, failure on the part of any
complaining Member to continue to complain or to pursue complaints with respect
to any act or failure to act of any other Member, or failure on the part of any
Member to declare any other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member of the rights
and remedies thereof under this Agreement or otherwise at law or in equity.
Section 10.14 Time of Essence.
-------------------------------
Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized corporate offices, each on the day
and year first above written.
CP VENTURE:
----------
CP VENTURE LLC
By: COUSINS PROPERTIES INCORPORATED,
as manager
By: _______________________________
Title: Senior Vice President
[CORPORATE SEAL]
PRUDENTIAL:
----------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: _______________________________
Title: _____________________________
[CORPORATE SEAL]
<PAGE>
Exhibit 10.4
CONTRIBUTION AND FORMATION AGREEMENT
------------------------------------
by and between
Cousins Properties Incorporated
and
The Prudential Insurance Company of America
November 12, 1998
Property Location
-------- --------
First Union Tower Greensboro, North Carolina
100-200 North Point Center East Alpharetta, Georgia
Grandview II Birmingham, Alabama
Presbyterian Medical Plaza Charlotte, North Carolina
North Point MarketCenter Alpharetta, Georgia
Greenbrier MarketCenter Chesapeake, Virginia
Los Altos MarketCenter Long Beach, California
Mansell Crossing II Alpharetta, Georgia
<PAGE>
TABLE OF CONTENTS
-----------------
1. Definitions.........................................................2
2. Formation and Transfer Documentation...............................17
2.1 Closing Date..............................................17
A. Venture Two Formation............................18
B. Venture Two Conveyance...........................18
C. Venture Formation................................18
D. Venture Three Formation..........................18
E. Venture Two Modification and Restatement.........18
F. Contribution by Cousins; Obligations
Unconditional....................................19
2.2 Closing Proration Date....................................19
A. Formation Closing Statement......................19
B. Investment by Prudential.........................19
3. Prudential Investment..............................................19
3.1 Obligations of Prudential Unconditional...................19
3.2 Initial Prudential Investment.............................20
3.3 Remainder of Prudential Investment........................20
4. Prudential's Due Diligence and Inspections.........................20
4.1 Delivery and Review of Property Documents.................20
4.2 Title and Survey Results..................................20
4.3 Disclaimer of Warranties..................................21
4.4 As-Is Contribution........................................22
5. Conditions to Closing..............................................22
5.1 Of Prudential.............................................22
A. Accuracy of Representations; No Default..........22
B. Environmental Condition..........................22
C. ERISA............................................23
D. Title Updates....................................23
E. Approval by Prudential's Investment Committees...23
5.2 Of Cousins................................................24
A. Accuracy of Representations; No Default..........24
B. ERISA............................................24
C. Title Updates....................................24
6. Closing............................................................24
7. Prorations, Credits and Closing Costs..............................25
7.1 Proration Items...........................................25
A. Real Estate Taxes and Assessments................25
B. Rents............................................26
C. Security Deposits/Advance Rent...................27
D. Utility Expenses and Payments; Existence of
Consolidated Utility Contract....................27
E. Utility Deposits.................................27
F. Service Contract Payments........................28
G. Lease-Up Costs and Commissions...................28
H. Ground Rent......................................28
I. New Lease Expenses...............................28
I. Other Adjustments................................28
K. 100/200 Repairs..................................29
L. Costs and Liabilities Related to Certain
Representation Exceptions........................29
M. Post Closing Documents...........................30
7.2 Proration Closing Statement and Schedules.................31
7.3 Reproration after Closing Proration Date..................31
7.4 Cousins'Closing Costs.....................................31
7.5 Prudential's Closing Costs................................31
8. Conveyances and Deliveries at Closing..............................32
8.1 Contribution Conveyance Agreements........................32
A. Deed.............................................32
B. Bill of Sale.....................................32
C. Assignment of Leases.............................32
D. Assignment of Service Contracts, Warranties
and Other Interests..............................32
E. Assignment of Ground Lease.......................33
F. Notices of Assignment and Assumption.............33
G. Transfer of Permits and Approvals................33
H. Transfer Tax Declaration.........................33
I. Other Instruments................................33
8.2 Cousins'Other Deliveries..................................33
A. Ground Lease Estoppel............................33
B. Lease Estoppels..................................34
C. Delivery of Keys and Property Documents..........34
D. Termination of Management Agreement and
Leasing Agreement................................34
E. Affidavit of Title...............................34
F. Non-Imputation Affidavit and Endorsement.........35
G. Evidence of Authority............................35
H. Loan Assumption Documents........................35
I. Existing Lender Estoppels........................35
J. Reaffirmation....................................35
K. Intentionally Omitted............................36
L. Formation Closing Statement......................36
M. Opinion of Cousins'Counsel.......................36
N. Non-Foreign Affidavit............................36
O. Georgia Residency Certificate....................36
P. Opinion of ERISA Counsel.........................36
Q. Management and Leasing Agreement.................36
R. Landlord Estoppels...............................36
S. Service Contract, Warranty and Title Estoppels...37
T. Master Lease.....................................37
U. Environmental Indemnity Agreement................37
V. Other Instruments................................37
8.3 Prudential's Deliveries...................................37
A. Formation Closing Statement......................37
B. Evidence Of Authority............................37
C. Reaffirmation....................................37
D. Intentionally Omitted............................37
E. Opinion of Prudential's Counsel..................37
F. Other Instruments................................38
8.4 Venture Two's Deliveries..................................38
A. Assignment of Leases.............................38
B. Assignment of Service Contracts, Warranties
and Other Interests..............................38
C. Ground Lease Assignment..........................38
D. Loan Assumption Documents........................38
E. Management and Leasing Agreement.................38
9. Representations and Warranties.....................................38
9.1 Cousins'Representations and Warranties....................38
A. Space Leases.....................................38
(i) Title...................................38
(ii) Rent....................................39
(iii) Rent Roll...............................39
(iv) Space Lease Defaults....................39
(v) Guarantees of Space Leases..............39
(vi) Copies of Space Leases and Commission
Agreements..............................39
(vii) No Lease Offsets........................39
(viii) Space Tenant Status.....................40
(ix) Leasing Commissions.....................40
B. Organization, Power and Authority................40
C. No Other Leases or Occupancies...................40
D. No Undisclosed Contracts.........................41
E. Defaults under Service Contracts.................41
F. Accuracy of Operating Statements.................41
G. No Violation of Land Use Requirements............41
H. Environmental Matters............................41
(i) Existing Reports........................42
(ii) No Known Litigation or Violation........42
(iii) Uses....................................42
(iv) No Asbestos; No PCBs....................42
I. Condemnation Proceedings.........................42
J. Litigation Proceedings...........................42
K. Bankruptcy.......................................42
L. Trade Name.......................................43
M. ERISA............................................43
N. Ground Lease.....................................43
O. Existing Indebtedness............................44
P. Building Systems Hardware and Software...........44
Q. Plans and Specifications and Soils Reports.......44
R. Assessments......................................44
S. Insurance Violations.............................45
T. Knowledgeable Parties............................45
9.2 Modifications, Reaffirmation at Closing...................45
9.3 Survival..................................................45
9.4 Remedies Prior To Closing.................................45
9.5 Cousins'Representations Deemed Modified...................45
9.6 Cousins'Representations and Warranties....................46
A. Organization, Power and Authority................46
B. No Bankruptcy....................................46
C. ERISA............................................46
D. Litigation Proceedings...........................47
E. Modifications; Reaffirmation at Closing..........47
F. Survival.........................................47
10. Cousins'Covenants..................................................47
10.1 No Alteration of Title....................................47
10.2 Standard of Operation and Maintenance.....................48
10.3 New Space Leases and Modifications to Existing
Space Leases..............................................48
10.4 Service Contracts.........................................48
10.5 Representations and Warranties............................49
10.6 More Greenbrier Land......................................49
11. Notices............................................................49
12. Casualty and Condemnation..........................................50
12.1 Casualty..................................................51
12.2 Condemnation..............................................51
13. Brokers............................................................51
14. Default and Remedies...............................................51
14.1 Default Prior To Closing..................................51
14.2 Cure Periods for Default Subsequent to Closing............51
14.3 Default by Cousins or Prudential Subsequent to
Closing; Liability and Limitation of Liability............52
15. General Provisions.................................................54
15.1 Execution Necessary.......................................54
15.2 Counterparts..............................................54
15.3 Successors and Assigns....................................54
15.4 Entire Agreement..........................................54
15.5 Time is of the Essence....................................54
15.6 Governing Law.............................................54
15.7 Survival..................................................54
15.8 Further Assurances........................................55
15.9 Exclusive Application.....................................55
15.10 Partial Invalidity........................................55
15.11 Interpretation............................................55
15.12 Waiver Rights.............................................55
15.13 No Implied Waiver.........................................56
15.14 Attorney's Fees...........................................56
15.15 Exhibits and Schedules....................................56
15.16 Confidentiality...........................................56
<PAGE>
SCHEDULE OF EXHIBITS
--------------------
EXHIBIT TITLE
------- -----
A. Legal Description of Land
B. Space Leases
C. Existing Loan Documents
D. Ground Lease
E. Personal Property
F. Record Exceptions
G. Rent Roll
H. Representation Exceptions Schedule
I. Service Contracts
J. Commission Agreements
K. Tenant Estoppel Certificate Form
L. Initial Venture Two Agreement
M. Venture Agreement
N. Venture Three Agreement
O. Venture Two Agreement
P. Title Cure Items
Q. Warranty Deed
R. Bill of Sale
S. Assignment and Assumption of Leases
T. Assignment of Service Contracts and Other Interests
U. Assignment of Ground Lease
V. Notices of Transfer:
-1: To Space Tenants
-2: To Contract Parties
W. Ground Lease Estoppel
X. Affidavit of Title
Y. Non-Imputation Affidavit
Z. Loan Assumption Agreement
AA. Existing Lender Estoppel
BB. Reaffirmation of Representations
CC. 100/200 North Point Center East Property Engineering Report
DD. Schedule of Operating Statements
EE. Schedule of Subleases
FF. Environmental Reports
GG. Building System Hardware and Software
HH. Schedule of Outstanding Lease-Up Costs and Commissions
II. Additional Adjustment Payment Details
JJ. Target Estoppel/Greenbrier MarketCenter
KK. Target Estoppel/North Point MarketCenter
LL. Additional Greenbrier MarketCenter Property
MM. First Union Environmental Indemnity
NN. Non-Foreign Affidavit
OO. Georgia Residency Certificate
PP. Cousins Estoppel Certificate
QQ. Master Lease (Best Buy Space)
RR Plans and Specifications
SS Soils Reports
<PAGE>
CONTRIBUTION AND FORMATION AGREEMENT
------------------------------------
THIS CONTRIBUTION AND FORMATION AGREEMENT (this "Agreement") is made
and entered into as of November 12, 1998, by and between Cousins Properties
Incorporated, a Georgia corporation ("Cousins"), Cousins/Daniel, L.L.C., a
Georgia limited liability company ("C/D") and Cousins MarketCenters, Inc., a
Georgia corporation ("CMC"), as to the Properties owned by C/D and CMC as shown
on Schedule A attached hereto and made a part hereof (C/D and CMC are referred
to individually and collectively as the context may require as the "Other
Owners"), and The Prudential Insurance Company of America, a New Jersey
corporation ("Prudential").
R E C I T A L S:
----------------
WHEREAS, Cousins and the Other Owners are the owners of the respective
Properties (as hereinafter defined) identified beside their respective names on
Schedule A attached hereto and made a part hereof, and of the respective tracts
or parcels of land more particularly described on Schedule A-1 through Schedule
A-8 attached to and made a part of said Exhibit A (the "Land"); and
WHEREAS, the Properties and the Assets (as hereinafter defined) owned
by Cousins (or the applicable Other Owner) consist of office and retail
properties located in Alpharetta, Georgia, Charlotte, North Carolina,
Greensboro, North Carolina, Chesapeake, Virginia, Birmingham, Alabama and Long
Beach, California; and,
WHEREAS, Cousins has formed CP Venture Two LLC (the "Venture Two"), a
Delaware limited liability company wholly owned by Cousins; and
WHEREAS, Cousins desires to contribute the Assets to Venture Two upon
the terms and conditions hereinafter set forth; and
WHEREAS, Cousins and Prudential intend to form CP Venture LLC (the
"Venture"), a to be formed Delaware limited liability company whose members
shall be Cousins and Prudential; and
WHEREAS, Cousins and Prudential desire to admit Venture as the majority
owner of Venture Two, upon the terms and conditions hereinafter set forth; and
WHEREAS, Cousins and Prudential intend to form CP Venture Three LLC
(the "Venture Three"), a to be formed Delaware limited liability company whose
members shall be Venture and Prudential, upon the terms and conditions
hereinafter set forth; and
WHEREAS, Prudential desires to invest monies in Venture and Venture
Three upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the promises, covenants,
representations and warranties hereinafter set forth, the sum of One Hundred
Dollars ($100.00) and other good and valuable consideration in hand paid by
Cousins to Prudential and by Prudential to Cousins upon the execution of this
Agreement, the receipt and sufficiency of which are hereby acknowledged by each
of Cousins and Prudential, Prudential and Cousins hereby agree as follows:
1. Definitions. Wherever used in this Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" shall mean, (a) as to Cousins, (i) a corporation,
partnership, limited liability company, or other entity owned (in whole or in
part) or controlled by Cousins, and (ii) a corporation, partnership, limited
liability company, or other entity owning or controlling, or under common
ownership or control with, Cousins, and (b) as to Prudential, (i) any investor
(individually and collectively, the "Investor") with respect to which Prudential
or Prudential Real Estate Advisors ("PREI") is acting as an advisor or
representing in connection with this Transaction, (ii) any of the officers,
members or partners of Prudential or an Investor, (iii) a corporation,
partnership, limited liability company, individual or other entity owned (in
whole or in part) or controlled by Prudential, the Investor or any of the
officers, members or partners of Prudential or the Investor, (iv) a corporation,
partnership, limited liability company, individual or other entity owning or
controlling, or under common ownership or control with, Prudential, the Investor
or any of such other officers, members or partners of Prudential or the
Investor.
"Agreement" shall mean this Contribution and Formation Agreement
between Cousins and Prudential with respect to the Assets.
"Alliance Management Agreement" shall mean, collectively, the Alliance
Management Agreement and the Alliance Leasing Agreement to be executed by
Cousins and Venture Two with respect to the Assets.
"Approved New Lease" is defined in Paragraph 7.1 (I). There are no
Approved New Leases which have been executed and delivered as of the date of
this Agreement.
"Approved New Tenant" shall mean a tenant under an Approved New Lease;
collectively, all tenants under the Approved New Leases are referred to as the
"Approved New Tenants".
"Assets" shall mean all of the Properties in the aggregate, as
described on Schedule A attached hereto and made a part hereof; the Assets shall
include, with respect to each Property, the Real Property, the Improvements, the
Space Leases, the Tenant Deposits, the Service Contracts, the Personal Property,
and the Other Interests applicable to each such Property.
"Building Systems" shall mean systems and facilities which are owned or
leased by Cousins or the Other Owners, or pursuant to which Cousins or the Other
Owners has an interest as a party to a Service Contract, and which are situated
on the Land with respect to the Assets, including, but not limited to,
elevators, security systems, HVAC, telephone facilities (including any cellular
or digital facilities), cable or satellite television systems and broadcast
facilities.
"Business Day" shall mean Monday through Friday excluding holidays
recognized by the state government of the State of Georgia.
"Closing" shall mean the consummation and closing of the Transaction.
"Closing Date" shall mean the date on which the Closing occurs, which
shall be on or before the Closing Deadline.
"Closing Deadline" shall mean the date hereof.
"Closing Proration Date" shall mean November 13, 1998, as of 12:01AM.
"Commissions" shall mean all leasing commissions, referral fees,
payments and obligations to make payments to agents, leasing agents, leasing
brokers or other parties under the Commission Agreements.
"Commission Agreements" shall mean all obligations to pay all leasing
commissions, referral fees, payments and obligations to make payments to agents,
leasing agents, leasing brokers or other parties with respect to the Space
Leases contained in a Space Lease or in the commission agreements described on
Exhibit J hereof. Notwithstanding the foregoing, however, when the term
"Commission Agreements" is used by implication in connection with a single
Property, the term "Commission Agreements" shall be a reference only to the
Commission Agreements applicable to such Property.
"Concession" shall mean any discount, concession, "free rent", payment,
gift, allowance, promise, incentive, inducement or other agreement whereby any
item or consideration of value (other than the right of occupancy of such Space
Tenant's demised premises) is granted to, extended to or provided to or for the
benefit of any Space Tenant.
"Condemnation Proceeding" shall mean any proceeding in condemnation,
eminent domain or any conveyance in lieu thereof against any portion of the
Assets.
"Contribution Conveyance Agreements" shall mean all those deeds,
assignments and instruments described in Paragraph 8.1 hereof evidencing and
relating to the contribution and conveyance by Cousins (or the applicable Other
Owner, as the case may be with respect to certain of the Properties owned by an
Affiliate of Cousins) of the Assets to Venture Two.
"Cousins" shall mean the entity referenced and defined in the first
paragraph of this Agreement.
"Cousins Estoppels" shall mean lease estoppel certificates in the form
of Exhibit PP executed by Cousins.
"Cousins' Express Representations and Warranties" is defined in Section
4.3.
"Cousins' Knowledge" shall mean the actual, as distinguished from
implied, imputed or constructive, knowledge on the date that the representation
or warranty is made, without inquiry or investigation or any duty to so inquire
or investigate, of the following individuals: Tom G. Charlesworth, Jack A.
LaHue, Dara J. Nicholson, Robert S. Wordes, Kelly Barrett, Terry M. Hampel and
Rox Green (the "Knowledgeable Parties"), and shall not be construed to refer to
the knowledge of any other Cousins Related Party or to impose or have imposed
upon the Knowledgeable Parties any duty to investigate the matters to which such
knowledge, or the absence thereof, pertains, including, but not limited to, the
contents of the files, documents and materials made available to or disclosed to
Prudential or the contents of files maintained by Cousins, any Affiliate of
Cousins, any Cousins Related Party or the Knowledgeable Parties. There shall be
no personal liability on the part of the Knowledgeable Parties arising out of
any representations or warranties made herein.
"Cousins Property Contribution" shall mean the contribution by Cousins
of the Assets into Venture Two, consisting of the conveyance by Cousins (or the
applicable Other Owner) of all of Cousins' or, as applicable, the Other Owners'
right, title and interest in and to the Assets pursuant to this Agreement.
"Cousins' Property Manager" shall mean Cousins or such other party or
parties which has provided, or is now or hereafter providing, property
management and/or leasing services with respect to the Assets, including any
Affiliate of Cousins which provides any such services to or for the benefit of
Cousins.
"Cousins Related Parties" shall mean any partner, shareholder, officer,
director, employee, agent, contractor, person or other representative acting or
purporting to act on behalf of Cousins or any Affiliate of Cousins.
"Cousins Venture Contribution" shall mean the contribution by Cousins
of a 99% member interest in Venture Two into Venture, including the admission of
Venture as the managing member of Venture Two.
"Environmental Matter" shall mean any issue related to (i) the disposal
or release of solid, liquid or gaseous waste into the environment, (ii) the
treatment, storage or other handling of any Hazardous Substance, (iii) the
placement of structures or materials into waters of the United States, or (iv)
the presence of any Hazardous Substance in any building, structure or workplace.
"Environmental Laws" shall mean any applicable local, state or federal
law with respect to the release of Hazardous Substances, the regulation of the
discharge of solid, liquid or gaseous waste into the environment or the
placement of structures or materials into the waters of the United States,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. ss.9601
et seq.; the Resource Conservation and Recovery Act, as amended ("RCRA") 42 USC
ss.6901 et seq.; the Hazardous Materials Transportation Act, as amended, 49
U.S.C. ss.1801, et seq.; the Federal Water Pollution Control Act, as amended, 33
U.S.C. ss.1251, et seq.; and any other applicable law or regulation.
"Environmental Litigation" shall mean any claims, actions, suits,
proceedings or investigations related to Environmental Matters with respect to
the ownership, use, condition, or operation of the Assets in any court or before
or by any federal, state or other governmental agency or private arbitration
tribunal.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Existing Indebtedness" shall mean those certain loans evidenced by the
Existing Loan Documents.
"Existing Lender" shall mean, as to the North Point MarketCenter
Property, The State of California Public Employee's Retirement System
("CALPERS"), and, as to the 100/200 North Point Center East Property, The
Northwestern Mutual Life Insurance Company ("Northwestern"). Notwithstanding the
foregoing, however, when the term "Existing Lender" is used by implication in
connection with a single Property, the term "Existing Lender" shall be a
reference only to the Existing Lender applicable to such Property.
"Existing Loan Documents" shall mean the loan documents with respect to
the North Point MarketCenter Property described on Schedule C-1 to Exhibit C
attached hereto and made a part hereof and the loan documents with respect to
the 100/200 North Point Center East Property described on Schedule C-2 to
Exhibit C hereof. Notwithstanding the foregoing, however, when the term
"Existing Loan Documents" is used by implication in connection with a single
Property, the term "Existing Loan Documents" shall be a reference only to the
Existing Loan Documents applicable to such Property.
"First Union Tower Property" shall mean the portion of the Land
described on Schedule A-1 to Exhibit A, together with all Appurtenances thereto
and all Improvements thereon.
"Future Active Commissions" shall mean obligations to pay leasing
commissions, referral fees, payments and obligations to make payments to agents,
leasing agents, leasing brokers or other parties with respect to the Space
Leases, whether such agreements are contained in a Space Lease or in any
separate commission agreement, which (i) result from an agreement made on or
prior to the Closing Date, and (ii) arise with respect to the extension or
renewal of a Space Lease or the expansion of the original premises demised under
the Space Lease, where such extension, renewal or expansion, as the case may be,
occurs after the Closing Date, but only as to which the leasing agent or leasing
broker is the sole broker to be paid on behalf of the Space Tenant in connection
therewith (other than the leasing agent for the owner of the respective Asset).
"Future Commissions" shall mean obligations to pay leasing commissions,
referral fees, payments and obligations to make payments to agents, leasing
agents, leasing brokers or other parties with respect to the Space Leases,
whether such agreements are contained in a Space Lease or in any separate
commission agreement, which (i) result from an agreement made on or prior to the
Closing Date and (ii) arise with respect to the extension or renewal of a Space
Lease or the expansion of the original premises demised under the Space Lease,
where such extension, renewal or expansion, as the case may be, occurs after the
Closing Date.
"Future Cousins Commissions" shall mean Future Commissions which are
not Future Active Commissions.
"Grandview II Property" shall mean the portion of the Land described on
Schedule A-3 to Exhibit A, together with all Appurtenances thereto and all
Improvements thereon.
"Greenbrier MarketCenter Property" shall mean the portion of the Land
described on Schedule A-6 to Exhibit A, together with all Appurtenances thereto
and all Improvements thereon.
"Ground Lease" shall mean that certain ground lease described on
Exhibit D.
"Hazardous Substance" shall mean any hazardous or toxic substance or
waste as those terms are defined by any applicable Environmental Law, together
with (if not so defined by such Environmental Laws), petroleum, petroleum
products, oil, PCBs and asbestos.
"Improvements" shall mean the buildings, structures (surface and
subsurface) and other improvements owned by Cousins (or the applicable Other
Owner) now or hereafter situated on or attached to any parcel of the Land.
Notwithstanding the foregoing, however, when the term "Improvements" is used by
implication in connection with a single Property, the term "Improvements" shall
be a reference only to the Improvements applicable to such Property.
"Initial Commissions" shall mean (i) all leasing commissions, referral
fees, payments and obligations to make payments to agents, leasing agents,
leasing brokers or other parties with respect to the Space Leases, whether such
agreements are contained in a Space Lease or in any separate commission
agreement, with respect to the procuring of the original term of the Space
Leases (and for the original premises demised under the Space Leases), and (ii)
any leasing commissions, referral fees, payments and obligations to make
payments to agents, leasing agents, leasing brokers or other parties with
respect to the Space Leases, whether such agreements are contained in a Space
Lease or in any separate commission agreement, payable upon any extension or
renewal of the Space Lease or any expansion of the original premises demised
under the Space Leases, where such extension, renewal or expansion, as the case
may be, has occurred prior to the Closing Date. "Initial Commissions" shall
exclude any Future Commissions.
"Initial Prudential Venture Investment" is defined in Paragraph 3.1.
"Initial Prudential Venture Three Investment" is defined in Paragraph
3.1.
"Initial Venture Two Agreement" is defined in Paragraph 2.
"Knowledgeable Parties" is defined in the definition of Cousins'
Knowledge.
"Land" shall mean those certain tracts or parcels of land, more
particularly described on Schedule A-1 through Schedule A-8 to Exhibit A.
Notwithstanding the foregoing, however, when the term "Land" is used by
implication in connection with a single Property, the term "Land" shall be a
reference only to the Land applicable to such Property.
"Land Use Requirements" shall mean all deed restrictions and
restrictive covenants contained in any Record Exception and all building codes,
zoning restrictions and other law, ordinance or regulation affecting the Real
Property or Improvements.
"Lease-Up Costs" shall mean the costs of executing, delivering and
complying with the initial construction and inducement obligations (relating to
tenant occupancy, but not ongoing obligations, such as maintenance, operations
or utilities) of the "landlord" or "lessor" under a Space Lease, which shall
include, without limitation, the costs and expenses of (i) Tenant Improvements,
(ii) legal fees for services in connection with the preparation and negotiation
of documents and other services rendered in connection with the effectuation of
the Space Lease transaction, and (iii) expenses incurred for the purpose of
satisfying or terminating the obligations of a Space Tenant under a Space Lease
to the landlord under another lease (whether or not such other lease covers
space in the Assets), but which exclude the costs of all leasing commissions,
referral fees, payments and obligations to make payments to agents, leasing
agents, leasing brokers or other parties with respect to the Space Leases,
whether such agreements are contained in a Space Lease or in any separate
commission agreement.
"Lien" shall mean any mortgage, deed of trust, security deed, lien,
judgment, pledge, conditional sales contract, security interest, past-due taxes,
past-due assessments, contractor's lien, materialmen's lien, judgment or similar
encumbrance against the Assets of a monetary nature, other than the Existing
Loan Documents.
"Los Altos MarketCenter Property" shall mean the portion of the Land
described on Schedule A-7 to Exhibit A, together with all Appurtenances thereto
and all Improvements thereon.
"Loss" shall mean any and all direct or indirect payments, obligations,
actions or causes of action, assessments, losses, liabilities, costs and
expenses, including, without limitation, penalties, interest on any amount
payable to a third party as a result of the foregoing, lost income and profits,
and any legal or other expenses (including, without limitation, reasonable
attorneys' fees and expenses) reasonably incurred in connection with
investigating or defending any claims or actions, whether or not resulting in
any liability.
"Major Tenant" shall mean any Space Tenant leasing 10,000 square feet
or more.
"Mansell Crossing II Property" shall mean the portion of the Land
described on Schedule A-8 to Exhibit A, together with all Appurtenances thereto
and all Improvements thereon.
"New Lease Commissions" shall mean all leasing commissions, referral
fees, payments and obligations to make payments to agents, leasing agents,
leasing brokers or other parties under the Approved New Leases.
"New Lease-Up Costs" shall mean the costs of executing, delivering and
complying with the initial construction and inducement obligations (relating to
tenant occupancy, but not ongoing obligations, such as maintenance, operations
or utilities) of the "landlord" or "lessor" under the Approved New Leases, which
shall include, without limitation, the costs and expenses of (i) New Lease
Tenant Improvements , (ii) legal fees for services in connection with the
preparation and negotiation of documents and other services rendered in
connection with the effectuation of the Approved New Lease transaction, and
(iii) expenses incurred for the purpose of satisfying or terminating the
obligations of an Approved New Tenant under an Approved New Lease to the
landlord under another lease (whether or not such other lease covers space in
the Assets), but which exclude New Lease Commissions.
"New Lease Tenant Improvements" shall mean all construction work,
repairs, improvements, equipment, painting, decorating, partitioning, and other
work and obligations to satisfy the Approved New Tenant's requirements with
regard to initial occupancy under an Approved New Lease, which are required to
be completed by and/or paid for by the "lessor" or "landlord" under the Approved
New Lease, including payment of all construction allowances.
"North Point MarketCenter Property" shall mean the portion of the Land
described on Schedule A-5 to Exhibit A, together with all Appurtenances thereto
and all Improvements thereon.
"Operating Statements" shall mean the operating statements identified
on Exhibit DD hereof.
"Other Documents" shall mean all documents, other than the Property
Documents, relating to the ownership, operation, leasing, development and
management of the Assets in the possession or control of Cousins or the Other
Owners, including, but not limited to, (a) lease applications, and credit
information for both signed and proposed Space Leases, (b) all of Cousins' files
relating to the original construction of the Improvements, replacements made to
such Improvements, Tenant Improvements, and any additional improvements after
construction, (c) all environmental assessments, tests, investigations and
inspection reports, with respect to Hazardous Substances or Environmental
Matters, together with all written communications and documents relating to such
reports sent or received by Cousins, (d) all written communications and
documents relating to all soils reports and engineering studies relating to the
Assets, (e) all tenant prospect lists and other mailing lists which are directly
related to the leasing and promotion of the Assets, (f) all other files and
correspondence pertaining to the development, construction, operation,
maintenance, leasing and management of the Assets, specifically including, but
not limited to, all data contained in computer records with respect thereto
(and, if and to the extent assignable and subject to any license agreements with
respect thereto, all such computer records pertaining to the development,
construction, operation, maintenance, leasing and management of the Assets being
contributed, including the Building Systems, and the software and manuals with
respect to the operation thereof, but expressly excluding software and manuals
for the software operated on the Cousin's network), all files concerning
litigation relating to the Assets, and any items, instruments or documents
comprising, documenting or relating to any of the Other Interests, and (g) all
guaranties, work letter agreements, improvement agreements and other agreements
with Space Tenants, subleases, default letters or notices, estoppel letters,
rental adjustment notices, escalation notices and other correspondence in regard
to the Space Leases, and other documents relating to the Space Leases and all
credit reports and accounting records in regard thereto, together with all
amendments to, modifications of, renewals and extensions thereof.
"Other Interest" shall mean any other (without duplication of any
interests described in any other definition set forth herein) interest of
Cousins (or the applicable Other Owner) in and to the Real Property and the
Improvements or pertaining thereto, including, without limitation, all of the
right, title and interest of the Cousins in and to:
(i) All Property Documents (and Other Documents, but
without duplication of any other assignment or transfer hereunder);
(ii) All entitlement of Cousins in and to any award to be made
in exchange for any of Cousins' interests in the Assets to be conveyed,
including any award or payment to be made (a) for any taking in any
Condemnation Proceeding of land lying in the bed of any street, road,
highway or avenue, open or proposed, in front of or adjoining all or
any part of the Land, (b) for damage to the Assets or any part thereof
by reason of change of grade or closing of any such street, road,
highway or avenue, and (c) for any taking in a Condemnation Proceeding
of any part of the Assets;
(iii) Any name or trade name by which the Improvements or the
Real Property or any part thereof may be known, if any, including, but
not limited to the Project Name and all other fictitious names used on
the date hereof in connection with the ownership and operation of the
Assets and all registrations for such names, subject to the provisions
of Paragraph 8.1 (D) of this Agreement regarding the name
"MarketCenter";
(iv) The right to the use of any telephone number located
under the Project Name and the right to list telephone numbers under
the Project Name ), subject to the provisions of Paragraph 8.1 (D) of
this Agreement regarding the name "MarketCenter";
(v) All entitlement of Cousins and the Other Owners in and to
any casualty insurance proceeds due Cousins or the Other Owners with
respect to the Assets arising after the date hereof less, however, (a)
subject to part (b) below, the amount of any expenditures by Cousins
and the Other Owners with respect to any such casualty, which shall be
reimbursed to Cousins and the Other Owners from such casualty insurance
proceeds, provided, however, that (b) Cousins or the Other Owner, as
applicable, shall contribute to Venture Two the amount (but in no event
greater than the amount of such casualty loss) which the insurer is
entitled pursuant to the terms of the applicable insurance policy to
deduct from the proceeds otherwise payable to Cousins on account of any
such casualty loss occurring on or prior to the Closing Date as a
deductable or coinsurance payment, as applicable, to the extent not
theretofore paid to the insurer; and
(vi) All of the right, title, interest, powers, privileges,
benefits and options of Cousins and the Other Owners, or otherwise
accruing to the owner of the Assets, in and to (i) any development
rights (including the benefit of any impact fee payments previously
made with respect to the Properties for the construction of the
existing Improvements on the Properties, but excluding any impact fee
credits remaining with respect to the Properties and/or any land in the
vicinity of the Properties, all of which shall be retained by Cousins),
allocations of development density or other similar rights allocated to
or attributable to the Land or the Improvements, and (ii) any utility
capacity allocated to or attributable to the Land or the Improvements,
whether the matters described in the preceding clauses (i) and (ii)
arise under or pursuant to governmental requirements, administrative or
formal action by governmental authorities, or agreement with
governmental authorities or third parties.
Notwithstanding the foregoing, however, when the term "Other Interests" is used
by implication in connection with a single Property, the term "Other Interests"
shall be a reference only to the Other Interests applicable to such Property.
"Other Owners" shall mean the entities referenced and defined in the
first paragraph of this Agreement, which entities are Affiliates of Cousins; as
used herein, when the term "Other Owner" is used it shall be a reference only to
the Property owned by such Other Owner.
"Permits and Approvals" shall mean all licenses, certificates
(including certificates of occupancy), consents, variances, waivers,
authorizations, permits and similar approvals issued with respect to the
construction, ownership, operation or occupancy of the Assets by governmental
authorities having jurisdiction over the Assets ("Permits") or by private
parties or associations pursuant to any of the Permitted Title Exceptions or
otherwise in connection with any Land Use Requirement ("Approvals").
Notwithstanding the foregoing, however, when the term "Permits and Approvals" is
used by implication in connection with a single Property, the term "Permits and
Approvals" shall be a reference only to the Permits and Approvals applicable to
the Improvements located on such Property.
"Permitted Title Exceptions" shall mean the following:
(a) The Space Leases and any Approved New Lease entered into
between the date hereof and the Closing Date in accordance with the
terms of this Agreement; and the Ground Lease.
(b) All real estate taxes and assessments not yet due and
payable as of the Closing Date.
(c) The terms and conditions of all Permits and Approvals and
all local, state and federal (if applicable) zoning and building laws,
ordinances and regulations.
(d) The Record Exceptions, including the Existing Loan
Documents but excluding any Liens.
(e) Any existing utility easements serving the Real Property.
(f) The state of facts disclosed by the Surveys.
"Personal Property" shall mean all personal property and fixtures owned
by Cousins or the Other Owners and located on the Property and used or usable in
connection with any present or future occupation or operation of all or any part
of the Real Property or the Improvements or both, but excluding any personal
property owned by Cousins which is located on the Property and used or usable by
Cousins' Property Manager in the provision of property management services to
the Property (the "Excluded Personal Property"), which Excluded Personal
Property is listed on Schedule E-9 of Exhibit E, which personal property shall
include (to the extent not constituting a portion of the Excluded Personal
Property on the Property) all fixtures, furniture, furnishings, carpeting,
draperies, fittings, equipment, machinery, apparatus, building materials, and
wall partitions, appliances and articles, all Building Systems, building
drawings, plans and specifications, sprinkler and well systems, electrical
equipment, fire prevention and extinguishing apparatus, engineering, maintenance
and housekeeping supplies and materials. An inventory of the Personal Property
is shown on Exhibit E. Notwithstanding the foregoing, however, when the term
"Personal Property" is used by implication in connection with a single Property,
the term "Personal Property" shall be a reference only to the Personal Property
applicable to the Improvements located on such Property.
"Plan Assets Regulations" shall mean C.F.R ss. 2510.3-101, promulgated
under ERISA.
"Plans and Specifications" shall mean the schedule of plans and
specifications for the Improvements set forth on Exhibit RR hereof.
"Presbyterian Medical Plaza Property" shall mean the portion of the
Land described on Schedule A-4 to Exhibit A, together with all Appurtenances
thereto and all Improvements thereon.
"Project Name" shall mean Cousins' and the Other Owners' right, title,
and interest, if any, in the names of each of the Properties set forth on
Schedule A attached hereto and made a part hereof, subject to the provisions of
Paragraph 8.1 (D) hereof regarding the name "MarketCenter". Notwithstanding the
foregoing, however, when the term "Project Name" is used by implication in
connection with a single Property, the term "Project Name" shall be a reference
only to the Project Name applicable to the Improvements located on such
Property.
"Property" shall mean the Real Property, the Ground Lease, the
Improvements, the Space Leases, the Tenant Deposits, the Service Contracts, the
Personal Property and the Other Interests. Notwithstanding the foregoing,
however, when the term "Property" is used by implication in connection with a
single parcel or group of parcels of Land as identified in Schedule A-1 through
Schedule A-8 of Exhibit A, the term "Property" shall be a reference only to such
Property.
"Property Documents" shall mean the following documents owned by
Cousins or the Other Owners relating to the Assets [but in each case only to the
extent such document is in the possession or control of Cousins or the Other
Owners or Cousins' Property Manager];
(1) all leasing activity records, lease files and other records
pertaining to the Space Tenants or any proposed tenants;
(2) Cousins' standard form of lease for the Assets;
(3) the most recent real estate tax bills for each Property;
(4) copies of Cousins' existing owner's title insurance policies,
as endorsed;
(5) copies of all title documents relating to the Assets
(including all amendments and modifications thereto) and
operating files related thereto, if any;
(6) all existing surveys of the Assets;
(7) all plans and specifications pertaining to the Assets;
(8) all Warranties (or copies thereof if originals are
unavailable);
(9) all soils reports and engineering studies relating to the
Assets and the Environmental Reports;
(10) all Permits and Approvals (or copies thereof if originals are
unavailable);
(11) the current Rent Roll for each Property;
(12) all catalogs, booklets, manuals, files, records,
correspondence, leasing brochures and materials, advertising
materials and other items which are directly related to the
leasing and promotion of the Assets; and
(13) the Operating Statements.
Notwithstanding the foregoing, however, when the term "Property Documents" is
used by implication in connection with a single Property, the term "Property
Documents" shall be a reference only to the Property Documents applicable to
such Property.
"Prudential" shall mean the entity referenced and defined in the first
paragraph of this Agreement.
"Prudential Express Representations and Warranties" shall mean the
representations and warranties of Prudential set forth herein.
"Prudential Investment" shall mean the investment by Prudential into
Venture and Venture Three of an amount equal to (i) Two Hundred Eighty-Three
Million Seven Hundred Fifty Thousand and No/100 Dollars ($283,750,000.00), minus
(ii) the unpaid principal balance of the Existing Indebtedness as of the Closing
Date. The current balance of the Existing Indebtedness is $53,281,219.40 as of
the Closing Date, as follows: (a) $24,581,670.20, as to the North Point
MarketCenter Property and the Existing Indebtedness held by CALPERS, and (b)
$28,699,549.20, as to the 100/200 North Point Center East Property and the
Existing Indebtedness held by Northwestern. The Prudential Investment shall be
equal to $230,468,780.60.
"Prudential Venture Investment" shall mean the investment by Prudential
into Venture of an amount equal to 99% of the Prudential Investment.
"Prudential Venture Three Investment" shall mean the investment by
Prudential into Venture Three of an amount equal to 1% of the Prudential
Investment.
"Real Estate Operating Company" shall mean a real estate operating
company under the Plan Assets Regulations.
"Real Property" shall mean the Land and the Improvements located
thereon, including, without limitation, (a) all easements appurtenant to the
Land and other easements, grants of right, licenses, privileges or other
agreements for the benefit of, belonging to or appurtenant to the Land whether
or not situate upon the Land, including, without limitation, signage rights and
parking rights or agreements, all whether or not specifically referenced on
Exhibit A, (b) all mineral, oil and gas rights, riparian rights, water rights,
sewer rights and other utility rights allocated to the Land, (c) all right,
title and interest, if any, of Cousins in and to any and all strips and gores of
land located on or adjacent to the Land, (d) all right, title and interest of
the owner of the Land in and to any roads, streets and ways, public or private,
open or proposed, in front of or adjoining all or any part of the Land and
serving the Land, and (e) all rights to development of the Land granted by
governmental entities having jurisdiction over the Land (except only as limited
with respect to certain impact fee credits as set forth in the definition of
Other Interests) (collectively, the "Appurtenances"). Notwithstanding the
foregoing, however, when the term "Real Property" is used by implication in
connection with a single Property, the term "Real Property" shall be a reference
only to the Real Property applicable to such Property.
"Record Exceptions" shall mean all instruments recorded in the real
estate records of the County (or City, as the case may be) in which the Land is
located which affect the status of title to the Real Property, including, but
not limited to, those items described on Exhibit F.
"Rent Roll" shall mean the rent rolls with respect to the Property set
forth on Exhibit G, each of which show (a) the names of all Space Tenants, and
(b) the portion of the Improvements and total number of square feet covered by
each Space Lease.
"Rental Payments" shall mean all payments received by or on behalf of
Cousins or the Other Owners or Venture Two from Space Tenants and Approved New
Tenants with respect to the Space Leases and Approved New Leases for items such
as minimum or base rent, additional rent, percentage rent, termination or
cancellation charges, reimbursement for real estate taxes, utilities, operating
and maintenance expenses and insurance, as well as any other reimbursements or
charges received thereunder.
"Representation Exception Schedule" shall mean the exceptions to the
representations and warranties of Cousins set forth on Exhibit H.
"Service Contracts" shall mean the agreements listed on Exhibit I and
made a part hereof. Notwithstanding the foregoing, however, when the term
"Service Contracts" is used by implication in connection with a single Property,
the term "Service Contracts" shall be a reference only to the Service Contracts
applicable to the Improvements located on such Property.
"Service Contract Estoppel" is defined as an estoppel certificate
executed by each contractor party to a Service Contract which is not cancelable
upon thirty (30) days after written notice from the owner of the Assets, which
estoppel certificates shall be in the form reasonably approved by Prudential.
"Service Contract Records" shall mean all operating files relating to
the Service Contracts, including, but not limited to, all repair and maintenance
files with respect to the Improvements and all Building Systems, including all
operating manuals relating to the Building Systems and all data contained in
software programs and manuals with respect to such installation, operation and
maintenance.
"Soils Reports" shall mean the soils reports and soils engineering
studies, tests, and investigations for the Land set forth on Exhibit SS hereof.
"Space Leases" shall mean the leases listed on Exhibit B hereof.
Notwithstanding the foregoing, however, when the term "Space Leases" is used by
implication in connection with a single Property, the term "Space Leases" shall
be a reference only to the Space Leases applicable to such Property.
"Space Tenant" shall mean a tenant under a Space Lease; collectively,
all tenants under the Space Leases are referred to as the "Space Tenants".
"Survey" shall mean the current as-built plat of surveys of the Land
and Improvements obtained by Cousins and approved by Prudential as provided in
Paragraph 4.2 hereof.
"Surviving Commissions" shall mean those Commissions listed on Exhibit
J, which shall be the only leasing commissions, referral fees, payments and
obligations to make payments to agents, leasing agents, leasing brokers or other
parties with respect to the Space Leases or Approved New Lease, whether such
agreements are contained in a Space Lease or Approved New Lease or in any
separate commission agreement which will be binding on Prudential or the Assets
as of and after the Closing Date with respect to the Space Leases and the
Approved New Leases, all of which are either (a) Future Active Commissions; or
(b) Initial Commissions for Space Leases or Approved New Leases as to which the
Initial Commission has not been earned on account of the status of completion of
Tenant Improvements or occupancy by the Space Tenant or Approved New Tenant.
"Tenant Deposits" shall mean all security deposits and other deposits
made with respect to the Space Leases and Approved New Leases (including
cleaning deposits, pet deposits and redecorating deposits).
"Tenant Estoppels" shall mean the estoppel certificates executed by the
Space Tenants.
"Tenant Estoppel Certificate Form" shall mean the estoppel certificate
in the form set forth on Exhibit K.
"Tenant Estoppel Requirement" shall mean Tenant Estoppels executed by
(i) the Major Tenants, and (ii) ninety percent (90%) of the remaining Space
Tenants (and such percentage shall calculated on a rentable square footage basis
of the Improvements so leased).
"Tenant Improvements" shall mean all construction work, repairs,
improvements, equipment, painting, decorating, partitioning, and other work and
obligations to satisfy the Space Tenant's requirements with regard to occupancy
under the currently effective term (whether initial or renewal) of each Space
Lease, which are required to be completed by and/or paid for by the "lessor" or
"landlord" under the Space Lease, including payment of all construction
allowances.
"Title Commitment" shall mean, for each Property, the commitment of the
Title Company to issue the Title Policy.
"Title Company" shall mean Stewart Title Guaranty Company, or such
other title insurance company selected by Prudential to insure Venture Two's
title to the Real Property and Improvements.
"Title Cure Items" is defined in Paragraph 4.
"Title Estoppel" is defined as an estoppel certificate executed by
parties relating to Approvals or in connection with covenants, conditions and
restrictions, reciprocal easement agreements encumbering the Assets, which
estoppel certificates shall be in the form reasonably approved by Prudential.
"Title Policy" shall mean, for each Property, the full coverage,
standard, revised ALTA-1987 Owner's Policy of Title Insurance, Form B issued by
the Title Company in favor of Venture Two in the aggregate amount of the
Prudential Investment, and containing, unless prohibited by applicable statutes
or regulations, the following endorsements: (a) "same land as survey" (Survey
legal matches title legal); (b) access (right of vehicular access over
driveways); (c) land abuts physically open street; (d) separately assessed tax
parcel; (e) owner's comprehensive; (f) zoning (ALTA 3.1); (g) tax foreclosure
subordinate to easement (if applicable); and (h) such other endorsements as are
reasonably required by Prudential. The Title Policy shall insure as separate
insured parcels any easement rights running to the benefit of the Assets,
including, without limitation, easements for storm and sewer lines, storm
drainage and detention, and other utilities which are required in connection
with the operation of the Assets. If required by Prudential, the Title Policy
shall include fully executed facultative reinsurance agreements with direct
access from other title insurance companies for all amounts of liability under
the Title Policy in excess of such amounts as Prudential shall determine prior
to Closing.
"Transaction" shall mean the contribution and formation transaction
contemplated by this Agreement.
"UCC Certifications" shall mean Uniform Commercial Code and other
relevant searches from the State and County (or City, as the case may be) in
which the Land is located, and in which each of Cousins, Cousins/Daniel LLC, and
Cousins MarketCenters, Inc.
maintains its chief executive office or its principal business office.
"Venture" shall mean CP Venture LLC, a to be formed Delaware limited
liability company to be owned by Cousins and Prudential as the sole members
thereof pursuant to the Venture Agreement.
"Venture Agreement" is defined in Paragraph 2.
"Venture Capital Operating Company" shall mean a venture capital
operating company under the Plan Assets Regulations.
"Venture Three" shall mean CP Venture Three LLC, a to be formed
Delaware limited liability company to be owned by Venture (as to a 99% interest
as managing member) and Prudential (as to a 1% interest as non-managing member)
pursuant to the Venture Three Agreement.
"Venture Three Agreement" is defined in Paragraph 2.
"Venture Two" shall mean CP Venture Two LLC, a to be formed Delaware
limited liability company to be wholly owned by Cousins upon formation pursuant
to the Initial Venture Two Agreement, but which Delaware limited liability
company shall be reconstituted so as to be owned by Venture (as to a 99%
interest) and Cousins (as to a 1% interest) pursuant to the Venture Two
Agreement.
"Venture Two Agreement" is defined in Paragraph 2.
"Venture Two Contribution Documents" shall mean the formation and
conveyance documents to be executed and/or delivered by Cousins or the Other
Owners pursuant to Paragraph 8.
"Warranties" shall mean each and every now existing and outstanding
bond and warranty concerning the Real Property, the Improvements located thereon
or the Personal Property, including, but not limited to, any and all bonds and
warranties, if any, now or hereafter in effect, arising out of, made, given or
issued, whether express or implied, in conjunction with any construction
contracts and any other contracts between Cousins (or any predecessors in title
of Cousins) and any third party relative to the construction, operation and/or
maintenance of the Improvements on the Real Property or related to the Personal
Property, or otherwise arising out of, made, given or issued by any such third
party under each of the construction contracts (or by a subcontractor performing
any of the work which inures to the benefit of Cousins), all in conjunction with
the construction, operation and/or maintenance of the Improvements made pursuant
to the construction contracts, or arising out of, made, given or issued, by
manufacturers or suppliers, in conjunction with the Improvements or the Personal
Property, together with all claims in contract or quasi-contract and any similar
chose-in-action arising out of or resulting therefrom; the Warranties shall
include, without limitation, any roofing, air conditioning, heating, elevator or
other bond or warranty relating to construction of the Improvements, subject to
any applicable express limitations contained in each such bond or warranty.
Notwithstanding the foregoing, however, when the term "Warranties" is used by
implication in connection with a single Property, the term "Warranties" shall be
a reference only to the Warranties applicable to the Improvements located on
such Property.
"Warranty Estoppel" is defined as an estoppel certificate executed by
each warrantor or guarantor under a Warranty, which estoppel certificates shall
be in the form reasonably approved by Prudential.
"100/200 North Point Center East Property" shall mean the portion of
the Land described on Schedule A-2 to Exhibit A, together with all Appurtenances
thereto and all Improvements thereon.
2. Formation and Transfer Documentation. The formation of Venture Two,
Venture and Venture Three, and the investment of the Prudential Investment and
the contribution of the Assets by Cousins shall be upon the following terms and
conditions.
2.1 Closing Date. On the Closing Date, the following
actions shall occur in the following order:
A. Venture Two Formation. Cousins shall enter
into an Operating Agreement (the "Initial Venture Two Agreement") for Venture
Two in the form attached hereto as Exhibit L, which Initial Venture Two
Agreement shall be the governing agreement for Venture Two upon formation
and acquisition of the Assets by Venture Two. In connection therewith,
Cousins shall execute and file all other agreements, instruments and filings
deemed necessary or desirable to secure Venture Two's compliance with all
applicable laws, including a Certificate of Formation filed with the
Secretary of State of the State of Delaware and such local filings as Prudential
and Cousins may deem necessary or desirable.
B. Venture Two Conveyance. Cousins shall
convey all of Cousins' right, title and interest in and to the Assets into
Venture Two by the Venture Two Contribution Conveyance Documents, and
Venture Two shall acquire fee simple title to the Assets, subject to the
Permitted Exceptions. Cousins agrees to cause those of the Assets which are
owned by the Other Owners to be conveyed to Venture Two at the Closing
simultaneous with the conveyance by Cousins to Venture Two of those of the
Assets which are owned by Cousins.
C. Venture Formation. Cousins and Prudential
shall enter into an Operating Agreement (the "Venture Agreement") for Venture in
the form attached hereto as Exhibit M, which Venture Agreement shall be the
governing agreement for Venture. In connection therewith, Cousins and Prudential
shall execute and file all other agreements, instruments and filings deemed
necessary or desirable to secure Venture's compliance with all applicable
laws, including a Certificate of Formation filed with the Secretary of
State of the State of Delaware and such local filings as Prudential and Cousins
may deem necessary or desirable.
D. Venture Three Formation. Venture and
Prudential shall enter into an Operating Agreement (the "Venture Three
Agreement") for Venture Three in the form attached hereto as Exhibit N, which
Venture Three Agreement shall be the governing agreement for Venture Three.
In connection therewith, Venture and Prudential shall execute and file all othe
agreements, instruments and filings deemed necessary or desirable to secure
Venture Three's compliance with all applicable laws, including a Certificate
of Formation filed with the Secretary of State of the State of Delaware and
such local filings as Prudential and Cousins may deem necessary or desirable.
E. Venture Two Modification and Restatement.
Cousins, Venture and Prudential shall enter into a modification, amendment and
restatement of the Initial Venture Two Agreement for Venture Two in the form
attached hereto as Exhibit O (the "Venture Two Agreement"), which Venture
Two Agreement shall be the governing agreement for Venture Two and shall amend
and restate in its entirety the Initial Venture Two Agreement. In connection
therewith, Cousins, Venture and Prudential shall execute and file all other
agreements, instruments and filings deemed necessary or desirable to secure
Venture Two's compliance with all applicable laws.
F. Contribution by Cousins; Obligations
Unconditional. Cousins shall contribute to Venture all of Cousins' right,
title and interest in and to a ninety-nine percent (99%) interest in
Venture Two pursuant to the terms hereof and of the Venture Agreement.
On the Closing Date, Cousins' obligation to transfer the Assets to Venture Two
and Cousins' obligation to contribute to Venture a ninety-nine percent (99%)
interest in Venture Two pursuant to the terms of the Venture Agreement shall
be absolute, unconditional, and irrevocable as of the Closing Date. In the
event Cousins shall default in its obligations as of the Closing Date to cause
such transfer of the Assets and the contribution to Venture and shall fail to
cure such default within five (5) days of receipt of written notice of such
default from Prudential, Prudential shall thereafter have all rights and
remedies available at law or in equity including, without limitation, the right
to pursue a suit for specific performance against Cousins with respect to its
obligations to cause such transfer and contribution as of the Closing Date.
2.2 Closing Proration Date. On the Closing Proration
Date, the following actions shall occur in the following order:
A. Formation Closing Statement. Cousins and
Prudential shall execute the Proration Closing Statement.
B. Investment by Prudential. Prudential shall
make the Prudential Venture Investment in Venture and the Prudential Venture
Three Investment in Venture Three pursuant to the terms of Paragraph 3 hereof.
3. Prudential Investment. The Prudential Investment shall be due and
payable as follows:
3.1 Obligations of Prudential Unconditional. On the Closing
Date, (a) Prudential's obligation to make the initial portion of the Prudential
Venture Investment in the amount of $39,600,000.00 to Venture (the "Initial
Prudential Venture Investment") and the initial portion of the Prudential
Venture Three Investment in the amount of $400,000.00 to Venture Three or
Venture, as set forth below (the "Initial Prudential Venture Three Investment")
pursuant to the terms of this Agreement, the Venture Agreement and the Venture
Three Agreement shall be absolute, unconditional and irrevocable, without credit
and without offset or delay, and (b) Prudential's obligation to make the
remainder of the Prudential Investment pursuant to the terms of the Venture
Agreement and the Venture Three Agreement shall be absolute, unconditional and
irrevocable in accordance with the terms thereof. In the event that Prudential
shall fail to pay as of the Closing Proration Date, absolutely and
unconditionally, the Initial Prudential Venture Investment or the Initial
Prudential Venture Three Investment, and if such failure shall continue for five
(5) days after receipt by Prudential from Cousins of written notice of such
default, Cousins shall have all rights and remedies available at law or in
equity including, without limitation, the right to pursue a suit for specific
performance against Prudential. In addition to all other rights and remedies at
law or in equity, in the event Prudential fails to make the payments required of
Prudential on the Closing Proration Date, Cousins shall have the right to cause
the 99% interest of Venture in Venture Two to be transferred to Cousins.
3.2 Initial Prudential Investment. On the Closing Proration
Date, Prudential shall pay to Venture the Initial Prudential Venture Investment
in cash by federal reserve bank wire transfer to such account and bank as
Venture shall designate in writing to Prudential at or prior to Closing. On the
Closing Proration Date, Prudential shall contribute the Initial Prudential
Venture Three Investment to Venture Three payable in cash by federal reserve
bank wire transfer to such account and bank as the "Development Manager" under
the Venture Agreement shall designate in writing to Prudential at or prior to
the Closing Proration Date; provided, however, if Venture Three is not a Real
Estate Operating Company as of the Closing Proration Date, such amount shall be
paid to Venture in accordance with the provisions of Section 3.4.2 of the
Venture Agreement.
3.3 Remainder of Prudential Investment. The remainder of the
Prudential Venture Investment shall be contributed by Prudential in accordance
with the Venture Agreement, and the remainder of the Prudential Venture Three
Investment shall be contributed by Prudential in accordance with the Venture
Three Agreement and, as applicable, the Venture Agreement.
4. Prudential's Due Diligence and Inspections.
4.1 Delivery and Review of Property Documents. Cousins has
made available, and shall continue to make available, to Prudential copies of
the Property Documents and such other documents relating to the Assets as
Prudential shall reasonably require and shall make originals of the Property
Documents and such other documents relating to the Assets as Prudential shall
reasonably require available to Prudential for its inspection. To the extent
that any Property Documents are updated or that any other documents material to
the use, operation, maintenance, occupancy or ownership of the Assets are
created or received by Cousins, Cousins shall deliver such items to Prudential
promptly after such items become available. Prudential agrees that it will
indemnify and hold harmless Cousins and the Other Owners from and against any
and all loss, cost or expenses (including reasonable attorneys' fees) arising
from any wrongful or negligent acts or omissions in the conduct of the
inspection activities by Prudential, its Affiliates and their respective
employees, agents and contractors, including, but not limited to, any failure to
pay any such agents and contractors or to remove any liens filed by such
parties, or any failure to restore and repair any damage to the Assets during
such inspection; provided, however, that Prudential shall not have any liability
for mere discovery of facts that may trigger obligations of Cousins. This
indemnity by Prudential shall expressly survive any termination of this
Agreement and the Closing.
4.2 Title and Survey Results. Prudential has received the
Title Commitment for each Property and the Survey obtained by Cousins for each
Property. Subject to the cure, correction or conveyance of the matters listed on
Exhibit P (the "Title Cure Items"), Prudential hereby confirms its approval of
the Title Commitment and the Surveys. At Closing, the Title Company shall issue
to Venture Two the Title Policy, in the amounts set forth on Schedule A,
insuring that fee simple title (or, as to the Presbyterian Medical Plaza
Property, leasehold title) to the Real Property and fee simple title to the
Improvements is vested in Venture Two subject only to the Permitted Title
Exceptions. Prudential shall be entitled to request that the Title Company
provide such further endorsements (or amendments) to the Owner's Title Policy as
Prudential may reasonably require, provided that (a) such endorsements (or
amendments) shall be at no cost to, and shall impose no additional liability on,
Cousins, except as and to the extent listed in the Title Cure Items or addressed
in Paragraph 7, (b) Prudential's obligations under this Agreement shall not be
conditioned upon Prudential's ability to obtain such endorsements, except as and
to the extent listed in the Title Cure Items, and, if Prudential is unable to
obtain such endorsements, Prudential shall nevertheless be obligated to proceed
to close the Transaction, and (c) the Closing shall not be delayed as a result
of Prudential's request.
4.3 Disclaimer of Warranties. Except for the representations
and warranties expressly set forth herein or in the Contribution Conveyance
Agreements (collectively, "Cousins' Express Representations and Warranties"),
Prudential expressly acknowledges and agrees that Cousins has not made and shall
not make any representation or warranty, express or implied, of any kind or
nature whatsoever with respect to the Assets, and any and all such
representations and/or warranties (except for Cousins' Express Representations
and Warranties) are hereby disclaimed. To the extent that Cousins has provided
to Prudential any documents, reports, studies, materials, information or data
relating to the Assets, including, without limitation, the Commission
Agreements, the Existing Loan Documents, the Environmental Reports, the Ground
Lease, the Operating Statements, the Property Documents, the Rent Roll, the
Service Contracts, the Space Leases and the Warranties (collectively, "Due
Diligence Materials") to assist Prudential with its inspection of and due
diligence with respect to the Assets, Prudential acknowledges and agrees that,
except for Cousins' Express Representations and Warranties, Cousins makes no
(and hereby disclaims any) representation or warranty, express or implied, of
any kind or nature whatsoever with respect to the accuracy, completeness,
methodology of preparation or otherwise concerning the contents of the Due
Diligence Materials. Without limiting the generality of the foregoing, except
for Cousins' Express Representations and Warranties, Cousins makes, and shall
make, no express or implied warranty as to matters of title (other than the
limited warranty of title set forth in the limited and/or special warranty deeds
to be delivered at Closing), zoning, tax consequences, physical or environmental
conditions, compliance with laws (including, without limitation, laws, rules,
regulations, orders and requirements pertaining to the use, handling,
generation, treatment, storage or disposal of any Hazardous Materials or any
toxic or hazardous waste or toxic, hazardous or regulated substance), valuation,
the expense of operation of the Assets, the income potential of the Assets,
governmental approvals, governmental regulations, the Due Diligence Materials,
or any other matter or thing relating to or affecting the Assets (hereinafter,
except for Cousins' Express Representations and Warranties, collectively called
the "Disclaimed Matters"). Prudential acknowledges and agrees that, with respect
to the Assets, Prudential has not relied upon and will not rely upon, either
directly or indirectly, any representation or warranty of Cousins other than
Cousins' Express Representations and Warranties. Prudential has conducted and
will conduct such inspections and investigations of the Assets (including, but
not limited to, the physical and environmental condition thereof) as it deems
necessary or desirable and shall rely upon the same and, upon closing, shall
assume the risk that adverse matters including, but not limited to, the
Disclaimed Matters, may not have been revealed by Prudential's inspections and
investigations.
4.4 As-Is Contribution. Except for Cousins' Express
Representations and Warranties and the limited warranty set forth in the limited
and/or special warranty deeds to be delivered by Cousins or the Other Owners at
Closing, Cousins shall contribute to Venture Two, and Venture Two shall accept,
the Assets "As Is", "Where Is", and "With All Faults", and Prudential shall
acquire its interest in Venture and its interest in Venture Development on such
basis. Except as set forth in (and limited by) Paragraph 14.3 hereof with
respect to a breach by Cousins of Cousins' Express Representations and
Warranties, Prudential hereby waives, releases and discharges any claim it has,
might have had or may have against Cousins, any Affiliate of Cousins and any
Cousins Related Parties with respect to the Disclaimed Matters and Disclosed
Matters (as hereinafter defined). The terms and conditions of this Paragraph 4.4
shall expressly survive the delivery of the limited and/or special warranty
deeds by Cousins or the Other Owners to Venture Two, the acquisition by
Prudential of its interest in Venture and the acquisition by Prudential of its
interest in Venture Three.
5. Conditions to Closing.
5.1 Of Prudential. The obligation of Prudential to consummate
the Closing hereunder shall be further subject to the satisfaction at or prior
to Closing of the following conditions precedent all of which shall be deemed
satisfied upon the consummation of the Closing by Cousins and Prudential (and,
in the event that the aforesaid conditions have not been satisfied by the
Closing Date, Prudential shall be entitled to, at Prudential's option, terminate
this Agreement or to extend the Closing Date by not more than thirty (30) days):
A. Accuracy of Representations; No Default.
All of Cousins' Express Representations and Warranties contained in this
Agreement shall be true in all material respects (without regard to any
knowledge qualification set forth with respect thereto) on the Closing Date
with the same effect as if they had been made on the Closing Date, except as
modified in a manner permitted by the Agreement, and Cousins shall have
complied in all material respects with and performed in all material
respects all covenants of Cousins under this Agreement.
B. Environmental Condition. On the Closing
Date, the Assets shall be free of any and all Hazardous Substances either within
the Improvements or on or under the surface of the Assets, except for (a)
Hazardous Substances used in the ordinary course of business by Cousins or
the Other Owners or Space Tenants, which uses are in compliance with all
Environmental Laws, and (b) matters revealed in the Environmental Reports
or in the environmental assessment obtained by Prudential in connection with
Prudential's due diligence evaluation of the Assets, provided that there have
been no new Environmental Matters which arose after the date of Prudential's
environmental assessment reports and which were not disclosed in such reports
and no material change to the matters which were disclosed in such reports on
account of matters arising after the dates thereof. In the event that any
environmental assessment or report prepared after the date hereof recommends
further investigation of Environmental Matters which arose after the date of
Prudential's environmental assessment reports, the Closing Date shall be
extended by not more than thirty (30) days in order to permit such further
tests. In the event that any such environmental assessment or report is
unsatisfactory to Prudential in its reasonable determination on account of the
matters set forth in the first sentence of this Paragraph, then Prudential shall
have the right, at Prudential's option, by notice to Cousins, to terminate this
Agreement and, in such event, neither Party shall have any further rights or
obligations hereunder.
C. ERISA. This Transaction is subject to
ERISA. Unless and until Prudential shall be satisfied that the Assets, the
Space Leases, the Space Tenants and this Transaction comply with ERISA,
Prudential shall not be obligated to consummate the Transaction. In the event
that prior to Closing Prudential determines that this Transaction will fail
to comply with ERISA, then Prudential shall have the right, at Prudential's
option, by notice to Cousins, to terminate this Agreement and, in such event,
neither Party shall have any further rights or obligations hereunder. Prudential
has heretofore provided to Cousins a list of the employee benefit plans whose
assets are 10% or more of the total assets in the pooled separate account which
will be invested in the Assets and the plan sponsors of such employee benefit
plans. Cousins represents and warrants to Prudential that Cousins is not a party
in interest (as defined in Section 3(14) of ERISA) to any of the 10% plans
disclosed by Prudential on such list (provided that such representation and
warranty is given to Cousins' best knowledge with respect to the plan of
Prudential disclosed on such list).
D. Title Updates. At the time of Closing,
Venture Two shall have received a "marked" Title Commitment, endorsed by the
Title Company to (i) remove all references to payment of premium and charges
for the policy and all references to expiration of the Title Commitment;
(ii) indicate that all requirements have been satisfied; (iii) delete any
general survey exception (and replace with a reference to the specific
matters shown on the current Survey), any exception relating to rights of
parties in possession, and easements, liens, taxes or assessments not shown
by the public records; and (iv) delete any exception for any matters first
appearing of record after the date of the Commitment and prior to the effective
date of the final policy.
E. Approval by Prudential's Investment
Committees. Prudential's obligation to consummate the Transaction shall not be
binding unless and until both (i) the appropriate officers in Prudential's
corporate office in their sole discretion, and (ii) the Investment Committee of
Prudential Real Estate Investors and the Investment Committee of The
Prudential Insurance Company of America ("Prudential's Approval Committee") in
its sole discretion have approved the Transaction, without qualification
or condition. Cousins hereby acknowledges that Prudential shall have no
obligation to present any proposal for approval of this Transaction or this
Agreement to said corporate officers or Prudential's Approval Committee for
such requisite approvals unless and until Prudential shall have completed its
due diligence investigations of the Assets as authorized by this Agreement.
Should said corporate officers or Prudential's Approval Committee fail to give
the requisite approvals to this Transaction by the date prior to the date hereof
either Cousins or Prudential may terminate this Agreement by written notice to
the other party and in such event thereafter neither party hereto shall have any
further rights, obligations or liabilities hereunder except to the extent that
any right, obligation or liability set forth herein expressly survives
termination of this Agreement.
5.2 Of Cousins. The obligation of Cousins to consummate the
Closing hereunder shall be further subject to the satisfaction at or prior to
Closing of the following conditions precedent all of which shall be deemed
satisfied upon the consummation of the Closings by Cousins and Prudential (and,
in the event that the aforesaid conditions have not been satisfied by the
Closing Date, Cousins shall be entitled to, at Cousins option, terminate this
Agreement or to extend the Closing Date, but not more than thirty (30) days):
A. Accuracy of Representations; No Default. All
of the warranties and representations of Prudential contained in this Agreement
shall be true in all material respects (without regard to any knowledge
qualification set forth with respect thereto) on the Closing Date with the same
effect as if they have been made on the Closing Date, except as modified in a
manner permitted by this Agreement, and Prudential shall have complied in all
material respects with and performed in all material respects all covenants
of Prudential under this Agreement.
B. ERISA. This Transaction is subject to
ERISA. Unless and until Cousins shall be satisfied that the Transaction
complies with ERISA, Cousins shall not be obligated to consummate the
Transaction. In the event that prior to Closing Cousins determines that
this Transaction will fail to comply with ERISA, then Cousins shall have the
right, at Cousins' option, by notice to Prudential, to terminate this Agreement
and, in such event, neither Party shall have any further rights or obligations
hereunder. Prudential has heretofore provided to Cousins a list of the employee
benefit plans whose assets are 10% or more of the total assets in the pooled
separate account which will be invested in the Assets and the plan sponsors of
such employee benefit plans. Prudential represents and warrants that such
schedule is true, correct and complete as of the date hereof.
C. Title Updates. At the time of Closing,
Venture Two shall have received a "marked" Title Commitment in the manner
required by 5.1 (D), above.
6. Closing. The exact day, time and place of Closing shall be agreed
upon by Prudential and Cousins not less than three (3) Business Days prior to
the date so selected. If no such selection is timely made, the Closing shall be
held at 9:00 a.m. local Atlanta, Georgia time on the Closing Deadline at the
offices of Alston & Bird LLP, One Atlantic Center, 1201 West Peachtree Street,
N.E., Atlanta, Georgia 30309-3424. Closing may, at Prudential's election, be
either by a so-called "New York style" closing or through escrow. In addition,
Cousins and Prudential shall conduct a "pre-closing" on the day preceding the
Closing Date, in order to finalize and execute (but not deliver, pending the
Closing) the documents to be executed and delivered at Closing. At Closing,
Cousins shall deliver to Prudential and Venture Two the items required of
Cousins as elsewhere set forth herein and Prudential shall deliver the items
required of Prudential as elsewhere set forth herein. Cousins shall deliver
possession of the Assets, subject only to the Permitted Title Exceptions, to
Venture Two at the time of Closing. The parties agree to execute and deliver
into escrow the day prior to the Closing Date all documents required for Closing
release of the escrow to occur on the Closing Date.
7. Prorations, Credits and Closing Costs.
7.1 Proration Items. In each such proration set forth below,
the portion thereof allocable to periods beginning as of the Closing Proration
Date shall be credited to Venture Two, or charged to Venture Two, as applicable,
and the portion thereof allocable to periods ending as of the Closing Proration
Date shall be credited to Cousins, or charged to Cousins, as applicable, all of
which prorations shall be made on the Closing Proration Date or, in the case of
allocations to be made after the Closing Proration Date, upon receipt of such
payments or payment of such expenses. If there is a net amount due to Venture
Two after the direct transfers and payments described below in this Paragraph 7,
such amount shall not be a credit against the Prudential Investment, but Cousins
shall pay such amount directly to Venture Two on the Closing Proration Date. If
there is a net amount due to Cousins, Prudential shall pay such amount to
Cousins on the Closing Proration Date or at such other time as is set forth
herein. Cousins and Prudential acknowledge and agree that twelve (12) days of
income for the month of November, 1998 shall belong to Cousins and eighteen (18)
days of expenses for the month of November, 1998 shall be the responsibility of
Cousins. Cousins and Prudential agree that the Closing Proration Statement will
not reflect a credit for income for November 1 through 12, 1998 or a charge for
expenses for November 1 through 12, 1998, and Cousins and Prudential agree that,
upon finalizing the books of account for the Assets for the month of November,
1998, Venture Two shall pay to Cousins 12/30th of the net income of the Assets
for the month of November, 1998. Such amount shall be paid as soon as Venture
Two shall finalize its books of account for such month, but in all events not
later than December 20, 1998. The following items shall be prorated between
Venture Two and Cousins or credited to Venture Two or Cousins, and the
provisions of this Paragraph shall survive Closing hereunder:
A. Real Estate Taxes and Assessments. All ad
valorem real estate taxes and assessments and personal property taxes with
respect to the Assets for the current calendar year shall be prorated as of the
Closing Proration Date (including any which may become payable in the
future in the event of any reassessment or re-billing thereof). Cousins shall
pay all installments of assessments levied upon the Assets which are due prior
to the Closing Proration Date. In the event that tax bills for the current
year's taxes are not available on the Closing Proration Date, taxes shall be
prorated based upon the tax bills for the previous year, or, if available,
based upon the current assessed valuation and current millage rates, and, in
such event (or in the event of any reassessment or re-billing thereof), Cousins
and Venture Two shall reprorate the taxes when actual tax bills for the current
year are available. All ad valorem real estate taxes and assessments and
personal property taxes with respect to the Assets for periods prior to the
current calendar year (which may become payable in the event of any reassessment
or re-billing thereof, or in the event of any failure of any tax contest
maintained by Cousins with respect thereto) shall remain the obligation of
Cousins (and Cousins shall be entitled to receive any refund or rebate on any ad
valorem real estate taxes and assessments and personal property taxes with
respect to the Assets for periods prior to the current calendar year).
B. Rents. All Rental Payments received by
Cousins prior to the Closing Proration Date shall be prorated as of the Closing
Proration Date. Any checks for Rental Payments received after the Closing
Proration Date by Cousins or its agents shall be promptly endorsed to Venture
Two by the payee thereof and promptly transmitted to Venture Two; if any of
such Rental Payments belong in part to Cousins and in part to Venture Two,
upon such endorsement and transmittal (and receipt of collected funds),
such checks shall be promptly deposited by Venture Two or its agent and the part
thereof belonging to Cousins shall be promptly paid to Cousins and the
balance shall be retained by Venture Two.
(i) Past Due Rents. Any Rental Payments which, as of
the Closing Proration Date, are past due and unpaid and which are
received subsequent to the Closing Proration Date by Venture Two or its
agents or Cousins or its agents with respect to any Space Leases shall
be applied first to pay the current portion of all Rental Payments due
Venture Two under such Space Lease, and then, to pay to Cousins any
portion of such Rental Payments applicable to the period ending as of
the Closing Proration Date. Upon any payment of such amounts to
Cousins, a proportionate share of any costs of collection actually
incurred by Venture Two in connection therewith shall be deducted from
such payment.
(ii) Post-Closing Adjustment Payments. In the event
that on the Closing Proration Date there shall be any Rental Payments
under any Space Lease which, although relating to a period prior to the
Closing Proration Date, do not become due and payable until after the
Closing Proration Date (such as year-end common area expense
reimbursements, percentage rents, and the like), then any Rental
Payments of such type received by Venture Two or its agents or Cousins
or its agents subsequent to the Closing Proration Date shall, to the
extent applicable to a period extending through the Closing Proration
Date, be prorated upon receipt thereof between Cousins and Venture Two
as of the Closing Proration Date, and Cousins' portion thereof shall be
remitted promptly to Cousins by Venture Two without regard to whether
any other type of Rental Payment is currently due Venture Two under
such Space Lease. Percentage rents received by Venture Two shall be
prorated in accordance with Section 3.3 of the Venture Agreement. Upon
any payment of such amounts to Cousins, a proportionate share of any
costs of collection actually incurred by Venture Two in connection
therewith shall be deducted from such payment.
(iii) Cousins' Collection Rights. Cousins shall not
have the option to collect any Rental Payments after Closing, except as
agent of Venture Two. Venture Two shall use its reasonable efforts in
the normal course of its business operations to collect and to enforce
collection of all such Rental Payments.
C. Security Deposits/Advance Rent. Cousins
shall transfer to the account of Venture Two at Closing an amount equal to all
Tenant Deposits then outstanding under the Space Leases and for all Rental
Payments made in advance (to the extent not prorated as set forth above). With
respect to any Tenant Deposits which are letters of credit, certificates of
deposit or other non-cash Tenant Deposits ("Non-Cash Tenant Deposits"),
Cousins shall, at Cousins' expense (i) deliver to Venture Two at the Closing
such Non-Cash Tenant Deposits, and (ii) execute and deliver such other
instruments as are necessary to cause such Non-Cash Tenant Deposits to be
payable to Venture Two upon presentation in accordance with their terms. If such
transfer to Venture Two's name cannot be accomplished simply by Cousins'
assignment at Closing, Cousins shall have such time as is reasonably necessary
to deliver the necessary transfer documents so long as Cousins promptly
commences, after the Closing Date, the action necessary to accomplish such
transfer and diligently pursues it to completion. If, prior to the date Cousins
properly transfers the Non-Cash Tenant Deposits to Venture Two, Venture Two
notifies Cousins that Venture Two requires a Non-Cash Tenant Deposit to be drawn
or cashed, Cousins will promptly, as agent for Venture Two, take the required
action and deliver all proceeds to Venture Two, provided that Venture Two
indemnifies Cousins from any loss on account of such action taken at the
direction of Venture Two.
D. Utility Expenses and Payments; Existence of
Consolidated Utility Contract. Water, sewer, gas, waste fee, fire protection,
electric and all other utility expenses and payments due or made with respect
to the Assets shall be prorated as of the Closing Proration Date. At
Venture Two's option, all such utility accounts shall be transferred to new
accounts in Venture Two's name or retained in the name of Venture Two's
designated management agent as of the Closing Date. Cousins shall cooperate
with Venture Two's efforts to transfer such accounts and continue
uninterrupted utility service to the Assets. Prudential has received and
reviewed a copy of the electrical service contract with Georgia Power Company
for service to the 100/200 North Point Center East Property, and acknowledges
that the contract was entered into for electrical service to both the 100/200
North Point Center East Property and the 333 North Point Center East Property
(such contract is identified on Exhibit I hereof as the "100/200 North Point
Center East Electrical Contract"). One bill for all 3 buildings is issued by
Georgia Power Company for the Improvements on the 100/200 North Point Center
East Property and the building known as 333 North Point Center East and a single
contract is required in order to obtain a favorable rate. However, the buildings
are separately sub-metered by Cousins. The 100/200 North Point Center East
Electrical Contract shall remain in place and, therefore, the utility service
will remain in the name of Cousins.
E. Utility Deposits. Cousins shall receive a
credit on the Closing Proration Date for the amount of any utility deposits made
by Cousins which are not refundable to Cousins by the holder thereof and which
deposits are transferred to Venture Two at Closing and are reasonably
documented to Venture Two by either Cousins or the holder thereof. Except
as aforesaid, Cousins shall not assign to Venture Two any deposits which
Cousins has with any of the utility services or companies servicing the
Assets.
F. Service Contract Payments. All payments due
or owing under any Service Contracts assumed by Venture Two at Closing shall be
prorated as of the Closing Proration Date. The blanket insurance policies for
liability coverages shall be assumed by Venture Two, and such blanket
insurance policies for liability coverages shall be prorated as of the
Closing Proration Date. The blanket insurance policies for casualty coverages
shall not be assumed by Venture Two, and such blanket insurance policies
for casualty coverages shall not be prorated as of the Closing Proration
Date, and if Cousins elects to continue such coverages, such coverages shall be
at the sole cost and expense of Cousins.
G. Lease-Up Costs and Commissions.
Except as set forth as a cost of CP Venture Two on Exhibit HH attached hereto,
(i) Lease-Up Costs shall not be prorated or assumed, and all Lease-Up Costs for
Space Leases shall be paid in full by Cousins as and when due, (ii) with respect
to Space Leases as to which an Initial Commission has not yet been earned as
of Closing, Venture Two will not assume the obligation to pay such Initial
Commissions and Cousins shall be responsible for payment, in full, of such
Initial Commissions, (iii) with respect to Future Active Commissions, Venture
Two will assume the obligation, if any so arises, to pay such Future Active
Commission, without reimbursement from Cousins, and (iv) with respect to Future
Cousins Commissions, Venture Two will not assume the obligation, if any so
arises, to pay such Future Cousins Commissions, and Cousins shall retain
such obligation. Exhibit HH sets forth a Schedule of Cousins' calculation
or current estimates of such Lease-Up Costs and Commission costs described in
this subparagraph G. Amounts which are the responsibility of Cousins shall be
paid by Cousins (or, at Venture Two's option, paid to Venture Two) promptly
upon written request from Venture Two. Venture Two further agrees to pay the
amounts with respect to the Monarch Bank Space Lease if and when due, in
accordance with Exhibit II.
H. Ground Rent. Rent paid or payable under the
Ground Lease shall be prorated as of the Closing Proration Date.
I. New Lease Expenses. Except as set forth on
Exhibit HH, in the event that any new leases are entered into by Cousins after
the date of this Agreement, and provided that Prudential has approved
every such lease (any such approved new lease being herein referred to as an
"Approved New Lease"), then in the event the Closing occurs, Venture Two shall
pay the New Lease Commissions and pay all New Lease-Up Costs.
J. Other Adjustments. Cousins shall pay (i)
with respect to the Space Lease with Monarch Bank at the Greenbrier MarketCenter
Property the amounts set forth in Exhibit II on the payment dates set forth
on Exhibit II hereof (the "Monarch Valuation Bank Adjustment"), (ii) with
respect to the Space Lease with Solutions Plus at the Grandview II Property
the amounts set forth on Exhibit II on the payment dates set forth on Exhibit
II hereof (the "Solutions Plus Valuation Adjustment") and (iii) with respect to
the Space Lease with Paychex at the Grandview II Property the amounts set forth
on Exhibit II on the payment dates set forth on Exhibit II hereof (the "Paychex
Valuation Adjustment"). Cousins has also agreed to pay certain amounts with
respect to the Space Lease with Best Buy Stores L.P. at the Greenbrier
MarketCenter Property in the amounts and upon the terms and conditions
set forth in the Master Lease (the "Best Buy Rentals"). Notwithstanding an
other provision of this Agreement, the Venture Agreement or the Venture Two
Agreement to the contrary, Cousins and Prudential acknowledge and agree that
the Monarch Bank Valuation Adjustment, the Solutions Plus Valuation
Adjustment, the Paychex Valuation Adjustment and the Best Buy Rentals shall
constitute "Gross Receipts" (as defined in the Venture Two Agreement) for the
periods in which such amounts are paid for the purposes of determining "Cash
Flow" (as defined in the Venture Two Agreement"). Notwithstanding any other
provision of this Agreement, the Venture Agreement or the Venture Two Agreement
to the contrary, Cousins and Prudential acknowledge and agree that the Lease-Up
Costs and Commissions shown on Exhibit HH as the responsibility of Venture Two
shall be paid by Venture Two when due and shall thereupon constitute Operating
Expenses (as defined in the Venture Two Agreement) when paid. The provisions of
this Section 7.1L shall expressly survive the Closing.
K. 100/200 Repairs. Cousins shall repair the
defects described on Exhibit CC as and to the extent on, and on the schedule
set forth on, said Exhibit CC with respect to the 100/200 North Point Center
East Property, on or before July 31, 1999, at the sole cost and expense of
Cousins, which work must be completed in a fashion reasonably satisfactory to
Prudential and its engineers. Prior to commencement of such repair work,
Cousins shall deliver to Prudential a contract from a reputable and licensed
contractor outlining the specifications and work to be undertaken to complete
such repair, which specifications and contract shall be subject to Prudential's
approval, which shall not be unreasonably withheld or delayed. Cousins shall
complete such work in such fashion as shall minimize the interruption of tenant
activities at such Property, including scheduling work on weekends as necessary
to minimize loss of use of parking spaces, and in no event shall Cousins
undertake such work in such fashion as shall violate in any material respect
the Space Leases of such Property. Upon completion of such work, but in any
event on or before such deadline, Cousins shall deliver written notice to
Prudential certifying the completion of such work, which notice shall include
a certification of completion and lien waiver signed by the contractor(s
performing such work.
L. Costs and Liabilities Related to Certain
Representation Exceptions. Cousins shall indemnify and hold harmless Prudential
from and against any and all claims, demands, causes of action, debts,
liabilities, judgments and damages (including costs and reasonable
attorneys' fees incurred in connection with the enforcement of this indemnity)
which may be asserted or recovered against the indemnified party on account of
or arising from the matters set forth in Item 3 of Exhibit H (Rent Credit
claim by "Linens N Things"), Item 5 of Exhibit H (default claim by Bloeser,
to the extent uncured or to the extent Bloeser may dispute such cure or allege
failure to cure), Item 6 of Exhibit H (lien claim by "Standard
Concrete"), and Item 7 of Exhibit H (Los Altos past due tax claim), and as to
claims in the estoppel certificates by Bed, Bath & Beyond (Mansell II) and
Office Max (Greenbrier) as to defaults relating to roof leaks. Cousins, at its
sole cost and expense, shall pay any amounts due from the owner of the Property
with respect to such matters, and, subject to the prior written approval of
Prudential, which shall not be unreasonably withheld or delayed, shall take such
action as Cousins may describe to Prudential in writing on behalf of the owner
of the Property with respect to such claims. This indemnity and agreement by
Cousins and agreement by Prudential shall expressly survive any termination of
this Agreement and the Closing.
M. Post Closing Documents. Subsequent to
Closing, Cousins shall use commercially reasonable efforts to obtain from GTE
(or the holder thereof) a modification or vacation of the easement held by
GTE under the Target improvements at the Greenbrier MarketCenter
Property, so that the easement no longer encumbers the portion of the
Greenbrier MarketCenter Property on which the Target improvements are
located. In the event GTE (or such holder) is unwilling to deliver such
modification or vacation in recordable form, Cousins shall use commercially
reasonable efforts to obtain a letter agreement from GTE consenting to the
Target improvements or otherwise clarifying that GTE has not constructed or
installed any utility facilities beneath the Target improvements, and that GTE
does not intend to exercise any such right to so utilize any portion of the
easement which may extend beneath the Target improvements. If requested by
Prudential, Cousins shall, upon receipt of any such letter agreement, record an
Affidavit Regarding Real Property attaching such letter agreement and setting
forth the facts regarding same. Cousins shall use commercially reasonable
efforts to obtain such modification or vacation on or before December 15, 1998.
If Cousins fails to obtain such modification or vacation, Cousins shall secure
for Venture Two on or before December 20, 1998 affirmative insurance to the
title insurance policy of Venture Two which shall set forth coverage against the
enforced removal of the Target improvements which are located over such
easement. In addition, Cousins shall indemnify and hold harmless Prudential and
Venture Two from and against any and all claims, demands, causes of action,
debts, liabilities, judgments and damages (including costs and reasonable
attorneys' fees incurred in connection with the enforcement of this indemnity)
which may be asserted or recovered against the indemnified party on account of
or arising from the enforcement of such easement by GTE (or such holder) on the
portion of the Greenbrier MarketCenter Property on which the Target improvements
are located. Cousins, at its sole cost and expense, shall pay any amounts due to
GTE (or such holder) or Target (or its successors or assigns) from the owner of
the Property with respect to such matters, and, subject to the prior written
approval of Prudential, which shall not be unreasonably withheld or delayed,
shall be permitted to take such action as Cousins may describe to Prudential in
writing on behalf of the owner of the Property with respect to such claims. This
indemnity and agreement by Cousins and agreement by Prudential shall expressly
survive any termination of this Agreement and the Closing. The indemnity and
obligations of Cousins set forth in this paragraph shall expire and be deemed
satisfied upon receipt and recordation of such modification or vacation or upon
receipt and delivery to Prudential of such letter agreement, as the case may be,
and the endorsement of the title policy of Venture Two to reflect such
modification or vacation.
7.2 Proration Closing Statement and Schedules. On or before
five (5) days prior to the Closing Proration Date, Prudential shall prepare and
deliver to Cousins a draft Proration Closing Statement for the Transaction, and
Cousins shall deliver to Prudential a current schedule of the items and amounts
to be prorated or credited as set forth in this Paragraph 7.
7.3 Reproration after Closing Proration Date. The provisions
of this Paragraph 7 shall survive the Closing. In the event that the actual
amounts of any of the aforesaid proration items are unavailable as of the
Closing Proration Date, then such proration shall be made on the basis of an
amount reasonably estimated by Prudential and Cousins on the Closing Proration
Date and Prudential and Cousins shall thereupon reprorate such items at such
times as the exact amounts for such proration items become available; provided
however, that no reproration adjustment shall be made if the net amount due is
$100 or less.
7.4 Cousins' Closing Costs. Cousins shall pay the following
closing costs, fees, charges and expenses in regard to this Agreement and the
consummation of the Transaction: (a) one half of any transfer, stamp or
recording tax due in connection with the Transaction in the State of Alabama and
all of the grantor tax applicable in the State of Virginia, (b) one half of any
title examinations and premiums for the Title Policy in the States of Alabama,
California and North Carolina, (c) one-half of any surveys of the Real Property
obtained by or for the benefit of Cousins and Prudential in connection with this
Transaction in the States of Alabama, California, North Carolina and Virginia,
(d) any transfer, stamp or recording tax due in connection with the Transaction
in the States of Georgia, North Carolina and California, (e) one half of any
escrow agent fees (if any are charged in connection with this Transaction), (f)
one half of any loan transfer fees and costs (including lenders' attorneys'
fees), (g) all costs and recording charges due on recordation of any documents
required to cure Title Cure Items, (h) all "per page" recording costs due on
recordation of any documents required to convey the Assets, (i) the fees and
expenses of Cousins' attorneys and accountants, and (j) the fees and expenses of
Cousins' investment advisors and investment bankers.
7.5 Prudential's Closing Costs. Prudential shall pay the
following closing costs, fees, charges and expenses in regard to this Agreement
and the consummation of the Transaction: (a) one half of any transfer, stamp or
recording tax due in connection with the Transaction in the State of Alabama and
all of the grantee tax in the State of Virginia, (b) one half of any title
examinations and premiums for the Title Policy in the States of Alabama,
California and North Carolina, (c) one-half of any surveys of the Real Property
obtained by or for the benefit of Cousins and Prudential in connection with this
Transaction in the States of Alabama, California, North Carolina and Virginia,
(c) title examinations and premiums for owner's title insurance in the States of
Georgia and Virginia, (d) any surveys of the Real Property obtained by or for
the benefit of Cousins and Prudential in the State of Georgia in connection with
this Transaction, (e) one half of any escrow agent fees (if any are charged in
connection with this Transaction), (f) one half of any loan transfer fees and
costs (including lenders' attorneys' fees), (g) the fees and expenses of
Prudential's attorneys and accountants, if any, and (h) any other
investigations, studies and appraisals conducted by or for the benefit of
Prudential.
8. Conveyances and Deliveries at Closing. In addition to the documents
to be delivered at Closing pursuant to Paragraph 2, the following conveyances
and deliveries shall be made at Closing:
8.1 Contribution Conveyance Agreements. At the Closing,
Cousins shall deliver or cause to be delivered to Venture Two the following
(which, as to documents to be executed by Cousins or any Affiliate of Cousins,
shall be duly executed and delivered):
A. Deed. For each Real Property (other than
the Presbyterian Medical Plaza Property), a Limited Warranty Deed in the form
of Exhibit Q, subject only to the Permitted Title Exceptions.
B. Bill of Sale. For each Property, a Bill of
Sale (with a limited warranty of title) in the form of Exhibit R, to which
shall be attached a current inventory of all Personal Property.
C. Assignment of Leases. For each Property, an
Assignment and Assumption of Leases in the form of Exhibit S (the "Assignment
of Leases"), to which shall be attached a true, correct and complete list of
all Space Leases and, if applicable, any Commission Agreements.
D. Assignment of Service Contracts, Warranties
and Other Interests. For each Property, an Assignment and Assumption of Service
Contracts, Warranties and Other Interests in the form of Exhibit T (the
"Assignment of Contracts and Interests") with respect to Cousins' interest
in the Service Contracts (except those which Cousins is obligated to
terminate pursuant to this Agreement) and the Other Interests, to which shall
be attached true, correct and complete lists of all Service Contracts
and Warranties to be assigned at Closing. Except as otherwise provided in this
Agreement, Venture Two shall assume in writing the due and full
performance of all of Cousins' covenants and obligations accruing on and after
the Closing Date under the Service Contracts. Cousins shall execute a separate
assignment instrument for the Service Contract identified on Exhibit I as the
100/200 North Point Center East Electrical Service Contract, the form of which
is attached to Exhibit T as Schedule T-1. Further, it is acknowledged and agreed
by Prudential that the Assignment and Assumption of Service Contracts,
Warranties and Other Interests shall grant only a non-exclusive license, to be
held in common with Cousins and its Affiliates and their respective successors
and assigns, to use the name "MarketCenter". In addition, the license to use the
name "MarketCenter" shall terminate in the event the Alliance Management
Agreement between Cousins and Venture Two is terminated or upon the earlier
termination of any direct or indirect ownership interest of Cousins in Venture
Two, such termination to be effective upon 180 days after such event (in order
to provide the owner of such Properties sufficient time to implement a new
Project Name, signage and other necessary changes).
E. Assignment of Ground Lease. With respect to
the Presbyterian Medical Plaza Property, Cousins shall convey all right, title
and interest in and to the Ground Lease, together with any easements
appurtenant thereto and any Improvements thereon, to Venture Two by an
Assignment of Ground Lease in the form of Exhibit U attached hereto and made
a part hereof (hereinafter referred to as the "Ground Lease
Assignment"), subject only to the Permitted Title Exceptions. In the Ground
Lease Assignment, Venture Two shall assume in writing the due and full
performance of all of Cousins' obligations accruing on and after the Closing
Date under such Ground Lease.
F. Notices of Assignment and Assumption. A
written notice in the form of Exhibit V-1, a copy of which shall be sent to each
Space Tenant under a Space Lease (the "Tenant Notice"), and a written
notice in the form of Exhibit V-2 to each party to a Service Contract (the
"Contract Notices"), which notices shall include a request for a new insurance
certificate naming Venture Two as an additional insured.
G. Transfer of Permits and Approvals. If
applicable and if requested by Prudential, Cousins shall execute all
applications and instruments required in connection with the transfer of
all Permits and Approvals, to the extent transferable, in order to transfer
the benefits of each such Permit and Approval to Venture Two.
H. Transfer Tax Declaration. If applicable, a
duly completed real estate transfer tax declaration or return.
I. Other Instruments. Such other instruments
or documents as may be reasonably requested by Prudential or the Title Company,
or reasonably necessary, to effect or carry out the purposes of this Agreement
(which instruments or documents shall be subject to Cousins' prior approval
thereof, which approval shall not be unreasonably withheld or delayed).
8.2 Cousins' Other Deliveries. At the Closing, Cousins shall
deliver or cause to be delivered to Prudential the following (which, as to
documents to be executed by Cousins or any Affiliate, shall be duly executed and
delivered):
A. Ground Lease Estoppel. As a condition
precedent to Prudential's obligations at Closing, Cousins shall deliver to
Prudential at or prior to Closing an estoppel certificate executed by the
lessor under the Ground Lease, which estoppel certificate (the "Ground Lessor
Estoppel") shall be substantially in the form of Exhibit W attached hereto
and made a part hereof; the Ground Lessor Estoppel shall be dated no earlier
than thirty (30) days prior to Closing, nor shall the Ground Lessor Estoppel
indicate any material defaults or material discrepancies in information
previously made available to Prudential. Notwithstanding the foregoing,
Cousins shall not have any obligation to incur any expenditures in order to
obtain the Ground Lessor Estoppel. Cousins shall forward a copy of the Ground
Lessor Estoppel to Prudential upon receipt by Cousins. Subsequent to Closing,
Cousins shall use commercially reasonable efforts to obtain a ground lessor
estoppel substantially in the form of Exhibit W-1 attached hereto and made a
part hereof. Notwithstanding the foregoing, Cousins shall not have any
obligation to incur any expenditures in order to obtain the Ground Lessor
Estoppel. Cousins shall forward a copy of the Ground Lessor Estoppel to
Prudential upon receipt by Cousins.
B. Tenant Estoppels. Any and all Tenant
Estoppels received by Cousins. Cousins shall use its commercially reasonable
efforts to deliver to Prudential at or prior to Closing Tenant Estoppels from
each of the Space Tenants substantially in the form of the Tenant Estoppel Form
or, if the Space Lease includes a different form, substantially in the form
required by the Space Lease (which shall, for the purposes of this Agreement,
satisfy the Tenant Estoppel Requirement if the Tenant so uses the form
attached to its Space Lease). Notwithstanding the foregoing to the
contrary, the form of Tenant Estoppel to be obtained from Dayton Hudson
Corporation ("Target") with respect to the Greenbrier MarketCenter Property
shall be substantially as set forth on Exhibit JJ hereof, and the form of
Tenant Estoppel to be obtained from Target with respect to the North Point
MarketCenter Property shall be substantially as set forth on Exhibit KK hereof.
As a condition precedent to Prudential's obligations at Closing, Cousins shall
deliver to Prudential at or prior to Closing Tenant Estoppels executed by such
number of the Space Tenants as is necessary to comply with the Tenant Estoppel
Requirement. Notwithstanding the foregoing, Cousins shall not have any
obligation to incur any expenditures in order to obtain such estoppel
certificates.
C. Delivery of Keys and Property Documents. The
Ground Lease, the Operating Statements, the Commission Agreements, the Existing
Loan Documents, the Environmental Reports, the Rent Roll, the Service Contracts,
the Service Contract Records, the Space Leases, the Warranties, the Property
Documents and all Other Documents, together with all keys to the Assets shall,
at the option of Prudential, remain in the possession of Cousins upon Closing
but shall be the property of Venture Two upon Closing, and the right of
possession thereof by Cousins shall exist solely under the Alliance Management
Agreement to be entered into at Closing between Cousins and Venture Two.
D. Termination of Management Agreement and
Leasing Agreement. An executed original copy of the agreement terminating, as
of the Closing Date, the Daniel Management and Leasing Agreement, as such
document is defined and described on Exhibit I.
E. Affidavit of Title. An Affidavit of Title with
respect to Liens in the form of Exhibit X.
F. Non-Imputation Affidavit and Endorsement.
At Closing, Cousins shall execute and deliver to the Title Company a
Non-Imputation Affidavit in the form of Exhibit Y attached hereto and made a
part hereof.
G. Evidence of Authority. Evidence that
Cousins has the requisite power and authority to execute and deliver, and
perform under, this Agreement and all documents to be signed by Cousins in
connection herewith, consisting of a Certificate of Existence from the State
of Georgia, an incumbency certificate duly executed by the secretary or
assistant secretary of Cousins with respect to the offices held by the
persons who at Closing execute documents on behalf of Cousins, and a certificate
(duly certified by the secretary or assistant secretary of such corporation)
with respect to the resolution of the Board of Directors of such corporation
authorizing Cousins to enter into this Transaction, which certificate shall also
recite that the resolution has been duly adopted at a meeting of the Board of
Directors and remains in full force and effect. With respect to any Asset which
is owned by the Other Owners, Cousins shall cause to be delivered evidence of
authority of such Affiliate to transfer the respective Property to Venture Two
as is reasonably required by the Title Company and Prudential.
H. Loan Assumption Documents. Venture Two
shall assume and agree to pay the Existing Loans in accordance with their
respective terms and shall assume and agree to comply with all of the covenants,
terms and obligations of the Existing Loan Documents, and to deliver the
assumption agreements and indemnity agreements required by the Existing Loan
Documents, which assumption agreements and indemnity agreements shall be in
the form set forth on Exhibit Z (the "Loan Assumption Documents"). Venture Two
shall not assume nor incur any personal liability under the Existing Loan
Documents except as and to the extent that Cousins had, prior to the
transfer, liability under the Existing Loan Documents. Prudential shall not
assume or incur any personal liability or obligations under the Existing Loan
Documents.
I. Existing Lender Estoppels. As a condition
precedent to Prudential's obligation to consummate the Transaction at Closing,
Cousins shall obtain and deliver to Venture Two at Closing estoppel
certificates executed by the Existing Lenders, which estoppel certificates
shall be in the form set forth on Exhibit AA; no estoppel certificate
shall be dated earlier than thirty (30) days prior to Closing nor shall the
estoppel certificate indicate any material defaults or material
discrepancies in information previously made available to Prudential.
Notwithstanding the foregoing, Cousins shall not have any obligation to incur
any expenditures in order to obtain such estoppel certificates. Cousins shall
forward a copy of the estoppel certificates to Prudential upon receipt of the
estoppel certificates by Cousins.
J. Reaffirmation. A reaffirmation of the
representations, warranties and covenants set forth in Paragraph 9 hereof in the
form of Exhibit BB and made a part hereof, to which shall be attached a current
Rent Roll, a Representation Exception Schedule (which shall include a current
delinquency report), and, true, correct and complete lists of (i) all
Personal Property, (ii) all Space Leases and, if applicable, Commission
Agreements, and (iii) all Service Contracts and Warranties to be assigned
at Closing.
K. Intentionally Omitted.
L. Formation Closing Statement. A Formation
Closing Statement (the "Closing Statement") which shall, among other items, set
forth the Initial Prudential Venture Investment, the Initial Prudential
Venture Three Investment, all cash contributions and transfers made by
Cousins, and all disbursements made at Closing on behalf of Prudential and
Cousins.
M. Opinion of Cousins' Counsel. On the Closing Date,
Prudential shall have received the opinion of Cousins' counsel dated as of the
Closing Date, in form reasonably satisfactory to Prudential, that Cousins is a
corporation duly created, validly existing and in good standing under the laws
of the State of its organization; the Cousins has the power and authority to
enter into and perform this Agreement; and that the execution, delivery and
performance of this Agreement and of all instruments to be executed and
delivered by Cousins hereunder have been duly authorized by all necessary
action on the part of Cousins and have been duly executed and delivered.
N. Non-Foreign Affidavit. A certificate in the
form of Exhibit NN.
O. Georgia Residency Certificate. A
certificate in the form of Exhibit OO evidencing that Cousins is a resident of
the State of Georgia pursuant to O.C.G.A. 48-7-128.
P. Opinion of ERISA Counsel. On the Closing Date,
Prudential shall have obtained, at the sole cost and expense of Cousins (not to
exceed $7,500, with Prudential to pay any costs in excess of such amount),
an opinion from its counsel in form acceptable to Prudential that Venture is a
Venture Capital Operating Company and that Venture Two is a Real Estate
Operating Company.
Q. Management and Leasing Agreement.
The Alliance Management Agreement.
R. Landlord Estoppels. If Cousins shall be
unable to deliver to Prudential at or prior to Closing Tenant Estoppels
executed by one hundred percent (100%) of all Space Tenants under the Space
Leases, as a condition precedent to Prudential's obligation to consummate the
Transaction at Closing, Cousins shall have the obligation to deliver to
Prudential at Closing a Cousins Estoppel for each Space Lease sufficient
to comprise, together with the Tenant Estoppels executed by Space Tenants,
one hundred percent (100%) of the Space Leases as aforesaid.
S. Service Contract, Warranty and Title
Estoppels. Any and all Service Contract Estoppels, Warranty Estoppels and Title
Estoppels received by Cousins.
T. Master Lease. The Master Lease in the
form of Exhibit QQ (the "Master Lease").
U. Environmental Indemnity Agreement. The
Environmental Indemnity Agreement in the form of Exhibit MM.
V. Other Instruments. Such other instruments
or documents as may be reasonably requested by Prudential or the Title Company,
or reasonably necessary, to effect or carry out the purposes of this Agreement
(which instruments or documents shall be subject to Cousins' prior approval
thereof, which approval shall not be unreasonably withheld or delayed).
8.3 Prudential's Deliveries. At the Closing, Prudential
shall deliver or cause to be delivered to Cousins the following:
A. Formation Closing Statement. An executed
counterpart of the Formation Closing Statement.
B. Evidence of Authority. Evidence that
Prudential has the requisite power and authority to execute and deliver, and
perform under, this Agreement and all documents to be signed by Prudential in
connection herewith, consisting of a Certificate of Existence from the State
of New Jersey, an incumbency certificate duly executed by the secretary
or assistant secretary of Prudential with respect to the offices held by the
persons who at Closing execute documents on behalf of Prudential, and a
certificate (duly certified by the secretary or assistant secretary of such
corporation) with respect to the approval of Prudential authorizing Prudential
to enter into this Transaction, which certificate shall also recite that the
resolution has been duly adopted by the Investment Committee of Prudential and
remains in full force and effect.
C. Reaffirmation. A reaffirmation of the
representations, warranties and covenants set forth in paragraph 9 hereof in the
form of Schedule BB-1 Attached to Exhibit BB hereof.
D. Intentionally Omitted.
E. Opinion of Prudential's Counsel. On the
Closing Date, Cousins shall have received the opinion of Prudential's counsel
dated as of the Closing Date, in form reasonably satisfactory to Cousins,
that Prudential is a corporation duly created, validly existing and in good
standing under the laws of the State of its organization; the Prudential has
the power and authority to enter into and perform this Agreement; and that
the execution, delivery and performance of this Agreement and of all
instruments to be executed and delivered by Prudential hereunder have been duly
authorized by all necessary action on the part of Prudential and have been duly
executed and delivered.
F. Other Instruments. Such other instruments
or documents as may be reasonably requested by Cousins or the Title Company,
or reasonably necessary, to effect or carry out the purposes of this Agreement
(which instruments or documents shall be subject to Prudential's prior approval
thereof, which approval shall not be unreasonably withheld or delayed).
8.4 Venture Two's Deliveries. At the Closing, Venture
Two shall deliver or cause to be delivered to Cousins the following:
A. Assignment of Leases. For each Property, an
Assignment and Assumption of Leases.
B. Assignment of Service Contracts, Warranties
and Other Interests. For each Property, an Assignment and Assumption of
Contracts and Other Interests (including the form attached as Schedule T-1).
C. Ground Lease Assignment. An executed
counterpart of the Ground Lease Assignment.
D. Loan Assumption Documents. Executed
counterparts of the Loan Assumption Documents.
E. Management and Leasing Agreement. The
Alliance Management Agreement.
9. Representations and Warranties.
9.1 Cousins' Representations and Warranties. Cousins, as of
the date of the execution of this Agreement by Cousins, represents and warrants
to Prudential, and covenants with Prudential, subject to the matters on the
Representation Exception Schedule, as follows:
A. Space Leases:
(i) Title. Cousins is the lessor or landlord or the
successor lessor or landlord under the Space Leases. Except as set
forth in the Existing Loan Documents, no rent reserved in the Space
Leases has been assigned by Cousins and, except as set forth in the
Existing Loan Documents, Cousins has not otherwise assigned its rights,
title or interest in and to the Space Leases.
(ii) Rent. To Cousins' Knowledge (and without
limiting Prudential's rights under Paragraph 7 hereof), except as set
forth on the Representation Exception Schedule, no Rental Payments have
been collected in advance of the time when the same becomes due under
the terms of the Space Leases, except only for Rental Payments paid not
more than thirty (30) days in advance. Except as set forth in the Space
Leases, Cousins has not granted to any Space Tenant any Concessions
which would be binding upon Venture Two after the Closing Date. Except
as set forth in the Space Leases and on the Representation Exception
Schedule, no Concession has been granted to a Space Tenant prior to the
date hereof which resulted in the waiver of the obligation of such
Space Tenant to pay base monthly rent.
(iii) Rent Roll. The Rent Roll is, in all material
respects, accurate and not misleading.
(iv) Space Lease Defaults. Except as set forth on the
Representation Exception Schedule, there are no monetary defaults on
the part of any Space Tenant and no conditions or facts which, with the
passage of time or the giving of notice, or both, would constitute a
monetary default by any Space Tenant. To Cousins' Knowledge, except as
set forth on the Representation Exception Schedule, there are no
material defaults under or with respect to the Space Leases on the part
of the landlord thereunder, no material non-monetary defaults on the
part of any Space Tenant and no conditions or facts which, with the
passage of time or the giving of notice, or both, would constitute such
a material non-monetary default, and there have been no waivers of any
material non-monetary defaults by Cousins or the Other Owners under the
Space Leases except as set forth in writings constituting the Space
Lease.
(v) Guarantees of Space Leases. To Cousins'
Knowledge, all guarantees (if any) of the obligations of the Space
Tenants under the Space Leases are in full force and effect.
(vi) Copies of Space Leases and Commission
Agreements. Cousins has made available to Prudential true, correct and
complete copies of the Space Leases and Commission Agreements. To
Cousins' Knowledge, there are no understandings, Concessions, promises
or agreements between Cousins or the Other Owners and any Space Tenant
except as set forth in the Space Leases and the Commission Agreements.
(vii) No Lease Offsets. Except as set forth on the
Representation Exception Schedule, neither Cousins nor the Other Owners
has received notice by a Space Tenant asserting, and to Cousins'
Knowledge, no Space Tenant has (A) any current right to off-set rent by
reason of Cousins' or the Other Owners' failure, in any material
respect, to perform its obligations pursuant to any Space Lease, (B) a
claim against Cousins or the Other Owners, or (C) a right to abate
rent.
(viii) Space Tenant Status. Except as set forth on
the Representation Exception Schedule, neither Cousins nor the Other
Owners has received written notice that any Space Tenant has (A)
commenced a voluntary case, or had entered against it a petition, for
relief under any federal bankruptcy act or any similar petition, order
or decree under any federal or state law or statute relative to
bankruptcy, insolvency or other relief for debtors, (B) caused,
suffered or consented to the appointment of a receiver, trustee,
administrator, conservator, liquidator or similar official in any
federal, state or foreign judicial or non-judicial proceeding, to hold,
administer and/or liquidate all or substantially all of its assets, or
(C) made an assignment for the benefit of creditors. To Cousins'
Knowledge, except as set forth on Exhibit EE, no Space Tenant has
executed a written sublease for all or part of its demised premises or
a written assignment of its Space Lease.
(ix) Leasing Commissions. Except for the Surviving
Commissions, there are no leasing commissions, referral fees, payments
and obligations to make payments to agents, leasing agents, leasing
brokers or other parties with respect to the Space Leases, whether such
agreements are contained in a Space Lease or in any separate commission
agreement, due or payable now or hereafter with respect to the Space
Leases.
B. Organization, Power and Authority. Cousins
is a Georgia corporation duly organized, validly existing and in good standing
under the laws of the State of its organization or incorporation, is, to the
extent required by law, duly qualified to do business in the States in which the
Assets are located and has all necessary power to execute and deliver this
Agreement and perform all its obligations hereunder. Cousins has the full
power and authority to enter into and perform this Agreement and the
execution, delivery and performance of this Agreement by Cousins (i) has
been duly and validly authorized by all necessary action on the part of Cousins,
(ii) does not conflict with or result in a violation of Cousins' articles
of incorporation (or charter or by-laws) or partnership agreement or
operating agreement, or any judgment, order or decree of any court or arbiter
in any proceeding to which Cousins is a party, and (iii) does not conflict
with or constitute a material breach of, or constitute a material default
under, any contract, agreement or other instrument by which Cousins is bound
or to which it is a party.
C. No Other Leases or Occupancies. Cousins has
not entered into any, and to Cousins' Knowledge there are no, leases or other
agreements granting to any party any right to occupy any of the Assets, except
for the Space Leases. To Cousins' Knowledge, except for any subleases set
forth on Exhibit EE or as permitted under the Space Leases, no party other than
the Space Tenants is actually occupying any portion of the Real Property or the
Improvements.
D. No Undisclosed Contracts. To Cousins'
Knowledge, there are no management, real estate, leasing or rental commission,
service, maintenance, employment, union or other contracts of any kind or
description in existence relating to the Assets, and no options to purchase,
deeds, or other documents conveying any ownership or possessory interest
in or to the Assets, except for the Ground Lease, the Venture Agreement,
the Venture Two Agreement, the Permitted Title Exceptions, the Commission
Agreements (for Surviving Commissions), the Space Leases, the Service Contracts,
the Permits and Approvals and the Warranties, the terms of which will survive
the Closing or would constitute an obligation upon Venture Two after the Closing
Date.
E. Defaults under Service Contracts. To
Cousins' Knowledge, there are no material defaults under or with respect to the
Service Contracts on the part of Cousins, and to Cousins' Knowledge there are
no material defaults on the part of any other party to any Service Contract,
and no conditions or facts exist which, with the passage of time or the giving
of notice, or both, would constitute such a material default on the part of
Cousins or any such other party to any Service Contract, and there have
been no waivers of any material defaults except as set forth in writings
constituting the Service Contracts. Cousins has made available to Prudential
true, correct and complete copies of the Service Contracts. To Cousins'
Knowledge, there are no understandings, concessions, promises or agreements
between Cousins or the Other Owners and any party to the Service Contracts
except as set forth in the Service Contracts.
F. Accuracy of Operating Statements. Cousins
has delivered to Prudential true, correct and complete copies of the Operating
Statements. The Operating Statements are prepared in accordance with generally
accepted accounting principles, excluding footnotes, and fairly represent in
all material respects the results of operations of the Assets for the periods
indicated, exclusive of any footnote disclosure.
G. No Violations of Land Use Requirements. To
Cousins' Knowledge, the Assets and all Improvements are not in violation, in any
material respect, of the Land Use Requirements. Cousins has not received and,
to Cousins' Knowledge, Cousins is not aware of, any notification from any
governmental or public authority that the Assets are not in compliance in all
material respects with any Land Use Requirements.
H. Environmental Matters. With respect to the
matters set forth in subsections (ii) through (vi) of this Subparagraph,
Cousins' Knowledge is based solely on those certain environmental reports
listed on Exhibit FF attached hereto, which list includes all supplements,
amendments and modifications (if any)to such reports (the "Environmental
Reports"). To Cousins' Knowledge, Cousins has not conducted or received from
any third party any other environmental investigations with respect to
Environmental Matters in the Assets, except for the Environmental Reports.
(i) Existing Reports. Cousins has made
available to Prudential true, correct and complete copies of the
Environmental Reports.
(ii) No Known Litigation or Violation. To Cousins'
Knowledge, there is no Environmental Litigation pending or threatened
with respect to the Assets. Except as may be referenced in the
Environmental Reports identified in Exhibit FF, Except as disclosed in
the environmental report prepared for the First Union Tower Property
identified on Exhibit FF and addressed in Exhibit MM, Cousins has
received no notice of existing violations of applicable Environmental
Laws with respect to the ownership, use, condition, or operation of the
Assets.
(iii) Uses. To Cousins' Knowledge, Cousins has not
used the Assets for the treatment, storage, or disposal of any
Hazardous Substance in a manner which would violate, in any material
respect, any applicable Environmental Laws. To Cousins' Knowledge, no
Space Tenant has used the Assets for the treatment, storage or disposal
of any Hazardous Substance in a manner which would violate, in any
material respect, any applicable Environmental Laws.
(iv) No Asbestos; No PCBs. Except as set forth in the
applicable Environmental Reports, to Cousins' Knowledge, no Improvement
contains any asbestos or asbestos-containing materials in material
violation of any applicable Environmental Law. To Cousins' Knowledge,
no electrical transformers installed or located on the Assets contain
polychlorinated biphenyls in material violation of any applicable
Environmental Law.
I. Condemnation Proceedings. To Cousins'
Knowledge, Cousins has received no written notice of pending or threatened
Condemnation Proceedings which would affect the Assets, or any part thereof, or
any written request for a conveyance in lieu thereof.
J. Litigation Proceedings. To Cousins'
Knowledge, there are no judgments unsatisfied against Cousins with respect to
the Assets or consent decrees or injunctions to which the Assets are subject,
and, to Cousins' Knowledge, there is no litigation, claim or proceeding
pending against or relating to the Assets. There is no criminal
investigation concerning Cousins which will have a material adverse effect on
its ability to perform under this Agreement or the Assets.
K. Bankruptcy. Cousins has not (A) commenced a
voluntary case, or had entered against it a petition, for relief under any
federal bankruptcy act or any similar petition, order or decree under any
federal or state law or statute relative to bankruptcy, insolvency or other
relief for debtors, (B) caused, suffered or consented to the appointment of a
receiver, trustee, administrator, conservator, liquidator or similar official
in any federal, state or foreign judicial or non-judicial proceeding, to
hold, administer and/or liquidate all or substantially all of its assets, (C)
made an assignment for the benefit of creditors.
L. Trade Name. Cousins has received no notice
from any other party who claims that Cousins' use of the Project Name violates
or infringes upon such party's rights.
M. ERISA. To Cousins' Knowledge:
(i) Neither Cousins nor any of its affiliates (within
the meaning of Part V(c) of Prohibited Transaction Exemption 84-14
granted by the U.S. Department of Labor ("PTE 84-14") has, or during
the immediately preceding year has exercised, the authority to appoint
or terminate Prudential as investment manager of any assets of the
employee benefit plans whose assets are held by Prudential or to
negotiate the terms of any management agreement with Prudential on
behalf of any such plan;
(ii) The Transaction is not specifically excluded
by Part I(b) of PTE 84-14;
(iii) Cousins is not a related party of Prudential
(as defined in Part V(h) of PTE 84-14); and
(iv) The terms of the Transaction have been
negotiated and determined at arm's length, as such terms would be
negotiated and determined by unrelated parties.
Cousins hereby agrees to execute such documents or provide such information as
Prudential may reasonably require in connection with the Transaction or to
otherwise reasonably assure Prudential that: (a) this is not a prohibited
transaction under ERISA, (ii) that the Transaction is otherwise in compliance in
all respects with ERISA and (iii) that Prudential is not in violation of ERISA
by compliance with this Agreement and by closing the Transaction.
N. Ground Lease. With respect to the Ground
Lease,
(i) Cousins is the owner and holder of the lessee's
interest in the Ground Lease and of the leasehold estate created
thereby.
(ii) To Cousins' Knowledge, neither Cousins nor the
lessor under the Ground Lease is in material default under any of the
terms, covenants or conditions thereof nor does there exist any event
of material default or any state of facts or condition which would,
with the passage of time or the giving of notice, or both, constitute a
material default or event of material default on the part of said
lessor or Cousins under any of said terms, covenants or conditions of
the Ground Lease.
(iii) The copy of the Ground Lease made available by
Cousins to Prudential is a true, correct and complete copy thereof. To
Cousins' Knowledge, there are no understandings, concessions, promises
or agreements between Cousins and any party to the Ground Lease except
as set forth in the Ground Lease.
O. Existing Indebtedness. With respect to the
Existing Indebtedness, Cousins represents and warrants as follows:
(i) The copies of the Existing Loan Documents made
available by Cousins to Prudential are true, correct and complete
copies thereof.
(ii) To Cousins' Knowledge, no material default or
events which would, upon the passage of time or the giving of notice or
both, ripen into a material default exist under the Existing Loan
Documents.
P. Building Systems Hardware and Software. To
Cousins' Knowledge, based on a review of Building System records and requests
for information from parties to Service Contracts, the "make" of each item of
computer driven or assisted equipment related to Building Systems (including
type of hardware equipment, manufacturer, product name, and product number,
if available to Cousins after making commercially reasonable and diligent
inquiry of the parties to the applicable Service Contracts and manufacturers
of the Building Systems, as applicable), and the "brand" of software used to
operate such equipment used with Building Systems (including type of
software, manufacturer, product name, product number, version, and other
relevant identifying information), are as set forth on Exhibit GG attached
hereto.
Q. Plans and Specification and Soils Reports.
To Cousins' Knowledge, the copies of the Plans and Specifications made
available to Prudential by Cousins are the final plans and specifications for
the Improvements and are true, correct and complete copies thereof (except
for changes to the Plans and Specifications which may have occurred during
the construction of the Improvements and which do not materially adversely
affect the Improvements). To Cousins' Knowledge, the copies of the Soils
Reports made available to Prudential by Cousins are true, correct and
complete copies thereof. To Cousins' Knowledge, there are no other soils reports
or soils engineering studies, tests or investigations which are within the
possession or control of Cousins and which contain materially different
information from that contained in the Soils Reports.
R. Assessments. To Cousins' Knowledge, Cousins
has not received notice of any contemplated or actual reassessments of the
Assets or any part thereof for general real estate tax purposes except as
set forth in the Representation Exception Schedule. To Cousins' Knowledge,
except as set forth on the Representation Exception Schedule, no
assessments for public improvements, impact fees or similar exactions have
been made against the Assets which remain unpaid.
S. Insurance Violations. To Cousins'
Knowledge, Cousins has not received any notice from any insurance company
insuring the Assets stating that Cousins or the Other Owners is in violation of
the terms and conditions of any insurance policy issued with respect to the
Assets.
T. Knowledgeable Parties. The individuals
identified as Knowledgeable Parties are the officers or employees of Cousins
and the Other Owners who have had responsibility for the ownership,
development, leasing, management and operation of the Assets.
9.2 Modifications, Reaffirmation at Closing. All of the
foregoing representations and warranties of Cousins shall be reaffirmed by
Cousins in writing at Closing. In the event that there shall be any material
change to any of the representations and warranties made herein by Cousins,
Cousins agrees to give prompt written notice thereof to Prudential in order to
reflect the accurate state of facts with respect to the foregoing (hereinafter
such modifications are referred to as "Representation Exceptions").
9.3 Survival. The representations and warranties set forth
above shall survive Closing hereunder for the earlier of (i) a period of seven
(7) years after the date hereof or (ii) with respect to any Asset, the sale of
such Asset by Venture Two (the "Survival Period") and shall not be merged with
the execution and delivery of the deeds and other Closing documents. Cousins
shall have no liability for a breach or inaccuracy of any of the aforesaid
representations and warranties unless Prudential has delivered to Cousins
written notice of such breach or inaccuracy on or prior to the expiration of the
Survival Period.
9.4 Remedies Prior To Closing. Intentionally Omitted.
9.5 Cousins' Representations Deemed Modified. Notwithstanding
any other term or provision of the Venture Agreement, the Venture Two Agreement,
the Venture Three Agreement or this Agreement to the contrary, Prudential
expressly acknowledges and agrees that the liability of Cousins for any breach,
failure or default of the Cousins' Express Representations and Warranties set
forth in this Agreement shall not extend to, and shall in all events exclude
therefrom, (i) any matter known to Prudential's Representatives as of the date
of Closing ("Prudential's Representatives" are those employees of Prudential who
have been engaged in review of due diligence matters for Prudential in this
Transaction, namely, Dale H. Taysom, Mark Seedorff, Charles Miller, Thomas
Barker and John Stevens), (ii) any matter disclosed by and specifically noted as
an exception to the Cousins' Express Representations and Warranties in this
Agreement, the Venture Agreement, or the Venture Two Agreement, and (iii) any
matter disclosed by the Space Leases, the Ground Lease, the Permits and
Approvals, the Warranties, the Tenant Estoppels, the Title Commitment, the Title
Policy, the UCC Certifications, the Rent Roll, the Commission Agreements, the
Service Contracts, the Environmental Reports, the Existing Loan Documents, the
Existing Lender Estoppels, the Ground Lease Estoppel, the Service Contract
Estoppels, the Covenant Estoppels, the Warranty Estoppels, the Permitted
Exceptions, the Operating Statements, and any other Property Documents actually
delivered by Cousins to Prudential and the Closing Documents (the information in
Clauses (i), (ii) and (iii) being collectively, the "Disclosed Matters"). In the
event Prudential elects to consummate the Closing and not to terminate this
Agreement upon discovery of any inaccuracy of any of Cousins' Express
Representations and Warranties, it is expressly acknowledged and agreed by
Prudential that Cousins' Express Representations and Warranties shall be deemed
modified so as to include such information as is required to correct any such
inaccuracy and Prudential shall be deemed to have accepted and approved such
modification.
9.6 Prudential's Representations and Warranties. Prudential,
as of the date of the execution of this Agreement by Prudential, represents and
warrants to Cousins as follows and, as a condition precedent to Cousins'
obligation to consummate the Transaction at Closing under this Agreement, the
following representations of Prudential shall be true and correct in all
material respects as of the Closing Date:
A. Organization, Power and Authority.
Prudential is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey, is, or will by the Closing
Date be, to the extent required by law, duly qualified to do business
in the States in which the Assets are located and has all necessary power to
execute and deliver this Agreement and perform all its obligations
hereunder. Prudential has the full power and authority to enter into this
Agreement and the execution and delivery of this Agreement by Prudential (i) has
been duly and validly authorized by all necessary action on the part of
Prudential, (ii) does not conflict with or result in a violation of Prudential's
Articles of Incorporation or By-Laws or any judgment, order or decree of any
court or arbiter in any proceeding to which Prudential is a party, and (iii)
does not conflict with or constitute a material breach of, or constitute a
material default under, any contract, agreement or other instrument by which
Prudential is bound or to which it is a party.
B. No Bankruptcy. Prudential has not (A)
commenced a voluntary case, or had entered against it a petition, for relief
under any federal bankruptcy act or any similar petition, order or decree
under any federal or state law or statute relative to bankruptcy,
insolvency or other relief for debtors, (B) caused, suffered or consented to
the appointment of a receiver, trustee, administrator, conservator, liquidator
or similar official in any federal, state or foreign judicial or non-judicial
proceeding, to hold, administer and/or liquidate all or substantially
all of its assets, or (C) made an assignment for the benefit of creditors.
C. ERISA. To Prudential's knowledge:
(i) The Transaction is not specifically excluded by Part
I (b) of PTE 84-14;
(iii) Prudential is not a related party of Cousins (as defined
in Part V (h) of PTE 84-14);
(iii) The terms of the Transaction have been negotiated and
determined at arms length, as such terms would be negotiated and
determined by unrelated parties; and
(iv) Prudential is a qualified professional asset manager as
defined in Part V (a) of PTE 84-14.
Prudential hereby agrees to execute such documents or provide such
information as Cousins may reasonably require in connection with the Transaction
or to otherwise reasonably assure Cousins that: (i) this is not a prohibited
Transaction under ERISA, (ii) that the Transaction is otherwise in compliance
with ERISA, and (iii) that Cousins is not in violation of ERISA by compliance
with this Agreement and by closing this Transaction.
D. Litigation Proceedings. To Prudential's
knowledge, there are no judgments unsatisfied against Prudential and no
litigation, claim or proceeding pending or, to Prudential's knowledge,
threatened against Prudential which would have a material adverse impact on
the Transaction. There is no criminal investigation concerning Prudential
which will have a material adverse affect on its ability to perform under this
Agreement.
E. Modifications; Reaffirmation at Closing.
All of the foregoing representations and warranties of Prudential shall be
reaffirmed by Prudential in writing at Closing. In the event that there shall
be any material change to any of the representations and warranties made
herein by Prudential, Prudential agrees to give prompt written notice thereof
to Cousins in order to reflect the accurate state of facts with respect to the
foregoing.
F. Survival. The representations and
warranties set forth above shall survive Closing hereunder for a period of seven
(7) years after the date hereof (the "Survival Period") and shall not be
merged with the execution and delivery of the deeds and other Closing
documents. Prudential shall have no liability for a breach or inaccuracy of any
of the aforesaid representations and warranties unless Cousins has
delivered to Prudential written notice of such breach or inaccuracy on or prior
to the expiration of the Survival Period.
10. Cousins' Covenants. Cousins agrees that between the date hereof and
the Closing Date:
10.1 No Alteration of Title. Cousins shall not, so long as
this Agreement remains in effect, further alter or encumber in any way Cousins'
title to the Assets after the date hereof without the prior written consent of
Prudential, which consent shall not be unreasonably withheld.
10.2 Standard of Operation and Maintenance. Cousins shall
operate, manage and maintain the Assets substantially in the same manner as the
Assets have been operated by Cousins to the date hereof.
10.3 New Space Leases and Modifications to Existing Space
Leases. Cousins shall not (i) cancel, modify, amend, extend or renew any
existing Space Lease, (ii) waive any material default under or accept any
surrender of any Space Lease, or (iii) accept any prepayment of rent thereunder
(more than thirty (30) days in advance), without in each case the prior written
consent of Prudential, which consent will not be unreasonably withheld or
delayed (and if no response by Prudential is made within ten (10) Business Days
after such request, such consent shall be deemed to have been granted); upon
delivery of such written consent, such modification of any Space Lease shall
thereupon be included within the definition of "Space Leases" set forth herein.
Cousins shall not enter into any leases, subleases, rental agreements and other
occupancy agreements, whether oral or written and whether or not of record, for
the use or occupancy of any portion of the Assets, without in each case the
prior written consent of Prudential, which consent will not be unreasonably
withheld or delayed (and if no response by Prudential is made within ten (10)
Business Days after such request, such consent shall be deemed to have been
granted); upon delivery of such written consent, such modification of any Space
Lease shall thereupon be included within the definition of "Space Leases" set
forth herein. Except for space occupied by Cousins in its role as property
manager of the Assets, no space in the Assets shall at Closing be occupied by
Cousins or any Affiliate of Cousins on a rent free basis, for rent less than
fair market rent, or on terms which are not fair market terms.
10.4 Service Contracts. Prudential shall have the right to
reject any or all of the Service Contracts by the delivery of written notice to
Cousins of such election on or before the Closing Date, and, as to such Service
Contracts so rejected or not accepted, Cousins shall terminate such Service
Contracts at Closing (and the effective date of termination shall be governed by
the terms of the respective Service Contracts so terminated, if any) and Venture
Two shall not receive an assignment of, assume or take title to the Assets
subject to, such Service Contracts. However, to the extent that the effective
date of termination of any Service Contract is after the Closing Proration Date,
Venture Two will pay all amounts payable under the Service Contract from and
after the Closing Proration Date. After execution of this Agreement by
Prudential, Cousins shall not enter into any new service, maintenance, or other
contracts respecting leasing, management, maintenance or operation of the Real
Property or the Improvements, including, but not limited to, equipment leases,
construction contracts, maintenance contracts, contracts and agreements with
respect to Building Systems, equipment rental agreements, brokerage agreements,
annuity and Commission Agreements and management agreements which cannot be
terminated, without penalty, upon thirty (30) days (or less) written notice from
the owner of the Assets; and Cousins shall promptly notify Prudential if any
Service Contracts are entered into and shall provide Prudential by written
notice with true, correct and complete copies thereof. If any proposed Service
Contract cannot be terminated, without penalty, upon thirty (30) days (or less)
written notice from the owner of the Assets, Cousins shall not enter into such
Service Contract without the prior written consent of Prudential. In addition,
Cousins shall not cancel, modify, extend or renew any Service Contract, nor
waive any material default under or accept any surrender of the Service
Contracts, without in each case the prior written consent of Prudential, which
consent will not be unreasonably withheld or delayed.
10.5 Representations and Warranties. Cousins shall not take
any action which makes any of Cousins' Express Representations and Warranties
materially untrue or materially inaccurate in a manner which would produce a
material adverse impact on the Assets or fail to take any action which would
ordinarily be taken by Cousins in the normal course of business to prevent any
of the Cousins' Express Representations and Warranties from becoming materially
untrue or materially inaccurate in a manner which would produce a material
adverse impact on the Assets.
10.6 More Greenbrier Land. Cousins agrees that, in the event
the Best Buy Conditions (as defined in the Master Lease) are satisfied and the
resubdivision plat for the Greenbrier MarketCenter Property is recorded, Cousins
and CMC shall promptly (and within ten days after written demand from Prudential
or such earlier date as shall be required by the Space Lease to Best Buy)
contribute to Venture Two that certain parcel of land described on Exhibit LL
hereof (the "Additional Greenbrier MarketCenter Property") promptly after the
date of recordation of such resubdivision plat. Such contribution of the
Additional Greenbrier MarketCenter Property shall be on the same terms and
conditions as the contribution of the Assets under this Agreement, and shall,
for the purposes of this Agreement, be deemed to have been a part of the
Greenbrier MarketCenter Property.
11. Notices. All notices, consents, approvals and other communications
which may be or are required to be given by either Cousins or Prudential under
this Agreement shall be properly given only if made in writing and sent by (a)
hand delivery, or (b) certified mail, return receipt requested, or (c) a
nationally recognized overnight delivery service (such as Federal Express, UPS
Next Day Air, Purolator Courier or Airborne Express), or (d) by telecopying to
the telecopy number listed below (provided that a copy of such notice is also
delivered within 24 hours to the party by one of the other methods listed
herein), with all postage and delivery charges paid by the sender and addressed
to the Prudential or Cousins, as applicable, as follows, or at such other
address (or telecopy number) as each may request in writing. Such notices
delivered by hand, by telecopy, or overnight delivery service shall be deemed
received on the date of delivery and, if mailed, shall be deemed received upon
the earlier of actual receipt or two days after mailing. Said notice addresses
are as follows (and Cousins and Prudential shall have the right to designate
changes to their respective notice addresses, effective five (5) days after the
delivery of written notice thereof):
If to Cousins: Cousins Properties Incorporated
- ------------- 2500 Windy Ridge Parkway, Suite 1600
Atlanta, Georgia 30339-5683
Attention: Corporate Secretary
Telephone No.: (770) 955-2200
Telecopy No.: (770) 857-2360
With a copy to: Troutman Sanders LLP
-------------- 5200 NationsBank Plaza,
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attention: John W. Griffin
Telephone No.: (404) 885-3150
Telecopy No.: (404) 885-3900
If to Prudential: The Prudential Insurance Company of
- ---------------- America
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Managing Director,
Transactions (Dale H. Taysom)
Telephone No.: (770) 395-8654
Telecopy No.: (770) 396-9246
With a copy to: The Prudential Insurance Company of
--------------- America
Two Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attention: Principal, Asset Management
(Charles Miller)
Telephone No.: (770) 395-8655
Telecopy No.: (770) 399-5363
With a copy to: The Prudential Insurance Company of
--------------- America
PAMG-RE Law Department
Arbor Circle South, 8 Campus Drive,
4th Floor
Parsippany, New Jersey 07054-4493
Attention: Assistant General Counsel
(Ellen Towey Kendall, Esq.)
Telephone No.: (973) 683-1696
Telecopy No.: (973) 683-1788
With a copy to: Alston & Bird LLP
--------------- One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Albert E. Bender, Jr.
Telephone No.: (404) 881-7385
Telecopy No.: (404) 881-7777
12. Casualty and Condemnation.
12.1 Casualty. In the event that prior to the Closing Date any
portion of the Improvements is damaged or destroyed by fire or other casualty,
then Cousins shall assign to Venture Two all insurance proceeds payable under
Cousins' insurance policies on account of such damage or destruction or pay to
Venture Two all such insurance proceeds previously paid and not applied to the
restoration of the applicable Improvements, together with an amount equal to the
amount (but in no event greater than the amount of such casualty loss) which the
insurer is entitled pursuant to the terms of the applicable insurance policy to
deduct from the proceeds otherwise payable to Contributor on account of such
casualty loss.
12.2 Condemnation. In the event that prior to the Closing Date
there shall be commenced or instituted against an Asset any Condemnation
Proceeding or Cousins or any Other Owner shall receive any written request for a
conveyance in lieu thereof, (i) the conveyance of the Assets shall be less such
portion of the Asset so taken in (or shall be subject to, as applicable) said
Condemnation Proceeding without adjustment of the Prudential Investment, and
(ii) Cousins shall assign or pay to Venture Two all of Cousins' right, title and
interest in any award payable on account of such Condemnation Proceeding or pay
to Venture Two all such awards previously paid and not applied to the
restoration of the applicable Improvements.
13. Brokers. Other than as to the investment bankers engaged by Cousins
as disclosed herein by Cousins, Cousins and Prudential each hereby represent and
warrant to the other that it has not employed, retained or consulted any broker,
agent, or finder in carrying on a negotiation in connection with this Agreement
or the Transaction. Cousins and Prudential each hereby indemnify and agree to
hold the other harmless from and against any and all claims, demands, causes of
action, debts, liabilities, judgments and damages (including costs and
reasonable attorneys' fees incurred in connection with the enforcement of this
indemnity) which may be asserted or recovered against the indemnified party on
account of any brokerage fee, commission or other compensation arising by reason
of the indemnitor's breach of this representation and warranty. This Paragraph
shall survive the Closing or any termination of this Agreement.
14. Default and Remedies.
14.1 Default Prior to Closing. Intentionally Omitted.
14.2 Cure Periods for Default Subsequent to Closing. No
action, suit or proceeding shall be pursued or taken by Prudential as a result
of any alleged breach, failure or default by Cousins under this Agreement, or,
except for the failure of Prudential to make the Initial Prudential Venture
Investment and Initial Prudential Venture Three Investment on the Closing
Proration Date (for which there shall be only a five (5) day notice and cure
period), by Cousins as a result of any alleged breach, failure or default by
Prudential under this Agreement, unless written notice of such breach, failure
or default hereunder has been given to the defaulting party by the
non-defaulting party and such breach, failure or default is not cured within
thirty (30) days after the giving of such notice; provided, however, if any such
breach, failure or default is curable but will reasonably require more than
thirty (30) days to cure, no such action, suit or proceeding shall be pursued or
taken by the non-defaulting party if the defaulting party shall commence its
efforts to cure such breach, failure or default within such thirty (30) pay
period and shall thereafter diligently and continuously pursue such cure to
completion, which cure must, in any event, be completed within ninety (90) days.
In the event such breach, failure or default is not cured as aforesaid, then the
non-defaulting party shall be entitled to exercise any and all rights and
remedies at law or in equity, subject to the limitations set forth in Paragraph
14.3. Notwithstanding the foregoing, Cousins and Prudential acknowledge and
agree that the terms and provisions relating to the payment of any portion of
the Prudential Investment other than the Initial Prudential Venture Investment
and the Initial Prudential Venture Three Investment, including the cure periods
applicable in the event that Prudential shall fail to pay such amounts as and
when due and payable, shall, as set forth in the provisions of Paragraph 3.1 and
3.3 hereof, be as set forth in the Venture Agreement and the Venture Three
Agreement, and not in this Paragraph 14.2.
14.3 Default by Cousins or Prudential Subsequent to Closing;
Liability and Limitation of Liability. Subject to any express provision of the
Venture Agreement, the Venture Two Agreement, the Venture Three Agreement or
this Agreement to the contrary (which Venture Agreement, for example, permits
assignment to Affiliates of Cousins, and as set forth below in this Agreement,
which permits offset from the Alliance Management Agreement), in no event shall
any of the Cousins Related Parties or any Affiliate of Cousins, have any
liability (personal or otherwise) under this Agreement with respect to claims
for any breach, failure or default of Cousins' Express Representations and
Warranties or otherwise, and in no event shall any Affiliate of Prudential have
any liability (personal or otherwise) under this Agreement with respect to
claims for any breach, failure or default of the Prudential Express
Representations and Warranties or otherwise, and Cousins shall be responsible
for all liability of the Other Owners under this Agreement with respect to
claims for any breach, failure or default of Cousins' Express Representations
and Warranties and otherwise.
With respect to the liability of Cousins under this Agreement
subsequent to Closing, Prudential expressly acknowledges and agrees that,
notwithstanding any provision of the Venture Agreement, the Venture Two
Agreement, the Venture Three Agreement or this Agreement to the contrary, (i) in
no event shall Cousins have any obligation to make payment with respect to
claims for any breach, failure or default of the Cousins' Express
Representations and Warranties under this Agreement unless and until such claims
shall exceed an amount which Prudential agrees is no longer an immaterial loss
under this Agreement, such amount being $20,000.00 (the "Materiality Threshold")
in the aggregate (exclusive of matters set forth in Paragraph 7 hereof), in
which event the full amount of such claims shall be actionable, and (ii) any
obligations or liability of Cousins which may arise at any time under this
Agreement (exclusive of matters set forth in Paragraph 7 hereof) shall be
satisfied only (x) from the member interests of Cousins or any Affiliate of
Cousins in Venture, Venture Two and Venture Three, and (y) from distributions
payable to Cousins relating to the member interests of Cousins in Venture,
Venture Two and Venture Three, and (z) by offset from the Alliance Management
Agreement.
With respect to the liability of Prudential under this Agreement
subsequent to Closing, Cousins expressly acknowledges and agrees that,
notwithstanding any provision of the Venture Agreement, the Venture Two
Agreement, the Venture Three Agreement or this Agreement to the contrary, except
for Prudential's obligations to pay the Initial Prudential Venture Investment
and Initial Prudential Venture Three Investment which shall be absolute and
unconditional as of the Closing Date and shall not be subject to the Materiality
Threshold nor be limited to satisfaction from the interests described in (x),
(y) and (z) below, (i) in no event shall Prudential have any obligation to make
payment with respect to claims for any breach, failure or default of any of the
Prudential Express Representations and Warranties unless and until such claims
shall exceed the Materiality Threshold, in the aggregate (exclusive of matters
set forth in Paragraph 7 hereof), in which event the full amount of such claims
shall be actionable, and (ii) any obligations or liability of Prudential which
may arise at any time under this Agreement for a breach of Prudential's Express
Representations and Warranties (exclusive of matters set forth in Paragraph 7
hereof) shall be satisfied only (x) from the member interest of Prudential or
any Affiliate of Prudential in Venture, Venture Two and Venture Three, and (y)
from distributions payable to Prudential relating to the member interest of
Prudential in Venture, Venture Two and Venture Three. In the event that
Prudential fails to pay any portion of the Initial Prudential Venture Investment
and Initial Prudential Venture Three Investment pursuant to Paragraph 3 of this
Agreement as and when the same is due and payable, and if such failure continues
unremedied after giving effect to any cure period provided in Paragraph 3.1 of
this Agreement (as to the Initial Prudential Venture Investment and the Initial
Prudential Venture Three Investment), Cousins shall have the rights and remedies
specified in Paragraph 3.1 hereof. In addition to the rights and remedies of
Cousins in Paragraph 3.1 hereof (which relate to the failure of Prudential to
pay the Initial Prudential Venture Investment and the Initial Prudential Venture
Three Investment, and not to the payment of any portion of the Prudential
Investment other than the Initial Prudential Venture Investment and the Initial
Prudential Venture Three Investment), Cousins and Prudential acknowledge and
agree that the terms and provisions relating to the payment of any portion of
the Prudential Investment, including those relating to the liability of
Prudential for failure to make any such payment and the rights and remedies of
Cousins with respect thereto, shall be as set forth in the Venture Agreement and
the Venture Three Agreement. No breach or failure of Cousins' Express
Representations and Warranties on or subsequent to the Closing Date shall excuse
Prudential's performance of its obligations to make the Initial Prudential
Venture Investment and Initial Prudential Venture Three Investment, nor, as set
forth in the Venture Agreement and the Venture Three Agreement, shall any such
breach or failure of Cousins' Express Representations and Warranties on or
subsequent to the Closing Date excuse Prudential's performance of its
obligations to make the remainder of the Prudential Venture Investment and the
remainder of the Prudential Venture Three Investment pursuant to the Venture
Agreement and the Venture Three Agreement; provided, however, that no such
performance by Prudential shall alter, impair or waive any of Prudential's
rights against Cousins for such breach or failure of Cousins' Express
Representations and Warranties on or subsequent to the Closing Date.
Nothing set forth in this Agreement shall prohibit or impair the right
of either Cousins or Prudential to exercise any rights or remedies under the
Venture Agreement, the Venture Three Agreement or the Venture Two Agreement as
the case may be, including, but not limited to, any right to require
contributions or additional capital contributions.
15. General Provisions.
15.1 Execution Necessary. This Agreement shall not be binding
upon Cousins or Prudential until fully executed and delivered by an authorized
officer of each of Cousins and Prudential.
15.2 Counterparts. This Agreement may be executed in separate
counterparts. It shall be fully executed when each party whose signature is
required has signed at least one counterpart even though no one counterpart
contains the signatures of all of the parties to this Agreement.
15.3 Successors and Assigns. Neither Cousins nor Prudential
shall have the right to assign or delegate any of its rights, duties or
obligations under this Agreement to any other party. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
15.4 Entire Agreement. This Agreement, the Venture Agreement,
the Venture Two Agreement and the Venture Three Agreement, all the exhibits
referenced herein and annexed hereto, and all agreements entered into on the
Closing Date or otherwise contemporaneously herewith, contain the entire
agreement of the parties hereto with respect to the Transaction, and no prior
agreement or understanding (including without limitation the Term Sheet between
Prudential and Cousins dated September 4, 1998) pertaining to any of the matters
connected with this Transaction shall be effective for any purpose. Except as
may be otherwise provided herein, the agreements embodied herein may not be
amended except by an agreement in writing signed by the parties hereto.
15.5 Time is of the Essence. TIME IS OF THE ESSENCE of
the Transaction.
15.6 Governing Law. This Agreement shall be governed by
the laws of the State of Georgia.
15.7 Survival. All covenants, agreements, indemnities,
representations and warranties contained herein shall survive the Closing Date
for the terms, as applicable, specified herein, except for those covenants and
agreements which are actually performed at Closing and except as may be
otherwise specifically provided in this Agreement. In addition, in the event of
a termination of this Agreement prior to the Closing Date, the covenants,
agreements, indemnities, representations and warranties contained herein which
relate to obligations incurred prior to such termination (and excluding any
obligation to consummate the Transaction) shall survive the Closing Date, except
as otherwise expressly set forth herein.
15.8 Further Assurances. Each party agrees to execute and
deliver to the other such further documents or instruments as may be reasonable
and necessary in furtherance of the performance of the terms, covenants and
conditions of the within Agreement. This covenant shall survive the Closing.
15.9 Exclusive Application. Nothing in this Agreement is
intended or shall be construed to confer upon or to give to any person, firm or
corporation other than Prudential and Cousins hereto any right, remedy or claim
under or by reason of this Agreement.
15.10 Partial Invalidity. If all or any portion of any of the
provisions of this Agreement shall be declared invalid by laws applicable
thereto, then the performance of said offending provision shall be excused by
the parties hereto; provided, however, that, if the performance of such excused
provision materially affects any material aspect of this Transaction and the
other party does not promptly enter into a modification or separate agreement
which sets forth in valid fashion the covenants of such offending provision in a
manner which counsel to both parties determine is valid, then the party hereto
for whose benefit such excused provision was inserted in this Agreement shall
have the right, exercisable by written notice given to the other party within
ten (10) days after such provision is so declared invalid, to terminate this
Agreement; thereupon this Agreement shall be null and void.
15.11 Interpretation. The titles, captions and paragraph
headings are inserted for convenience only and are in no way intended to
interpret, define, limit or expand the scope or content of this Agreement or any
provision hereof. If any party to this Agreement is made up of more than one
person or entity, then all such persons and entities shall be included jointly
and severally, even though the defined term for such party is used in the
singular in this Agreement. If any time period under this Agreement ends on a
day other than a Business Day, then the time period shall be extended until the
next Business Day. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted. If any words or phrases in this Agreement shall have
been stricken out or otherwise eliminated, whether or not any other words or
phrases have been added, this Agreement shall be construed as if the words or
phrases so stricken out or otherwise eliminated were never included in this
Agreement and no implication or inference shall be drawn from the fact that said
words or phrases were so stricken out or otherwise eliminated.
15.12 Waiver Rights. Prudential reserves the right to waive,
in whole or in part, any provision hereof which is for the benefit of
Prudential. Cousins reserves the right to waive, in whole or in part, any
provision hereof which is for the benefit of Cousins.
15.13 No Implied Waiver. Unless otherwise expressly provided
herein, no waiver by Cousins or Prudential of any provision hereof shall be
deemed to have been made unless expressed in writing and signed by such party.
No delay or omission in the exercise of any right or remedy accruing to Cousins
or Prudential upon any breach under this Agreement shall impair such right or
remedy or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by Cousins or Prudential of any breach of any term,
covenant or condition herein stated shall not be deemed to be a waiver of any
other breach, or of a subsequent breach of the same or any other term, covenant
or condition herein contained.
15.14 Attorney's Fees. Should either party employ an attorney
or attorneys to enforce any of the provisions hereof or to protect its interest
in any manner arising under this Agreement, or to recover damages for breach of
this Agreement, the non-prevailing party in any action pursued in a court of
competent jurisdiction (the finality of which is not legally contested) agrees
to pay to the prevailing party all reasonable costs, damages and expenses,
including reasonable attorney's fees, expended or incurred in connection
therewith.
15.15 Exhibits and Schedules. All exhibits and schedules
referred to in, and attached to, this Agreement are hereby incorporated herein
in full by this reference.
15.16 Confidentiality. Cousins and Prudential agree that the
subject matter of this Agreement and the Term Sheet between Cousins and
Prudential dated September 4, 1998, and all negotiations related thereto will
remain confidential until November 12, 1998 (the "Disclosure Date") and until
such Disclosure Date neither party shall disclose any terms of this Agreement or
the Term Sheet without the prior written approval of the other party. Prior to
the Disclosure Date, Cousins and Prudential will disclose such information only
to those parties required to know it, including, without limitation, employees
of either of the parties, consultants, attorneys engaged by either Cousins or
Prudential and prospective or existing investors and lenders, and the Investor
of Prudential with respect to this investment. This Paragraph 15.16 shall
survive the termination of this Agreement. Cousins and Prudential shall
cooperate with one another to prepare and release press statements on or after
the Disclosure Date, and thereafter Cousins and Prudential shall be free to
disclose the Transaction to third parties. Notwithstanding the foregoing,
Cousins and Prudential shall each be free to make such disclosures of the
Agreement and the Transaction contemplated hereby as may be required or
appropriate under applicable laws or regulations including, without limitation,
the rules and regulations of the Securities Exchange Commission.
IN WITNESS WHEREOF, Prudential and Cousins and the Other Owners have
executed this Agreement under seal as of the day and year first above written.
Cousins Properties
Incorporated, a Georgia
corporation
By:______________________________________
Name:_________________________________
Title:________________________________
Cousins/Daniel, L.L.C., a Georgia
limited liability company
By: Cousins, Inc., an Alabama
corporation, as a managing member
thereof
By:______________________________________
Name:_________________________________
Title:________________________________
Cousins MarketCenters, Inc.,
a Georgia corporation
By:______________________________________
Name:_________________________________
Title:________________________________
The Prudential Insurance Company of
America, a New Jersey corporation
By:______________________________________
Name:_________________________________
Title:________________________________
<PAGE>
Schedule A
----------
(attached to and made a part of that certain
Contribution and Formation Agreement by and between
Cousins Properties Incorporated, as Cousins, and
The Prudential Insurance Company of America, as Prudential,
dated as of November 12, 1998)
The following is the Schedule of each of the Properties, as more
particularly defined in the within Agreement and the other Schedules and
Exhibits attached hereto. Properties shown as owned by parties other than
Cousins shall be conveyed by such parties to Cousins at or prior to Closing.
<TABLE>
<CAPTION>
Allocated
Property Owner Location Type Value
-------- ----- -------- ---- ---------
<S> <C> <C> <C> <C>
First Union Cousins Properties Incorporated, Greensboro Office $53,000,000
Tower a Georgia corporation North
Property Carolina
100-200
North Point Cousins Properties Incorporated, Alpharetta, Office $46,050,000
Center East a Georgia corporation Georgia
Property
Grandview II Cousins/Daniel, L.L.C., a Georgia Birmingham, Office $23,000,000
Property limited liability company Alabama
Presbyterian Cousins Properties Incorporated, Charlotte Office $8,600,000
Medical Plaza a Georgia corporation North
Property Carolina
(Leasehold)
North Point Cousins Properties Incorporated, Alpharetta, Retail $56,750,000
MarketCenter a Georgia corporation Georgia
Property
Greenbrier Cousins MarketCenters, Inc., a Chesapeake, Retail $51,200,000
MarketCenter Georgia corporation and Cousins Virginia
Property Properties Incorporated, a
Georgia corporation
Los Altos Cousins Properties Incorporated, Long Beach, Retail $32,800,000
MarketCenter a Georgia corporation California
Property
Mansell II Cousins Properties Incorporated, Alpharetta, Retail $12,350,000
Property a Georgia corporation Georgia
</TABLE>
