SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 9, 1999 (December 1, 1999)
STORAGE USA, INC.
(Exact name of registrant as specified in charter)
Tennessee 001-12910 62-1251239
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
165 Madison Avenue, Suite 1300
Memphis, Tennessee 38103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901) 252-2000
--------------
Not Applicable
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(Former name or former address, if changed since last report)
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INFORMATION TO BE INCLUDED IN REPORT
Item 5. Other Events.
On December 1, 1999, Storage USA, Inc. (the "Registrant") filed a
current report on Form 8-K announcing the formation of two joint ventures with
GE Capital Corporation. The Registrant is filing this amendment to the current
report to provide additional information with respect to those transactions, as
set forth in the exhibits included herewith, which are incorporated by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a) Financial Statements.
None
b) Pro Forma Financial Information.
None
c) Exhibits.
Number Exhibit
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10.1 Limited Liability Company Agreement of
Storage Development Portfolio, L.L.C.,
dated November 30, 1999, between SUSA
Partnership, L.P. and Storage Ventures,
L.P.
10.2 Limited Liability Company Agreement of
Storage Acquisition Portfolio, L.L.C.,
dated November 30, 1999, between SUSA
Partnership, L.P. and Storage Ventures,
L.P.
10.3 Warrant Purchase Agreement dated
November 30, 1999, between Storage USA,
Inc. and Storage Ventures, L.P.
10.4 Common Stock Warrant, dated November 30,
1999, issued by Storage USA, Inc. to
Storage Ventures, L.P.
10.5 Participation Rights Letter dated
November 12, 1999 from Storage USA, Inc.
to Security Capital U.S. Realty
Management.
99.1 Storage USA Press Release dated December
1, 1999, announcing joint ventures with
GE Capital Corporation (previously
filed).
99.2 Storage USA Press Release dated December
1, 1999, announcing approval of
repurchase program (previously filed).
99.3 Summary of Material Terms of the GE
Capital Transactions (previously filed).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STORAGE USA, INC.
Date: December 9, 1999 By: /s/ Christopher P. Marr
-----------------------------
Christopher P. Marr
Chief Financial Officer
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EXHIBIT INDEX
Number Exhibit
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10.1 Limited Liability Company Agreement of Storage Development
Portfolio, L.L.C., dated November 30, 1999, between SUSA
Partnership, L.P. and Storage Ventures, L.P.
10.2 Limited Liability Company Agreement of Storage Acquisition
Portfolio, L.L.C., dated November 30, 1999, between SUSA
Partnership, L.P. and Storage Ventures, L.P.
10.3 Warrant Purchase Agreement dated November 30, 1999, between
Storage USA, Inc. and Storage Ventures, L.P.
10.4 Common Stock Warrant, dated November 30, 1999, issued by
Storage USA, Inc. to Storage Ventures, L.P.
10.5 Participation Rights Letter dated November 12, 1999 from
Storage USA, Inc. to Security Capital U.S. Realty
Management.
99.1 Storage USA Press Release dated December 1, 1999, announcing
joint ventures with GE Capital Corporation (previously
filed).
99.2 Storage USA Press Release dated December 1, 1999, announcing
approval of repurchase program (previously filed).
99.3 Summary of Material Terms of the GE Capital Transactions
(previously filed).
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LIMITED LIABILITY COMPANY AGREEMENT
OF
STORAGE DEVELOPMENT PORTFOLIO, L.L.C.
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THE MEMBERSHIP INTERESTS IN STORAGE DEVELOPMENT PORTFOLIO, L.L.C. (THE
"INTERESTS") ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN ARTICLE 3
OF THIS AGREEMENT AND THE OTHER TERMS AND CONDITIONS OF THIS AGREEMENT. THE
INTERESTS HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED (i)
UNDER ANY STATE SECURITIES LAWS OR (ii) 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 3 OF THIS AGREEMENT AND (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER ANY 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 AND (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE FEDERAL ACT OR IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE FEDERAL ACT OR WHICH IS OTHERWISE IN COMPLIANCE WITH
THE FEDERAL ACT.
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................... 1
Section 1.1 Definitions...................................... 1
Section 1.2 Other Terms ..................................... 27
Section 1.3 Schedules and Exhibits .......................... 27
Section 1.4 Currency......................................... 27
ARTICLE 2 ORGANIZATIONAL MATTERS; PURPOSE; TERM.......................... 27
Section 2.1 Formation of Company............................. 27
Section 2.2 Name............................................. 28
Section 2.3 Registered Office; Registered Agent;
Principal Office................................. 28
Section 2.4 Foreign Qualification............................ 28
Section 2.5 Purpose and Scope................................ 28
Section 2.6 Term............................................. 29
Section 2.7 No State Law Partnership......................... 29
Section 2.8 Warranties and Representations - Developer
Member........................................... 29
Section 2.9 Warranties and Representations - GECC Member..... 29
Section 2.10 Equity Formation Costs........................... 29
Section 2.11 Investment Representations of the Members........ 30
Section 2.12 Warranty Regarding Brokers....................... 30
Section 2.13 Publicity........................................ 30
ARTICLE 3 MEMBERSHIP; DISPOSITIONS OF INTERESTS.......................... 31
Section 3.1 Members ......................................... 31
Section 3.2 Dispositions of Membership Interests ............ 31
Section 3.3 Creation of Additional Membership Interests...... 32
Section 3.4 Resignation ..................................... 32
Section 3.5 Information ..................................... 32
Section 3.6 Liability to Third Parties....................... 32
ARTICLE 4 MANAGEMENT OF COMPANY.......................................... 32
Section 4.1 Executive Committee.............................. 32
Section 4.2 Management of the Company........................ 35
Section 4.3 Annual Business Plan............................. 36
Section 4.4 Investments...................................... 38
Section 4.5 Independent Investments.......................... 45
Section 4.6 Right of First Refusal; Certain Restrictions;
Non-Compete...................................... 45
Section 4.7 Officers......................................... 48
Section 4.8 Removal of Manager............................... 48
Section 4.9 No Reimbursement of Expenses..................... 50
Section 4.10 Compensation of Members and Manager.............. 50
Section 4.11 Transactions with Affiliates..................... 50
Section 4.12 Property and Asset Management Agreement; Asset
Disposition Fee.................................. 51
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Section 4.13 Development and Construction Agreements.......... 51
Section 4.14 Trade Name License............................... 54
Section 4.15 Indemnification; Reimbursement of Expenses;
Insurance........................................ 54
Section 4.16 Conflicts of Interest............................ 55
Section 4.17 Integrity Policy................................. 55
Section 4.18 No Employees..................................... 56
Section 4.19 Year 2000 Compliant.............................. 56
Section 4.20 Insurance........................................ 56
Section 4.21 Selection of Company Counsel..................... 56
ARTICLE 5 ACCOUNTING AND REPORTING....................................... 57
Section 5.1 Fiscal Year, Accounts, Reports................... 57
Section 5.2 Bank Accounts.................................... 58
ARTICLE 6 CAPITAL CONTRIBUTIONS.......................................... 58
Section 6.1 Project Capital Contributions.................... 58
Section 6.2 Additional Capital Contributions................. 60
Section 6.3 Failure to Make Additional Capital
Contributions..................................... 61
Section 6.4 Return of Contributions........................... 62
Section 6.5 Balances.......................................... 62
Section 6.6 General Provisions Concerning Capital
Contributions..................................... 62
ARTICLE 7 FINANCING....................................................... 62
Section 7.1 Financing......................................... 62
Section 7.2 Right of First Offer.............................. 63
Section 7.3 No Commitment..................................... 64
Section 7.4 Acknowledgment and Waiver......................... 65
ARTICLE 8 DISTRIBUTIONS................................................... 65
Section 8.1 Distributions in General.......................... 65
Section 8.2 Distribution of Available Cash.................... 65
ARTICLE 9 CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS.................. 66
Section 9.1 [Reserved]........................................ 66
Section 9.2 Capital Accounts.................................. 66
Section 9.3 Adjustment of Gross Asset Value. "Gross
Asset Value"...................................... 67
Section 9.4 Profits, Losses and Distributive Shares of
Tax Items......................................... 67
Section 9.5 Tax Returns....................................... 71
Section 9.6 Tax Elections..................................... 71
Section 9.7 Tax Matters Member................................ 72
Section 9.8 Allocations on Transfer of Interests.............. 72
ARTICLE 10 WITHDRAWAL, DISSOLUTION, LIQUIDATION, AND TERMINATION.......... 72
Section 10.1 Dissolution, Liquidation, and Termination
Generally......................................... 72
Section 10.2 Liquidation and Termination....................... 73
Section 10.3 Deficit Capital Accounts.......................... 73
Section 10.4 Cancellation of Certificate....................... 74
ARTICLE 11 MISCELLANEOUS PROVISIONS....................................... 74
Section 11.1 Notices........................................... 74
Section 11.2 Governing Law..................................... 74
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Section 11.3 Entireties; Amendments............................ 74
Section 11.4 Waiver............................................ 74
Section 11.5 Severability...................................... 74
Section 11.6 Ownership of Property and Right of Partition...... 75
Section 11.7 Captions, References.............................. 75
Section 11.8 Involvement of Members in Certain Proceedings..... 75
Section 11.9 Interest.......................................... 75
Section 11.10 Right to Bring Action............................. 75
Section 11.11 Cumulative Remedies............................... 76
Section 11.12 Jurisdiction...................................... 76
Section 11.13 Arbitration....................................... 76
ARTICLE 12 BUY-SELL OPTION................................................ 77
Section 12.1 Exercise.......................................... 77
Section 12.2 Closing........................................... 79
Section 12.3 Default........................................... 79
Section 12.4 Payment of Debts.................................. 80
Section 12.5 Payment of Loans Held by GECC..................... 80
Section 12.6 Release of Capital Contribution Obligations....... 80
Section 12.7 Offset............................................ 80
Section 12.8 Minimum Purchase Price............................ 80
Section 12.9 Operations in Pre-Closing Period.................. 80
Section 12.10 Suspension of Rights Under Articles 13 and 14..... 81
Section 12.11 Changes in Distribution Rights.................... 81
ARTICLE 13 REQUIRED SALE; RIGHT OF FIRST OFFER............................ 81
Section 13.1 Offers............................................ 81
Section 13.2 Response.......................................... 82
Section 13.3 REIT Limitation................................... 83
Section 13.4 No Suspension of Rights Under Articles 12 and 14.. 84
ARTICLE 14 MARKETING RIGHT................................................ 84
Section 14.1 Marketing Right................................... 84
Section 14.2 Right of Either Member to Bid..................... 85
Section 14.3 Sale By the Company............................... 85
Section 14.4 Changes to Schedule 14.1.......................... 85
Section 14.5 Operations in Pre-Closing Period.................. 85
Section 14.6 REIT Limitation................................... 85
Section 14.7 Suspension of Rights Under Articles 12 and 13..... 86
Section 14.8 Changes in Distribution Rights.................... 86
ARTICLE 15 SPECIAL PURCHASE RIGHT......................................... 86
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<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT OF
STORAGE DEVELOPMENT PORTFOLIO, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT is entered into as of November
30, 1999 (the "Effective Date"), between SUSA PARTNERSHIP, L.P., a Tennessee
limited partnership, as a Member and the initial Manager (the "Developer
Member"), and STORAGE VENTURES, L.P., a Delaware limited partnership, as a
Member (the "GECC Member").
ARTICLE 1
DEFINITIONS
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Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"AAA" means the American Arbitration Association or any successor
organization.
"Abandoned Target" means a Target with respect to which either (a) a
Preliminary Presentation for such Target was approved by the Executive Committee
but the Final Presentation for such Target was not approved by the Executive
Committee, or (b) the Final Presentation for such Target was approved by the
Executive Committee but such Target was not subsequently acquired by the Company
or a Subsidiary.
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THE MEMBERSHIP INTERESTS IN STORAGE DEVELOPMENT PORTFOLIO, L.L.C. (THE
"INTERESTS") ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN ARTICLE 3
OF THIS AGREEMENT AND THE OTHER TERMS AND CONDITIONS OF THIS AGREEMENT. THE
INTERESTS HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED (i)
UNDER ANY STATE SECURITIES LAWS OR (ii) 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 3 OF THIS AGREEMENT AND (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER ANY 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 AND (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE FEDERAL ACT OR IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE FEDERAL ACT OR WHICH IS OTHERWISE IN COMPLIANCE WITH
THE FEDERAL ACT.
<PAGE>
"Act" means the Delaware Limited Liability Company Act, as it may be
amended from time to time.
"Additional Capital Contribution Balance" means, for each Member, the
cumulative Additional Capital Contributions of that Member without reduction for
any distributions in return thereof.
"Additional Capital Contribution Default" has the meaning given it in
Section 6.2(c) hereof.
"Additional Capital Contribution Default Account" means, with respect
to each Member, an account to which will be credited the dollar amount of all
Additional Capital Contributions, if any, not made by such Member. The making of
a Default Loan by a Non-Delinquent Member shall not reduce or remove any amounts
credited to a Member's Additional Capital Contribution Default Account.
"Additional Capital Contribution Default Event" means, with respect to
each Member, the point or time, if at all, at which such Member's Additional
Capital Contribution Default Account balance equals or exceeds twenty-five
percent (25%) of such Member's Capital Contribution Account Balance.
"Additional Capital Contributions" means, collectively,
Non-discretionary Additional Capital Contributions and Discretionary Additional
Capital Contributions.
"Additional Capital Defaulting Member" has the meaning given it in
Section 6.3(b) hereof.
"Adjusted Capital Account" means, with respect to a Member, such
Member's Capital Account as of the end of each Fiscal Year, as the same is
specially computed to reflect the adjustments required or permitted to be taken
into account in applying Regulations Section 1.704-l(b)(2)(ii)(d) (including
adjustments for Company Minimum Gain and Member Nonrecourse Debt Minimum Gain).
"Adjusted Capital Account Deficit" means, for each Member, the deficit
balance, if any, in that Member's Adjusted Capital Account.
"Affiliate" (including the term "Affiliated with") means, with respect
to any Person, (a) any other Person, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with such
Person, (b) any other Person with respect to which such Person possesses the
right to exercise, directly or indirectly, through one or more intermediaries,
twenty percent (20%) or more of the voting rights attributable to the ownership
interests of such other Person, or (c) any other Person with respect to which
such Person is entitled to receive, directly or indirectly, through one or more
intermediaries, twenty percent (20%) or more of all dividends or distributions,
as applicable, paid by such Person. As used in the preceding sentence, the term
"control" (including the terms "controlling", "controlled by" or "under common
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<PAGE>
control with") means the possession, directly or indirectly, through one or more
intermediaries, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. For the avoidance of doubt, SUSA is an Affiliate of the
Developer Member and GECC is an Affiliate of the GECC Member.
"Agreement" means this Limited Liability Company Agreement of the
Company, including the exhibits and schedules attached hereto, as amended and in
effect from time to time.
"Annual Business Plan" has the meaning given it in Section 4.3(a)
hereof.
"Approved Investment Parameters" means the criteria set forth on
Schedule 1.1 (AIP) hereto, as the same may be changed from time to time with the
express, written approval of the Developer Member and the GECC Member.
"Auditor" means the national accounting firm of independent certified
public accountants selected by the Executive Committee following a competitive
bidding process that will include one firm proposed by the Developer Member, one
firm proposed by the GECC Member and a third firm proposed jointly by the
Members.
"Available Cash" means with respect to any period for which such
calculation is being made,
(a) the sum of:
(i) all cash revenues and funds received by the Company from
whatever source, including all Capital Contributions and all distributions from
Subsidiaries during such period and all repayments from Subsidiaries on account
of advances or other amounts that may have been loaned by the Company to any
Subsidiary, and
(ii) the amount of any reduction (including, without limitation,
a reduction resulting because the Executive Committee determines such amounts
are no longer necessary) in reserves of the Company, which reserves are referred
to in clause (b)(iii) below;
(b) less the sum of the following (without duplication):
(i) all interest, scheduled or required principal payments and
other debt and escrow account payments made during such period by the Company on
account of the Company or any Subsidiary's indebtedness for money borrowed, if
any;
(ii) all cash expenditures (including all operating and capital
expenditures, the Developer Fee and the General Contractor Fee paid to the
Developer Member or a Controlled Affiliate of the Developer Member pursuant to
the Development Agreements and the Construction Contracts, and any and all
capital contributions, loans or other advances of funds made by the Company to
any Subsidiary) made by the Company or any Subsidiary during such period; and
3
<PAGE>
(iii) the amount of any increase in any reserves established
during such period pursuant to the approved Annual Business Plan or the approved
Operating Budget or which the Executive Committee otherwise determines is
necessary or appropriate.
"Bankruptcy" means, with respect to a Person, the occurrence of (1) an
assignment by the Person for the benefit of creditors; (2) the filing by the
Person of a voluntary petition in bankruptcy; (3) the entry of a judgment by any
court that the Person is bankrupt or insolvent, or the entry against the Person
of an order for relief in any bankruptcy or insolvency proceeding; (4) the
filing of a petition or answer by the Person seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation; (5) the filing by the
Person of an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding for
reorganization or of a similar nature; (6) the consent or acquiescence of the
Person to the appointment of a trustee, receiver or liquidator of the Person or
of all or any substantial part of its properties; or (7) any event which would
cause the Person to cease to be a member of a limited liability company under
Section 18-304 of the Act.
"Borrowing Parties" and "Borrowing Party" have the meanings given them
in Section 7.2(a) hereof.
"Business Day" means any day other than a Saturday, a Sunday or other
day on which commercial banks in New York are authorized or required to close
under the laws of the State of New York.
"Buy-Sell Option" has the meaning given it in Article 12 hereof.
"Capital Account" shall have the meaning set forth in Section 9.2.
"Capital Contribution Account Balance" means the sum of each Member's
Project Capital Contribution Balance and Additional Capital Contribution
Balance. For the avoidance of doubt, the Developer Member's Credited Cost
Overrun Contribution Balance shall not be included in its Capital Contribution
Account Balance.
"Capital Contributions" means, with respect to each Member, the sum of
such Member's Project Capital Contributions and Additional Capital
Contributions, consisting of the aggregate amount of cash and the initial Gross
Asset Value of any property (net of liabilities assumed by the Company resulting
from such contribution and liabilities to which the property is subject)
contributed to the Company by that Member. For the avoidance of doubt, neither
the Developer Member's Credited Cost Overrun Contributions nor any Default Loans
made by either Member are Capital Contributions.
"Capital Proceeds" means funds of the Company or a Subsidiary arising
from a Capital Transaction, net of the actual costs incurred by the Company or
such Subsidiary in consummating the Capital Transaction, including any
Disposition Fee, if applicable.
4
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"Capital Sharing Ratios" means the percentages in which the Members
participate in, and bear, certain Company items, as such percentages may change
from time to time. The initial Capital Sharing Ratios of the Members are as
follows:
Developer Member 25%
GECC Member 75%
Following the making of any Capital Contributions by the Members, or either of
them, to the Company, the Capital Sharing Ratio of each Member shall ipso facto
equal the percentage determined by dividing (a) such Member's then Capital
Contribution Account Balance by (b) the then aggregate Capital Contribution
Account Balances for all Members.
"Capital Transaction" means the sale, financing, refinancing or similar
transaction of or involving any Project (including condemnation awards, payment
of title insurance proceeds or casualty loss insurance proceeds, other than
business interruption or rental loss insurance proceeds, to the extent such
awards and proceeds are not applied to mortgage indebtedness of the Company or a
Subsidiary and not used to repair damage caused by a casualty or taking or in
alleviation of any title defect).
"Cause" means, when used with respect to the Developer Member, the
existence or occurrence of any of the following events or conditions with
respect to the Developer Member, either individually or in its capacity as
Manager, or SUSA, including the existence or occurrence of such events with
respect to the Developer Member's or SUSA's officers or employees: (a) the
indictment for a felony involving a crime or crimes of moral turpitude or
dishonesty (whether or not convicted), misapplication, conversion or theft of
any funds belonging to the Company or a Subsidiary, including rents, security
deposits, insurance proceeds or condemnation or eminent domain awards or
payments; or (b) the commission of fraud, knowing misrepresentation, gross
negligence or willful misconduct; or (c) the occurrence or existence of a Cost
Overrun Default; however, in any case, but subject to the last sentence of this
definition, the occurrence or existence of any such events or conditions
described in clause (a) or (b) of this sentence shall not constitute "Cause" if
such event or condition was committed or caused by a non-executive officer or
employee of the Developer Member or SUSA and the Company has not suffered
monetary loss or damage as a result thereof or to the extent the Company has
suffered monetary loss or damage as a result thereof, the Developer Member
compensates the Company for any such monetary loss or damage suffered or
incurred by the Company within twenty (20) Business Days after notice thereof
from the GECC Member. For the avoidance of doubt, the indictment of the
Developer Member or SUSA, or any executive officer of either of them, for a
felony involving a crime or crimes of moral turpitude or dishonesty (whether or
not convicted), or the misapplication of funds belonging to the Company or any
Subsidiary, fraud, gross negligence or willful misconduct committed in any
instance by the Developer Member or SUSA, or any executive officer of either of
them, shall not be curable and "Cause" shall be deemed to exist upon the
occurrence or existence of any such event.
5
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"Certificate" has the meaning given it in Section 2.1 hereof.
"Change in Control" means, with respect to the Developer Member or
SUSA, the occurrence of any of the following: (i) the sale of all or
substantially all of the Developer Member's or SUSA's assets (other than (a) a
sale or conveyance to a wholly-owned subsidiary of the Developer Member or SUSA
that conducts the business or businesses formerly conducted by the Developer
Member or SUSA, or (b) any transaction undertaken solely for the purpose of
reorganizing or reincorporating the Developer Member or SUSA under the laws of
another jurisdiction if such transaction does not affect the beneficial
ownership of the Developer Member's or SUSA's outstanding equity securities);
(ii) the merger, reorganization, share exchange, recapitalization, restructuring
or consolidation of the Developer Member or SUSA, other than a transaction which
would result in the voting securities of the Developer Member or SUSA
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 51% of the combined voting power of the voting
securities of the Developer Member, SUSA or such surviving entity outstanding
immediately after such transaction; (iii) the acquisition by any "Person" or
"Group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) of an aggregate of 51% or more of the beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of the
issued and outstanding voting securities of SUSA; (iv) the acquisition by any
"Person" or "Group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) of an aggregate of 51% or more of the
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934) of the issued and outstanding general partnership
interests of the Developer Member; or (v) any transaction that results in the
common shares of SUSA no longer being required to be registered under Section 12
of the Securities Exchange Act of 1934, as amended. Notwithstanding the
foregoing, a Change of Control of the Developer Member or SUSA shall not be
deemed to have occurred if, regardless of the form of the transaction, (a) any
two of the following executive officers of SUSA remain in their respective
offices at SUSA or the surviving entity: (i) Dean Jernigan, Chief Executive
Officer, (ii) Christopher P. Marr, Chief Financial Officer, or (iii) Karl Haas,
Executive Vice President - Operations, (b) the "Incumbent Directors" (i.e., the
individuals constituting the Board of Directors of SUSA on the Effective Date,
together with any director whose nomination for election to the Board was
approved by a vote of at least a majority of the directors in office at the time
of such nomination who were either directors on the Effective Date or whose
nomination for election was previously so approved) continue to comprise a
majority of the directors of SUSA or the surviving entity, and (c) SUSA or the
surviving entity remains the sole general partner in the Developer Member.
"Change Order" means any amendment or change to the Project Development
Budget, the Project Development Costs or the Plans and Specifications for a
Project after their approval by the Executive Committee and any instruction for
a change in the "Work" (as defined in the Construction Contract for a Project)
for the construction and completion of a Project, including any amendment or
change to the Construction Contract for such Project.
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"Closing Date" has the meaning given it in Section 12.2 hereof.
"CPI Increase" means, with respect to each calendar year, the
percentage, if any, by which the Consumer Price Index ("CPI") for the month of
December in each calendar year for which the CPI is then available has increased
from the CPI for the month of December 1999. "CPI" means the Consumer Price
Index for All Urban Consumers for All Items, U.S. City Average, as set forth in
the Consumer Price Index for Standard Metropolitan Statistical Areas
(1982-84=100), published by the United States Department of Labor, Bureau of
Labor Statistics (the "Index"). If the Index is changed so that the base year
differs from that in effect on the Effective Date, the Index shall be converted
in accordance with the conversion factor published with the United States
Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or
revised during the term of this Agreement, such other government index or
computation with which it is replaced shall be used in order to obtain
substantially the same result as would be obtained if the Index had not been
discontinued or revised. If the Index is not replaced with any other government
index or computation, then the Members shall, in good faith, agree on a suitable
substitute.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any corresponding provisions of succeeding law.
"Commitment Termination Date" means the earliest to occur of: (i) the
second (2nd) anniversary of the Effective Date; (ii) if the Performance
Benchmarks have not been satisfied as of the first (1st) anniversary of the
Effective Date under either this Agreement or the Other Company LLC Agreement,
the election (if at all) of the GECC Member to terminate its commitment to make
Project Capital Contributions evidenced by written notice to the Developer
Member given within thirty (30) days after the GECC Member has received evidence
regarding the Company's satisfaction or non-satisfaction of the Performance
Benchmarks; (iii) the election (if at all) of the GECC Member to terminate its
commitment to make Project Capital Contributions evidenced by written notice to
the Developer Member following the occurrence or existence of a Removal Event or
any other event or condition that would permit the GECC Member to exercise the
Buy-Sell Option or the Marketing Right, or (iv) if, at any time after four (4)
months from the Effective Date, the GECC Member's Project Capital Contribution
Balance under this Agreement exceeds the GECC Member's Project Capital
Contribution Balance under the Other Company LLC Agreement and such imbalance
continues for more than forty-five (45) days or such an imbalance having
previously existed, such imbalance occurs or exists again without regard to the
number of days, the election (if at all) of the GECC Member to terminate its
commitment to make Project Capital Contributions evidenced by written notice
given by the GECC Member to the Developer Member within forty-five (45) days
after either (x) the end of such forty-five (45) day period, in the case of the
initial imbalance, or ((y)) the date on which such imbalance occurs or exists
again, in the case of any subsequent imbalance.
"Company" means Storage Development Portfolio, L.L.C. a Delaware limited
liability company.
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"Company Minimum Gain" means "partnership minimum gain" as defined in
Regulations Section 1.704-2(d).
"Construction Contract" has the meaning given it in Section 4.13(b)
hereof.
"Construction Loan" has the meaning given it in Section 7.1(a) hereof.
"Controlled Affiliate" means, with respect to the Developer Member or
SUSA, (a) any other Person, directly or indirectly, through one or more
intermediaries, controlled by the Developer Member or SUSA, or (b) any other
Person in which the Developer Member or SUSA owns, directly or indirectly,
through one or more intermediaries, capital stock or other equity interests
representing the right to receive at least fifty percent (50%) of all dividends
or distributions, as applicable, paid by such Person, regardless of whether the
Developer Member or SUSA controls such Person. As used in the preceding
sentence, the term "controlled" (including the terms "control") means the
possession of the power, directly or indirectly, through stock or other
ownership, by agreement or otherwise, to direct or cause the direction of the
management or policies of a Person.
"Cost Overrun" means, with respect to any Project, the amount, if any,
by which the actual Project Development Costs for such Project, excluding,
however, any Project Permitted Excess Construction Interest, exceed the
estimated Project Development Costs for such Project as set forth in the Project
Development Budget for such Project that was initially approved by the Executive
Committee as part of the Final Presentation. Cost Overrun includes any Credited
Cost Overrun. For the avoidance of doubt, increases to the Project Development
Costs resulting from (a) any Project Permitted Excess Construction Interest, and
(b) Project upgrades or changes in the scope of work that have, in each
instance, been approved by the Executive Committee in a Change Order in
accordance with Section 4.13(d)(2) hereof are not Cost Overruns.
"Cost of the Work" means, with respect to any Project, the "Cost of the
Work" as set forth in the Construction Contact for such Project.
"Cost Overrun Default" has the meaning given it in Section 4.13(c).
"Credited Cost Overrun Contribution Balance" means, for the Developer
Member, the total Credited Cost Overrun Contributions of the Developer Member,
less the cumulative distributions to the Developer Member in return thereof
pursuant to Section 8.2(e) hereof.
"Credited Cost Overrun Contributions" means, with respect to the
Developer Member, the amounts paid by or on behalf of the Developer Member on
account of only Credited Cost Overruns with respect to a Project or Projects
pursuant to Section 4.13(c) hereof. Credited Cost Overrun Contributions shall
not be taken into account in determining the respective Capital Sharing Ratios
or Capital Contribution Account Balances of the Members nor shall they be deemed
Capital Contributions to the Company.
"Credited Cost Overrun" means, with respect to any Project, any Cost
Overruns, including any additional architectural, engineering fees and other
so-called soft costs,
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other than interest, which result from work that was caused by Undisclosed Site
Conditions or changes in any Requirement of a Governmental Authority occurring
after the date on which the Final Presentation for such Project was approved by
the Executive Committee and, in each case, a Change Order for which has been
approved by the Executive Committee in accordance with Section 4.13(d)(1)
hereof.
"Default Loan" means a loan made by a Non-Delinquent Member to the
Company in accordance with Section 6.3(a) hereof.
"Default Rate" means the per annum rate of interest equal to the greater
of (i) eighteen percent (18%) or (ii) the sum of the Prime Rate, as it may
change from time to time, plus five percentage points (5%); provided, however,
in no event will the Default Rate exceed the maximum lawful rate of interest
permitted by applicable law.
"Delayed Project Acquisition" has the meaning given it in Section 4.4(g)
hereof.
"Delayed Project Development" has the meaning given it in Section 4.4(g)
hereof.
"Delayed Project Return Rate" means an amount calculated like interest
at a per annum rate equal to the Prime Rate, as it may change from time to time,
plus one percentage point, compounded quarterly.
"Delinquent Member" has the meaning given it in Section 6.3(a) hereof.
"Depreciation" means, for each taxable year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for the 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 the year or other period, Depreciation
will be an amount which bears the same ratio to the beginning Gross Asset Value
as the federal income tax depreciation, amortization or other cost recovery
deduction for the year or other period bears to the beginning adjusted tax
basis, provided that if the federal income tax depreciation, amortization, or
other cost recovery deduction for the year or other period is zero, Depreciation
will be determined with reference to the beginning Gross Asset Value using any
reasonable method selected by the Executive Committee.
"Developer" has the meaning given it in Section 4.13(a) hereof.
"Developer Fee" has the meaning given it in Section 4.13(a) hereof.
"Development Agreement" has the meaning given it in Section 4.13(a)
hereof.
"Discretionary Additional Capital Contributions" means the contributions
of cash to the capital of the Company made by or on behalf of the Members
pursuant to Section 6.2 hereof that are neither Project Capital Contributions
nor Non-discretionary Additional Capital Contributions.
"Disposition Fee" has the meaning given it in Section 4.12(c) hereof.
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"Drawdown Notice" has the meaning given it in Section 6.1(c) hereof.
"Due Diligence Information" means, with respect to a Target, the due
diligence information forming a part of the Final Presentation for such Target
and identified on Schedule 1.1 (FP) hereto.
"Electing Member" has the meaning given it in Article 15 hereof.
"Election Notice" has the meaning given it in Section 4.5(b) hereof.
"Encumbrance" has the meaning given it in Section 3.2(a) hereof.
"Environmental Reports" has the meaning given it in Section 4.4(j)
hereof.
"Equity Formation Costs" has the meaning given it in Section 2.10
hereof.
"Equity Franchisee" means any Person which is a franchisee of the
Storage USA or Budget-Storage USA franchise program or system and which is not a
Non-Equity Franchisee.
"Excluded Affiliates" means Storage Portfolio I LLC and Budget-Storage
USA Joint Venture, LLC, and any of their respective wholly-owned subsidiaries,
including any entity, directly or indirectly, wholly-owned by Storage Portfolio
I LLC or Budget-Storage USA Joint Venture, LLC.
"Executive Committee" means the Company's management committee as
established in accordance with Section 4.1 hereof.
"Federal Act" has the meaning given it in Section 2.11(b) hereof.
"Final Completion Date" means, with respect to any Project, the date on
which the following matters have been achieved with respect to such Project: (i)
the General Contractor shall have certified to the Company and the applicable
Subsidiary that the Project has been completed substantially in accordance with
the Plans and Specifications and all Requirements of Governmental Authorities
having jurisdiction of the Project, (ii) the General Contractor and the Manager
shall have certified to the Company and the applicable Subsidiary that the Cost
of the Work has been paid in full, including payment for services rendered and
material delivered by mechanics, materialmen, suppliers, architects, engineers,
subcontractors and the like, (iii) the Manager shall have certified to the
Company and the applicable Subsidiary that all utilities reflected in the Plans
and Specifications and required for the use and occupancy of the Project have
been installed, any and all hook-up, tap-on or other service connection fees and
charges invoiced by the utility companies providing such services have been paid
in full, the installation thereof has been approved by the various utility
companies providing such service and utility service to the Project has
commenced, and (iv) (a) if certificates of occupancy are issued by the
Governmental Authorities having jurisdiction of the Project, then (l) as to a
single story, non-climate controlled building, a temporary certificate(s) of
occupancy has been issued for the entire Project, and (2) as to a multi-story
and/or climate controlled building, a temporary certificate(s) of occupancy has
been issued for the entire Project and the elevator systems and
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HVAC system are installed and operational, with any inspections or certificates
required by Governmental Authorities completed or issued, and (3) in either
case, the Subsidiary has occupied the entire Project, or (b) if certificates of
occupancy are not issued by the Governmental Authorities having jurisdiction of
the Project, then (1) the entire Project, including all buildings and grounds,
is fit for use, rental and operation as a self-storage facility, (2) the
Subsidiary has occupied the entire Project, and (3) if the Project includes a
multi-story and/or climate controlled building, the elevator systems and HVAC
system are installed and operational. For the avoidance of doubt, partial
occupancy or use of a portion of a Project shall not constitute occupancy of the
entire Project.
"Final Presentation" means, when used with respect to a Target, a
comprehensive proposal prepared and submitted by the Developer Member to the
Executive Committee setting forth the overall scheme for the acquisition and
development or redevelopment of the Target, including the information listed on
Schedule 1.1 (FP). The Final Presentation must include a statement by the
Developer Member that, in the Developer Member's judgment, the Target, if
acquired and developed or redeveloped in accordance with the Final Presentation,
would comply with the Approved Investment Parameters or reflecting, where
applicable, any deviations from the Approved Investment Parameters. The Final
Presentation shall include the amount, source, terms and conditions of any
financing which is proposed for the acquisition, development or redevelopment of
the Target. The Final Presentation will be delivered to the members of the
Executive Committee in notebook format similar to the presentation form that the
Developer Member has previously delivered to, and that has been approved by, the
GECC Member. Any reference in this Agreement to an "approved Final Presentation"
means the Final Presentation for a Project, as unanimously approved by the
Executive Committee in accordance with the procedures hereinafter set forth in
Section 4.4 hereof, as the same may be subsequently amended by the unanimous
action of the Executive Committee.
"Financial Rights" means the right to receive distributions of funds and
allocations of income, gain, loss, deduction and credit.
"Fiscal Year" has the meaning given it in Section 5.1(a) hereof.
"Franchise Equity Program Transaction" means any new loan or other
credit facility, or any refinancing of any existing loan or credit facility
entered into after the Effective Date by the Developer Member or SUSA, or any of
their respective Controlled Affiliates, with a franchisee of the "Storage USA"
or "Budget-Storage USA" franchise program or system pursuant to which
transaction (i) the Developer Member or SUSA, or any such Controlled Affiliate,
is entitled to receive interest payable on any such loan or credit facility at a
rate determined by reference to a spread above an established index of 400 basis
points or more, (ii) the Developer Member or SUSA, or any such Controlled
Affiliate, receives, as collateral for any such loan or credit facility
described in clause (i) of this definition, a pledge of ownership or other
equity interest in the franchisee, or (iii) the Developer Member or SUSA, or any
such Controlled Affiliate, receives an ownership or other equity interest (or
the right to acquire such interest) in the franchisee or is entitled to receive
payments based upon the franchisee's revenues, cash flow or value (other than a
customary license fee or royalty and management fee),
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<PAGE>
excluding, however, any refinancing of an existing loan or credit facility after
Effective Date pursuant to which the Developer Member or SUSA, or any of their
respective Controlled Affiliates, had already received an ownership or other
equity interest in any such franchisee prior to the Effective Date.
"Franchise Equity Program Transaction Notice" has the meaning given it
in Section 4.6(f).
"General Contractor" has the meaning given it in Section 4.13(b) hereof.
"General Contractor Fee" has the meaning given it in Section 4.13(b)
hereof.
"GECC" means General Electric Capital Corporation, a New York
corporation and an Affiliate of the GECC Member.
"GECC Affiliate" means, with respect to the GECC Member, any other
Person, directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with, GECC or General Electric Company.
The term "control" (including the terms "controlling", "controlled by" and
"under common control with"), as used in the preceding sentence, means the
possession, directly or indirectly, through one or more intermediaries, of the
power to direct or cause the direction of the management or policies of such
other Person, whether through the ownership of voting securities, by contract or
otherwise.
"Governmental Authority" means the United States of America, any of the
several states, any county or municipality in which a Project is located, and
any agency, authority, court, department, commission, board, bureau or
instrumentality of any of them.
"Gross Asset Value" has the meaning given it in Section 9.3.
"Imputed Closing Costs" means, when used in connection with the Buy-
Sell Option, an amount, not to exceed three percent (3%) of the sales price,
that would normally be incurred by the Company or its Subsidiaries if the
Projects then owned by the Company or its Subsidiaries were sold for the amount
specified in Article 12, for title insurance premiums, survey costs, brokerage
commissions and other commercially reasonable closing costs.
"Independent Investment" has the meaning given it in Section 4.5(a)
hereof.
"Inflation Adjusted" means, when used with respect to any number or
item, that the number or item will be increased by the applicable CPI Increase,
if any.
"Initiating Member" has the meaning given it in Section 13.1 hereof.
"Initiating Notice" has the meaning given it in Section 12.1 hereof.
"Insurance Program" means a complete and detailed program of insurance
(including the insurance required by Section 4.15) for the Company, its
Subsidiaries and the Projects prepared by the Manager and approved by the
Executive Committee, as amended and updated from time to time with the approval
of the Executive Committee. The initial Insurance
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Program will form a part of the Company's initial Annual Business Plan. In no
event shall the Insurance Program provide for less insurance than that reflected
in Schedule 1.1 (INS) without the approval of the Executive Committee.
"Integrity Policy" means the Company's Ethical Business Practices
Policy, a copy of which is attached hereto as Schedule 1.1 (IP), and which is
hereby adopted by the Members, as such Policy may be amended from time to time
by the Executive Committee.
"Internal Rate of Return" or "IRR" means the annual percentage return
rate which, when used as a discount rate to determine the net present value of a
Member's Capital Contributions to and cash distributions from the Company
(treating cash outflows as negative numbers and cash inflows as positive
numbers), results in a net present value of zero, calculated as of the date of
such Member's initial Capital Contribution. The Internal Rate of Return shall be
calculated on a quarterly basis. For example, a Member shall have received an
annual fourteen percent (14%) Internal Rate of Return if the difference between
the aggregate of the following is zero: (a) the sum of all Capital Contributions
during each quarter to the Company by such Member each discounted to present
value at an annual rate of fourteen percent (14%) from the date of each such
contribution and (b) the sum of all cash distributions during each quarter to
the Member discounted to present value at an annual rate of fourteen percent
(14%) from the date of each such distribution, with "present value" being the
value as of the date of the first Capital Contribution by such Member. The
quarterly discount rate equivalent to an annual rate of nine percent (9%) is
2.1778%; the quarterly discount rate equivalent to an annual rate of fourteen
percent (14%) is 3.3299%; and the quarterly discount rate equivalent to an
annual rate of seventeen percent (17%) is 4.0031%. The cost reimbursement paid
to the GECC Member in accordance with Section 4.12(b) hereof, the fees
(including the Developer Fee, the General Contractor Fee and any Disposition
Fee, if applicable) and expense reimbursements paid to the Developer Member, the
Property Manager, the Developer and the General Contractor as contemplated in
Sections 4.12 and 4.13 hereof, any interest and other payments on account of any
Default Loans and any earnest money retained by a Member in accordance with
Section 12.3 hereof shall not be considered cash distributions for purposes of
calculating the Internal Rate of Return. At the time of each distribution of
Available Cash, the Manager shall provide the Members with a calculation of the
IRR through the date of such distribution.
"Major Decisions" means any of the matters described below:
(1) To the extent not otherwise expressly approved as part of an
approved Annual Business Plan, an approved Preliminary Presentation or an
approved Final Presentation, the establishment of any Subsidiary, and the terms,
provisions and conditions of its governing agreements and any amendments or
modifications thereof;
(2) The approval or adoption of an Annual Business Plan, a Preliminary
Presentation and a Final Presentation and, to the extent not approved as part of
the approval of any of the foregoing, an Operating Budget, a Project Operating
Budget and a Project Development Budget, and any amendment, modification or
other change to any of the foregoing.
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(3) Any matter which is defined as a "Major Decision" in any limited
liability company or other agreement governing a Subsidiary;
(4) To the extent not otherwise expressly approved as part of an
approved Annual Business Plan, an approved Operating Budget, an approved Project
Development Budget, an Approved Preliminary Presentation, or an approved Final
Presentation, any acquisition, sale, transfer, exchange, mortgage, financing,
hypothecation or encumbrance of all, any part of or any interest in a Project,
or any lease of an entire Project, and, in each such case, the material terms
and conditions thereof, excluding, however, (A) sales from inventory (e.g.,
locks and packaging material) held for sale to customers in the ordinary course
of a Subsidiary's business, (B) incidental sales, exchanges, conveyances,
transfers or other dispositions of personal property or fixtures owned by a
Subsidiary and used in the operation and management of a Project if such
disposition of personal property and fixtures in accordance with this clause (B)
for any one Project, together with all other such dispositions in the calendar
year in question, involves property having a value or sales price of less than
$5,000.00 in the aggregate, and (C) granting easements or entering into
reciprocal operating or easement agreements, cross-easement agreements and
similar agreements with utility providers, adjoining property owners or other
parties, not Affiliated with the Manager, in connection with the development of
a Project in accordance with the approved Final Presentation for such Project,
so long as any such easement or other agreement (x) does not materially
interfere with the use and operation of the Project, (y) does not adversely
affect the Project's value and (z) is consistent with the overall development
plan for such Project as set forth in the approved Final Presentation for such
Project;
(5) Regarding the Company or any Subsidiary, to the extent not otherwise
expressly approved as part of an approved Annual Business Plan, an approved
Operating Budget, an approved Project Development Budget or an approved Final
Presentation, (A) incurring, or becoming liable for, or permitting to exist, any
indebtedness for borrowed money, (B) guaranteeing or assuming the obligations of
any Person, (C) providing indemnification with respect to the acts or
obligations of any Person other than with respect to the Company, or (D) loaning
any funds or money, extending credit or otherwise providing financial
accommodations to any Person other than a Subsidiary;
(6) Regarding the Company or any Subsidiary, any merger, reorganization,
business combination, share or equity interest sale, exchange or other
disposition, recapitalization, restructuring or consolidation;
(7) Regarding the following Company and Subsidiary financial affairs,
(A) selection of the Auditor, (B) determination of major accounting policies,
including selection of accounting methods and making various decisions regarding
treatment and allocation of transactions for federal and state income, franchise
or other tax purposes, (C) selection of the bank(s) for one or more consolidated
operating and disbursement accounts of the Company (being the only bank accounts
at the Company-level, all other bank accounts being Project-level) and the
designation of Persons with signatory authority over withdrawal of funds from
such accounts (the Manager may select the
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banks for Project-level accounts maintained by the Property Manager so long as
(i) the deposits of each such bank are federally insured, (ii) each such account
will be swept into the Company's consolidated operating account no less
frequently than weekly and (iii) each such account is depository only), and (D)
making of any expenditure or incurring any obligation by or for the Company or a
Subsidiary for an aggregate sum in excess of $25,000.00 per Project in any one
Fiscal Year for any transaction or group of similar or related transactions,
except for expenditures made and obligations incurred pursuant to an approved
Project Development Budget, an approved Project Operating Budget or an approved
Operating Budget; however, if emergency repairs to any Project are necessary to
avoid imminent danger of injury to such Project or to an individual, the Manager
may make such expenditures as may be necessary to alleviate such situation and
shall promptly notify the GECC Member of the event giving rise to such repairs
and the actions taken with respect thereto;
(8) Regarding Additional Capital Contributions, except Non-Discretionary
Additional Capital Contributions which may be required of a Member in accordance
with Section 6.3(a) hereof;
(9) Regarding development or redevelopment, construction, repair or
refurbishment of any Project and to the extent not expressly approved in an
approved Preliminary Presentation, an approved Final Presentation, an approved
Project Development Budget or an approved Project Operating Budget for a
Project: (A) approval of any plans, development schedule, budgets, and all other
material matters relating to the acquisition, development, redevelopment or the
refurbishment of such Project; (B) the selection of a contractor and the
approval of any construction contracts if the Developer Member or a Controlled
Affiliate of the Developer Member acceptable to the GECC Member is not the
General Contractor for such Project pursuant to a Construction Contract (if the
General Contractor for a Project delegates substantially all of the work to a
single subcontractor, then the selection of such single subcontractor shall be
subject to the approval of the Executive Committee); (C) selection of architects
and engineers retained for review and analysis of the Plans and Specifications
other than from those identified on Schedule 1.1 (Engineers), the Members
acknowledging that the Plans and Specifications for a Project will be prepared
under the direction of the Manager by architects or engineers selected by the
Manager; and (D) any material variation from or amendment to any of the
foregoing, including the form of Construction Contract; however, to the extent
any of the foregoing constitute a Change Order, then the procedures set forth in
Section 4.13(d) shall govern and control;
(10) Regarding all leases of space in the Projects: (A) the use of any
form of lease other than the standard forms of lease used by the Developer
Member in its own business on the Effective Date and any material change,
modification or amendment to such standard forms of lease, unless such amendment
or modification is required to conform to the Requirements of a Governmental
Authority; (B) to the extent not approved in an approved Annual Business Plan or
the applicable approved Project Operating Budget, approval of guidelines for
minimum rental rates; and (C) any lease of space for a term of more than one
year, unless such lease may be terminated at any time
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at the election of the Company or the applicable Subsidiary with no more than
sixty (60) days prior notice;
(11) Regarding Project and Subsidiary operations and to the extent not
approved in an approved Annual Business Plan, an approved Final Presentation or
an approved Project Operating Budget or not otherwise in the sole and exclusive
authority of the GECC Member following the removal of the Developer Member as
the Manager: (A) the selection of property managers and the approval of any
asset or property management agreements, but only if the Developer Member or a
Controlled Affiliate of the Developer Member acceptable to the GECC Member is
not the Property Manager pursuant to the Property Management Agreement; (B) the
selection of any brokers or agents for the sale or other disposition of a
Project and the approval of any listing or brokerage agreements relating to the
sale or other disposition of a Project; (C) filing any application or other
petition to change or vary the zoning conditions or other entitlements for a
Project; and (D) any material variation from or amendment to any of the
foregoing;
(12) Except to the extent not otherwise in the exclusive authority of
the Developer Member pursuant to Section 7.4 hereof or in the exclusive
authority of the GECC Member in accordance with the last sentence of Section
4.2(a) hereof, the taking or initiation of any legal action on behalf of the
Company or a Subsidiary, except (A) initiating action (i) to collect rentals and
other amounts payable to the Company or a Subsidiary under leases and other
occupancy agreements affecting a Project, (ii) to dispossess any tenant or
occupant which is in default in its obligations to the Company or a Subsidiary,
(iii) against vendors, suppliers and subcontractors in the ordinary course of
business, or (iv) to appeal ad valorem or other property tax assessments, and
(B) defending against tenant and other liability claims for which the Company or
such Subsidiary maintains insurance so long as the amount claimed in any such
action or suit does not exceed $100,000.00;
(13) Filing of any petition or consenting to the filing of any petition
that would subject the Company or any Subsidiary to a Bankruptcy;
(14) Except as provided in Section 4.21 hereof, engaging any attorney to
represent the Company or any Subsidiary;
(15) Entering into, amending, modifying or changing any agreement with
the Developer Member or an Affiliate of the Developer Member other than as set
forth in Section 4.12 and Section 4.13 hereof;
(16) To the extent not approved in an approved Final Presentation for a
Project, regarding any environmental matter relating to a Project, including
selection of environmental consultants other than one of the consultants
identified on Schedule 1.1 (Environmental), and adoption of and implementation
of any operation and maintenance program or any other program to remove or
otherwise remediate hazardous materials; and
(17) To the extent not expressly approved in an Annual Business Plan,
entering into any agreement, incurring any obligation or taking any other action
with
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respect to the Company or a Subsidiary (A) which, considered before the taking
thereof, could be reasonably expected to have a material adverse effect on the
business or affairs of the Company or any Subsidiary or (B) which would be
considered by reasonably prudent Persons engaged in the real estate property
management business to be out of the ordinary course of the day-to-day
management of the Company or its Subsidiaries.
"Major Dispute" means the failure of the Members or the Executive Committee
to agree upon or approve any Major Decision, other than those Major Decisions
identified in the immediately following sentence, which failure to agree has
continued for a period of thirty (30) days after written notice thereof (the
"Major Dispute Notice") has been given by a Member to the other Member(s). The
failure of the Executive Committee to approve a Preliminary Presentation or a
Final Presentation, including a Project Development Budget or the Plans and
Specifications, for a Target, or any amendment, modification or change to either
of them, or the failure of the Executive Committee to agree whether a Target
conforms to the Approved Investment Parameters, is not a Major Dispute. In order
to be effective, any Major Dispute Notice must contain a description of the
Major Decision which the Members or the Executive Committee has been unable to
agree and must contain the following language typed in BOLD PRINT on the face of
the Major Dispute Notice:
THIS NOTICE IS GIVEN PURSUANT TO THE LIMITED LIABILITY
COMPANY AGREEMENT OF STORAGE DEVELOPMENT PORTFOLIO, L.L.C.
(THE "AGREEMENT") IN ORDER TO ADVISE A MEMBER THAT A MAJOR
DISPUTE WILL EXIST UNDER THE AGREEMENT UNLESS THE MEMBERS
ARE ABLE TO AGREE WITHIN THIRTY (30) DAYS WITH RESPECT TO
THE MATTER OR MATTERS SET FORTH IN THIS NOTICE.
"Management Rights" means the right of a Member to participate in the
management of the Company to the extent herein expressly provided.
"Manager" means the Developer Member, as the initial Manager designated
pursuant to Section 4.2 hereof, and each Person hereafter designated as a
Manager in accordance with this Agreement, until such Person ceases to be a
Manager of the Company. The Manager is not required to be a Member.
"Marketing Firm" has the meaning given it in Section 14.1 hereof.
"Marketing Notice" has the meaning given it in Section 14.1 hereof.
"Marketing Right" has the meaning given it in Section 14.1 hereof.
"Member Nonrecourse Debt" means "partner nonrecourse debt" as defined in
Regulations Sections 1.704-2(b)(4) and 1.752-2.
"Member Nonrecourse Debt Minimum Gain" means "partner nonrecourse debt
minimum gain" as defined in Regulations Section 1.704-2(i)(3).
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"Member Nonrecourse Deductions" means "partner nonrecourse deductions" as
defined in Regulations Section 1.704-2(i)(2).
"Members" means the GECC Member, the Developer Member, and each Person
hereafter admitted as a Member in accordance with this Agreement, until such
Person ceases to be a Member of the Company.
"Membership Interests" means all of the rights and interests of whatsoever
nature of the Members in the Company, including Management Rights and Financial
Rights.
"Moving Member" has the meaning given it in Section 14.1 hereof.
"Net Cash Flow" means, with respect to each Subsidiary and for any period,
Net Operating Income less debt service (including interest and principal
payments) on loans to the applicable Subsidiary.
"Net Operating Income" means, with respect to each Subsidiary and for any
period, the amount by which Operating Revenues exceed Operating Expenses for
such period.
"Non-Conforming Offer" has the meaning given it in Section 13.2(c) hereof.
"Non-Delinquent Member" has the meaning given it in Section 6.3(a) hereof.
"Non-Discretionary Additional Capital Contributions" means contributions of
cash to the capital of the Company made by or on behalf of the Members pursuant
to Section 6.2(a) hereof and that are required to (a) pay operating deficits or
budgeted capital items, including, without limitation, property taxes, insurance
premiums and debt service with respect to the Company, a Subsidiary or a Project
after the Final Completion Date for such Project, (b) pay Project Permitted
Excess Construction Interest, (c) maintain value of the Projects in
unanticipated emergency situations to remedy conditions that create an imminent
threat of property damage or personal injury or death, (d) discharge other valid
liabilities of the Company, the Subsidiaries or the Projects not covered by the
approved Operating Budget, including, without limitation, contractual
commitments of the Company or any of the Subsidiaries, or (e) replenish working
capital or other reserves as established in the approved Operating Budget for
any of the foregoing items. For the avoidance of doubt, Non-Discretionary
Additional Capital Contributions shall not be used to pay for costs and expenses
included within the Project Development Costs for such Project (other than
Project Permitted Excess Construction Interest).
"Non-Equity Franchisee" means any Person which is a franchisee of the
Storage USA or Budget-Storage USA franchise program or system and in which
neither the Developer Member nor SUSA, nor any of their respective Controlled
Affiliates, directly or indirectly, through one or more intermediaries, then
owns any economic interest or otherwise has a right to receive any share of such
Person's revenues, income, distributions, dividends, cash flow or value, other
than a customary license fee or royalty and property management fee.
"Non-Initiating Member" has the meaning given it in Section 13.1 hereof.
"Offer" has the meaning given it in Section 13.1 hereof.
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"Offeree" has the meaning given it in Section 12.1 hereof.
"Offeror" has the meaning given it in Section 12.1 hereof.
"Officers" has the meaning given it in Section 4.7 hereof.
"Old Business Plan" has the meaning given it in Section 4.3(d) hereof.
"Operating Budget" means the annual operating budget for the Company,
setting forth by line item the estimated capital and operating expenses for the
Company, which consolidates all Project Operating Budgets, as approved by the
Executive Committee. Any reference in this Agreement to an "approved Operating
Budget" means an Operating Budget, as unanimously approved by the Executive
Committee in accordance with Section 4.3 hereof, as the same may be subsequently
amended from time to time by the unanimous action of the Executive Committee.
"Operating Expenses" means, with respect to each Subsidiary and for any
period, the current obligations of the Subsidiary for such period, determined in
accordance with sound accounting principles approved by the Executive Committee
and applicable to commercial real estate, consistently applied, for operating
expenses of the Project, for capital expenditures not paid from reserves or the
Members' Capital Contributions to the Company and the Company's capital
contributions to the Subsidiary, and for reserves for working capital, operating
deficits and capital items, including a capital replacement reserve of $0.15 per
square foot per annum for each Project or such other amount as may be approved
by the Executive Committee. Operating Expenses shall include the fees paid to
the Property Manager pursuant to the Property Management Agreement but shall not
include any debt service on loans to the Subsidiary nor any non-cash expenses
such as depreciation or amortization.
"Operating Revenues" means, with respect to each Subsidiary and for any
period, the gross revenues of the Subsidiary arising from the ownership and
operation of the Project during such period, including proceeds of any business
interruption insurance and amounts funded from Company or Subsidiary reserves,
but specifically excluding Capital Proceeds and Capital Contributions made by
the Members with respect to such Subsidiary.
"Other Company" means Storage Acquisition Portfolio, L.L.C., a Delaware
limited liability company in which the Developer Member and the GECC Member are
also the only initial members.
"Other Company LLC Agreement" means the Limited Liability Company Agreement
of the Other Company dated as of the Effective Date and executed between the
Developer Member and the GECC Member, including the exhibits and schedules
thereto, as amended and in effect from time to time.
"Other Member" has the meaning given it in Section 6.3(b) hereof.
"Performance Benchmarks" means the criteria for determination of the
Company's performance, as set forth on Schedule 1.1 (PB) attached hereto.
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"Permitted Sale Date" means, with respect to any Project, the date that is
forty-two (42) months after the date on which such Project was acquired by the
Company or a Subsidiary.
"Person" means an individual or entity.
"Plans and Specifications" means, when used with respect to a Target, the
preliminary plans for the proposed improvements to be developed or redeveloped
on the site, including a preliminary site plan and schematic, computer
generated, non-scalable renderings, which will have been prepared under the
direction of the Manager and submitted to the Executive Committee as part of the
Final Presentation for the Target, and when used with respect to a Project, the
detailed plans and specifications for the proposed improvements to be developed
or redeveloped on the site and comprising the Project, which will have been
prepared under the direction of the Manager and submitted to the Executive
Committee for approval prior to construction commencement, including (a) a
boundary survey and site plan showing (i) the dimensional locations of each
proposed building, drive, paved area, setback, fence, wall, sign, walk and
service element, (ii) setbacks of proposed improvements from the boundary lines
of the site, (iii) site grading and drainage of the entire site with two-foot
minimum contours, finished floor elevations, spot grades at building corners,
drainage low points, driveways, swales and entries, (iv) total square footage of
gross floor area contained in the proposed buildings, together with a breakdown
of such square footage by floor (if applicable), (v) location of proposed
utility lines, service elements and drainage facilities, including utility
connections, meters, transformers, trash and garbage containers, HVAC units,
underground lines and pipes, retention and detention ponds and other facilities
and headwalls, and (vi) location of any proposed thirdparty easements affecting
the site, (b) a landscaping plan showing types, sizes and locations of all
grassed areas, trees and shrubs to be planted, moved or preserved, (c) complete
exterior elevations and floor plans of each building, and (d) description of
proposed exterior materials, finishes and colors, including those for walls,
roofs, windows, doors, paving, fences, signs and exterior lighting fixtures, all
of which shall be consistent with the preliminary Plans and Specifications
approved by the Executive Committee as part of the Final Presentation for such
Project and which have been approved by the Executive Committee prior to the
commencement of construction of such Project, together with any and all
amendments and changes thereto as may be approved by the Executive Committee.
"Preferred Return" means, for the Developer Member, an amount that accrues
at the per annum rate of nine percent (9%) on the Developer Member's Credited
Cost Overrun Contributions. The Preferred Return shall accrue on the Credited
Cost Overrun Contributions from the date such contributions are made until they
are returned (if at all) to the Developer Member pursuant to Section 8.2(e)
hereof. The Preferred Return of the Developer Member shall be cumulative and
shall compound quarterly.
"Preferred Return Balance" means, for the Developer Member, the cumulative
accrued Preferred Return of that Member less all amounts distributed by the
Company to that Member in payment thereof pursuant to Section 8.2(d) hereof.
"Preliminary Presentation" means, when used with respect to a Target, a
preliminary proposal prepared and submitted by the Developer Member to the
Executive
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Committee setting forth, in general terms, the overall scheme for the
acquisition and development or redevelopment of the Target, including
information similar to the information identified on Schedule 1.1 (FP) hereto.
The Preliminary Presentation must include a statement by the Developer Member
that, in the Developer Member's judgment to the extent then ascertainable, the
Target, if acquired and developed or redeveloped in accordance with the
Preliminary Presentation, would comply with the Approved Investment Parameters
or reflecting, where applicable, any deviations from the Approved Investment
Parameters. The Preliminary Presentation will be prepared in advance of a Final
Presentation and therefore will necessarily be more general and preliminary in
its discussion and presentation of a Target. The Preliminary Presentation will
be delivered to the members of the Executive Committee in notebook format
similar to the presentation form that the Developer Member has previously
delivered to, and that has been approved by, the GECC Member. Any reference in
this Agreement to an "approved Preliminary Presentation" means a Preliminary
Presentation for a Target, as unanimously approved by the Executive Committee in
accordance with the procedures hereinafter set forth in Section 4.4 hereof, as
the same may be subsequently amended by the unanimous action of the Executive
Committee; however, for purposes of determining the Pursuit Cost Cap applicable
to a Target, the budgeted Pursuit Costs set forth in the Preliminary
Presentation for such Target initially approved by the Executive Committee shall
be deemed the Pursuit Cost Cap for such Target unless the Executive Committee
should thereafter unanimously and expressly approve an increase in the Pursuit
Cost Cap for such Target. For the avoidance of doubt, the Executive Committee's
approval of an amendment to a Preliminary Presentation for a Target, without
more, shall not increase the Pursuit Cost Cap for such Target. Upon the approval
of a Final Presentation for a Target, the Preliminary Presentation for such
Target shall be completely superceded and no longer effective.
"Prime Rate" means, for each calendar month, the highest prime rate
reported in the Money Rates column or section of The Wall Street Journal
published on the second Business Day of that month, as having been the rate in
effect for corporate loans at large U.S. money center commercial banks (whether
or not such rate has actually been charged by any such bank) as of the first
Business Day of such month. If The Wall Street Journal ceases publication of the
Prime Rate, the "Prime Rate" shall mean the prime rate (or base rate) announced
by Bankers Trust Company, New York, New York, or its successors (whether or not
such rate has actually been charged by such bank). If such bank discontinues the
practice of announcing the Prime Rate, the "Prime Rate" shall mean the highest
rate charged by such bank on short-term, unsecured loans to its most
creditworthy large corporate borrowers.
"Proceeding" has the meaning given it in Section 4.15 hereof.
"Profits" and "Losses" mean, for each taxable year or other period, an
amount equal to the Company's taxable income or loss for the year or other
period, determined in accordance with Section 703(a) of the Code (including all
items of income, gain, loss or deduction required to be stated separately under
Section 703(a)(1) of the Code), with the following adjustments:
(1) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses will be
added to taxable income or loss;
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(2) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures under
Regulations Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses, will be subtracted from taxable
income or loss;
(3) Gain or loss resulting from any disposition of Company property
with respect to which gain or loss is recognized for federal income tax
purposes will be computed by reference to the Gross Asset Value of the
property, notwithstanding that the adjusted tax basis of the property
differs from its Gross Asset Value;
(4) In lieu of depreciation, amortization and other cost recovery
deductions taken into account in computing taxable income or loss, there
will be taken into account Depreciation for the taxable year or other
period;
(5) Any items which are specially allocated under Section 9.4(c) or
9.4(d) will not affect calculations of Profits or Losses; and
(6) If the Gross Asset Value of any Company asset is adjusted under
Section 9.3(b) or 9.3(c), the adjustment will be taken into account as gain
or loss from disposition of the asset for purposes of computing Profits or
Losses.
"Prohibited Radius" means three (3) miles from any Project owned,
directly or indirectly, by the Company or the Other Company; provided, however,
if any such Project is located within the corporate city limits of any of the
cities identified on Schedule 1.1 (PR) hereto, then the Prohibited Radius for
such Project shall be the lesser Prohibited Radius set forth on Schedule 1.1
(PR) hereto for such city.
"Project" means any Target with respect to which a Final Presentation
has been approved by the Executive Committee in accordance with the procedures
set forth in Section 4.4 hereof and which has been acquired by the Company or a
Subsidiary.
"Project Capital Contribution Balance" means, for each Member, the
cumulative Project Capital Contributions of that Member without reduction for
any distributions in return thereof.
"Project Capital Contribution Default" means the failure of a Member,
after the notice and cure period set forth in Section 6.1(d) hereof, to make any
part of its Project Capital Contributions to the Company.
"Project Capital Contributions" means the aggregate contributions of
cash to the capital of the Company made by or on behalf of the Members pursuant
to Section 6.1 hereof.
"Project Construction Interest" means, with respect to each Project, the
sum of the aggregate amount of interest accrued and payable on the Construction
Loan for such Project calculated with respect of the period from the initial
funding thereof through the Final Completion Date for such Project.
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"Project Development Budget" means the development or redevelopment
budget for each Target or Project, as applicable, setting forth by line item the
estimated Total Project Costs, including the Cost of the Work, Project
Construction Interest and Project Development Costs, to be incurred in
connection with the acquisition, development or redevelopment, completion and
operation to break-even (i.e., the point at which the Subsidiary's Net Operating
Income derived from such Target or Project, as applicable, for three (3)
consecutive calendar months equals or exceeds the debt service (including
required interest and principal payments) on loans for such Target or Project
for such three (3) consecutive calendar months), as approved by the Executive
Committee as part of the Final Presentation for a Target. The Project
Development Budget will include the cost of all financing. Any reference in this
Agreement to an "approved Project Development Budget" means a Project
Development Budget for a Project, as unanimously approved by the Executive
Committee as part of the Final Presentation for such Project in accordance with
the procedures hereinafter set forth in Section 4.4 hereof, as the same may be
subsequently amended by the unanimous action of the Executive Committee;
however, for purposes of determining the amount of any Cost Overrun for a
Project, the estimated Project Development Costs for such Project, as set forth
in the Project Development Budget initially approved by the Executive Committee,
shall be used unless the Executive Committee should thereafter unanimously and
expressly approve a different amount in connection with the approval of a Change
Order for such Project in accordance with Section 4.13(d)(2) hereof. For the
avoidance of doubt, the Executive Committee's approval of an amendment to a
Project Development Budget, without more, shall not constitute a change to the
reference amount, i.e., the initial estimated Project Development Costs, by
which a Cost Overrun is determined.
"Project Development Costs" means, with respect to any Target or
Project, as applicable, the estimated or actual, as applicable, costs of
acquiring and developing or redeveloping, as applicable, such Target or Project,
including, without duplication, the purchase price of the land or existing
facility and related closing costs, Pursuit Costs, the total construction,
development or redevelopment costs, both hard and soft costs, including the Cost
of the Work, the Project Construction Interest, the Developer Fee and the
General Contractor Fee payable to the Developer and the General Contractor,
costs of furnishing and equipping the Project, the cost of premiums for all
bonds and insurance which the Company or its Subsidiary is required to purchase
and maintain with respect to the construction of the Project, sales, use and
similar taxes paid or to be paid by the Company or its Subsidiary in connection
with the construction and equipping of the Project, permit and inspection fees,
water, sewer, power and other utility service, hook-up, tap-on and connection
fees and costs, including the cost of acquiring any easements, the cost of all
off-site work, fees and expenses of architects, engineers and surveyors, loan
closing costs, mortgage brokerage and commitment fees, short-term capital
expenditures, and costs to carry the Project, including debt service and
Operating Expenses, all to the Final Completion Date, as approved by the
Executive Committee as part of the Final Presentation for such Project. However,
for purposes of determining the amount of any Cost Overrun for a Project, the
estimated Project Development Costs for such Project, as set forth in the
approved Project Development Budget that was initially approved by the Executive
Committee as part of the Final Presentation shall be used except for (and
increased by) any increases to such estimated Project Development Costs
resulting from Project upgrades or changes in the scope of the work that have,
in each instance, been approved by the Executive
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Committee in connection with the approval of a Change Order pursuant to Section
4.13(d)(2) hereof.
"Project Operating Budget" means the annual budget for each Project
owned by a Subsidiary, setting forth the estimated capital and operating
expenses for such Project for the then current or immediately succeeding
calendar year and for each month and each calendar quarter of said calendar year
as approved by the Executive Committee. Any reference in this Agreement to an
"approved Project Operating Budget" means a Project Operating Budget, as
unanimously approved by the Executive Committee in accordance with Section 4.3
hereof or as part of the approved Final Presentation for such Project, as the
same may be subsequently amended from time to time by the unanimous action of
the Executive Committee.
"Project Permitted Excess Construction Interest" means, with respect to
each Project, the amount, if any, by which the Project Construction Interest for
such Project exceeds the amount thereof set forth in the approved Project
Development Budget for such Project, but only to the extent such excess amount
results from (a) interest attributable to an increase in interest rates payable
under the Construction Loan for such Project, (b) any interest attributable to
(i) an increase in the Project Development Costs for such Project and (ii)
delays in construction, in each case resulting from upgrades or changes in the
scope of work that have, in each instance, been approved by the Executive
Committee in a Change Order in accordance with Section 4.13(d)(2) hereof, (c)
any interest attributable to the period between the closing of the Subsidiary's
acquisition of the Project and the commencement of construction (as evidenced by
the issuance of a building permit and the commencement of grading), and (d) any
interest attributable to delays in construction resulting from a Change Order
that has been approved by the Executive Committee in accordance with Section
4.13(d)(1) hereof.
"Property Management Agreement" has the meaning given it in Section 4.12(a)
hereof.
"Property Manager" has the meaning given it in Section 4.12(a) hereof.
"Proposal" has the meaning given it in Section 7.2(b) hereof.
"Pursuit Cost Cap" means, with respect to any Target, $10,000.00 or such
greater amount, but not to exceed $50,000.00, as may be approved by the
Executive Committee at the time the Preliminary Presentation for such Target is
approved by the Executive Committee; provided, however, in the event the Final
Presentation for a Target is approved by the Executive Committee and such Target
becomes an Abandoned Target solely because such Target was not subsequently
acquired by the Company or a Subsidiary on account of the failure or refusal to
close or other default on the part of the seller under the contract to purchase
such Target, then the Pursuit Cost Cap with respect to such Target shall equal
$100,000.00.
"Pursuit Costs" means, with respect to each Target, the out-of-pocket costs
and expenses paid or incurred by the Developer Member to or with third-parties
not Affiliated with the Company or its Members in connection with the activities
to be undertaken prior to such Target's acquisition by the Company or a
Subsidiary to identify the Target, determine whether it is an appropriate
investment for the Company, engage in preliminary investigation and
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evaluation work, including soil, environmental and other engineering studies,
market studies, title and survey work, and review of entitlements, including
activities to gather information necessary or desirable in connection with
preparing, where applicable, a Final Presentation for the Executive Committee,
including travel expenses for site visits, legal expenses, costs for demographic
and market studies, expenses for soil tests, environmental reports, title
examination, surveys, costs incurred in arranging financing for such Target and
similar third-party expenses. Pursuit Costs do not include (i) any general
administrative overhead costs for the Manager or any Affiliate of the Manager,
(ii) any earnest money deposits that may be required to be deposited by the
Company or a Subsidiary in connection with a contract to purchase a Target, nor
(iii) any portion of the purchase price and other costs incurred in connection
with the Developer Member's acquisition of a Target pursuant to clause (iv) of
Section 4.4(d) hereof prior to the approval of a Final Presentation for such
Target; however, the costs that may be incurred by the Developer Member with
respect to a Target and referenced in clauses (ii) and (iii) of the preceding
clause of this sentence are part of the Total Project Costs which would be
reimbursed from Project Capital Contributions as hereinafter provided in this
Agreement.
"Regulations" means the regulations promulgated by the United States
Department of the Treasury pursuant to and in respect of provisions of the Code.
All references herein to sections of the Regulations shall include any
corresponding provisions of succeeding, similar, substitute proposed or final
Regulations.
"Regulatory Allocations" has the meaning assigned to it in Section 9.4(d).
"Removal Event" has the meaning given it in Section 4.8 hereof.
"Requirement of a Governmental Authority" means any law, ordinance, order,
requirement, restriction, rule, writ, injunction, decree, demand or regulation
of or imposed by a Governmental Authority.
"Residual Sharing Ratios" means the percentages in which Members
participate in distributions of Available Cash after prior distributions under
Section 8.2. The initial Residual Sharing Ratios of the Members are as follows:
Developer Member 50%
GECC Member 50%
Commencing on the earlier of (i) the date on which the Developer Member is
removed as Manager following the occurrence or existence of a Removal Event in
accordance with Section 4.8(b) or (ii) the date of the occurrence or existence
of an Additional Capital Contribution Default Event by the Developer Member, the
Residual Sharing Ratios of the Members shall change to the following:
Developer Member 25%
GECC Member 75%
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"Response Period" has the meaning given it in Section 13.2 hereof.
"Sale Notice" has the meaning given it in Section 13.1 hereof.
"Shortfall" has the meaning given it in Section 6.2(a) hereof.
"Special Defaulting Member" has the meaning given it in Article 15 hereof.
"Subsidiary" means any wholly-owned subsidiary of the Company (each such
direct or indirect subsidiary is herein individually referred to as a
"Subsidiary" and collectively as the "Subsidiaries") that is formed by the
Company for the acquisition, construction, development, ownership, leasing and
selling of Projects. The Members contemplate that each Project will be owned by
a separate Subsidiary which will be formed or organized as a limited
partnership, limited liability company or other so-called "tax pass-through"
entity. To the extent permitted and not adversely taxed by applicable state law,
the Members intend to form each Subsidiary as a single-member limited liability
company which will be disregarded for federal income tax purposes.
"SUSA" means Storage USA, Inc., a Tennessee corporation and the sole
general partner in the Developer Member.
"SUSA Competitor" means Public Storage, Inc., Shurgard Storage Centers,
Inc., Sovran Self-Storage, Inc. or U-Haul International, Inc., or any of their
respective successors.
"Target" means (i) any undeveloped site in the United States of America
that could be developed as a self-storage facility, (ii) any existing developed
site in the United States of America not then being used or operated as a
self-storage facility that could be redeveloped as a self storage facility, but
specifically excluding any such site that is located within one hundred (100)
yards of, and is intended to be used to expand, an existing self-storage
facility owned by the Developer Member or any of its Affiliates, and (iii) any
Person (other than an Equity Franchisee or a Non-Equity Franchisee) which,
directly or indirectly, through one or more intermediaries, owns, or has the
right to acquire, one or more developed or undeveloped sites described in
clauses (i) and (ii) of this definition.
"Total Project Costs" means, with respect to any Project, the estimated
or actual, as applicable, Project Development Costs and the total costs and
expenses to carry the Project from the Final Completion Date to break-even
(i.e., the point at which the Subsidiary's Net Operating Income derived from
such Project for three (3) consecutive calendar months equals or exceeds the
debt service (including required interest and principal payments) on loans for
such Project for such three (3) consecutive calendar months), as approved by the
Executive Committee as part of the Final Presentation for such Project. However,
for purposes of determining the amount of any Project Capital Contributions for
a Project, the estimated Total Project Costs for such Project, as set forth in
the Project Development Budget initially approved by the Executive Committee,
shall be used unless the Executive Committee should thereafter unanimously and
expressly approve a different amount in connection with the approval of a Change
Order for- such Project in accordance with Section 4.13(d)(2) hereof.
"Transaction Party" has the meaning given it in Section 4.6(f) hereof.
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"Transfer" has the meaning given it in Section 3.2(a) hereof.
"Underwriting Information" has the meaning given it in Section 7.2(b)
hereof.
"Undisclosed Site Conditions" means, with respect to any Project,
conditions encountered at the site which are (1) unknown subsurface or otherwise
concealed physical conditions which differ materially from those indicated in
the Construction Contract and Due Diligence Information for such Project and (2)
are unusual in nature and differ materially from those ordinarily found to exist
and generally recognized as inherent in construction activities of the character
provided for in the Construction Contract.
"Unpermitted Transfer" means a Transfer with respect to a Member,
including a Transfer under the Other Company LLC Agreement (which, in the case
of the Developer Member, includes a Change of Control with respect to itself or
SUSA), that is not permitted by the terms of this Agreement or the Other Company
LLC Agreement or is not otherwise consented to by the other Member.
"Valuation Amount" has the meaning given it in Section 12.1 hereof.
"Year 2000 Compliant" means, in regard to any property or Person, that
all material software, hardware, equipment, goods or systems utilized by, or
material to the physical operations, business operations or financial reporting
of, such property, asset or Person (collectively the "systems") will (i)
properly perform date sensitive functions before, on and after January l, 2000,
(ii) accurately perform leap year calculations, and (iii) will not cause any
other information technology to fail or generate errors related to any such
dates.
Section 1.2 Other Terms. All terms used in this Agreement that are not
defined in this Article 1 shall have the meanings set forth elsewhere in this
Agreement.
Section 1.3 Schedules and Exhibits. All schedules and exhibits annexed or
attached hereto are expressly incorporated into and made a part of this
Agreement.
Section 1.4 Currency. All payments, advances and cash contributions of
capital to be made by a Member to or on behalf of the Company and all cash
distributions and other payments made by the Company to a Member shall be made
in lawful money of the United States of America, which shall at the time of
payment be legal tender for payment of all debts and dues, public and private
and in funds available for immediate credit to the recipient's account. All
references in this Agreement to "dollars ($)" shall mean United States of
America dollars.
ARTICLE 2
ORGANIZATIONAL MATTERS; PURPOSE; TERM
-------------------------------------
Section 2.1 Formation of Company. The Company has been organized as a
Delaware limited liability company by filing a certificate of formation (the
"Certificate") under the Act. The parties hereto acknowledge and agree that upon
the signing of this Agreement the Members are hereby admitted to the Company as
the members of the Company and will be
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shown as members on the books and records of the Company as of the Effective
Date. The Company shall be governed by the Act, subject to the terms and
conditions of this Agreement.
Section 2.2 Name. The name of the Company shall be Storage Development
Portfolio, L.L.C., and all Company business must be conducted in that name or
such other name as the Executive Committee may approve.
Section 2.3 Registered Office; Registered Agent; Principal Office. The
registered office and the registered agent of the Company in the State of
Delaware shall be as specified in the Certificate or as designated by the
Executive Committee. The principal office of the Company shall be at the
principal executive office of the Manager, presently Suite 1300, 165 Madison
Avenue, Memphis, Tennessee 38103 or at such other location as the Executive
Committee may approve.
Section 2.4 Foreign Qualification. Before the Company conducts business in
any jurisdiction other than Delaware, the Manager shall cause the Company to
comply with all requirements necessary to qualify the Company as a foreign
limited liability company in that jurisdiction. At the request of the Manager,
each Member shall execute, acknowledge, swear to, and deliver all certificates
and other instruments conforming with this Agreement that are necessary or
appropriate to qualify, continue, or terminate the Company as a foreign limited
liability company in all jurisdictions in which the Company may conduct
business.
Section 2.5 Purpose and Scope.
(a) The purpose and scope of the Company's activities are strictly
limited to investing in Subsidiaries created for the purpose of acquiring,
developing, redeveloping, constructing, improving, maintaining, owning as an
investment, managing, leasing, holding for appreciation and selling, Projects;
financing the foregoing activities; and performing all other activities
reasonably necessary or incidental to the furtherance of such purposes.
(b) Without the unanimous approval of the Members, the Company and its
Subsidiaries shall not engage in any other business or activity, including the
loaning of any funds or money, extending credit or otherwise providing financial
accommodations to any Person, other than a Subsidiary.
(c) The Company intends to form wholly-owned Subsidiaries each of which
will own a Project and will conduct part of the Company's business. The terms of
the organizational documents relating to the formation of any Subsidiary will be
approved or ratified by the Executive Committee, but such documents will conform
substantially to the form and substance of the form of limited liability
agreement attached hereto as Schedule 2.5(c). The Members intend to finance each
Subsidiary's development or redevelopment of a Project with debt totaling
approximately fifty percent (50%) of Total Project Costs for each Project, with
the balance of Total Project Costs being funded by Capital Contributions made by
the Members to the Company, which in turn will make capital contributions to
each Subsidiary. The Members intend to cause each Subsidiary to make
distributions of Net Cash Flow and Capital Proceeds to the Company not less
frequently than quarterly so that the Company may make distributions of
Available Gash to the Members pursuant to Section 8.2 hereof.
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Section 2.6 Term. The Company commenced on October 8, 1999, which is the
date on which the Certificate was filed with the Office of the Secretary of
State of the State of Delaware, and shall have perpetual existence, unless
sooner dissolved as herein provided.
Section 2.7 No State Law Partnership. The Company shall not be a
partnership or joint venture under any state or federal law, and no Member or
Manager shall be a partner or joint venturer of any other Member or Manager for
any purposes (except that the Company intends to be classified as a partnership
for purposes of the Code and other applicable tax laws), and this Agreement may
not be construed otherwise.
Section 2.8 Warranties and Representations - Developer Member. As a
material inducement to the GECC Member's execution and delivery of this
Agreement, the Developer Member represents and warrants to the GECC Member with
respect to the matters set forth on Schedule 2.8 hereto, each such warranty and
representation being made as of the Effective Date.
Section 2.9 Warranties and Representations - GECC Member. As a material
inducement to the Developer Member's execution and delivery of this Agreement,
the GECC Member represents and warrants to the Developer Member with respect to
the matters set forth on Schedule 2.9 hereto, each such warranty and
representation being made as of the Effective Date.
Section 2.10 Equity Formation Costs.
(a) Upon receipt of invoices therefor, the Developer Member and the GECC
Member shall each pay fifty percent (50%) of (i) the aggregate out-of-pocket
costs and expenses incurred by the Developer Member and the GECC Member,
respectively, in connection with the formation of the Company, including the
respective reasonable attorneys' fees and expenses of the parties in the
preparation and negotiation of this Agreement and the other documents and
agreements executed contemporaneously with this Agreement, the reasonable
travel, meal and lodging expenses of the Members' respective employees incurred
in connection with the negotiation and consummation of the Company's formation,
and reasonable accountants' fees and expenses, and (ii) the aggregate costs and
expenses incurred by the Company with respect to any program loan or credit
facility for multiple Projects which are approved by the Executive Committee
(all such costs and expenses are herein collectively called the "Equity
Formation Costs"). Any fee or other compensation payable by the Developer Member
to Security Capital Markets Group is excluded from Equity Formation Costs and
shall be paid entirely by the Developer Member.
(b) The respective amounts paid by the Developer Member and the GECC
Member on account of Equity Formation Costs shall be deemed Project Capital
Contributions and shall be credited to the respective Member's Capital Account
and Project Capital Contribution Balance. As and when a Final Presentation for a
Project is approved by the Executive Committee, the Project has been acquired by
the Company or a Subsidiary and the GECC Member makes one or more Project
Capital Contributions with respect to such Project, the GECC Member shall pay to
the Developer Member an amount equal to the product derived by multiplying (i)
twenty-five percent (25%) times (ii) the total Equity Formation Costs times
(iii) a fraction, the numerator of which is the amount of each such GECC
Member's Project
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Capital Contribution and the denominator of which is $15,000,000.00 until such
time as the GECC Member shall have paid, in the aggregate, seventy-five percent
(75%) of the total Equity Formation Costs. Payments made by the GECC Member to
the Developer Member in accordance with this Section 2.10(b) shall be credited
to the GECC Member's Capital Account and its Project Capital Contribution
Balance and shall correspondingly be debited from the Developer Member's Capital
Account and its Project Capital Contribution Balance.
Section 2.11 Investment Representations of the Members.
(a) Investment Intent. Each Member does hereby represent and warrant to
the Company and to the Manager that such Member has acquired such Member's
Membership Interest for such Member's own account for investment purposes only
and not with a view to the distribution or resale thereof, in whole or in part,
and agrees that it will not Transfer, or offer to Transfer, all or any portion
of its Membership Interest in any manner that would violate or cause the Company
or the Manager to violate the Federal Act or any securities laws of the several
states.
(b) Unregistered Membership Interests. Each Member does hereby
acknowledge that such Member is aware that such Member's Membership Interest has
not been registered (i) under the Securities Act of 1933, as amended (the
"Federal Act"), or (ii) under the securities laws of any of the several states.
Each Member further understands and acknowledges that such Member's
representations and warranties contained in this Section 2.11 are being relied
upon by the Company and by the Manager as the basis for the exemption of the
Members' Membership Interests from the registration requirements of the Federal
Act and from the registration requirements of the securities laws of the several
states. Each Member further acknowledges that the Company will not, and has no
obligation to, recognize any Transfer of all or any part of such Member's
Membership Interest to any Person except in accordance with this Agreement.
(c) Legend on Agreement. Each of the Members does hereby acknowledge and
agree that a legend reflecting the restrictions imposed upon the Transfer of
such Member's Membership Interest under Article 3 hereof, under the Federal Act
and under any securities acts of the several states will be and has been placed
on the first pages of this Agreement.
Section 2.12 Warranty Regarding Brokers. Each Member represents and
warrants to the other Member that no Persons (other than Security Capital
Markets Group as to the Developer Member) are entitled, as a result of the
actions of such Member, or any of their respective Affiliates, to a brokerage
commission, fee or similar compensation relating to the formation of the
Company. Each Member shall indemnify, defend and hold the Company and the other
Member harmless from and against any and all losses, costs, damages and expenses
(including reasonable attorneys' fees and court costs) actually incurred or paid
by the Company or such other Member as a result of the inaccuracy of the
foregoing warranty and representation. The Developer Member shall pay any fee or
other compensation due Security Capital Markets Group with respect to the
Company's formation.
Section 2.13 Publicity. The Members shall mutually agree on appropriate
press releases, advertisements and other promotional materials describing in
general terms or in detail
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the formation of the Company, the Members' participation in the Company as
Members and the business of the Company.
ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF INTERESTS
-------------------------------------
Section 3.1 Members. The initial Members of the Company are the GECC
Member and the Developer Member, each of which is admitted to the Company as a
Member as of the Effective Date.
Section 3.2 Dispositions of Membership Interests.
(a) General Restriction. Except as permitted in Section 3.2(b) hereof, a
Member shall not make an assignment, transfer, or other disposition
(voluntarily, involuntarily or by operation of law) (a "Transfer") of all or any
portion of or any interest in its Membership Interest, nor pledge, mortgage,
hypothecate, grant a security interest in, or otherwise encumber (an
"Encumbrance") all or any portion of or any interest in its Membership Interest.
In addition, the Developer Member shall not permit a Change in Control with
respect to SUSA or itself to occur (any Change in Control of the Developer
Member or SUSA shall be included within the meaning of, and shall be deemed to
be a "Transfer"). Except as permitted in Section 3.2(b) hereof, a Person to whom
a Membership Interest is Transferred may be admitted to the Company as a member
only with the consent of the other Member, which may be given or withheld in the
other Member's sole and absolute discretion. In connection with any Transfer of
a Membership Interest or any portion thereof, and any admission of an assignee
as a Member, the Member making such Transfer and the assignee shall furnish the
other Member with such documents regarding the Transfer as the other Member may
reasonably request (in form and substance reasonably satisfactory to the other
Member), including a copy of the Transfer instrument, a ratification by the
assignee of this Agreement (if the assignee is to be admitted as a Member), a
legal opinion that the Transfer (i) complies with applicable federal and state
securities laws, (ii) will not cause the company to be classified as other than
a "partnership" for federal income tax purposes, and (iii) will not cause the
Company or any Subsidiary to be in breach of or default under any credit
agreement, mortgage, deed of trust, security agreement or other agreement
encumbering a Project or otherwise binding on the Company, any Subsidiary or any
of their respective assets.
(b) Permitted Transfers. Notwithstanding the limitations in Section
3.2(a) hereof, the GECC Member may Transfer or otherwise grant Encumbrances in
all or a portion of its Membership Interest (1) to any GECC Affiliate
(excluding, however, to the extent it is or becomes a GECC Affiliate in any form
or manner, whether through an asset purchase, stock purchase, merger or any
other type of acquisition or exchange, a SUSA Competitor), and, at the election
of the GECC Member, upon any such Transfer that transferee shall be admitted as
a Member or (2) without ceasing to be a Member, to any Person so long as the
GECC Member retains its Management Rights; provided, however, in each case, any
such Transferee, and the Membership Interest transferred, shall continue to be
subject to the restrictions of Section 3.2(a). Ownership interests in the GECC
Member may be Transferred so long as the GECC Member is controlled by a GECC
Affiliate.
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(c) Limited Remedies. In the event of an Unpermitted Transfer, then the
other Member shall be entitled to exercise simultaneously, as its sole remedy
under both this Agreement and the Other Company LLC Agreement, the Buy-Sell
Option or the Marketing Right under both this Agreement and the Other Company
LLC Agreement.
Section 3.3 Creation of Additional Membership Interests. Additional
Membership Interests may be created and issued to existing Members or to other
Persons, and such other Persons may be admitted to the Company as Members, with
the approval of the Developer Member and the GECC Member, on such terms and
conditions as the Developer Member and the GECC Member may determine at the time
of admission.
Section 3.4 Resignation. A Member may not resign or withdraw from the
Company without the consent of the other Member(s).
Section 3.5 Information. In addition to the other rights specifically set
forth in this Agreement, each Member is entitled to the following information
under the circumstances and conditions set forth in the Act: (a) true and full
information regarding the status of the business and financial condition of the
Company and each Subsidiary, (b) promptly after becoming available, a copy of
the Company's and each Subsidiary's (if applicable) federal, state and local
income tax returns for each year; (c) a current list of the name and last known
business, residence or mailing address of each Member and Manager; (d) a copy of
this Agreement, the Company's Certificate and each Subsidiary's certificate of
formation and other organizational documents, and all amendments to such
documents; (e) true and full information regarding the amount of cash and a
description and statement of the agreed value of any other property or services
contributed by each Member and which each Member has agreed to contribute in the
future, and the date on which each became a Member; and (f) other information
regarding the affairs of the Company to which that Member is entitled pursuant
to Section 18-305 of the Act (including all Company books and records). Under no
circumstances shall any information regarding the Company or its business be
kept confidential from any Member.
Section 3.6 Liability to Third Parties. No Member, in its capacity as
such, shall be liable for the debts, obligations or liabilities of the Company;
however, with the prior approval of the Executive Committee or as otherwise
contemplated by this Agreement, a Member or an Affiliate of a Member may, or may
be required by this Agreement to, by separate written agreement that has been
approved by the Executive Committee, guarantee or otherwise provide credit
support to obligations of the Company or any Subsidiary.
ARTICLE 4
MANAGEMENT OF COMPANY
---------------------
Section 4.1 Executive Committee.
(a) There is hereby created and established the Executive Committee of
Company. The management and control of the Company and each Subsidiary shall be
vested in the Executive Committee which shall be responsible for the approval of
all Major Decisions and the adoption of other policy procedures respecting the
business affairs of the Company and each Subsidiary. Except as otherwise
expressly provided in this Agreement, no action shall be taken,
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sum expended, decision made or obligation incurred by the Company or any
Subsidiary with respect to a matter within the scope of any of the Major
Decisions, unless such matter has been expressly approved by the Executive
Committee or unless express provision therefor has been made as part of the
Annual Business Plan, the Operating Budget, any Project Operating Budget or a
Final Presentation, in each instance as approved by the Executive Committee,
except that the Manager of the Company shall be authorized to make any payment
or take any action with respect to any contractual or legal obligations of the
Company or a Subsidiary which have been duly authorized by the Executive
Committee.
(b) Subject at all times to subsection 4.1(l) hereof, the Executive
Committee shall at all times consist of four (4) members, two (2) of whom shall
be designated by the Developer Member and two (2) of whom shall be designated by
the GECC Member. Each Member may appoint an alternate for each member appointed
by it to the Executive Committee, and the members and alternates representing a
Member may act interchangeably and with equal authority with the members. Each
member or alternate appointed to the Executive Committee shall represent the
interests of the Member making such appointment or designation.
(c) Initially, the members of the Executive Committee designated by
each Member are as follows:
Developer Member GECC Member
---------------- -----------
Dean Jernigan David Henry
Christopher P. Marr Mark Dawejko
(d) Each Member shall have the power and authority to remove any member
or alternate member of the Executive Committee designated by it by delivering
written notice of such removal to the Company and the other Member. Vacancies on
the Executive Committee shall be filled by the Member which appointed the
Executive Committee member or alternate member previously holding the position
which is then vacant.
(e) All of the members or alternate members of the Executive Committee
representing a Member shall collectively be entitled to cast one (1) vote on
behalf of that Member with respect to any decision made by the Executive
Committee; provided that if only one member or alternate member representing a
Member is present at a meeting of the Executive Committee, the member or
alternate member so present shall be entitled to cast the one (1) vote on behalf
of such Member.
(f) Regular meetings of the Executive Committee may be held at such
times and places as may be designated from time to time by resolution of the
Executive Committee and communicated to all members and alternate members of the
Executive Committee. Special meetings of the Executive Committee may be called
by the Manager or any member of the Executive Committee upon five (5) Business
Days' notice to all members and alternates by telephone or telefax. The
Executive Committee may conduct its meetings through the use of any means of
communication by which all members participating may hear each other during the
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meeting. An agenda for each meeting shall be prepared in advance by the Manager
in consultation with the GECC Member. Subject at all times to subsection 4.1(1)
hereof, two (2) members or alternate members of the Executive Committee, one
representing each Member, shall constitute a quorum. Unanimous concurring votes
shall be required for all actions of the Executive Committee and such unanimous
concurring votes shall be binding upon both Members for all matters, including,
without limitation, financing, refinancing, conveyance of some or all of the
Company's assets, dissolution of the Company, and execution of contracts. Any
action required or permitted to be taken by the Executive Committee may be taken
by written consent signed by the number of members or alternates required to
approve such actions and taken at a meeting of the Executive Committee.
(g) With advance notice to the members representing the other Member, an
Executive Committee member or alternate representing either Member, may invite
to any meeting of the Executive Committee any Person having an equity interest
in the Member represented or in any constituent entity thereof, or any legal
counsel, consultant or other agent of any such party, provided that no Persons
other than the Executive Committee members or alternates shall be entitled to
vote with respect to any proceedings of the Executive Committee.
(h) The Manager shall cause written minutes to be prepared of all
actions taken by the Executive Committee whether by formal meeting, telephonic
meeting or otherwise, and, within twenty (20) Business Days after any such
meeting, shall deliver a copy thereof to each member or alternate member of the
Executive Committee in attendance at such meeting for his or her review and
written approval, which written approval shall be required in order to evidence
the approval of any action taken by the Executive Committee.
(i) In addition to the foregoing, the Executive Committee may adopt
other procedures and methods designed to permit the business of the Company and
the Subsidiaries to proceed in an orderly and prompt manner, notwithstanding the
necessity of Executive Committee approval hereunder, so long as such procedures
and methods are calculated to keep members and alternates of the Executive
Committee advised of the affairs of the Company and allow for a reasonable
period for objection by any member of the Executive Committee.
(j) The members and alternates of the Executive Committee representing
each Member may rely absolutely on the vote, consent, approval, disapproval or
execution and delivery of any instrument by any member or alternate representing
the other Member as having been fully authorized and approved by the other
Member, and no member or alternate is authorized or required to inquire as to
whether any member or alternate representing the other Member was actually
authorized by the Member represented by him or her.
(k) Members and alternates of the Executive Committee shall not receive
any compensation or other remuneration from the Company for their services to
the Company.
(l) Upon either Member (or a permitted transferee of such Member)
ceasing to be a Member in the Company, such Member (or such permitted
transferee) shall cause the members and alternates appointed by it to the
Executive Committee to resign from the Executive Committee of the Company in
which event the Executive Committee will consist of only two (2) members who
will be designated by the remaining Member.
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(m) At the request of the other Member, each Member shall remove any
member or alternate to the Executive Committee appointed by it who (a) engages
in a pattern or practice of not adhering to the Company's Integrity Policy, (b)
misappropriates or converts any funds of the Company or a Subsidiary to his or
her personal use, (c) is declared to be an incompetent in any judicial
proceedings, or (d) is indicted for a felony (whether or not convicted).
Section 4.2 Management of the Company.
(a) The Manager shall manage the affairs of the Company and make all
decisions with regard thereto, except where (1) the Executive Committee's or
the GECC Member's approval is required under this Agreement or (2) the approval
of any of the Members is expressly required by a non-waivable provision of
applicable law. The GECC Member shall have sole and exclusive authority to
enforce on behalf of the Company or a Subsidiary any agreement between the
Company or a Subsidiary and the Developer Member or SUSA, or any of their
respective Affiliates, including any Property Management Agreement, any
Development Agreement, and any Construction Contract.
(b) The Manager shall discharge its duties to the Company in good faith
and in the best interests of the Company. The Manager, on behalf of the Company,
shall in good faith use all reasonable efforts to implement all Major Decisions
approved by the Executive Committee, enforce agreements entered into by the
Company, and conduct the ordinary business and affairs of the Company in
accordance with good industry practice and this Agreement. The Manager shall not
be required to devote a particular amount of time to the Company's business, but
shall devote sufficient time and effort to the Company's business and operation
as is reasonably necessary to manage the affairs of the Company prudently and in
accordance with this Agreement, and to perform its duties hereunder. Except as
may be expressly permitted by this Agreement, the Manager shall not delegate any
of its rights or powers to manage and control the business and affairs of the
Company without the prior written approval of the Executive Committee.
(c) Subject to the limitations and qualifications set forth in this
Agreement, the Members' obligations to make Capital Contributions to the
Company, and the availability of sufficient funds in the Company and Subsidiary
bank accounts, the Manager shall perform the following on behalf of the Company:
(1) Engage qualified Persons to assist in the Company's business,
including design professionals and consultants, attorneys, accountants, real
estate brokers and management agents.
(2) Pay, without duplication, all expenses incurred by the Company
and its Subsidiaries in accordance with the approved Operating Budget and each
approved Project Operating Budget, respectively.
(3) Maintain the books and records for the Company and its
Subsidiaries and prepare the reports required to be submitted to the Members in
accordance with this Agreement.
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(4) Operate the business of the Company substantially in accordance
with the approved Operating Budget and the approved Annual Business Plan.
(5) Supervise negotiations with the appropriate Governmental
Authorities.
(6) Supervise the resolution of any disputes concerning boundaries of
Projects and the rights of adjoining owners.
(7) Use its commercially reasonable best efforts to cause each Project
to be acquired, developed or redeveloped, and operated substantially in
accordance with the approved Final Presentation therefor, the applicable
approved Project Operating Budget and the approved Annual Business Plan, and in
substantial compliance with all applicable Requirements of Governmental
Authorities having jurisdiction over each Project, including those relating to
zoning, building, fire, subdivision control, and environmental requirements,
including the Americans with Disabilities Act, and applicable variances to any
of the foregoing.
(8) Use its commercially reasonable best efforts to obtain all
permits, licenses, approvals, and variances required for the development or
redevelopment, operation, management and use of each Project in accordance with
applicable Requirements of Governmental Authorities and customary local
practices.
(9) Select and approve materials to be incorporated into the Projects
consistent with their intended quality.
(10) Comply with the Insurance Program.
(11) Coordinate and oversee the work of the design professionals
throughout all phases of development or redevelopment of the Projects from the
commencement to the final completion.
(12) Oversee the development or redevelopment and management of all
Projects and procure the proper performance of all obligations connected with
the carrying out and completion thereof substantially in accordance with the
approved Final Presentations, the approved Project Development Budgets and the
approved Project Operating Budgets therefor.
(13) Verify and pay all costs incurred in connection with the
development or redevelopment of the Projects in substantial conformity with the
applicable approved Project Development Budgets.
Section 4.3 Annual Business Plan.
(a) Operation Under Business Plan. The Manager will operate the Company
in accordance with a strategic business plan approved in accordance with this
Section. Any business plan that is in effect with respect to any Fiscal Year, as
it may be amended, is called the "Annual Business Plan".
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(b) Contents of Annual Business Plan. The Annual Business Plan will
include an executive summary outlining the business strategy and budgeted and
forecasted financial information for the upcoming period and will contain a
comprehensive statement setting forth the overall plan for the business of the
Company and each Subsidiary, including proposed Project acquisitions, financings
and refinancings, and development or redevelopment (in all cases, to the extent
then known or reasonably anticipated), and will set forth the following criteria
for the operation of the Company during the Fiscal Year to which it relates: (i)
the Operating Budget for the Company and all Subsidiaries, including anticipated
reserves, (ii) the Project Operating Budget for each Project, including
anticipated reserves, for each of the Subsidiaries which own a Project with
respect to which the Manager anticipates a Project Operating Budget will be
required, during the Fiscal Year, under the applicable property management
agreement, (iii) for forecasting purposes only, an estimated schedule of Pursuit
Costs and calls for Capital Contributions for the year. In preparing and
approving each Annual Business Plan and any revisions or amendments thereto, the
Manager and the Executive Committee will consider, among other things, the
previous year's experience, current and projected market conditions and
anticipated future needs in light of such projections.
(c) Adoption of Annual Business Plan. As soon as reasonably practicable
after the Effective Date, but in no event later than thirty (30) days after the
Effective Date, the Manager will present a proposed Annual Business Plan for
Fiscal Year 2000 to the Executive Committee for its approval. With respect to
each subsequent Fiscal Year, the Manager will, on or before November 1 of each
year, present a proposed Annual Business Plan for the next succeeding Fiscal
Year to the Executive Committee for its approval. The Members anticipate that
the Annual Business Plan will be revised quarterly or more frequently in
response to market conditions. In addition, the Manager and any Member may from
time to time during a Fiscal Year present proposed amendments to the Annual
Business Plan to the Executive Committee for its approval. The Executive
Committee will promptly consider any proposed Annual Business Plan or amendment
thereto, including the Operating Budget and each Project Operating Budget, and
if the Annual Business Plan is not approved by the Executive Committee, the
member or alternative member of the Executive Committee failing to approve the
Annual Business Plan shall notify the Manager and the Members in writing of
those portions or line items thereof not so approved. The failure of the
Executive Committee to approve an Annual Business Plan within forty-five (45)
days after its presentation to the Executive Committee will constitute a Major
Dispute; however, the Members shall cause the Executive Committee to work in
good faith to approve an Annual Business Plan in order to avoid a Major Dispute.
No change, revision or other amendment to an approved Annual Business Plan will
change or modify the Performance Benchmarks, which may be changed only by the
express, written approval of the Developer Member and the GECC Member in the
exercise of their respective sole discretion. Upon approval and adoption of an
Annual Business Plan, the previously effective Annual Business Plan shall be
completely superceded and no longer effective.
(d) Operations in Gap Period. With respect to Fiscal Year 2001 and each
Fiscal Year thereafter, if an Annual Business Plan has not been approved in
accordance with this Section with respect to any Fiscal Year by the start of the
Fiscal Year, the Annual Business Plan in effect for the immediately preceding
Fiscal Year (the "Old Business Plan") will (subject to the proviso at the end of
this sentence) serve as the interim Annual Business Plan until a new Annual
Business Plan is so approved (if at all); provided, however, that the Old
Business Plan
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will be deemed to include (i) with respect to each approved Project Operating
Budget, such approved Project Operating Budget for the applicable Subsidiary,
and (ii) with respect to each Project Operating Budget or line item thereof that
has not been approved by the Executive Committee, a Project Operating Budget, or
particular line item thereof, for each applicable Subsidiary that (A) is based
on the Project Operating Budget, or particular line item thereof, for its
Project with respect to the then current Fiscal Year (Inflation Adjusted), (B)
reflects increases in amounts payable with respect to items that are outside the
reasonable control of the Manager (including taxes, insurance, and debt
service), and (C) includes other amounts reasonably believed by the Manager to
be required to preserve the value of the Subsidiary's assets. For the avoidance
of doubt, even though the Old Business Plan will serve as the interim Annual
Business Plan with the changes included in this Section 4.3(d), the failure of
the Executive Committee to approve and adopt an Annual Business Plan in
accordance with Section 4.3(c) shall constitute a Major Dispute.
Section 4.4 Investments.
(a) From time to time until the Commitment Termination Date the
Developer Member shall identify for the Executive Committee Targets which the
Developer Member proposes as Projects for acquisition and development or
redevelopment by the Company pursuant to this Agreement. Prior to the Effective
Date, the Developer Member has acquired and is in the process of developing the
Targets identified on Schedule 4.4(a) hereto and the Developer Member will
submit to the Executive Committee Preliminary Presentations for each of such
Targets within a reasonable period of time after the Effective Date. If a
Preliminary Presentation and Final Presentation for any such Target or Targets
is subsequently approved by the Executive Committee, then the Developer Member
shall convey such Project to the Company at the Developer Member's cost,
including a Developer Fee and General Contractor Fee calculated through the date
of such conveyance on the same basis as if the Project had been initially
acquired and developed by the Company hereunder, carrying costs and all other
costs incurred or accrued by the Developer Member with respect to such Project
prior to the date of such conveyance that would constitute Project Development
Costs under this Agreement, which the Members agree equals the fair market value
thereof. Any conveyance of any such Target to the Company or its Subsidiary
shall be made by special warranty deed (or equivalent thereof) accompanied by
limited representations and warranties to be made by, and based upon the
knowledge of, the Developer Member to the Company and its Subsidiary, in scope
and substance mutually satisfactory to the Developer Member and the GECC Member.
(b) The Developer Member shall have primary responsibility to identify
such Targets. Subject to the reimbursement obligations with respect to Pursuit
Costs set forth in Sections 4.4(k) and 4.4(l), the Developer Member shall pay
all costs and expenses incurred by the Developer Member in locating,
identifying, evaluating and presenting Targets to the Executive Committee,
including all overhead, travel expenses, salaries and other payroll costs for
the Developer Member's officers and employees engaged in such work.
(c) The Developer Member shall present all such proposed Targets to the
Executive Committee for preliminary approval through a Preliminary Presentation.
The Executive Committee shall have ten (10) Business Days after receipt of such
Preliminary Presentation to provide the Developer Member with its approval or
rejection thereof, such
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approval or rejection to be made by the Executive Committee based upon the
Target's compliance (or failure to comply) with the Approved Investment
Parameters. If the Executive Committee fails to approve the Preliminary
Presentation within such ten (10) day period, the Executive Committee shall be
deemed to have rejected the same. Approval of a Preliminary Presentation by the
Executive Committee must be made by unanimous vote. If the Executive Committee
fails to approve the Preliminary Presentation, then the member or alternate
member of the Executive Committee failing to approve the Preliminary
Presentation shall give a written statement of objections thereto. If the
Developer Member and the Executive Committee are unable thereafter to resolve
the Executive Committee's objections to the Preliminary Presentation, then the
Developer Member shall have an option to pursue such Target as an Independent
Investment as provided in Section 4.5 hereof.
(d) Approval by the Executive Committee of the Preliminary Presentation
with respect to a Target shall constitute the Executive Committee's
authorization to the Developer Member to (i) incur Pursuit Costs with respect to
such Target in accordance with budget therefor included within such approved
Preliminary Presentation, (ii) conduct due diligence with respect to such
Target, (iii) prepare the Final Presentation for such Target and (iv) at the
Developer Member's option, to acquire such Target in the name of the Developer
Member or a Controlled Affiliate thereof, pending completion and approval of the
Final Presentation for such Target. If, pursuant to clause (iv) of the preceding
sentence, the Developer Member acquires a Target and a Final Presentation for
such Target is not approved by the Executive Committee, or if so approved, the
Target is not subsequently conveyed by the Developer Member to a Subsidiary for
any reason, other than a Project Capital Contribution Default by the GECC
Member, then, notwithstanding anything to the contrary contained in this
Agreement, neither the Company nor any Subsidiary shall have any obligation to
reimburse the Developer Member for any Pursuit Costs or any other costs and
expenses incurred by the Developer Member with respect to such Target.
(e) Approval by the Executive Committee of the Preliminary Presentation
with respect to a Target shall also constitute the Executive Committee's
authorization to the Developer Member to call for Project Capital Contributions
to make earnest money deposits required in connection with the execution of a
contract for the purchase of such Target and the Members agree to make Project
Capital Contributions to the Company for such required earnest money deposits.
Except as otherwise expressly provided in Section 4.4(g) hereof, if the Final
Presentation for such Target is not subsequently approved by the Executive
Committee as hereinafter provided or if the Final Presentation for such Target
is approved but for whatever reason, other than a Project Capital Contribution
Default by the GECC Member, the Target is not subsequently acquired by the
Company or a Subsidiary, then the Developer Member shall, within thirty (30)
days after the Executive Committee's failure so to approve such Final
Presentation or the Company or a Subsidiary's failure so to acquire such Target,
return to the Members the Project Capital Contributions so contributed for such
earnest money. Forfeiture or other inability of the Developer Member to obtain a
refund of any earnest money deposit made with respect to a Target shall not
excuse the Developer Member's obligation to return such Project Capital
Contributions to the Members unless caused by a Project Capital Contribution
Default by the GECC Member. After the approval of a Preliminary Presentation by
the Executive Committee, any material amendment to a purchase agreement with
respect to the
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Target, including amendments increasing the purchase price or required earnest
money deposits must be submitted to the Executive Committee for approval.
(f) Prior to the acquisition of a Target by the Company or a
Subsidiary, the Developer Member shall deliver to the Executive Committee a
Final Presentation for such Target. The Executive Committee shall have ten (10)
Business Days after receipt of such Final Presentation with respect to the
Target to provide the Developer Member with its approval or rejection thereof,
such approval or rejection to be made by the Executive Committee based upon (i)
the Target's compliance (or failure to comply) with the Approved Investment
Parameters and (ii) satisfactory Due Diligence Information. Approval of a Final
Presentation by the Executive Committee must be made by unanimous vote. If the
Executive Committee fails to approve the Final Presentation within such ten (10)
Business Day period, the Executive Committee shall be deemed to have rejected
the same. If the Executive Committee fails to approve the Final Presentation
then the member or alternate member of the Executive Committee failing to
approve the Final Presentation shall give a written statement of objections to
the Final Presentation. If the Developer Member and the Executive Committee are
unable thereafter to resolve the Executive Committee's objections to the Final
Presentation, then the Developer Member shall have an option to pursue such
Target as an Independent Investment as provided in Section 4.5 hereof.
(g) Approval by the Executive Committee of the Final Presentation with
respect to a Target shall constitute the Executive Committee's authorization to
the Developer Member to cause such Target to be conveyed to a Subsidiary and
thereafter proceed with the Target as a Project. If, after the approval of a
Target's Final Presentation, (i) the Target has not been acquired by the Company
or a Subsidiary within ninety (90) days after such approval (a "Delayed Project
Acquisition") or (ii) if acquired, the development or redevelopment thereof (as
evidenced by the issuance of a building permit and the commencement of grading)
has not commenced within fourteen (14) months after such approval (a "Delayed
Project Development"), then the Executive Committee's approval thereof shall be
deemed automatically withdrawn and revoked. If the Executive Committee's
Approval is deemed withdrawn and revoked in accordance with the preceding
sentence, then the Company and its Subsidiary shall cease work with respect to
such Target or Project, as applicable, and the Members shall have no further
obligation to make Project Capital Contributions with respect thereto unless and
until the Developer Member submits a revised and updated proposed Final
Presentation for such Target or Project to the Executive Committee for its
approval in accordance with Section 4.4(f) hereof; provided, however, with
respect to a Delayed Project Development and if the acquisition of the Project
has been financed and the Company and its Subsidiary's cessation of work with
respect to such Project requires that any such financing be repaid, then the
Members shall make Project Capital Contributions to the Company in an amount
necessary to repay such financing in full. In the event such revised and updated
proposed Final Presentation is not then approved by the Executive Committee,
then (A) with respect to a Delayed Project Development, the Developer Member
shall have an option to purchase such Project for a purchase price equal to the
sum of (i) any indebtedness secured by such Project and (ii) all Project Capital
Contributions made with respect to such Project plus a return thereon at the
Delayed Project Return Rate, and thereafter may pursue such Project as an
Independent Investment in accordance with Section 4.5 hereof; however, so long
as the Company and its Subsidiary are released from any liability or other
obligation on account of all indebtedness incurred by the Company or its
Subsidiary in
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connection with such Project and so long as the Developer Member's Capital
Account and Capital Account Contribution Balance are reduced by all amounts
attributable to such Project as if any Project Capital Contributions and
Additional Capital Contributions related to such Project had never been made,
then the Developer Member may purchase such Project by paying directly to the
GECC Member that portion of the GECC Member's Capital Account Contribution
Balance related to such Project, plus a return thereon at the Delayed Project
Return Rate, which payment, excluding the return, shall reduce the GECC Member's
Capital Account and Capital Account Contribution Balance as of the date such
payment is received; or (B) with respect to the Delayed Project Acquisition, the
Developer Member shall have the option to proceed with such Target as an
Independent Investment in accordance with Section 4.5 hereof upon reimbursement
or repayment to the GECC Member of any and all Project Capital Contributions
made by the GECC Member with respect to such Target, upon which reimbursement
and payment the purchase contract for such Project will be assigned, without
warranty or recourse, to the Developer Member or its Affiliate. If the Developer
Member does not exercise its option to purchase such Project or Target, as
applicable, and pursue it as an Independent Investment in accordance with the
preceding sentence within ninety (90) days after the Executive Committee's
failure to approve the revised and updated proposed Final Presentation for such
Target or Project, then (A) in the event of a Delayed Project Development, the
Manager shall cause the Company or its Subsidiary to sell such Project at its
fair market value to a third party not Affiliated with the Company or any of its
Members or (B) in the event of a Delayed Project Acquisition, at the GECC
Member's election, the Manager shall cause the Company or its Subsidiary either
(i) to acquire such Target and thereafter sell such Project at its fair market
value to a third party not Affiliated with the Company or any of its Members, or
(ii) to terminate the purchase contract for such Target and relinquish and
forfeit any earnest money deposit thereunder, and in such latter event, the
Developer Member shall have no obligation to repay or return to the GECC Member
any Project Capital Contributions made by the GECC Member with respect to such
Target; however, to the extent the sales price for any such Project is less than
the total Project Development Costs incurred by the Company or a Subsidiary with
respect thereto, then, at the option of the GECC Member, such sale may either be
approved or disapproved, in which latter case such Project shall be retained,
but not further developed, by the applicable Subsidiary. Earnest money deposits
so forfeited are Project Capital Contributions.
(h) In approving or disapproving a Preliminary Presentation or a Final
Presentation, as the case may be, the Executive Committee's only obligation will
be to make a good faith effort to determine whether or not the Preliminary
Presentation or the Final Presentation, as applicable, for a Target satisfies
the Approved Investment Parameters and whether or not the Due Diligence
Information, in the case of a Final Presentation, for the Target is
satisfactory.
(i) If the Final Presentation for the Target is approved by the
Executive Committee, then the Developer Member shall cause a Subsidiary to be
formed for the purpose of acquiring, owning, developing and holding the Target
and carrying out the approved Final Presentation. A Subsidiary shall be formed
for the acquisition and development or redevelopment of each Project.
(j) Prior to the acquisition of a Target by the Company or a Subsidiary
or contemporaneously therewith:
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(1) The Developer Member shall have verified, after reasonable due
diligence, that all applicable zoning, land use, wetlands, flood hazard,
endangered species, and other entitlements needed to permit the use of the
Target reasonably consistent with the approved Final Presentation therefor shall
have been obtained, and all zoning and other entitlement permits required to
permit the use of such Target in accordance with the approved. Final
Presentation therefor shall have been obtained. Zoning and other entitlement
permits referenced in the preceding sentence do not include building, land
disturbance, construction or other similar permits that are not normally
obtained upon a Target's acquisition. To the extent any portion of the Target
includes wetlands, estimates of the applicable compliance and mitigation costs
shall have been included in the approved Project Development Budget for such
Target.
(2) Phase I Environmental Reports (or Phase II Environmental Reports if
such is the recommendation of the Phase I Environmental Report) (collectively,
the "Environmental Reports") shall have been approved by the GECC Member as part
of the Due Diligence Information in the Final Presentation for such Target or
otherwise, which approval shall not be unreasonably withheld or delayed. The
Environmental Reports shall be prepared by an environmental engineer or
consultant selected from a list of engineers and consultants approved from time
to time by the GECC Member pursuant to a scope of work approved from time to
time by the GECC Member. The approved Project Development Budget for each Target
shall include the reasonable estimate of any remediation costs associated with
hazardous substances reflected by such Environmental Reports and the Developer
Member shall implement a remediation plan in accordance with recommendations in
the Environmental Report obtained in connection with the acquisition of such
Target as approved by the Executive Committee as part of the approved Final
Presentation.
(3) A commitment for an Owner's Policy of Title Insurance shall have
been obtained on behalf of the Subsidiary in the amount of the purchase price
thereof with a pending construction endorsement for the Cost of the Work (as
reflected in the approved Project Development Budget) for such Target insuring
good, indefeasible, marketable and insurable fee simple title to such Target (or
a leasehold estate if approved by the Executive Committee), subject only to
matters and exceptions that do not materially and adversely affect the
Subsidiary's ability to develop or redevelop and operate such Target or cause
the Total Project Costs for such Target to exceed, in any material respect, the
amounts shown in the Project Development Budget approved as part of the Final
Presentation for such Target.
(4) The following shall have been verified by the Developer Member: (i)
satisfactory methods of access to and egress from such Target and adjoining or
nearby public ways are or will be available, sufficient to meet the reasonable
needs of such Target, (ii) sanitary water supply, including a well, and storm
sewer and sanitary sewer facilities, including a septic system, and other
required utilities (gas (if applicable), electricity, telephone, etc.) are or
will be available for the Target and in sufficient capacities (with no
moratoriums for such services in effect or reasonably anticipated) to meet the
reasonable needs of such Target, and (iii) if any private easements over land of
others are required for such means of access and egress or for any such
utilities, such easements are or will be available and will be acquired
contemporaneously with the Subsidiary's acquisition of such Target.
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(k) Contemporaneously with a Subsidiary's acquisition of a Target and
so long as such Pursuit Costs were included in an approved Project Development
Budget therefor, the Subsidiary shall reimburse the Developer Member for all
Pursuit Costs incurred by the Developer Member in connection with the Project
through Project Capital Contributions made by the Members to the Company which
in turn will be contributed to the Subsidiary. As soon as reasonably practicable
following the acquisition of a Project, the Manager shall cause the Subsidiary
to close the Construction Loan for such Project. No development or redevelopment
and construction of a Project shall commence until the Plans and Specifications
for such Project shall have been approved by the Executive Committee, which
approval shall be deemed to have occurred on the tenth (l0th) Business Day after
the delivery of such Plans and Specifications to the Executive Committee, unless
within such ten (10) Business Day period a member or alternate member of the
Executive Committee makes an objection in writing to such Plans and
Specifications.
(l) With respect to an Abandoned Target and within thirty (30) days
after the GECC Member's receipt of invoices and other reasonable evidence
verifying the amount, purpose and recipient of such Pursuit Costs, the GECC
Member shall reimburse the Developer Member for fifty percent (50%) of all
Pursuit Costs incurred by the Developer Member with respect to such Abandoned
Target in accordance with the approved budget therefor, up to, but not
exceeding, one-half (1/2) of the Pursuit Cost Cap for such Abandoned Target;
provided, however, in no event shall the aggregate amount paid by the GECC
Member to the Developer Member in accordance with the preceding clause of this
sentence for all Pursuit Costs incurred by the Developer Member with respect to
all Abandoned Targets exceed, in the aggregate, $150,000.00. The total payments
made by the Developer Member and the GECC Member on account of Pursuit Costs
incurred with respect to Abandoned Targets, up to, but not exceeding the Pursuit
Cost Cap for any one Abandoned Target and $300,000.00 for all Pursuit Costs with
respect to all Abandoned Targets, shall be treated for all purposes of this
Agreement as Project Capital Contributions and, to the extent permissible, such
costs shall be capitalized in the Total Project Costs of all consummated
Projects in accordance with a methodology to be approved by the Executive
Committee. All Pursuit Costs incurred by the Developer Member with respect to an
Abandoned Target in excess of the Pursuit Cost Cap for that Target and all
Pursuit Costs incurred by the Developer Member in excess of $300,000, in the
aggregate, for all Abandoned Targets will be paid by the Developer Member from
its own funds which will not be treated as Capital Contributions to the Company
or any Subsidiary and will not be credited to its Project Capital Contribution
Balance or Additional Capital Contribution Balance. For the avoidance of doubt,
the Developer Member shall pay (i) any and all Pursuit Costs with respect to an
Abandoned Target in excess of the Pursuit Cost Cap for such Abandoned Target,
(ii) any and all Pursuit Costs with respect to any Target the Preliminary
Presentation for which is not approved by the Executive Committee, and (iii) any
and all Pursuit Costs in excess of $300,000 for all Abandoned Targets; however,
none of such payments made in accordance with the preceding clauses of this
sentence shall be credited to the Developer Member's Capital Account in the
Company, none shall be considered a Capital Contribution to the Company for
purposes of distributions or otherwise, and none shall be credited to its
Project Capital Contribution Balance or its Additional Capital Contribution
Balance. Notwithstanding the foregoing, if an Abandoned Target is not acquired
by the Company or a Subsidiary solely because of a Project Capital Contribution
Default by the GECC Member, then the GECC Member shall be responsible for,
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and shall pay to the Developer Member fifty percent (50%) of all Pursuit Costs
incurred by the Developer Member pursuant to the approved budget therefor
without regard to any limitation on such reimbursement obligation that would
otherwise be applicable.
(m) If, at any time after four (4) months from the Effective Date, the
GECC Member's Project Capital Contribution Balance under this Agreement exceeds
the GECC Member's Project Capital Contribution Balance under the Other Company
LLC Agreement and the Commitment Termination Date has not occurred, then the
following special requirements shall apply:
(1) the Executive Committee may approve a Preliminary
Presentation or a Final Presentation, as applicable, in which event the
remainder of this Section 4.4 shall be applicable to such Target; or
(2) the Executive Committee may disapprove a Preliminary
Presentation or a Final Presentation, as applicable, in which event the
Developer Member may pursue such Target as an Independent Investment in
accordance with Section 4.5 hereof; or
(3) the Executive Committee, acting by and through the member or
alternate member thereof representing the GECC Member, may disapprove a
Preliminary Presentation or a Final Presentation, as applicable, solely because
the GECC Member's Project Capital Contribution Balance under this Agreement
exceeds the GECC Member's Project Capital Contribution Balance under the Other
Company LLC Agreement, in which event and so long as the Commitment Termination
Date has not occurred the Developer Member shall again present such Target to
the Executive Committee within the earlier to occur of forty-five (45) days
after such disapproval or the date on which such imbalance no longer exists, in
which event the Executive Committee may approve or disapprove such Preliminary
Presentation or Final Presentation, as appropriate, in accordance with
Subsection 4.4(m)(1) or (2). If at the time such Target is again presented to
the Executive Committee, such imbalance in Project Capital Contributions still
exists, then the Executive Committee, acting by and through the member or
alternate member thereof representing the GECC Member, may disapprove the
Preliminary Presentation or Final Presentation solely on account thereof. If a
Target is disapproved by the Executive Committee for a second time in accordance
with this Subsection 4.4(m)(3), then the Developer Member may pursue such Target
as an Independent Investment in accordance with Section 4.5 hereof.
(n) The Members acknowledge and agree that the Developer Member's
delivery of a Preliminary Presentation or a Final Presentation pursuant to this
Section 4.4 shall not constitute a guaranty that the actual results of any
Target or Project will correspond to the information contained in or
accompanying any such Preliminary Presentation or Final Presentation or a
guaranty of performance of any Project.
(o) Notwithstanding anything to the contrary contained in this
Agreement, the Executive Committee shall have no obligation to approve a
Preliminary Presentation or a Final Presentation for a Target if the then sum of
the GECC Member's Project Capital Contribution Balance plus its share of
unfunded Project Capital Contributions for all Targets and Projects, as
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applicable, for which Final Presentations have been approved by the Executive
Committee equals or exceeds $60,000,000.00.
(p) Notwithstanding anything to the contrary contained in this
Agreement, including this Section 4.4, the presentation of a Target by the
Developer Member to the Executive Committee for preliminary approval through a
Preliminary Presentation or for final approval through a Final Presentation
shall constitute the approval of such Preliminary Presentation or Final
Presentation, as applicable, by the Developer Member and the member or alternate
member of the Executive Committee appointed by the Developer Member must vote to
approve any such Preliminary Presentation or Final Presentation so submitted by
the Developer Member to the Executive Committee, including any revised or
updated Final Presentation presented by the Developer Member to the Executive
Committee for approval.
Section 4.5 Independent Investments.
(a) If the Executive Committee fails to approve the Preliminary
Presentation or the Final Presentation for a Target, or if the Executive
Committee's approval of the Final Presentation for a Target or Project, as
applicable, is deemed withdrawn and revoked in accordance with Section 4.4(g)
hereof and the Executive Committee fails to approve a revised and updated
proposed Final Presentation for such Target or Project in accordance with
Section 4.4(g) hereof, then the Developer Member or an Affiliate of the
Developer Member shall have the option, to be exercised within ninety (90)
calendar days after the Executive Committee's failure to approve the Preliminary
Presentation, the Final Presentation, or any revised and updated Final
Presentation, as applicable, to enter into a contract to acquire, or close, as
the case may be, and to develop or redevelop the Target or Project in question
free of any participation by the Company, the GECC Member or a Subsidiary so
long as such acquisition is made substantially on the same terms as those
submitted to the Executive Committee in such disapproved Preliminary
Presentation, Final Presentation or revised and updated Final Presentation, as
applicable (herein called an "Independent Investment").
(b) If the Developer Member or its Affiliate elects to exercise its
option under this Section 4.5 with respect to an Independent Investment, then
the Developer Member shall so notify (the "Election Notice") the GECC Member
within such ninety (90) calendar day period. Contemporaneously with its sending
the Election Notice to the GECC Member and as a condition to its undertaking the
Independent Investment, the Developer Member shall reimburse the Company for all
costs and expenses, if any, incurred by the Company or any of its Subsidiaries
with respect to such Independent Investment, including, if applicable in the
case of a Delayed Project Development, a return thereon at the Delayed Project
Return Rate.
(c) The rights of the Developer Member under this Section 4.5 to pursue
Independent Investments is subject at all times to the provisions of Section 4.6
hereof.
Section 4.6 Right of First Refusal; Certain Restrictions; Non-Compete.
(a) From the Effective Date until the earlier to occur of (i) the
Commitment Termination Date or (ii) the date on which the GECC Member has funded
all of its Project Capital Contributions, the Developer Member and SUSA, and
each of their respective Controlled
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Affiliates, shall offer the Company a right of first refusal to acquire or to
attempt to acquire and to develop or redevelop or attempt to develop or
redevelop, any and all Targets pursuant to the procedures set forth in Section
4.4 hereof, except: (i) Independent Investments, (ii) Targets to be acquired by
the Other Company and its subsidiaries, (iii) the self-storage facilities
identified on Schedule 4.6(d) to be acquired with proceeds received by the
Developer Member prior to the Effective Date from the sale or exchange of
properties intended to qualify as tax-free exchanges under Section 1031 of the
Code, including as a result of the formation of Storage Portfolio I LLC, a
limited liability company formed between the Developer Member and FREAM No. 18
LLC, (iv) the redevelopment, reconstruction or repair of self storage facilities
owned by the Developer Member or SUSA or any of their respective Controlled
Affiliates, that have been damaged or destroyed by casualty, (v) as may be
permitted in accordance with Section 4.6(d) hereof, (vi) Targets to be acquired
by Non-Equity Franchisees, and (vii) subject always to Section 4.6(f) hereof,
Targets to be acquired by Equity Franchisees. In addition, if after the
Effective Date the Developer Member or SUSA, or any of their respective
Controlled Affiliates, disposes of any Target or self-storage facility that it
holds other than through its interest in the Company, then the Developer Member,
SUSA or any such Controlled Affiliate may invest up to an aggregate of $40
million in each twelve (12) month period following the Effective Date (whether
in the form of cash and/or incurrence of acquisition indebtedness) in the
acquisition of Targets or self-storage facilities outside of the Company, but
only to the extent that such investment is made as part of one or more like-kind
exchanges under Section 1031 of the Code. For the avoidance of doubt and
notwithstanding anything to the contrary contained in clauses (vi) and (vii) of
the first sentence of this Section 4.6(a), the Developer Member and SUSA, and
each of their Controlled Affiliates, shall offer the Company a right of first
refusal, pursuant to the procedures set forth in Section 4.4 hereof, in any
equity investment opportunity to participate in any joint venture, partnership,
limited liability company or other investment vehicle that is not part of the
Storage USA or Budget-Storage USA franchise program or system for the purposes
of acquiring, developing, redeveloping or investing in Targets.
(b) In addition to the right of first refusal contained in Section
4.6(a) hereof and the non-competition provisions of Sections 4.6(c) and (d)
hereof, but subject always to the last sentence of this Section 4.6(b), until
the earlier of (i) the fifth (5th) anniversary of the Effective Date or (ii) the
date on which the GECC Member no longer owns any interest in the Company or the
Other Company, neither the Developer Member nor SUSA, nor any of their
respective Controlled Affiliates, shall own, operate, manage, franchise, grant a
license to use its trade name or otherwise have any direct or indirect material
economic interest in any Target that is within the Prohibited Radius of any
Project owned, directly or indirectly, by the Company or the Other Company
except as expressly permitted in this Section 4.6(b). If the Developer Member or
SUSA, or any of their respective Controlled Affiliates desires to undertake any
such competing activity, the Developer Member shall notify the GECC Member of
its intended action and the GECC Member shall either: (A) disapprove of the
action, in which case the Developer Member and SUSA, and their respective
Controlled Affiliates, shall not undertake it or (B) approve of the action in
which case the Developer Member or SUSA, or any of their respective Controlled
Affiliates, may undertake it. The restriction contained in the preceding
sentence shall not apply to the self-storage facilities identified on Schedule
4.6(d) hereto or which at the time they became owned, operated, managed or
franchised (i.e., acceptance of a franchise application) by the Developer Member
or SUSA, or any of their respective Controlled Affiliates, did not
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violate this Section 4.6(b) or constitute a breach of the right of the first
refusal obligation set forth in Section 4.6(a).
(c) In addition to the right of first refusal contained in Section
4.6(a) hereof and the non-competition provisions of Sections 4.6(b) and (d)
hereof, but subject always to the last sentence of this Section 4.6(c), until
the earlier of (i) the fifth (5th) anniversary of the Effective Date or (ii) the
date on which the GECC Member no longer owns any interest in the Company or the
Other Company, neither the Developer Member nor SUSA, nor any of their
respective Controlled Affiliates, shall own, operate, manage, franchise, grant a
license to use its trade name or otherwise have any direct or indirect material
economic interest in any self-storage facility that is not a Target within a one
(1) mile radius of any Project owned, directly or indirectly, by the Company or
the Other Company unless the Developer Member shall have first complied with
Section 4.6(c) of the Other Company LLC Agreement. The restriction contained in
the preceding sentence shall not apply to the self-storage facilities identified
on Schedule 4.6(d) hereto or which at the time they became owned, operated,
managed or franchised (i.e., acceptance of a franchise application) by the
Developer Member or SUSA, or any of their respective Controlled Affiliates, did
not violate this Section 4.6(c) or constitute a breach of the right of first
refusal obligation set forth in Section 4.6(a).
(d) In addition to the right of first refusal contained in Section
4.6(a) hereof and the non-competition provisions of Sections 4.6(b) and 4.6(c)
hereof, until the earlier of (i) the fifth (5th) anniversary of the Effective
Date or (ii) the date on which the GECC Member no longer owns any interest in
the Company or the Other Company, in the event the Developer Member or SUSA, or
any of their respective Controlled Affiliates, is involved in any merger,
reorganization, share exchange, recapitalization, restructuring, consolidation
or other business combination (whether or not such transaction constitutes a
Change in Control of the Developer Member or SUSA) that would result in the
Developer Member or SUSA, or any of their respective Controlled Affiliates, or
the surviving entity's owning, operating, managing, franchising, granting a
license to use its trade name or otherwise having any direct or indirect
material economic interest in any self-storage facility located within a one (1)
mile radius of any Project owned, directly or indirectly, by the Company, then,
notwithstanding any contrary provisions of this Agreement, the GECC Member, on
behalf of the Company, shall have the sole and exclusive right and authority to
cause the Company to dispose of the Project impacted by the proposed transaction
in accordance with Article 13 hereof unless the Other Company acquires the
Project in accordance with the Other Company LLC Agreement, such right to be
exercised (if at all) on behalf of the Company by the GECC Member without regard
to any time or other restrictions or limitations, including any restrictions set
forth in Section 13.3 hereof, that might otherwise be applicable to such right.
(e) In the event of a breach or threatened breach of Section 4.6(a),
Section 4.6(b), Section 4.6(c), Section 4.6(d) or Section 4.6(f) by the
Developer Member or SUSA, or any of their respective Controlled Affiliates, the
remedy at law in favor of the GECC Member will be inadequate, and the GECC
Member, in addition to all other rights and remedies which may be available,
shall accordingly have the right of specific performance in the event of any
breach, or injunction in the event of any threatened breach, of Section 4.6(a),
Section 4.6(b), Section 4.6(c), Section 4.6(d) or Section 4.6(f) hereof by the
Developer Member or SUSA, or any of their respective Controlled Affiliates.
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(f) From the Effective Date until the earliest to occur of (i) the
Commitment Termination Date, (ii) the date on which the GECC Member has funded
all of its Project Capital Contributions, or (iii) the date on which the GECC
Member and the Developer Member agree, if at all, as hereinafter provided with
respect to the terms and conditions on which the GECC Member may have a right to
participate in Franchise Equity Program Transactions, if the Developer Member or
SUSA, or any of their respective Controlled Affiliates (herein individually
called a "Transaction Party") desires to enter into a Franchise Equity Program
Transaction or any other franchise agreement with an Equity Franchisee or a
Non-Equity Franchisee, then such Transaction Party shall provide the GECC Member
with prior written notice of the terms and conditions on which such Transaction
Party intends to enter into such Franchise Equity Program Transaction or any
other transaction with an Equity Franchisee or a Non-Equity Franchisee. The GECC
Member has expressed an interest that it or GECC be permitted to participate
with each Transaction Party in Franchise Equity Program Transactions. After the
Effective Date, the GECC Member and the Developer Member shall attempt to agree
on the terms and conditions of any such participation by the GECC Member or
GECC, and in the event the GECC Member and the Developer Member agree, if at
all, on such terms and conditions, then such terms and conditions, as so agreed,
shall apply to any or all Franchise Equity Program Transactions agreed by such
parties to be covered under such terms and conditions entered into by a
Transaction Party after the date of such agreement; provided, however, any such
participation by the GECC Member or GECC shall not be treated in any way as a
Project Capital Contribution by the GECC Member and shall not in any way reduce
the obligation of the GECC Member to make Capital Contributions under this
Agreement. The parties anticipate that if such an agreement is reached between
the GECC Member and the Developer Member regarding participation in such
Franchise Equity Program Transactions, then any such agreement will be evidenced
by a separate agreement executed among the applicable parties.
Section 4.7 Officers. The Manager, with the approval of the Executive
Committee, may designate one or more Persons to be officers of the Company
("Officers"), and any officer so designated shall have such title, authorities
and duties, as the Manager, with the Executive Committee's approval, may
delegate to them; however, no such Officer shall be an employee of the Company
or any Subsidiary and shall not receive any compensation or other remuneration
from the Company or any Subsidiary. Any Officer may be removed as such, either
with or without cause, by the Manager, with the approval of the Executive
Committee.
Section 4.8 Removal of Manager.
(a) The Manager may be removed by the GECC Member as provided herein under
the following circumstances (a "Removal Event"):
(1) Developer Member commits material breach of this Agreement (other
than Cause, an Additional Capital Contribution Default or a Project Capital
Contribution Default) and such breach is not cured within ten (10) days after
written notice by the GECC Member to the Developer Member, or if such breach
does not involve the failure to pay money and cannot reasonably be cured within
such ten (10) day period, such breach is not cured within thirty (30) days after
such written notice;
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(2) Cause exists or occurs with respect to the Developer Member or
SUSA;
(3) the occurrence or existence of an Additional Capital Contribution
Default Event with respect to the Developer Member;
(4) the occurrence or existence of a Project Capital Contribution
Default with respect to the Developer Member; or
(5) the occurrence or existence of a "Removal Event" under the Other
Company LLC Agreement.
(b) Upon the occurrence of a Removal Event, the GECC Member may remove the
Developer Member as the Manager, in which event (i) the GECC Member may appoint
itself, a GECC Affiliate or a third party as Manager, (ii) if the Developer
Member is removed as Manager, the right of the Developer Member to receive
distributions of Available Cash, as set forth in Section 8.2 hereof, shall be
modified as set forth in Schedule 6.3(b) hereto, and (iii) if the Developer
Member is removed as Manager and its right to receive distributions of Available
Cash is reduced in accordance with the preceding clause, the right of the GECC
Member to receive distributions of Available Cash shall be correspondingly
increased, or the GECC Member may admit any Person as a Member without the
consent or approval of the Developer Member and may assign to such new Member
all or part of the GECC Member's increased distribution right; however, the
replacement Manager is not required to be a Member and may be paid such
reasonable compensation by the Company for its services as the GECC Member shall
determine.
(c) Upon the occurrence of a Removal Event and if the Developer Member is
removed as Manager in accordance with the preceding paragraph, then in addition
and at the option of the GECC Member, any and all agreements between the Company
(or any of its Subsidiaries) and the Developer Member or SUSA, or any of their
respective Affiliates, including any Development Agreements, Construction
Contracts and the Property Management Agreement, shall terminate without payment
of any fees, penalties or other compensation except for such amounts as may have
accrued and remain unpaid as of the date of any such termination; however, the
Property Management Agreement provides for a continuing license to operate the
Projects under the trade name "Storage USA" for a royalty-free transition period
not to exceed 180 days, which license shall survive any termination of the
Property Management Agreement. If the Company continues the use of such name
after the expiration of such transition period, then, in addition to all other
rights and remedies available at law or in equity to the Developer Member for
such use, the Company shall pay to the Developer Member, as a royalty, a license
fee equal to five percent (5%) of the Operating Revenues derived from any
Projects that continue to be operated under the trade name "Storage USA" until
the use of such trade name ceases. In addition, the removal of the Developer
Member as Manager and termination of any Construction Contracts shall not waive,
alter or discharge the continuing obligations of the Developer Member under
Section 4.13(c) hereof, and notwithstanding anything to the contrary contained
in this Agreement, following the removal of the Developer Member as Manager, the
GECC Member shall have the sole and exclusive authority on behalf of the Company
to make all determinations with respect to the Property Management Agreement,
any Development Agreement and any
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Construction Contract (if such Agreements are not terminated as hereinabove
provided) and any new property management, development and construction contract
that the GECC Member may enter into on behalf of the Company following such
removal. Notwithstanding anything to the contrary contained in this Agreement,
after termination of the Property Management Agreement, the GECC Member shall
have the sole and exclusive authority on behalf of the Company to appoint and
employ any self-storage operator to provide asset and property management
services to the Company and its Subsidiaries for the Projects and pay such
operator market rate compensation.
Section 4.9 No Reimbursement of Expenses. Except as otherwise expressly
provided elsewhere in this Agreement, the Property Management Agreement, any
Development Agreement or any Construction Contract, neither the Manager nor any
Member, including any of their respective Affiliates, shall receive any
reimbursement for their out-of-pocket expenses incurred by them in conjunction
with the business and affairs of the Company or any of its Subsidiaries.
Section 4.10 Compensation of Members and Manager. Except as otherwise
expressly provided in this Agreement, the Property Management Agreement, any
Development Agreement or any Construction Contract, no compensatory payment
shall be made by the Company to any Member or Manager for the services to the
Company of such Member or Manager or any member or employee of such Member or
Manager.
Section 4.11 Transactions with Affiliates.
(a) General. Except as expressly provided in this Agreement, the
Property Management Agreement, any Development Agreement or any Construction
Contract, when any service or activity to be performed on behalf of the Company
is performed by an Affiliate of a Member, the fee payable for such service or
activity shall not exceed the fee which would be payable by the Company to a
third party of comparable standing providing the same services not Affiliated
with such Member.
(b) Termination of Agreements with Affiliates. If the Developer Member
is removed as Manager as a result of the occurrence of a Removal Event, then the
Company may terminate any and all agreements between the Company or any
Subsidiary with Developer Member or SUSA, or any of their respective Affiliates
without payment of any fees, penalties or other compensation except for such
amounts as may have accrued and remain unpaid as of the date of any such
termination, and all such agreements must contain a provision that allows for
the exercise of the right of termination under this Section 4.11(b).
Notwithstanding any provision of this Agreement to the contrary, the GECC Member
shall have the sole and exclusive authority to enforce this provision on behalf
of the Company.
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Section 4.12 Property and Asset Management Agreement; Asset Disposition Fee.
(a) The Company shall enter into a management and service agreement
substantially in the form attached hereto as Schedule 4.12(a) (the "Property
Management Agreement") with the Developer Member or a Controlled Affiliate of
the Developer Member acceptable to the GECC Member (the "Property Manager"),
under which the Property Manager shall provide both asset management and
property management services for all Projects owned by the Subsidiaries for an
asset and property management fee equal to six percent (6%) of each Project's
Operating Revenues (payable monthly in arrears). In addition, the Property
Management Agreement shall provide that the Company shall pay the Property
Manager $18,750.00 annually (Inflation Adjusted) as an annual expense
reimbursement, such reimbursement to be paid in four (4) equal quarterly
installments.
(b) The Company shall pay the GECC Member as an annual expense
reimbursement in connection with its providing its representatives on the
Executive Committee and their review and evaluation of Preliminary Presentations
and Final Presentations for Targets an amount equal to $100,000.00 annually
(Inflation Adjusted), such payment to be made to the GECC Member in four (4)
quarterly installments.
(c) If the Developer Member or SUSA, or any of their respective
Affiliates, is selected by the Executive Committee as the selling agent on
behalf of the Company after a competitive bidding process and if neither the
Developer Member nor SUSA, nor any of their respective Affiliates acquires the
Project, then upon the closing of the sale of such Project, the Company or its
Subsidiary shall pay the Developer Member or SUSA, or any such Affiliate, as
applicable, an asset disposition fee (the "Disposition Fee") equal to one
percent (1%) of the total sales price received by the Company or such Subsidiary
in connection with the sale or other disposition of the Project; provided,
however, neither the Company nor any Subsidiary shall be obligated to pay the
Developer Member or SUSA, or any such Affiliate, as applicable, any fee or other
compensation in the event such sale or other disposition fails to close for any
reason.
Section 4.13 Development and Construction Agreements.
(a) Development Agreements. The Company or its Subsidiaries shall
enter into development agreements (each a "Development Agreement") with the
Developer Member or a Controlled Affiliate of the Developer Member acceptable to
the GECC Member (the "Developer") under which the Developer shall provide
development services to the Company and its Subsidiaries in connection with the
development and construction of each Project for a development fee (the
"Developer Fee") equal to three percent (3%) of total direct "hard costs" (i.e.,
the cost of land, building and other improvements but excluding all "soft" costs
such as professional fees and financing charges). Each Development Agreement
will be substantially in the form of Schedule 4.13(a) hereto. The Developer Fee
shall be payable pro-ratably over the course of the construction period, with
ten percent (10%) of such fee retained until the issuance of the final
certificate of occupancy at completion.
(b) Construction Contracts. The Company or its Subsidiaries shall
enter into construction contracts (each a "Construction Contract") with the
Developer Member or a Controlled Affiliate of the Developer Member acceptable to
the GECC Member (the "General
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Contractor") under which the General Contractor shall serve as general
contractor for the construction and completion of each Project for a
contractor's fee (the "General Contractor Fee") equal to five percent (5%) of
total direct "hard costs" of construction (i.e., the cost of building and other
improvements but excluding land costs and all "soft" costs such as professional
fees and financing charges). Each Construction Contract will be substantially in
the form of Schedule 4.13(b) hereto. The General Contractor Fee shall be payable
pro-ratably over the course of the construction period, with ten percent (10%)
of such fee retained until the issuance of the final certificate of occupancy at
completion. The construction contract pricing will be "cost plus with guaranteed
maximum" and the construction contract shall be on such other terms and
conditions, including the scope of work and General Contractor responsibility,
as may be approved by the GECC Member and Manager.
(c) Cost Overruns. The Developer Member shall promptly pay out of its
own funds all Cost Overruns, including Credited Cost Overruns, incurred by the
Company or any Subsidiary in the completion of any and all Projects and, if the
General Contractor fails to complete any such Project, the Developer Member
shall, at its sole cost and expense, cause such Project to be completed
substantially in accordance with the approved Construction Contract and Plans
and Specifications therefor. Notwithstanding any provision of this Agreement to
the contrary, the GECC Member shall have the sole right and authority to
terminate each Construction Contract and replace the General Contractor with
another contractor satisfactory to the GECC Member upon material breach or other
material non-performance by such General Contractor or upon the Developer
Member's removal as Manager on account of the occurrence or existence of Cause
with respect to the Developer Member. In addition, the Developer Member shall
immediately pay out of its own funds any additional costs incurred by the
Company or its Subsidiary in the completion of the Project resulting from the
termination and replacement of the General Contractor and the Developer Member's
removal as Manager on account of the occurrence or existence of Cause with
respect to the Developer Member, including the difference (if any) between the
Cost of the Work for the applicable Project under the original Construction
Contract therefor and the total construction cost of the Project under any new
construction contract for the completion of the Project. Payments made by the
Developer Member on account of Credited Cost Overruns shall be treated as
Credited Cost Overrun Contributions; however, any and all other payments made by
the Developer Member in accordance with this Section 4.13(c) shall not be
credited to the Developer Member's Credited Cost Overrun Contribution Balance
and shall not be considered either a Project Capital Contribution or an
Additional Capital Contribution for purposes of distributions or otherwise. A
"Cost Overrun Default" shall have occurred and exist if the Developer Member
defaults in any of its obligations under this Section 4.13(c) and such default
has continued for ten (10) Business Days after written notice thereof is given
by the GECC Member to the Developer Member.
(d) Change Orders. Neither the Company nor any Subsidiary shall enter
into any Change Order except in accordance with this Section 4.13(d):
(1) The Developer Member shall present to the Executive Committee
for its review and approval any proposed Change Order that is required by reason
of Undisclosed Site Conditions or changes in any Requirement of a Governmental
Authority occurring after the date on which the Final Presentation for such
Project was approved by the Executive Committee and that would result in an
increase in the Cost of the Work under the Construction Contract
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(determined as if any contingency amount included in such Construction Contract
had been previously exhausted) or otherwise increase the costs and expenses to
be incurred in connection with the development of the Project. Any such Change
Order will be approved by the Executive Committee in a timely manner, but in any
event within ten (10) Business Days, so long as (A) the Developer Member assumes
and agrees to pay, as a Credited Cost Overrun by the Developer Member's Credited
Cost Overrun Contribution, any Cost Overruns resulting from such Change Order,
(B) the Change Order will not materially reduce the quality of the Project or
materially adversely affect the layout, design or aesthetics of the Project, (C)
such Change Order is in fact required by reason of Undisclosed Site Conditions
or a change in the Requirement of a Governmental Authority occurring after the
date on which the Final Presentation for such Project was approved by the
Executive committee, and (D) the Change Order would not result in such Project's
no longer conforming with the Approved Investment Parameters. The Developer
Member shall provide the Executive Committee with such information as any member
or alternate member of the Executive Committee may reasonably request in order
to permit the Executive Committee to verify such Change Order's satisfaction of
the requirements of this subparagraph. In the event a Change Order described in
this Section 4.13(d)(1) is not approved by the Executive Committee any Cost
Overrun resulting therefrom shall not constitute a Credited Cost Overrun.
(2) The Developer Member shall present to the Executive Committee
for its review and approval any proposed Change Order that is required by reason
of a change in the scope of work for such Project, as set forth in the approved
Final Presentation for such Project, including Project upgrades or downgrades.
The Executive Committee shall not be obligated to approve any such Change Order.
The Developer Member shall provide the Executive Committee with such information
as any member or alternate member of the Executive Committee may reasonably
request in order to permit the Executive Committee to evaluate such requested
Change Order. Any such Change Order approved by the Executive Committee in
accordance with this subparagraph shall increase or decrease, as the case may
be, the Total Project Costs for such Project as set forth in the approved Final
Presentation for such Project and, to the extent any such approved Change Order
results in an increase in the Total Project Costs for such Project, the Members
shall fund such additional costs by additional Project Capital Contributions,
seventy-five percent (75%) to be contributed by the GECC Member and twenty-five
percent (25%) to be contributed by the Developer Member.
(3) Not less than ten (10) Business Days in advance of
implementing such Change Order, the Developer Member shall advise the Executive
Committee in writing of any other proposed Change Order, including any Change
Order attributable to an error or omission in the Plans and Specifications, that
the Developer Member proposes the Company or a Subsidiary make and that
individually or when combined with all previous Change Orders for such Project
would result in an increase or decrease in the Cost of the Work for such Project
by an amount equal to or greater than one percent (1%) of the Total Project
Costs for such Project as set forth in the approved Project Development Budget
for such Project. So long as (A) the Developer Member assumes and agrees to pay,
as a Cost Overrun, but not as a Credited Cost Overrun, any such Cost Overruns
resulting from such Change Order, (B) the Change Order will not materially
reduce the quality of the Project or materially adversely affect the layout,
design or aesthetics of the Project, (C) the Change Order will not materially
adversely alter or change the approved Plans and Specifications for such
Project, (D) the Change Order would not result in
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such Project's no longer conforming with the Approved Investment Parameters, and
(E) the Developer Member shall have provided the Executive Committee with such
information as any member or alternate member of the Executive Committee may
have reasonably requested in order to permit the Executive Committee to verify
such Change Order's satisfaction of the requirements of this subparagraph, the
Developer Member may, on behalf of the Company, approve any such Change Order.
(4) Except as otherwise provided in Subsection 4.13(d)(5) hereof,
the Company or its Subsidiary shall be entitled to full credit for any cost
reduction attributable to any Change Order (A) against the Total Project Costs
for a Project, (B) in the Guaranteed Maximum Price payable to the General
Contractor under the Construction Contract for such Project and (C) in the
Developer Fee and the General Contractor Fee payable under the Development
Agreement and the Construction Contract, respectively, for such Project. The
amount of the reduction in the Guaranteed Maximum Price under the Construction
Contract will equal 100% of the actual net decrease in the amount payable by the
General Contractor to its subcontractors, vendors, suppliers and laborers
attributable to such Change Order; the amount of the reduction in the Developer
Fee payable to the Developer under the Development Agreement and in the General
Contractor Fee payable to the General Contractor under the Construction Contract
shall equal three percent (3%) and five percent (5%), respectively, of the
reduction in the Guaranteed Maximum Price under the Construction Contract; and
the amount of the reduction in Total Project Costs for such Project will equal
the sum of such reductions in such Guaranteed Maximum Price, the Developer Fee
and the General Contractor Fee.
(5) Notwithstanding anything to the contrary in Subsection
4.13(d)(4) hereof, in the event after the approval of a Change Order in
accordance with Subsection 4.13(d)(1) or (3) another Change Order is approved
that reduces the Cost Overrun that would otherwise have been payable by the
Developer Member with respect to such previous Change Order, the Developer
Member shall be entitled to full credit for any cost reduction attributable to
any such subsequent Change Order.
Section 4.14 Trade Name License. Except as otherwise provided in Section
4.8(c) hereof, each Project will be operated under the "Storage USA" trade name
on a royalty-free basis pursuant to the rights granted under the Property
Management Agreement. In no event shall the name "General Electric", "GE", "GE
Capital" or other GECC Affiliate trade-name or derivative be used in connection
with any Project without the prior express approval of the GECC Member.
Section 4.15 Indemnification; Reimbursement of Expenses; Insurance. To the
fullest extent permitted by the Act: (a) the Company shall, and does hereby,
indemnify, hold harmless and defend each member and alternate member of the
Executive Committee and each Manager who was, is or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
("Proceeding"), any appeal therein, or any inquiry or investigation preliminary
thereto, solely by reason of the fact that he, she or it is or was a member or
alternate member of the Executive Committee or a Manager and was acting within
scope of duties or under the authority of the Members; (b) the Company shall pay
or reimburse each member and alternate member of the Executive Committee and a
Manager for expenses incurred by him, her or it (1) in advance of the final
disposition of a Proceeding to which such member or alternate member of the
Executive Committee or a Manager was, is or is threatened to be made a party,
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and (2) in connection with his, her or its (and in the case of a Manager, any of
its officers or employees) appearance as a witness or other participation in any
Proceeding. The Company, by adoption of a resolution of the Members, may
indemnify and advance expenses to an Officer, employee or agent of the Company
to the same extent and subject to the same conditions under which it may
indemnify and advance expenses to members and alternate members of the Executive
Committee and Managers under the preceding sentence. The provisions of this
Section 4.15 shall not be exclusive of any other right under any law, provision
of the Certificate or this Agreement, or otherwise. Notwithstanding the
foregoing, this indemnity shall not apply to actions constituting gross
negligence, willful misconduct or bad faith, or involving a breach of this
Agreement, but shall apply to actions constituting simple negligence. The
Company may purchase and maintain insurance to protect itself, the members and
alternate members of the Executive Committee, the Manager and any Officer,
employee or agent of the Company, whether or not the Company would have the
power to indemnify such Person under this Section 4.15. This indemnification
obligation shall be limited to the assets of Company and no Member shall be
required to make a Capital Contribution in respect thereof. Nothing contained in
this Section 4.15 is intended to obligate the Company or its Subsidiaries to
provide liability or other insurance on behalf of the Property Manager.
Section 4.16 Conflicts of Interest.
(a) The GECC Member and each of its Affiliates may engage in and
possess interests in other business ventures of any and every type and
description, independently or with others, including ones in competition with
the Company and its Subsidiaries, with no obligation to offer to the Company or
any other Member the right to participate therein or to account therefor.
Without limiting the foregoing, neither the GECC Member nor any Affiliate of the
GECC Member shall be prevented or restricted in any way from owning, financing,
managing, advising, franchising or leasing any self-storage property or
management company, even if such activity is in direct competition with the
Company and its Subsidiaries.
(b) Except as otherwise expressly provided to the contrary in this
Agreement, the Developer Member and each of its Affiliates may engage in and
possess interests in other business ventures of any and every type and
description, independently or with others, including ones in competition with
the Company and its Subsidiaries, with no obligation to offer to the Company or
any other Member the right to participate therein or to account therefor.
Without limiting the foregoing and except as otherwise expressly provided to the
contrary in this Agreement, neither the Developer Member nor any Affiliate of
the Developer Member shall be prevented or restricted in any way from owning,
financing, managing, advising, franchising or leasing any self-storage property
or management company, even if such activity is in direct competition with the
Company and its Subsidiaries.
(c) The Company may transact business with any Member, Manager or Of-
ficer, or any Affiliate of any of them, provided the terms of those transactions
are no less favorable than those the Company could obtain from third parties not
Affiliated with any Member, the Manager or any Officer.
Section 4.l7 Integrity Policy. The Manager will use its reasonable efforts
to cause the Company and each of the Subsidiaries to conduct their respective
businesses in accordance with
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the Company's Integrity Policy and all applicable Requirements of Governmental
Authorities having jurisdiction of the Company and the Subsidiaries and their
respective properties and assets.
Section 4.18 No Employees. Neither the Company nor its Subsidiaries will
have any employees and members and alternate members of the Executive Committee
shall be employees or other representatives of the Member which appointed them.
Any Persons providing asset or property management services for the Company or
any Subsidiary shall be employees of the Property Manager and not of the Company
or its Subsidiaries.
Section 4.19 Year 2000 Compliant. Manager will use reasonable efforts to
cause each Project and the Company's and each Subsidiary's operations to be Year
2000 Compliant in all material respects. In addition and on behalf of the
Company, Manager will make on a timely basis written inquiry of each of the
Company's key suppliers, vendors, and customers as to whether such Persons will,
on a timely basis, be Year 2000 Compliant in all material respects. For purposes
hereof, "key suppliers, vendors and customers" refers to those suppliers,
vendors, and customers of the Company, a Subsidiary or a Project whose business
failure would, with reasonable probability, result in a material adverse change
in the business, properties, or condition (financial or otherwise) of the
Company, a Subsidiary or a Project. The GECC Member and its agents,
representatives and employees may, upon reasonable prior notice to the Manager,
enter the Manager's offices and each Project and conduct inspections relating to
Year 2000 Compliance as the GECC Member may require, from time to time; however,
to the extent the GECC Member engages third party consultants to conduct any
testing of a Project's systems, the GECC Member shall require such consultants
to conduct the tests at a time designed to minimize disruption of the Project's
operations during normal business hours.
Section 4.20 Insurance. The Manager shall cause the Company and the
Subsidiaries to maintain insurance in accordance with the Insurance Program.
Section 4.21 Selection of Company Counsel.
(a) The appointment of any law firm as general counsel to the Company
and its Subsidiaries is a Major Decision to be decided by the Executive
Committee.
(b) Notwithstanding Section 4.21(a) hereof, the Manager shall have the
authority to appoint counsel to represent the Company and its Subsidiaries with
respect to (i) the litigation described in clauses (i) through (iv) of paragraph
(12) of the definition of "Major Decision" and (ii) the acquisition, development
or redevelopment, financing and disposition of a Project (but not substantially
all of the Projects).
(c) The Members hereby consent to the appointment of counsel to
represent the Company or any of its Subsidiaries by the Company's insurer(s) so
long as the amount or amounts claimed do not exceed the limits of coverage under
the Company's policies and the insurer(s) has assumed defense of the claim
without a reservation of rights; provided, however, if the amount claimed in any
such action exceeds $100,000, either Member may require the Executive Committee
to engage separate counsel to represent the Company in addition to counsel
appointed by the insurer(s).
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(d) If the Executive Committee cannot agree on the selection of a law
firm to serve as general counsel to the Company in accordance with Section
4.21(a) hereof or on the selection of a law firm to represent the Company or a
Subsidiary with respect to the litigation described in Section 4.21(c) hereof or
otherwise, then the Member proposing the engagement of counsel shall submit the
names of no more than five (5) nor less than three (3) proposed law firms to the
other Member and the other Member shall either select one of such firms which
shall be deemed accepted or submit its proposed list from which the original
proposing Member shall select counsel to be engaged.
(e) Notwithstanding the foregoing, the Developer Member shall have
authority to select counsel to represent the Company with respect to the matters
within the sole authority of the Developer Member pursuant to Section 7.4 hereof
and the GECC Member shall have authority to select counsel to represent the
Company with respect to the matters within the sole authority of the GECC Member
pursuant to the last sentence of Section 4.2(a) hereof.
ARTICLE 5
ACCOUNTING AND REPORTING
------------------------
Section 5.1 Fiscal Year, Accounts, Reports.
(a) The Fiscal Year of the Company and each Subsidiary shall be the
calendar year.
(b) The books of account of the Company and each Subsidiary shall be
kept and maintained by the Manager at the Manager's expense on the accrual basis
in accordance with generally accepted accounting principles applied on a
consistent basis applicable to commercial real estate, as selected by the
Executive Committee. The books of account shall be kept at the principal place
of business of the Company, and shall at all times be available for inspection
by the Members.
(c) The Manager shall, at the Manager's expense, furnish to the
Members (1) on or before the 20th day of each month, an unaudited statement
setting forth and describing in reasonable detail the receipts and expenditures
of each Subsidiary, and, on a consolidated basis, the Company during the
preceding month and comparing the results of operations of each Subsidiary and
the Company for such month and for the year to date to the appropriate Project
Operating Budget and the Operating Budget, including a variance report
describing the reason for any material variances and a current occupancy report
(both physical and economic), (2) on or before 20 days after the end of each
quarter, an unaudited balance sheet of each Subsidiary and, on a consolidated
basis, the Company dated as of the end of such quarter and an unaudited
statement setting forth and describing in reasonable detail the receipts and
expenditures of each Subsidiary, and, on a consolidated basis, the Company
during the preceding quarter and comparing the results of operations of each
Subsidiary and the Company for such quarter and for the year to date to the
appropriate Project Operating Budget and the Operating Budget, including a
variance report describing the reason for any material variances and a current
occupancy report (both physical and economic), a statement of the Company's
Available Cash for the preceding quarter, and a construction job cost report for
each Project, the Final Completion Date for which has not occurred, (3) on or
before 60 days after the end of each Fiscal Year, a balance sheet of the
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Company dated as of the end of such Fiscal Year, a statement of the Company's
cash flows for such Fiscal Year, a statement of the Members' Capital Accounts,
Additional Capital Contribution Balances, Project Capital Contribution Balances,
and Credited Cost Overrun Contribution Balance as of the end of such Fiscal
Year, and a statement setting forth the Profits and Losses of the Company for
such Fiscal Year, all as audited by the Auditor, and an unaudited statement of
the Company's Available Cash for such Fiscal Year, and an unaudited Fiscal Year
end balance sheet, Profit and Loss statement, and a statement of Net Cash Flow,
Net Operating Income and Capital Proceeds for each Subsidiary and, on a
consolidated basis, the Company for such Fiscal Year, and (4) from time to time,
all other information relating to each Subsidiary and the Company and its
business, affairs and assets reasonably requested by any Member. Notwithstanding
the foregoing, the cost of the annual audit performed by the Auditor shall be
made at the Company's expense.
(d) The Manager shall, at the Manager's expense, furnish to the GECC
Member, within thirty (30) days after the first anniversary of the Effective
Date, such information as may be reasonably required by the GECC Member to
permit it to determine whether the Performance Benchmarks have been satisfied as
of the first anniversary of the Effective Date.
(e) Each Member, at its expense, may at all reasonable times during
usual business hours audit, examine, and make copies of or extracts from the
books of account, records, files, and bank statements of each Subsidiary and the
Company. Such right may be exercised by any Member, or by its designated agents
or employees.
Section 5.2 Bank Accounts. Subject always to Section 4.2(a) hereof, the
Manager shall open and maintain (in the name of the Company or its Subsidiaries,
as appropriate) a special bank account or accounts in a bank or savings and loan
association, the deposits of which are insured, up to the applicable limits, by
an agency of the United States government, in which shall be deposited all funds
of the Company and its Subsidiaries. Withdrawals therefrom shall be made
pursuant to the Property Management Agreement or upon the signatures of such
Persons as the Manager shall designate with the approval of the Executive
Committee.
ARTICLE 6
CAPITAL CONTRIBUTIONS
---------------------
Section 6.1 Project Capital Contributions.
(a) Upon the approval by the Executive Committee of the Final
Presentation for a Target and contemporaneously with the acquisition of such
Project by the Company or a Subsidiary, unless and until such approval has been
withdrawn or revoked by the Executive Committee or deemed withdrawn or revoked
in accordance with Section 4.4(f) hereof, the Members shall make Capital
Contributions (the "Project Capital Contributions") for that Subsidiary and
Project. Project Capital Contributions will be made on an as needed basis as
required to pay Equity Formation Costs in accordance with Section 2.10 hereof,
earnest money deposits on an as-needed basis in accordance with Section 4.4(e)
hereof and otherwise, as Projects are acquired and developed by the Company
through a Subsidiary. The proceeds thereof shall, in turn, be paid by the
Company on account of Equity Formation Costs or earnest
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money deposits or be contributed to the applicable Subsidiary to consummate the
acquisition and to pay the Total Project Costs for such Project.
(b) The total Project Capital Contributions for each Project will
equal the Total Project Costs for such Project, as set forth in the Project
Development Budget initially approved by the Executive Committee for such
Project, less the principal amount of the financing for such Project, all as
approved by the Executive Committee in the Final Presentation for such Project.
The Developer Member shall contribute twenty-five percent (25%) and the GECC
Member shall contribute seventy-five percent (75%) of all Project Capital
Contributions, except (i) in the case of Project Capital Contributions made to
pay Equity Formation Costs, which Project Capital Contributions shall be made
initially in the percentages set forth in Section 2.10 hereof and (ii) in the
case of Project Capital Contributions made to pay Pursuit Costs with respect to
Abandoned Targets, which Project Capital Contributions shall be made in the
percentages set forth in Section 4.4(l) hereof. Notwithstanding anything to the
contrary contained in this Agreement, the Developer Member shall not be
obligated to contribute more than Twenty Million Dollars ($20,000,000), in the
aggregate, in Project Capital Contributions and the GECC Member shall not be
obligated to contribute more than Sixty Million Dollars ($60,000,000), in the
aggregate, in Project Capital Contributions. The obligation of the Members to
make Project Capital Contributions is not a "revolving" commitment and the
repayment or return of Project Capital Contributions to the Members shall not
create any obligation or commitment to readvance or recontribute any such
Project Capital Contributions so repaid or returned.
(c) Subject to the limitation contained in the last sentence of
Section 6.1(b), the Manager may call for Project Capital Contributions from the
Members from time to time in accordance with Section 6.1(a). Any call for
Project Capital Contributions will be made by written notice (a "Drawdown
Notice") given by the Manager to the Members. The Drawdown Notice will specify
(i) each Project to which it relates, (ii) the specific purposes for which the
Project Capital Contributions are being requested, which will correspond to the
line items of such Project's approved Project Development Budget, (iii) the
amount of the Project Capital Contributions being requested (and the aggregate
amount of all Project Capital Contributions previously funded for such Project),
(iv) any deviations from such Project's approved Project Development Budget, and
(v) the date by which the requested Project Capital Contributions are to be
funded by the Members, which must be at least ten (10) Business Days after the
date the Drawdown Notice is given unless the GECC Member agrees to a shorter
period of time. Upon the request of the GECC Member, the Manager shall promptly
deliver to the GECC Member copies of all receipts, invoices, and other material
to substantiate the amounts, payees, and purposes for which a Project Capital
Contribution is being requested. It is anticipated that Drawdown Notices will be
given no less frequently than monthly. Notwithstanding anything to the contrary
contained herein, the GECC Member shall have no obligation to make any Project
Capital Contributions (1) after the Commitment Termination Date except for any
Project for which a Final Presentation was approved by the Executive Committee
on or prior to the Commitment Termination Date, or (2) with respect to any
Project which has not been acquired by a Subsidiary on or before the second
(2nd) anniversary of the Effective Date unless a later date has been expressly
approved by the Executive Committee, or (3) after the Bankruptcy of the
Developer Member or SUSA.
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(d) A "Project Capital Contribution Default" shall have occurred if
either Member fails to make any Project Capital Contribution required to be made
by it under this Agreement by the date due if such failure continues for ten
(10) Business Days after written notice thereof is given by the Manager or any
Member to the Member which has failed to make such Project Capital Contribution.
Section 6.2 Additional Capital Contributions.
(a) If at any time or from time to time after the Effective Date,
additional funds (a "Shortfall") are required (a) for the reasonable working
capital needs of the Company for both operating and capital needs, and (b) for
all other costs and expenses (whether operating or capital in nature) in
connection with the operation of the Projects or in connection with the
operations of the Subsidiaries or the Company, in each case as determined by the
Executive Committee, and the Company is unable to obtain or the Executive
Committee has determined not to seek third party debt financing, the Executive
Committee may call (but shall not be obligated to) for Additional Capital
Contributions in the amount of such Shortfall and the Members shall make such
Additional Capital Contributions as called for by the Executive Committee.
Notwithstanding the foregoing, to the extent that an Annual Business Plan
approved by the Executive Committee contemplates that the Members will make
Additional Capital Contributions to pay such Shortfall or if the Shortfall is
required to pay costs and expenses of the Company or a Subsidiary described in
the definition of "Non-discretionary Additional Capital Contributions" that in
the good faith judgment of a Member are needed by the Company, then the Members
shall make Additional Capital Contributions in the amount of such Shortfall on
the request of either the Manager or any Member. Capital items for which
reserves have been established pursuant to the approved Annual Business Plan
will be funded first from the reserves therefor before any calls are made for
Additional Capital Contributions to pay for such capital items. Notwithstanding
anything to the contrary contained in this Agreement, Additional Capital
Contributions shall not be used to pay Pursuit Costs, Cost Overruns (which are
the responsibility of the Developer Member) or any costs and expenses included
within the Project Development Costs for a Project (other than Project Permitted
Excess Construction Interest), but Non-Discretionary Additional Capital
Contributions may be used to pay Project Permitted Excess Construction Interest
and the cost to carry a Project to break-even after such Project's Final
Completion Date. Each additional Capital Contribution made under this Section
6.2 is an "Additional Capital Contribution" and also either a "Discretionary
Additional Capital Contribution" or a "Non-Discretionary Additional Capital
Contribution".
(b) Each Member shall make Discretionary Additional Capital
Contributions to the Company in the following proportions: 75% by the GECC
Member and 25% by the Developer Member; and each Member shall make
Non-discretionary Additional Capital Contributions to the Company in the
following proportions: 50% by the GECC Member and 50% by the Developer Member.
Any call for Additional Capital Contributions will be made by written notice
given by the Manager or a Member, as applicable, to the Members, which notice
will specify (i) the amount of the Shortfall, (ii) the specific purposes for
which the Additional Capital Contributions are being requested, including, if
applicable the name of the particular Project or Projects, (iii) whether the
Additional Capital Contribution is a Discretionary Additional Capital
Contribution or a Non-discretionary Additional Capital Contribution, (iv) each
Member's required contribution amount, and (v) the date by which the requested
Additional
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Capital Contributions are to be funded by the Members, which must be at least
ten (10) Business Days after the date of such notice is given unless the GECC
Member agrees to a shorter period of time.
(c) An "Additional Capital Contribution Default" shall have occurred
if either Member fails to make any Additional Capital Contribution required to
be made by it under this Agreement by the date due if such failure continues for
ten (10) Business Days after written notice thereof is given by the Manager or
any Member to the Member which has failed to make such Additional Capital
Contribution.
Section 6.3 Failure to Make Additional Capital Contributions.
(a) A Member which fails to timely contribute all or any portion of
any required Additional Capital Contribution shall be considered a "Delinquent
Member." As its sole and exclusive remedy, except in the case of an Additional
Capital Contribution Default Event, the other Member (the "Non-Delinquent
Member") shall, upon notice to a Delinquent Member, exercise either of the
following rights or remedies:
(1) request a refund of its share of such requested Additional
Capital Contribution within ten (10) days after the default by the Delinquent
Member, in which case the Company shall immediately refund such amount to the
Non-Delinquent Member; or
(2) cause the Company to retain its share of such requested
Additional Capital Contribution and may elect to contribute to the Company the
Delinquent Member's share of such requested Additional Capital Contribution and
in any such case the Non-Delinquent Member shall designate all of such
Additional Capital Contributions made by the Non-Delinquent Member in respect of
the related request therefor (including both the Non-Delinquent Member's and, if
it elects to contribute such amount, the Delinquent Member's portion thereof) as
a loan by the Non-Delinquent Member to the Company (a "Default Loan"). Each
Default Loan shall be a loan by the Non-Delinquent Member to the Company, shall
bear interest at the Default Rate and shall be repaid on a priority basis from
Available Cash.
(b) If an Additional Capital Contribution Default Event occurs with
respect to a Member (the "Additional Capital Defaulting Member") under this
Agreement or under the Other Company LLC Agreement, then in addition to its
specified rights and remedies under Section 6.3(a) hereof, the other Member (the
"Other Member") may, upon notice to the Additional Capital Defaulting Member,
exercise any and all of the following additional rights and remedies:
(1) such Member may exercise the Buy-Sell Option under this
Agreement and the Buy-Sell Option under the Other Company LLC Agreement; and
(2) the Additional Capital Defaulting Member's rights to
distributions of Available Cash, as set forth in Section 8.2 hereof shall be
modified as set forth in Schedule 6.3(b) and the Additional Capital Defaulting
Member's rights to distributions under Section 8.2 of the Other Company LLC
Agreement shall be modified as therein provided.
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(c) The express rights and remedies granted to the Non-Delinquent
Member and the Other Member, as applicable, in this Section 6.3 and elsewhere in
this Agreement are exclusive of (and the Non-Delinquent Member and the Other
Member shall not be entitled to exercise) any other rights and remedies granted
or available to the Non-Delinquent Member or the Other Member, as applicable,
at law or in equity by reason of (i) the failure of a Delinquent Member to
contribute all or any portion of any required Additional Capital Contribution or
(ii) the occurrence or existence of an Additional Capital Contribution Default
Event.
Section 6.4 Return of Contributions. Except as expressly provided herein, no
Member shall be entitled to (a) the return of any part of its Capital
Contributions, (b) any interest in respect of any Capital Contribution, or (c)
the fair market value of its Membership Interest in connection with a withdrawal
from the Company or otherwise. Unreturned or unrepaid Capital Contributions
shall not be a liability of the Company or of any Member. No Member shall be
required to contribute or lend any cash or property to the Company to enable the
Company to return any Member's Capital Contributions to the Company.
Section 6.5 Balances. The Company's books and records shall contain entries
indicating the type and amount of Capital Contributions made to the Company and,
if applicable, the Preferred Return thereon.
Section 6.6 General Provisions Concerning Capital Contributions. The
obligation of the Members to make Capital Contributions under this Agreement
shall not inure to the benefit of, or be enforceable by any Person other than
the other Member. Neither Member shall be obligated to make any Project Capital
Contributions in the event a Project Capital Contribution Default shall have
occurred with respect to the Other Member.
ARTICLE 7
FINANCING
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Section 7.1 Financing.
(a) The Company intends to obtain on behalf of each Subsidiary
financing for the acquisition, development or redevelopment and construction of
each Project (each a "Construction Loan"). Each Construction Loan will be
secured by a first-priority deed of trust or mortgage lien on the Project and
shall be made on such terms and conditions as may be approved by the Executive
Committee. Manager shall deliver to the GECC Member all notices, correspondence,
and information delivered to or received from the Construction Loan lender by
the Company or any Subsidiary.
(b) The Manager will be responsible for arranging each Construction
Loan which the Members contemplate will be "mini-perm" loans, each in a
principal amount equal to approximately fifty percent (50%) of the Total Project
Costs for the Project, as reflected in the Project Development Budget approved
by the Executive Committee.
(c) Each Construction Loan shall be non-recourse to the Members and
the Company (unless each of the Members, in the exercise of its sole discretion,
should expressly agree in writing to the contrary), except that the Developer
Member will provide any required
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construction completion guaranties. In addition, the Developer Member will
provide any required guaranties or indemnities which may be required by the
lender relating to certain items that would be responsibilities performed by the
Developer Member subsequent to the acquisition of the Project as Developer,
General Contractor and Property Manager (e.g., so called "carve outs" for
development, construction and operating items including criminal acts,
misapplication, fraud, gross negligence, willful misconduct, environmental
matters arising after acquisition which are, or should be, within the control of
the Developer Member as Property Manager). The Company will provide the lender
any required indemnities relating to preexisting environmental and, to the
extent applicable, engineering conditions and other "carve-out" matters beyond
the control of the Developer Member. The Members will contemplate whether
environmental insurance is economically feasible in lieu of the Company's
providing any such required indemnities for preexisting environmental and, if
applicable, engineering conditions.
Section 7.2 Right of First Offer.
(a) If, at any time and from time to time during the term of this
Agreement, the Company, any Subsidiary, the Developer Member, individually, or
SUSA (herein, together with each of their respective Controlled Affiliates,
other than the Excluded Affiliates, collectively called the "Borrowing Parties"
and individually, a "Borrowing Party") desires to obtain any financing with
respect to any Target (including any Independent Investment), any Project or any
other self-storage facility, or program loan or credit facility for multiple
Targets, Projects or other self-storage facilities, in which a Borrowing Party
has an interest, direct or indirect (excluding only Targets or self-storage
facilities in which a Borrowing Party has an interest solely as either
franchisor or franchisor and minority-owner through its franchise program), GECC
or one or more of the GECC Affiliates shall have the right of first offer to
provide such financing as hereinafter provided in this Section 7.2; provided,
however, any such financing provided by GECC or one or more of the GECC
Affiliates shall not be treated in any way as a Project Capital Contribution by
the GECC Member and shall not in any way reduce the obligation of the GECC
Member to make Capital Contributions under this Agreement. For the avoidance of
doubt, to the extent any such financing constitutes a Franchise Equity Program
Transaction, then the provisions of Section 4.6(f), and not this Section 7.2,
shall apply thereto.
(b) Any such Borrowing Party desiring to obtain any financing shall
advise GECC thereof and shall provide GECC with such information as GECC may
reasonably request with respect to the Target or self-storage facility or
facilities proposed to be financed (the "Underwriting Information"). GECC shall
have a period of ten (10) Business Days after receipt of the Underwriting
Information to respond (if at all) by delivery to such Borrowing Party of an
offer (subject to completion of satisfactory due diligence) to provide such
financing (the "Proposal"). If the Borrowing Party accepts such Proposal, then
such Borrowing Party shall enter into such financing transaction with GECC or
one or more of the GECC Affiliates (subject to completion of satisfactory due
diligence and governing documents reasonably acceptable to GECC and such
Borrowing Party).
(c) If (i) GECC does not so respond within such ten (10) Business Day
period, or (ii) GECC offers to provide the financing on terms and conditions
that are not acceptable to the Borrowing Party, or (iii) GECC and such Borrowing
Party are unable to agree on the governing documents with respect to such
financing within forty-five (45) days after GECC
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delivers the Proposal, or (iv) GECC has not advised such Borrowing Party prior
to the end of such forty-five (45) day period that such due diligence is
completed and satisfactory, then such Borrowing Party shall be permitted to seek
and obtain such financing from a third party on terms and conditions not
materially less favorable in the aggregate than those contained in the Proposal
within one hundred eighty (180) days after the later of (i) the GECC's delivery
of the Proposal to such Borrowing Party or (ii) in the case of GECC and such
Borrowing Party's being unable to agree on the governing documents or such due
diligence not being complete or if complete, unsatisfactory to GECC, the
expiration of the forty-five (45) day period.
(d) If the terms and conditions of any such financing proposed to be
obtained from the third party are substantially the same or less favorable to
such Borrowing Party than the terms and conditions contained in the Proposal
(including, among others, rate, term, "due on sale", assumability and other
material terms and conditions of the governing documents), then before
consummating such financing with the third party, such Borrowing Party shall
submit such terms and conditions to GECC and GECC shall have a period of ten
(10) Business Days after receipt thereof to offer to provide such financing on
the same terms and conditions so offered by the third party or to decline to
provide such financing; provided, however, no such submission to GECC shall be
required where GECC, pursuant to the provisions of Section 7.2(c), has advised
such Borrowing Party that GECC's due diligence results were unsatisfactory or
that GECC failed to reach agreement with such Borrowing Party on the governing
documents (and the alternate financing documents are more favorable to the
Borrowing Party than the GECC documents) and such Borrowing Party shall be free
to obtain such financing on substantially the same terms as offered by such
third party. GECC's failure to respond, or GECC's notice to such Borrowing Party
that it will not offer to provide the applicable financing, within such ten (10)
Business Day period shall be conclusively deemed to constitute GECC's election
not to provide such financing and such Borrowing Party shall be free to obtain
such financing on substantially the same terms as offered by such third party.
If GECC offers to provide the financing on the same terms and conditions as
those offered by the third party, then so long as GECC and such Borrowing Party
reach agreement on the governing documents within ten (10) Business Days after
such offer by GECC, such Borrowing Party shall enter into such financing
transaction with GECC or one or more of the GECC Affiliates. If GECC and such
Borrowing Party fail to reach agreement on the governing documents in such
period (after good faith efforts to do so), such Borrowing Party may obtain
financing on substantially the same terms so offered by such third party.
(e) The right of first offer granted GECC in accordance with this
Section 7.2 was a material inducement for the GECC Member to execute and deliver
this Agreement and the Other Company LLC Agreement. GECC shall be a third party
beneficiary of this Section 7.2 and Section 7.3.
Section 7.3 No Commitment. The Members acknowledge and agree that GECC has
not committed or otherwise agreed to make or provide any Construction Loan to
the Company or a Subsidiary. Nothing contained herein shall constitute or be
deemed to constitute GECC's commitment or other agreement to make or provide a
Construction Loan or other financing to the Company or a Subsidiary. GECC shall
have no liability to the Company, any Subsidiary or the Members in the event the
Company's or a Subsidiary's application for a Construction Loan or other
financing is rejected. If approved, GECC's commitment to make a Construction
Loan
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or other financing to the Company or a Subsidiary shall be evidenced by a
separate writing and shall be executed by GECC.
Section 7.4 Acknowledgment and Waiver. In the event GECC makes or provides a
Construction Loan or other financing to the Company or a Subsidiary, the Members
hereby acknowledge and agree that GECC shall be treated as, and shall have all
the rights, remedies and benefits, of an unrelated third party lender with
respect to any such Construction Loan or other financing. No action, consent or
authorization of GECC under the documents and instruments evidencing and
securing a Construction Loan or other financing shall be construed or imputed as
the action, consent or authorization of the GECC Member under this Agreement and
no action, consent or authorization of the GECC Member under this Agreement
shall be construed or imputed as the action, consent or authorization of GECC
under the documents and instruments evidencing and securing any such
Construction Loan or other financing. The refusal of GECC to consent to or waive
a requirement under any of the documents and instruments evidencing and securing
a Construction Loan or other financing shall not be a defense to any default by
any Member, the Company or any Subsidiary under this Agreement or the documents
and instruments evidencing and securing any Construction Loan or other
financing. The Developer Member shall have the sole and exclusive authority to
enforce any and all agreements between the Company or a Subsidiary and GECC with
respect to any such Construction Loan or other financing.
ARTICLE 8
DISTRIBUTIONS
-------------
Section 8.1 Distributions in General. From time to time, but not less often
than quarterly, the Executive Committee shall determine the amount, if any, of
Available Cash. Any Available Cash shall be distributed to the Members in
accordance with the provisions of this Article 8.
Section 8.2 Distribution of Available Cash. Subject always to Sections
4.8(b) and 6.3(b)(2) hereof, the Available Cash for any particular period shall
be distributed to the Members in the following order of priority:
(a) first, to the Members in proportion to and in payment of their
Default Loans until their Default Loans, including both principal and interest,
have been paid in full;
(b) next, to the Members in accordance with their respective Capital
Sharing Ratios until the GECC Member shall have achieved a fourteen percent
(14%) Internal Rate of Return on its Capital Contributions (including the return
to the GECC Member of all of its Capital Contributions);
(c) next, sixty percent (60%) to the GECC Member and forty percent
(40%) to the Developer Member until the GECC Member has achieved a seventeen
percent (17%) Internal Rate of Return on its Capital Contributions (including
the return to the GECC Member of all of its Capital Contributions);
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(d) next, to the Developer Member in payment of its Preferred Return
on its Credited Cost Overrun Contributions until its Preferred Return Balance
has been reduced to zero;
(e) next, to the Developer Member in return of its Credited Cost
Overrun Contributions until the Credited Cost Overrun Contribution Balance has
been reduced to zero;
(f) last, to the Members in accordance with their Residual Sharing
Ratios.
ARTICLE 9
CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS
----------------------------------------------
Section 9.1 [Reserved].
Section 9.2 Capital Accounts.
(a) Establishment and Maintenance. A separate capital account
("Capital Account") will be maintained for each Member. The Capital Account of
each Member will be determined and adjusted as follows:
(1) Each Member's Capital Account will be credited with the
Member's Capital Contributions, the Member's distributive share of Profits, any
items in the nature of income or gain that are specially allocated to the Member
under Sections 9.4(c) or 9.4(d) and the amount of any Company liabilities that
are assumed by the Member or secured by any Company property distributed to the
Member.
(2) Each Member's Capital Account will be debited with the amount
of cash and the Gross Asset Value of any Company property distributed to the
Member under any provision of this Agreement, the Member's distributive share of
Losses, any items in the nature of deduction or loss that are specially
allocated to the Member under Section 9.4(c) or 9.4(d), and the amount of any
liabilities of the Member assumed by the Company or which are secured by any
property contributed by the Member to the Company.
(3) If any interest in the Company is transferred in accordance
with the terms of this Agreement, the transferee will succeed to the Capital
Account of the transferor to the extent it relates to the transferred interest.
(b) Modifications by Manager. The provisions of this Section 9.2 and
the other provisions of this Agreement relating to the maintenance of Capital
Accounts have been included in this Agreement to comply with Section 704(b) of
the Code and the Regulations promulgated thereunder and will be interpreted and
applied in a manner consistent with those provisions. The Manager may, with the
consent of the Executive Committee, modify the manner in which the Capital
Accounts are maintained under this Section 9.2 to comply with those provisions,
as well as upon the occurrence of events that might otherwise cause this
Agreement not to comply with those provisions; however, without the unanimous
consent of all Members, the Manager may not make any modification to the way
Capital Accounts are maintained if such modification would have the effect of
changing the amount of distributions to which any Member would be entitled
during the operation, or upon the liquidation, of the Company.
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Section 9.3 Adjustment of Gross Asset Value. "Gross Asset Value", with
respect to any asset, is the adjusted basis of that asset for federal income tax
purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed (or deemed
contributed under Code Sections 704(b) and 752 and the Regulations promulgated
thereunder) by a Member to the Company will be the fair market value of the
asset on the date of the contribution, as determined by the Executive Committee.
(b) The Gross Asset Values of all Company assets will be adjusted to
equal the respective fair market values of the assets, as determined by the
Manager and the GECC Member, as of (1) the acquisition of an additional interest
in the Company by any new or existing Member in exchange for more than a de
minimis capital contribution, (2) the distribution by the Company to a Member of
more than a de minimis amount of Company property as consideration for an
interest in the Company if an adjustment is necessary or appropriate to reflect
the relative economic interests of the Members in the Company, and (3) the
liquidation of the Company within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g).
(c) The Gross Asset Value of any Company asset distributed to any Member
will be the gross fair market value of the asset on the date of distribution.
(d) The Gross Asset Values of Company assets will be increased or
decreased to reflect any adjustment to the adjusted basis of the assets under
Code Section 734(b) or 743(b), but only to the extent that the adjustment is
taken into account in determining Capital Accounts under Regulations Section
1.704-l(b)(2)(iv)(m), provided that Gross Asset Values will not be adjusted
under this Section 9.3 to the extent that the Manager determines that an
adjustment under Section 9.3(b) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment under this Section
9.3(d).
(e) After the Gross Asset Value of any asset has been determined or
adjusted under Section 9.3(a), 9.3(b) or 9.3(d), Gross Asset Value will be
adjusted by the Depreciation taken into account with respect to the asset for
purposes of computing Profits or Losses.
Section 9.4 Profits, Losses and Distributive Shares of Tax Items.
(a) Profits. Profits for any taxable year shall be allocated to the
Members in the following manner:
(1) first, to the Members in accordance with their Capital Sharing
Ratios until the cumulative Profits allocated under this Section 9.4(a)(1) for
the current and all prior taxable years are equal to the cumulative Losses
allocated to the Members under Section 9.4(b)(6) for all prior taxable years;
(2) next, to the Members until the cumulative Profits allocated under
this Section 9.4(a)(2) for the current and all prior taxable years are equal to
the cumulative Losses allocated to the Members under Section 9.4(b)(5) for all
prior taxable years; provided that, in the event there are insufficient Profits
to allocate the full amount required by this Section 9.4(a)(2), allocations of
Profits shall be made hereunder pro rata among the Members in
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accordance with each such Member's relative share of the full amount of
allocations that would have been made hereunder if there were sufficient Profits
therefor;
(3) next, to the Members in accordance with their Capital Sharing
Ratios until the GECC Member has received allocations of Profits under this
Section 9.4(a)(3) for the current taxable year sufficient to give the GECC
Member a Capital Account balance such that, if such balance were distributed to
such Member as of the end of such taxable year, such Member would have achieved
a fourteen percent (14%) Internal Rate of Return on its Capital Contributions
(including the return to the GECC Member of all such Capital Contributions),
taking into account all prior distributions (other than repayment of principal
and interest on Default Loans) made to the GECC Member under Section 8.2 and
10.2(c) hereof;
(4) next, sixty percent (60%) to the GECC Member and forty percent
(40%) to the Developer Member until the GECC Member has received allocations
under this Section 9.4(a)(4) for the current taxable year sufficient to give
such Member a Capital Account balance such that, if its Capital Account balance
were distributed to such Member as of the end of such taxable year, such Member
would have achieved a seventeen percent (17%) Internal Rate of Return on its
Capital Contributions (including the return to the GECC Member of all such
Capital Contributions), taking into account all prior distributions (other than
repayments of principal and interest on Default Loans) made to the GECC Member
under Section 8.2 and 10.2(c) hereof;
(5) next, to the Developer Member until such Member has received
cumulative allocations of Profits under this Section 9.4(a)(5) for the current
and all prior taxable years equal to the cumulative allocations of Losses to
such Member under Section 9.4(b)(3) for all prior taxable years;
(6) next, to the Developer Member until the cumulative allocations of
Profits under this Section 9.4(a)(6) for the current and all prior taxable years
(net of the cumulative allocations of Losses to the Developer Member under
Section 9.4(b) for all prior taxable years) are equal to the Preferred Return on
its Credited Cost Overrun Contributions;
(7) next, to the Members in accordance with their Residual Sharing
Ratios.
(b) Losses. After making the special allocations required by Sections
9.4(c) and 9.4(d), Losses for any taxable year shall be allocated to the Members
in the following order of priority:
(1) first, to the Members in accordance with their Residual Sharing
Ratios, until the cumulative Losses allocated under this Section 9.4(b)(1) are
equal to the excess, if any, of (x) the cumulative Profits allocated to each
Member under Section 9.4(a)(7) for all prior taxable years over (y) the
cumulative distributions of Available Cash to each such Member under Section
8.2(f) from the inception of the Company through the end of the current taxable
year;
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(2) next, to the Developer Member until the cumulative Losses
allocated under this Section 9.4(b)(2) are equal to the excess, if any, of (x)
the cumulative Profits allocated to such Member under Section 9.4(a)(6) hereof
for all prior taxable years over (y) the cumulative distributions of Available
Cash to such Member under Section 8.2(e) from the inception of the Company
through the end of the current taxable year;
(3) next, to the Developer Member until the cumulative Losses
allocated to such Member for the current and all prior taxable years (net of the
cumulative allocations of Profits allocated under Section 9.4(a)(5) for all
prior taxable years) are equal to the Credited Cost Overrun Contribution Balance
of such Member as of the end of the current taxable year;
(4) next, sixty percent (60%) to the GECC Member and forty percent
(40%) to the Developer Member until the cumulative Losses allocated under this
Section 9.4(b)(4) for the current and all prior taxable years are equal to the
excess, if any, of (x) the cumulative Profits allocated to each Member under
Section 9.4(a)(4) hereof for all prior taxable years over (y) the cumulative
distributions of Available Cash to each such Member under Section 8.2(c) from
the inception of the Company through the end of the current taxable year;
(5) next, to the Members in accordance with their Capital Sharing
Ratios until each Member's Adjusted Capital Account has been reduced to zero,
and any Losses that would otherwise cause or increase a deficit balance in a
Member's Adjusted Capital Account shall be allocated to the other Member until
such other Member's Adjusted Capital Account has been reduced to zero;
(6) next, any remaining Losses shall be allocated to the Members in
accordance with their Capital Sharing Ratios.
(c) Special Allocations. The following special allocations will be made
in the following order and priority before allocations of Profits and Losses:
(1) Company Minimum Gain Chargeback. If there is a net decrease in
Company Minimum Gain during any taxable year or other period for which
allocations are made, before any other allocation under this Agreement, each
Member will be specially allocated items of Company income and gain for that
period (and, if necessary, subsequent periods) in proportion to, and to the
extent of, an amount equal to such Member's share of the net decrease in Company
Minimum Gain during such year determined in accordance with Regulations Section
1.704-2(g)(2). The items to be allocated will be determined in accordance with
Regulations Section 1.704-2(g). This Section 9.4(c)(1) is intended to comply
with the Company Minimum Gain chargeback requirements of the Regulations, will
be interpreted consistently with the Regulations and will be subject to all
exceptions provided therein.
(2) Member Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding
any other provision of this Section 9.4 (other than Section 9.4(c)(1) which
shall be applied first), if there is a net decrease in Member Nonrecourse Debt
Minimum Gain with respect to a Member Nonrecourse Debt during any taxable year
or other period for which allocations are made, any Member with a share of such
Member Nonrecourse Debt Minimum
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Gain (determined under Regulations Section 1.704-2(i)(5)) as of the beginning of
the year will be specially allocated items of Company income and gain for that
period (and, if necessary, subsequent periods) in an amount equal to such
Member's share of the net decrease in the Member Nonrecourse Debt Minimum Gain
during such year determined in accordance with Regulations Section
1.704-2(g)(2). The items to be so allocated will be determined in accordance
with Regulations Section 1.704-2(g). This Section 9.4(c)(2) is intended to
comply with the Member Nonrecourse Debt Minimum Gain chargeback requirements of
the Regulations, will be interpreted consistently with the Regulations and will
be subject to all exceptions provided therein.
(3) Qualified Income Offset. A Member who unexpectedly receives any
adjustment, allocation or distribution described in Regulations Sections 1.704-
l(b)(2)(ii)(d)(4), (5) or (6) will be specially allocated items of Company
income and gain in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of the Member,
if any, as quickly as possible.
(4) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
year or other period for which allocations are made will be allocated among the
Members in proportion to their respective Capital Sharing Ratios in the Company.
(5) Member Nonrecourse Deductions. Notwithstanding anything to the
contrary in this Agreement, any Member Nonrecourse Deductions for any taxable
year or other period for which allocations are made will be allocated to the
Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which the Member Nonrecourse Deductions are attributable in
accordance with Regulations Section 1.704-2(i).
(6) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset under Code Section 734(b) or 743(b) is
required to be taken into account in determining Capital Accounts under
Regulations Section 1.704-l(b)(2)(iv)(m), the amount of the adjustment to the
Capital Accounts will be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis), and the
gain or loss will be specially allocated to the Members in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
under Regulations Section 1.704-1(b)(2(iv)(m).
(d) Curative Allocations. The allocations set forth in Section 9.4(c)
(the "Regulatory Allocations") are intended to comply with certain requirements
of Regulations Sections 1.704-l(b) and 1.704-2. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss, and deduction pursuant to this Section 9.4(d).
Therefore, notwithstanding any other provision of this Section 9 (other than the
Regulatory Allocations), the Manager shall make such offsetting special
allocations in whatever manner it determines appropriate so that, after such
offsetting allocations are made, each Member's Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would have
had if the Regulatory Allocations were not part of the Agreement and all Company
items were allocated pursuant to Sections 9.4(a) and (b). In exercising its
discretion under this Section 9.4(d), the Manager shall take into account future
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Regulatory Allocations under Sections 9.4(c)(1) and (2) that, although not yet
made, are likely to offset other Regulatory Allocations previously made under
Sections 9.4(c)(4) and (5).
(e) Tax Allocations; Code Section 704(c). For federal, state and local
income tax purposes, Company income, gain, loss, deduction or expense (or any
item thereof) for each fiscal year shall be allocated to and among the Members
to reflect the allocations made pursuant to the provisions of this Section 9.4
for such fiscal year. In accordance with Code Section 704(c) and the related
Regulations, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company, solely for tax purposes, will be
allocated among the Members so as to take account of any variation between the
adjusted basis to the Company of the property for federal income tax purposes
and the initial Gross Asset Value of the property (computed in accordance with
Section 9.3). If the Gross Asset Value of any Company asset is adjusted under
Section 9.3(b), subsequent allocations of income, gain, loss and deduction with
respect to that asset will take account of any variation between the adjusted
basis of the asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the related Regulations. Any
elections or other decisions relating to allocations under this Section 9.4(e)
will be made in any manner that the Manager determines reasonably reflects the
purpose and intention of this Agreement. Allocations under this Section 9.4(e)
are solely for purposes of federal, state and local taxes and will not affect,
or in any way be taken into account in computing, any Member's Capital Account
or share of Profits, Losses or other items or distributions under any provision
of this Agreement.
(f) Members shall be bound by the provisions of this Section 9.4 in
reporting their shares of Company income and loss for income tax purposes.
Section 9.5 Tax Returns. The Manager will cause the Auditor, at the
Company's expense, to prepare all federal, state and local tax returns for each
year for which the returns are required to be filed for the Company and all
Subsidiaries, including making the allocations required under Article 9 hereof.
The Manager will use its reasonable efforts to cause returns for a Fiscal Year
to be furnished to each Member for its review within fifty (50) days following
the end of that Fiscal Year and to cause the returns to be finalized and filed
within sixty (60) days following the end of that Fiscal Year. The Manager will
file or cause to be filed with the appropriate taxing authorities requests for
extensions of time for filing of tax returns to the extent required to be in
compliance with any statute or regulation governing the timely filing of
returns. The Manager will also cause to be provided to each Member, at the time
the quarterly financial statements are required to be delivered pursuant to
Section 5.1(c) above, an estimate of each Member's share of all items of income,
gain, loss, deduction and credit of the Company for federal income tax purposes
for the calendar quarter just completed and for the Fiscal Year to date.
Section 9.6 Tax Elections. The following elections shall be made on the
appropriate returns of the Company:
(a) to adopt the calendar year as the Company's fiscal year;
(b) to adopt the accrual method of accounting and to keep the
Company's books and records on the income-tax method;
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(c) if there is a distribution of Company property as described in
section 734 of the Code or if there is a transfer of a Company interest as
described in section 743 of the Code, upon written request of any Member, to
elect, pursuant to section 754 of the Code, to adjust the basis of Company
properties; and
(d) to elect to amortize the organizational expenses of the Company
ratably over a period of 60 months as permitted by section 709(b) of the Code.
No election shall be made by the Company or any Member to be excluded from the
application of the provisions of subchapter K of chapter 1 of subtitle A of the
Code or any similar provisions of applicable state laws.
Section 9.7 Tax Matters Member. The Member serving as Manager shall be the
"tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code;
provided, however, if the GECC Member has removed the Developer Member as the
initial Manager and appointed a non-Member Manager, then the GECC Member shall
be the "tax matters partner" of the Company pursuant to Section 6231 (a)(7) of
the Code. As tax matters partner, such Member shall take such action as may be
necessary to cause each other Member to become a "notice partner" within the
meaning of Section 6223 of the Code. Such Member shall inform each other Member
of all significant matters that may come to its attention in its capacity as tax
matters partner by giving notice thereof within ten days after becoming aware
thereof and, within such time, shall forward to each other Member copies of all
significant written communications it may receive in such capacity. Such Member
shall not take any action contemplated by Sections 6222 through 6232 of the Code
without the consent of the GECC Member. This provision is not intended to
authorize such Member to take any action left to the determination of an
individual Member under Sections 6222 through 6232 of the Code.
Section 9.8 Allocations on Transfer of Interests. All items of income,
gain, loss, deduction, and credit allocable to any interest in the Company that
may have been transferred shall be allocated between the transferor and the
transferee based upon that portion of the calendar year during which each was
recognized as owning such interest, without regard to the results of Company
operations during any particular portion of such calendar year and without
regard to whether cash distributions were made to the transferee or the
transferee during such calendar year; however, such allocation shall be made in
accordance with a method permissible under section 706 of the Code and the
Regulations thereunder.
ARTICLE 10
WITHDRAWAL, DISSOLUTION, LIQUIDATION, AND TERMINATION
-----------------------------------------------------
Section 10.1 Dissolution, Liquidation, and Termination Generally. The
Company shall be dissolved upon the first to occur of any of the following:
(a) The sale or disposition of all of the assets of the Company and
the receipt, in cash, of all consideration therefor;
(b) The determination of the Members to dissolve the Company; and
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(c) The occurrence of any event which, as a matter of law, requires
that the Company be dissolved.
Notwithstanding the foregoing, if the Company is dissolved pursuant to Section
10.1(c) because an event described in Section 18-801(4) of the Act occurs with
respect to a Member, then the other Member may elect to continue the Company
business within 90 days after the Members have actual notice of such event, and,
at the option of the electing Member, may admit a new Member to the Company with
a Residual Sharing Ratio determined by the electing Member. The Residual Sharing
Ratio of the electing Member then shall be reduced by the Residual Sharing Ratio
allocated to the new Member.
Section 10.2 Liquidation and Termination. Upon dissolution of the Company,
unless it is continued as provided above, the Manager shall act as liquidator or
may appoint one or more other Persons as liquidator; however, if the Company is
dissolved because of an event occurring with respect to the Manager, the
liquidator shall be one or more Persons selected in writing by the other Member.
The liquidator shall proceed diligently to wind up the affairs of the Company
and make final distributions as provided herein. The costs of liquidation shall
be a Company expense. Until final distribution, the liquidator shall continue to
operate the Company properties with all of the power and authority of the
Manager hereunder. The steps to be accomplished by the liquidator are as
follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the liquidator shall cause a proper accounting to be made by the
Auditor of the Company's assets, liabilities, and operations through the last
day of the calendar month in which the dissolution shall occur or the final
liquidation shall be completed, as applicable;
(b) the liquidator shall pay all of the debts and liabilities of the
Company (other than the Default Loans, if any) or otherwise make adequate
provision therefor (including the establishment of a cash escrow fund for
contingent liabilities in such amount and for such term as the liquidator may
reasonably determine); and
(c) all remaining assets of the Company shall be distributed to the
Members as provided in Section 8.2 hereof.
In connection with such liquidation or termination, the liquidator may sell any
or all Company property and the sum of (A) any resulting gain or loss from each
sale plus (B) the fair market value of such property that has not been sold
shall be determined and (notwithstanding the provisions of Article 9) income,
gain, loss, and deduction inherent in such property (that has not been reflected
in the Capital Accounts previously) shall be allocated among the Members to the
extent possible to cause the Capital Account balance of each Member to equal the
amount distributable to such Member under Section 10.2(c) hereof.
Section 10.3 Deficit Capital Accounts. No Member shall be required to pay
to the Company, to any other Member or to any third party any deficit balance
which may exist from time to time in the Member's Capital Account.
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Section 10.4 Cancellation of Certificate. On completion of the
distribution of Company assets, the Member (or such other person as the Act may
require or permit) shall file a Certificate of Cancellation with the Secretary
of State of Delaware, cancel any other filings made pursuant to Section 2.4, and
take such other actions as may be necessary to terminate the existence of the
Company.
ARTICLE 11
MISCELLANEOUS PROVISIONS
------------------------
Section 11.1 Notices. All notices provided for or permitted to be given
pursuant to this Agreement must be in writing and shall be given or served by
(a) depositing the same in the United States mail addressed to the party to be
notified, postpaid and certified with return receipt requested, (b) by
delivering such notice in person to such party, or (c) by prepaid telegram,
telex, or telecopy. All notices are to be sent to or made at the addresses set
forth on the signature pages hereto. All notices given in accordance with this
Agreement shall be effective upon delivery at the address of the addressee. By
giving written notice thereof, each Member shall have the right from time to
time to change its address pursuant hereto. Copies of all such notices shall be
sent to each member and alternate member of the Executive Committee at their
respective addresses maintained with the Company.
Section 11.2 Governing Law. This Agreement and the obligations of the
Members hereunder shall be construed and enforced in accordance with the laws of
the State of Delaware, excluding any conflicts of law rule or principle which
might refer such construction to the laws of another state or country.
Section 11.3 Entireties; Amendments. This Agreement and its exhibits
constitute the entire agreement between the Members relative to the formation of
the Company. Except as otherwise provided herein, no amendments to this
Agreement shall be binding upon any Member unless set forth in a document duly
executed by such Member.
Section 11.4 Waiver. No consent or waiver, express or implied, by any
Member of any breach or default by any other Member in the performance by the
other Member of its obligations hereunder 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 obligation hereunder. Failure on the
part of any Member to complain of any act or to declare any other Member in
default, irrespective of how long such failure continues, shall not constitute a
waiver of rights hereunder.
Section 11.5 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstances shall be invalid or
unenforceable to any extent, and such invalidity or unenforceability does not
destroy the basis of the bargain between the parties, then the remainder of this
Agreement and the application of such provisions to other Persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
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Section 11.6 Ownership of Property and Right of Partition. A Member's
interest in the Company shall be personal property for all purposes. No Member
shall have any right to partition the property or other assets owned by the
Company.
Section 11.7 Captions, References. Pronouns, wherever used herein, and of
whatever gender, shall include natural persons and corporations and associations
of every kind and character, and the singular shall include the plural wherever
and as often as may be appropriate. Article and Section headings are for
convenience of reference and shall not affect the construction or interpretation
of this Agreement. Whenever the terms "hereof", "hereby", "herein", or words of
similar import are used in this Agreement they shall be construed as referring
to this Agreement in its entirety rather than to a particular Section or
provision, unless the context specifically indicates to the contrary. Whenever
the words "include" and "including" are used herein, they shall be construed to
mean "including, without limitation". Any reference to a particular "Article" or
a "Section" shall be construed as referring to the indicated article or Section
of this Agreement unless the context indicates to the contrary.
Section 11.8 Involvement of Members in Certain Proceedings.
(a) Should any Member become involved in legal proceedings unrelated
to the Company's business in which the Company is required to provide books,
records, an accounting, or other information, then such Member shall indemnify
the Company from all expenses incurred in conjunction therewith.
(b) If the GECC Member brings an action on behalf of the Company or
one or more of its Subsidiaries to enforce an agreement against the Developer
Member or one of its Affiliates pursuant to Section 4.2(a) or 4.11(b) hereof, or
if the Developer Member brings an action on behalf of the Company or one or more
of its Subsidiaries to enforce a loan agreement against GECC pursuant to Section
7.4 hereof, and in either such case, the Company or one or more of its
Subsidiaries is not the prevailing party, then the GECC Member, in the case of
an action against the Developer Member or one of its Affiliates, or the
Developer Member, in the case of an action against GECC, shall indemnify the
Company from any and all reasonable costs and expenses, including court costs
and reasonable attorneys' fees, incurred by the Company or one or more of its
Subsidiaries in connection with any such enforcement action.
Section 11.9 Interest. No amount charged as interest on loans hereunder
shall exceed the maximum rate from time to time allowed by applicable law.
Section 11.10 Right to Bring Action. A Member may bring an action in the
right of the Company as provided elsewhere in this Agreement or if the Manager
or the Executive Committee has refused to bring an action upon the request of
the Member, and each Member on behalf of itself and the Company hereby waives
any requirement of the Act to plead with particularity the effort of such Member
to secure initiation of the action by the Manager or the Executive Committee. In
such event, it shall be sufficient that the Member bringing the derivative
action has made demand on the Manager and the Executive Committee and no such
action has been filed within thirty (30) days after such demand was made.
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Section 11.11 Cumulative Remedies. Except as otherwise expressly provided
in this Agreement, the rights and remedies granted to the Members are in
addition to any other rights and remedies granted or available to the Members at
law or in equity by reason of the default of the other Member, all of which
rights and remedies are specifically reserved by the Members. The failure to
exercise any one of the rights and remedies herein provided shall not constitute
a waiver thereof, nor, except as otherwise expressly provided in this Agreement,
shall the exercise of any of the rights and remedies hereby provided prevent the
subsequent or concurrent resort to any other right or remedy. Notwithstanding
any of the foregoing, no Member shall be entitled to seek or obtain
consequential or punitive damages for any breach of this Agreement by the other
Member.
Section 11.12 Jurisdiction.
(a) Subject always to Section 11.13 hereof, each Member hereby (i)
submits to personal jurisdiction in the State of Delaware for the enforcement of
this Agreement and (ii) waives any and all personal rights under the law of any
state or country to object to jurisdiction within the State of Delaware for the
purposes of litigation to enforce this Agreement.
(b) Subject always to Section 11.13 hereof, in the event that any such
litigation is commenced, each Member agrees that service of process may be made
and personal jurisdiction over such party may be obtained by the serving of a
copy of the summons and complaint upon such party's appointed agent for service
of process in the State of Delaware. As of the Effective Date, the names and
addresses of the appointed agents for service of process for each Member are as
follows: (i) with respect to the Developer Member, Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801; and with respect to the GECC Member, Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. Upon thirty (30) calendar days' prior written notice to the
other Member, a Member may change its appointed agent if the replacement agent
is located in the State of Delaware. In the event of a Transfer which is
permitted under this Agreement, the transferee shall, at the time of its
admission as a Member, designate an agent for service of process within the
State of Delaware as contemplated by this Section 11.12.
(c) Subject always to Section 11.13 hereof, nothing contained herein,
however, shall prevent a Member from bringing any action or exercising any
rights against any other Member within any other state. Initiating such
proceedings shall in no event constitute a waiver of the agreement contained
herein that the law of the State of Delaware shall govern the rights and
obligations of the parties hereunder or the submission herein made by each
Member to personal jurisdiction within the State of Delaware. The aforesaid
means of obtaining personal jurisdiction and perfecting service of process are
not intended to be exclusive, but are cumulative in addition to all other means
of obtaining personal jurisdiction and perfecting service of process now or
hereafter provided by the laws of the State of Delaware.
Section 11.13 Arbitration. Any controversy, claim, or dispute arising out
of or relating to this Agreement, including any alleged breach or threatened
breach of the provisions contained in this Agreement, will, upon demand of a
party to the controversy, claim, or dispute, be resolved by arbitration held in
Atlanta, Georgia, and administered by the AAA in accordance with the
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Commercial Arbitration Rules of the AAA and, to the maximum extent applicable,
pursuant to the Federal Arbitration Act, 9 U.S.C. 1 et seq.; provided, however,
no disagreement as to a matter within the authority of the Executive Committee
shall be subject to arbitration under this Section 11.13, and any such
disagreement shall remain unresolved unless and until resolved by agreement of
the Executive Committee. An award rendered in any such proceeding shall be
final, binding, and non-appealable, and judgment thereon may be entered in any
court having competent jurisdiction. With respect to a controversy, claim or
dispute in which the claim or amount in controversy does not exceed $100,000, a
single arbitrator will be impaneled, who will have authority to render a maximum
award of $100,000, including all damages of any kind and costs, fees, interest
and the like. With respect to a controversy, claim or dispute in which the claim
or amount in controversy exceeds $100,000, the dispute will be decided by a
majority vote of three arbitrators. Subject to the limitations contained in this
Agreement, the arbitrators may grant any remedy or relief they deem just and
equitable, including any provisional and injunctive remedies available at law or
in equity (in which case the party receiving such relief may apply to the court
of competent jurisdiction for enforcement of such provisional or injunctive
order, without prejudice to the continued arbitration of the matter); provided,
however, that the AAA may, upon the demand of any party to the controversy,
claim, or dispute, administratively appoint a single "provisional relief"
arbitrator on an expedited basis to consider any request for, and grant, such
provisional or injunctive remedy; and provided further, that the arbitrators
shall award reasonable attorneys' fees and expenses to the prevailing party. The
arbitrators will resolve all disputes in accordance with the laws of the State
of Delaware. The arbitrators will be knowledgeable in the subject matter of the
dispute. The arbitrators will make specific, written findings of fact and
conclusions of law. The arbitrators' findings of fact will be binding on all
parties and will not be subject to further review.
ARTICLE 12
BUY-SELL OPTION
---------------
Section 12.1 Exercise. At any time there exists a Major Dispute, in which
case either Member may be an initiating party, or at any time a Removal Event
has occurred or exists with respect to the Developer Member, in which case only
the GECC Member may be the initiating party, or in the event of an Unpermitted
Transfer, in which case only the non-transferring Member may be the initiating
party, or at any time there should exist or occur a Project Capital Contribution
Default or an Additional Capital Contribution Default Event, in which case only
the non-defaulting Member may be the initiating party, or at any time the
Buy-Sell Option is exercised under the Other Company LLC Agreement, in which
case only the Member exercising the Buy-Sell Option under the Other Company LLC
Agreement may be the initiating party of the Buy-Sell Option under this
Agreement, then the Member which is permitted to be the initiating party under
this Section 12.1, may exercise its right to initiate the provisions of this
Article 12 (the "Buy-Sell Option"). The Member desiring to exercise the Buy-Sell
Option (the "Offeror") shall do so by giving notice (the "Initiating Notice") to
the other Member (the "Offeree") setting forth a statement of intent to invoke
its rights under this Article 12, stating therein the aggregate dollar amount
(the "Valuation Amount") which the Offeror would be willing to pay for the
assets of the Company as of the Closing Date (defined below) free and clear of
all liabilities (other than any and all Default Loans), and setting forth all
oral or written offers and inquiries received by the Offeror during the previous
12-month period relating to the financing,
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disposition or leasing of any Company property (including proposals for the
formation of a new entity for the ownership and operation of the Projects).
After receipt of such notice the Offeree shall elect either to (1) sell its
entire Membership Interest to the Offeror for an amount equal to the amount the
Offeree would have been entitled to receive if the Company had sold its assets
for the Valuation Amount on the Closing Date and the Company had immediately
paid all Company liabilities (including any and all Default Loans) and Imputed
Closing Costs and distributed the net proceeds of sale to the Members in
satisfaction of their interests in the Company pursuant to Section 10.2, or (2)
purchase the entire Membership Interest of the Offeror for an amount equal to
the amount the Offeror would have been entitled to receive if the Company had
sold all of its assets for the Valuation Amount on the Closing Date and the
Company had immediately paid all Company liabilities (including any and all
Default Loans) and Imputed Closing Costs and distributed the net proceeds of the
sale to the Members in satisfaction of their interests in the Company pursuant
to Section 10.2 (including repayment of any and all Default Loans held by the
selling Member to the extent of available proceeds). If the Buy-Sell Option is
exercised following the existence of a Major Dispute or an Unpermitted Transfer,
then the Offeree shall have 90 days after the giving of the Offeror's notice in
which to exercise either of its options by giving written notice to the Offeror;
provided, however, if the Offeree elects to buy the Offeror's entire Membership
Interest, such election shall be deemed made subject to the Offeree's ability to
obtain financing on terms reasonably acceptable to the Offeree and the Offeree
shall pursue such financing diligently and in good faith. If the Buy-Sell Option
is exercised in any other event, then the Offeree shall have 30 days after the
giving of the Offeror's notice in which to exercise either of its options by
giving written notice to the Offeror but any election to buy the Offeror's
Membership Interest shall not be made subject to the Offeree's ability to obtain
financing. If the Offeree does not elect to acquire the Offeror's Membership
Interest within the applicable time period, the Offeree shall be deemed to have
elected to sell its interest to the Offeror. Within one hundred-sixty (160) days
after the Initiating Notice (unless the election to buy has been sooner
rescinded as hereafter provided), in the event the Buy-Sell Option is exercised
following a Major Dispute or an Unpermitted Transfer, or within three (3)
Business Days after an election has been made under this Section 12.1 (whether
deemed or otherwise), in the event the Buy-Sell Option is exercised in any other
case, the acquiring Member shall deposit with the selling Member an earnest
money deposit in an amount equal to five percent (5%) of the amount the selling
Member is entitled to receive for its Membership Interest under this Section
12.1, which deposit will be applied to the purchase price at Closing. If the
Offeree's election to buy the Offeror's Membership Interest has been deemed made
subject to its ability to obtain financing as provided above, then (a) the
Offeree shall rescind its election to buy at such time as the Offeree determines
that such financing is unavailable on terms reasonably acceptable to the
Offeree, but in no event later than one hundred-sixty (160) days after the
Initiating Notice (the Offeree's failure so to rescind being a waiver of the
financing condition and any right so to rescind), and thereafter (b) either (i)
in the case of the exercise of the Buy-Sell Option following an Unpermitted
Transfer, the Offeror shall have the option (but shall not be obligated), such
option to be exercised within thirty (30) days after the Offeree's recission of
its election to purchase, or (ii) in the case of an exercise of the Buy-Sell
Option following the existence of a Major Dispute, the Offeror shall have the
obligation, to buy the Offeree's Membership Interest on the terms set forth
above, including the required earnest money deposit, any such Closing to occur
not later than two hundred ten (2l0) days after the Initiating Notice.
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Section 12.2 Closing. The closing of an acquisition pursuant to Sections
12.1 through 12.3 shall be held at the principal place of business of the
Company on a mutually acceptable date (the "Closing Date") not later than 180
days after the Initiating Notice, in the event the Buy-Sell Option is exercised
following the existence of a Major Dispute or an Unpermitted Transfer or 120
days after the Initiating Notice in any other event. At the Closing of the
disposition and acquisition of such interests the following shall occur:
(a) The selling Member shall assign to the acquiring Member or its
designee the selling Member's Membership Interest in accordance with the
instructions of the acquiring Member, and shall execute and deliver to the
acquiring Member or its designee all documents which may be reasonably required
to give effect to the disposition and acquisition of such interests, in each
case free and clear of all liens, claims, and encumbrances, with covenants of
general warranty;
(b) If the selling Member holds any Default Loans as of the Closing
Date, then such Default Loans shall be assigned, without recourse and without
warranty to the acquiring Member or its designee and the selling Member shall
execute and deliver to the acquiring Member or its designee all documents which
may be reasonably required to give effect to such assignment (for the avoidance
of doubt, the assignment of any such Default Loans by the selling Member to the
acquiring Member or its designee shall in no way affect the purchase price due
the selling Member in accordance with this Article 12 which will be determined,
in part, by the amount of any Default Loans held by the selling Member
immediately prior to the assignment thereof in accordance with this Subsection
12.2(b)); and
(c) The acquiring Member shall pay to the selling Member the
consideration therefor in cash.
Section 12.3 Default.
(a) If the acquiring Member should default in its obligation to buy in
accordance with this Article 12, the selling Member shall exercise one of the
following alternative remedies within thirty (30) days after the acquiring
Member's default as the selling Member's sole and exclusive remedy for such
default:
(1) The selling Member shall purchase the acquiring Member's
Membership Interest on the terms set forth above, such closing to occur not
later than two hundred-ten (210) days after the Initiating Notice; or
(2) The selling Member shall retain the earnest money deposit as
full liquidated damages for such default of the acquiring Member, the Members
hereby acknowledging and agreeing that it is impossible to more precisely
estimate the damages to be suffered by the selling Member upon the acquiring
Member's default and the Members acknowledge and agree that the earnest money
deposit which may be retained by the selling Member is intended not as a
penalty, but as full liquidated damages for such default of the acquiring
Member. In the event the acquiring Member failed to make its earnest money
deposit as required in Section 12.1 hereof and the selling Member has elected
its remedy under this Section 12.3(b), then the selling Member shall have the
right to recover an award or judgment
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against the acquiring Member in the amount of such required earnest money
deposit, together with its reasonable attorneys' fee and costs incurred in
obtaining such award or judgment.
(b) If the selling Member should default in its obligation to sell in
accordance with this Article 12, the acquiring Member shall exercise one of the
following alternative remedies within thirty (30) days after the selling
Member's default as the acquiring Member's sole and exclusive remedy for such
default:
(1) The acquiring Member shall be entitled to demand and receive
a return of its earnest money deposit previously deposited with the selling
Member; or
(2) The acquiring Member shall be entitled to seek specific
performance of the selling Member's obligations under this Article 12, the
Members' expressly agreeing that the remedy at law for breach of the obligations
of the selling Member set forth in this Article 12 is inadequate in view of (A)
the complexities and uncertainties in measuring the actual damage to be
sustained by the acquiring Member on account of the default of the selling
Member, and (B) the uniqueness of the Company business and the Members'
relationships.
Section 12.4 Payment of Debts. If, at the Closing Date, the selling Member
has any outstanding debts to the Company or the acquiring Member relating to the
Company, all proceeds of the purchase price due the selling Member for its
Membership Interest will be paid to the Company or the acquiring Member (pro
rata in accordance with the amounts owed by the selling Member to each) for and
on behalf of the selling Member until all the debts will have been paid and
discharged in full.
Section 12.5 Payment of Loans Held by GECC. If the Developer Member is the
acquiring Member under this Article 12 and if on the Closing Date under this
Article 12 the Company or any Subsidiary is then indebted to GECC, then, as a
condition to closing under this Article 12, all such loans then held by GECC
will be modified to provide that, at the option of the holder thereof, any or
all such loans will become due and payable, if not sooner due, on that date
which is 18 months after the Closing Date.
Section 12.6 Release of Capital Contribution Obligations. At the time of
closing pursuant to this Article 12, each selling Member will be released from
any further obligation to make Capital Contributions to the Company.
Section 12.7 Offset. The acquiring Member will be entitled to deduct from
the amounts otherwise payable to the selling Member any and all amounts owed to
the acquiring Member, including damages owed by reason of any default, to the
extent agreed by the parties or to the extent such damages have been reduced to
an arbitration award or a final nonappealable judgment, as applicable.
Section 12.8 Minimum Purchase Price. Notwithstanding anything to the
contrary contained in this Agreement, in no event will the purchase price paid
for a Membership Interest pursuant to this Article 12 be less than zero.
Section 12.9 Operations in Pre-Closing Period. From the date the Initiating
Notice is given until the date the closing occurs under this Article 12 or, if
earlier, the date on which the
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Members agree not to proceed with such closing, the Company will continue to be
operated in the ordinary course, as if the closing were not going to occur, the
Members, the Manager and the Executive Committee will continue to have all power
and authority granted in this Agreement (including the power to make
distributions), and the Members will exercise their power and authority in good
faith and without regard to the fact that such closing may occur; provided,
however, that, without the approval of both Members (i) no Pursuit Costs may be
incurred during such period with respect to any Target or Project for which the
Final Presentation has not been approved by the Executive Committee at the
beginning of such period, (ii) the Manager will not submit any additional
Targets to the Executive Committee for approval, (iii) any and all distributions
received by the selling Member from the Company during such period representing
distributions of Capital Proceeds shall be credited against and reduce the price
otherwise payable to the selling Member for its Membership Interest and any
Project Capital Contributions made by the selling Member to the Company during
such period and a return thereon at seventeen percent (17%) per annum shall be
added to and increase the price otherwise payable to the selling Member for its
Membership Interest, and (iv) neither the Company nor any Subsidiary shall enter
into any contracts or agreements, or otherwise agree, to sell or otherwise
dispose of any of the Projects; however, the Company and each Subsidiary shall
be authorized to consummate any transactions which were the subject of binding
contractual obligations entered into prior to the commencement of such period.
Section 12.10 Suspension of Rights Under Articles 13 and 14. Notwithstanding
anything to the contrary contained in this Agreement, at any time a Member has
exercised the Buy-Sell Option in accordance with this Article 12, then the
Members' respective rights under Articles 13 and 14 shall not be exercised
unless and until the initiation of the Buy-Sell Option is withdrawn or rescinded
by the Offeror or unless and until the occurrence of a breach or default with
respect to the Buy-Sell Option by the acquiring Member.
Section 12.11 Changes in Distribution Rights. In the event following the
exercise by a Member of the Buy-Sell Option, a Member's right to distributions
of Available Cash are modified as provided elsewhere in this Agreement, then the
amount due the selling Member on the Closing Date shall be determined in
accordance with such modified distribution rights set forth in Schedule 6.3(b)
hereto.
ARTICLE 13
REQUIRED SALE; RIGHT OF FIRST OFFER
-----------------------------------
Section 13.1 Offers. Subject always to Section 13.3 hereof, if at any time
and from time to time following a Project's Permitted Sale Date, either Member
desires to offer a Project or a group of Projects (all of whose respective
Permitted Sale Dates have previously occurred) then owned by the Company or its
Subsidiaries for sale on specified terms (including the sales price, method of
payment, anticipated closing date measured from the date of any to-be-executed
contract, and in the case of a group of Projects, whether such Projects would be
sold in a single transaction or in a series of transactions), or receives from a
third-party purchaser not Affiliated with such Member a bona fide written cash
offer (i.e., not seller financed) for the purchase of such Project or Projects
on terms which such Member desires for the Company to accept (such specified
terms or bona fide offer being herein called the "Offer"), then the Member
desiring to
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make or accept the Offer (the "Initiating Member") shall provide notice of the
terms of such Offer (the "Sale Notice") to the other Member (the Non-Initiating
Member"). Any Offer must be in an amount at least equal to the amount of all
indebtedness secured by the Projects which are offered to be sold. A Member's
rights under this Section 13.1 may be exercised (1) on a Project by Project
basis, or (2) with respect to any number of Projects so long as the Projects
covered by the Offer do not represent all or substantially of the Projects then
owned by the Company. Additionally, Developer Member may not exercise this right
if a Removal Event has occurred with respect to it.
Section 13.2 Response. The Non-Initiating Member shall have 15 Business Days
from the date of the Sale Notice (the "Response Period") to provide notice to
the Initiating Member of its willingness or unwillingness to make or accept the
Offer; failure to deliver such notice shall constitute an election to sell the
Project or Projects on the terms of the Offer.
(a) Offer Unacceptable. If the Non-Initiating Member does not desire
for the Company to make or accept the Offer, the Initiating Member may elect to
sell such Project or Projects to the Non-Initiating Member, in which case the
Non-Initiating Member shall purchase, the Project or Projects covered by such
Offer on the terms set forth in the Offer. The Initiating Member must exercise
this option, if at all, by delivering written notice thereof to the
Non-Initiating Member within ten (10) Business Days after the end of the
Response Period. Closing shall take place on or before the date as specified in
the Sale Notice, but if the Non-Initiating Member is purchasing the Project or
Projects in accordance with the first sentence of this Section 13.2(a), then the
Non-Initiating Member shall have until 120 days after the Sale Notice in which
to close. If the Initiating Member or the Non-Initiating Member defaults at
closing, the non-defaulting party shall have the right to bring suit for
damages, for specific performance, or exercise any other remedy available at law
or in equity. Upon payment at closing, the Company and the Non-Initiating Member
shall execute and deliver all documents reasonably required to transfer the
Project or Projects being sold.
(b) Offer Acceptable. If the Non-Initiating Member consents to the
Company selling the Project or Projects on the terms of the Offer, then the
Initiating Member shall be permitted to sell the Projects on behalf of the
Company for cash at a price not less than 95% of the price set forth in the
Offer and substantially on the other terms and conditions set forth in the Offer
for a period of up to 180 days following the expiration of the Response Period.
If the Initiating Member obtains a bona fide third party contract to sell the
Projects for cash at a price not less than 95% of the price set forth in the
Offer and substantially on the other terms and conditions set forth in the Offer
within such 180-day period, the Initiating Member shall have an additional
period of 60 days after the date of such contract (that is, within 240 days
after the Sale Notice) in which to consummate the sale. If after having received
the consent of the Non-Initiating Member to the sale of the Project or Projects
substantially on the terms of the Offer, the Initiating Member is unable to
obtain a bona fide contract to sell the Projects for cash at a price not less
than 95% of the price set forth in the Offer and substantially on the other
terms and conditions set forth in the Offer within such 180-day period, or if
after having obtained such bona fide contract, the Initiating Member is unable
to consummate such sale within 240 days after the Sale Notice, then the
Initiating Member must again submit an Offer to the Non-Initiating Member under
the terms of this Article 13 before it may sell any Project or Projects pursuant
to this Article 13.
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(c) Further Right of First Refusal. If the Initiating Member obtains a
bona fide third party offer to purchase the Projects within the 180-day period
after the Sale Notice at a price and on other terms and conditions that the
Initiating Member desires to accept but the purchase price is less than 95% of
the price set forth in the Offer or otherwise does not substantially conform to
the terms and conditions set forth in the Offer (a "Nonconforming Offer"), the
Initiating Member shall provide the Non-Initiating Member with a copy of the
Nonconforming Offer and the Non-Initiating Member shall have the option to
purchase such Project or Projects covered by the Nonconforming Offer from the
Company at the price and on the other terms and conditions set forth in the
Nonconforming Offer, including the closing date. The Non-Initiating Member must
exercise this option, if at all, by delivering written notice thereof to the
Initiating Member within 20 days after the Non-Initiating Member's receipt of
the Nonconforming Offer. Closing shall take place on or before the date as
specified in the Nonconforming Offer. Failure of the Non-Initiating Member to
exercise such option within such 20 period shall be deemed a waiver of such
option to purchase and a consent to the Company's sale of the Project or
Projects to such third-party at the price and on the other terms and conditions
set forth in the Nonconforming Offer. If the Non-Initiating Member defaults at
closing, the Initiating Member shall have the right to bring suit for damages,
for specific performance, or exercise any other remedy available at law or in
equity. Upon payment at closing, the Company and the Non-Initiating Member shall
execute and deliver all documents reasonably required to transfer the Project or
Projects being sold.
(d) Sale By the Company. In the event of a purchase of the Project or
Projects by the Non-Initiating Member in accordance with this Article 13 or in
the event of the sale of the Project or Projects to a third party in accordance
with this Article 13, the sale will be treated as a sale by the Company (or its
Subsidiaries), and the Available Cash resulting therefrom shall be distributed
accordingly. At the request of either Member and so long as the same can be
accomplished at no additional cost, expense or delay to the Company and so long
as the Company or a Subsidiary is not required to take title to any exchange
property, the Members will give fair consideration to, but will be under no
obligation to implement, any structure proposed by the requesting member for
disposing of any such Project or Projects in a manner that permits the
requesting Member to report its share of the sales proceeds as a tax-free
exchange under Section 1031 of the Code.
Section 13.3 REIT Limitation. Prior to the fifth (5th) anniversary of the
Effective Date, a Member's rights to effect a sale of a Project or Projects
pursuant to this Article 13 shall not be exercised if nationally recognized tax
counsel to SUSA reasonably determines in a written opinion addressed to the
Company (a copy of which must be delivered to the GECC Member at or prior to the
end of the Response Period) that the sale of such Project or Projects on the
terms set forth in the Sale Notice by the Company or a Subsidiary would create a
material risk that SUSA would incur taxes under Section 857(b)(6) of the Code
(determined as if the Company were the sole investment of the Developer Member
and SUSA). Notwithstanding anything in this Section to the contrary, if the
opinion contemplated in the first sentence of this Section is not timely
delivered or in any event after the fifth (5th) anniversary of the Effective
Date, the restriction in the preceding sentence shall no longer be applicable
and a Member may exercise its rights under this Article 13 without regard to the
impact of such sale or sales on the tax liability of the Developer Member or
SUSA.
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Section 13.4 No Suspension of Rights Under Articles 12 and 14.
Notwithstanding anything to the contrary contained in this Agreement, a Member's
exercise of its rights under this Article 13 shall not affect or prevent a
Member's exercise of its rights under Article 12 or 14 hereof but any such
exercise of rights shall be subject to the sale of any Project or Projects in
accordance with this Article 13.
ARTICLE 14
MARKETING RIGHT
---------------
Section 14.1 Marketing Right. Subject always to Section 14.6 hereof, at any
time there exists a Major Dispute, in which case either Member may be an
initiating party, or at any time after the Commitment Termination Date, in which
case either Member may be an initiating party, or in the event Bankruptcy shall
occur or exist with respect to a Member (or in the case of the Developer Member,
SUSA) in which case the other Member may be the initiating party, or at any time
a Removal Event has occurred or exists with respect to the Developer Member, in
which case only the GECC Member may be the initiating party, or in the event of
an Unpermitted Transfer, in which case only the non-transferring Member may be
the initiating party, or at any time there should exist a Project Capital
Contribution Default or an Additional Capital Contribution Default Event, in
which case only the non-defaulting Member may be the initiating party, or at any
time the Marketing Right is exercised under the Other Company LLC Agreement, in
which case only the Member exercising the Marketing Right under the Other
Company LLC Agreement may be the initiating party of the Marketing Right under
this Agreement, then the Member which is permitted to be the initiating party
under this Section 14.1, may exercise its right to initiate the provisions of
this Article 14 (the "Marketing Right"). The Member desiring to exercise the
Marketing Right (the "Moving Member") shall do so by giving notice (the
"Marketing Notice") to the other Member setting forth a statement of intent to
invoke its rights under this Article 14 and stating therein (i) the names of
three (3) nationally recognized investment banking firms or real estate
investment brokers, not an Affiliate of the Moving Member, selected from the
list of such firms attached hereto as Schedule 14.1 (as such list may be amended
from time to time as hereinafter provided), which the Moving Member proposes to
retain on behalf of the Company to manage and oversee the sale of all or
substantially all of the Projects then owned by the Company and its
Subsidiaries, together with a copy of each such firm's proposal describing the
services to be undertaken by such firm and the compensation that would be
payable to such firm in connection with any such transaction, and (ii) the
material terms on which such sale would be effected (including a sales price,
method of payment, anticipated closing date measured from the date of any
to-be-executed contracts, and whether the Project would be offered for sale as
an entirety in a single portfolio or in selected portfolios. Within thirty (30)
days after its receipt of the Marketing Notice, the other Member will select one
of the investment banking firms or investment brokers named in the Marketing
Notice as the firm (the "Marketing Firm") which will be retained by the Company
to manage and oversee the sale of substantially all of the Projects then owned
by the Company and its Subsidiaries. If the other Member fails to select one of
such firms within such thirty (30) day period, then the Moving Member shall have
the right to select the Marketing Firm from the list of such firms set forth in
the Marketing Notice. The Marketing Firm thus selected shall proceed to value
all of the Projects then owned by the Company and its Subsidiaries and shall
offer them for sale in accordance with the Marketing Notice at a fair market
price and on such other terms
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and conditions as the Marketing Firm shall deem consistent with then market
practices. After advising the Executive Committee concerning any offer or offers
received by it, the Marketing Firm may accept such offer or offers as it may
have received for the sale and purchase of substantially all of the Projects,
all on such terms and conditions as the Marketing Firm shall deem appropriate.
The Manager and, to the extent required, both Members shall execute such
documents as may be required to effect the sale and disposition of the Projects
at the price and on the other terms and conditions approved by the Marketing
Firm.
Section 14.2 Right of Either Member to Bid. Both Members will have the right
to bid for and purchase the Projects so offered for sale by the Marketing Firm
on the same terms and conditions as potential third-party purchasers.
Section 14.3 Sale By the Company. In the event of a sale of the Projects in
accordance with this Article 14, the sale will be treated as a sale by the
Company (or its Subsidiaries), and the Available Cash resulting therefrom shall
be distributed accordingly. Any sale or other disposition of assets in
accordance with this Article 14 may be affected as a sale of the Projects by the
Subsidiaries or as a sale by the Company of its interests in the Subsidiaries,
or any combination thereof. Any and all costs and expenses, including the fees
and expenses of the Marketing Firm, incurred by the Company in connection with
the sale or sales of assets pursuant to this Article 14 shall be paid by the
Company.
Section 14.4 Changes to Schedule 14.1. At any time and from time to time the
Executive Committee, by unanimous action, may amend the list of firms and
brokers set forth on Schedule 14.1 hereto by adding additional firms or brokers
or by removing any such firms or brokers.
Section 14.5 Operations in Pre-Closing Period. From the date the Marketing
Notice is given until the date the last closing occurs under this Article 14 or,
if earlier, the date on which the Members agree not to proceed with any such
transaction pursuant to this Article 14, the Company will continue to be
operated in the ordinary course, as if the closing or closings were not going to
occur, the Members, the Manager and the Executive Committee will continue to
have all power and authority granted in this Agreement (including the power to
make distributions) and the Members will exercise their power and authority in
good faith and without regard to the fact that such transaction or transactions
may occur; provided, however, that, without the approval of both Members, (i) no
Pursuit Costs may be incurred during such period with respect to any such Target
or Project for which the Final Presentation has not been approved by the
Executive Committee at the beginning of such period, (ii) the Manager will not
submit any additional Targets to the Executive Committee for approval, and (iii)
neither the Company nor any Subsidiary shall enter into any contract or
agreements, or otherwise agree, to sell or otherwise dispose of any of the
Projects except pursuant to this Article 14; however, the Company and each
Subsidiary shall be authorized to consummate any transactions which were the
subject of binding contractual obligations entered into prior to the
commencement of such period.
Section 14.6 REIT Limitation. Prior to the fifth (5th) anniversary of the
Effective Date, a Member's rights to exercise the Marketing Right pursuant to
this Article 14 shall not be exercised if nationally recognized tax counsel to
SUSA reasonably determines in a written
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opinion addressed to the Company (a copy of which must be delivered to the GECC
Member within thirty (30) days after the Marketing Notice) that the consummation
of the sale of substantially all of the Projects then owned, directly or
indirectly, by the Company on the terms set forth in the Marketing Notice would
create a material risk that SUSA would incur taxes under Section 857(b)(6) of
the Code (determined as if the Company were the sole investment of the Developer
Member and SUSA). Notwithstanding anything in this Section 14.6 to the contrary,
if the opinion contemplated in the first sentence of this Section is not timely
delivered or if at any time Bankruptcy should occur or exist with respect to the
Developer Member or SUSA or in any event after the fifth (5th) anniversary of
the Effective Date, the restriction in the preceding sentence shall no longer be
applicable and a Member may exercise its rights under this Article 14 without
regard to the impact of such sale or sales on the tax liability of the Developer
Member or SUSA.
Section 14.7 Suspension of Rights Under Articles 12 and 13. Notwithstanding
anything to the contrary contained in this Agreement, at any time a Member has
exercised the Marketing Right under this Article 14, then the Members'
respective rights under Articles 12 and 13 shall not be exercised unless and
until the initiation of the Marketing Right in accordance with this Article 14
is withdrawn or rescinded by the Moving Member or unless and until the
transaction provided for under this Article 14 has been concluded.
Section 14.8 Changes in Distribution Rights. In the event following the
exercise by a Member of the Marketing Right, a Member's right to distributions
of Available Cash are modified as provided elsewhere in this Agreement, then the
amounts due the Members on the Closing Date shall be determined in accordance
with such modified distribution rights set forth in Schedule 6.3(b) hereto.
ARTICLE 15
SPECIAL PURCHASE RIGHT
----------------------
In addition to all other rights and remedies available to the Electing
Member under this Agreement or the Other Company LLC Agreement, at law, in
equity or otherwise, upon the occurrence or existence of Cause with respect to
the Developer Member under this Agreement or under the Other Company LLC
Agreement (in which case the Developer Member shall be a "Special Defaulting
Member") or in the event of a Project Capital Contribution Default by either
Member under this Agreement or under the Other Company LLC Agreement (in which
case such Member shall be a "Special Defaulting Member"), then the other Member
(the "Electing Member") may, by delivering written notice thereof to the Special
Defaulting Member, at any time thereafter elect to purchase the Membership
Interest of the Special Defaulting Member in the Company and the Other Company
for a purchase price equal to the difference between (A) the lesser of (i) the
fair market value of the Special Defaulting Member's Membership Interest in the
Company and the Other Company taking into account any changes to such Special
Defaulting Member's distribution rights in accordance with Schedule 6.3(b)
hereto) or (ii) the unreturned Capital Contributions of the Special Defaulting
Member in the Company and the Other Company (as determined by the Auditor whose
determination shall be binding on the Members absent manifest error) less (B)
all damages and costs incurred by the Company and the Other Company in
connection with the event giving rise to such purchase. The fair market
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value of the Membership Interest of the Special Defaulting Member shall be
determined by the Electing Member and the Special Defaulting Member within 30
days after the Electing Member elects to purchase such Membership Interests. If
the Members are unable to agree on the fair market value of such Membership
Interests, the Electing Member, by notice to the Special Defaulting Member, may
require the determination of the fair market value to be made by an independent
appraiser specified in that notice. If the Special Defaulting Member objects to
the independent appraiser designated therein within ten days after it receives
such notice and the Electing Member and the Special Defaulting Member fail to
agree on an independent appraiser, then either Member may request that the
Atlanta, Georgia office of the AAA designate an independent appraiser, in which
case the selection of the appraiser by the AAA shall be binding on the parties.
The Company shall pay the cost of the appraisal. The closing of such transaction
shall occur within 30 days after the purchase price for the Membership Interests
is finally determined.
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Executed effective as of the date above written.
MEMBERS: SUSA PARTNERSHIP, L.P.
BY: STORAGE USA, INC., General Partner
By: /s/Christopher P. Marr
------------------------------------
Name: Christopher P. Marr
Title: Chief Financial Officer
Address: 165 Madison Ave, Ste 1300
Memphis, TN 38103
Taxpayer Identification
Number: 62-1554135
STORAGE VENTURES, L.P., a Delaware limited
partnership
BY: MF Funding, Inc., a Delaware corporation,
General Partner
By: /s/Mark Dawejko
-------------------------------------
Name: Mark Dawejko
Title: Vice President
Address: c/o GE Capital Real Estate
Attn: Legal Operations
(Project SUSA)
292 Long Ridge Road
Stamford, CT 06927
Taxpayer Identification
Number: 58-2499649
-88-
<PAGE>
STORAGE USA. INC. is a signatory to this Agreement in its individual capacity to
evidence its agreement to those provisions of this Agreement that are binding on
it, including Section 4.6 and Section 7.2.
STORAGE USA, INC., a Tennessee corporation
By: /s/Christopher P. Marr
------------------------------------------
Name: Christopher P. Marr
Title: Chief Financial Officer
Address: 165 Madison Ave, Ste 1300
Memphis, TN 38103
-89-
<PAGE>
GECC DOCUMENT INDEX - STORAGE DEVELOPMENT PORTFOLIO, L.L.C.
Schedule 1.1(AIP) Approved Investment Parameters
Schedule l.l(FP) Required Information for Final Presentation
Schedule 1.1(INS) Insurance Program
Schedule 1.1(IP) Company's Ethical Business Policy
Schedule 1.1 (Engineers)
Schedule 1.1 (Environmental)
Schedule l.l(PB) Performance Benchmarks
Schedule l.l(PR) Prohibited Radius
Schedule 2.5(c) Form of Subsidiary Operating Agreement
Schedule 2.8 Developer Member's Representation and Warranties
Schedule 2.9 GECC Member's Representation and Warranties
Schedule 4.4(a) Development Pipeline Targets
Schedule 4.6(d) Listing of Excluded Properties
Schedule 4.12(a) Management Agreement
Schedule 4.13(a) Form of Development Agreement
Schedule 4.13(b) Form of Construction Contract
Schedule 6.3(b) Modified Distribution Rights
Schedule 14.1 Approved Investment Banking Firms
<PAGE>
SCHEDULE 1.1 (PB)
PERFORMANCE BENCHMARKS
Volume Thresholds
Acquisitions $90MM
Developments $35MM in addition to the current pipeline
in no event less than $70MM in total.
Volume Mix in Ventures No greater than 1:1 Development:Acquisitions
Pipeline Deals SUSA will present 14 deals identified on
Schedule 4.4 (a) to GE at cost (including
normal fees and carry).
Geographic Diversity No more than 15% of total volume in any one
market.
Cost overruns
Credited Cost Overruns Not more than 3% of total development costs
cumulatively.
Total Cost overruns Not more than 5% total development costs
cumulatively.
Business Plan Year 2001 Business Plan submitted to
Executive Committee for approval.
Financial Performance
Acquisition NOI Not more than 10% off of plan cumulatively.
Development Lease Up Not more than 10% off of plan cumulatively.
Construction Completion Average Completion dates not more than 45
days late. Not more than one property 120
days late or more.
<PAGE>
SCHEDULE 2.8
------------
1. Organization and Good Standing.
(a) Each of the Developer Member and SUSA (i) is a partnership or
corporation, as the case may be, duly organized, validly existing and in good
standing under the laws of the State of Tennessee, (ii) is duly qualified and in
good standing and authorized to do business in every other jurisdiction where
ownership of its properties or the conduct of its business requires it to be so
qualified, except where the failure to do so would not have a Material Adverse
Effect (as defined below), and (iii) has the requisite partnership or corporate
power and authority to own its properties and to carry on its business as now
conducted and as proposed to be conducted.
(b) As used in this Schedule 2.8, the term "Material Adverse Effect"
means any event, circumstance or condition that has or is reasonably expected to
have a material adverse effect on the business, assets, properties, liabilities,
operations (or the results thereof) or condition (financial or otherwise) of the
Developer Member, SUSA and their respective Subsidiaries taken as a whole or
that would materially impair the Developer Member's or SUSA's ability to perform
its obligations under this Agreement.
(c) As used in this Schedule 2.8, the term "Subsidiaries" means all
entities that would be treated as consolidated subsidiaries of the Developer
Member or SUSA for financial accounting purposes under generally accepted
accounting principles as applied in the United States of America ("GAAP").
2. Due Authorization. Each of the Developer Member and SUSA (a) has the
requisite partnership or corporate, as the case may be, power and authority (i)
to execute, deliver and perform this Agreement, (ii) to consummate the
transactions contemplated by this Agreement, and (iii) to incur the obligations
provided for in this Agreement, and (b) is duly authorized to, and has been
authorized by all necessary partnership or corporate, as the case may be, action
to, execute, deliver and perform this Agreement and to consummate the
transactions contemplated by this Agreement
3. No Conflicts. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated in this Agreement, nor the
performance of and compliance with the terms and provisions of this Agreement by
the Developer Member or SUSA will (a) violate or conflict, in each case, in any
material respect, with any provision of its organizational documents, (b)
violate, contravene or conflict with any law, regulation, order, writ, judgment,
injunction, decree or permit applicable to it, (c) violate, contravene or
conflict with contractual provisions of, or cause an event of default under, any
indenture, loan agreement, mortgage, deed of trust, security agreement, contract
or other agreement or instrument to which it is a party or by which it or any of
its assets or properties may be bound, or (d) result in the creation of any lien
or other encumbrance upon or with respect to any of its assets or properties,
which, in any such case, would result in a Material Adverse Effect.
PAGE 1 OF SCHEDULE 2.8
<PAGE>
4. Consents. No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or third
party in respect of the Developer Member or SUSA is required in connection with
the execution, delivery or performance of this Agreement by the Developer Member
or SUSA or to consummate the transactions contemplated by this Agreement.
5. Enforceable Obligations. This Agreement and all other documents executed
in connection herewith have been duly executed and delivered by, and constitute
legal, valid and binding obligations of, the Developer Member and SUSA, as
applicable, enforceable against the Developer Member and SUSA, as applicable, in
accordance with their respective terms, except as may be limited by bankruptcy
or insolvency laws or similar laws affecting creditors' rights generally or by
general equitable principles.
6. No Default. Neither the Developer Member nor SUSA is in default in any
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound, except for such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.
7. Investment Company. Neither the Developer Member nor SUSA is required to
register as an "investment company" and neither the Developer Member nor SUSA
is, to the knowledge of the Developer Member, directly or indirectly controlled
by any Person which is required to register as an "investment company", within
the meaning of and under the Investment Company Act of 1940, as amended.
8. SEC Reports. The Developer Member has provided to the GECC Member true
and complete copies of each report and proxy statement filed by the Developer
Member and SUSA with the United States Securities and Exchange Commission since
January 1, 1999 (collectively, the "Company SEC Reports"), all of which, as of
their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder. None of such Company SEC Reports, as of the respective
dates they were filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the audited consolidated financial
statements of the Developer Member and SUSA (including any related notes and
schedules) included (incorporated by reference) in their respect Annual Reports
on Form 10-K for the fiscal year ended December 31, 1998, fairly present, in
conformity with GAAP (except as may be indicated in the notes thereto), the
consolidated financial position of the Developer Member and SUSA and its their
Subsidiaries as of the date thereof and the consolidated results of their
operations and their cash flows for the periods then ended.
9. Compliance with Law. Except as disclosed in any Company SEC Reports, the
Developer Member and SUSA are in compliance with all applicable laws, rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, except to the extent that the failure to be in such compliance would
not have a Material Adverse Effect. The Developer Member and SUSA have all
necessary permits, licenses and other authorizations required to conduct their
businesses as currently conducted, and as proposed to be conducted, except where
- 2 -
<PAGE>
a failure to have such permits, licenses or other authorizations would not have
a Material Adverse Effect. Except as disclosed in the Company SEC Reports,
neither the Developer Member nor SUSA has violated any domestic or foreign law
or any regulation or requirement, which violation has or would be reasonably
likely to have a Material Adverse Effect, and neither the Developer Member nor
SUSA has received notice of any such violation. There are no adverse orders,
judgments, writs, injunctions, decrees or demands of any court or administrative
body, domestic or foreign, or of any other governmental agency or
instrumentality, domestic or foreign, outstanding against the Developer Member
or SUSA which would have a Material Adverse Effect.
10. Intellectual Property. The Developer Member and SUSA own or have the
legal right to use, all service marks, trademarks, trade names, copyrights,
technology, know-how and resources necessary for each of them to conduct its
business as currently conducted.
11. Solvency. Each of the Developer Member and SUSA is and, after
consummation of the transactions contemplated by this Agreement will be,
solvent.
12. Federal Tax Matters.
(a) SUSA is and has been, commencing with SUSA's taxable year ended
1994, qualified to be taxed as a "real estate investment trust" ("REIT") under
Sections 856 through 860 of the Code and the present and contemplated method of
operation, assets and income of the Developer Member, SUSA and the Subsidiaries
presently comply with the requirements for taxation as a REIT under the Code.
(b) Neither the Developer Member nor SUSA is a "foreign person"
within the meaning of Section 1445 or 7701 of the Code.
13. Year 2000. The Developer Member has reviewed and assessed, or caused to
be reviewed and assessed, all areas within its and SUSA's businesses and
operations that could be adversely affected by the risk that computer
applications may not be able to recognize and properly perform date sensitive
functions after December 31, 1999. Based on the foregoing, all computer
applications that are material to the Developer Member's or SUSA's business and
operations are reasonably expected to be Year 2000 Compliant, except to the
extent that a failure to do so is not reasonably expected to have a Material
Adverse Effect.
- 3 -
<PAGE>
SCHEDULE 2.9
------------
1. Organization and Good Standing. The GECC Member (a) is duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(b) is duly qualified and in good standing and authorized to do business in
every other jurisdiction where ownership of its properties or the conduct of its
business requires it to be so qualified, except where the failure to do so would
not have a Material Adverse Effect (as defined below), and (c) has the requisite
partnership power and authority to own its properties and to carry on its
business as now conducted and as proposed to be conducted. As used in this
Schedule 2.9, the term "Material Adverse Effect" means any event, circumstance
or condition that has or is reasonably expected to have a material adverse
effect on the business, assets, properties, liabilities, operations (and the
results thereof), or condition (financial or otherwise) of the GECC Member taken
as a whole or that would materially impair the GECC Member's ability to perform
its obligations under this Agreement.
2. Due Authorization. The GECC Member (a) has the requisite partnership
power and authority (i) to execute, deliver and perform this Agreement, (ii) to
consummate the transactions contemplated by this Agreement, and (iii) to incur
the obligations provided for in this Agreement, and (b) is duly authorized to,
and has been authorized by all necessary partnership action to, execute, deliver
and perform this Agreement and to consummate the transactions contemplated by
this Agreement.
3. No Conflicts. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated in this Agreement, nor the
performance of and compliance with the terms and provisions of this Agreement by
the GECC will (a) violate or conflict with any provision of its organizational
documents, (b) violate, contravene or conflict, in each case, in any material
respect, with any law, regulation, order, writ, judgment, injunction, decree or
permit applicable to it, (c) violate, contravene or conflict with contractual
provisions of, or cause an event of default under, any indenture, loan
agreement, mortgage, deed of trust, contract or other agreement or instrument to
which it is a party or by which it or any of its assets or properties may be
bound, or (d) result in the creation of any lien or other encumbrance upon or
with respect to any of its assets or properties, which, in any such case, would
result in a Material Adverse Effect.
4. Consents. No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or third
party in respect of the GECC Member is required in connection with the
execution, delivery or performance of this Agreement by the GECC Member or to
consummate the transactions contemplated by this Agreement.
5. Enforceable Obligations. This Agreement and all other documents executed
in connection herewith have been duly executed and delivered by, and constitute
legal, valid and binding obligations of, the GECC Member, enforceable against
the GECC Member, as applicable, in accordance with their respective terms,
except as may be limited by bankruptcy or insolvency laws or similar laws
affecting creditors' rights generally or by general equitable principles.
PAGE 1 OF SCHEDULE 2.9
<PAGE>
6. No Default. The GECC Member is not in default in any respect under any
contract, lease, loan agreement, indenture, mortgage, security agreement or
other agreement or obligation to which it is a party or by which any of its
properties is bound, except for such defaults as would not, individually or in
the aggregate, have a Material Adverse Effect.
7. Litigation. There are no actions, suits or legal, equitable, arbitration
or administrative proceedings, pending or, to the knowledge of the GECC Member,
threatened against the GECC Member or any of it properties and assets which, if
adversely determined, would have a Material Adverse Effect.
8. Compliance with Law. The GECC Member is in compliance with all
applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, except to the extent that the failure to be in
such compliance would not have a Material Adverse Effect. The GECC Member has
all necessary permits, licenses and other authorizations required to conduct its
business as currently conducted, and as proposed to be conducted, except where a
failure to have such permits, licenses or other authorizations would not have a
Material Adverse Effect. The GECC Member has not violated any domestic or
foreign law or any regulation or requirement, which violation has or would be
reasonably likely to have a Material Adverse Effect, and the GECC Member has not
received notice of any such violation. There are no adverse orders, judgments,
writs, injunctions, decrees or demands of any court or administrative body,
domestic or foreign, or of any other governmental agency or instrumentality,
domestic or foreign, outstanding against the GECC Member which would have a
Material Adverse Effect.
9. Solvency. The GECC Member is and, after consummation of the transactions
contemplated by this Agreement will be, solvent.
10. Federal Tax Matters. The GECC Member is not a "foreign person" within
the meaning of Section 1445 or 7701 of the Code.
11. Year 2000. The GECC Member has reviewed and assessed, or caused to be
reviewed and assessed, all areas within its business and operations that could
be adversely affected by the risk that computer applications may not be able to
recognize and properly perform date sensitive functions after December 31, 1999.
Based on the foregoing, all computer applications that are material to the
GECC Member's business and operations are reasonably expected to be Year 2000
Compliant, except to the extent that a failure to do so is not reasonably
expected to have a Material Adverse Effect.
PAGE 2 OF SCHEDULE 2.9
<PAGE>
SCHEDULE 4.4(a)
Development Pipeline Targets
1. Soquel/Santa Cruz, CA. New construction involving single and two-story
buildings on a 2.24 acre site at 2900 Soquel, in this community at the
southern end of the San Francisco/San Jose metropolitan area. Property will
include 88,639 gross square feet and 67,600 rentable square feet.
2. Everett/Everett, MA. Conversion of 113,526 square foot building at 329
Second Street in the northern Boston suburb of Everett. Development includes
construction of a free-standing office/apartment. Project will contain
116,526 gross square feet and 77,050 rentable square feet.
3. Spring Street/Herndon, VA. New construction at 250 Spring Street in Herndon,
VA, west of Washington, D.C. The 4.17 acre site will contain single and
split-level buildings aggregating 87,200 gross square feet yielding 75,450
rentable square feet.
4. Boston Post Road/Orange, CT. A 5.2 acre site (after sale of a one-acre
outlot) at 486 Boston Post Road (Connecticut suburb of New York City) that
will include single and multi-story buildings and contain 102,461 gross
square feet resulting in 79,925 rentable square feet.
5. Lodi/Lodi, NJ. 3.7 acre site at Route 17 and Gregg Street (New Jersey suburb
of New York City) that will include single-story and one three-story
buildings and will involve 90,300 gross square feet and 72,650 rentable
square feet.
6. Jericho Turnpike/Commack, NY. A 2.02 acre site at 4057 Jericho Turnpike
(Nassau County, Long Island) that will include one three level building (one
level below grade) grossing 87,775 square feet and netting 63,475 rentable
square feet.
7. Hearn Street/Santa Rosa, CA. A 4.2 acre site at 496 Hearn Street that will
involve single-story and one three-story building(s) and will yield 115,950
gross square feet and 97,800 rentable square feet. Santa Rosa is at the
northern extreme of the San Francisco metropolitan area.
8. Joliet Mall/Joliet, IL. A 4.45 acre site on the ring road of Louis Joliet
Regional Mall that will include single-story buildings and yield 74,275
gross square feet and 63,875 leasable square feet. Joliet is a southwest
suburb of Chicago.
9. Milwaukee Ave./Riverwoods, IL. A 4.6 acre site on the east side of Milwaukee
Avenue that will include single and two-story buildings and yield 100,100
gross square feet and 79,500 leasable square feet. Riverwoods is north of
Chicago.
10. Montvale Ave./Stoneham, MA. A 1.4 acre site in this northern suburb of
Boston that will involve one 4 level building that will contain 84,600 gross
and 61,050 rentable square feet.
PAGE 1 OF SCHEDULE 4.4(a)
<PAGE>
11. Butterfield Rd./Vernon Hills, IL. A 9 acre site at the northeast corner of
US 45 and Butterfield Road in this northern suburb of Chicago. The
single-story buildings comprising this development will include 99,200 gross
square feet and 87,725 leasable square feet.
12. Old Oakland Rd./San Jose, CA. A 1.3 acre site at 1265 Old Oakland Road.
Development will involve one three-story building yielding 81,000 gross and
59,454 net square feet.
13. White Marsh/Baltimore County, MD. A 5.2 acre site in this northern suburb of
Baltimore that will involve single and split level buildings yielding
101,700 gross square feet and 84,250 rentable square feet.
14. Route 202/Yorktown Heights, NY. A 10 acre site in this northern suburb of
New York City that will involve 97,200 gross square feet and 81,900 leasable
square feet (NOT YET CLOSED).
PAGE 2 OF SCHEDULE 4.4(a)
<PAGE>
SCHEDULE 6.3(b)
---------------
Upon either (a) the occurrence or existence of a Removal Event and the
Developer Member's removal as Manager or (b) the occurrence or existence of an
Additional Capital Contribution Default Event with respect to either Member,
then Section 8.2 of the within and foregoing Limited Liability Company Agreement
shall be ipso facto and instanter amended to read as follows:
If the GECC Member is the Additional Capital Defaulting Member:
Section 8.2 Distribution of Available Cash. The Available Cash for any
particular period shall be distributed to the Members in the following order of
priority:
(a) first, to the Members in proportion to and in payment of
their Default Loans until their Default Loans, including both principal and
interest, have been paid in full;
(b) next, to the Members in accordance with their respective
Capital Sharing Ratios until the GECC Member shall have achieved a nine percent
(9%) Internal Rate of Return on its Capital Contributions (including the return
to the GECC Member of all of its Capital Contributions);
(c) next, to the Developer Member in payment of its Preferred
Return on its Credited Cost Overrun Contributions until its Preferred Return
Balance has been reduced to zero;
(d) next, to the Developer Member in return of its Credited Cost
Overrun Contributions until the Credited Cost Overrun Contribution Balance has
been reduced to zero;
(e) last, to the Members in accordance with their Residual
Sharing Ratios.
If a Removal Event occurs or exists with respect to the Developer Member
and the Developer Member is removed as Manager or if the Developer Member is the
Additional Capital Defaulting Member:
Section 8.2 Distribution of Available Cash. The Available Cash for any
particular period shall be distributed to the Members in the following order of
priority:
(a) first, to the Members in proportion to and in payment of
their Default Loans until their Default Loans, including both principal and
interest, have been paid in full;
(b) next, to the Members in accordance with their respective
Capital Sharing Ratios until the GECC Member shall have achieved a seventeen
percent (17%) Internal Rate of Return on its Capital Contributions (including
the return to the GECC Member of all of its Capital Contributions);
(c) next, to the Developer Member in payment of its Preferred
Return on its Credited Cost Overrun Contributions until its Preferred Return
Balance has been reduced to zero;
PAGE 1 OF SCHEDULE 6.3(b)
<PAGE>
(d) next, to the Developer Member in return of its Credited Cost
Overrun Contributions until the Credited Cost Overrun Contribution Balance has
been reduced to zero;
(e) last, to the Members in accordance with their Residual
Sharing Ratios.
Upon either (a) the occurrence or existence of a Removal Event and the Developer
Member's removal as Manager or (b) the occurrence or existence of an Additional
Capital Contribution Default Event with respect to either Member, the Profit and
Loss allocations under Section 9.4 of this Agreement shall be adjusted in such a
manner that, in the reasonable discretion of the Manager with advice from tax
counsel to the Company, more accurately reflects the modified economic sharing
arrangement as set forth in this Schedule 6.3(b).
PAGE 2 OF SCHEDULE. 6.3(b)
- --------------------------------------------------------------------------------
LIMITED LIABILITY COMPANY AGREEMENT
OF
STORAGE ACQUISITION PORTFOLIO, L.L.C.
- --------------------------------------------------------------------------------
THE MEMBERSHIP INTERESTS IN STORAGE ACQUISITION PORTFOLIO, L.L.C. (THE
"INTERESTS") ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN ARTICLE 3
OF THIS AGREEMENT AND THE OTHER TERMS AND CONDITIONS OF THIS AGREEMENT. THE
INTERESTS HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED (i)
UNDER ANY STATE SECURITIES LAWS OR (ii) 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 3 OF THIS AGREEMENT AND (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER ANY 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 AND (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE FEDERAL ACT OR IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE FEDERAL ACT OR WHICH IS OTHERWISE IN COMPLIANCE WITH
THE FEDERAL ACT.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS .............................................. 1
Section 1.1 Definitions ................................... 1
Section 1.2 Other Terms ................................... 22
Section 1.3 Schedules and Exhibits ........................ 23
Section 1.4 Currency ...................................... 23
ARTICLE 2 ORGANIZATIONAL MATTERS; PURPOSE; TERM .................... 23
Section 2.1 Formation of Company .......................... 23
Section 2.2 Name .......................................... 23
Section 2.3 Registered Office; Registered Agent;
Principal Office .............................. 23
Section 2.4 Foreign Qualification ......................... 23
Section 2.5 Purpose and Scope ............................. 23
Section 2.6 Term .......................................... 24
Section 2.7 No State Law Partnership ...................... 24
Section 2.8 Warranties and Representations - Developer
Member 24
Section 2.9 Warranties and Representations - GECC Member .. 24
Section 2.10 Equity Formation Costs ........................ 24
Section 2.11 Investment Representations of the Members ..... 25
Section 2.12 Warranty Regarding Brokers .................... 26
Section 2.13 Publicity ..................................... 26
ARTICLE 3 MEMBERSHIP; DISPOSITIONS OF INTERESTS .................... 26
Section 3.1 Members ....................................... 26
Section 3.2 Dispositions of Membership Interests .......... 26
Section 3.3 Creation of Additional Membership Interests ... 27
Section 3.4 Resignation ................................... 27
Section 3.5 Information ................................... 27
Section 3.6 Liability to Third Parties .................... 28
ARTICLE 4 MANAGEMENT OF COMPANY .................................... 28
Section 4.1 Executive Committee ........................... 28
Section 4.2 Management of the Company ..................... 30
Section 4.3 Annual Business Plan .......................... 32
Section 4.4 Investments ................................... 33
Section 4.5 Independent Investments ....................... 38
Section 4.6 Right of First Refusal; Certain
Restrictions; Non-Compete ..................... 38
Section 4.7 Officers ...................................... 42
Section 4.8 Removal of Manager ............................ 43
Section 4.9 No Reimbursement of Expenses .................. 44
Section 4.10 Compensation of Members and Manager ........... 44
Section 4.11 Transactions with Affiliates .................. 44
Section 4.12 Property and Asset Management Agreement; Asset
Disposition Fee ............................... 45
Section 4.13 Acquisition Fee ............................... 45
<PAGE>
Section 4.14 Trade Name License ............................ 45
Section 4.15 Indemnification; Reimbursement of
Expenses; Insurance ........................... 45
Section 4.16 Conflicts of Interest ......................... 46
Section 4.17 Integrity Policy .............................. 47
Section 4.18 No Employees .................................. 47
Section 4.19 Year 2000 Compliant ........................... 47
Section 4.20 Insurance ..................................... 47
Section 4.21 Selection of Company Counsel .................. 47
ARTICLE 5 ACCOUNTING AND REPORTING ................................. 48
Section 5.1 Fiscal Year, Accounts, Reports ................ 48
Section 5.2 Bank Accounts ................................. 49
ARTICLE 6 CAPITAL CONTRIBUTIONS .................................... 49
Section 6.1 Project Capital Contributions ................. 49
Section 6.2 Additional Capital Contributions .............. 51
Section 6.3 Failure to Make Additional Capital
Contributions ................................. 52
Section 6.4 Return of Contributions ....................... 53
Section 6.5 Balances ...................................... 53
Section 6.6 General Provisions Concerning Capital
Contributions ................................. 53
ARTICLE 7 FINANCING ................................................ 53
Section 7.1 Financing ..................................... 53
Section 7.2 Right of First Offer .......................... 54
Section 7.3 No Commitment ................................. 56
Section 7.4 Acknowledgment and Waiver ..................... 56
ARTICLE 8 DISTRIBUTIONS ............................................ 56
Section 8.1 Distributions in General ...................... 56
Section 8.2 Distribution of Available Cash ................ 56
ARTICLE 9 CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS ........... 57
Section 9.1 [Reserved] .................................... 57
Section 9.2 Capital Accounts .............................. 58
Section 9.3 Adjustment of Gross Asset Value.
"Gross Asset Value"............................ 58
Section 9.4 Profits, Losses and Distributive
Shares of Tax Items ............................ 58
Section 9.5 Tax Returns .................................... 61
Section 9.6 Tax Elections .................................. 62
Section 9.7 Tax Matters Member ............................. 62
Section 9.8 Allocations on Transfer of Interests ........... 62
ARTICLE 10 WITHDRAWAL, DISSOLUTION, LIQUIDATION, AND TERMINATION .... 63
Section 10.1 Dissolution, Liquidation, and Termination
Generally ...................................... 63
Section 10.2 Liquidation and Termination .................... 63
Section 10.3 Deficit Capital Accounts ....................... 64
Section 10.4 Cancellation of Certificate .................... 64
ARTICLE 11 MISCELLANEOUS PROVISIONS
Section 11.1 Notices ........................................ 64
Section 11.2 Governing Law .................................. 64
Section 11.3 Entireties; Amendments ......................... 64
Section 11.4 Waiver ......................................... 64
Section 11.5 Severability ................................... 65
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<PAGE>
Section 11.6 Ownership of Property and Right of Partition .. 65
Section 11.7 Captions, References .......................... 65
Section 11.8 Involvement of Members in Certain Proceedings . 65
Section 11.9 Interest ...................................... 65
Section 11.10 Right to Bring Action ......................... 66
Section 11.11 Cumulative Remedies ........................... 66
Section 11.12 Jurisdiction .................................. 66
Section 11.13 Arbitration ................................... 67
ARTICLE 12 BUY-SELL OPTION .......................................... 67
Section 12.1 Exercise ...................................... 67
Section 12.2 Closing ....................................... 69
Section 12.3 Default ....................................... 69
Section 12.4 Payment of Debts .............................. 70
Section 12.5 Payment of Loans Held by GECC ................. 70
Section 12.6 Release of Capital Contribution Obligations ... 70
Section 12.7 Offset ........................................ 70
Section 12.8 Minimum Purchase Price ........................ 71
Section 12.9 Operations in Pre-Closing Period .............. 71
Section 12.10 Suspension of Rights Under Articles 13
and 14 ........................................ 71
Section 12.11 Changes in Distribution Rights ................ 71
ARTICLE 13 REQUIRED SALE; RIGHT OF FIRST OFFER ...................... 72
Section 13.1 Offers ........................................ 72
Section 13.2 Response ...................................... 72
Section 13.3 REIT Limitation ............................... 74
Section 13.4 No Suspension of Rights Under Articles 12
and 14......................................... 74
ARTICLE 14 MARKETING RIGHT .......................................... 74
Section 14.1 Marketing Right ............................... 74
Section 14.2 Right of Either Member to Bid ................. 75
Section 14.3 Sale By the Company ........................... 75
Section 14.4 Changes to Schedule 14.1 ...................... 75
Section 14.5 Operations in Pre-Closing Period .............. 75
Section 14.6 REIT Limitation ............................... 76
Section 14.7 Suspension of Rights Under Articles 12 and 13 . 76
Section 14.8 Changes in Distribution Rights ................ 76
ARTICLE 15 SPECIAL PURCHASE RIGHT ................................... 76
</TABLE>
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<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT OF
STORAGE ACQUISITION PORTFOLIO, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT is entered into as of November
30, 1999 (the "Effective Date"), between SUSA PARTNERSHIP, L.P., a Tennessee
limited partnership, as a Member and the initial Manager (the "Developer
Member"), and STORAGE VENTURES, L.P., a Delaware limited partnership, as a
Member (the "GECC Member").
the following meanings:
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"AAA" means the American Arbitration Association or any successor
organization.
"Abandoned Target" means a Target with respect to which either (a) a
Preliminary Presentation for such Target was approved by the Executive Committee
but the Final Presentation for such Target was not approved by the Executive
Committee, or (b) the Final Presentation for such Target was approved by the
Executive Committee but such Target was not subsequently acquired by the Company
or a Subsidiary.
"Acquisition Fee" has the meaning given it in Section 4.13 hereof.
- --------------------------------------------------------------------------------
THE MEMBERSHIP INTERESTS IN STORAGE ACQUISITION PORTFOLIO, L.L.C. (THE
"INTERESTS") ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN ARTICLE 3
OF THIS AGREEMENT AND THE OTHER TERMS AND CONDITIONS OF THIS AGREEMENT. THE
INTERESTS HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED (i)
UNDER ANY STATE SECURITIES LAWS OR (ii) 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 3 OF THIS AGREEMENT AND (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER ANY 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 AND (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE FEDERAL ACT OR IN A TRANSACTION WHICH IS EXEMPT
FROM REGISTRATION UNDER THE FEDERAL ACT OR WHICH IS OTHERWISE IN COMPLIANCE WITH
THE FEDERAL ACT.
<PAGE>
"Acquisition Loan" has the meaning given it in Section 7.1(a) hereof.
"Act" means the Delaware Limited Liability Company Act, as it may be
amended from time to time.
"Additional Capital Contribution Balance" means, for each Member, the
cumulative Additional Capital Contributions of that Member without reduction for
any distributions in return thereof.
"Additional Capital Contribution Default" has the meaning given it in
Section 6.2(c) hereof.
"Additional Capital Contribution Default Account" means, with respect
to each Member, an account to which will be credited the dollar amount of all
Additional Capital Contributions, if any, not made by such Member. The making of
a Default Loan by a NonDelinquent Member shall not reduce or remove any amounts
credited to a Member's Additional Capital Contribution Default Account.
"Additional Capital Contribution Default Event" means, with respect to
each Member, the point or time, if at all, at which such Member's Additional
Capital Contribution Default Account balance equals or exceeds twenty-five
percent (25%) of such Member's Capital Contribution Account Balance.
"Additional Capital Contributions" means, collectively,
Non-discretionary Additional Capital Contributions and Discretionary Additional
Capital Contributions.
"Additional Capital Defaulting Member" has the meaning given it in
Section 6.3(b) hereof.
"Adjusted Capital Account" means, with respect to a Member, such
Member's Capital Account as of the end of each Fiscal Year, as the same is
specially computed to reflect the adjustments required or permitted to be taken
into account in applying Regulations Section 1.704-l(b)(2)(ii)(d) (including
adjustments for Company Minimum Gain and Member Nonrecourse Debt Minimum Gain).
"Adjusted Capital Account Deficit" means, for each Member, the deficit
balance, if any, in that Member's Adjusted Capital Account.
"Affiliate" (including the term "Affiliated with") means, with respect
to any Person, (a) any other Person, directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with such
Person, (b) any other Person with respect to which such Person possesses the
right to exercise, directly or indirectly, through one or more intermediaries,
twenty percent (20%) or more of the voting rights attributable to the ownership
interests of such other Person, or (c) any other Person with respect to which
such Person is entitled to receive, directly or indirectly, through one or more
intermediaries, twenty percent (20%) or more of all dividends or distributions,
as applicable, paid by such Person.
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As used in the preceding sentence, the term "control" (including the terms
"controlling", "controlled by" or "under common control with") means the
possession, directly or indirectly, through one or more intermediaries, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. For the avoidance of doubt, SUSA is an Affiliate of the Developer
Member and GECC is an Affiliate of the GECC Member.
"Agreement" means this Limited Liability Company Agreement of the
Company, including the exhibits and schedules attached hereto, as amended and in
effect from time to time.
"Annual Business Plan" has the meaning given it in Section 4.3(a)
hereof.
"Approved Investment Parameters" means the criteria set forth on
Schedule 1.1 (AIP) hereto, as the same may be changed from time to time with the
express, written approval of the Developer Member and the GECC Member.
"Auditor" means the national accounting firm of independent certified
public accountants selected by the Executive Committee following a competitive
bidding process that will include one firm proposed by the Developer Member, one
firm proposed by the GECC Member and a third firm proposed jointly by the
Members.
"Available Cash" means with respect to any period for which such
calculation is being made,
(a) the sum of:
(i) all cash revenues and funds received by the Company from whatever
source, including all Capital Contributions and all distributions from
Subsidiaries during such period and all repayments from Subsidiaries on account
of advances or other amounts that may have been loaned by the Company to any
Subsidiary, and
(ii) the amount of any reduction (including, without limitation, a
reduction resulting because the Executive Committee determines such amounts are
no longer necessary) in reserves of the Company, which reserves are referred to
in clause (b)(iii) below;
(b) less the sum of the following (without duplication):
(i) all interest, scheduled or required principal payments and other
debt and escrow account payments made during such period by the Company on
account of the Company or any Subsidiary's indebtedness for money borrowed, if
any;
(ii) all cash expenditures (including all operating and capital
expenditures, the Acquisition Fee paid to the Developer Member or its Affiliate,
and any and all capital contributions, loans or other advances of funds made by
the Company to any Subsidiary) made by the Company or any Subsidiary during such
period; and
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(iii) the amount of any increase in any reserves established during such
period pursuant to the approved Annual Business Plan or the approved Operating
Budget or which the Executive Committee otherwise determines is necessary or
appropriate.
"Bankruptcy" means, with respect to a Person, the occurrence of (1) an
assignment by the Person for the benefit of creditors; (2) the filing by the
Person of a voluntary petition in bankruptcy; (3) the entry of a judgment by any
court that the Person is bankrupt or insolvent, or the entry against the Person
of an order for relief in any bankruptcy or insolvency proceeding; (4) the
filing of a petition or answer by the Person seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation; (5) the filing by the
Person of an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding for
reorganization or of a similar nature; (6) the consent or acquiescence of the
Person to the appointment of a trustee, receiver or liquidator of the Person or
of all or any substantial part of its properties; or (7) any event which would
cause the Person to cease to be a member of a limited liability company under
Section 18-304 of the Act.
"Borrowing Parties" and "Borrowing Party" have the meanings given them
in Section 7.2(a) hereof.
"Business Day" means any day other than a Saturday, a Sunday or other
day on which commercial bans in New York are authorized or required to close
under the laws of the State of New York.
"Buy-Sell Option" has the meaning given it in Article 12 hereof.
"Capital Account" shall have the meaning set forth in Section 9.2.
"Capital Contribution Account Balance" means the sum of each Member's
Project Capital Contribution Balance and Additional Capital Contribution
Balance.
"Capital Contributions" means, with respect to each Member, the sum of
such Member's Project Capital Contributions and Additional Capital
Contributions, consisting of the aggregate amount of cash and the initial Gross
Asset Value of any property (net of liabilities assumed by the Company resulting
from such contribution and liabilities to which the property is subject)
contributed to the Company by that Member. For the avoidance of doubt, Default
Loans are not Capital Contributions.
"Capital Proceeds" means funds of the Company or a Subsidiary arising
from a Capital Transaction, net of the actual costs incurred by the Company or
such Subsidiary in consummating the Capital Transaction, including any
Disposition Fee, if applicable.
"Capital Sharing Ratios" means the percentages in which the Members
participate in, and bear, certain Company items, as such percentages may change
from time to time. The initial Capital Sharing Ratios of the Members are as
follows:
Developer Member 16.67%
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GECC Member 83.33%
Following the making of any Capital Contributions by the Members, or either of
them, to the Company, the Capital Sharing Ratio of each Member shall ipso facto
equal the percentage determined by dividing (a) such Member's then Capital
Contribution Account Balance by (b) the then aggregate Capital Contribution
Account Balances for all Members.
"Capital Transaction" means the sale, financing, refinancing or similar
transaction of or involving any Project (including condemnation awards, payment
of title insurance proceeds or casualty loss insurance proceeds, other than
business interruption or rental loss insurance proceeds, to the extent such
awards and proceeds are not applied to mortgage indebtedness of the Company or a
Subsidiary and not used to repair damage caused by a casualty or taking or in
alleviation of any title defect).
"Cause" means, when used with respect to the Developer Member, the
existence or occurrence of any of the following events or conditions with
respect to the Developer Member, either individually or in its capacity as
Manager, or SUSA, including the existence or occurrence of such events with
respect to the Developer Member's or SUSA's officers or employees: (a) the
indictment for a felony involving a crime or crimes of moral turpitude or
dishonesty (whether or not convicted), misapplication, conversion or theft of
any funds belonging to the Company or a Subsidiary, including rents, security
deposits, insurance proceeds or condemnation or eminent domain awards or
payments; or (b) the commission of fraud, knowing misrepresentation, gross
negligence or willful misconduct; however, in any case, but subject to the last
sentence of this definition, the occurrence or existence of any such events or
conditions described in clause (a) or (b) of this sentence shall not constitute
"Cause" if such event or condition was committed or caused by a non-executive
officer or employee of the Developer Member or SUSA and the Company has not
suffered monetary loss or damage as a result thereof or to the extent the
Company has suffered monetary loss or damage as a result thereof, the Developer
Member compensates the Company for any such monetary loss or damage suffered or
incurred by the Company within twenty (20) Business Days after notice thereof
from the GECC Member. For the avoidance of doubt, the indictment of the
Developer Member or SUSA, or any executive officer of either of them, for a
felony involving a crime or crimes of moral turpitude or dishonesty (whether or
not convicted), or the misapplication of funds belonging to the Company or any
Subsidiary, fraud, gross negligence or willful misconduct committed in any
instance by the Developer Member or SUSA, or any executive officer of either of
them, shall not be curable and "Cause" shall be deemed to exist upon the
occurrence or existence of any such event.
"Certificate" has the meaning given it in Section 2.1 hereof.
"Change in Control" means, with respect to the Developer Member or SUSA,
the occurrence of any of the following: (i) the sale of all or substantially all
of the Developer Member's or SUSA's assets (other than (a) a sale or conveyance
to a wholly-owned subsidiary of the Developer Member or SUSA that conducts the
business or businesses formerly conducted by the Developer Member or SUSA, or
(b) any transaction undertaken solely for the purpose of reorganizing or
reincorporating the Developer Member or SUSA under the laws of another
jurisdiction if such transaction does not affect the beneficial ownership of the
Developer
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<PAGE>
Member's or SUSA's outstanding equity securities); (ii) the merger,
reorganization, share exchange, recapitalization, restructuring or consolidation
of the Developer Member or SUSA, other than a transaction which would result in
the voting securities of the Developer Member or SUSA outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 51% of
the combined voting power of the voting securities of the Developer Member, SUSA
or such surviving entity outstanding immediately after such transaction; (iii)
the acquisition by any "Person" or "Group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934) of an aggregate of 51% or
more of the beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934) of the issued and outstanding voting securities
of SUSA; (iv) the acquisition by any "Person" or "Group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) of an
aggregate of 51% or more of the beneficial ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934) of the issued and outstanding
general partnership interests of the Developer Member; or (v) any transaction
that results in the common shares of SUSA no longer being required to be
registered under Section 12 of the Securities Exchange Act of 1934, as amended.
Notwithstanding the foregoing, a Change of Control of the Developer Member or
SUSA shall not be deemed to have occurred if, regardless of the form of the
transaction, (a) any two of the following executive officers of SUSA remain in
their respective offices at SUSA or the surviving entity: (i) Dean Jernigan,
Chief Executive Officer, (ii) Christopher P. Marr, Chief Financial Officer, or
(iii) Karl Haas, Executive Vice President - Operations, (b) the "Incumbent
Directors" (i.e., the individuals constituting the Board of Directors of SUSA on
the Effective Date, together with any director whose nomination for election to
the Board was approved by a vote of at least a majority of the directors in
office at the time of such nomination who were either directors on the Effective
Date or whose nomination for election was previously so approved) continue to
comprise a majority of the directors of SUSA or the surviving entity, and (c)
SUSA or the surviving entity remains the sole general partner in the Developer
Member.
"Closing Date" has the meaning given it in Section 12.2 hereof.
"CPI Increase" means, with respect to each calendar year, the
percentage, if any, by which the Consumer Price Index ("CPI") for the month of
December in each calendar year for which the CPI is then available has increased
from the CPI for the month of December 1999. "CPI" means the Consumer Price
Index for All Urban Consumers for All Items, U.S. City Average, as set forth in
the Consumer Price Index for Standard Metropolitan Statistical Areas
(1982-84=100), published by the United States Department of Labor, Bureau of
Labor Statistics (the "Index"). If the Index is changed so that the base year
differs from that in effect on the Effective Date, the Index shall be converted
in accordance with the conversion factor published with the United States
Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or
revised during the term of this Agreement, such other government index or
computation with which it is replaced shall be used in order to obtain
substantially the same result as would be obtained if the Index had not been
discontinued or revised. If the Index is not replaced with any other government
index or computation, then the Members shall, in good faith, agree on a suitable
substitute.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any corresponding provisions of succeeding law.
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<PAGE>
"Commitment Termination Date" means the earliest to occur of: (i) the
second (2nd) anniversary of the Effective Date; (ii) if the Performance
Benchmarks have not been satisfied as of the first (1st) anniversary of the
Effective Date under either this Agreement or the Other Company LLC Agreement,
the election (if at all) of the GECC Member to terminate its commitment to make
Project Capital Contributions evidenced by written notice to the Developer
Member given within thirty (30) days after the GECC Member has received evidence
regarding the Company's satisfaction or non-satisfaction of the Performance
Benchmarks; (iii) the election (if at all) of the GECC Member to terminate its
commitment to make Project Capital Contributions evidenced by written notice to
the Developer Member following the occurrence or existence of a Removal Event or
any other event or condition that would permit the GECC Member to exercise the
Buy-Sell Option or the Marketing Right, or (iv) if the Commitment Termination
Date occurs as defined by clause (iv) of the definition thereof in the Other
Company LLC Agreement, the election (if at all) of the GECC Member to terminate
its commitment to make Project Capital Contributions evidenced by written notice
given by the GECC Member to the Developer Member within forty-five (45) days
after the occurrence of such Commitment Termination Date under the Other Company
LLC Agreement.
"Company" means Storage Acquisition Portfolio, L.L.C. a Delaware limited
liability company.
"Company Minimum Gain" means "partnership minimum gain" as defined in
Regulations Section 1.704-2(d).
"Controlled Affiliate" means, with respect to the Developer Member or
SUSA, (a) any other Person, directly or indirectly, through one or more
intermediaries, controlled by the Developer Member or SUSA, or (b) any other
Person in which the Developer Member or SUSA owns, directly or indirectly,
through one or more intermediaries, capital stock or other equity interests
representing the right to receive at least fifty percent (50%) of all dividends
or distributions, as applicable, paid by such Person, regardless of whether the
Developer Member or SUSA controls such Person. As used in the preceding
sentence, the term "controlled" (including the terms "control") means the
possession of the power, directly or indirectly, through stock or other
ownership, by agreement or otherwise, to direct or cause the direction of the
management or policies of a Person.
"Default Loan" means a loan made by a Non-Delinquent Member to the
Company in accordance with Section 6.3(a) hereof.
"Default Rate" means the per annum rate of interest equal to the greater
of (i) eighteen percent (18%) or (ii) the sum of the Prime Rate, as it may
change from time to time, plus five percentage points (5%); provided, however,
in no event will the Default Rate exceed the maximum lawful rate of interest
permitted by applicable law.
"Delayed Project Acquisition" has the meaning given it in Section 4.4(g)
hereof.
"Delinquent Member" has the meaning given it in Section 6.3(a) hereof.
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<PAGE>
"Depreciation" means, for each taxable year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for the 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 the year or other period, Depreciation
will be an amount which bears the same ratio to the beginning Gross Asset Value
as the federal income tax depreciation, amortization or other cost recovery
deduction for the year or other period bears to the beginning adjusted tax
basis, provided that if the federal income tax depreciation, amortization, or
other cost recovery deduction for the year or other period is zero, Depreciation
will be determined with reference to the beginning Gross Asset Value using any
reasonable method selected by the Executive Committee.
"Discretionary Additional Capital Contributions" means the contributions
of cash to the capital of the Company made by or on behalf of the Members
pursuant to Section 6.2 hereof that are neither Project Capital Contributions
nor Non-discretionary Additional Capital Contributions.
"Disposition Fee" has the meaning given it in Section 4.12(c) hereof.
"Drawdown Notice" has the meaning given it in Section 6.1(c) hereof.
"Due Diligence Information" means, with respect to a Target, the due
diligence information forming a part of the Final Presentation for such Target
and identified on Schedule 1.1 (FP) hereto.
"Electing Member" has the meaning given it in Article 15 hereof.
"Election Notice" has the meaning given it in Section 4.5(b) hereof.
"Encumbrance" has the meaning given it in Section 3.2(a) hereof.
"Environmental Reports" has the meaning given it in Section 4.4(j)
hereof.
"Equity Formation Costs" has the meaning given it in Section 2.10
hereof.
"Equity Franchisee" means any Person which is a franchisee of the
Storage USA or the Budget-Storage USA franchise program or system and which is
not a Non-Equity Franchisee.
"Excluded Affiliates" means Storage Portfolio I LLC and Budget-Storage
USA Joint Venture, LLC, and any of their respective wholly-owned subsidiaries,
including any entity, directly or indirectly, wholly-owned by Storage Portfolio
I LLC or Budget-Storage USA Joint Venture, LLC.
"Executive Committee" means the Company's management committee as
established in accordance with Section 4.1 hereof.
"Federal Act" has the meaning given it in Section 2.11(b) hereof.
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<PAGE>
"Final Presentation" means, when used with respect to a Target, a
comprehensive proposal prepared and submitted by the Developer Member to the
Executive Committee setting forth the overall scheme for the acquisition and
operation of the Target, including the information listed on Schedule 1.1 (FP).
The Final Presentation must include a statement by the Developer Member that, in
the Developer Member's judgment, the Target, if acquired and operated in
accordance with the Final Presentation, would comply with the Approved
Investment Parameters or reflecting, where applicable, any deviations from the
Approved Investment Parameters. The Final Presentation shall include the amount,
source, terms and conditions of any financing which is proposed for the
acquisition of the Target. The Final Presentation will be delivered to the
members of the Executive Committee in notebook format similar to the
presentation form that the Developer Member has previously delivered to, and
that has been approved by, the GECC Member. Any reference in this Agreement to
an "approved Final Presentation" means the Final Presentation for a Project, as
unanimously approved by the Executive Committee in accordance with the
procedures hereinafter set forth in Section 4.4 hereof, as the same may be
subsequently amended by the unanimous action of the Executive Committee.
"Financial Rights" means the right to receive distributions of funds and
allocations of income, gain, loss, deduction and credit.
"Fiscal Year" has the meaning given it in Section 5.1(a) hereof.
"Franchise Equity Program Transaction" means any new loan or other
credit facility or any refinancing of any existing loan or credit facility,
entered into after the Effective Date by the Developer Member or SUSA, or any of
their respective Controlled Affiliates, with a franchisee of the "Storage USA"
or "Budget-Storage USA" franchise program or system pursuant to which
transaction (i) the Developer Member or SUSA, or any such Controlled Affiliate,
is entitled to receive interest payable on any such loan or credit facility at a
rate determined by reference to a spread above an established index of 400 basis
points or more, (ii) the Developer Member or SUSA, or any such Controlled
Affiliate, receives, as collateral for any such loan or credit facility
described in clause (i) of this definition, a pledge of ownership or other
equity interest in the franchisee, or (iii) the Developer Member or SUSA, or any
such Controlled Affiliate, receives an ownership or other equity interest (or
the right to acquire such interest) in the franchisee or is entitled to receive
payments based upon the franchisee's revenues, cash flow or value (other than a
customary license fee or royalty and management fee), excluding, however, any
refinancing of an existing loan or credit facility after Effective Date pursuant
to which the Developer Member or SUSA, or any of their respective Controlled
Affiliates, had already received an ownership or other equity interest in any
such franchisee prior to the Effective Date.
"Franchise Equity Program Transaction Notice" has the meaning given it
in Section 4.6(f).
"GECC" means General Electric Capital Corporation, a New York
corporation and an Affiliate of the GECC Member.
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"GECC Affiliate" means, with respect to the GECC Member, any other
Person, directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with, GECC or General Electric Company.
The term "control" (including the terms "controlling", "controlled by" and
"under common control with"), as used in the preceding sentence, means the
possession, directly or indirectly, through one or more intermediaries, of the
power to direct or cause the direction of the management or policies of such
other Person, whether through the ownership of voting securities, by contract or
otherwise.
"Governmental Authority" means the United States of America, any of the
several states, any county or municipality in which a Project is located, and
any agency, authority, court, department, commission, board, bureau or
instrumentality of any of them.
"Gross Asset Value" has the meaning given it in Section 9.3.
"Imputed Closing Costs" means, when used in connection with the Buy-
Sell Option, an amount, not to exceed three percent (3%) of the sales price,
that would normally be incurred by the Company or its Subsidiaries if the
Projects then owned by the Company or its Subsidiaries were sold for the amount
specified in Article 12, for title insurance premiums, survey costs, brokerage
commissions and other commercially reasonable closing costs.
"Independent Investment" has the meaning given it in Section 4.5(a)
hereof.
"Inflation Adjusted" means, when used with respect to any number or
item, that the number or item will be increased by the applicable CPI Increase,
if any.
"Initiating Member" has the meaning given it in Section 13.1 hereof
"Initiating Notice" has the meaning given it in Section 12.1 hereof.
"Insurance Program" means a complete and detailed program of insurance
(including the insurance required by Section 4.15) for the Company, its
Subsidiaries and the Projects prepared by the Manager and approved by the
Executive Committee, as amended and updated from time to time with the approval
of the Executive Committee. The initial Insurance Program will form a part of
the Company's initial Annual Business Plan. In no event shall the Insurance
Program provide for less insurance than that reflected in Schedule 1.1 (INS)
without the approval of the Executive Committee.
"Integrity Policy" means the Company's Ethical Business Practices
Policy, a copy of which is attached hereto as Schedule 1.1 (IP), and which is
hereby adopted by the Members, as such Policy may be amended from time to time
by the Executive Committee.
"Internal Rate of Return" or "IRR" means the annual percentage return
rate which, when used as a discount rate to determine the net present value of a
Member's Capital Contributions to and cash distributions from the Company
(treating cash outflows as negative numbers and cash inflows as positive
numbers), results in a net present value of zero, calculated as of the date of
such Member's initial Capital Contribution. The Internal Rate of Return shall be
calculated on a quarterly basis. For example, a Member shall have received an
annual fifteen percent (15%) Internal Rate of Return if the difference between
the aggregate of the following is
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zero: (a) the sum of all Capital Contributions during each quarter to
the Company by such Member each discounted to present value at an annual rate of
fifteen percent (15%) from the date of each such contribution and (b) the sum of
all cash distributions during each quarter to the Member discounted to present
value at an annual rate of fifteen percent (15%) from the date of each such
distribution, with "present value" being the value as of the date of the first
Capital Contribution by such Member. The quarterly discount rate equivalent to
an annual rate of nine percent (9%) is 2.1778%; and the quarterly discount rate
equivalent to an annual rate of fifteen percent (15%) is 3.5558%. The cost
reimbursement paid to the GECC Member in accordance with Section 4.12(b) hereof,
the fees (including the Acquisition Fee and any Disposition Fee, if applicable)
and expense reimbursements paid to the Developer Member and the Property Manager
as contemplated in Sections 4.12 and 4.13 hereof, any interest and other
payments on account of any Default Loans and any earnest money retained by a
Member in accordance with Section 12.3 hereof shall not be considered cash
distributions for purposes of calculating the Internal Rate of Return. At the
time of each distribution of Available Cash, the Manager shall provide the
Members with a calculation of the IRR through the date of such distribution.
"Major Decisions" means any of the matters described below:
(1) To the extent not otherwise expressly approved as part of an
approved Annual Business Plan, an approved Preliminary Presentation or an
approved Final Presentation, the establishment of any Subsidiary, and the terms,
provisions and conditions of its governing agreements and any amendments or
modifications thereof;
(2) The approval or adoption of an Annual Business Plan, a Preliminary
Presentation and a Final Presentation and, to the extent not approved as part of
the approval of any of the foregoing, an Operating Budget, a Project Operating
Budget and a Project Acquisition Budget, and any amendment, modification or
other change to any of the foregoing.
(3) Any matter which is defined as a "Major Decision" in any limited
liability company or other agreement governing a Subsidiary;
(4) To the extent not otherwise expressly approved as part of an
approved Annual Business Plan, an approved Operating Budget, an approved Project
Acquisition Budget, an Approved Preliminary Presentation, or an approved Final
Presentation, any acquisition, sale, transfer, exchange, mortgage, financing,
hypothecation or encumbrance of all, any part of or any interest in a Project,
or any lease of an entire Project, and, in each such case, the material terms
and conditions thereof, excluding, however, (A) sales from inventory (e.g, locks
and packaging material) held for sale to customers in the ordinary course of a
Subsidiary's business, (B) incidental sales, exchanges, conveyances, transfers
or other dispositions of personal property or fixtures owned by a Subsidiary and
used in the operation and management of a Project if such disposition of
personal property and fixtures in accordance with this clause (B) for any one
Project, together with all other such dispositions in the calendar year in
question, involves property having a value or sales price of less than $5,000.00
in the aggregate, and (C) granting easements or entering into reciprocal
operating or easement agreements, cross-easement agreements and similar
agreements with utility providers, adjoining
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<PAGE>
property owners or other parties, not Affiliated with the Manager, in connection
with the development of a Project in accordance with the approved Final
Presentation for such Project, so long as any such easement or other agreement
(x) does not materially interfere with the use and operation of the Project, (y)
does not adversely affect the Project's value and (z) is consistent with the
overall ownership plan for such Project as set forth in the approved Final
Presentation for such Project;
(5) Regarding the Company or any Subsidiary, to the extent not otherwise
expressly approved as part of an approved Annual Business Plan, an approved
Operating Budget, an approved Project Acquisition Budget or an approved Final
Presentation, (A) incurring, or becoming liable for, or permitting to exist, any
indebtedness for borrowed money, (B) guaranteeing or assuming the obligations of
any Person, (C) providing indemnification with respect to the acts or
obligations of any Person other than with respect to the Company, or (D) loaning
any funds or money, extending credit or otherwise providing financial
accommodations to any Person other than a Subsidiary;
(6) Regarding the Company or any Subsidiary, any merger, reorganization,
business combination, share or equity interest sale, exchange or other
disposition, recapitalization, restructuring or consolidation;
(7) Regarding the following Company and Subsidiary financial affairs,
(A) selection of the Auditor, (B) determination of major accounting policies,
including selection of accounting methods and making various decisions regarding
treatment and allocation of transactions for federal and state income, franchise
or other tax purposes, (C) selection of the bank(s) for one or more consolidated
operating and disbursement accounts of the Company (being the only bank accounts
at the Company-level, all other bank accounts being Project-level) and the
designation of Persons with signatory authority over withdrawal of funds from
such accounts (the Manager may select the banks for Project- level accounts
maintained by the Property Manager so long as (i) the deposits of each such bank
are federally insured, (ii) each such account will be swept into the Company's
consolidated operating account no less frequently than weekly and (iii) each
such account is depository only), and (D) making of any expenditure or incurring
any obligation by or for the Company or a Subsidiary for an aggregate sum in
excess of $25,000.00 per Project in any one Fiscal Year for any transaction or
group of similar or related transactions, except for expenditures made and
obligations incurred pursuant to an approved Project Acquisition Budget, an
approved Project Operating Budget or an approved Operating Budget; however, if
emergency repairs to any Project are necessary to avoid imminent danger of
injury to such Project or to an individual, the Manager may make such
expenditures as may be necessary to alleviate such situation and shall promptly
notify the GECC Member of the event giving rise to such repairs and the actions
taken with respect thereto;
(8) Regarding Additional Capital Contributions, except Non-Discretionary
Additional Capital Contributions which may be required of a Member in accordance
with Section 6.3(a) hereof;
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(9) Regarding repair or refurbishment of any Project and to the extent
not expressly approved in an approved Preliminary Presentation, an approved
Final Presentation, an approved Project Acquisition Budget or an approved
Project Operating Budget for a Project: (A) approval of any plans, development
schedule, budgets, and all other material matters relating to the acquisition or
the refurbishment of such Project; (B) the selection of a contractor and the
approval of any construction contracts; (C) selection of architects and
engineers retained for review and analysis of the Plans and Specifications other
than from those identified on Schedule 1.1 (Engineers); and (D) any material
variation from or amendment to any of the foregoing;
(10) Regarding all leases of space in the Projects: (A) the use of any
form of lease other than the standard forms of lease used by the Developer
Member in its own business on the Effective Date and any material change,
modification or amendment to such standard forms of lease, unless such amendment
or modification is required to conform to the Requirements of a Governmental
Authority; (B) to the extent not approved in an approved Annual Business Plan or
the applicable approved Project Operating Budget, approval of guidelines for
minimum rental rates; and (C) any lease of space for a term of more than one
year, unless such lease may be terminated at any time at the election of the
Company or the applicable Subsidiary with no more than sixty (60) days prior
notice;
(11) Regarding Project and Subsidiary operations and to the extent not
approved in an approved Annual Business Plan, an approved Final Presentation or
an approved Project Operating Budget or not otherwise in the sole and exclusive
authority of the GECC Member following the removal of the Developer Member as
the Manager: (A) the selection of property managers and the approval of any
asset or property management agreements, but only if the Developer Member or a
Controlled Affiliate of the Developer Member acceptable to the GECC Member is
not the Property Manager pursuant to the Property Management Agreement; (B) the
selection of any brokers or agents for the sale or other disposition of a
Project and the approval of any listing or brokerage agreements relating to the
sale or other disposition of a Project; (C) filing any application or other
petition to change or vary the zoning conditions or other entitlements for a
Project; and (D) any material variation from or amendment to any of the
foregoing;
(12) Except to the extent not otherwise in the exclusive authority of
the Developer Member pursuant to Section 7.4 hereof or in the exclusive
authority of the GECC Member in accordance with the last sentence of Section
4.2(a) hereof, the taking or initiation of any legal action on behalf of the
Company or a Subsidiary, except (A) initiating action (i) to collect rentals and
other amounts payable to the Company or a Subsidiary under leases and other
occupancy agreements affecting a Project, (ii) to dispossess any tenant or
occupant which is in default in its obligations to the Company or a Subsidiary,
(iii) against vendors, suppliers and subcontractors in the ordinary course of
business, or (iv) to appeal ad valorem or other property tax assessments, and
(B) defending against tenant and other liability claims for which the Company or
such Subsidiary maintains insurance so long as the amount claimed in any such
action or suit does not exceed $100,000.00;
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(13) Filing of any petition or consenting to the filing of any petition
that would subject the Company or any Subsidiary to a Bankruptcy;
(14) Except as provided in Section 4.21 hereof, engaging any attorney to
represent the Company or any Subsidiary;
(15) Entering into, amending, modifying or changing any agreement with
the Developer Member or an Affiliate of the Developer Member other than as set
forth in Section 4.12 hereof;
(16) To the extent not approved in an approved Final Presentation for a
Project, regarding any environmental matter relating to a Project, including
selection of environmental consultants other than one of the consultants
identified on Schedule 1.1 (Environmental) and adoption of and implementation of
any operation and maintenance program or any other program to remove or
otherwise remediate hazardous materials; and
(17) To the extent not expressly approved in an Annual Business Plan,
entering into any agreement, incurring any obligation or taking any other action
with respect to the Company or a Subsidiary (A) which, considered before the
taking thereof, could be reasonably expected to have a material adverse effect
on the business or affairs of the Company or any Subsidiary or (B) which would
be considered by reasonably prudent Persons engaged in the real estate property
management business to be out of the ordinary course of the day-to-day
management of the Company or its Subsidiaries.
"Major Dispute" means the failure of the Members or the Executive
Committee to agree upon or approve any Major Decision, other than those Major
Decisions identified in the immediately following sentence, which failure to
agree has continued for a period of thirty (30) days after written notice
thereof (the "Major Dispute Notice") has been given by a Member to the other
Member(s). The failure of the Executive Committee to approve a Preliminary
Presentation or a Final Presentation, including a Project Acquisition Budget,
for a Target, or any amendment, modification or change to either of them, or the
failure of the Executive Committee to agree whether a Target conforms to the
Approved Investment Parameters, is not a Major Dispute. In order to be
effective, any Major Dispute Notice must contain a description of the Major
Decision which the Members or the Executive Committee has been unable to agree
and must contain the following language typed in BOLD PRINT on the face of the
Major Dispute Notice:
THIS NOTICE IS GIVEN PURSUANT TO THE LIMITED LIABILITY
COMPANY AGREEMENT OF STORAGE ACQUISITION PORTFOLIO, L.L.C.
(THE "AGREEMENT") IN ORDER TO ADVISE A MEMBER THAT A MAJOR
DISPUTE WILL EXIST UNDER THE AGREEMENT UNLESS THE MEMBERS
ARE ABLE TO AGREE WITHIN THIRTY (30) DAYS WITH RESPECT TO
THE MATTER OR MATTERS SET FORTH IN THIS NOTICE.
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<PAGE>
"Management Rights" means the right of a Member to participate in the
management of the Company to the extent herein expressly provided.
"Manager" means the Developer Member, as the initial Manager designated
pursuant to Section 4.2 hereof, and each Person hereafter designated as a
Manager in accordance with this Agreement, until such Person ceases to be a
Manager of the Company. The Manager is not required to be a Member.
"Marketing Firm" has the meaning given it in Section 14.1 hereof.
"Marketing Notice" has the meaning given it in Section 14.1 hereof.
"Marketing Right" has the meaning given it in Section 14.1 hereof.
"Member Nonrecourse Debt" means "partner nonrecourse debt" as defined
in Regulations Sections 1.704-2(b)(4) and 1.752-2.
"Member Nonrecourse Debt Minimum Gain" means "partner nonrecourse debt
minimum gain" as defined in Regulations Section 1.704-2(i)(3).
"Member Nonrecourse Deductions" means "partner nonrecourse deductions"
as defined in Regulations Section 1.704-2(i)(2).
"Members" means the GECC Member, the Developer Member, and each Person
hereafter admitted as a Member in accordance with this Agreement, until such
Person ceases to be a Member of the Company.
"Membership Interests" means all of the rights and interests of
whatsoever nature of the Members in the Company, including Management Rights and
Financial Rights.
"Moving Member" has the meaning given it in Section 14.1 hereof.
"Net Cash Flow" means, with respect to each Subsidiary and for any
period, Net Operating Income less debt service (including interest and principal
payments) on loans to the applicable Subsidiary.
"Net Operating Income" means, with respect to each Subsidiary and for
any period, the amount by which Operating Revenues exceed Operating Expenses for
such period.
"Non-Conforming Offer" has the meaning given it in Section 13.2(c)
hereof.
"Non-Delinquent Member" has the meaning given it in Section 6.3(a)
hereof.
"Non-Discretionary Additional Capital Contributions" means contributions
of cash to the capital of the Company made by or on behalf of the Members
pursuant to Section 6.2(a) hereof and that are required to (a) pay operating
deficits or budgeted capital items, including, without limitation, property
taxes, insurance premiums and debt service with respect to the Company, a
Subsidiary or a Project, (b) maintain value of the Projects in unanticipated
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emergency situations to remedy conditions that create an imminent threat of
property damage or personal injury or death, (c) discharge other valid
liabilities of the Company, the Subsidiaries or the Projects not covered by the
approved Operating Budget, including, without limitation, contractual
commitments of the Company or any of the Subsidiaries, or (d) replenish working
capital or other reserves as established in the approved Operating Budget for
any of the foregoing items.
"Non-Equity Franchisee" means any Person which is a franchisee of the
Storage USA or Budget-Storage USA franchise program or system and in which
neither the Developer Member nor SUSA, nor any of their respective Controlled
Affiliates, directly or indirectly, through one or more intermediaries, then
owns any economic interest or otherwise has a right to receive any share of such
Person's revenues, income, distributions, dividends, cash flow or value, other
than a customary license fee or royalty and property management fee.
"Non-Initiating Member" has the meaning given it in Section 13.1
hereof.
"Offer" has the meaning given it in Section 13.1 hereof.
"Offeree" has the meaning given it in Section 12.1 hereof.
"Offeror" has the meaning given it in Section 12.1 hereof.
"Officers" has the meaning given it in Section 4.7 hereof.
"Old Business Plan" has the meaning given it in Section 4.3(d) hereof.
"Operating Budget" means the annual operating budget for the Company,
setting forth by line item the estimated capital and operating expenses for the
Company, which consolidates all Project Operating Budgets, as approved by the
Executive Committee. Any reference in this Agreement to an "approved Operating
Budget" means an Operating Budget, as unanimously approved by the Executive
Committee in accordance with Section 4.3 hereof, as the same may be subsequently
amended from time to time by the unanimous action of the Executive Committee.
"Operating Expenses" means, with respect to each Subsidiary and for any
period, the current obligations of the Subsidiary for such period, determined in
accordance with sound accounting principles approved by the Executive Committee
and applicable to commercial real estate, consistently applied, for operating
expenses of the Project, for capital expenditures not paid from reserves or the
Members' Capital Contributions to the Company and the Company's capital
contributions to the Subsidiary, and for reserves for working capital, operating
deficits and capital items, including a capital replacement reserve of $0.15 per
square foot per annum for each Project or such other amount as may be approved
by the Executive Committee. Operating Expenses shall include the fees paid to
the Property Manager pursuant to the Property Management Agreement but shall not
include any debt service on loans to the Subsidiary nor any non-cash expenses
such as depreciation or amortization.
"Operating Revenues" means, with respect to each Subsidiary and for any
period, the gross revenues of the Subsidiary arising from the ownership and
operation of the
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Project during such period, including proceeds of any business interruption
insurance and amounts funded from Company or Subsidiary reserves, but
specifically excluding Capital Proceeds and Capital Contributions made by the
Members with respect to such Subsidiary.
"Other Company" means Storage Development Portfolio, L.L.C., a Delaware
limited liability company in which the Developer Member and the GECC Member are
also the only initial members.
"Other Company LLC Agreement" means the Limited Liability Company
Agreement of the Other Company dated as of the Effective Date and executed
between the Developer Member and the GECC Member, including the exhibits and
schedules thereto, as amended and in effect from time to time.
"Other Company Target" means (i) any undeveloped site in the United
States of America that could be developed as a self-storage facility, (ii) any
existing developed site in the United States of America not then being used or
operated as a self-storage facility that could be redeveloped as a self storage
facility, but specifically excluding any such site that is located within one
hundred (100) yards of, and is intended to be used to expand, an existing
self-storage facility owned by the Developer Member or any of its Affiliates,
and (iii) any Person (other than an Equity Franchisee or a Non-Equity
Franchisee) which, directly or indirectly, through one or more intermediaries,
owns, or has the right to acquire, one or more developed or undeveloped sites
described in clauses (i) and (ii) of this definition.
"Other Member" has the meaning given it in Section 6.3(b) hereof.
"Performance Benchmarks" means the criteria for determination of the
Company's performance, as set forth on Schedule 1.1 (PB) attached hereto.
"Permitted Sale Date" means, with respect to any Project, the date that
is eighteen (18) months after the date on which such Project was acquired by the
Company or a Subsidiary.
"Person" means an individual or entity.
"Plans and Specifications" means, when used with respect to a Target or
a Project, the existing plans and specifications for the improvements existing
on the site and comprising the Project, which will have been obtained, if and to
the extent available, by the Developer Member from the Target's current owner
and submitted to the Executive Committee for approval as part of the Final
Presentation for such Target.
"Preliminary Presentation" means, when used with respect to a Target, a
preliminary proposal prepared and submitted by the Developer Member to the
Executive Committee setting forth, in general terms, the overall scheme for the
acquisition and operation of the Target, including information similar to the
information identified on Schedule 1.1 (FP) hereto. The Preliminary Presentation
must include a statement by the Developer Member that, in the Developer Member's
judgment to the extent then ascertainable, the Target, if acquired and operated
in accordance with the Preliminary Presentation, would comply with the Approved
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Investment Parameters or reflecting, where applicable, any deviations from the
Approved Investment Parameters. The Preliminary Presentation will be prepared in
advance of a Final Presentation and therefore will necessarily be more general
and preliminary in its discussion and presentation of a Target. The Preliminary
Presentation will be delivered to the members of the Executive Committee in
notebook format similar to the presentation form that the Developer Member has
previously delivered to, and that has been approved by, the GECC Member. Any
reference in this Agreement to an "approved Preliminary Presentation" means a
Preliminary Presentation for a Target, as unanimously approved by the Executive
Committee in accordance with the procedures hereinafter set forth in Section 4.4
hereof, as the same may be subsequently amended by the unanimous action of the
Executive Committee; however, for purposes of determining the Pursuit Cost Cap
applicable to a Target, the budgeted Pursuit Costs set forth in the Preliminary
Presentation for such Target initially approved by the Executive Committee shall
be deemed the Pursuit Cost Cap for such Target unless the Executive Committee
should thereafter unanimously and expressly approve an increase in the Pursuit
Cost Cap for such Target. For the avoidance of doubt, the Executive Committee's
approval of an amendment to a Preliminary Presentation for a Target, without
more, shall not increase the Pursuit Cost Cap for such Target. Upon the approval
of a Final Presentation for a Target, the Preliminary Presentation for such
Target shall be completely superceded and no longer effective.
"Prime Rate" means, for each calendar month, the highest prime rate
reported in the Money Rates column or section of The Wall Street Journal
published on the second Business Day of that month, as having been the rate in
effect for corporate loans at large U.S. money center commercial banks (whether
or not such rate has actually been charged by any such bank) as of the first
Business Day of such month. If The Wall Street Journal ceases publication of the
Prime Rate, the "Prime Rate" shall mean the prime rate (or base rate) announced
by Bankers Trust Company, New York, New York, or its successors (whether or not
such rate has actually been charged by such bank). If such bank discontinues the
practice of announcing the Prime Rate, the "Prime Rate" shall mean the highest
rate charged by such bank on short-term, unsecured loans to its most
creditworthy large corporate borrowers.
"Proceeding" has the meaning given it in Section 4.15 hereof.
"Profits" and "Losses" mean, for each taxable year or other period, an
amount equal to the Company's taxable income or loss for the year or other
period, determined in accordance with Section 703(a) of the Code (including all
items of income, gain, loss or deduction required to be stated separately under
Section703(a)(1) of the Code), with the following adjustments:
(1) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses will be
added to taxable income or loss;
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(2) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures under Regulations
Section 1.704-l(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses, will be subtracted from taxable income or loss;
(3) Gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for federal income tax
purposes will be computed by reference to the Gross Asset Value of the property,
notwithstanding that the adjusted tax basis of the property differs from its
Gross Asset Value;
(4) In lieu of depreciation, amortization and other cost recovery
deductions taken into account in computing taxable income or loss, there will be
taken into account Depreciation for the taxable year or other period;
(5) Any items which are specially allocated under Section 9.4(c)
or 9.4(d) will not affect calculations of Profits or Losses; and
(6) If the Gross Asset Value of any Company asset is adjusted
under Section 9.3(b) or 9.3(c), the adjustment will be taken into account as
gain or loss from disposition of the asset for purposes of computing Profits or
Losses.
"Prohibited Radius" means three (3) miles from any Project owned,
directly or indirectly, by the Company or the Other Company; provided, however,
if any such Project is located within the corporate city limits of any of the
cities identified on Schedule 1.1 (PR) hereto, then the Prohibited Radius for
such Project shall be the lesser Prohibited Radius set forth on Schedule 1.1
(PR) hereto for such city.
"Project" means any Target with respect to which a Final Presentation
has been approved by the Executive Committee in accordance with the procedures
set forth in Section 4.4 hereof and which has been acquired by the Company or a
Subsidiary.
"Project Acquisition Budget" means the acquisition budget for each
Target or Project, as applicable, setting forth by line item the estimated Total
Project Costs, including the Acquisition Fee, to be incurred in connection with
the acquisition and operation to break-even (i.e., the point at which the
Subsidiary's Net Operating Income derived from such Target or Project, as
applicable, for three (3) consecutive calendar months equals or exceeds the debt
service (including required interest and principal payments) on loans for such
Target or Project for such three (3) consecutive calendar months), as approved
by the Executive Committee as part of the Final Presentation for a Target. The
Project Acquisition Budget will include the cost of all financing. Any reference
in this Agreement to an "approved Project Acquisition Budget" means a Project
Acquisition Budget for a Project, as unanimously approved by the Executive
Committee as part of the Final Presentation for such Project in accordance with
the procedures hereinafter set forth in Section 4.4 hereof, as the same may be
subsequently amended by the unanimous action of the Executive Committee.
"Project Capital Contribution Balance" means, for each Member, the
cumulative Project Capital Contributions of that Member without reduction for
any distributions in return thereof.
"Project Capital Contribution Default" means the failure of a Member,
after the notice and cure period set forth in Section 6.1(d) hereof, to make any
part of its Project Capital Contributions to the Company.
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"Project Capital Contributions" means the aggregate contributions of
cash to the capital of the Company made by or on behalf of the Members pursuant
to Section 6.1 hereof.
"Project Operating Budget" means the annual budget for each Project
owned by a Subsidiary, setting forth the estimated capital and operating
expenses for such Project for the then current or immediately succeeding
calendar year and for each month and each calendar quarter of said calendar year
as approved by the Executive Committee. Any reference in this Agreement to an
"approved Project Operating Budget" means a Project Operating Budget, as
unanimously approved by the Executive Committee in accordance with Section 4.3
hereof or as part of the approved Final Presentation for such Project, as the
same may be subsequently amended from time to time by the unanimous action of
the Executive Committee.
"Property Management Agreement" has the meaning given it in Section
4.12(a) hereof.
"Property Manager" has the meaning given it in Section 4.12(a) hereof.
"Proposal" has the meaning given it in Section 7.2(b) hereof.
"Pursuit Cost Cap" means, with respect to any Target, $10,000.00 or such
greater amount as may be approved by the Executive Committee.
"Pursuit Costs" means, with respect to each Target, the out-of-pocket
costs and expenses paid or incurred by the Developer Member to or with
third-parties not Affiliated with the Company or its Members in connection with
the activities to be undertaken prior to such Target's acquisition by the
Company or a Subsidiary to identify the Target, determine whether it is an
appropriate investment for the Company, engage in preliminary investigation and
evaluation work, including soil, environmental and other engineering studies,
market studies, title and survey work, and review of entitlements, including
activities to gather information necessary or desirable in connection with
preparing, where applicable, a Final Presentation for the Executive Committee,
including travel expenses for site visits, legal expenses, costs for demographic
and market studies, expenses for soil tests, environmental reports, title
examination, surveys, costs incurred in arranging financing for such Target and
similar third-party expenses. Pursuit Costs do not include (i) any general
administrative overhead costs for the Manager or any Affiliate of the Manager,
(ii) any earnest money deposits that may be required to be deposited by the
Company or a Subsidiary in connection with a contract to purchase a Target, nor
(iii) any portion of the purchase price and other costs incurred in connection
with the Developer Member's acquisition of a Target pursuant to clause (iv) of
Section 4.4(d) hereof prior to the approval of a Final Presentation for such
Target; however, the costs that may be incurred by the Developer Member with
respect to a Target and referenced in clauses (ii) and (iii) of the preceding
clause of this sentence are part of the Total Project Costs which would be
reimbursed from Project Capital Contributions as hereinafter provided in this
Agreement.
"Regulations" means the regulations promulgated by the United States
Department of the Treasury pursuant to and in respect of provisions of the Code.
All references
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herein to sections of the Regulations shall include any corresponding provisions
of succeeding, similar, substitute proposed or final Regulations.
"Regulatory Allocations" has the meaning assigned to it in Section
9.4(d).
"Removal Event" has the meaning given it in Section 4.8 hereof.
"Requirement of a Governmental Authority" means any law, ordinance,
order, requirement, restriction, rule, writ, injunction, decree, demand or
regulation of or imposed by a Governmental Authority.
"Residual Sharing Ratios" means the percentages in which Members
participate in distributions of Available Cash after prior distributions under
Section 8.2. The initial Residual Sharing Ratios of the Members are as follows:
Developer Member 40%
GECC Member 60%
Commencing on the earlier of (i) the date on which the Developer Member is
removed as Manager following the occurrence or existence of a Removal Event in
accordance with Section 4.8(b) or (ii) the date of the occurrence or existence
of an Additional Capital Contribution Default Event by the Developer Member, the
Residual Sharing Ratios of the Members shall change to the following:
Developer Member 16.67%
GECC Member 83.33%
"Response Period" has the meaning given it in Section 13.2 hereof.
"Sale Notice" has the meaning given it in Section 13.1 hereof.
"Shortfall" has the meaning given it in Section 6.2(a) hereof.
"Special Defaulting Member" has the meaning given it in Article 15
hereof.
"Subsidiary" means any wholly-owned subsidiary of the Company (each such
direct or indirect subsidiary is herein individually referred to as a
"Subsidiary" and collectively as the "Subsidiaries") that is formed by the
Company for the acquisition, ownership, leasing and selling of Projects. The
Members contemplate that each Project will be owned by a separate Subsidiary
which will be formed or organized as a limited partnership, limited liability
company or other so-called "tax pass-through" entity. To the extent permitted
and not adversely taxed by applicable state law, the Members intend to form each
Subsidiary as a single-member limited liability company which will be
disregarded for federal income tax purposes.
"SUSA" means Storage USA, Inc., a Tennessee corporation and the sole
general partner in the Developer Member.
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"SUSA Competitor" means Public Storage, inc., Shurgard Storage Centers,
Inc., Sovran Self-Storage, Inc. or U-Haul International, Inc., or any of their
respective successors.
"Target" means (i) any existing self-storage facility in the United
States of America, and (ii) any Person (other than an Equity Franchisee or a
Non-Equity Franchisee) which, directly or indirectly, through one or more
intermediaries, owns, or has the right to acquire, one or more existing
self-storage facilities described in clause (i) of this definition.
"Total Project Costs" means, with respect to any Project, the estimated
or actual, as applicable, costs of acquiring such Target- or Project, including,
without duplication, the purchase price of such existing facility and related
closing costs, Pursuit Costs, the Acquisition Fee, costs of refurbishing and
re-equipping the Target or Project, utility deposits, fees and expenses of
architects, engineers and surveyors, loan closing costs, mortgage brokerage and
commitment fees, short-term capital expenditures, and, to the extent applicable,
the costs to carry the Target or Project, including debt service and Operating
Expenses, from the acquisition date to break-even (i.e., the point at which the
Subsidiary's Net Operating Income derived from such Project for three (3)
consecutive calendar months equals or exceeds the debt service (including
required interest and principal payments) on loans for such Project for such
three (3) consecutive calendar months), as approved by the Executive Committee
as part of the Final Presentation for such Project. However, for purposes of
determining the amount of any Project Capital Contributions for a Project, the
estimated Total Project Costs for such Project, as set forth in the approved
Project Acquisition Budget shall be used unless the Executive Committee should
thereafter unanimously and expressly approve a different amount.
"Transaction Party" has the meaning given it in Section 4.6(f).
"Transfer" has the meaning given it in Section 3.2(a) hereof.
"Underwriting Information" has the meaning given it in Section 7.2(b)
hereof.
"Unpermitted Transfer" means a Transfer with respect to a Member,
including a Transfer under the Other Company LLC Agreement (which, in the case
of the Developer Member, includes a Change of Control with respect to itself or
SUSA), that is not permitted by the terms of this Agreement or the Other Company
LLC Agreement or is not otherwise consented to by the other Member.
"Valuation Amount" has the meaning given it in Section 12.1 hereof.
"Year 2000 Compliant" means, in regard to any property or Person, that
all material software, hardware, equipment, goods or systems utilized by, or
material to the physical operations, business operations or financial reporting
of, such property, asset or Person (collectively the "systems") will (i)
properly perform date sensitive functions before, on and after January 1, 2000,
(ii) accurately perform leap year calculations, and (iii) will not cause any
other information technology to fail or generate errors related to any such
dates.
Section 1.2 Other Terms. All terms used in this Agreement that are not
defined in this Article 1 shall have the meanings set forth elsewhere in this
Agreement.
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Section 1.3 Schedules and Exhibits. All schedules and exhibits annexed
or attached hereto are expressly incorporated into and made a part of this
Agreement.
Section 1.4 Currency. All payments, advances and cash contributions of
capital to be made by a Member to or on behalf of the Company and all cash
distributions and other payments made by the Company to a Member shall be made
in lawful money of the United States of America, which shall at the time of
payment be legal tender for payment of all debts and dues, public and private
and in funds available for immediate credit to the recipient's account. All
references in this Agreement to "dollars ($)" shall mean United States of
America dollars.
ARTICLE 2
ORGANIZATIONAL MATTERS; PURPOSE; TERM
-------------------------------------
Section 2.1 Formation of Company. The Company has been organized as a
Delaware limited liability company by filing a certificate of formation (the
"Certificate") under the Act. The parties hereto acknowledge and agree that upon
the signing of this Agreement the Members are hereby admitted to the Company as
the members of the Company and will be shown as members on the books and records
of the Company as of the Effective Date. The Company shall be governed by the
Act, subject to the terms and conditions of this Agreement.
Section 2.2 Name. The name of the Company shall be Storage Acquisition
Portfolio, L.L.C., and all Company business must be conducted in that name or
such other name as the Executive Committee may approve.
Section 2.3 Registered Office; Registered Agent; Principal Office. The
registered office and the registered agent of the Company in the State of
Delaware shall be as specified in the Certificate or as designated by the
Executive Committee. The principal office of the Company shall be at the
principal executive office of the Manager, presently Suite 1300, 165 Madison
Avenue, Memphis, Tennessee 38103 or at such other location as the Executive
Committee may approve.
Section 2.4 Foreign Qualification. Before the Company conducts business
in any jurisdiction other than Delaware, the Manager shall cause the Company to
comply with all requirements necessary to qualify the Company as a foreign
limited liability company in that jurisdiction. At the request of the Manager,
each Member shall execute, acknowledge, swear to, and deliver all certificates
and other instruments conforming with this Agreement that are necessary or
appropriate to qualify, continue, or terminate the Company as a foreign limited
liability company in all jurisdictions in which the Company may conduct
business.
Section 2.5 Purpose and Scope.
(a) The purpose and scope of the Company's activities are strictly
limited to investing in Subsidiaries created for the purpose of acquiring,
repairing, refurbishing, improving, maintaining, owning as an investment,
managing, leasing, holding for appreciation and selling, Projects; financing the
foregoing activities; and performing all other activities reasonably necessary
or incidental to the furtherance of such purposes.
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(b) Without the unanimous approval of the Members, the Company and
its Subsidiaries shall not engage in any other business or activity, including
the loaning of any funds or money, extending credit or otherwise providing
financial accommodations to any Person, other than a Subsidiary.
(c) The Company intends to form wholly-owned Subsidiaries each of
which will own a Project and will conduct part of the Company's business. The
terms of the organizational documents relating to the formation of any
Subsidiary will be approved or ratified by the Executive Committee, but such
documents will conform substantially to the form and substance of the form of
limited liability agreement attached hereto as Schedule 2.5(c). The Members
intend to finance each Subsidiary's acquisition of a Project with debt totaling
approximately fifty percent (50%) of Total Project Costs for each Project, with
the balance of Total Project Costs being funded by Capital Contributions made by
the Members to the Company, which in turn will make capital contributions to
each Subsidiary. The Members intend to cause each Subsidiary to make
distributions of Net Cash Flow and Capital Proceeds to the Company not less
frequently than quarterly so that the Company may make distributions of
Available Cash to the Members pursuant to Section 8.2 hereof.
Section 2.6 Term. The Company commenced on October 8, 1999, which is
the date on which the Certificate was filed with the Office of the Secretary of
State of the State of Delaware, and shall have perpetual existence, unless
sooner dissolved as herein provided.
Section 2.7 No State Law Partnership. The Company shall not be a
partnership or joint venture under any state or federal law, and no Member or
Manager shall be a partner or joint venturer of any other Member or Manager for
any purposes (except that the Company intends to be classified as a partnership
for purposes of the Code and other applicable tax laws), and this Agreement may
not be construed otherwise.
Section 2.8 Warranties and Representations - Developer Member. As a
material inducement to the GECC Member's execution and delivery of this
Agreement, the Developer Member represents and warrants to the GECC Member with
respect to the matters set forth on Schedule 2.8 hereto, each such warranty and
representation being made as of the Effective Date.
Section 2.9 Warranties and Representations - GECC Member. As a material
inducement to the Developer Member's execution and delivery of this Agreement,
the GECC Member represents and warrants to the Developer Member with respect to
the matters set forth on Schedule 2.9 hereto, each such warranty and
representation being made as of the Effective Date.
Section 2.10 Equity Formation Costs.
(a) Upon receipt of invoices therefor, the Developer Member and the
GECC Member shall each pay fifty percent (50%) of (i) the aggregate
out-of-pocket costs and expenses incurred by the Developer Member and the GECC
Member, respectively, in connection with the formation of the Company, including
the respective reasonable attorneys' fees and expenses of the parties in the
preparation and negotiation of this Agreement and the other documents and
agreements executed contemporaneously with this Agreement, the reasonable
travel, meal and
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lodging expenses of the Members' respective employees incurred in connection
with the negotiation and consummation of the Company's formation, and reasonable
accountants' fees and expenses, and (ii) the aggregate costs and expenses
incurred by the Company with respect to any program loan or credit facility for
multiple Projects which is approved by the Executive Committee (all such costs
and expenses are herein collectively called the "Equity Formation Costs"). Any
fee or other compensation payable by the Developer Member to Security Capital
Markets Group is excluded from Equity Formation Costs and shall be paid entirely
by the Developer Member.
(b) The respective amounts paid by the Developer Member and the GECC
Member on account of Equity Formation Costs shall be deemed Project Capital
Contributions and shall be credited to the respective Member's Capital Account
and Project Capital Contribution Balance. As and when a Final Presentation for a
Project is approved by the Executive Committee, the Project has been acquired by
the Company or a Subsidiary and the GECC Member makes one or more Project
Capital Contributions with respect to such Project, the GECC Member shall pay to
the Developer Member an amount equal to the product derived by multiplying (i)
33.33% times (ii) the total Equity Formation Costs times (iii) a fraction, the
numerator of which is the amount of each such GECC Member's Project Capital
Contribution and the denominator of which is $25,000,000.00 until such time as
the GECC Member shall have paid, in the aggregate, 83.33% of the total Equity
Formation Costs. Payments made by the GECC Member to the Developer Member in
accordance with this Section 2.10(b) shall be credited to the GECC Member's
Capital Account and its Project Capital Contribution Balance and shall
correspondingly be debited from the Developer Member's Capital Account and its
Project Capital Contribution Balance.
Section 2.l1 Investment Representations of the Members.
(a) Investment Intent. Each Member does hereby represent and warrant
to the Company and to the Manager that such Member has acquired such Member's
Membership Interest for such Member's own account for investment purposes only
and not with a view to the distribution or resale thereof, in whole or in part,
and agrees that it will not Transfer, or offer to Transfer, all or any portion
of its Membership Interest in any manner that would violate or cause the Company
or the Manager to violate the Federal Act or any securities laws of the several
states.
(b) Unregistered Membership Interests. Each Member does hereby
acknowledge that such Member is aware that such Member's Membership Interest has
not been registered (i) under the Securities Act of 1933, as amended (the
"Federal Act"), or (ii) under the securities laws of any of the several states.
Each Member further understands and acknowledges that such Member's
representations and warranties contained in this Section 2.11 are being relied
upon by the Company and by the Manager as the basis for the exemption of the
Members' Membership Interests from the registration requirements of the Federal
Act and from the registration requirements of the securities laws of the several
states. Each Member further acknowledges that the Company will not, and has no
obligation to, recognize any Transfer of all or any part of such Member's
Membership Interest to any Person except in accordance with this Agreement.
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(c) Legend on Agreement. Each of the Members does hereby acknowledge
and agree that a legend reflecting the restrictions imposed upon the Transfer of
such Member's Membership Interest under Article 3 hereof, under the Federal Act
and under any securities acts of the several states will be and has been placed
on the first pages of this Agreement.
Section 2.12 Warranty Regarding Brokers. Each Member represents and
warrants to the other Member that no Persons (other than Security Capital
Markets Group as to the Developer Member) are entitled, as a result of the
actions of such Member, or any of their respective Affiliates, to a brokerage
commission, fee or similar compensation relating to the formation of the
Company. Each Member shall indemnify, defend and hold the Company and the other
Member harmless from and against any and all losses, costs, damages and expenses
(including reasonable attorneys' fees and court costs) actually incurred or paid
by the Company or such other Member as a result of the inaccuracy of the
foregoing warranty and representation. The Developer Member shall pay any fee or
other compensation due Security Capital Markets Group with respect to the
Company's formation.
Section 2.13 Publicity. The Members shall mutually agree on appropriate
press releases, advertisements and other promotional materials describing in
general terms or in detail the formation of the Company, the Members'
participation in the Company as Members and the business of the Company.
ARTICLE 3
MEMBERSHIP; DISPOSITIONS OF INTERESTS
-------------------------------------
Section 3.1 Members. The initial Members of the Company are the GECC
Member and the Developer Member, each of which is admitted to the Company as a
Member as of the Effective Date.
Section 3.2 Dispositions of Membership Interests.
(a) General Restriction. Except as permitted in Section 3.2(b)
hereof, a Member shall not make an assignment, transfer, or other disposition
(voluntarily, involuntarily or by operation of law) (a "Transfer") of all or any
portion of or any interest in its Membership Interest, nor pledge, mortgage,
hypothecate, grant a security interest in, or otherwise encumber (an
"Encumbrance") all or any portion of or any interest in its Membership Interest.
In addition, the Developer Member shall not permit a Change in Control with
respect to SUSA or itself to occur (any Change in Control of the Developer
Member or SUSA shall be included within the meaning of, and shall be deemed to
be a "Transfer"). Except as permitted in Section 3.2(b) hereof, a Person to whom
a Membership Interest is Transferred may be admitted to the Company as a member
only with the consent of the other Member, which may be given or withheld in the
other Member's sole and absolute discretion. In connection with any Transfer of
a Membership Interest or any portion thereof, and any admission of an assignee
as a Member, the Member making such Transfer and the assignee shall furnish the
other Member with such documents regarding the Transfer as the other Member may
reasonably request (in form and substance reasonably satisfactory to the other
Member), including a copy of the Transfer instrument, a ratification by the
assignee of this Agreement (if the assignee is to be admitted as a Member), a
legal opinion that the Transfer (i) complies with applicable federal and state
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securities laws, (ii) will not cause the company to be classified as other than
a "partnership" for federal income tax purposes, and (iii) will not cause the
Company or any Subsidiary to be in breach of or default under any credit
agreement, mortgage, deed of trust, security agreement or other agreement
encumbering a Project or otherwise binding on the Company, any Subsidiary or any
of their respective assets.
(b) Permitted Transfers. Notwithstanding the limitations in Section
3.2(a) hereof, the GECC Member may Transfer or otherwise grant Encumbrances in
all or a portion of its Membership Interest (1) to any GECC Affiliate
(excluding, however, to the extent it is or becomes a GECC Affiliate in any form
or manner, whether through an asset purchase, stock purchase, merger or any
other type of acquisition or exchange, a SUSA Competitor), and, at the election
of the GECC Member, upon any such Transfer that transferee shall be admitted as
a Member or (2) without ceasing to be a Member, to any Person so long as the
GECC Member retains its Management Rights; provided, however, in each case, any
such Transferee, and the Membership Interest transferred, shall continue to be
subject to the restrictions of Section 3.2(a). Ownership interests in the GECC
Member may be Transferred so long as the GECC Member is controlled by a GECC
Affiliate.
(c) Limited Remedies. In the event of an Unpermitted Transfer, then
the other Member shall be entitled to exercise simultaneously, as its sole
remedy under both this Agreement and the Other Company LLC Agreement, the
Buy-Sell Option or the Marketing Right under both this Agreement and the Other
Company LLC Agreement.
Section 3.3 Creation of Additional Membership Interests. Additional
Membership Interests may be created and issued to existing Members or to other
Persons, and such other Persons may be admitted to the Company as Members, with
the approval of the Developer Member and the GECC Member, on such terms and
conditions as the Developer Member and the GECC Member may determine at the time
of admission.
Section 3.4 Resignation. A Member may not resign or withdraw from the
Company without the consent of the other Member(s).
Section 3.5 Information. In addition to the other rights specifically
set forth in this Agreement, each Member is entitled to the following
information under the circumstances and conditions set forth in the Act: (a)
true and full information regarding the status of the business and financial
condition of the Company and each Subsidiary, (b) promptly after becoming
available, a copy of the Company's and each Subsidiary's (if applicable)
federal, state and local income tax returns for each year; (c) a current list of
the name and last known business, residence or mailing address of each Member
and Manager, (d) a copy of this Agreement, the Company's Certificate and each
Subsidiary's certificate of formation and other organizational documents, and
all amendments to such documents; (e) true and full information regarding the
amount of cash and a description and statement of the agreed value of any other
property or services contributed by each Member and which each Member has agreed
to contribute in the future, and the date on which each became a Member; and (f)
other information regarding the affairs of the Company to which that Member is
entitled pursuant to Section 18-305 of the Act (including all Company books and
records). Under no circumstances shall any information regarding the Company or
its business be kept confidential from any Member.
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Section 3.6 Liability to Third Parties. No Member, in its capacity as
such, shall be liable for the debts, obligations or liabilities of the Company;
however, with the prior approval of the Executive Committee or as otherwise
contemplated by this Agreement, a Member or an Affiliate of a Member may, or may
be required by this Agreement to, by separate written agreement that has been
approved by the Executive Committee, guarantee or otherwise provide credit
support to obligations of the Company or any Subsidiary.
ARTICLE 4
MANAGEMENT OF COMPANY
---------------------
Section 4.1 Executive Committee.
(a) There is hereby created and established the Executive Com-
mittee of Company. The management and control of the Company and each Subsidiary
shall be vested in the Executive Committee which shall be responsible for the
approval of all Major Decisions and the adoption of other policy procedures
respecting the business affairs of the Company and each Subsidiary. Except as
otherwise expressly provided in this Agreement, no action shall be taken, sum
expended, decision made or obligation incurred by the Company or any Subsidiary
with respect to a matter within the scope of any of the Major Decisions, unless
such matter has been expressly approved by the Executive Committee or unless
express provision therefor has been made as part of the Annual Business Plan,
the Operating Budget, any Project Operating Budget or a Final Presentation, in
each instance as approved by the Executive Committee, except that the Manager of
the Company shall be authorized to make any payment or take any action with
respect to any contractual or legal obligations of the Company or a Subsidiary
which have been duly authorized by the Executive Committee.
(b) Subject at all times to subsection 4.1(1) hereof, the Execu-
tive Committee shall at all times consist of four (4) members, two (2) of whom
shall be designated by the Developer Member and two (2) of whom shall be
designated by the GECC Member. Each Member may appoint an alternate for each
member appointed by it to the Executive Committee, and the members and
alternates representing a Member may act interchangeably and with equal
authority with the members. Each member or alternate appointed to the Executive
Committee shall represent the interests of the Member making such appointment or
designation.
(c) Initially, the members of the Executive Committee designated
by each Member are as follows:
Developer Member GECC Member
---------------- -----------
Dean Jernigan David Henry
Christopher P. Marr Mark Dawejko
(d) Each Member shall have the power and authority to remove any
member or alternate member of the Executive Committee designated by it by
delivering written notice of
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such removal to the Company and the other Member. Vacancies on the Executive
Committee shall be filled by the Member which appointed the Executive Committee
member or alternate member previously holding the position which is then vacant.
(e) All of the members or alternate members of the Executive
Committee representing a Member shall collectively be entitled to cast one (1)
vote on behalf of that Member with respect to any decision made by the Executive
Committee: provided that if only one member or alternate member representing a
Member is present at a meeting of the Executive Committee, the member or
alternate member so present shall be entitled to cast the one (1) vote on behalf
of such Member.
(f) Regular meetings of the Executive Committee may be held at such
times and places as may be disignated from time to time by resolution of the
Executive Committee and communicated to all members and alternate members of the
Executive Committee. Special meetings of teh Executive Committee may be called
by the Manager or any member of the Executive Committee upon five (5) Business
Days' notice to all members and alternates by telephone or telefax. The
Executive Committee may conduct its meetings through the use of any means of
communication by which all members participating may hear each other during the
meeting. An agenda for each meeting shall be prepared in advance by the Manager
in consultation with the GECC Member. Subject at all times to subsection 4.1(1)
hereof, two (2) members or alternate members of the Executive Committee, one
representing each Member, shall constitute a quorum. Unanimous concurring votes
shall be required for all actions of the Executive Committee and such unanimous
concurring votes shall be binding upon both Members for all matters, including,
without limiation, financing, refinancing, conveyance of some or all of the
Company's assets, dissolution of the Company, and execution of contracts. Any
action required or permitted to be taken by the Executive Committee may be taken
by written consent signed by the number of members or alternates required to
approve such actions and taken at a meeting of the Executive Committee.
(g) With advance notice to the members representing the other Member,
an Executive Committee member or alternate representing either Member, may
invite to any meeting of the Executive Committee any Person having an equity
interest in the Member represented or in any constituent entity thereof, ot any
legal counsel, consultant or other agent of any such party, provided that no
Persons other than the Executive Committee members or alternates shall be
entitled to vote with respect to any proceedings of the Executive Committee.
(h) The Manager shall cause written minutes to be prepared of all
actions taken by the Executive Committee whether by formal meeting, telephonic
meeting or otherwise, and, within twenty (20) Business Days after any such
meeting, shall deliver a copy thereof to each member or alternate member of the
Executive Committee in attendance at such meeting for his or her review and
written approval, which written approval shall be required in order to evidence
the approval of any action taken by the Executive Committee.
(i) In addition to the foregoing, the Executive Committee may adopt
other procedures and methods designed to permit the business of the Company and
the Subsidiaries to proceed in any orderly and prompt manner, nothwithstanding
the necessity of Executive Committee aprocal hereunder, so long as such
procedures and methods are calculated to keep members and
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alternates of the Executive Committee advised of the affairs of the Company and
allow for a reasonable period for objection by any member of the Executive
Committee.
(j) The members and alternates of the Executive Committee
representing each Member may rely absolutely on the vote, consent, approval,
disapproval or execution and delivery of any instrument by any member or
alternate representing the other Member as having been fully authorized and
approved by the other Member, and no member or alternate is authorized or
required to inquire as to whether any member or alternate representing the other
Member was actually authorized by the Member represented by him or her.
(k) Members and alternates of the Executive Committee shall not
receive any compensation or other remuneration from the Company for their
services to the Company.
(l) Upon either Member (or a permitted transferee of such Member)
ceasing to be a Member in the Company, such Member (or such permitted
transferee) shall cause the members and alternates appointed by it to the
Executive Committee to resign from the Executive Committee of the Company in
which event the Executive Committee will consist of only two (2) members who
will be designated by the remaining Member.
(m) At the request of the other Member, each Member shall remove any
member or alternate to the Executive Committee appointed by it who (a) engages
in a pattern or practice of not adhering to the Company's Integrity Policy, (b)
misappropriates or converts any funds of the Company or a Subsidiary to his or
her personal use, (c) is declared to be an incompetent in any judicial
proceedings, or (d) is indicted for a felony (whether or not convicted).
Section 4.2 Management of the Company.
(a) The Manager shall manage the affairs of the Company and make all
decisions with regard thereto, except where (1) the Executive Committee's or the
GECC Member's approval is required under this Agreement or (2) the approval of
any of the Members is expressly required by a non-waivable provision of
applicable law. The GECC Member shall have sole and exclusive authority to
enforce on behalf of the Company or a Subsidiary any agreement between the
Company or a Subsidiary and the Developer Member or SUSA, or any of their
respective Affiliates, including the Property Management Agreement.
(b) The Manager shall discharge its duties to the Company in good
faith and in the best interests of the Company. The Manager, on behalf of the
Company, shall in good faith use all reasonable efforts to implement all Major
Decisions approved by the Executive Committee, enforce agreements entered into
by the Company, and conduct the ordinary business and affairs of the Company in
accordance with good industry practice and this Agreement. The Manager shall not
be required to devote a particular amount of time to the Company's business, but
shall devote sufficient time and effort to the Company's business and operation
as is reasonably necessary to manage the affairs of the Company prudently and in
accordance with this Agreement, and to perform its duties hereunder. Except as
may be expressly permitted by this Agreement, the Manager shall not delegate any
of its rights or powers to manage and control
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the business and affairs of the Company without the prior written approval of
the Executive Committee.
(c) Subject to the limitations and qualifications set forth in this
Agreement, the Members' 31;1igations to make Capital Contributions to the
Company, and the availability of aufficient funds in the Company and Subsidiary
bank accounts, the Manager shall perform the following on behalf of the Company:
(l) Engage qualified Persons to assist in the Company's business,
including design professionals and consultants, attorneys, accountants, real
estate brokers and management agents.
(2) Pay, without duplication, all expenses incurred by the
Company and its Subsidiaries in accordance with the approved Operating Budget
and each approved Project Operating Budget, respectively.
(3) Maintain the books and records for the Company and its
Subsidiaries and prepare the reports required to be submitted to the Members in
accordance with this Agreement.
(4) Operate the business of the Company substantially in
accordance with the approved Operating Budget and the approved Annual Business
Plan.
(5) Supervise negotiations with the appropriate Governmental
Authorities.
(6) Supervise the resolution of any disputes concerning bound-
aries of Projects and the rights of adjoining owners.
(7) Use its commercially reasonable best efforts to cause each
Project to be acquired and operated substantially in accordance with the
approved Final Presentation therefor, the applicable approved Project Operating
Budget and the approved Annual Business Plan, and in substantial compliance with
all applicable Requirements of Governmental Authorities having jurisdiction over
each Project, including those relating to zoning, building, fire, subdivision
control, and environmental requirements, including the Americans with
Disabilities Act, and applicable variances to any of the foregoing.
(8) Use its commercially reasonable best efforts to obtain all
permits, licenses, approvals, and variances required for the operation,
management and use of each Project in accordance with applicable Requirements of
Governmental Authorities and customary local practices.
(9) Comply with the Insurance Program.
(10) Oversee the acquisition and management of all Projects and
procure the proper performance of all obligations connected therewith
substantially in accordance with the approved Final Presentations, the approved
Project Acquisition Budgets and the approved Project Operating Budgets therefor.
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(11) Verify and pay all costs incurred in connection with the
acquisition of the Projects in substantial conformity with the applicable
approved Project Acquisition Budgets.
Section 4.3 Annual Business Plan.
(a) Operation Under Business Plan. The Manager will operate the Company
in accordance with a strategic business plan approved in accordance with this
Section. Any business plan that is in effect with respect to any Fiscal Year, as
it may be amended, is called the "Annual Business Plan".
(b) Contents of Annual Business Plan. The Annual Business Plan will
include an executive summary outlining the business strategy and budgeted and
forecasted financial information for the upcoming period and will contain a
comprehensive statement setting forth the overall plan for the business of the
Company and each Subsidiary, including proposed Project acquisitions, and
financings and refinancings (in all cases, to the extent then known or
reasonably anticipated), and will set forth the following criteria for the
operation of the Company during the Fiscal Year to which it relates: (i) the
Operating Budget for the Company and all Subsidiaries, including anticipated
reserves, (ii) the Project Operating Budget for each Project, including
anticipated reserves, for each of the Subsidiaries which own a Project, and
(iii) for forecasting purposes only, an estimated schedule of Pursuit Costs and
calls for Capital Contributions for the year. In preparing and approving each
Annual Business Plan and any revisions or amendments thereto, the Manager and
the Executive Committee will consider, among other things, the previous year's
experience, current and projected market conditions and anticipated future needs
in light of such projections.
(c) Adoption of Annual Business Plan. As soon as reasonably practicable
after the Effective Date, but in no event later than thirty (30) days after the
Effective Date, the Manager will present a proposed Annual Business Plan for
Fiscal Year 2000 to the Executive Committee for its approval. With respect to
each subsequent Fiscal Year, the Manager will, on or before November 1 of each
year, present a proposed Annual Business Plan for the next succeeding Fiscal
Year to the Executive Committee for its approval. The Members anticipate that
the Annual Business Plan will be revised quarterly or more frequently in
response to market conditions. In addition, the Manager and any Member may from
time to time during a Fiscal Year present proposed amendments to the Annual
Business Plan to the Executive Committee for its approval. The Executive
Committee will promptly consider any proposed Annual Business Plan or amendment
thereto, including the Operating Budget and each Project Operating Budget, and
if the Annual Business Plan is not approved by the Executive Committee, the
member or alternate member of the Executive Committee failing to approve the
Annual Business Plan shall notify the Manager and the Members in writing of
those portions or line items thereof not so approved. The failure of the
Executive Committee to approve an Annual Business Plan within forty-five (45)
days after its presentation to the Executive Committee will constitute a Major
Dispute; however, the Members shall cause the Executive Committee to work in
good faith to approve an Annual Business Plan in order to avoid a Major Dispute.
No change, revision or other amendment to an approved Annual Business Plan will
change or modify the Performance Benchmarks, which may be changed only by the
express, written approval of the Developer Member and the GECC Member in the
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exercise of their respective sole discretion. Upon approval and adoption of an
Annual Business Plan, the previously effective Annual Business Plan shall be
completely superceded and no longer effective.
(d) Operations in Gap Period. With respect to Fiscal Year 2001 and each
Fiscal Year thereafter, if an Annual Business Plan has not been approved in
accordance with this Section with respect to any Fiscal Year by the start of the
Fiscal Year, the Annual Business Plan in effect for the immediately preceding
Fiscal Year (the "Old Business Plan") will (subject to the proviso at the end of
this sentence) serve as the interim Annual Business Plan until a new Annual
Business Plan is so approved (if at all); provided, however, that the Old
Business Plan will be deemed to include (i) with respect to each approved
Project Operating Budget, such approved Project Operating Budget for the
applicable Subsidiary, and (ii) with respect to each Project Operating Budget or
line item thereof that has not been approved by the Executive Committee, a
Project Operating Budget, or particular line item thereof, for each applicable
Subsidiary that (A) is based on the Project Operating Budget, or particular line
item thereof, for its Project with respect to the then current Fiscal Year
(Inflation Adjusted), (B) reflects increases in amounts payable with respect to
items that are outside the reasonable control of the Manager (including taxes,
insurance, and debt service), and (C) includes other amounts reasonably believed
by the Manager to be required to preserve the value of the Subsidiary's assets.
For the avoidance of doubt, even though the Old Business Plan will serve as the
interim Annual Business Plan with the changes included in this Section 4.3(d),
the failure of the Executive Committee to approve and adopt an Annual Business
Plan in accordance with Section 4.3(c) shall constitute a Major Dispute.
Section 4.4 Investments.
(a) From time to time until the Commitment Termination Date the
Developer Member shall identify for the Executive Committee Targets which the
Developer Member proposes as Projects for acquisition by the Company pursuant to
this Agreement.
(b) The Developer Member shall have primary responsibility to identify
such Targets. Subject to the reimbursement obligations with respect to Pursuit
Costs set forth in Sections 4.4(k) and 4.4(1), the Developer Member shall pay
all costs and expenses incurred by the Developer Member in locating,
identifying, evaluating and presenting Targets to the Executive Committee,
including all overhead, travel expenses, salaries and other payroll costs for
the Developer Member's officers and employees engaged in such work.
(c) The Developer Member shall present all such proposed Targets to the
Executive Committee for preliminary approval through a Preliminary Presentation.
The Executive Committee shall have ten (10) Business Days after receipt of such
Preliminary Presentation to provide the Developer Member with its approval or
rejection thereof, such approval or rejection to be made by the Executive
Committee based upon the Target's compliance (or failure to comply) with the
Approved Investment Parameters. If the Executive Committee fails to approve the
Preliminary Presentation within such ten (10) day period, the Executive
Committee shall be deemed to have rejected the same. Approval of a Preliminary
Presentation by the Executive Committee must be made by unanimous vote. If the
Executive Committee fails to approve the Preliminary Presentation, then the
member or alternate member of the Executive Committee failing to approve the
Preliminary Presentation shall give a
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written statement of objections thereto. If the Developer Member and the
Executive Committee are unable thereafter to resolve the Executive Committee's
objections to the Preliminary Presentation, then the Developer Member shall have
an option to pursue such Target as an Independent Investment as provided in
Section 4.5 hereof.
(d) Approval by the Executive Committee of the Preliminary Presentation
with respect to a Target shall constitute the Executive Committee's
authorization to the Developer Member to (i) incur Pursuit Costs with respect to
such Target in accordance with budget therefor included within such approved
Preliminary Presentation, (ii) conduct due diligence with respect to such
Target, (iii) prepare the Final Presentation for such Target and (iv) at the
Developer Member's option, to acquire such Target in the name of the Developer
Member or a Controlled Affiliate thereof, pending completion and approval of the
Final Presentation for such Target. If, pursuant to clause (iv) of the preceding
sentence, the Developer Member acquires a Target and a Final Presentation for
such Target is not approved by the Executive Committee, or if so approved, the
Target is not subsequently conveyed by the Developer Member to a Subsidiary for
any reason, other than a Project Capital Contribution Default by the GECC
Member, then, notwithstanding anything to the contrary contained in this
Agreement, neither the Company nor any Subsidiary shall have any obligation to
reimburse the Developer Member for any Pursuit Costs or any other costs and
expenses incurred by the Developer Member with respect to such Target.
(e) Approval by the Executive Committee of the Preliminary Presentation
with respect to a Target shall also constitute the Executive Committee's
authorization to the Developer Member to call for Project Capital Contributions
to make earnest money deposits required in connection with the execution of a
contract for the purchase of such Target and the Members agree to make Project
Capital Contributions to the Company for such required earnest money deposits.
Except as otherwise expressly provided in Section 4.4(g) hereof, if the Final
Presentation for such Target is not subsequently approved by the Executive
Committee as hereinafter provided or if the Final Presentation for such Target
is approved but for whatever reason, other than a Project Capital Contribution
Default by the GECC Member, the Target is not subsequently acquired by the
Company or a Subsidiary, then the Developer Member shall, within thirty (30)
days after the Executive Committee's failure so to approve such Final
Presentation or the Company or a Subsidiary's failure so to acquire such Target,
return to the Members the Project Capital Contributions so contributed for such
earnest money. Forfeiture or other inability of the Developer Member to obtain a
refund of any earnest money deposit made with respect to a Target shall not
excuse the Developer Member's obligation to return such Project Capital
Contributions to the Members unless caused by a Project Capital Contribution
Default by the GECC Member. After the approval of a Preliminary Presentation by
the Executive Committee, any material amendment to a purchase agreement with
respect to the Target, including amendments increasing the purchase price or
required earnest money deposits must be submitted to the Executive Committee for
approval.
(f) Prior to the acquisition of a Target by the Company or a
Subsidiary, the Developer Member shall deliver to the Executive Committee a
Final Presentation for such Target. The Executive Committee shall have ten (10)
Business Days after receipt of such Final Presentation with respect to the
Target to provide the Developer Member with its approval or rejection thereof,
such approval or rejection to be made by the Executive Committee based upon
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(i) the Target's compliance (or failure to comply) with the Approved Investment
Parameters and (ii) satisfactory Due Diligence Information. Approval of a Final
Presentation by the Executive Committee must be made by unanimous vote. If the
Executive Committee fails to approve the Final Presentation within such ten (10)
Business Day period, the Executive Committee shall be deemed to have rejected
the same. If the Executive Committee fails to approve the Final Presentation
then the member or alternate member of the Executive Committee failing to
approve the Final Presentation shall give a written statement of objections to
the Final Presentation. If the Developer Member and the Executive Committee are
unable thereafter to resolve the Executive Committee's objections to the Final
Presentation, then the Developer Member shall have an option to pursue such
Target as an Independent Investment as provided in Section 4.5 hereof.
(g) Approval by the Executive Committee of the Final Presentation with
respect to a Target shall constitute the Executive Committee's authorization to
the Developer Member to cause such Target to be conveyed to a Subsidiary and
thereafter proceed with the Target as a Project. If, after the approval of a
Target's Final Presentation, (i) the Target has not been acquired by the Company
or a Subsidiary within ninety (90) days after such approval (a "Delayed Project
Acquisition"), then the Executive Committee's approval thereof shall be deemed
automatically withdrawn and revoked. If the Executive Committee's Approval is
deemed withdrawn and revoked in accordance with the preceding sentence, then the
Company and its Subsidiary shall cease work with respect to such Target and the
Members shall have no further obligation to make Project Capital Contributions
with respect thereto unless and until the Developer Member submits a revised and
updated proposed Final Presentation for such Target to the Executive Committee
for its approval in accordance with Section 4.4(f) hereof. In the event such
revised and updated proposed Final Presentation is not then approved by the
Executive Committee, then the Developer Member shall have the option to proceed
with such Target as an Independent Investment in accordance with Section 4.5
hereof upon reimbursement or repayment to the GECC Member of any and all Project
Capital Contributions made by the GECC Member with respect to such Target, upon
which reimbursement and payment the purchase contract for such Target will be
assigned, without warranty or recourse, to the Developer Member or its
Affiliate. If the Developer Member does not exercise its option to purchase such
Target and pursue it as an Independent Investment in accordance with the
preceding sentence within ninety (90) days after the Executive Committee's
failure to approve the revised and updated proposed Final Presentation for such
Target, then, the Manager shall cause the Company or its Subsidiary to terminate
the purchase contract for such Target and relinquish and forfeit any earnest
money deposit thereunder and in such event, the Developer Member shall have no
obligation to repay or return to the GECC Member any Project Capital
Contributions made by the GECC Member with respect to such Target. Earnest money
deposits so forfeited are Project Capital Contributions.
(h) In approving or disapproving a Preliminary Presentation or a Final
Presentation, as the case may be, the Executive Committee's only obligation will
be to make a good faith effort to determine whether or not the Preliminary
Presentation or the Final Presentation, as applicable, for a Target satisfies
the Approved Investment Parameters and whether or not the Due Diligence
Information, in the case of a Final Presentation, for the Target is
satisfactory.
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(i) If the Final Presentation for the Target is approved by the
Executive Committee, then the Developer Member shall cause a Subsidiary to be
formed for the purpose of acquiring, owning and holding the Target and carrying
out the approved Final Presentation. A Subsidiary shall be formed for the
acquisition of each Project.
(j) Prior to the acquisition of a Target by the Company or a Subsidiary
or contemporaneously therewith:
(1) The Developer Member shall have verified, after reasonable
due diligence, that all applicable zoning, land use, wetlands, flood hazard,
endangered species, and other entitlements needed to permit the use of the
Target reasonably consistent with the approved Final Presentation therefor shall
have been obtained, and all zoning and other entitlement permits required to
permit the use of such Target in accordance with the approved Final Presentation
therefor shall have been obtained.
(2) Phase I Environmental Reports (or Phase II Environmental
Reports if such is the recommendation of the Phase I Environmental Report)
(collectively, the "Environmental Reports") shall have been approved by the GECC
Member as part of the Due Diligence Information in the Final Presentation for
such Target or otherwise, which approval shall not be unreasonably withheld or
delayed. The Environmental Reports shall be prepared by an environmental
engineer or consultant selected from a list of engineers and consultants
approved from time to time by the GECC Member pursuant to a scope of work
approved from time to time by the GECC Member. The approved Project Acquisition
Budget for each Target shall include the reasonable estimate of any remediation
costs associated with hazardous substances reflected by such Environmental
Reports and the Developer Member shall implement a remediation plan in
accordance with recommendations in the Environmental Report obtained in
connection with the acquisition of such Target as approved by the Executive
Committee as part of the approved Final Presentation.
(3) A commitment for an Owner's Policy of Title Insurance
shall have been obtained on behalf of the Subsidiary in the amount of the
purchase price (as reflected in the approved Project Acquisition Budget) for
such Target insuring good, indefeasible, marketable and insurable fee simple
title to such Target (or a leasehold estate if approved by the Executive
Committee), subject only to matters and exceptions that do not materially and
adversely affect the Subsidiary's ability to operate and use such Target or
cause the Total Project Costs for such Target to exceed, in any material
respect, the amounts shown in the Project Acquisition Budget approved as part of
the Final Presentation for such Target.
(4) The following shall have been verified by the Developer
Member: (i) satisfactory methods of access to and egress from such Target and
adjoining or nearby public ways are or will be available, sufficient to meet the
reasonable needs of such Target, (ii) sanitary water supply, including a well,
and storm sewer and sanitary sewer facilities, including a septic system, and
other required utilities (gas (if applicable), electricity, telephone, etc.) are
or will be available for the Target and in sufficient capacities (with no
moratoriums for such services in effect or reasonably anticipated) to meet the
reasonable needs of such Target, and (iii) if any private easements over land of
others are required for such means of access and egress or for any
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such utilities, such easements are or will be available and will be acquired
contemporaneously with the Subsidiary's acquisition of such Target.
(k) Contemporaneously with a Subsidiary's acquisition of a Target and
so long as such Pursuit Costs were included in an approved Project Acquisition
Budget therefor, the Subsidiary shall reimburse the Developer Member for all
Pursuit Costs incurred by the Developer Member in connection with the Project
through Project Capital Contributions made by the Members to the Company which
in turn will be contributed to the Subsidiary. As soon as reasonably practicable
following the acquisition of a Project, the Manager shall cause the Subsidiary
to close the Acquisition Loan for such Project.
(l) With respect to an Abandoned Target and within thirty (30) days
after the GECC Member's receipt of invoices and other reasonable evidence
verifying the amount, purpose and recipient of such Pursuit Costs, the GECC
Member shall reimburse the Developer Member for fifty percent (50%) of all
Pursuit Costs incurred by the Developer Member with respect to such Abandoned
Target in accordance with the approved budget therefor, up to, but not
exceeding, one-half (1/2) of the Pursuit Cost Cap for such Abandoned Target. The
total payments made by the Developer Member and the GECC Member on account of
Pursuit Costs incurred with respect to Abandoned Targets, up to, but not
exceeding the Pursuit Cost Cap for any Abandoned Target shall be treated for all
purposes of this Agreement as Project Capital Contributions and, to the extent
permissible, such costs shall be capitalized in the Total Project Costs of all
consummated Projects in accordance with a methodology to be approved by the
Executive Committee. All Pursuit Costs incurred by the Developer Member with
respect to an Abandoned Target in excess of the Pursuit Cost Cap for that Target
will be paid by the Developer Member from its own funds which will not be
treated as Capital Contributions to the Company or any Subsidiary and will not
be credited to its Project Capital Contribution Balance or Additional Capital
Contribution Balance. For the avoidance of doubt, the Developer Member shall pay
(i) any and all Pursuit Costs with respect to an Abandoned Target in excess of
the Pursuit Cost Cap for such Abandoned Target, and (ii) any and all Pursuit
Costs with respect to any Target the Preliminary Presentation for which is not
approved by the Executive Committee; however, none of such payments made in
accordance with the preceding clauses of this sentence shall be credited to the
Developer Member's Capital Account in the Company, none shall be considered a
Capital Contribution to the Company for purposes of distributions or otherwise,
and none shall be credited to its Project Capital Contribution Balance or its
Additional Capital Contribution Balance. Notwithstanding the foregoing, if an
Abandoned Target is not acquired by the Company or a Subsidiary solely because
of a Project Capital Contribution Default by the GECC Member, then the GECC
Member shall be responsible for, and shall pay to the Developer Member fifty
percent (50%) of all Pursuit Costs incurred by the Developer Member pursuant to
the approved budget therefor without regard to any limitation on such
reimbursement obligation that would otherwise be applicable.
(m) The Members acknowledge and agree that the Developer Member's
delivery of a Preliminary Presentation or a Final Presentation pursuant to this
Section 4.4 shall not constitute a guaranty that the actual results of any
Target or Project will correspond to the information contained in or
accompanying any such Preliminary Presentation or Final Presentation or a
guaranty of performance of any Project.
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(n) Notwithstanding anything to the contrary contained in this
Agreement, the Executive Committee shall have no obligation to approve a
Preliminary Presentation or a Final Presentation for a Target if the then sum of
the GECC Member's Project Capital Contribution Balance plus its share of
unfunded Project Capital Contributions for all Targets and Projects, as
applicable, for which Final Presentations have been approved by the Executive
Committee, equals or exceeds $100,000,000.00.
(o) Notwithstanding anything to the contrary contained in this
Agreement, including this Section 4.4, the presentation of a Target by the
Developer Member to the Executive Committee for preliminary approval through a
Preliminary Presentation or for final approval through a Final Presentation
shall constitute the approval of such Preliminary Presentation or Final
Presentation, as applicable, by the Developer Member and the member or alternate
member of the Executive Committee appointed by the Developer Member must vote to
approve any such Preliminary Presentation or Final Presentation so submitted by
the Developer Member to the Executive Committee, including any revised or
updated Final Presentation presented by the Developer Member to the Executive
Committee for approval.
Section 4.5 Independent Investments.
(a) If the Executive Committee fails to approve the Preliminary
Presentation or the Final Presentation for a Target, or if the Executive
Committee's approval of the Final Presentation for a Target is deemed withdrawn
and revoked in accordance with Section 4.4(g) hereof and the Executive Committee
fails to approve a revised and updated proposed Final Presentation for such
Target in accordance with Section 4.4(g) hereof, then the Developer Member or an
Affiliate of the Developer Member shall have the option, to be exercised within
ninety (90) calendar days after the Executive Committee's failure to approve the
Preliminary Presentation, the Final Presentation, or any revised and updated
Final Presentation, as applicable, to enter into a contract to acquire, or
close, as the case may be, and to own and operate the Target in question free of
any participation by the Company, the GECC Member or a Subsidiary so long as
such acquisition is made substantially on the same terms as those submitted to
the Executive Committee in such disapproved Preliminary Presentation, Final
Presentation or revised and updated Final Presentation, as applicable (herein
called an "Independent Investment").
(b) If the Developer Member or its Affiliate elects to exercise its
option under this Section 4.5 with respect to an Independent Investment, then
the Developer Member shall so notify (the "Election Notice") the GECC Member
within such ninety (90) calendar day period. Contemporaneously with its sending
the Election Notice to the GECC Member and as a condition to its undertaking the
Independent Investment, the Developer Member shall reimburse the Company for all
costs and expenses, if any, incurred by the Company or any of its Subsidiaries
with respect to such Independent Investment.
(c) The rights of the Developer Member under this Section 4.5 to pursue
Independent Investments is subject at all times to the provisions of Section 4.6
hereof.
Section 4.6 Right of First Refusal; Certain Restrictions; Non-Compete.
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(a) From the Effective Date until the earlier to occur of (i) the
Commitment Termination Date or (ii) the date on which the GECC Member has funded
all of its Project Capital Contributions, the Developer Member and SUSA, and
each of their respective Controlled Affiliates, shall offer the Company a right
of first refusal to acquire or to attempt to acquire any and all Targets
pursuant to the procedures set forth in Section 4.4 hereof, except: (i)
Independent Investments, (ii) Targets to be acquired by the Other Company and
its subsidiaries, (iii) the self-storage facilities identified on Schedule
4.6(d) to be acquired with proceeds received by the Developer Member prior to
the Effective Date from the sale or exchange of properties intended to qualify
as tax-free exchanges under Section 1031 of the Code, including as a result of
the formation of Storage Portfolio I LLC, a limited liability company formed
between the Developer Member and FREAM No. 18 LLC, (iv) the redevelopment,
reconstruction or repair of self storage facilities owned by the Developer
Member or SUSA or any of their respective Controlled Affiliates, that have been
damaged or destroyed by casualty, (v) as may be permitted in accordance with
Section 4.6(d) hereof, (vi) Targets to be acquired by Non-Equity Franchisees,
and (vii) subject always to Section 4.6(f) hereof, Targets to be acquired by
Equity Franchisees. In addition, if after the Effective Date the Developer
Member or SUSA, or any of their respective Controlled Affiliates, disposes of
any Target or self-storage facility that it holds other than through its
interest in the Company, then the Developer Member, SUSA or any such Controlled
Affiliate may invest up to an aggregate of $40 million in each twelve (12) month
period following the Effective Date (whether in the form of cash and/or
incurrence of acquisition indebtedness) in the acquisition of Targets or Other
Company Targets outside of the Company, but only to the extent that such
investment is made as part of one or more like-kind exchanges under Section 1031
of the Code. For the avoidance of doubt and notwithstanding anything to the
contrary contained in clauses (vi) and (vii) of the first sentence of this
Section 4.6(a), the Developer Member and SUSA, and each of their Controlled
Affiliates, shall offer the Company a right of first refusal, pursuant to the
procedures set forth in Section 4.4 hereof, in any equity investment opportunity
to participate in any joint venture, partnership, limited liability company or
other investment vehicle that is not part of the Storage USA or Budget-Storage
USA franchise program or system for the purposes of acquiring, developing,
redeveloping or investing in Targets.
(b) In addition to the right of first refusal contained in Section
4.6(a) hereof and the non-competition provisions of Sections 4.6(c) and (d)
hereof, but subject always to the last sentence of this Section 4.6(b), until
the earlier of (i) the fifth (5th) anniversary of the Effective Date or (ii) the
date on which the GECC Member no longer owns any interest in the Company or the
Other Company, neither the Developer Member nor SUSA, nor any of their
respective Controlled Affiliates, shall own, operate, manage, franchise, grant a
license to use its trade name or otherwise have any direct or indirect material
economic interest in any Other Company Target that is within the Prohibited
Radius of any Project owned, directly or indirectly, by the Company or the Other
Company except as expressly permitted in this Section 4.6(b). If the Developer
Member or SUSA, or any of their respective Controlled Affiliates desires to
undertake any such competing activity, the Developer Member shall notify the
GECC Member of its intended action and the GECC Member shall either: (A)
disapprove of the action, in which case the Developer Member and SUSA, and their
respective Controlled Affiliates, shall not undertake it or (B) approve of the
action in which case the Developer Member or SUSA, or any of their respective
Controlled Affiliates, may undertake it. The restriction contained in the
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preceding sentence shall not apply to the self-storage facilities identified on
Schedule 4.6(d) hereto or which at the time they became owned, operated, managed
or franchised (i.e., acceptance of a franchise application) by the Developer
Member or SUSA, or any of their respective Controlled Affiliates, did not
violate this Section 4.6(b) or constitute a breach of the right of the first
refusal obligation set forth in Section 4.6(a).
(c) In addition to the right of first refusal contained in Section
4.6(a) hereof and the non-competition provisions of Sections 4.6(b) and (d)
hereof, but subject always to the last sentence of this Section 4.6(c), until
the earlier of (i) the fifth (5th) anniversary of the Effective Date or (ii) the
date on which the GECC Member no longer owns any interest in the Company or the
Other Company, neither the Developer Member nor SUSA, nor any of their
respective Controlled Affiliates, shall own, operate, manage, franchise, grant a
license to use its trade name or otherwise have any direct or indirect material
economic interest in any Target within a one (1) mile radius of any Project
owned, directly or indirectly, by the Company or the Other Company unless the
Developer Member or SUSA, or any such Controlled Affiliate, as the case may be,
shall first offer to the GECC Member (i) a right of first refusal to participate
with it in the ownership, operation, management, franchising, licensing or other
direct or indirect material economic interest in such Target on the same terms
and conditions available to the Developer Member, SUSA, or such Controlled
Affiliate with respect to such Target pursuant to the procedures set forth in
Section 4.4 hereof as if such Target were a Target under this Agreement or (ii)
the right to dispose of the Company's Project impacted by the proposed
transaction in accordance with Article 13 hereof, in each such case such right
to be exercised (if at all) on behalf of the Company by the GECC Member. In the
event the GECC Member elects that the Company dispose of the Project impacted by
the proposed transaction, then such right shall be exercised without regard to
any time or other restrictions or limitations, including any restrictions set
forth in Section 13.3 hereof, that might otherwise be applicable to such right.
If the GECC Member elects to participate with the Developer Member, SUSA or such
Controlled Affiliate in such Target, then, at the option of the GECC Member,
such participation may be effected either through the Company or through a new
single-purpose, single-asset limited liability company to be formed between the
Developer Member and the GECC Member for the purpose of effecting such
participation, which new company shall be governed by an agreement substantially
similar to this Agreement but with such changes as are appropriate to reflect
that its single-purpose, single-asset entity status. If the GECC Member elects
to participate with the Developer Member, SUSA or such Controlled Affiliate with
respect to such Target pursuant to the right of first refusal, then,
notwithstanding any limitations on the obligation of the Members to make Project
Capital Contributions to the Company, the Members shall make Project Capital
Contributions to the Company or such new entity in an amount equal to, and in
the same proportions, i.e. 83.33%, in the case of the GECC Member, and 16.67%,
in the case of the Developer Member, as if such Target were a Project under this
Agreement, and the failure of either Member to make such required capital
contributions shall constitute a Project Capital Contribution Default under this
Agreement. The restriction contained in this Section 4.6(c) shall not apply to
the self-storage facilities identified on Schedule 4.6(d) hereto or which at the
time they became owned, operated, managed or franchised (i.e., acceptance of a
franchise application) by the Developer Member or SUSA, or any of their
respective Controlled Affiliates, did not violate this Section 4.6(c) or
constitute a breach of the right of first refusal obligation set forth in
Section 4.6(a).
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(d) In addition to the right of first refusal contained in Section
4.6(a) hereof and the non-competition provisions of Sections 4.6(b) and 4.6(c)
hereof, until the earlier of (i) the fifth (5th) anniversary of the Effective
Date or (ii) the date on which the GECC Member no longer owns any interest in
the Company or the Other Company, in the event the Developer Member or SUSA, or
any of their respective Controlled Affiliates, is involved in any merger,
reorganization, share exchange, recapitalization, restructuring, consolidation
or other business combination (whether or not such transaction constitutes a
Change in Control of the Developer Member or SUSA) that would result in the
Developer Member or SUSA, or any of their respective Controlled Affiliates, or
the surviving entity (if other than the Developer Member, SUSA or one of their
respective Controlled Affiliates), owning, operating, managing, franchising,
granting a license to use its trade name or otherwise having any direct or
indirect material economic interest in any Target located within a one (1) mile
radius of any Project owned, directly or indirectly, by the Company, then,
notwithstanding any contrary provisions of this Agreement, the GECC Member, on
behalf of the Company, shall have the sole and exclusive right and authority
either (i) to cause the Company to acquire such Target from the Developer
Member, SUSA, such Controlled Affiliate or such surviving entity, as the case
may be, at a price to be agreed to by the Members consistent with the valuation
methodology used in valuing the respective enterprises involved in such
transaction, or if the Members are unable to agree on such price, at such
Target's fair market value, as determined by an appraisal (as hereinafter
provided), in which case such Target would be acquired by the Company on the
same terms and conditions applicable to other Projects acquired by the Company,
or (ii) to cause the Company to dispose the Company's Project impacted by the
proposed transaction in accordance with Article 13 hereof, unless the Other
Company acquires the Project in accordance with the Other Company LLC Agreement.
In the event the GECC Member elects that the Company acquire such Target, then
such acquisition may be effected either through the Company or through a new
single-purpose, single-asset limited liability company to be formed between the
Developer Member and the GECC Member for the purpose of effecting such
acquisition, which new company shall be governed by an agreement substantially
similar to this Agreement but with such changes as are appropriate to reflect
that its single-purpose, single-asset entity status, and notwithstanding any
limitations on the obligation of the Members to make Project Capital
Contributions to the Company, the Members shall make Project Capital
Contributions to the Company or such new entity in an amount equal to, and in
the same proportions, i.e. 83.33%, in the case of the GECC Member, and 16.67%,
in the case of the Developer Member, as if such Target were a Project under this
Agreement, and the failure of either Member to make such required capital
contributions shall constitute a Project Capital Contribution Default under this
Agreement. In the event the GECC Member elects that the Company dispose of the
Project impacted by the proposed transaction, then such right shall be exercised
without regard to any time or other restrictions or limitations, including any
restrictions set forth in Section 13.3 hereof, that might otherwise be
applicable to such right. If the Members are unable to agree on the price at
which the Company would acquire such Target, then the GECC Member, by notice to
the Developer Member, may require the determination of the fair market value to
be made by an independent appraiser specified in that notice. If the Developer
Member objects to the independent appraiser designated therein within ten days
after it receives such notice and the GECC Member and the Developer Member fail
to agree on an independent appraiser, then either Member may request that the
Atlanta, Georgia office of the AAA designate an independent appraiser, in which
case the selection of the appraiser by the AAA and such appraiser's
determination of value shall be
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binding on the parties. The Company shall pay the cost of any such appraisal and
the closing of the Company's acquisition of such Target shall occur within 30
days after the purchase price for the Target is finally determined.
(e) In the event of a breach or threatened breach of Section 4.6(a),
Section 4.6(b), Section 4.6(c), Section 4.6(d) or Section 4.6(f) by the
Developer Member or SUSA, or any of their respective Controlled Affiliates, the
remedy at law in favor of the GECC Member will be inadequate, and the GECC
Member, in addition to all other rights and remedies which may be available,
shall accordingly have the right of specific performance in the event of any
breach, or injunction in the event of any threatened breach, of Section 4.6(a),
Section 4.6(b), Section 4.6(c), Section 4.6(d) or Section 4.6(f) hereof by the
Developer Member or SUSA, or any of their respective Controlled Affiliates.
(f) From the Effective Date until the earliest to occur of (i) the
Commitment Termination Date, (ii) the date on which the GECC Member has funded
all of its Project Capital Contributions, or (iii) the date on which the GECC
Member and the Developer Member agree, if at all, as hereinafter provided with
respect to the terms and conditions on which the GECC Member may have a right to
participate in Franchise Equity Program Transactions, if the Developer Member or
SUSA, or any of their respective Controlled Affiliates (herein individually
called a "Transaction Party") desires to enter into a Franchise Equity Program
Transaction or any other transaction with an Equity Franchisee or a Non-Equity
Franchisee, then such Transaction Party shall provide the GECC Member with prior
written notice of the terms and conditions on which such Transaction Party
intends to enter into such Franchise Equity Program Transaction or any other
franchise agreement with an Equity Franchisee or a Non-Equity Franchisee. The
GECC Member has expressed an interest that it or GECC be permitted to
participate with each Transaction Party in Franchise Equity Program
Transactions. After the Effective Date, the GECC Member and the Developer Member
shall attempt to agree on the terms and conditions of any such participation by
the GECC Member or GECC, and in the event the GECC Member and the Developer
Member agree, if at all, on such terms and conditions, then such terms and
conditions, as so agreed, shall apply to any and all Franchise Equity Program
Transactions agreed by such parties to be covered under such terms and
conditions entered into by a Transaction Party after the date of such agreement;
provided, however, any such participation by the GECC Member or GECC shall not
be treated in any way as a Project Capital Contribution by the GECC Member and
shall not in any way reduce the obligation of the GECC Member to make Capital
Contributions under this Agreement. The parties anticipate that if such an
agreement is reached between the GECC Member and the Developer Member regarding
participation in such Franchise Equity Program Transactions, then any such
agreement will be evidenced by a separate agreement executed among the
applicable parties.
Section 4.7 Officers. The Manager, with the approval of the Executive
Committee, may designate one or more Persons to be officers of the Company
("Officers"), and any officer so designated shall have such title, authorities
and duties, as the Manager, with the Executive Committee's approval, may
delegate to them; however, no such Officer shall be an employee of the Company
or any Subsidiary and shall not receive any compensation or other remuneration
from the Company or any Subsidiary. Any Officer may be removed as such, either
with or without cause, by the Manager, with the approval of the Executive
Committee.
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Section 4.8 Removal of Manager.
(a) The Manager may be removed by the GECC Member as provided herein
under the following circumstances (a "Removal Event"):
(1) Developer Member commits material breach of this Agreement
(other than Cause, an Additional Capital Contribution Default or a Project
Capital Contribution Default) and such breach is not cured within ten (10) days
after written notice by the GECC Member to the Developer Member, or if such
breach does not involve the failure to pay money and cannot reasonably be cured
within such ten (10) day period, such breach is not cured within thirty (30)
days after such written notice;
(2) Cause exists or occurs with respect to the Developer Member
or SUSA;
(3) the occurrence or existence of an Additional Capital
Contribution
Default Event with respect to the Developer Member;
(4) the occurrence or existence of a Project Capital Contribution
Default with respect to the Developer Member; or
(5) the occurrence or existence of a "Removal Event" under the
Other Company LLC Agreement.
(b) Upon the occurrence of a Removal Event, the GECC Member may remove
the Developer Member as the Manager, in which event (i) the GECC Member may
appoint itself, a GECC Affiliate or a third party as Manager, (ii) if the
Developer Member is removed as Manager, the right of the Developer Member to
receive distributions of Available Cash, as set forth in Section 8.2 hereof,
shall be modified as set forth in Schedule 6.3(b) hereto, and (iii) if the
Developer Member is removed as Manager and its right to receive distributions of
Available Cash is reduced in accordance with the preceding clause, the right of
the GECC Member to receive distributions of Available Cash shall be
correspondingly increased, or the GECC Member may admit any Person as a Member
without the consent or approval of the Developer Member and may assign to such
new Member all or part of the GECC Member's increased distribution right;
however, the replacement Manager is not required to be a Member and may be paid
such reasonable compensation by the Company for its services as the GECC Member
shall determine.
(c) Upon the occurrence of a Removal Event and if the Developer Member
is removed as Manager in accordance with the preceding paragraph, then in
addition and at the option of the GECC Member, any and all agreements between
the Company (or any of its Subsidiaries) and the Developer Member or SUSA, or
any of their respective Affiliates, including the Property Management Agreement,
shall terminate without payment of any fees, penalties or other compensation
except for such amounts as may have accrued and remain unpaid as of the date of
any such termination; however, the Property Management Agreement provides for a
continuing license to operate the Projects under the trade name "Storage USA"
for a royalty-free transition period not to exceed 180 days, which license shall
survive any termination
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of the Property Management Agreement. If the Company continues the use of such
name after the expiration of such transition period, then, in addition to all
other rights and remedies available at law or in equity to the Developer Member
for such use, the Company shall pay to the Developer Member, as a royalty, a
license fee equal to five percent (5%) of the Operating Revenues derived from
any Projects that continue to be operated under the trade name "Storage USA"
until the use of such trade name ceases. In addition, notwithstanding anything
to the contrary contained in this Agreement, following the removal of the
Developer Member as Manager, the GECC Member shall have the sole and exclusive
authority on behalf of the Company to make all determinations with respect to
the Property Management Agreement (if such Agreement is not terminated as
hereinabove provided) and any new property management contract that the GECC
Member may enter into on behalf of the Company following such removal.
Notwithstanding anything to the contrary contained in this Agreement, after
termination of the Property Management Agreement, the GECC Member shall have the
sole and exclusive authority on behalf of the Company to appoint and employ any
self-storage operator to provide asset and property management services to the
Company and its Subsidiaries for the Projects and pay such operator market rate
compensation.
Section 4.9 No Reimbursement of Expenses. Except as otherwise expressly
provided elsewhere in this Agreement or the Property Management Agreement,
neither the Manager nor any Member, including any of their respective
Affiliates, shall receive any reimbursement for their out-of-pocket expenses
incurred by them in conjunction with the business and affairs of the Company or
any of its Subsidiaries.
Section 4.10 Compensation of Members and Manager. Except as otherwise
expressly provided in this Agreement or the Property Management Agreement, no
compensatory payment shall be made by the Company to any Member or Manager for
the services to the Company of such Member or Manager or any member or employee
of such Member or Manager.
Section 4.11 Transactions with Affiliates.
(a) General. Except as expressly provided in this Agreement or the
Property Management Agreement, when any service or activity to be performed on
behalf of the Company is performed by an Affiliate of a Member, the fee payable
for such service or activity shall not exceed the fee which would be payable by
the Company to a third party of comparable standing providing the same services
not Affiliated with such Member.
(b) Termination of Agreements with Affiliates. If the Developer Member
is removed as Manager as a result of the occurrence of a Removal Event, then the
Company may terminate any and all agreements between the Company or any
Subsidiary with Developer Member or SUSA, or any of their respective Affiliates
without payment of any fees, penalties or other compensation except for such
amounts as may have accrued and remain unpaid as of the date of any such
termination, and all such agreements must contain a provision that allows for
the exercise of the right of termination under this Section 4.11(b).
Notwithstanding any provision of this Agreement to the contrary, the GECC Member
shall have the sole and exclusive authority to enforce this provision on behalf
of the Company.
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Section 4.12 Property and Asset Management Agreement; Asset Disposition
Fee.
(a) The Company shall enter into a management and service agreement
substantially in the form attached hereto as Schedule 4.12(a) (the "Property
Management Agreement") with the Developer Member or a Controlled Affiliate of
the Developer Member acceptable to the GECC Member (the "Property Manager"),
under which the Property Manager shall provide both asset management and
property management services for all Projects owned by the Subsidiaries for an
asset and property management fee equal to six percent (6%) of each Project's
Operating Revenues (payable monthly in arrears). In addition, the Property
Management Agreement shall provide that the Company shall pay the Property
Manager $56,250.00 annually (Inflation Adjusted) as an annual expense
reimbursement, such reimbursement to be paid in four (4) equal quarterly
installments.
(b) The Company shall pay the GECC Member as an annual expense
reimbursement in connection with its providing its representatives on the
Executive Committee and their review and evaluation of Preliminary Presentations
and Final Presentations for Targets an amount equal to $300,000.00 annually
(Inflation Adjusted), such payment to be made to the GECC Member in four (4)
equal quarterly installments.
(c) If the Developer Member or SUSA, or any of their respective
Affiliates, is selected by the Executive Committee as the selling agent on
behalf of the Company after a competitive bidding process and if neither the
Developer Member nor SUSA, nor any of their respective Affiliates acquires the
Project, then upon the closing of the sale of such Project, the Company or its
Subsidiary shall pay the Developer Member or SUSA, or any such Affiliate, as
applicable, an asset disposition fee (the "Disposition Fee") equal to one
percent (1%) of the total sales price received by the Company or such Subsidiary
in connection with the sale or other disposition of the Project; provided,
however, neither the Company nor any Subsidiary shall be obligated to pay the
Developer Member or SUSA, or any such Affiliate, as applicable, any fee or other
compensation in the event such sale or other disposition fails to close for any
reason.
Section 4.13 Acquisition Fee. Contemporaneously with the Company or its
Subsidiary's acquisition of a Project, the Company shall pay the Developer
Member, or a designated Affiliate of the Developer Member, an acquisition fee
(the "Acquisition Fee") equal to one percent (1%) of the purchase price paid by
the Company to the seller of such Project.
Section 4.14 Trade Name License. Except as otherwise provided in Section
4.8(c) hereof, each Project will be operated under the "Storage USA" trade name
on a royalty-free basis pursuant to the rights granted under the Property
Management Agreement. In no event shall the name "General Electric", "GE", "GE
Capital" or other GECC Affiliate trade-name or derivative be used in connection
with any Project without the prior express approval of the GECC Member.
Section 4.15 Indemnification; Reimbursement of Expenses; Insurance. To the
fullest extent permitted by the Act: (a) the Company shall, and does hereby,
indemnify, hold harmless and defend each member and alternate member of the
Executive Committee and each Manager who was, is or is threatened to be made a
party to any threatened, pending or completed action? suit or proceeding
("Proceeding"), any appeal therein, or any inquiry or investigation preliminary
thereto, solely by reason of the fact that he, she or it is or was a member or
alternate
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member of the Executive Committee or a Manager and was acting within scope of
duties or under the authority of the Members; (b) the Company shall pay or
reimburse each member and alternate member of the Executive Committee and a
Manager for expenses incurred by him, her or it (1) in advance of the final
disposition of a Proceeding to which such member or alternate member of the
Executive Committee or a Manager was, is or is threatened to be made a party,
and (2) in connection with his, her or its (and in the case of a Manager, any of
its officers or employees) appearance as a witness or other participation in any
Proceeding. The Company, by adoption of a resolution of the Members, may
indemnify and advance expenses to an Officer, employee or agent of the Company
to the same extent and subject to the same conditions under which it may
indemnify and advance expenses to members and alternate members of the Executive
Committee and Managers under the preceding sentence. The provisions of this
Section 4.15 shall not be exclusive of any other right under any law, provision
of the Certificate or this Agreement, or otherwise. Notwithstanding the
foregoing, this indemnity shall not apply to actions constituting gross
negligence, willful misconduct or bad faith, or involving a breach of this
Agreement, but shall apply to actions constituting simple negligence. The
Company may purchase and maintain insurance to protect itself, the members and
alternate members of the Executive Committee, the Manager and any Officer,
employee or agent of the Company, whether or not the Company would have the
power to indemnify such Person under this Section 4.15. This indemnification
obligation shall be limited to the assets of Company and no Member shall be
required to make a Capital Contribution in respect thereof. Nothing contained in
this Section is intended to obligate the Company or its Subsidiaries to provide
liability or other insurance on behalf of the Property Manager.
Section 4.16 Conflicts of Interest.
(a) The GECC Member and each of its Affiliates may engage in and
possess interests in other business ventures of any and every type and
description, independently or with others, including ones in competition with
the Company and its Subsidiaries, with no obligation to offer to the Company or
any other Member the right to participate therein or to account therefor.
Without limiting the foregoing, neither the GECC Member nor any Affiliate of the
GECC Member shall be prevented or restricted in any way from owning, financing,
managing, advising, franchising or leasing any self-storage property or
management company, even if such activity is in direct competition with the
Company and its Subsidiaries.
(b) Except as otherwise expressly provided to the contrary in this
Agreement, the Developer Member and each of its Affiliates may engage in and
possess interests in other business ventures of any and every type and
description, independently or with others, including ones in competition with
the Company and its Subsidiaries, with no obligation to offer to the Company or
any other Member the right to participate therein or to account therefor.
Without limiting the foregoing and except as otherwise expressly provided to the
contrary in this Agreement, neither the Developer Member nor any Affiliate of
the Developer Member shall be prevented or restricted in any way from owning,
financing, managing, advising, franchising or leasing any self-storage property
or management company, even if such activity is in direct competition with the
Company and its Subsidiaries.
(c) The Company may transact business with any Member, Manager or
Officer or any Affiliate of any of them, provided the terms of those
transactions are no less
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favorable than those the Company could obtain from third parties not Affiliated
with any Member, the Manager or any Officer.
Section 4.17 Integrity Policy. The Manager will use its reasonable efforts
to cause the Company and each of the Subsidiaries to conduct their respective
businesses in accordance with the Company's Integrity Policy and all applicable
Requirements of Governmental Authorities having jurisdiction of the Company and
the Subsidiaries and their respective properties and assets.
Section 4.18 No Employees. Neither the Company nor its Subsidiaries will
have any employees and members and alternate members of the Executive Committee
shall be employees or other representatives of the Member which appointed them.
Any Persons providing asset or property management services for the Company or
any Subsidiary shall be employees of the Property Manager and not of the Company
or its Subsidiaries.
Section 4.19 Year 2000 Compliant. Manager will use reasonable efforts to
cause each Project and the Company's and each Subsidiary's operations to be Year
2000 Compliant in all material respects. In addition and on behalf of the
Company, Manager will make on a timely basis written inquiry of each of the
Company's key suppliers, vendors, and customers as to whether such Persons will,
on a timely basis, be Year 2000 Compliant in all material respects. For purposes
hereof, "key suppliers, vendors and customers" refers to those suppliers,
vendors, and customers of the Company, a Subsidiary or a Project whose business
failure would, with reasonable probability, result in a material adverse change
in the business, properties, or condition (financial or otherwise) of the
Company, a Subsidiary or a Project. The GECC Member and its agents,
representatives and employees may, upon reasonable prior notice to the Manager,
enter the Manager's offices and each Project and conduct inspections relating to
Year 2000 Compliance as the GECC Member may require, from time to time; however,
to the extent the GECC Member engages third party consultants to conduct any
testing of a Project's systems, the GECC Member shall require such consultants
to conduct the tests at a time designed to minimize disruption of the Project's
operations during normal business hours.
Section 4.20 Insurance. The Manager shall cause the Company and the
Subsidiaries to maintain insurance in accordance with the Insurance Program.
Section 4.21 Selection of Company Counsel.
(a) The appointment of any law firm as general counsel to the Company
and its Subsidiaries is a Major Decision to be decided by the Executive
Committee.
(b) Notwithstanding Section 4.21(a) hereof, the Manager shall have the
authority to appoint counsel to represent the Company and its Subsidiaries with
respect to (i) the litigation described in clauses (i) through (iv) of paragraph
(12) of the definition of "Major Decision" and (ii) the acquisition, financing
and disposition of a Project (but not substantially all of the Projects).
(c) The Members hereby consent to the appointment of counsel to
represent the Company or any of its Subsidiaries by the Company's insurer(s) so
long as the amount or
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amounts claimed do not exceed the limits of coverage under the Company's
policies and the insurer(s) has assumed defense of the claim without a
reservation of rights; provided, however, if the amount claimed in any such
action exceeds $100,000, either Member may require the Executive Committee to
engage separate counsel to represent the Company in addition to counsel
appointed by the insurer(s). If the Executive Committee cannot agree on the
selection of counsel (as general counsel, the law firm of Burch, Porter &
Johnson, PLLC is hereby approved) in accordance with the preceding sentence, the
Member proposing the engagement of counsel shall submit the names of no more
than five (5) nor less than three (3) proposed law firms and the other Member
shall either select one of such firms which shall be deemed accepted or submit
its proposed list from which the original proposing Member shall select counsel
to be engaged.
(d) If the Executive Committee cannot agree on the selection of a law
firm to serve as general counsel to the Company in accordance with Section
4.21(a) hereof or on the selection of a law firm to represent the Company or a
Subsidiary with respect to the litigation described in Section 4.21(c) hereof or
otherwise, then the Member proposing the engagement of counsel shall submit the
names of no more than five (5) nor less than three (3) proposed law firms to the
other Member and the other Member shall either select one of such firms which
shall be deemed accepted or submit its proposed list from which the original
proposing Member shall select counsel to be engaged.
(e) Notwithstanding the foregoing, the Developer Member shall have
authority to select counsel to represent the Company with respect to the matters
within the sole authority of the Developer Member pursuant to Section 7.4 hereof
and the GECC Member shall have authority to select counsel to represent the
Company with respect to the matters within the sole authority of the GECC Member
pursuant to the last sentence of Section 4.2(a) hereof.
ARTICLE 5
ACCOUNTING AND REPORTING
------------------------
Section 5.1 Fiscal Year, Accounts, Reports.
(a) The Fiscal Year of the Company and each Subsidiary shall be the
calendar year.
(b) The books of account of the Company and each Subsidiary shall be
kept and maintained by the Manager at the Manager's expense on the accrual basis
in accordance with generally accepted accounting principles applied on a
consistent basis applicable to commercial real estate, as selected by the
Executive Committee. The books of account shall be kept at the principal place
of business of the Company, and shall at all times be available for inspection
by the Members.
(c) The Manager shall, at the Manager's expense, furnish to the
Members (l) on or before the 20th day of each month, an unaudited statement
setting forth and describing in reasonable detail the receipts and expenditures
of each Subsidiary, and, on a consolidated basis, the Company during the
preceding month and comparing the results of operations of each Subsidiary and
the Company for such month and for the year to date to the appropriate Project
Operating Budget and the Operating Budget, including a variance report
describing the reason
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for any material variances and a current occupancy report (both physical and
economic), (2) on or before 20 days after the end of each quarter, an unaudited
balance sheet of each Subsidiary and, on a consolidated basis, the Company dated
as of the end of such quarter and an unaudited statement setting forth and
describing in reasonable detail the receipts and expenditures of each
Subsidiary, and, on a consolidated basis, the Company during the preceding
quarter and comparing the results of operations of each Subsidiary and the
Company for such quarter and for the year to date to the appropriate Project
Operating Budget and the Operating Budget, including a variance report
describing the reason for any material variances and a current occupancy report
(both physical and economic), and a statement of the Company's Available Cash
for the preceding quarter, (3) on or before 60 days after the end of each Fiscal
Year, a balance sheet of the Company dated as of the end of such Fiscal Year, a
statement of the Company's cash flows for such Fiscal Year, a statement of the
Members' Capital Accounts, Additional Capital Contribution Balances, and Project
Capital Contribution Balances as of the end of such Fiscal Year, a statement of
the Company's Available Cash for such Fiscal Year, and a statement setting forth
the Profits and Losses of the Company for such Fiscal Year, all as audited by
the Auditor, and an unaudited statement of the Company's Available Cash for such
Fiscal Year, and an unaudited Fiscal Year end balance sheet, Profit and Loss
statement, and a statement of Net Cash Flow, Net Operating Income and Capital
Proceeds for each Subsidiary and, on a consolidated basis, the Company for such
Fiscal Year, and (4) from time to time, all other information relating to each
Subsidiary and the Company and its business, affairs and assets reasonably
requested by any Member. Notwithstanding the foregoing, the cost of the annual
audit performed by the Auditor shall be made at the Company's expense.
(d) The Manager shall, at the Manager's expense, furnish to the GECC
Member, within thirty (30) days after the first anniversary of the Effective
Date, such information as may be reasonably required by the GECC Member to
permit it to determine whether the Performance Benchmarks have been satisfied as
of the first anniversary of the Effective Date.
(e) Each Member, at its expense, may at all reasonable times during
usual business hours audit, examine, and make copies of or extracts from the
books of account, records, files, and bank statements of each Subsidiary and the
Company. Such right may be exercised by any Member, or by its designated agents
or employees.
Section 5.2 Bank Accounts. Subject always to Section 4.2(a) hereof, the
Manager shall open and maintain (in the name of the Company or its Subsidiaries,
as appropriate) a special bank account or accounts in a bank or savings and loan
association, the deposits of which are insured, up to the applicable limits, by
an agency of the United States government, in which shall be deposited all funds
of the Company and its Subsidiaries. Withdrawals therefrom shall be made
pursuant to the Property Management Agreement or upon the signatures of such
Persons as the Manager shall designate with the approval of the Executive
Committee.
ARTICLE 6
CAPITAL CONTRIBUTIONS
---------------------
Section 6.1 Project Capital Contributions.
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(a) Upon the approval by the Executive Committee of the Final
Presentation for a Target and contemporaneously with the acquisition of such
Project by the Company or its Subsidiary, unless and until such approval has
been withdrawn or revoked by the Executive Committee or deemed withdrawn or
revoked in accordance with Section 4.4(f) hereof, the Members shall make Capital
Contributions (the "Project Capital Contributions") for that Subsidiary and
Project. Project Capital Contributions will be made on an as needed basis as
required to pay Equity Formation Costs in accordance with Section 2.10 hereof,
earnest money deposits on an as-needed basis in accordance with Section 4.4(e)
hereof and otherwise, as Projects are acquired by the Company through a
Subsidiary. The proceeds thereof shall, in turn, be paid by the Company on
account of Equity Formation Costs or earnest money deposits or be contributed to
the applicable Subsidiary to consummate the acquisition and to pay the Total
Project Costs for such Project.
(b) The total Project Capital Contributions for each Project will
equal the Total Project Costs for such Project, as set forth in the approved
Project Acquisition Budget for such Project, less the principal amount of the
financing for such Project, all as approved by the Executive Committee in the
Final Presentation for such Project. The Developer Member shall contribute
16.67% and the GECC Member shall contribute 83.33% of all Project Capital
Contributions, except (i) in the case of Project Capital Contributions made to
pay Equity Formation Costs, which Project Capital Contributions shall be made
initially in the percentages set forth in Section 2.10 hereof and (ii) in the
case of Project Capital Contributions made to pay Pursuit Costs with respect to
Abandoned Targets, which Project Capital Contributions shall be made in the
percentages set forth in Section 4.4(1) hereof. Notwithstanding anything to the
contrary contained in this Agreement, the Developer Member shall not be
obligated to contribute more than Twenty Million Dollars ($20,000,000), in the
aggregate, in Project Capital Contributions and the GECC Member shall not be
obligated to contribute more than One Hundred Million Dollars ($100,000,000), in
the aggregate, in Project Capital Contributions. The obligation of the Members
to make Project Capital Contributions is not a "revolving" commitment and the
repayment or return of Project Capital Contributions to the Members shall not
create any obligation or commitment to readvance or recontribute any such
Project Capital Contributions so repaid or returned.
(c) Subject to the limitation contained in the last sentence of
Section 6.1(b), the Manager may call for Project Capital Contributions from the
Members from time to time in accordance with Section 6.1(a). Any call for
Project Capital Contributions will be made by written notice (a "Drawdown
Notice") given by the Manager to the Members. The Drawdown Notice will specify
(i) each Project to which it relates, (ii) the specific purposes for which the
Project Capital Contributions are being requested, which will correspond to the
line items of such Project's approved Project Acquisition Budget, (iii) the
amount of the Project Capital Contributions being requested (and the aggregate
amount of all Project Capital Contributions previously funded for such Project),
(iv) any deviations from such Project's approved Project Acquisition Budget, and
(v) the date by which the requested Project Capital Contributions are to be
funded by the Members, which, if the closing of a Project's acquisition occurs
within ten (10) Business Days after the Executive Committee's approval of the
Final Presentation for such Project, must be at least three (3) days after the
date the Drawdown Notice is given or in any other case, must be at least ten
(10) Business Days after the date the Drawdown Notice is given
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unless, in each instance, the GECC Member agrees to a shorter period of time.
Upon the request of the GECC Member, the Manager shall promptly deliver to the
GECC Member copies of all receipts, invoices, and other material to substantiate
the amounts, payees, and purposes for which a Project Capital Contribution is
being requested. Notwithstanding anything to the contrary contained herein, the
GECC Member shall have no obligation to make any Project Capital Contributions
(1) after the Commitment Termination Date except for any Project for which a
Final Presentation was approved by the Executive Committee on or prior to the
Commitment Termination Date, or (2) with respect to any Project which has not
been acquired by a Subsidiary on or before the second (2nd) anniversary of the
Effective Date unless a later date has been expressly approved by the Executive
Committee, or (3) after the Bankruptcy of the Developer Member or SUSA.
(d) A "Project Capital Contribution Default" shall have occurred if
either Member fails to make any Project Capital Contribution required to be made
by it under this Agreement by the date due if such failure continues for ten
(10) Business Days after written notice thereof is given by the Manager or any
Member to the Member which has failed to make such Project Capital Contribution.
Section 6.2 Additional Capital Contributions.
(a) If at any time or from time to time after the Effective Date,
additional funds (a "Shortfall") are required (a) for the reasonable working
capital needs of the Company for both operating and capital needs, and (b) for
all other costs and expenses (whether operating or capital in nature) in
connection with the operation of the Projects or in connection with the
operations of the Subsidiaries or the Company, in each case as determined by the
Executive Committee, and the Company is unable to obtain or the Executive
Committee has determined not to seek third party debt financing, the Executive
Committee may call (but shall not be obligated to) for Additional Capital
Contributions in the amount of such Shortfall and the Members shall make such
Additional Capital Contributions as called for by the Executive Committee.
Notwithstanding the foregoing, to the extent that an Annual Business Plan
approved by the Executive Committee contemplates that the Members will make
Additional Capital Contributions to pay such Shortfall or if the Shortfall is
required to pay costs and expenses of the Company or a Subsidiary described in
the definition of "Non-discretionary Additional Capital Contributions" that in
the good faith judgment of a Member are needed by the Company, then the Members
shall make Additional Capital Contributions in the amount of such Shortfall on
the request of either the Manager or any Member. Capital items for which
reserves have been established pursuant to the approved Annual Business Plan
will be funded first from the reserves therefor before any calls are made for
Additional Capital Contributions to pay for such capital items. Notwithstanding
anything to the contrary contained in this Agreement, Additional Capital
Contributions shall not be used to pay Pursuit Costs, or any costs and expenses
included within the Project Acquisition Costs for a Project, but
Non-Discretionary Additional Capital Contributions may be used to pay the cost
to carry a Project to break-even after such Project's acquisition. Each
additional Capital Contribution made under this Section 6.2 is an "Additional
Capital Contribution" and also either a "Discretionary Additional Capital
Contribution" or a "Non-Discretionary Additional Capital Contribution".
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(b) Each Member shall make Discretionary Additional Capital
Contributions to the Company in the following proportions: 83.33% by the GECC
Member and 16.67% by the Developer Member; and each Member shall make
Non-discretionary Additional Capital Contributions to the Company in the
following proportions: 60% by the GECC Member and 40% by the Developer Member.
Any call for Additional Capital Contributions will be made by written notice
given by the Manager or a Member, as applicable, to the Members, which notice
will specify (i) the amount of the Shortfall, (ii) the specific purposes for
which the Additional Capital Contributions are being requested, including, if
applicable the name of the particular Project or Projects, (iii) whether the
Additional Capital Contribution is a Discretionary Additional Capital
Contribution or a Non-discretionary Additional Capital Contribution, (iv) each
Member's required contribution amount, and (v) the date by which the requested
Additional Capital Contributions are to be funded by the Members, which must be
at least ten (10) Business Days after the date of such notice is given unless
the GECC Member agrees to a shorter period of time.
(c) An "Additional Capital Contribution Default" shall have occurred
if either Member fails to make any Additional Capital Contribution required to
be made by it under this Agreement by the date due if such failure continues for
ten (10) Business Days after written notice thereof is given by the Manager or
any Member to the Member which has failed to make such Additional Capital
Contribution.
Section 6.3 Failure to Make Additional Capital Contributions.
(a) A Member which fails to timely contribute all or any portion of
any required Additional Capital Contribution shall be considered a "Delinquent
Member." As its sole and exclusive remedy, except in the case of an Additional
Capital Contribution Default Event, the other Member (the "Non-Delinquent
Member") shall, upon notice to a Delinquent Member, exercise either of the
following rights or remedies:
(1) request a refund of its share of such requested Additional
Capital Contribution within ten (10) days after the default by the Delinquent
Member, in which case the Company shall immediately refund such amount to the
Non-Delinquent Member; or
(2) cause the Company to retain its share of such requested
Additional Capital Contribution and may elect to contribute to the Company the
Delinquent Member's share of such requested Additional Capital Contribution and
in any such case the Non-Delinquent Member shall designate all of such
Additional Capital Contributions made by the Non-Delinquent Member in respect of
the related request therefor (including both the Non-Delinquent Member's and, if
it elects to contribute such amount, the Delinquent Member's portion thereof) as
a loan by the Non-Delinquent Member to the Company (a "Default Loan"). Each
Default Loan shall be a loan by the Non-Delinquent Member to the Company, shall
bear interest at the Default Rate and shall be repaid on a priority basis from
Available Cash.
(b) If an Additional Capital Contribution Default Event occurs with
respect to a Member (the "Additional Capital Defaulting Member") under this
Agreement or under the Other Company LLC Agreement, then in addition to its
specified rights and remedies under Section 6.3(a) hereof, the other Member (the
"Other Member") may, upon notice to the
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Additional Capital Defaulting Member, exercise any and all of the following
additional rights and remedies:
(1) such Member may exercise the Buy-Sell Option under this
Agreement and the Buy-Sell Option under the Other Company LLC Agreement; and
(2) the Additional Capital Defaulting Member's rights to
distributions of Available Cash, as set forth in Section 8.2 hereof shall be
modified as set forth in Schedule 6.3(b) and the Additional Capital Defaulting
Member's rights to distributions under Section 8.2 of the Other Company LLC
Agreement shall be modified as therein provided.
(c) The express rights and remedies granted to the Non-Delinquent
Member and the Other Member, as applicable, in this Section 6.3 and elsewhere in
this Agreement are exclusive of (and the Non-Delinquent Member and the Other
Member shall not be entitled to exercise) any other rights and remedies granted
or available to the Non-Delinquent Member or the Other Member, as applicable,
at law or in equity by reason of (i) the failure of a Delinquent Member to
contribute all or any portion of any required Additional Capital Contribution or
(ii) the occurrence or existence of an Additional Capital Contribution Default
Event.
Section 6.4 Return of Contributions. Except as expressly provided herein,
no Member shall be entitled to (a) the return of any part of its Capital
Contributions, (b) any interest in respect of any Capital Contribution, or (c)
the fair market value of its Membership Interest in connection with a withdrawal
from the Company or otherwise. Unreturned or unrepaid Capital Contributions
shall not be a liability of the Company or of any Member. No Member shall be
required to contribute or lend any cash or property to the Company to enable the
Company to return any Member's Capital Contributions to the Company.
Section 6.5 Balances. The Company's books and records shall contain entries
indicating the type and amount of Capital Contributions made to the Company and,
if applicable, the Preferred Return thereon.
Section 6.6 General Provisions Concerning Capital Contributions. The
obligation of the Members to make Capital Contributions under this Agreement
shall not inure to the benefit of, or be enforceable by any Person other than
the other Member. Neither Member shall be obligated to make any Project Capital
Contributions in the event a Project Capital Contribution Default shall have
occurred with respect to the Other Member.
ARTICLE 7
FINANCING
---------
Section 7.1 Financing.
(a) The Company intends to obtain on behalf of each Subsidiary
financing for the acquisition of each Project (each a "Acquisition Loan"). Each
Acquisition Loan will be secured by a first-priority deed of trust or mortgage
lien on the Project and shall be made on such terms and conditions as may be
approved by the Executive Committee. Manager shall deliver to
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the GECC Member all notices, correspondence, and information delivered to or
received from the Acquisition Loan lender by the Company or any Subsidiary.
(b) The Manager will be responsible for arranging each Acquisition
Loan which the Members contemplate will be term loans, each in a principal
amount equal to approximately fifty percent (50%) of the Total Project Costs for
the Project, as reflected in the Project Acquisition Budget approved by the
Executive Committee.
(c) Each Acquisition Loan shall be non-recourse to the Members and the
Company (unless each of the Members, in the exercise of its sole discretion,
should expressly agree in writing to the contrary). The Developer Member will
provide any required guaranties or indemnities which may be required by the
lender relating to certain items that would be responsibilities performed by the
Developer Member subsequent to the acquisition of the Project as Property
Manager (e.g., so called "carve outs" for operating items including criminal
acts, misapplication, fraud, gross negligence, willful misconduct, environmental
matters arising after acquisition which are, or should be, within the control of
the Developer Member as Property Manager). The Company will provide the lender
any required indemnities relating to preexisting environmental and, to the
extent applicable, engineering conditions and other "carve-out" matters beyond
the control of the Developer Member. The Members will contemplate whether
environmental insurance is economically feasible in lieu of the Company's
providing any such required indemnities for preexisting environmental and, if
applicable, engineering conditions.
Section 7.2 Right of First Offer.
(a) If, at any time and from time to time during the term of this
Agreement, the Company, any Subsidiary, the Developer Member, individually, or
SUSA (herein, together with each of their respective Controlled Affiliates,
other than the Excluded Affiliates, collectively called the "Borrowing Parties"
and individually, a "Borrowing Party") desires to obtain any financing with
respect to any Target (including any Independent Investment), any Project or any
other self-storage facility, or program loan or credit facility for multiple
Targets, Projects or other self-storage facilities, in which a Borrowing Party
has an interest, direct or indirect (excluding only Targets or self-storage
facilities in which a Borrowing Party has an interest solely as either
franchisor or franchisor and minority-owner through its franchise program), GECC
or one or more of the GECC Affiliates shall have the right of first offer to
provide such financing as hereinafter provided in this Section 7.2; provided,
however, any such financing provided by GECC or one or more of the GECC
Affiliates shall not be treated in any way as a Project Capital Contribution by
the GECC Member and shall not in any way reduce the obligation of the GECC
Member to make Capital Contributions under this Agreement. For the avoidance of
doubt, to the extent any such financing constitutes a Franchise Equity Program
Transaction, then the provisions of Section 4.6(f), and not this Section 7.2,
shall apply thereto.
(b) Any such Borrowing Party desiring to obtain any financing shall
advise GECC thereof and shall provide GECC with such information as GECC may
reasonably request with respect to the Target or self-storage facility or
facilities proposed to be financed (the "Underwriting Information"). GECC shall
have a period of ten (10) Business Days after receipt of the Underwriting
Information to respond (if at all) by delivery to such Borrowing Party of an
offer (subject to completion of satisfactory due diligence) to provide such
financing (the
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"Proposal"). If the Borrowing Party accepts such Proposal, then such Borrowing
Party shall enter into such financing transaction with GECC or one or more of
the GECC Affiliates (subject to completion of satisfactory due diligence and
governing documents reasonably acceptable to GECC and such Borrowing Party).
(c) If (i) GECC does not so respond within such ten (10) Business Day
period, or (ii) GECC offers to provide the financing on terms and conditions
that are not acceptable to the Borrowing Party, or (iii) GECC and such Borrowing
Party are unable to agree on the governing documents with respect to such
financing within forty-five (45) days after GECC delivers the Proposal, or (iv)
GECC has not advised such Borrowing Party prior to the end of such forty-five
(45) day period that such due diligence is completed and satisfactory, then such
Borrowing Party shall be permitted to seek and obtain such financing from a
third party on terms and conditions not materially less favorable in the
aggregate than those contained in the Proposal within one hundred eighty (180)
days after the later of (i) the GECC's delivery of the Proposal to such
Borrowing Party or (ii) in the case of GECC and such Borrowing Party's being
unable to agree on the governing documents or such due diligence not being
complete or if complete, unsatisfactory to GECC, the expiration of the
forty-five (45) day period.
(d) If the terms and conditions of any such financing proposed to be
obtained from the third party are substantially the same or less favorable to
such Borrowing Party than the terms and conditions contained in the Proposal
(including, among others, rate, term, "due on sale", assumability and other
material terms and conditions of the governing documents), then before
consummating such financing with the third party, such Borrowing Party shall
submit such terms and conditions to GECC and GECC shall have a period of ten
(10) Business Days after receipt thereof to offer to provide such financing on
the same terms and conditions so offered by the third party or to decline to
provide such financing; provided, however, no such submission to GECC shall be
required where GECC, pursuant to the provisions of Section 7.2(c), has advised
such Borrowing Party that GECC's due diligence results were unsatisfactory or
that GECC failed to reach agreement with such Borrowing Party on the governing
documents (and the alternate financing documents are more favorable to the
Borrowing Party than the GECC documents) and such Borrowing Party shall be free
to obtain such financing on substantially the same terms as offered by such
third party. GECC's failure to respond, or GECC's notice to such Borrowing Party
that it will not offer to provide the applicable financing, within such ten (10)
Business Day period shall be conclusively deemed to constitute GECC's election
not to provide such financing and such Borrowing Party shall be free to obtain
such financing on substantially the same terms as offered by such third party.
If GECC offers to provide the financing on the same terms and conditions as
those offered by the third party, then so long as GECC and such Borrowing Party
reach agreement on the governing documents within ten (10) Business Days after
such offer by GECC, such Borrowing Party shall enter into such financing
transaction with GECC or one or more of the GECC Affiliates. If GECC and such
Borrowing Party fail to reach agreement on the governing documents in such
period (after good faith efforts to do so), such Borrowing Party may obtain
financing on substantially the same terms so offered by such third party.
(e) The right of first offer granted GECC in accordance with this
Section 7.2 was a material inducement for the GECC Member to execute and deliver
this Agreement and the
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Other Company LLC Agreement. GECC shall be a third party beneficiary of this
Section 7.2 and Section 7.3.
Section 7.3 No Commitment. The Members acknowledge and agree that GECC has
not committed or otherwise agreed to make or provide any Acquisition Loan or
other financing to the Company or a Subsidiary. Nothing contained herein shall
constitute or be deemed to constitute GECC's commitment or other agreement to
make or provide an Acquisition Loan or other financing to the Company or a
Subsidiary. GECC shall have no liability to the Company, any Subsidiary or the
Members in the event the Company's or a Subsidiary's application for an
Acquisition Loan or other financing is rejected. If approved, GECC's commitment
to make an Acquisition Loan or other financing to the Company or a Subsidiary
shall be evidenced by a separate writing and shall be executed by GECC.
Section 7.4 Acknowledgment and Waiver. In the event GECC makes or provides
an Acquisition Loan or other financing to the Company or a Subsidiary, the
Members hereby acknowledge and agree that GECC shall be treated as, and shall
have all the rights, remedies and benefits, of an unrelated third party lender
with respect to any such Acquisition Loan or other financing. No action, consent
or authorization of GECC under the documents and instruments evidencing and
securing an Acquisition Loan or other financing shall be construed or imputed as
the action, consent or authorization of the GECC Member under this Agreement and
no action, consent or authorization of the GECC Member under this Agreement
shall be construed or imputed as the action, consent or authorization of GECC
under the documents and instruments evidencing and securing any such Acquisition
Loan or other financing. The refusal of GECC to consent to or waive a
requirement under any of the documents and instruments evidencing and securing
an Acquisition Loan or other financing shall not be a defense to any default by
any Member, the Company or any Subsidiary under this Agreement or the documents
and instruments evidencing and securing any Acquisition Loan or other financing.
The Developer Member shall have the sole and exclusive authority to enforce any
and all agreements between the Company or a Subsidiary and GECC with respect to
any such Acquisition Loan or other financing.
ARTICLE 8
DISTRIBUTIONS
-------------
Section 8.1 Distributions in General. From time to time, but not less often
than quarterly, the Executive Committee shall determine the amount, if any, of
Available Cash. Any Available Cash shall be distributed to the Members in
accordance with the provisions of this Article 8.
Section 8.2 Distribution of Available Cash. Subject always to Sections
4.8(b) and 6.3(b)(2) hereof, the Available Cash for any particular period shall
be distributed to the Members in the following order of priority:
(a) first, to the Members in proportion to and in payment of their
Default Loans until their Default Loans, including both principal and interest,
have been paid in full;
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(b) next, to the Members in accordance with their respective Capital
Sharing Ratios until the GECC Member shall have achieved a fifteen percent (15%)
Internal Rate of Return on its Capital Contributions (including the return to
the GECC Member of all of its Capital Contributions);
(c) last, to the Members in accordance with their Residual Sharing
Ratios.
ARTICLE 9
CAPITAL ACCOUNTS, ALLOCATIONS, AND TAX MATTERS
----------------------------------------------
Section 9.1 [Reserved].
Section 9.2 Capital Accounts.
(a) Establishment and Maintenance. A separate capital account
("Capital Account") will be maintained for each Member. The Capital Account of
each Member will be determined and adjusted as follows:
(1) Each Member's Capital Account will be credited with the
Member's Capital Contributions, the Member's distributive share of Profits, any
items in the nature of income or gain that are specially allocated to the Member
under Sections 9.4(c) or 9.4(d) and the amount of any Company liabilities that
are assumed by the Member or secured by any Company property distributed to the
Member.
(2) Each Member's Capital Account will be debited with the amount
of cash and the Gross Asset Value of any Company property distributed to the
Member under any provision of this Agreement, the Member's distributive share of
Losses, any items in the nature of deduction or loss that are specially
allocated to the Member under Section 9.4(c) or 9.4(d), and the amount of any
liabilities of the Member assumed by the Company or which are secured by any
property contributed by the Member to the Company.
(3) If any interest in the Company is transferred in accordance
with the terms of this Agreement, the transferee will succeed to the Capital
Account of the transferor to the extent it relates to the transferred interest.
(b) Modifications by Manager. The provisions of this Section 9.2 and
the other provisions of this Agreement relating to the maintenance of Capital
Accounts have been included in this Agreement to comply with Section 704(b) of
the Code and the Regulations promulgated thereunder and will be interpreted and
applied in a manner consistent with those provisions. The Manager may, with the
consent of the Executive Committee, modify the manner in which the Capital
Accounts are maintained under this Section 9.2 to comply with those provisions,
as well as upon the occurrence of events that might otherwise cause this
Agreement not to comply with those provisions; however, without the unanimous
consent of all Members, the Manager may not make any modification to the way
Capital Accounts are maintained if such modification would have the effect of
changing the amount of distributions to which any Member would be entitled
during the operation, or upon the liquidation, of the Company.
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Section 9.3 Adjustment of Gross Asset Value. "Gross Asset Value", with
respect to any asset, is the adjusted basis of that asset for federal income tax
purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed (or
deemed contributed under Code Sections 704(b) and 752 and the Regulations
promulgated thereunder) by a Member to the Company will be the fair market value
of the asset on the date of the contribution, as determined by the Executive
Committee.
(b) The Gross Asset Values of all Company assets will be adjusted
to equal the respective fair market values of the assets, as determined by the
Manager and the GECC Member, as of (1) the acquisition of an additional interest
in the Company by any new or existing Member in exchange for more than a
de minimis capital contribution, (2) the distribution by the Company to a Member
of more than a de minimis amount of Company property as consideration for an
interest in the Company if an adjustment is necessary or appropriate to reflect
the relative economic interests of the Members in the Company, and (3) the
liquidation of the Company within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g).
(c) The Gross Asset Value of any Company asset distributed to any
Member will be the gross fair market value of the asset on the date of
distribution.
(d) The Gross Asset Values of Company assets will be increased or
decreased to reflect any adjustment to the adjusted basis of the assets under
Code Section 734(b) or 743(b), but only to the extent that the adjustment is
taken into account in determining Capital Accounts under Regulations Section
1.704-1(b)(2)(iv)(m), provided that Gross Asset Values will not be adjusted
under this Section 9.3 to the extent that the Manager determines that an
adjustment under Section 9.3(b) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment under this Section
9.3(d).
(e) After the Gross Asset Value of any asset has been determined
or adjusted under Section 9.3(a), 9.3(b) or 9.3(d), Gross Asset Value will be
adjusted by the Depreciation taken into account with respect to the asset for
purposes of computing Profits or Losses.
Section 9.4 Profits, Losses and Distributive Shares of Tax Items.
(a) Profits. Profits for any taxable year shall be allocated to the
Members in the following manner:
(1) first, to the Members in accordance with their Capital
Sharing Ratios until the cumulative Profits allocated under this Section
9.4(a)(1) for the current and all prior taxable years are equal to the
cumulative Losses allocated to the Members under Section 9.4(b)(3) for all prior
taxable years;
(2) next, to the Members until the cumulative Profits allocated
under this Section 9.4(a)(2) for the current and all prior taxable years are
equal to the cumulative Losses allocated to the Members under Section 9.4(b)(2)
for all prior taxable years; provided that, in the event there are insufficient
Profits to allocate the full amount required by this Section 9.4(a)(2),
allocations of Profits shall be made hereunder pro rata among the Members in
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accordance with each such Member's relative share of the full amount of
allocations that would have been made hereunder if there were sufficient Profits
therefor;
(3) next, to the Members in accordance with their Capital Sharing
Ratios until the GECC Member has received allocations of Profits under this
Section 9.4(a)(3) for the current taxable year sufficient to give the GECC
Member a Capital Account balance such that, if such balance were distributed to
such Member as of the end of such taxable year, such Member would have achieved
a fifteen percent (15%) Internal Rate of Return on its Capital Contributions
(including the return to the GECC Member of all such Capital Contributions),
taking into account all prior distributions (other than repayment of principal
and interest on Default Loans) made to the GECC Member under Section 8.2 and
10.2(c) hereof;
(4) next, to the Members in accordance with their Residual
Sharing Ratios.
(b) Losses. After making the special allocations required by Sections
9.4(c) and 9.4(d), Losses for any taxable year shall be allocated to the Members
in the following order of priority:
(1) first, to the Members in accordance with their Residual
Sharing Ratios, until the cumulative Losses allocated under this Section
9.4(b)(1) are equal to the excess, if any, of (x) the cumulative Profits
allocated to each Member under Section 9.4(a)(4) for all prior taxable years
over (y) the cumulative distributions of Available Cash to each such Member
under Section 8.2(c) from the inception of the Company through the end of the
current taxable year;
(2) next, to the Members in accordance with their Capital Sharing
Ratios until each Member's Adjusted Capital Account has been reduced to zero,
and any Losses that would otherwise cause or increase a deficit balance in a
Member's Adjusted Capital Account shall be allocated to the other Member until
such other Member's Adjusted Capital Account has been reduced to zero;
(3) next, any remaining Losses shall be allocated to the Members
in accordance with their Capital Sharing Ratios.
(c) Special Allocations. The following special allocations will be
made in the following order and priority before allocations of Profits and
Losses:
(1) Company Minimum Gain Chargeback. If there is a net decrease
in Company Minimum Gain during any taxable year or other period for which
allocations are made, before any other allocation under this Agreement, each
Member will be specially allocated items of Company income and gain for that
period (and, if necessary, subsequent periods) in proportion to, and to the
extent of, an amount equal to such Member's share of the net decrease in Company
Minimum Gain during such year determined in accordance with Regulations Section
1.704-2(g)(2). The items to be allocated will be determined in accordance with
Regulations Section 1.704-2(g). This Section 9.4(c)(1) is intended to comply
with the Company
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Minimum Gain chargeback requirements of the Regulations, will be interpreted
consistently with the Regulations and will be subject to all exceptions provided
therein.
(2) Member Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any other provision of this Section 9.4 (other than Section
9.4(c)(1) which shall be applied first), if there is a net decrease in Member
Nonrecourse Debt Minimum Gain with respect to a Member Nonrecourse Debt during
any taxable year or other period for which allocations are made, any Member with
a share of such Member Nonrecourse Debt Minimum Gain (determined under
Regulations Section 1.704-2(i)(5)) as of the beginning of the year will be
specially allocated items of Company income and gain for that period (and, if
necessary, subsequent periods) in an amount equal to such Member's share of the
net decrease in the Member Nonrecourse Debt Minimum Gain during such year
determined in accordance with Regulations Section 1.704-2(g)(2). The items to be
so allocated will be determined in accordance with Regulations Section 1.704-
2(g). This Section 9.4(c)(2) is intended to comply with the Member Nonrecourse
Debt Minimum Gain chargeback requirements of the Regulations, will be
interpreted consistently with the Regulations and will be subject to all
exceptions provided therein.
(3) Qualified Income Offset. A Member who unexpectedly receives
any adjustment, allocation or distribution described in Regulations Sections
1.704-l(b)(2)(ii)(d)(4), (5) or (6) will be specially allocated items of Company
income and gain in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of the Member,
if any, as quickly as possible.
(4) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable year or other period for which allocations are made will be allocated
among the Members in proportion to their respective Capital Sharing Ratios in
the Company.
(5) Member Nonrecourse Deductions. Notwithstanding anything to
the contrary in this Agreement, any Member Nonrecourse Deductions for any
taxable year or other period for which allocations are made will be allocated to
the Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which the Member Nonrecourse Deductions are attributable in
accordance with Regulations Section 1.704-2(i).
(6) Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company asset under Code Section 734(b) or 743(b)
is required to be taken into account in determining Capital Accounts under
Regulations Section 1.704-1(b)(2)(iv)(m), the amount of the adjustment to the
Capital Accounts will be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis), and the
gain or loss will be specially allocated to the Members in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
under Regulations Section 1.704-1(b)(2)(iv)(m).
(d) Curative Allocations. The allocations set forth in Section 9.4(c)
(the "Regulatory Allocations,") are intended to comply with certain requirements
of Regulations Sections 1.704-l(b) and 1.704-2. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special
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allocations of other items of Company income, gain, loss, and deduction pursuant
to this Section 9.4(d). Therefore, notwithstanding any other provision of this
Section 9 (other than the Regulatory Allocations), the Manager shall make such
offsetting special allocations in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 9.4(a) and
(b). In exercising its discretion under this Section 9.4(d), the Manager shall
take into account future Regulatory Allocations under Sections 9.4(c)(1) and (2)
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 9.4(c)(4) and (5).
(e) Tax Allocations; Code Section 704(c). For federal, state and local
income tax purposes, Company income, gain, loss, deduction or expense (or any
item thereof) for each fiscal year shall be allocated to and among the Members
to reflect the allocations made pursuant to the provisions of this Section 9.4
for such fiscal year. In accordance with Code Section 704(c) and the related
Regulations, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company, solely for tax purposes, will be
allocated among the Members so as to take account of any variation between the
adjusted basis to the Company of the property for federal income tax purposes
and the initial Gross Asset Value of the property (computed in accordance with
Section 9.3). If the Gross Asset Value of any Company asset is adjusted under
Section 9.3(b), subsequent allocations of income, gain, loss and deduction with
respect to that asset will take account of any variation between the adjusted
basis of the asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the related Regulations. Any
elections or other decisions relating to allocations under this Section 9.4(e)
will be made in any manner that the Manager determines reasonably reflects the
purpose and intention of this Agreement. Allocations under this Section 9.4(e)
are solely for purposes of federal, state and local taxes and will not affect,
or in any way be taken into account in computing, any Member's Capital Account
or share of Profits, Losses or other items or distributions under any provision
of this Agreement.
(f) Members shall be bound by the provisions of this Section 9.4 in
reporting their shares of Company income and loss for income tax purposes.
Section 9.5 Tax Returns. The Manager will cause the Auditor, at the
Company's expense, to prepare all federal, state and local tax returns for each
year for which the returns are required to be filed for the Company and all
Subsidiaries, including making the allocations required under Article 9 hereof.
The Manager will use its reasonable efforts to cause returns for a Fiscal Year
to be furnished to each Member for its review within fifty (50) days following
the end of that Fiscal Year and to cause the returns to be finalized and filed
within sixty (60) days following the end of that Fiscal Year. The Manager will
file or cause to be filed with the appropriate taxing authorities requests for
extensions of time for filing of tax returns to the extent required to be in
compliance with any statute or regulation governing the timely filing of
returns. The Manager will also cause to be provided to each Member, at the time
the quarterly financial statements are required to be delivered pursuant to
Section 5.1(c) above, an estimate of each Member's share of all items of income,
gain, loss, deduction and credit of the Company for federal income tax purposes
for the calendar quarter just completed and for the Fiscal Year to date.
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Section 9.6 Tax Elections. The following elections shall be made on the
appropriate returns of the Company:
(a) to adopt the calendar year as the Company's fiscal year;
(b) to adopt the accrual method of accounting and to keep the Company's
books and records on the income-tax method;
(c) if there is a distribution of Company property as described in
section 734 of the Code or if there is a transfer of a Company interest as
described in section 743 of the Code, upon written request of any Member, to
elect, pursuant to section 754 of the Code, to adjust the basis of Company
properties; and
(d) to elect to amortize the organizational expenses of the Company
ratably over a period of 60 months as permitted by section 709(b) of the Code.
No election shall be made by the Company or any Member to be excluded from the
application of the provisions of subchapter K of chapter 1 of subtitle A of the
Code or any similar provisions of applicable state laws.
Section 9.7 Tax Matters Member. The Member serving as Manager shall be the
"tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code;
provided, however, if the GECC Member has removed the Developer Member as the
initial Manager and appointed a non-Member Manager, then the GECC Member shall
be the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of
the Code. As tax matters partner, such Member shall take such action as may be
necessary to cause each other Member to become a "notice partner" within the
meaning of Section 6223 of the Code. Such Member shall inform each other Member
of all significant matters that may come to its attention in its capacity as tax
matters partner by giving notice thereof within ten days after becoming aware
thereof and, within such time, shall forward to each other Member copies of all
significant written communications it may receive in such capacity. Such Member
shall not take any action contemplated by Sections 6222 through 6232 of the Code
without the consent of the GECC Member. This provision is not intended to
authorize such Member to take any action left to the determination of an
individual Member under Sections 6222 through 6232 of the Code.
Section 9.8 Allocations on Transfer of Interests. All items of income, gain,
loss, deduction, and credit allocable to any interest in the Company that may
have been transferred shall be allocated between the transferor and the
transferee based upon that portion of the calendar year during which each was
recognized as owning such interest, without regard to the results of Company
operations during any particular portion of such calendar year and without
regard to whether cash distributions were made to the transferee or the
transferee during such calendar year; however, such allocation shall be made in
accordance with a method permissible under section 706 of the Code and the
Regulations thereunder.
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ARTICLE 10
WITHDRAWAL, DISSOLUTION, LIQUIDATION, AND TERMINATION
-----------------------------------------------------
Section 10.1 Dissolution, Liquidation, and Termination Generally. The
Company shall be dissolved upon the first to occur of any of the following:
(a) The sale or disposition of all of the assets of the Company and the
receipt, in cash, of all consideration therefor;
(b) The determination of the Members to dissolve the Company; and
(c) The occurrence of any event which, as a matter of law, requires that
the Company be dissolved.
Notwithstanding the foregoing, if the Company is dissolved pursuant to Section
10.1(c) because an event described in Section 18-801(4) of the Act occurs with
respect to a Member, then the other Member may elect to continue the Company
business within 90 days after the Members have actual notice of such event, and,
at the option of the electing Member, may admit a new Member to the Company with
a Residual Sharing Ratio determined by the electing Member. The Residual Sharing
Ratio of the electing Member then shall be reduced by the Residual Sharing Ratio
allocated to the new Member.
Section 10.2 Liquidation and Termination. Upon dissolution of the Company,
unless it is continued as provided above, the Manager shall act as liquidator or
may appoint one or more other Persons as liquidator; however, if the Company is
dissolved because of an event occurring with respect to the Manager, the
liquidator shall be one or more Persons selected in writing by the other Member.
The liquidator shall proceed diligently to wind up the affairs of the Company
and make final distributions as provided herein. The costs of liquidation shall
be a Company expense. Until final distribution, the liquidator shall continue to
operate the Company properties with all of the power and authority of the
Manager hereunder. The steps to be accomplished by the liquidator are as
follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the liquidator shall cause a proper accounting to be made by the
Auditor of the Company's assets, liabilities, and operations through the last
day of the calendar month in which the dissolution shall occur or the final
liquidation shall be completed, as applicable;
(b) the liquidator shall pay all of the debts and liabilities of the
Company (other than the Default Loans, if any) or otherwise make adequate
provision therefor (including the establishment of a cash escrow fund for
contingent liabilities in such amount and for such term as the liquidator may
reasonably determine); and
(c) all remaining assets of the Company shall be distributed to the
Members as provided in Section 8.2 hereof.
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In connection with such liquidation or termination, the liquidator may sell any
or all Company property and the sum of (A) any resulting gain or loss from each
sale plus (B) the fair market value of such property that has not been sold
shall be determined and (notwithstanding the provisions of Article 9) income,
gain, loss, and deduction inherent in such property (that has not been reflected
in the Capital Accounts previously) shall be allocated among the Members to the
extent possible to cause the Capital Account balance of each Member to equal the
amount distributable to such Member under Section 10.2(c) hereof.
Section 10.3 Deficit Capital Accounts. No Member shall be required to pay to
the Company, to any other Member or to any third party any deficit balance which
may exist from time to time in the Member's Capital Account.
Section 10.4 Cancellation of Certificate. On completion of the distribution
of Company assets, the Member (or such other person as the Act may require or
permit) shall file a Certificate of Cancellation with the Secretary of State of
Delaware, cancel any other filings made pursuant to Section 2.4, and take such
other actions as may be necessary to terminate the existence of the Company.
ARTICLE 11
MISCELLANEOUS PROVISIONS
------------------------
Section 11.1 Notices. All notices provided for or permitted to be given
pursuant to this Agreement must be in writing and shall be given or served by
(a) depositing the same in the United States mail addressed to the party to be
notified, postpaid and certified with return receipt requested, (b) by
delivering such notice in person to such party, or (c) by prepaid telegram,
telex, or telecopy. All notices are to be sent to or made at the addresses set
forth on the signature pages hereto. All notices given in accordance with this
Agreement shall be effective upon delivery at the address of the addressee. By
giving written notice thereof, each Member shall have the right from time to
time to change its address pursuant hereto. Copies of all such notices shall be
sent to each member and alternate member of the Executive Committee at their
respective addresses maintained with the Company.
Section 11.2 Governing Law. This Agreement and the obligations of the
Members hereunder shall be construed and enforced in accordance with the laws of
the State of Delaware, excluding any conflicts of law rule or principle which
might refer such construction to the laws of another state or country.
Section 11.3 Entireties; Amendments. This Agreement and its exhibits
constitute the entire agreement between the Members relative to the formation of
the Company. Except as otherwise provided herein, no amendments to this
Agreement shall be binding upon any Member unless set forth in a document duly
executed by such Member.
Section 11.4 Waiver. No consent or waiver, express or implied, by any Member
of any breach or default by any other Member in the performance by the other
Member of its obligations hereunder 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 obligation hereunder. Failure on the part of any
Member to complain of any act or to declare any other
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Member in default, irrespective of how long such failure continues, shall not
constitute a waiver of rights hereunder.
Section 11.5 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstances shall be invalid or
unenforceable to any extent, and such invalidity or unenforceability does not
destroy the basis of the bargain between the parties, then the remainder of this
Agreement and the application of such provisions to other Persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
Section 11.6 Ownership of Property and Right of Partition. A Member's
interest in the Company shall be personal property for all purposes. No Member
shall have any right to partition the property or other assets owned by the
Company.
Section 11.7 Captions, References. Pronouns, wherever used herein, and of
whatever gender, shall include natural persons and corporations and associations
of every kind and character, and the singular shall include the plural wherever
and as often as may be appropriate. Article and Section headings are for
convenience of reference and shall not affect the construction or interpretation
of this Agreement. Whenever the terms "hereof", "hereby", "herein", or words of
similar import are used in this Agreement they shall be construed as referring
to this Agreement in its entirety rather than to a particular Section or
provision, unless the context specifically indicates to the contrary. Whenever
the words "include" and "including" are used herein, they shall be construed to
mean "including, without limitation". Any reference to a particular "Article" or
a "Section" shall be construed as referring to the indicated article or Section
of this Agreement unless the context indicates to the contrary.
Section 11.8 Involvement of Members in Certain Proceedings.
(a) Should any Member become involved in legal proceedings unrelated to
the Company's business in which the Company is required to provide books,
records, an accounting, or other information, then such Member shall indemnify
the Company from all expenses incurred in conjunction therewith.
(b) If the GECC Member brings an action on behalf of the Company or one
or more of its Subsidiaries to enforce an agreement against the Developer Member
or one of its Affiliates pursuant to Section 4.2(a) or 4.11(b) hereof, or if the
Developer Member brings an action on behalf of the Company or one or more of its
Subsidiaries to enforce a loan agreement against GECC pursuant to Section 7.4
hereof, and in either such case, the Company or one or more of its Subsidiaries
is not the prevailing party, then the GECC Member, in the case of an action
against the Developer Member or one of its Affiliates, or the Developer Member,
in the case of an action against GECC, shall indemnify the Company from any and
all reasonable costs and expenses, including court costs and reasonable
attorneys' fees, incurred by the Company or one or more of its Subsidiaries in
connection with any such enforcement action.
Section 11.9 Interest. No amount charged as interest on loans hereunder
shall exceed the maximum rate from time to time allowed by applicable law.
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Section 11.10 Right to Bring Action. A Member may bring an action in the
right of the Company as provided elsewhere in this Agreement or if the Manager
or the Executive Committee has refused to bring an action upon the request of
the Member, and each Member on behalf of itself and the Company hereby waives
any requirement of the Act to plead with particularity the effort of such Member
to secure initiation of the action by the Manager or the Executive Committee. In
such event, it shall be sufficient that the Member bringing the derivative
action has made demand on the Manager and the Executive Committee and no such
action has been filed within thirty (30) days after such demand was made.
Section 11.11 Cumulative Remedies. Except as otherwise expressly provided in
this Agreement, the rights and remedies granted to the Members are in addition
to any other rights and remedies granted or available to the Members at law or
in equity by reason of the default of the other Member, all of which rights and
remedies are specifically reserved by the Members. The failure to exercise any
one of the rights and remedies herein provided shall not constitute a waiver
thereof, nor, except as otherwise expressly provided in this Agreement, shall
the exercise of any of the rights and remedies hereby provided prevent the
subsequent or concurrent resort to any other right or remedy. Notwithstanding
any of the foregoing, no Member shall be entitled to seek or obtain
consequential or punitive damages for any breach of this Agreement by the other
Member.
Section 11.12 Jurisdiction.
(a) Subject always to Section 11.13 hereof, each Member hereby (i)
submits to personal jurisdiction in the State of Delaware for the enforcement of
this Agreement and (ii) waives any and all personal rights under the law of any
state or country to object to jurisdiction within the State of Delaware for the
purposes of litigation to enforce this Agreement.
(b) Subject always to Section 11.13 hereof, in the event that any such
litigation is commenced, each Member agrees that service of process may be made
and personal jurisdiction over such party may be obtained by the serving of a
copy of the summons and complaint upon such party's appointed agent for service
of process in the State of Delaware. As of the Effective Date, the names and
addresses of the appointed agents for service of process for each Member are as
follows: (i) with respect to the Developer Member, Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801; and with respect to the GECC Member, Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. Upon thirty (30) calendar days' prior written notice to the
other Member, a Member may change its appointed agent if the replacement agent
is located in the State of Delaware. In the event of a Transfer which is
permitted under this Agreement, the transferee shall, at the time of its
admission as a Member, designate an agent for service of process within the
State of Delaware as contemplated by this Section 11.12.
(c) Subject always to Section 11.13 hereof, nothing contained herein,
however, shall prevent a Member from bringing any action or exercising any
rights against any other Member within any other state. Initiating such
proceedings shall in no event constitute a waiver of the agreement contained
herein that the law of the State of Delaware shall govern the rights and
obligations of the parties hereunder or the submission herein made by each
Member to
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personal jurisdiction within the State of Delaware. The aforesaid means of
obtaining personal jurisdiction and perfecting service of process are not
intended to be exclusive, but are cumulative in addition to all other means of
obtaining personal jurisdiction and perfecting service of process now or
hereafter provided by the laws of the State of Delaware.
Section 11.13 Arbitration. Any controversy, claim, or dispute arising out of
or relating to this Agreement, including any alleged breach or threatened breach
of the provisions contained in this Agreement, will, upon demand of a party to
the controversy, claim, or dispute, be resolved by arbitration held in Atlanta,
Georgia, and administered by the AAA in accordance with the Commercial
Arbitration Rules of the AAA and, to the maximum extent applicable, pursuant to
the Federal Arbitration Act, 9 U.S.C. 1 et seq.; provided, however, no
disagreement as to a matter within the authority of the Executive Committee
shall be subject to arbitration under this Section 11.13, and any such
disagreement shall remain unresolved unless and until resolved by agreement of
the Executive Committee. An award rendered in any such proceeding shall be
final, binding, and non-appealable, and judgment thereon may be entered in any
court having competent jurisdiction. With respect to a controversy, claim or
dispute in which the claim or amount in controversy does not exceed $100,000, a
single arbitrator will be impaneled, who will have authority to render a maximum
award of $100,000, including all damages of any kind and costs, fees, interest
and the like. With respect to a controversy, claim or dispute in which the claim
or amount in controversy exceeds $100,000, the dispute will be decided by a
majority vote of three arbitrators. Subject to the limitations contained in this
Agreement, the arbitrators may grant any remedy or relief they deem just and
equitable, including any provisional and injunctive remedies available at law or
in equity (in which case the party receiving such relief may apply to the court
of competent jurisdiction for enforcement of such provisional or injunctive
order, without prejudice to the continued arbitration of the matter); provided,
however, that the AAA may, upon the demand of any party to the controversy,
claim, or dispute, administratively appoint a single "provisional relief"
arbitrator on an expedited basis to consider any request for, and grant, such
provisional or injunctive remedy; and provided further, that the arbitrators
shall award reasonable attorneys' fees and expenses to the prevailing party. The
arbitrators will resolve all disputes in accordance with the laws of the State
of Delaware. The arbitrators will be knowledgeable in the subject matter of the
dispute. The arbitrators will make specific, written findings of fact and
conclusions of law. The arbitrators' findings of fact will be binding on all
parties and will not be subject to further review.
ARTICLE 12
BUY-SELL OPTION
---------------
Section 12.1 Exercise. At any time there exists a Major Dispute, in which
case either Member may be an initiating party, or at any time a Removal Event
has occurred or exists with respect to the Developer Member, in which case only
the GECC Member may be the initiating party, or in the event of an Unpermitted
Transfer, in which case only the non-transferring Member may be the initiating
party, or at any time there should exist or occur a Project Capital Contribution
Default or an Additional Capital Contribution Default Event, in which case only
the non-defaulting Member may be the initiating party, or at any time the
Buy-Sell Option is exercised under the Other Company LLC Agreement, in which
case only the Member exercising the Buy-Sell Option under the Other Company LLC
Agreement may be the initiating party of the
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Buy-Sell Option under this Agreement, then the Member which is permitted to be
the initiating party under this Section 12.1, may exercise its right to initiate
the provisions of this Article 12 (the "Buy-Sell Option"). The Member desiring
to exercise the Buy-Sell Option (the "Offeror") shall do so by giving notice
(the "Initiating Notice") to the other Member (the "Offeree") setting forth a
statement of intent to invoke its rights under this Article 12, stating therein
the aggregate dollar amount (the "Valuation Amount") which the Offeror would be
willing to pay for the assets of the Company as of the Closing Date (defined
below) free and clear of all liabilities (other than any and all Default Loans),
and setting forth all oral or written offers and inquiries received by the
Offeror during the previous 12-month period relating to the financing,
disposition or leasing of any Company property (including proposals for the
formation of a new entity for the ownership and operation of the Projects).
After receipt of such notice the Offeree shall elect either to (1) sell its
entire Membership Interest to the Offeror for an amount equal to the amount the
Offeree would have been entitled to receive if the Company had sold its assets
for the Valuation Amount on the Closing Date and the Company had immediately
paid all Company liabilities (including any and all Default Loans) and Imputed
Closing Costs and distributed the net proceeds of sale to the Members in
satisfaction of their interests in the Company pursuant to Section 10.2, or (2)
purchase the entire Membership Interest of the Offeror for an amount equal to
the amount the Offeror would have been entitled to receive if the Company had
sold all of its assets for the Valuation Amount on the Closing Date and the
Company had immediately paid all Company liabilities (including any and all
Default Loans) and Imputed Closing Costs and distributed the net proceeds of the
sale to the Members in satisfaction of their interests in the Company pursuant
to Section 10.2 (including repayment of any and all Default Loans held by the
selling Member to the extent of available proceeds). If the Buy-Sell Option is
exercised following the existence of a Major Dispute or an Unpermitted Transfer,
then the Offeree shall have 90 days after the giving of the Offeror's notice in
which to exercise either of its options by giving written notice to the Offeror;
provided, however, if the Offeree elects to buy the Offeror's entire Membership
Interest, such election shall be deemed made subject to the Offeree's ability to
obtain financing on terms reasonably acceptable to the Offeree and the Offeree
shall pursue such financing diligently and in good faith. If the Buy-Sell Option
is exercised in any other event, then the Offeree shall have 30 days after the
giving of the Offeror's notice in which to exercise either of its options by
giving written notice to the Offeror but any election to buy the Offeror's
Membership Interest shall not be made subject to the Offeree's ability to obtain
financing. If the Offeree does not elect to acquire the Offeror's Membership
Interest within the applicable time period, the Offeree shall be deemed to have
elected to sell its interest to the Offeror. Within one hundred-sixty (160) days
after the Initiating Notice (unless the election to buy has been sooner
rescinded as hereinafter provided), in the event the Buy-Sell Option is
exercised following a Major Dispute or an Unpermitted Transfer, or within three
(3) Business Days after an election has been made under this Section 12.1
(whether deemed or otherwise), in the event the Buy-Sell Option is exercised in
any other case, the acquiring Member shall deposit with the selling Member an
earnest money deposit in an amount equal to five percent (5%) of the amount the
selling Member is entitled to receive for its Membership Interest under this
Section 12.1, which deposit will be applied to the purchase price at Closing. If
the Offeree's election to buy the Offeror's Membership Interest has been deemed
made subject to its ability to obtain financing as provided above, then (a) the
Offeree shall rescind its election to buy at such time as the Offeree determines
that such financing is unavailable on terms reasonably acceptable to the
Offeree, but in no event later than one hundred-sixty (160) days after the
Initiating Notice (the
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Offeree's failure so to rescind being a waiver of the financing condition and
any right to so rescind) and thereafter (b) either (i) in the case of the
exercise of the Buy-Sell Option following an Unpermitted Transfer, the Offeror
shall have the option (but shall not be obligated), such option to be exercised
within thirty (30) days after the Offeree's recission of its election to
purchase, or (ii) in the case of an exercise of the Buy-Sell Option following
the existence of a Major Dispute, the Offeror shall have the obligation, to buy
the Offeree's Membership Interest on the terms set forth above, including the
required earnest money deposit, any such Closing to occur not later than two
hundred ten (210) days after the Initiating Notice.
Section 12.2 Closing. The closing of an acquisition pursuant to Sections
12.1 through 12.3 shall be held at the principal place of business of the
Company on a mutually acceptable date (the "Closing Date") not later than 180
days after the Initiating Notice, in the event the Buy-Sell Option is exercised
following the existence of a Major Dispute or an Unpermitted Transfer or 120
days after the Initiating Notice in any other event. At the Closing of the
disposition and acquisition of such interests the following shall occur:
(a) The selling Member shall assign to the acquiring Member or its
designee the selling Member's Membership Interest in accordance with the
instructions of the acquiring Member, and shall execute and deliver to the
acquiring Member or its designee all documents which may be reasonably required
to give effect to the disposition and acquisition of such interests, in each
case free and clear of all liens, claims, and encumbrances, with covenants of
general warranty;
(b) If the selling Member holds any Default Loans as of the Closing
Date, then such Default Loans shall be assigned, without recourse and without
warranty to the acquiring Member or its designee and the selling Member shall
execute and deliver to the acquiring Member or its designee all documents which
may be reasonably required to give effect to such assignment (for the avoidance
of doubt, the assignment of any such Default Loans by the selling Member to the
acquiring Member or its designee shall in no way affect the purchase price due
the selling Member in accordance with this Article 12 which will be determined,
in part, by the amount of any Default Loans held by the selling Member
immediately prior to the assignment thereof in accordance with this Subsection
12.2(b)); and
(c) The acquiring Member shall pay to the selling Member the
consideration therefor in cash.
Section 12.3 Default.
(a) If the acquiring Member should default in its obligation to buy in
accordance with this Article 12, the selling Member shall exercise one of the
following alternative remedies within thirty (30) days after the acquiring
Member's default as the selling Member's sole and exclusive remedy for such
default:
(1) The selling Member shall purchase the acquiring Member's
Membership Interest on the terms set forth above, such closing to occur not
later than two hundred-ten (210) days after the Initiating Notice; or
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(2) The selling Member shall retain the earnest money deposit as
full liquidated damages for such default of the acquiring Member, the Members
hereby acknowledging and agreeing that it is impossible to more precisely
estimate the damages to be suffered by the selling Member upon the acquiring
Member's default and the Members acknowledge and agree that the earnest money
deposit which may be retained by the selling Member is intended not as a
penalty, but as full liquidated damages for such default of the acquiring
Member. In the event the acquiring Member failed to make its earnest money
deposit as required in Section 12.1 hereof and the selling Member has elected
its remedy under this Section 12.3(b), then the selling Member shall have the
right to recover an award or judgment against the acquiring Member in the amount
of such required earnest money deposit, together with its reasonable attorneys'
fee and costs incurred in obtaining such award or judgment.
(b) If the selling Member should default in its obligation to sell in
accordance with this Article 12, the acquiring Member shall exercise one of the
following alternative remedies within thirty (30) days after the selling
Member's default as the acquiring Member's sole and exclusive remedy for such
default:
(1) The acquiring Member shall be entitled to demand and receive a
return of its earnest money deposit previously deposited with the selling
Member; or
(2) The acquiring Member shall be entitled to seek specific
performance of the selling Member's obligations under this Article 12, the
Members' expressly agreeing that the remedy at law for breach of the obligations
of the selling Member set forth in this Article 12 is inadequate in view of (A)
the complexities and uncertainties in measuring the actual damage to be
sustained by the acquiring Member on account of the default of the selling
Member, and (B) the uniqueness of the Company business and the Members'
relationships.
Section 12.4 Payment of Debts. If, at the Closing Date, the selling Member
has any outstanding debts to the Company or the acquiring Member relating to the
Company, all proceeds of the purchase price due the selling Member for its
Membership Interest will be paid to the Company or the acquiring Member (pro
rata in accordance with the amounts owed by the selling Member to each) for and
on behalf of the selling Member until all the debts will have been paid and
discharged in full.
Section 12.5 Payment of Loans Held by GECC. If the Developer Member is the
acquiring Member under this Article 12 and if on the Closing Date under this
Article 12 the Company or any Subsidiary is then indebted to GECC, then, as a
condition to closing under this Article 12, all such loans then held by GECC
will be modified to provide that, at the option of the holder thereof, any or
all such loans will become due and payable, if not sooner due, on that date
which is 18 months after the Closing Date.
Section 12.6 Release of Capital Contribution Obligations. At the time of
closing pursuant to this Article 12, each selling Member will be released from
any further obligation to make Capital Contributions to the Company.
Section 12.7 Offset. The acquiring Member will be entitled to deduct from
the amounts otherwise payable to the selling Member any and all amounts owed to
the acquiring
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Member, including damages owed by reason of any default, to the extent agreed by
the parties or to the extent such damages have been reduced to an arbitration
award or a final nonappealable judgment, as applicable.
Section 12.8 Minimum Purchase Price. Notwithstanding anything to the
contrary contained in this Agreement, in no event will the purchase price paid
for a Membership Interest pursuant to this Article 12 be less than zero.
Section 12.9 Operations in Pre-Closing Period. From the date the Initiating
Notice is given until the date the closing occurs under this Article 12 or, if
earlier, the date on which the Members agree not to proceed with such closing,
the Company will continue to be operated in the ordinary course, as if the
closing were not going to occur, the Members, the Manager and the Executive
Committee will continue to have all power and authority granted in this
Agreement (including the power to make distributions), and the Members will
exercise their power and authority in good faith and without regard to the fact
that such closing may occur; provided, however, that, without the approval of
both Members (i) no Pursuit Costs may be incurred during such period with
respect to any Target or Project for which the Final Presentation has not been
approved by the Executive Committee at the beginning of such period, (ii) the
Manager will not submit any additional Targets to the Executive Committee for
approval, (iii) any and all distributions received by the selling Member from
the Company during such period representing distributions of Capital Proceeds
shall be credited against and reduce the price otherwise payable to the selling
Member for its Membership Interest and any Project Capital Contributions made by
the selling Member to the Company during such period and a return thereon at
seventeen percent (17%) per annum shall be added to and increase the price
otherwise payable to the selling Member for its Membership Interest, and (iv)
neither the Company nor any Subsidiary shall enter into any contracts or
agreements, or otherwise agree, to sell or otherwise dispose of any of the
Projects; however, the Company and each Subsidiary shall be authorized to
consummate any transactions which were the subject of binding contractual
obligations entered into prior to the commencement of such period.
Section 12.10 Suspension of Rights Under Articles 13 and 14. Notwithstanding
anything to the contrary contained in this Agreement, at any time a Member has
exercised the Buy-Sell Option in accordance with this Article 12, then the
Members' respective rights under Articles 13 and 14 shall not be exercised
unless and until the initiation of the Buy-Sell Option is withdrawn or rescinded
by the Offeror or unless and until the occurrence of a breach or default with
respect to the Buy-Sell Option by the acquiring Member.
Section 12.11 Changes in Distribution Rights. In the event following the
exercise by a Member of the Buy-Sell Option, a Member's right to distributions
of Available Cash are modified as provided elsewhere in this Agreement, then the
amount due the selling Member on the Closing Date shall be determined in
accordance with such modified distribution rights set forth in Schedule 6.3(b)
hereto.
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ARTICLE 13
REQUIRED SALE; RIGHT OF FIRST OFFER
-----------------------------------
Section 13.1 Offers. Subject always to Section 13.3 hereof, if at any
time and from time to time following a Project's Permitted Sale Date, either
Member desires to offer a Project or a group of Projects (all of whose
respective Permitted Sale Dates have previously occurred) then owned by the
Company or its Subsidiaries for sale on specified terms (including the sales
price, method of payment, anticipated closing date measured from the date of any
to-be-executed contract, and in the case of a group of Projects, whether such
Projects would be sold in a single transaction or in a series of transactions),
or receives from a third-party purchaser not Affiliated with such Member a bona
fide written cash offer (i.e., not seller financed) for the purchase of such
Project or Projects on terms which such Member desires for the Company to accept
(such specified terms or bona fide offer being herein called the "Offer"), then
the Member desiring to make or accept the Offer (the "Initiating Member") shall
provide notice of the terms of such Offer (the "Sale Notice") to the other
Member (the "Non-Initiating Member"). Any Offer must be in an amount at least
equal to the amount of all indebtedness secured by the Projects which are
offered to be sold. A Member's rights under this Section 13.1 may be exercised
(1) on a Project by Project basis, or (2) with respect to any number of Projects
so long as the Projects covered by the Offer do not represent all or
substantially of the Projects then owned by the Company. Additionally, Developer
Member may not exercise this right if a Removal Event has occurred with respect
to it.
Section 13.2 Response. The Non-Initiating Member shall have 15 Business
Days from the date of the Sale Notice (the "Response Period") to provide notice
to the Initiating Member of its willingness or unwillingness to make or accept
the Offer; failure to deliver such notice shall constitute an election to sell
the Project or Projects on the terms of the Offer.
(a) Offer Unacceptable. If the Non-Initiating Member does not desire
for the Company to make or accept the Offer, the Initiating Member may elect to
sell such Project or Projects to the Non-Initiating Member, in which case the
Non-Initiating Member shall purchase, the Project or Projects covered by such
Offer on the terms set forth in the Offer. The Initiating Member must exercise
this option, if at all, by delivering written notice thereof to the
Non-Initiating Member within ten (10) Business Days after the end of the
Response Period. Closing shall take place on or before the date as specified in
the Sale Notice, but if the Non-Initiating Member is purchasing the Project or
Projects in accordance with the first sentence of this Section 13.2(a), then the
Non-Initiating Member shall have until 120 days after the Sale Notice in which
to close. If the Initiating Member or the Non-Initiating Member defaults at
closing, the non-defaulting party shall have the right to bring suit for
damages, for specific performance, or exercise any other remedy available at law
or in equity. Upon payment at closing, the Company and the Non-Initiating Member
shall execute and deliver all documents reasonably required to transfer the
Project or Projects being sold.
(b) Offer Acceptable. If the Non-Initiating Member consents to the
Company selling the Project or Projects on the terms of the Offer, then the
Initiating Member shall be permitted to sell the Projects on behalf of the
Company for cash at a price not less than 95% of the price set forth in the
Offer and substantially on the other terms and conditions set forth in the Offer
for a period of up to 180 days following the expiration of the Response Period.
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If the Initiating Member obtains a bona fide third party contract to sell the
Projects for cash at a price not less than 95% of the price set forth in the
Offer and substantially on the other terms and conditions set forth in the Offer
within such 180-day period, the Initiating Member shall have an additional
period of 60 days after the date of such contract (that is, within 240 days
after the Sale Notice) in which to consummate the sale. If after having received
the consent of the Non-Initiating Member to the sale of the Project or Projects
substantially on the terms of the Offer, the Initiating Member is unable to
obtain a bona fide contract to sell the Projects for cash at a price not less
than 95% of the price set forth in the Offer and substantially on the other
terms and conditions set forth in the Offer within such 180-day period, or if
after having obtained such bona fide contract, the Initiating Member is unable
to consummate such sale within 240 days after the Sale Notice, then the
Initiating Member must again submit an Offer to the Non-Initiating Member under
the terms of this Article 13 before it may sell any Project or Projects pursuant
to this Article 13.
(c) Further Right of First Refusal. If the Initiating Member obtains
a bona fide third party offer to purchase the Projects within the 180-day period
after the Sale Notice at a price and on other terms and conditions that the
Initiating Member desires to accept but the purchase price is less than 95% of
the price set forth in the Offer or otherwise does not substantially conform to
the terms and conditions set forth in the Offer (a "Nonconforming Offer"), the
Initiating Member shall provide the Non-Initiating Member with a copy of the
Nonconforming Offer and the Non-Initiating Member shall have the option to
purchase such Project or Projects covered by the Nonconforming Offer from the
Company at the price and on the other terms and conditions set forth in the
Nonconforming Offer, including the closing date. The Non-Initiating Member must
exercise this option, if at all, by delivering written notice thereof to the
Initiating Member within 20 days after the Non-Initiating Member's receipt of
the Nonconforming Offer. Closing shall take place on or before the date as
specified in the Nonconforming Offer. Failure of the Non-Initiating Member to
exercise such option within such 20 day period shall be deemed a waiver of such
option to purchase and a consent to the Company's sale of the Project or
Projects to such third-party at the price and on the other terms and conditions
set forth in the Nonconforming Offer. If the Non-Initiating Member defaults at
closing, the Initiating Member shall have the right to bring suit for damages,
for specific performance, or exercise any other remedy available at law or in
equity. Upon payment at closing, the Company and the Non-Initiating Member shall
execute and deliver all documents reasonably required to transfer the Project or
Projects being sold.
(d) Sale By the Company. In the event of a purchase of the Project or
Projects by the Non-Initiating Member in accordance with this Article 13 or in
the event of the sale of the Project or Projects to a third party in accordance
with this Article 13, the sale will be treated as a sale by the Company (or its
Subsidiaries), and the Available Cash resulting therefrom shall be distributed
accordingly. At the request of either Member and so long as the same can be
accomplished at no additional cost, expense or delay to the Company and so long
as the Company or a Subsidiary is not required to take title to any exchange
property, the Members will give fair consideration to, but will be under
no obligation to implement, any structure proposed by the requesting member for
disposing of any such Project or Projects in a manner that permits the
requesting Member to report its share of the sales proceeds as a tax-free
exchange under Section 1031 of the Code.
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Section 13.3 REIT Limitation. Prior to the fifth (5th) anniversary of
the Effective Date, a Member's rights to effect a sale of a Project or Projects
pursuant to this Article 13 shall not be exercised if nationally recognized tax
counsel to SUSA reasonably determines in a written opinion addressed to the
Company (a copy of which must be delivered to the GECC Member at or prior to the
end of the Response Period) that the sale of such Project or Projects on the
terms set forth in the Sale Notice by the Company or a Subsidiary would create a
material risk that SUSA would incur taxes under Section 857(b)(6) of the Code
(determined as if the Company were the sole investment of the Developer Member
and SUSA). Notwithstanding anything in this Section to the contrary, if the
opinion contemplated in the first sentence of this Section is not timely
delivered or in any event after the fifth (5th) anniversary of the Effective
Date, the restriction in the preceding sentence shall no longer be applicable
and a Member may exercise its rights under this Article 13 without regard to the
impact of such sale or sales on the tax liability of the Developer Member or
SUSA.
Section 13.4 No Suspension of Rights Under Articles 12 and 14.
Notwithstanding anything to the contrary contained in this Agreement, a Member's
exercise of its rights under this Article 13 shall not affect or prevent a
Member's exercise of its rights under Article 12 or 14 hereof but any such
exercise of rights shall be subject to the sale of any Project or Projects in
accordance with this Article 13.
ARTICLE 14
MARKETING RIGHT
---------------
Section 14.1 Marketing Right. Subject always to Section 14.6 hereof, at
any time there exists a Major Dispute, in which case either Member may be an
initiating party, or at any time after the Commitment Termination Date, in which
case either Member may be an initiating party, or in the event Bankruptcy shall
occur or exist with respect to a Member (or in the case of the Developer Member,
SUSA) in which case the other Member may be the initiating party, or at any time
a Removal Event has occurred or exists with respect to the Developer Member, in
which case only the GECC Member may be the initiating party, or in the event of
an Unpermitted Transfer, in which case only the non-transferring Member may be
the initiating party, or at any time there should exist a Project Capital
Contribution Default or an Additional Capital Contribution Default Event, in
which case only the non-defaulting Member may be the initiating party, or at any
time the Marketing Right is exercised under the Other Company LLC Agreement, in
which case only the Member exercising the Marketing Right under the Other
Company LLC Agreement may be the initiating party of the Marketing Right under
this Agreement, then the Member which is permitted to be the initiating party
under this Section 14.1, may exercise its right to initiate the provisions of
this Article 14 (the "Marketing Right"). The Member desiring to exercise the
Marketing Right (the "Moving Member") shall do so by giving notice (the
"Marketing Notice") to the other Member setting forth a statement of intent to
invoke its rights under this Article 14 and stating therein (i) the names of
three (3) nationally recognized investment banking firms or real estate
investment brokers, not an Affiliate of the Moving Member, selected from the
list of such firms attached hereto as Schedule 14.1 (as such list may be amended
from time to time as hereinafter provided), which the Moving Member proposes to
retain on behalf of the Company to manage and oversee the sale of all or
substantially all of the Projects then owned by the Company and its
Subsidiaries, together with a
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<PAGE>
copy of each such firm's proposal describing the services to be undertaken by
such firm and the compensation that would be payable to such firm in connection
with any such transaction and (ii) the material terms on which such sale would
be effected (including a sales price, method of payment, anticipated closing
date measured from the date of any to-be-executed contracts, and whether the
Project would be offered for sale as an entirety in a single portfolio or in
selected portfolios. Within thirty (30) days after its receipt of the Marketing
Notice, the other Member will select one of the investment banking firms or
investment brokers named in the Marketing Notice as the firm (the "Marketing
Firm") which will be retained by the Company to manage and oversee the sale of
substantially all of the Projects then owned by the Company and its
Subsidiaries. If the other Member fails to select one of such firms within such
thirty (30) day period, then the Moving Member shall have the right to select
the Marketing Firm from the list of such firms set forth in the Marketing
Notice. The Marketing Firm thus selected shall proceed to value all of the
Projects then owned by the Company and its Subsidiaries and shall offer them for
sale in accordance with the Marketing Notice at a fair market price and on such
other terms and conditions as the Marketing Firm shall deem consistent with then
market practices. After advising the Executive Committee concerning any offer or
offers received by it, the Marketing Firm may accept such offer or offers as it
may have received for the sale and purchase of substantially all of the
Projects, all on such terms and conditions as the Marketing Firm shall deem
appropriate. The Manager and, to the extent required, both Members shall execute
such documents as may be required to effect the sale and disposition of the
Projects at the price and on the other terms and conditions approved by the
Marketing Firm.
Section 14.2 Right of Either Member to Bid. Both Members will have the
right to bid for and purchase the Projects so offered for sale by the Marketing
Firm on the same terms and conditions as potential third-party purchasers.
Section 14.3 Sale By the Company. In the event of a sale of the Projects
in accordance with this Article 14, the sale will be treated as a sale by the
Company (or its Subsidiaries), and the Available Cash resulting therefrom shall
be distributed accordingly. Any sale or other disposition of assets in
accordance with this Article 14 may be affected as a sale of the Projects by the
Subsidiaries or as a sale by the Company of its interests in the Subsidiaries,
or any combination thereof. Any and all costs and expenses, including the fees
and expenses of the Marketing Firm, incurred by the Company in connection with
the sale or sales of assets pursuant to this Article 14 shall be paid by the
Company.
Section 14.4 Changes to Schedule 14.1. At any time and from time to time
the Executive Committee, by unanimous action, may amend the list of firms and
brokers set forth on Scbedule 14.1 hereto by adding additional firms or brokers
or by removing any such firms or brokers.
Section 14.5 Operations in Pre-Closing Period. From the date the
Marketing Notice is given until the date the last closing occurs under this
Article 14 or, if earlier, the date on which the Members agree not to proceed
with any such transaction pursuant to this Article 14, the Company will continue
to be operated in the ordinary course, as if the closing or closings were not
going to occur, the Members, the Manager and the Executive Committee will
continue to have all power and authority granted in this Agreement (including
the power to make distributions) and the Members will exercise their power and
authority in good faith and without
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<PAGE>
regard to the fact that such transaction or transactions may occur; provided,
however, that, without the approval of both Members, (i) no Pursuit Costs may be
incurred during such period with respect to any such Target or Project for which
the Final Presentation has not been approved by the Executive Committee at the
beginning of such period, (ii) the Manager will not submit any additional
Targets to the Executive Committee for approval, and (iii) neither the Company
nor any Subsidiary shall enter into any contract or agreements, or otherwise
agree, to sell or otherwise dispose of any of the Projects except pursuant to
this Article 14; however, the Company and each Subsidiary shall be authorized to
consummate any transactions which were the subject of binding contractual
obligations entered into prior to the commencement of such period.
Section 14.6 REIT Limitation. Prior to the fifth (5th) anniversary of
the Effective Date, a Member's rights to exercise the Marketing Right pursuant
to this Article 14 shall not be exercised if nationally recognized tax counsel
to SUSA reasonably determines in a written opinion addressed to the Company (a
copy of which must be delivered to the GECC Member within thirty (30) days after
the Marketing Notice) that the consummation of the sale of substantially all of
the Projects then owned, directly or indirectly, by the Company on the terms set
forth in the Marketing Notice would create a material risk that SUSA would incur
taxes under Section 857(b)(6) of the Code (determined as if the Company were the
sole investment of the Developer Member and SUSA). Notwithstanding anything in
this Section 14.6 to the contrary, if the opinion contemplated in the first
sentence of this Section is not timely delivered or if at any time Bankruptcy
should occur or exist with respect to the Developer Member or SUSA or in any
event after the fifth (5th) anniversary of the Effective Date, the restriction
in the preceding sentence shall no longer be applicable and a Member may
exercise its rights under this Article 14 without regard to the impact of such
sale or sales on the tax liability of the Developer Member or SUSA.
Section 14.7 Suspension of Rights Under Articles 12 and 13.
Notwithstanding anything to the contrary contained in this Agreement, at any
time a Member has exercised the Marketing Right under this Article 14, then the
Members' respective rights under Articles 12 and 13 shall not be exercised
unless and until the initiation of the Marketing Right in accordance with this
Article 14 is withdrawn or rescinded by the Moving Member or unless and until
the transaction provided for under this Anticle 14 has been concluded.
Section 14.8 Changes in Distribution Rights. In the event following the
exercise by a Member of the Marketing Right, a Member's right to distributions
of Available Cash are modified as provided elsewhere in this Agreement, then the
amounts due the Members on the Closing Date shall be determined in accordance
with such modified distribution rights set forth in Schedule 6.3(b) hereto.
ARTICLE 15
SPECIAL PURCHASE RIGHT
----------------------
In addition to all other rights and remedies available to the Electing
Member under this Agreement or the Other Company LLC Agreement, at law, in
equity or otherwise, upon the occurrence or existence of Cause with respect to
the Developer Member under this Agreement or
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<PAGE>
under the Other Company LLC Agreement (in which case the Developer Member shall
be a "Special Defaulting Member") or in the event of a Project Capital
Contribution Default by either Member under this Agreement or under the Other
Company LLC Agreement (in which case such Member shall be a "Special Defaulting
Member"), then the other Member (the "Electing Member") may, by delivering
written notice thereof to the Special Defaulting Member, at any time thereafter
elect to purchase the Membership Interest of the Special Defaulting Member in
the Company and the Other Company for a purchase price equal to the difference
between (A) the lesser of (i) the fair market value of the Special Defaulting
Member's Membership Interest in the Company and the Other Company taking into
account any changes to such Special Defaulting Member's distribution rights in
accordance with Schedule 6.3(b) hereto) or (ii) the unreturned Capital
Contributions of the Special Defaulting Member in the Company and the Other
Company (as detemmined by the Auditor whose determination shall be binding on
the Members absent manifest error) less (B) all damages and costs incurred by
the Company and the Other Company in connection with the event giving rise to
such purchase. The fair market value of the Membership Interest of the Special
Defaulting Member shall be detemmined by the Electing Member and the Special
Defaulting Member within 30 days after the Electing Member elects to purchase
such Membership Interests. If the Members are unable to agree on the fair market
value of such Membership Interests, the Electing Member, by notice to the
Special Defaulting Member, may require the detemmination of the fair market
value to be made by an independent appraiser specified in that notice. If the
Special Defaulting Member objects to the independent appraiser designated
therein within ten days after it receives such notice and the Electing Member
and the Special Defaulting Member fail to agree on an independent appraiser,
then either Member may request that the Atlanta, Georgia office of the AAA
designate an independent appraiser, in which case the selection of the appraiser
by the AAA shall be binding on the parties. The Company shall pay the cost of
the appraisal. The closing of such transaction shall occur within 30 days after
the purchase price for the Membership Interests is finally detemmined.
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<PAGE>
Executed effective as of the date above written.
MEMBERS: SUSA PARTNERSHIP, L.P.
BY: STORAGE USA, INC., General Partner
By: /s/ Christopher P. Marr
------------------------
Name: Christopher P. Marr
-----------------------------
Title: Chief Financial Officer
-----------------------------
Address: 165 Madison Ave. Ste 1300
Memphis, TN 38103
-----------------------------
Taxpayer Identification
Number: 62-1554135
STORAGE VENTURES, L.P., a Delaware limited
partnership
BY: MF Funding, Inc., a Delaware corporation,
General Partner
By: /s/ Mark Dawejko
----------------------------------
Name: Mark Dawejko
Title: Vice President
Address: c/o GE Capital Real Estate
Attn: Legal Operations
(Project SUSA)
292 Long Ridge Road
Stamford, CT 06927
Taxpayer Identification
Number: 58-2499649
- 78 -
<PAGE>
STORAGE USA, INC. is a signatory to this Agreement in its individual capacity to
evidence its agreement to those provisions of this Agreement that are binding on
it, including Section 4.6 and Section 7.2.
STORAGE USA, INC., a Tennessee corporation
By: /s/ Christopher P. Marr
------------------------------------------
Name: Christopher P. Marr
----------------------------------
Title: Chief Financial Officer
----------------------------------
Address: 165 Madison Ave. Ste 1300
Memphis, TN 38103
----------------------------------
- 79 -
<PAGE>
GECC DOCUMENT INDEX - STORAGE ACQUISITION PORTFOLIO, L.L.C.
Schedule 1.1(AIP) Approved Investment Parameters
Schedule 1.1(FP) Required Information for Final Presentation
Schedule 1.1(INS) Insurance Program
Schedule 1.1(IP) Company's Ethical Business Policy
Schedule 1.1 (Engineers)
Schedule 1.1 (Environmental)
Schedule l.1(PB) Performance Benchmarks
Schedule l.l(PR) Prohibited Radius
Schedule 2.5(c) Form of Subsidiary Operating Agreement
Schedule 2.8 Developer Member's Representation and Warranties
Schedule 2.9 GECC Member's Representation and Warranties
Schedule 4.6(d) Listing of Excluded Properties
Schedule 4.12(a) Management Agreement
Schedule 6.3(b) Modified Distribution Rights
Schedule 14.1 Approved Investment Banking Firms
<PAGE>
SCHEDULE 1.1 (PB)
PERFORMANCE BENCHMARKS
Volume Thresholds
Acquisitions $90MM
Developments $35mm in addition to the current
pipeline in no event less than
$70mm in total.
Volume Mix in Ventures No greater than 1:1 Development:
Acquisitions
Pipeline Deals SUSA will present 14 deals
identified on Schedule 4.4 (a) to
GE at cost (including normal fees
and carry).
Geographic Diversity No more than 15% of total volume
in any one market.
Cost overruns
Credited Cost Overruns Not more than 3% of total
development costs cumulatively.
Total Cost overruns Not more than 5% total
development costs cumulatively.
Business Plan Year 2001 Business Plan submitted
to Executive Committee for
approval.
Financial Performance
Acquisition NOI Not more than 10% off of plan
cumulatively.
Development Lease Up Not more than 10% off of plan
cumulatively.
Construction Completion Average Completion dates not more
than 45 days late. Not more than
one property 120 days late or
more.
<PAGE>
SCHEDULE 2.8
------------
1. Organization and Good Standing.
(a) Each of the Developer Member and SUSA (i) is a partnership or
corporation, as the case may be, duly organized, validly existing and in good
standing under the laws of the State of Tennessee, (ii) is duly qualified and in
good standing and authorized to do business in every other jurisdiction where
ownership of its properties or the conduct of its business requires it to be so
qualified, except where the failure to do so would not have a Material Adverse
Effect (as defined below), and (iii) has the requisite partnership or corporate
power and authority to own its properties and to carry on its business as now
conducted and as proposed to be conducted.
(b) As used in this Schedule 2.8, the term "Material Adverse Effect"
means any event, circumstance or condition that has or is reasonably expected to
have a material adverse effect on the business, assets, properties, liabilities,
operations (or the results thereof) or condition (financial or otherwise) of the
Developer Member, SUSA and their respective Subsidiaries taken as a whole or
that would materially impair the Developer Member's or SUSA's ability to perform
its obligations under this Agreement.
(c) As used in this Schedule 2.8, the term "Subsidiaries" means all
entities that would be treated as consolidated subsidiaries of the Developer
Member or SUSA for financial accounting purposes under generally accepted
accounting principles as applied in the United States of America ("GAAP").
2. Due Authorization. Each of the Developer Member and SUSA (a) has the
requisite partnership or corporate, as the case may be, power and authority (i)
to execute, deliver and perform this Agreement, (ii) to consummate the
transactions contemplated by this Agreement, and (iii) to incur the obligations
provided for in this Agreement, and (b) is duly authorized to, and has been
authorized by all necessary partnership or corporate, as the case may be, action
to, execute, deliver and perform this Agreement and to consummate the
transactions contemplated by this Agreement
3. No Conflicts. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated in this Agreement, nor the
performance of and compliance with the terms and provisions of this Agreement by
the Developer Member or SUSA will (a) violate or conflict, in each case, in any
material respect, with any provision of its organizational documents, (b)
violate, contravene or conflict with any law, regulation, order, writ, judgment,
injunction, decree or permit applicable to it, (c) violate, contravene or
conflict with contractual provisions of, or cause an event of default under, any
indenture, loan agreement, mortgage, deed of trust, security agreement, contract
or other agreement or instrument to which it is a party or by which it or any of
its assets or properties may be bound, or (d) result in the creation of any lien
or other encumbrance upon or with respect to any of its assets or properties,
which, in any such case, would result in a Material Adverse Effect.
PAGE I OF SCHEDULE 2.8
<PAGE>
4. Consents. No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or third
party in respect of the Developer Member or SUSA is required in connection with
the execution, delivery or performance of this Agreement by the Developer Member
or SUSA or to consummate the transactions contemplated by this Agreement.
5. Enforceable Obligations. This Agreement and all other documents executed
in connection herewith have been duly executed and delivered by, and constitute
legal, valid and binding obligations of, the Developer Member and SUSA, as
applicable, enforceable against the Developer Member and SUSA, as applicable, in
accordance with their respective terms, except as may be limited by bankruptcy
or insolvency laws or similar laws affecting creditors' rights generally or by
general equitable principles.
6. No Default. Neither the Developer Member nor SUSA is in default in any
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound, except for such defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.
7. Investment Company. Neither the Developer Member nor SUSA is required to
register as an "investment company" and neither the Developer Member nor SUSA
is, to the knowledge of the Developer Member, directly or indirectly controlled
by any Person which is required to register as an "investment company", within
the meaning of and under the Investment Company Act of 1940, as amended.
8. SEC Reports. The Developer Member has provided to the GECC Member true
and complete copies of each report and proxy statement filed by the Developer
Member and SUSA with the United States Securities and Exchange Commission since
January 1, 1999 (collectively, the "Company SEC Reports"), all of which, as of
their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder. None of such Company SEC Reports, as of the respective
dates they were filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Each of the audited consolidated financial
statements of the Developer Member and SUSA (including any related notes and
schedules) included (incorporated by reference) in their respect Annual Reports
on Form 10-K for the fiscal year ended December 31, 1998, fairly present, in
conformity with GAAP (except as may be indicated in the notes thereto), the
consolidated financial position of the Developer Member and SUSA and its their
Subsidiaries as of the date thereof and the consolidated results of their
operations and their cash flows for the periods then ended.
9. Compliance with Law. Except as disclosed in any Company SEC Reports, the
Developer Member and SUSA are in compliance with all applicable laws. rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, except to the extent that the failure to be in such compliance would
not have a Material Adverse Effect. The Developer Member and SUSA have all
necessary permits, licenses and other authorizations required to conduct their
businesses as currently conducted, and as proposed to be conducted, except where
PAGE 2 OF SCHEDULE 2.8
<PAGE>
a failure to have such permits, licenses or other authorizations would not have
a Material Adverse Effect. Except as disclosed in the Company SEC Reports,
neither the Developer Member nor SUSA has violated any domestic or foreign law
or any regulation or requirement, which violation has or would be reasonably
likely to have a Material Adverse Effect, and neither the Developer Member nor
SUSA has received notice of any such violation. There are no adverse orders,
judgments, writs, injunctions, decrees or demands of any court or administrative
body, domestic or foreign, or of any other governmental agency or
instrumentality, domestic or foreign, outstanding against the Developer Member
or SUSA which would have a Material Adverse Effect.
10. Intellectual Property. The Developer Member and SUSA own or have the
legal right to use, all service marks, trademarks, trade names, copyrights,
technology, know-how and resources necessary for each of them to conduct its
business as currently conducted.
11. Solvency. Each of the Developer Member and SUSA is and, after
consummation of the transactions contemplated by this Agreement will be,
solvent.
12. Federal Tax Matters.
(a) SUSA is and has been, commencing with SUSA's taxable year ended
1994, qualified to be taxed as a "real estate investment trust" ("REIT") under
Sections 856 through 860 of the Code and the present and contemplated method of
operation, assets and income of the Developer Member, SUSA and the Subsidiaries
presently comply with the requirements for taxation as a REIT under the Code.
(b) Neither the Developer Member nor SUSA is a "foreign person" within
the meaning of Section 1445 or 7701 of the Code.
13. Year 2000. The Developer Member has reviewed and assessed, or caused to
be reviewed and assessed, all areas within its and SUSA's businesses and
operations that could be adversely affected by the risk that computer
applications may not be able to recognize and properly perform date sensitive
functions after December 31, 1999. Based on the foregoing, all computer
applications that are material to the Developer Member's or SUSA's business and
operations are reasonably expected to be Year 2000 Compliant, except to the
extent that a failure to do so is not reasonably expected to have a Material
Adverse Effect.
PAGE 3 OF SCHEDULE 2.8
<PAGE>
SCHEDULE 2.9
------------
1. Organization and Good Standing. The GECC Member (a) is duly organized,
validly existing and in good standing under the laws of the State of Delaware,
(b) is duly qualified and in good standing and authorized to do business in
every other jurisdiction where ownership of its properties or the conduct of its
business requires it to be so qualified, except where the failure to do so would
not have a Material Adverse Effect (as defined below), and (c) has the requisite
partnership power and authority to own its properties and to carry on its
business as now conducted and as proposed to be conducted. As used in this
Schedule 2 9, the term "Material Adverse Effect" means any event, circumstance
or condition that has or is reasonably expected to have a material adverse
effect on the business, assets, properties, liabilities, operations (and the
results thereof), or condition (financial or otherwise) of the GECC Member taken
as a whole or that would materially impair the GECC Member's ability to perform
its obligations under this Agreement.
2. Due Authorization. The GECC Member (a) has the requisite partnership
power and authority (i) to execute, deliver and perform this Agreement, (ii) to
consummate the transactions contemplated by this Agreement, and (iii) to incur
the obligations provided for in this Agreement, and (b) is duly authorized to,
and has been authorized by all necessary partnership action to, execute, deliver
and perform this Agreement and to consummate the transactions contemplated by
this Agreement.
3. No Conflicts. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated in this Agreement, nor the
performance of and compliance with the terms and provisions of this Agreement by
the GECC will (a) violate or conflict with any provision of its organizational
documents, (b) violate, contravene or conflict, in each case, in any material
respect, with any law, regulation, order, writ, judgment, injunction, decree or
permit applicable to it, (c) violate, contravene or conflict with contractual
provisions of, or cause an event of default under, any indenture, loan
agreement, mortgage, deed of trust, contract or other agreement or instrument to
which it is a party or by which it or any of its assets or properties may be
bound, or (d) result in the creation of any lien or other encumbrance upon or
with respect to any of its assets or properties, which, in any such case, would
result in a Material Adverse Effect.
4. Consents. No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority or third
party in respect of the GECC Member is required in connection with the
execution, delivery or performance of this Agreement by the GECC Member or to
consummate the transactions contemplated by this Agreement.
5. Enforceable Obligations. This Agreement and all other documents executed
in connection herewith have been duly executed and delivered by, and constitute
legal, valid and binding obligations of, the GECC Member, enforceable against
the GECC Member, as applicable, in accordance with their respective terms,
except as may be limited by bankruptcy or insolvency laws or similar laws
affecting creditors' rights generally or by general equitable principles.
PAGE 1 OF SCHEDULE 2.9
<PAGE>
6. No Default. The GECC Member is not in default in any respect under any
contract, lease, loan agreement, indenture, mortgage, security agreement or
other agreement or obligation to which it is a party or by which any of its
properties is bound, except for such defaults as would not, individually or in
the aggregate, have a Material Adverse Effect.
7. Litigation. There are no actions, Suits or legal, equitable, arbitration
or administrative proceedings, pending or, to the knowledge of the GECC Member,
threatened against the GECC Member or any of it properties and assets which, if
adversely determined, would have a Material Adverse Effect.
8. Compliance with Law. The GECC Member is in compliance with all
applicable laws, rules, regulations, orders, licenses, judgments, writs,
injunctions, decrees or demands, except to the extent that the failure to be in
such compliance would not have a Material Adverse Effect. The GECC Member has
all necessary permits, licenses and other authorizations required to conduct its
business as currently conducted, and as proposed to be conducted, except where a
failure to have such permits, licenses or other authorizations would not have a
Material Adverse Effect. The GECC Member has not violated any domestic or
foreign law or any regulation or requirement, which violation has or would be
reasonably likely to have a Material Adverse Effect, and the GECC Member has not
received notice of any such violation. There are no adverse orders, judgments,
writs, injunctions, decrees or demands of any court or administrative body,
domestic or foreign, or of any other governmental agency or instrumentality,
domestic or foreign, outstanding against the GECC Member which would have a
Material Adverse Effect.
9. Solvency. The GECC Member is and, after consummation of the transactions
contemplated by this Agreement will be, solvent.
10. Federal Tax Matters. The GECC Member is not a "foreign person" within
the meaning of Section 1445 or 7701 of the Code.
11. Year 2000. The GECC Member has reviewed and assessed, or caused to be
reviewed and assessed, all areas within its business and operations that could
be adversely affected by the risk that computer applications may not be able to
recognize and properly perform date sensitive functions after December 31, 1999.
Based on the foregoing, all computer applications that are material to the GECC
Member's business and operations are reasonably expected to be Year 2000
Compliant, except to the extent that a failure to do so is not reasonably
expected to have a Material Adverse Effect.
PAGE 2 OF SCHEDULE 2.9
<PAGE>
SCHEDULE 6.3(b)
---------------
Upon either (a) the occurrence or existence of a Removal Event and the
Developer Member's removal as Manager or (b) the occurrence or existence of an
Additional Capital Contribution Default Event with respect to either Member,
then Section 8.2 of the within and foregoing Limited Liability Company Agreement
shall be ipso facto and instanter amended to read as follows:
If the GECC Member is the Additional Capital Defaulting Member:
Section 8.2 Distribution of Available Cash. The Available Cash for any
particular period shall be distributed to the Members in the following order of
priority:
(a) first, to the Members in proportion to and in payment of their
Default Loans until their Default Loans, including both principal and interest,
have been paid in full;
(b) next, to the Members in accordance with their respective Capital
Sharing Ratios until the GECC Member shall have achieved a nine percent (9%)
Internal Rate of Return on its Capital Contributions (including the return to
the GECC Member of all of its Capital Contributions);
(c) last, to the Members in accordance with their Residual Sharing
Ratios.
If a Removal Event occurs or exists with respect to the Developer Member
and the Developer Member is removed as Manager or if the Developer Member is the
Additional Capital Defaulting Member:
Section 8.2 Distribution of Available Cash. The Available Cash for any
particular period shall be distributed to the Members in the following order of
priority:
(a) first, to the Members in proportion to and in payment of their
Default Loans until their Default Loans, including both principal and interest,
have been paid in full;
(b) next, to the Members in accordance with their respective Capital
Sharing Ratios until the GECC Member shall have achieved a fifteen percent (15%)
Internal Rate of Return on its Capital Contributions (including the return to
the GECC Member of all of its Capital Contributions);
(c) last, to the Members in accordance with their Residual Sharing
Ratios.
Upon either (a) the occurrence or existence of a Removal Event and the Developer
Member's removal as Manager or (b) the occurrence or existence of an Additional
Capital Contribution Default Event with respect to either Member, the Profit and
Loss allocations under Section 9.4 of this Agreement shall be adjusted in such a
manner that, in the reasonable discretion of the Manager with advice from tax
counsel to the Company, more accurately reflects the modified economic sharing
arrangement as set forth in this Schedule 6.3(b).
PAGE I OF SCHEDULE 6.3(b3
WARRANT PURCHASE AGREEMENT
by and between
STORAGE USA, INC.
a Tennessee Corporation
and
STORAGE VENTURES, L.P.
a Delaware Limited Partnership
November 30, 1999
<PAGE>
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (the "AGREEMENT") is made as of November
30, 1999, by and between STORAGE USA, INC., a Tennessee corporation (the
"COMPANY") and STORAGE VENTURES, L.P., a Delaware Limited Partnership (the
"PURCHASER").
RECITALS
WHEREAS, affiliates of the Company and Purchaser have entered into those
certain transactions for certain joint ventures to acquire and develop
self-storage facilities, of even date herewith (the "JOINT VENTURE AGREEMENTS");
and
WHEREAS, upon the terms and subject to the conditions set forth herein and
in further consideration of the Joint Venture Agreements, the Company wishes to
issue to the Purchaser, and the Purchaser wishes to accept from the Company, a
warrant to purchase one million two hundred fifty thousand (1,250,000) shares of
common stock, par value $0.01 per share ("Common Stock"), of the Company in the
form attached hereto as EXHIBIT A, with terms and conditions as set forth
therein (the "WARRANT"), which Warrant shall be subject to the restrictions on
exercise contained therein and contain an exercise price determined in
accordance with the terms of the Warrant; and
WHEREAS, the Company and the Purchaser desire to make certain
representations and warranties in connection with the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the foregoing premises, the
representations and warranties, covenants and other agreements hereinafter set
forth, the mutual benefits to be gained by the performance thereof, and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged and accepted, the parties hereto hereby agree as follows:
1. ISSUANCE OF THE WARRANT.
1.1. ISSUANCE. On the Warrant Closing (as defined in SECTION 1.2 hereof),
upon the terms and subject to the conditions of this Agreement, the Company
agrees to issue to the Purchaser, and the Purchaser agrees to accept from the
Company, the Warrant in connection with the execution of the Joint Venture
Agreements by the parties' affiliates.
1.2. CLOSING. The closing of the transactions contemplated hereby pursuant
to the terms and provisions hereof (the "WARRANT CLOSING") shall take place
simultaneously with tile execution of the Joint Venture Agreements at such place
as the parties may agree unless
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another place or time is agreed to in writing by the Company and the Purchaser.
The date upon which the Warrant Closing occurs shall be referred to herein as
the "CLOSING DATE."
1.3. CLOSING DELIVERIES.
(a) PURCHASER. At the Warrant Closing, on the terms and subject to the
conditions set forth herein and in reliance on the representations and
warranties, covenants and other agreements set forth herein, the Purchaser shall
deliver, or cause to be delivered, to the Company such agreements, instruments,
certificates and other documents as may be necessary or reasonably appropriate
to effectuate completely the transactions contemplated hereby.
(b) COMPANY. At the Warrant Closing, on the terms and subject to the
conditions set forth herein and in reliance on the representations and
warranties, covenants and other agreements set forth herein, the Company shall
deliver, or cause to be delivered, to the Purchaser each of the following:
(i) a certified copy of the Company's current Certificate of
Incorporation as filed with the Secretary of State of Tennessee and a
Certificate of Existence for the Company from the Secretary of State of
Tennessee;
(ii) the executed Warrant; and
(iii) such other agreements, instruments, certificates and other
documents as may be necessary or reasonably appropriate to effectuate completely
the transactions contemplated hereby.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser as follows:
2.1. ORGANIZATION, STANDING AND POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Tennessee. The Company has the corporate power to carry on its business as now,
heretofore and proposed to be conducted and has all licenses, permits, consents
or approvals from or by, and has made all filings with, and has given all
notices to, all governmental authorities having jurisdiction, to the extent
required for the conduct of its business, except where any failure of the
foregoing would not have a material adverse effect on the Company or the ability
of the Company to consummate the transactions contemplated hereby (a "MATERIAL
ADVERSE EFFECT"). The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a Material Adverse Effect. The Company has made available a true and correct
copy of the Charter and Bylaws of the Company, as amended to date, to counsel
for the Purchaser. The Company is in compliance with its Charter and Bylaws, and
is in compliance with all applicable provisions of law, except where the failure
to comply would not have a Material Adverse Effect.
2.2. AUTHORITY. The Company has all requisite corporate power and authority
to enter into this Agreement and, upon the Warrant Closing, the Warrant and to
consummate the
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transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and, upon the Warrant Closing, the Warrant and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, and no further action is
required on the part of the Company to authorize the Agreement, the Warrant and
the transactions contemplated hereby and thereby. This Agreement and the Warrant
have been duly executed and delivered by the Company and constitutes or, in the
case of the Warrant, when executed will constitute, a valid and binding
obligation of the Company, enforceable in accordance with their respective
terms, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing specific
performance, injunctive relief or other equitable remedies. The execution and
delivery by the Company of this Agreement and, upon the Warrant Closing, the
Warrant do not, and the performance and consummation of the transactions
contemplated hereby and thereby will not violate, result in a breach of any
provision of, constitute a default (or an event that, with notice or lapse of
time or both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the right of termination or
acceleration, or the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company, under any of
the terms, conditions or provisions of: (i) any provisions of its Charter or
Bylaws, as amended (except any violation of Article XII of the Charter caused by
Purchaser's ownership of shares in excess of the Ownership Limitation set forth
therein); (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise or license to which the Company is
subject; or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets, other than as
would, with respect to clause (ii), not have a Material Adverse Effect. No
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any governmental body, agency, authority or any
other party is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the Warrant or the consummation of
the transactions contemplated hereby or thereby, except those which have been
fully obtained, made or complied with or which would not have a Material Adverse
Effect.
2.3. AUTHORIZED AND OUTSTANDING SHARES OF CAPITAL STOCK. As of November 29,
1999, the authorized capital stock of the Company consisted of one hundred fifty
million (150,000,000) shares of Common Stock and five million (5,000,000) shares
of preferred stock of which 28,055,124 shares of Common Stock and no shares of
preferred stock are issued and outstanding.
2.4. ISSUANCE OF WARRANT. Upon delivery to Purchaser of certificates
representing the Warrant, the Warrant will have been duly authorized and be
validly issued, subject to no pre-emptive rights, and free and clear of all
pledges, liens or encumbrances other than those created by the Purchaser. At all
times following the Warrant Closing during which the Warrant is outstanding and
exercisable, the Company will reserve and keep available out of its authorized
Common Stock, solely for the issuance and delivery upon exercise of the Warrant,
at least the number of shares of Common Stock issuable upon exercise of all of
the outstanding Warrants. The shares of Common Stock that are issued upon
exercise of the Warrant will, when issued in accordance with the terms thereof,
be duly authorized, validly issued, fully paid, non-
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assessable, subject to no preemptive rights, and free and clear of any pledges,
liens or encumbrances.
2.5. SECURITIES LAWS. Assuming the accuracy of Purchaser's representations
pursuant to Section 3 of this Agreement and Purchaser's compliance with its
obligations under this Agreement and the Warrant, the offer, issuance, sale and
delivery of the Warrant, as provided in this Agreement, and the offer, issuance,
sale and delivery of the Common Stock purchasable under the Warrant upon the
exercise thereof, are and will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act") and all applicable
state securities laws.
2.6. SEC REPORTS. The Company has provided to Purchaser true and complete
copies of each report and proxy statement filed by Company with the Securities
and Exchange Commission (the "COMMISSION") since January 1, 1999, (collectively,
the "COMPANY SEC REPORTS"), all of which, as of their respective filing dates,
complied in all material respects with all applicable requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder. None of such Company SEC Reports,
as of the respective dates they were filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the audited
consolidated financial statements of Company (including any related notes and
schedules) included (incorporated by reference) in its Annual Report on Form
10-K for the fiscal year ended December 31, 1998, fairly present, in conformity
with Generally Accepted Accounting Principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of Company and its subsidiaries as of the date thereof and the
consolidated results of their operations and their cash flows for the periods
then ended. The Company shall disclose the issuance of the Warrant to Purchaser
in its Annual Reports on Form 10-K for the fiscal year ended December 31, 1999
and subsequent fiscal years for so long as the Warrant is outstanding in whole
or in part.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company that:
3.1. ORGANIZATION AND STANDING. The Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
3.2. AUTHORITY. The Purchaser has all requisite partnership power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by the Purchaser of this
Agreement, the performance by the Purchaser of its obligations hereunder, and
the consummation by the Purchaser of the transactions contemplated hereby have
been duly authorized by all necessary partnership action on the part of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and constitutes a valid and binding obligation of the Purchaser, enforceable in
accordance with the terms hereof, except as such enforceability may be limited
by principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency, creditors rights and
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the relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.3. NO CONFLICTS. The execution and delivery by the Purchaser of this
Agreement, the performance by the Purchaser of its obligations hereunder, and
the consummation by the Purchaser of the transactions contemplated hereby, will
not (i) give rise to any conflict, violation, default, termination,
cancellation, modification, acceleration or loss under (A) any provision of the
organizational documents of the Purchaser, or (B) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Purchaser or its properties or assets, other than
any such conflicts, violations, defaults, terminations, cancellations,
modifications, accelerations or losses which would not have a material adverse
effect on the ability of the Purchaser to consummate the transactions
contemplated hereby, or (ii) violate any order, injunction, judgment, ruling,
law or regulation of any governmental authority applicable to the Purchaser or
any of its properties or assets. No consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental authority or
any third party, including, without limitation, a party to any agreement with
the Purchaser, is required by or with respect to the Purchaser in connection
with the execution and delivery by the Purchaser of this Agreement, the
performance by the Purchaser of its obligations hereunder, and the consummation
by the Purchaser of the transactions contemplated hereby, except for: (x) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state and federal securities and
antitrust laws, and (y) such other consents, authorizations, filings, approvals
and registrations which if not obtained or made would not have a material
adverse effect on the ability of the Purchaser to consummate the transactions
contemplated hereby.
3.4. BROKERS' AND FINDERS' FEES. The Purchaser has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement,
or the consummation of the transactions contemplated hereby.
3.5. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Warrant and the Common Stock
issued upon exercise of the Warrant will be acquired for investment for the
Purchaser's own account, not as a nominee or agent, and not with a view to the
resale, distribution or offering of any part thereof, and the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Purchaser does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to the Warrant
or any Common Stock issued upon exercise of the Warrant.
3.6. ACCREDITED INVESTOR; INVESTMENT EXPERIENCE. The Purchaser has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the prospective investment in the securities,
it is able to bear the economic consequences thereof, and it qualifies as an
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act. Purchaser is experienced in
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evaluating and investing in securities of publicly traded companies and
acknowledges that it can bear the economic risk of its investment. Purchaser is
a "U.S. Person" as that term is defined in the Internal Revenue Code of 1986, as
amended, and has not been formed for the specific purpose of acquiring the
Securities.
3.7. RESTRICTED SECURITIES; RESTRICTED SALE PERIOD. Purchaser understands
that the Warrant has not been, and will not be, registered under the Securities
Act or any state securities law ("Blue Sky"), by reason of a specific exemption
from the registration provisions of the Securities Act and the applicable Blue
Sky laws, which depend upon, among other things, the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed herein. Such Purchaser understands that, as such, the Warrant and the
shares of Common Stock issued upon exercise of the Warrant are characterized as
"restricted securities" under the Securities Act and that under the Securities
Act and applicable regulations such Warrant may be resold without registration
under the Securities Act by Purchaser and its affiliates only in certain limited
circumstances. In this connection, such Purchaser represents that it is familiar
with Rule 144 promulgated under the Securities Act, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
During the period of sixty (60) trading days immediately subsequent to any
exercise of all or any part of the Warrant, neither Purchaser nor any transferee
or assignee of Purchaser shall be permitted to execute open-market trades of the
Common Stock: (i) in any one trading day, exceeding thirty percent (30%) of the
average trading day volume of the Company's Common Stock on its principal
exchange (such average to be computed using the preceding thirty (30) days)
("ADTV"), except for any trades executed in single blocks (A) of more than 5,000
shares or (B) having an aggregate gross sales price exceeding $200,000; or (ii)
in excess of the greater of 300,000 shares or six times ADTV, in the aggregate,
during any consecutive thirty (30) trading day period, except for any trades
executed in single blocks (A) of more than 5,000 shares or (B) having an
aggregate gross sales price exceeding $200,000. The restrictions set forth in
this paragraph shall not apply to any transferee (other than an affiliate of
Purchaser) of shares of Common Stock acquired upon exercise of the Warrant.
4. REGISTRATION.
4.1. SHELF REGISTRATION. The Company shall use its commercially reasonable
best efforts to file a registration statement on a Form S-3 or other available
form with the Commission, within ninety (90) days after the Closing Date, to
effect a registration covering the Common Stock issuable upon the exercise of
the Warrant and any related qualification or compliance under applicable state
securities or Blue Sky laws with respect to the Common Stock issuable pursuant
to exercise of the Warrant, which shall be a resale "shelf" offering pursuant to
Rule 415 under the Securities Act; provided, however, that the Company shall not
be obligated to effect any such registration, qualification or compliance
pursuant to this Section 4.1, if the Company furnishes to the Purchaser a
certificate signed by the Chief Financial Officer of the Company stating, that
in the good faith judgment of the Company, the Company is unable to comply with
Commission requirements for such filing or such registration and sale would: (x)
require disclosure of a previously undisclosed material development involving
the Company
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which disclosure would have a material adverse effect on the Company or its
prospects; or (y) materially interfere with any financing, acquisition,
corporate reorganization or other material transaction involving the Company
then under consideration. In such event(s) the Company shall have the right to
defer the filing of such registration statement, and to require that Purchaser
suspend any sales under any registration statement that is already effective,
for a period of not more than ninety (90) days or 120 days in any 365 day
period. If and so long as the Common Stock is listed on the New York Stock
Exchange or any national securities exchange or interdealer quotation system,
then the Company will, at its expense, pay promptly and maintain the approval
for listing on each such exchange or inter-dealer quotation system upon official
notice of issuance, of the shares of Common Stock issuable upon exercise of the
then outstanding Warrant and maintain the listing of such shares after their
issuance.
4.2. INCIDENTAL REGISTRATION. If Company at any time commencing after the
date hereof proposes to file on its behalf and/or on behalf of any of its
security holders (the "demanding security holders") a Registration Statement
under the Securities Act on any form (other than a Registration Statement on
Form S-4 or S-8 or any successor form for securities to be offered in a
transaction of the type referred to in Rule 145 under the Securities Act to
employees of Company pursuant to any employee benefit plan or in connection with
the issuance of Common Stock in redemption of units of limited partnership
interest in SUSA Partnership, L.P. or the resale of such Common Stock,
respectively) for the general registration of Common Stock to be sold for cash,
it will give written notice to Purchaser at least 30 days before the initial
filing with the Commission of such Registration Statement, which notice shall
set forth the intended method of disposition of the securities proposed to be
registered by Company. The notice shall offer to include in such filing the
aggregate number of shares of Common Stock previously purchased upon exercise of
the Warrant and for which this Warrant remains exercisable ("WARRANT STOCK"), as
such holders may request. Each holder of any such Warrants or any such Warrant
Stock desiring to have Warrant Stock registered under this Section 4.2 shall
advise Company in writing within 15 days after the date of receipt of such offer
from Company, setting forth the amount of such Warrant Stock for which
registration is requested. Company shall thereupon include in such filing the
number of shares of Warrant Stock for which registration is so requested,
subject to the next sentence, and shall use its commercially reasonable best
efforts to effect registration under the Securities Act of such shares. If the
managing underwriter of a proposed public offering shall advise Company in
writing that, in its opinion, the distribution of the Warrant Stock requested to
be included in the registration concurrently with the securities being
registered by Company or such demanding security holder would materially and
adversely affect the distribution of such securities by Company or such
demanding security holder, then all selling security holders (including any
demanding security holder who initially requested such registration) shall
reduce the amount of securities each intended to distribute through such
offering on a pro rata basis based on the number of shares proposed to be
included in such registration. Company shall be required to include such shares
in any proposed public offering only on the same terms and conditions as the
securities of Company or the demanding security holders.
4.3. REGISTRATION PROCEDURES In connection with registration of Company
securities under this Section 4, Company will, as expeditiously as possible:
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(a) prepare and file with the Commission the applicable Registration
Statement with respect to such securities (in the case of the "shelf"
Registration Statement, in accordance with the time periods set forth in Section
4.1) and use its commercially reasonable best efforts to cause such Registration
Statement to become and remain effective until the disposition of such
securities by the holders thereof;
(b) prepare and file with the Commission such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such Registration Statement until such
time as all of such securities have been disposed of;
(c) furnish to such selling security holders such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such selling security holders may reasonably request;
(d) use its commercially reasonable best efforts to register or qualify the
securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions as each holder of such securities shall
request (provided, however, that Company shall not be obligated to qualify as a
foreign corporation to do business under the laws of any jurisdiction in which
it is not then qualified or to file any general consent to service of process),
and do such other reasonable acts and things as may be required of it to enable
such holder to consummate the disposition in such jurisdiction of the securities
covered by such Registration Statement;
(e) furnish, at the request of any holder, on the date that such shares of
Warrant Stock are delivered to the underwriters for sale pursuant to such
registration or, if such Warrant Stock is not being sold through underwriters,
on the date that the Registration Statement with respect to such shares of
Warrant Stock becomes effective, (1) opinion, dated such date, of the
independent counsel representing Company for the purposes of such registration,
addressed to the underwriters, if any, and if such Warrant Stock is not being
sold through underwriters, then to the holders making such request, in customary
form and covering matters of the type customarily covered in such legal
opinions; and (2) a comfort letter dated such date, from the independent
certified public accountants of Company, addressed to the underwriters, if any,
and if such Warrant Stock is not being sold through underwriters, then to the
holder making such request and, if such accountants refuse to deliver such
letter to such holder, then to Company in a customary form and covering matters
of the type customarily covered by such comfort letters as the underwriters or
such holders shall reasonably request;
(f) enter into customary agreements (including an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such securities; and
(g) otherwise use its commercially reasonable best efforts to comply with
all applicable rules and regulations of the Commission.
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4.4. EXPENSES. All expenses incurred in complying with Section 4,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), printing expenses, fees and
disbursements of counsel for Company, expenses of any special audits incident to
or required by any such registration and expenses of complying with the
securities or blue sky laws of any jurisdictions pursuant to Section 4.3(d),
shall be paid by Company, except that Company shall not be liable for any fees,
discounts or commissions to any underwriter or any fees or disbursements of
counsel for any underwriter in respect of the securities sold by such holder of
Warrant Stock.
4.5. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of any registration of any of the Warrant Stock under the
Securities Act pursuant to this Section 4, Company shall indemnify and hold
harmless the holder of such Warrant Stock, such holder's directors and officers,
and each other person (including each underwriter) who participated in the
offering of such Warrant Stock and each other person, if any, who controls such
holder or such participating person within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such holder or any such director or officer or participating person or
controlling person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any alleged
untrue statement of any material fact contained in any Registration Statement
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such holder or such director, officer or
participating person or controlling person for any legal or any other expenses
reasonably incurred by such holder or such director, officer or participating
person or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any alleged untrue statement
or alleged omission made in such Registration Statement, preliminary prospectus,
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to Company by such holder specifically for use
therein. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or such director, officer or
participating person or controlling person, and shall survive the transfer of
such securities by such holder.
(b) Each holder of any Warrant Stock, by acceptance thereof, agrees to
indemnify and hold harmless Company, its directors and officers and each other
person, if any, who controls Company within the meaning of the Securities Act
against any losses, claims, damages or liabilities, joint or several, to which
Company or any such director or officer or any such Person may become subject
under the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon information provided in writing to Company by such holder
of such Warrant Stock specifically for use in the following documents and
contained in any Registration Statement
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under which securities were registered under the Securities Act at the request
of such holder, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, but in an amount not to exceed
the net proceeds received by such holder in the offering.
(c) If the indemnification provided for in this Section 4 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. The liability of any holder of Warrant Stock
hereunder shall not exceed the net proceeds received by it in the offering.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.5(c) were determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
4.6. TERMINATION OF RESTRICTIONS. Any restrictions imposed upon the
transferability of the Warrant Stock and the legend requirements of Section 4.7
shall terminate as to any particular share of Warrant Stock (i) when and so long
as such security shall have been registered under the Securities Act and
disposed of pursuant thereto or (ii) when Company shall have received an opinion
of counsel reasonably satisfactory to it that such shares may be transferred
without registration thereof under the Securities Act. Whenever the transfer
restrictions shall terminate as to any share of Warrant Stock, as hereinabove
provided, the holder thereof shall be entitled to receive from Company, at
Company's expense, a new certificate representing such Common Stock not bearing
the restrictive legend set forth in Section 4.7.
4.7. LEGENDS. It is understood that the Warrant, and any securities issued
in respect thereof or exchange therefor prior to the effective date of any
registration statement filed pursuant to Section 4, may bear one or all of the
following legends:
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(a) THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. IN ADDITION, THE OWNERSHIP AND TRANSFER OF THIS WARRANT AND
ANY SHARES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT TO ARTICLE
XII OF THE COMPANY'S CHARTER, AS AMENDED AND RESTATED.
(b) Any legend required by the Blue Sky laws of any state to the extent
such laws are applicable to the securities represented by the
certificate so legended.
5. ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at the
request of the other party hereto, shall execute and deliver such other instru-
ments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
6. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless Purchaser and each
holder of the Warrants and any Common Stock issued pursuant to the Warrants from
and against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorney's fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Purchaser or
any holder of the Warrants and any Common Stock issued pursuant to the Warrants
in any manner relating to or arising out of any untrue representation, breach of
warranty or failure to perform any covenants by the Company contained herein or
in any certificate or document delivered pursuant hereto.
(b) Purchaser agrees to indemnify and hold harmless Company from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorney's fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Company in
any manner relating to or arising out of any untrue representation, breach of
warranty or failure to perform any covenants by Purchaser contained herein or in
any certificate or document delivered pursuant hereto.
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7. MISCELLANEOUS.
7.1. TERM. This Agreement shall remain in full force and effect until the
Warrants have expired by their terms and the Purchaser no longer holds any
shares of Warrant Stock.
7.2. SURVIVAL. The representations and warranties of the Company in this
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the transactions described herein or related
hereto.
7.3. TRANSFER, SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties and all Warrant Transferees (as defined
herein). Any assignee or transferee of all or any part of the Warrant ("WARRANT
TRANSFEREE") shall be deemed a party to this Agreement. This Agreement may not
be assigned or transferred except to assignees or transferees permitted pursuant
to the Warrant. Nothing in this Agreement, express or implied, is intended to
confer upon any party, other than the parties hereto, their respective
successors and assigns or any Warrant Transferees, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. All references herein to Purchaser shall
be deemed to include all subsequent Warrant Transferees.
7.4. GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of Tennessee.
7.5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.6. TITLES AND SUBTITLES; HEADINGS. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. The table of contents and headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement, or any of the
terms and provisions hereof.
7.7. NOTICES. All notices and other communications hereunder and under the
Warrant shall be in writing and shall be deemed given if delivered personally or
by a recognized commercial overnight delivery service, or mailed by registered
or certified mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to the Purchaser, to: STORAGE VENTURES, L.P.
c/o GE Capital Real Estate
292 Long Ridge Road
Stamford CT 06927
Attention: Legal Operations
(Project SUSA)
Facsimile No. (203) 357-6768
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with a copy to: KING & SPALDING
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Mason W. Stephenson
Facsimile No: (404) 572-5100
(ii) if to the Company, to: STORAGE USA, INC.
165 Madison Avenue, Suite 1300
Memphis, Tennessee 38103
Attention: Chief Financial Officer
Telephone No: 901-252-2030
Facsimile No: 901-252-2130
with a copy to: STORAGE USA, INC.
165 Madison Avenue, Suite 1300
Memphis, Tennessee 38103
Attention: General Counsel
Telephone No: 901-252-2074
Facsimile No: 901-252-2174
7.8. ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.9. AMENDMENTS. Any term of this Agreement may be amended only with the
written consent of the Company and the Purchaser.
7.10. SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
7.11. ENTIRE AGREEMENT. This Agreement, the Warrant and the Joint Venture
Agreements constitute the entire agreement between the parties hereto pertaining
to the issuance of the Warrant.
7.12. EXTENSION; WAIVER. At any time, the Purchaser and the Company may? to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
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agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as
of the date first above written.
COMPANY:
STORAGE USA, INC.
By: /s/ Christopher P. Marr
----------------------------
Christopher P. Marr
Chief Financial Offficer
PURCHASER:
STORAGE VENTURES, L.P.
By: MF FUNDING, INC.,
its general par tner
By: /s/ ILLEGIBLE
--------------------
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EXHIBIT A
FORM OF STORAGE USA, INC. COMMON STOCK WARRANT
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. IN ADDITION, THE
OWNERSHIP AND TRANSFER OF THIS WARRANT AND ANY SHARES ISSUABLE UPON THE EXERCISE
HEREOF ARE SUBJECT TO ARTICLE XII OF THE COMPANY'S CHARTER, AS AMENDED AND
RESTATED.
NO. SUSW-1 STORAGE USA, INC. ____________, 1999
COMMON STOCK WARRANT
This certifies that Storage Ventures, L.P. (the "Holder"), or its
registered assigns, is entitled, upon the terms and subject to the conditions
and restrictions on exercise hereinafter set forth, at any time on or after the
date hereof and at or prior to 11:59 p.m., Central Time, on ________, 2004
(the "Expiration Time"), but not thereafter, to acquire from STORAGE USA, INC.,
a Tennessee corporation (the "Company"), in whole or from time to time in part,
up to One Million Two Hundred Fifty Thousand (1,250,000) fully paid and
nonassessable shares of common stock, par value $0.01 per share ("Common
Stock"), of the Company (the "Warrant Stock") at a purchase price per share
equal to the Exercise Price as defined herein (the "Warrant"). Such number of
shares, type of security and Exercise Price are subject to adjustment as
provided herein, and all references to "Warrant Stock" and "Exercise Price"
herein shall be deemed to include any such adjustment or series of adjustments.
<PAGE>
1. EXERCISE OF WARRANT
The rights represented by this Warrant are exercisable by the
registered holder hereof, in whole or in part, at any time and from time to time
at or prior to the Expiration Time by the surrender of this Warrant and a duly
executed Notice of Exercise in the form attached hereto duly executed to the
office of the Company at 165 Madison Avenue, Suite 1300, Memphis, TN 38103 (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company), and upon payment of the Exercise Price (as defined
below) for the shares thereby purchased (by wire transfer to the order of the
Company at the time of exercise in an amount equal to the Exercise Price
multiplied by the number of shares of Warrant Stock thereby purchased);
whereupon the holder of this Warrant shall receive from the Company one or more
stock certificates (as reasonably requested by the holder) in proper form
representing the number of shares of Warrant Stock so purchased. Provided that
all the terms of this Warrant have been complied with, this Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued and the Holder or any other person so designated in
the Notice of Exercise shall be deemed for all purposes to be the record and
beneficial owner of such shares receivable upon exercise from and after the time
that this Warrant, Notice of Exercise and the Exercise Price are delivered to
the Company pursuant to this paragraph. {f this Warrant shall have been
exercised in part, Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
During the period of sixty (60) trading days immediately subsequent to
any exercise of all or any part of the Warrant, Holder shall not be permitted to
execute open-market trades of the Common Stock: (i) in any one trading day,
exceeding thirty percent (30%) of the average trading day volume of the
Company's Common Stock on its principal exchange (such average to be computed
using the preceding thirty (30) days) ("ADTV"), except for any trades executed
in single blocks (A) of more than 5,000 shares or (B) having an aggregate gross
sales price exceeding $200,000; or (ii) in excess of the greater of 300,000
shares or six times ADTV, in the aggregate, during any consecutive thirty (30)
trading day period, except for any trades executed in single blocks (A) of more
than 5,000 shares or (B) having an aggregate gross sales price exceeding
$200,000. The restrictions set forth in this paragraph shall not apply to any
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transferee (other than an affiliate of Holder) of shares of Common Stock
acquired upon exercise of the Warrant.
2. EXERCISE PRICE
Subject to adjustment as herein provided, the exercise price ("Exercise
Price") for each share of Warrant Stock shall be $42.00 per share.
3. ISSUANCE OF SHARES
(a) The Company shall deliver a stock certificate or certificates
evidencing the shares of Warrant Stock purchased hereunder to the registered
Holder or any other person so designated in the Notice of Exercise as promptly
as practicable (in no event exceeding seven (7) business days) after the date on
which the Company receives an executed Notice of Exercise and payment in full of
the Exercise Price in accordance with the terms hereof. The Company hereby
represents and warrants that all shares of Warrant Stock which may be issued
upon the exercise of this Warrant will, upon such exercise, be duly and validly
authorized and issued, fully paid and nonassessable shares of Common Stock of
the Company, free from all taxes, liens and charges in respect of the issuance
thereof (other than liens or charges created by or imposed upon the holder of
the Warrant Stock).
(b) A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act of 1933, as amended or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would have been entitled as Holder under Sections 6 and 16(a) of this
Warrant. Company will, at the time of each exercise of this Warrant, in whole or
in part, upon the request of the holder of the shares of Common Stock issued
upon such exercise hereof, acknowledge in writing, in form reasonably
satisfactory to such holder, its continuing obligation to afford to such holder
all such rights; provided, however, that if such holder shall fail to make any
such request, such failure shall not affect the continuing obligation of Company
to afford to such holder all such rights.
4. CHARGES, TAXES AND EXPENSES
Issuance of certificates for shares of Warrant Stock upon the exercise
of this Warrant shall be made without charge to the Holder hereof for any issue
or transfer tax, governmental charge or other incidental expense in respect of
the issuance of such certificate, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in the name of the
registered holder of this Warrant or in such name or names as may be directed by
the registered holder of this Warrant; provided, however, that in the event
certificates
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for shares of Warrant Stock are to be issued in a name other than the name of
the registered Holder of this Warrant, subject to Section 7 below, this Warrant
when surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the holder hereof.
5. NO RIGHTS AS SHAREHOLDER
This Warrant does not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Company prior to the exercise hereof.
Except as set forth in this Warrant, no dividends are or shall be payable, or
shall accrue, on or with respect to this Warrant or any interest represented by
this Warrant or on the Warrant Shares until or unless, and except to the extent
that, this Warrant is exercised.
6. REGISTRATION AND LISTING OF WARRANT STOCK
The Company shall use its commercially reasonable best efforts to
register the Warrant Stock issuable upon exercise of this Warrant pursuant to
Section 4 of the Warrant Purchase Agreement, of even date herewith, by and
between the Company and the Holder. If and so long as the Common Stock is listed
on the New York Stock Exchange or any national securities exchange or
inter-dealer quotation system, then the Company will, at its expense, pay
promptly and maintain the approval for listing on each such exchange or
inter-dealer quotation system, upon official notice of issuance, the shares of
Warrant Stock and maintain the listing of such shares after their issuance.
7. TRANSFERABILITY
(a) Subject to the provisions of the Warrant Purchase Agreement dated
of even date herewith by and between the Company and the Holder, prior to the
Expiration Time and subject to compliance with applicable laws (including
federal and state securities laws), this Warrant and all rights hereunder are
transferable, in whole or in part only (A) concurrent with and to the transferee
of a permitted Transfer of Membership Interests pursuant to Section 3.2(b) of
the Limited Liability Company Agreement of Storage Acquisition Portfolio,
L.L.C., or pursuant to Section 3.2(b) of the Limited Liability Company Agreement
of Storage Development Portfolio, L.L.C., or (B) to any GECC Affiliate (as that
term is defined in the Limited Liability Company Agreement of Storage
Acquisition Portfolio, L.L.C.).
(b) The Company agrees that, at the reasonable request of the Holder, it
will provide a list of the holders of record of the Common Stock of the Company
and the holders of units of limited partnership interest ("UNITS") in SUSA
Partnership, L.P. (a "SHAREHOLDER LIST") to the Holder solely for the purpose of
assisting Holder in determining the number of shares of Common Stock and Units
owned by General Electric Company and its affiliates. Holder
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and its affiliates shall keep any such Shareholder List confidential and,
immediately after determining the number of shares of Common Stock and Units so
owned, shall return the original Shareholder List to the Company and destroy any
and all copies of the Shareholder List in their possession. The Holder and its
affiliates shall not use any Shareholder List provided to it pursuant to this
subsection (b) for any purpose other than the purpose described herein.
(c) Any person to whom this Warrant is proposed to be transferred shall
execute a counterpart of the Warrant Purchase Agreement and provide to the
Company an opinion of legal counsel reasonably satisfactory to the Company that
the proposed transfer complies with applicable federal and state securities
laws. Such transfer shall be registered on the books of Company to be maintained
for such purpose, upon surrender of this Warrant together with the Assignment
Form of this Warrant substantially in the form of Exhibit B hereto duly executed
by Holder or its agent. Upon such surrender Company shall execute and deliver a
new Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assi; gnor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant may be exercised by a
new Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
8. EXCHANGE AND REGISTRY OF WARRANT
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant
("WARRANT TRANSFER BOOK"). This Warrant may be surrendered for exchange,
transfer, exercise, in accordance with its terms, at such office or agency of
the Company, and the Company shall be entitled to rely in all respects, prior to
written notice to the contrary, upon such registry.
9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
On receipt by the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
warrant, the Company will execute and deliver to the registered holder, in lieu
thereof, a new warrant in substantially identical form, dated as of the date of
such cancellation and reissuance.
10. SATURDAYS, SUNDAYS AND HOLIDAYS
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If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or a Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding business day.
11. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES, EXERCISE PRICE
The type and number of securities of the Company issuable upon exercise of
this Warrant and the Exercise Price for each share of Warrant Stock for which
this Warrant becomes exercisable are subject to adjustment as set forth below:
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Company shall: (i) declare a dividend or otherwise make a distribution to the
holders of its Common Stock in the form of additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock; or (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, then the number of shares of
Warrant Stock for which this Warrant is exercisable shall be adjusted as
follows:
(i) the number of shares of Warrant Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Warrant Stock for which this Warrant is
exercisable immediately before the occurrence of any such event multiplied by a
fraction, (x) the numerator of which is the total number of shares of Common
Stock outstanding immediately after the occurrence of such event, and (y) the
denominator of which is the total number of shares of Common Stock outstanding
immediately before the occurrence of such event; and
(ii) the Exercise Price shall be adjusted to an amount equal to the
Exercise Price in effect immediately before the occurrence of such event
multiplied by a fraction (x) the numerator of which is the total number of
shares of Warrant Stock for which this Warrant is exercisable immediately before
the adjustment, and (y) the denominator of which is the total number of shares
of Warrant Stock for which this Warrant is exercisable immediately after the
adjustment.
(b) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of: (i) any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in or implementation of a par
value, or as a result of a subdivision or combination); or (ii) any
consolidation or merger of the Company with or into another corporation or other
entity, other than a merger with another corporation or other entity in which
the Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this
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Warrant; or (iii) any sale, transfer or other disposition of all or
substantially all of the property, business or assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
execute a new Warrant providing that the holder of this Warrant shall have the
right to exercise such new Warrant and procure upon such exercise, in lieu of
each share of Warrant Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and property
("Other Property") receivable upon such reclassification, change, consolidation,
merger or sale by a holder of one share of Common Stock. Such new Warrant shall
provide for adjustments provided for in this Section 11. In case of any such
event, the successor or acquiring corporation (if other than Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by
Company and all the obligations and liabilities hereunder, subject to such
modifications to reflect the provisions of this paragraph and otherwise as may
be appropriate. The provisions of this subsection (b) shall similarly apply to
successive reclassifications, changes, consolidations, mergers and sales.
(c) CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS. With respect to any
securities which are of the same class and series as any Warrant Stock for which
this Warrant is exercisable pursuant to Section 1 hereof, if at any time the
Company shall fix a record date for the purpose of determining the holders of
such securities entitled to receive any dividend or other distribution
(including any such distribution made in connection with a consolidation or
merger, but excluding any distribution referred to in subparagraph (b) above and
any conversion, exercise, exchange or other actions taken by the Company
pursuant to its obligations to holders of Units held by certain third parties)
of: (i) any evidence of indebtedness, shares of its capital stock (including any
securities convertible into such securities but excluding Common Stock for which
an adjustment is made pursuant to Section 11(a)) or any other securities or
property of any nature whatsoever; (ii) any warrants or other rights to
subscribe for or purchase any evidence of its indebtedness, any shares of its
stock (including any securities convertible into such securities but excluding
Common Stock for which an adjustment is made pursuant to Section 11(a)); or
(iii) any other of its securities or its property of any nature whatsoever
(other than normal cash dividends or cash distributions permitted under
applicable law), then such other dividends on or with respect to the Warrant or
on the Warrant Shares shall not be received until and unless, and except to the
extent that the Warrant is exercised. The Holder of the Warrant shall have no
present or beneficial right in such other dividends or distributions until the
Warrant is exercised.
(d) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If at any time
Company shall (except as hereinafter provided) issue or sell any shares of
Common Stock issued by the Company after the date hereof, other than Warrant
Stock ("Additional Shares"), in exchange for consideration in
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an amount per Additional Share of Common Stock less than the Current Market
Price (as, defined herein) at the time the Additional Shares of Common Stock are
issued, then (i) the Exercise Price as to the number of shares for which this
Warrant is exercisable prior to such adjustment shall be reduced to a price
determined by dividing (A) an amount equal to the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Exercise Price, plus (y) the consideration, if
any, received by Company upon such issue or sale, by (B) the total number of
shares of Common Stock outstanding immediately after such issue or sale; and
(ii) the number of shares of Common Stock for which this Warrant is exercisable
shall be adjusted to equal the product obtained by multiplying the Exercise
Price in effect immediately prior to such issue or sale by the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale and dividing the product thereof by the Exercise Price resulting
from the adjustment made pursuant to clause (i) above. "Current Market Price"
shall mean as of any date (a), if the Common Stock is listed on the New York
Stock Exchange or any national securities exchange or inter-dealer quotation
system, (1) the closing price of the Common Stock on such date on the New York
Stock Exchange or any national securities exchange or inter-dealer quotation
system, as the case may be or (2) if there was no quotation of the Common Stock
on such date, the closing price on the next preceding business day on which
there was a quotation, or (b), if the Common Stock is not listed on the New York
Stock Exchange or any national securities exchange or inter-dealer quotation
system, the price that the Company Board of Directors acting in good faith
determines through any reasonable valuation method that a share of Common Stock
might change hands between a willing buyer and a willing seller, neither being
under any compulsion to buy or to sell and both having reasonable knowledge of
the relevant facts.
The provisions of this Section 11(d) shall not apply to
(i) any issuance by the Company of Additional Shares in an
arms-length transaction for cash or other consideration having a value
of at least 90 percent (90%) of the Current Market Price on the date
of the issuance of such Additional Shares, including but not limited
to, stock issuances pursuant to any merger, consolidation, corporate
reorganization (both taxable and nontaxable), corporate restructuring,
or private placement; or
(ii) any issuance by the Company of warrants, rights,
options or Common Stock to employees of the Company or its affiliates
(including, Storage USA Franchise Corp. and its affiliates) pursuant
to a deferred compensation plan, stock option plan or other employee
compensation plan or agreement; or
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(iii) any issuance of Additional Shares of Common Stock for
which an adjustment is provided under Section 11(a) or 11(c).
No adjustment of the number of shares of Common Stock for which this
Warrant shall be exercisable shall be made under this Section 11(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities (as defined herein), if any such adjustment shall previously have
been made upon the issuance of such warrants or other rights or upon the
issuance of such Convertible Securities (or upon the issuance of any warrant or
other rights therefor) pursuant to Section 11(e) or Section 11(f).
"Convertible Securities" shall mean evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable, with or without
payment of additional consideration in cash or property, for Additional Shares
of Common Stock, either immediately or upon the occurrence of a specified date
or a specified event.
(e) ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of any warrants or other rights to subscribe for
or purchase any Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the number of shares
for which this Warrant is exercisable and the Exercise Price shall be adjusted
as provided in Section 11(d) on the basis that the maximum number of Additional
Shares of Common Stock issuable pursuant to all such warrants or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and Company shall
be deemed to have received all of the consideration payable therefor, if any, as
of the date of the issuance of such warrants or other rights. No further
adjustments of the Exercise Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such warrants or
other rights or upon the actual issue of such Common Stock upon such conversion
or exchange of such Convertible Securities.
(f) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which Company is the surviving corporation) issue
or sell, any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange
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shall be less than the Current Market Price in effect immediately prior to the
time of such issue or sale, then the number of shares for which this Warrant is
exercisable and the Exercise Price shall be adjusted as provided in Section
11(d) on the basis that the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and Company shall
have received all of the consideration payable therefor, if any, as of the date
of issuance of such Convertible Securities. No adjustment of the number of
shares for which this Warrant is exercisable and the Exercise Price shall be
made under this Section 11(f) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights pursuant to Section
11(e). No further adjustments of the number of Shares for which this Warrant is
exercisable and the Exercise Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities and, if
any issue or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of shares for which this Warrant
is exercisable and the Exercise. Price have been or are to be made pursuant to
other provisions of this Section 11, no further adjustments of the number of
shares for which this Warrant is exercisable and the Exercise Price shall be
made by reason of such issue or sale.
(g) SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable and the
Exercise Price shall have been made pursuant to Section 11(e) or Section 11(f)
as the result of any issuance of warrants, rights or Convertible Securities,
(i) such warrants or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of such
warrants or rights, or the right of conversion or exchange with respect to all
or a portion of such other Convertible Securities, as the case may be, shall not
have been exercised, or
(ii) the consideration per share for which shares of Common Stock are
issuable pursuant to such warrants or rights, or the terms of such other
Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event, then for each outstanding Warrant
such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
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Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(iii) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or rights or any such right of conversion
or exchange, as having been issued on the date or dates of any such exercise and
for the consideration actually received and receivable therefor, and
(iv) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
share for which shares of Common Stock or other property are issuable under such
warrants or rights or other Convertible Securities; whereupon a new adjustment
of the number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be made, which new adjustment shall supersede the
previous adjustment so rescinded and annulled.
(h) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by Company therefor shall be the amount of the cash received by Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by Company for subscription, the subscription price, or,
if such Additional Shares of Common Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by Company for
and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of Company. In case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase such
Additional Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which Company issues any securities, the amount of
consideration therefor shall be deemed to be the fair value, as determined in
good faith by the Board of Directors of Company, of such portion of the assets
and business of the nonsurviving corporation as such Board in good with shall
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants or other rights, as the case may be. The
consideration for any Additional
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Shares of Common Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration received by
Company for issuing such warrants or other rights plus the additional
consideration payable to Company upon exercise of such warrants or other rights.
The consideration for any Additional Shares of Common Stock issuable pursuant to
the terms of any Convertible Securities shall be the consideration received by
Company for issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to Company in
respect of the subscription for or purchase of such Convertible Securities, plus
the additional consideration, if any, payable to Company upon the exercise of
the right of conversion or exchange in such Convertible Securities. In case of
the issuance at any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, Company shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities a consideration
equal to the amount of such dividend so paid or satisfied.
(i) OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from
time to time Company shall take any action in respect of its Common Stock, other
than any action described in this Section 11, then, unless such action will not
have a materially adverse effect upon the rights of the Holders, the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
(j) CERTIFICATE AS TO ADJUSTMENTS. In case of any adjustment in the
Exercise Price or number and type of securities issuable on the exercise of this
Warrant pursuant to Section 11, the Company will promptly give written notice
thereof to the holder of this Warrant in the form of a certificate, certified
and confirmed by an officer of the Company, setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of Directors
of Company determined the fair value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 11(h)), specifying the number of shares
of Common Stock for which this Warrant is exercisable and (if such adjustment
was made pursuant to Section 11(b) or Section 11(i)) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder. Company shall
keep at its office or agency designated pursuant to copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
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(k) FRACTIONAL INTERESTS. In computing adjustments under this Section
11, fractional interests in Common Stock shall be taken into account by rounding
up to the nearest whole number of shares.
(l) WHEN ADJUSTMENT TO BE MADE. The adjustments required by this Section
11 shall be made whenever and as often as any specified event requiring
adjustment shall occur except that any adjustment in the Exercise Price required
by this Section 11 may be postponed if such adjustment, either by itself or with
other adjustments not previously made, would require an increase or decrease of
less than one percent (1%) in such price. Any such adjustment representing a
change of less than such minimum amount which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 11 and not previously made, would result in a minimum
adjustment or on the date of exercise. Notwithstanding the foregoing, any
adjustment carried forward shall be made no less than ten business days prior to
the Termination Date. All calculations under this Section 11 shall be made to
the nearest cent. For the purposes of any adjustment, any specified event shall
be deemed to have occurred at the close of business on the date of its
occurrence.
(m) WHEN ADJUSTMENTS NOT REQUIRED. If the Company shall fix a record
date for the purpose of determining the holders of its Common Stock entitled to
receive a dividend or distribution hereof and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver
such dividend or distribution, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(n) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of Company shall be required to make a determination in good faith of
the fair value of any item under this Section 11, such determination may be
challenged in good faith by any registered Holder, and any dispute shall be
resolved by an investment banking or valuation firm of recognized national
standing selected by Company and acceptable to a majority of Holders.
12. NOTICES OF RECORD DATE, ETC.
In the event of:
(a) any taking by the Company of a record of the holders of any
securities issuable upon exercise of this Warrant for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right,
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(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any sale, transfer or
other disposition of all or substantially all the property, business or assets
of the Company to, or consolidation or merger of, the Company with or into any
person,
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, or
(d) any proposed issue or grant by the Company to the holders of any
securities issuable upon exercise of this Warrant of any shares of stock of any
class or any other securities, or any right or warrant to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities, then, and in each such event, the Company will mail to the holder
hereof a notice specifying: (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount,
character and date which such holders shall be entitled to such dividend,
distribution or right; (ii) the date on which any such reorganization,
reclassification, recapitalization, sale, transfer, disposition, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as to which the holders of record of Warrant Stock shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable on such reorganization, reclassification, recapitalization,
sale, transfer, disposition, consolidation, merger, dissolution, liquidation or
winding-up; (iii) the amount and character of any stock or other securities, or
rights or warrants with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made; and (iv) in reasonable
detail, the facts, including the proposed date, concerning any other such event.
Such notice shall be delivered to the Holder hereof at the last address of
Holder appearing on the books of Company at least thirty (30) days prior to the
date therein specified.
13. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the holder hereof that:
(a) during the period this Warrant is outstanding, the Company will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise of this
Warrant in full;
(b) the issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for the shares of Warrant Stock
issuable upon exercise of this Warrant;
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(c) the Company has all requisite legal and corporate power to execute
and deliver this Warrant, to sell and issue the Warrant Stock hereunder and to
carry out and perform its obligations under the terms of this Warrant;
(d) all corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Warrant by the Company, the authorization, sale, issuance
and delivery of the Warrant Stock issuable upon exercise of the Warrant, the
grant of registration rights as provided herein and the performance of the
company's obligations hereunder has been taken; and
(e) the Warrant Stock, when issued in compliance with the provisions of
this Warrant will be validly issued, fully paid and non assessable, and free of
any liens, preemptive rights or encumbrances and will be issued in compliance
with all applicable federal and state securities laws.
14. COOPERATION
The Company will not by any action, including, without limitation, by
amendment of its Charter or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder of the Warrant against impairment.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Warrant Stock or as a stockholder of Company, whether
such liability is asserted by Company or by creditors of Company.
16. MISCELLANEOUS
(a) REMEDIES. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate. Accordingly, it
is agreed that the holder of this Warrant shall be entitled to specific
performance, an injunction, restraining order or other equitable relief to
prevent breaches of this agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof. Such remedies shall be cumulative and non-exclusive and shall
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<PAGE>
be in addition to any other rights and remedies the parties may have under the
Agreement.
(b) SEVERABILITY. In the event that any provision of this Warrant, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this Warrant
will continue in full force and effect and the application of such provision to
other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Warrant with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
(c) SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 7
hereof, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder.
(d) STOCK AND WARRANT TRANSFER BOOKS. Company will not at any time,
except upon dissolution, liquidation or winding up of Company, close its stock
transfer books or Warrant Transfer Books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
(e) NONWAIVER AND EXPENSES. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder's rights, powers or remedies. If
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, Company shall pay to Holder
such amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
(f) AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of Company and
a majority of Holders, provided that no such Warrant may be modified or amended
to reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof.
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(g) HEADINGS. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
(h) GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officers.
Dated: _____________ , 1999 STORAGE USA, INC.
Attest: By: ____________________________
Its: ___________________________
____________________________
Secretary
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FORM OF
NOTICE OF EXERCISE
To: STORAGE USA, INC.
(1) The undersigned hereby elects to purchase __________________________
shares of common stock of STORAGE USA, INC. pursuant to the terms of the
attached Warrant, and has tendered herewith payment of the purchase price in
full by wire transfer.
(2) Please issue a certificate or certificates representing said shares
in the name of the undersigned.
(3) The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
except in compliance with applicable federal and state securities laws and that
the aforesaid shares are subject.
_____________________________________ ___________________________________
(Date) (Signature)
Signature Guaranteed: ___________________________________________________
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required
information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to:
________________________________________________________________________________
(Please Print)
_____________________________________________
(Please Print)
By: _________________________________________
Its: ________________________________________
Date: _______________________________________
STORAGE USA, INC. COMMON STOCK WARRANT
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. IN ADDITION, THE
OWNERSHIP AND TRANSFER OF THIS WARRANT AND ANY SHARES ISSUABLE UPON THE EXERCISE
HEREOF ARE SUBJECT TO ARTICLE XII OF THE COMPANY'S CHARTER, AS AMENDED AND
RESTATED.
NO. SUSW-1 STORAGE USA, INC. NOVEMBER 30, 1999
COMMON STOCK WARRANT
This certifies that Storage Ventures, L.P. (the "Holder"), or its
registered assigns, is entitled, upon the terms and subject to the conditions
and restrictions on exercise hereinafter set forth, at any time on or after the
date hereof and at or prior to 11:59 p.m., Central Time, on November 30, 2004
(the "Expiration Time"), but not thereafter, to acquire from STORAGE USA, INC.,
a Tennessee corporation (the "Company"), in whole or from time to time in part,
up to One Million Two Hundred Fifty Thousand (1,250,000) fully paid and non-
assessable shares of common stock, par value $0.01 per share ("Common Stock"),
of the Company (the "Warrant Stock") at a purchase price per share equal to the
Exercise Price as defined herein (the "Warrant"). Such number of shares, type of
security and Exercise Price are subject to adjustment as provided herein, and
all references to "Warrant Stock" and "Exercise Price" herein shall be deemed to
include any such adjustment or series of adjustments.
<PAGE>
1. EXERCISE OF WARRANT
The rights represented by this Warrant are exercisable by the registered
holder hereof, in whole or in part, at any time and from time to time at or
prior to the Expiration Time by the surrender of this Warrant and a duly
executed Notice of Exercise in the form attached hereto duly executed to the
office of the Company at 165 Madison Avenue, Suite 1300, Memphis, TN 38103 (or
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such holder appearing
on the books of the Company), and upon payment of the Exercise Price (as defined
below) for the shares thereby purchased (by wire transfer to the order of the
Company at the time of exercise in an amount equal to the Exercise Price
multiplied by the number of shares of Warrant Stock thereby purchased);
whereupon the holder of this Warrant shall receive from the Company one or more
stock certificates (as reasonably requested by the holder) in proper form
representing the number of shares of Warrant Stock so purchased. Provided that
all the terms of this Warrant have been complied with, this Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued and the Holder or any other person so designated in
the Notice of Exercise shall be deemed for all purposes to be the record and
beneficial owner of such shares receivable upon exercise from and after the time
that this Warrant, Notice of Exercise and the Exercise Price are delivered to
the Company pursuant to this paragraph. If this Warrant shall have been
exercised in part, Company shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same resumed to Holder.
During the period of sixty (60) trading days immediately subsequent to
any exercise of all or any part of the Warrant, Holder shall not be permitted to
execute open-market trades of the Common Stock: (i) in any one trading day,
exceeding thirty percent (30%) of the average trading day volume of the
Company's Common Stock on its principal exchange (such average to be computed
using the preceding thirty (30) days) ("ADTV"), except for any trades executed
in single blocks (A) of more than 5,000 shares or (B) having an aggregate gross
sales price exceeding $200,000; or (ii) in excess of the greater of 300,000
shares or six times ADTV, in the aggregate, during any consecutive thirty (30)
trading day period, except for any trades executed in single blocks (A) of more
than 5,000 shares or (B) having an aggregate gross sales price exceeding
$200,000. The restrictions set forth in this paragraph shall not apply to any
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transferee (other than an affiliate of Holder) of shares of Common Stock
acquired upon exercise of the Warrant.
2. EXERCISE PRICE
Subject to adjustment as herein provided, the exercise price ("Exercise
Price") for each share of Warrant Stock shall be $42.00 per share.
3. ISSUANCE OF SHARES
(a) The Company shall deliver a stock certificate or certificates
evidencing the shares of Warrant Stock purchased hereunder to the registered
Holder or any other person so designated in the Notice of Exercise as promptly
as practicable (in no event exceeding seven (7) business days) after the date on
which the Company receives an executed Notice of Exercise and payment in full of
the Exercise Price in accordance with the terms hereof. The Company hereby
represents and warrants that all shares of Warrant Stock which may be issued
upon the exercise of this Warrant will, upon such exercise, be duly and validly
authorized and issued, fully paid and nonassessable shares of Common Stock of
the Company, free from all taxes, liens and charges in respect of the issuance
thereof (other than liens or charges created by or imposed upon the holder of
the Warrant Stock).
(b) A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act of 1933, as amended or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would have been entitled as Holder under Sections 6 and 16(a) of this
Warrant. Company will, at the time of each exercise of this Warrant, in whole
or in part, upon the request of the holder of the shares of Common Stock issued
upon such exercise hereof, acknowledge in writing, in form reasonably
satisfactory to such holder, its continuing obligation to afford to such holder
all such rights; provided, however, that if such holder shall fail to make any
such request, such failure shall not affect the continuing obligation of Company
to afford to such holder all such rights.
4. CHARGES, TAXES AND EXPENSES
Issuance of certificates for shares of Warrant Stock upon the exercise
of this Warrant shall be made without charge to the Holder hereof for any issue
or transfer tax, governmental charge or other incidental expense in respect of
the issuance of such certificate, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in the name of the
registered holder of this Warrant or in such name or names as may be directed by
the registered holder of this Warrant; provided, however, that in the event
certificates
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for shares of Warrant Stock are to be issued in a name other than the name of
the registered Holder of this Warrant, subject to Section 7 below, this Warrant
when surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the holder hereof.
5. NO RIGHTS AS SHAREHOLDER
This Warrant does not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Company prior to the exercise hereof.
Except as set forth in this Warrant, no dividends are or shall be payable, or
shall accrue, on or with respect to this Warrant or any interest represented by
this Warrant or on the Warrant Shares until or unless, and except to the extent
that, this Warrant is exercised.
6. REGISTRATION AND LISTING OF WARRANT STOCK
The Company shall use its commercially reasonable best efforts to
register the Warrant Stock issuable upon exercise of this Warrant pursuant to
Section 4 of the Warrant Purchase Agreement, of even date herewith, by and
between the Company and the Holder. If and so long as the Common Stock is listed
on the New York Stock Exchange or any national securities exchange or
inter-dealer quotation system, then the Company will, at its expense, pay
promptly and maintain the approval for listing on each such exchange or
inter-dealer quotation system, upon official notice of issuance, the shares of
Warrant Stock and maintain the listing of such shares after their issuance.
7. TRANSFERABILITY
(a) Subject to the provisions of the Warrant Purchase Agreement dated of
even date herewith by and between the Company and the Holder, prior to the
Expiration Time and subject to compliance with applicable laws (including
federal and state securities laws), this Warrant and all rights hereunder are
transferable, in whole or in part only (A) concurrent with and to the transferee
of a permitted Transfer of Membership Interests pursuant to Section 3.2(b) of
the Limited Liability Company Agreement of Storage Acquisition Portfolio,
L.L.C., or pursuant to Section 3.2(b) of the Limited Liability Company Agreement
of Storage Development Portfolio, L.L.C., or (B) to any GECC Affiliate (as that
term is defined in the Limited Liability Company Agreement of Storage
Acquisition Portfolio, L.L.C.).
(b) The Company agrees that, at the reasonable request of the Holder, it
will provide a list of the holders of record of the Common Stock of the Company
and the holders of units of limited partnership interest ("UNITS") in SUSA
Partnership, L.P. (a "SHAREHOLDER LIST") to the Holder solely for the purpose of
assisting Holder in determining the number of shares of Common Stock and Units
owned by General Electric Company and its affiliates. Holder
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and its affiliates shall keep any such Shareholder List confidential and,
immediately after determining the number of shares of Common Stock and Units so
owned, shall return the original Shareholder List to the Company and destroy any
and all copies of the Shareholder List in their possession. The Holder and its
affiliates shall not use any Shareholder List provided to it pursuant to this
subsection (b) for any purpose other than the purpose described herein.
(c) Any person to whom this Warrant is proposed to be transferred shall
execute a counterpart of the Warrant Purchase Agreement and provide to the
Company an opinion of legal counsel reasonably satisfactory to the Company that
the proposed transfer complies with applicable federal and state securities
laws. Such transfer shall be registered on the books of Company to be maintained
for such purpose, upon surrender of this Warrant together with the Assignment
Form of this Warrant substantially in the form of Exhibit B hereto duly executed
by Holder or its agent. Upon such surrender Company shall execute and deliver a
new Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant may be exercised by a
new Holder for the purchase of shares of Common Stock without having a new
Warrant is sued.
8. EXCHANGE AND REGISTRY OF WARRANT
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant
("WARRANT TRANSFER BOOK"). This Warrant may be surrendered for exchange,
transfer, exercise, in accordance with its terms, at such office or agency of
the Company, and the Company shall be entitled to rely in all respects, prior to
written notice to the contrary, upon such registry.
9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT
On receipt by the Company of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and in the case
of any such loss, theft or destruction of this Warrant, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
warrant, the Company will execute and deliver to the registered holder, in lieu
thereof, a new warrant in substantially identical form, dated as of the date of
such cancellation and reissuance.
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10. SATURDAYS, SUNDAYS AND HOLIDAYS
If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday or a
Sunday or shall be a legal holiday, then such action may be taken or such right
may be exercised on the next succeeding business day.
11. ADJUSTMENT TO NUMBER AND TYPE OF SECURITIES, EXERCISE PRICE
The type and number of securities of the Company issuable upon exercise
of this Warrant and the Exercise Price for each share of Warrant Stock for which
this Warrant becomes exercisable are subject to adjustment as set forth below:
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Company shall: (i) declare a dividend or otherwise make a distribution to the
holders of its Common Stock in the form of additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock; or (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, then the number of shares of
Warrant Stock for which this Warrant is exercisable shall be adjusted as
follows:
(i) the number of shares of Warrant Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Warrant Stock for which this Warrant is
exercisable immediately before the occurrence of any such event multiplied by a
fraction, (x) the numerator of which is the total number of shares of Common
Stock outstanding immediately after the occurrence of such event, and (y) the
denominator of which is the total number of shares of Common Stock outstanding
immediately before the occurrence of such event; and
(ii) the Exercise Price shall be adjusted to an amount equal to the
Exercise Price in effect immediately before the occurrence of such event
multiplied by a fraction (x) the numerator of which is the total number of
shares of Warrant Stock for which this Warrant is exercisable immediately before
the adjustment, and (y) the denominator of which is the total number of shares
of Warrant Stock for which this Warrant is exercisable immediately after the
adjustment.
(b) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of: (i) any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in or implementation of a par
value, or as a result of a subdivision or combination); or (ii) any
consolidation or merger of the Company with or into another corporation or other
entity, other than a merger with another corporation or other entity in which
the
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Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant; or (iii) any sale, transfer or other disposition of all or
substantially all of the property, business or assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
execute a new Warrant providing that the holder of this Warrant shall have the
right to exercise such new Warrant and procure upon such exercise, in lieu of
each share of Warrant Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money and property
("Other Property") receivable upon such reclassification, change, consolidation,
merger or sale by a holder of one share of Common Stock. Such new Warrant shall
provide for adjustments provided for in this Section 11. In case of any such
event, the successor or acquiring corporation (if other than Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by
Company and all the obligations and liabilities hereunder, subject to such
modifications to reflect the provisions of this paragraph and otherwise as may
be appropriate. The provisions of this subsection (b) shall similarly apply to
successive reclassifications, changes, consolidations, mergers and sales.
(c) CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS. With respect to any
securities which are of the same class and series as any Warrant Stock for which
this Warrant is exercisable pursuant to Section 1 hereof, if at any time the
Company shall fix a record date for the purpose of determining the holders of
such securities entitled to receive any dividend or other distribution
(including any such distribution made in connection with a consolidation or
merger, but excluding any distribution referred to in subparagraph (b) above and
any conversion, exercise, exchange or other actions taken by the Company
pursuant to its obligations to holders of Units held by certain third parties)
of: (i) any evidence of indebtedness, shares of its capital stock (including any
securities convertible into such securities but excluding Common Stock for which
an adjustment is made pursuant to Section 11(a)) or any other securities or
property of any nature whatsoever; (ii) any warrants or other rights to
subscribe for or purchase any evidence of its indebtedness, any shares of its
stock (including any securities convertible into such securities but excluding
Common Stock for which an adjustment is made pursuant to Section 11(a)); or
(iii) any other of its securities or its property of any nature whatsoever
(other than normal cash dividends or cash distributions permitted under
applicable law), then such other dividends on or with respect to the Warrant or
on the Warrant Shares shall not be received until and unless, and except to the
extent that the Warrant is exercised. The Holder of the Warrant shall have no
present or beneficial right in such other dividends or distributions until the
Warrant is exercised.
(d) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If at any time
Company shall (except as hereinafter provided) issue or
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sell any shares of Common Stock issued by the Company after the date hereof,
other than Warrant Stock ("Additional Shares"), in exchange for consideration in
an amount per Additional Share of Common Stock less than the Current Market
Price (as defined herein) at the time the Additional Shares of Common Stock are
issued, then (i) the Exercise Price as to the number of shares for which this
Warrant is exercisable prior to such adjustment shall be reduced to a price
determined by dividing (A) an amount equal to the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Exercise Price, plus (y) the consideration, if
any, received by Company upon such issue or sale, by (B) the total number of
shares of Common Stock outstanding immediately after such issue or sale; and
(ii) the number of shares of Common Stock for which this Warrant is exercisable
shall be adjusted to equal the product obtained by multiplying the Exercise
Price in effect immediately prior to such issue or sale by the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale and dividing the product thereof by the Exercise Price resulting
from the adjustment made pursuant to clause (i) above. "Current Market Price"
shall mean as of any date (a), if the Common Stock is listed on the New York
Stock Exchange or any national securities exchange or inter-dealer quotation
system, (1) the closing price of the Common Stock on such date on the New York
Stock Exchange or any national securities exchange or inter-dealer quotation
system, as the case may be or (2) if there was no quotation of the Common Stock
on such date, the closing price on the next preceding business day on which
there was a quotation, or (b), if the Common Stock is not listed on the New York
Stock Exchange or any national securities exchange or inter-dealer quotation
system, the price that the Company Board of Directors acting in good faith
determines through any reasonable valuation method that a share of Common Stock
might change hands between a willing buyer and a willing seller, neither being
under any compulsion to buy or to sell and both having reasonable knowledge of
the relevant facts.
The provisions of this Section 11(d) shall not apply to
(i) any issuance by the Company of Additional Shares in an
arms-length transaction for cash or other consideration having a value
of at least 90 percent (90%) of the Current Market Price on the date of
the issuance of such Additional Shares, including but not limited to,
stock issuances pursuant to any merger, consolidation, corporate
reorganization (both taxable and nontaxable), corporate restructuring,
or private placement; or
(ii) any issuance by the Company of warrants, rights, options or
Common Stock to employees of the Company or its affiliates (including
Storage USA Franchise Corp. and its affiliates) pursuant to a deferred
compensation plan, stock option plan or other employee compensation plan
or agreement; or
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(iii) any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 11(a) or 11(c).
No adjustment of the number of shares of Common Stock for which this
Warrant shall be exercisable shall be made under this Section 11(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities (as defined herein), if any such adjustment shall previously have
been made upon the issuance of such warrants or other rights or upon the
issuance of such Convertible Securities (or upon the issuance of any warrant or
other rights therefor) pursuant to Section 11(e) or Section 11(f). "Convertible
Securities" shall mean evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable, with or without payment
of additional consideration in cash or property, for Additional Shares of Common
Stock, either immediately or upon the occurrence of a specified date or a
specified event.
(e) ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of any warrants or other rights to subscribe for
or purchase any Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the number of shares
for which this Warrant is exercisable and the Exercise Price shall be adjusted
as provided in Section 11(d) on the basis that the maximum number of Additional
Shares of Common Stock issuable pursuant to all such warrants or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and Company shall
be deemed to have received all of the consideration payable therefor, if any, as
of the date of the issuance of such warrants or other rights. No further
adjustments of the Exercise Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such warrants or
other rights or upon the actual issue of such Common Stock upon such conversion
or exchange of such Convertible Securities.
(f) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which Company is the surviving corporation) issue
or sell, any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange
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<PAGE>
shall be less than the Current Market Price in effect immediately prior to the
time of such issue or sale, then the number of shares for which this Warrant is
exercisable and the Exercise Price shall be adjusted as provided in Section
11(d) on the basis that the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and Company shall
have received all of the consideration payable therefor, if any, as of the date
of issuance of such Convertible Securities. No adjustment of the number of
shares for which this Warrant is exercisable and the Exercise Price shall be
made under this Section 11(f) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights pursuant to Section
11(e). No further adjustments of the number of Shares for which this Warrant is
exercisable and the Exercise Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities and, if
any issue or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of shares for which this Warrant
is exercisable and the Exercise Price have been or are to be made pursuant to
other provisions of this Section 11, no further adjustments of the number of
shares for which this Warrant is exercisable and the Exercise Price shall be
made by reason of such issue or sale.
(g) SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable and the
Exercise Price shall have been made pursuant to Section 11(e) or Section 11(f)
as the result of any issuance of warrants, rights or Convertible Securities,
(i) such warrants or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of such
warrants or rights, or the right of conversion or exchange with respect to all
or a portion of such other Convertible Securities, as the case may be, shall not
have been exercised, or
(ii) the consideration per share for which shares of Common Stock are
issuable pursuant to such warrants or rights, or the terms of such other
Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event, then for each outstanding Warrant
such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
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Thereupon, a recomputation shall be made of the effect of such rights or options
or other Convertible Securities on the basis of
(iii) treating the number of Additional Shares of Common Stock
or other property, if any, theretofore actually issued or issuable pursuant to
the previous exercise of any such warrants or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and
(iv) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
share for which shares of Common Stock or other property are issuable under such
warrants or rights or other Convertible Securities; whereupon a new adjustment
of the number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be made, which new adjustment shall supersede the
previous adjustment so rescinded and annulled.
(h) COMPUTATION OF CONSIDERATION. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by Company therefor shall be the amount of the cash received by Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by Company for subscription, the subscription price, or,
if such Additional Shares of Common Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by Company for
and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of Company. In case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase such
Additional Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which Company issues any securities, the amount of
consideration therefor shall be deemed to be the fair value, as determined in
good faith by the Board of Directors of Company, of such portion of the assets
and business of the nonsurviving corporation as such Board in good faith shall
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities, warrants or other rights, as the case may be. The
consideration for any Additional
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Shares of Common Stock issuable pursuant to any warrants or other rights to
subscribe for or purchase the same shall be the consideration received by
Company for issuing such warrants or other rights plus the additional
consideration payable to Company upon exercise of such warrants or other rights.
The consideration for any Additional Shares of Common Stock issuable pursuant to
the terms of any Convertible Securities shall be the consideration received by
Company for issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to Company in
respect of the subscription for or purchase of such Convertible Securities, plus
the additional consideration, if any, payable to Company upon the exercise of
the right of conversion or exchange in such Convertible Securities. In case of
the issuance at any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, Company shall be deemed to have received for such
Additional Shares of Common Stock or Convertible Securities a consideration
equal to the amount of such dividend so paid or satisfied.
(i) OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from
time to time Company shall take any action in respect of its Common Stock, other
than any action described in this Section 11, then, unless such action will not
have a materially adverse effect upon the rights of the Holders, the number of
shares of Common Stock or other stock for which this Warrant is exercisable
and/or the purchase price thereof shall be adjusted in such manner as may be
equitable in the circumstances.
(j) CERTIFICATE AS TO ADJUSTMENTS. In case of any adjustment in the
Exercise Price or number and type of securities issuable on the exercise of this
Warrant pursuant to Section 11, the Company will promptly give written notice
thereof to the holder of this Warrant in the form of a certificate, certified
and confirmed by an officer of the Company, setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of Directors
of Company determined the fair value of any evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights referred to in Section 11(h)), specifying the number of shares
of Common Stock for which this Warrant is exercisable and (if such adjustment
was made pursuant to Section 11(b) or Section 11(i)) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder. Company shall
keep at its office or agency designated pursuant to copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
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(k) FRACTIONAL INTERESTS. In computing adjustments under this Section
11, fractional interests in Common Stock shall be taken into account by rounding
up to the nearest whole number of shares.
(l) WHEN ADJUSTMENT TO BE MADE. The adjustments required by this
Section 11 shall be made whenever and as often as any specified event requiring
adjustment shall occur except that any adjustment in the Exercise Price required
by this Section 11 may be postponed if such adjustment, either by itself or with
other adjustments not previously made, would require an increase or decrease of
less than one percent (1%) in such price. Any such adjustment representing a
change of less than such minimum amount which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 11 and not previously made, would result in a minimum
adjustment or on the date of exercise. Notwithstanding the foregoing, any
adjustment carried forward shall be made no less than ten business days prior to
the Termination Date. All calculations under this Section 11 shall be made to
the nearest cent. For the purposes of any adjustment, any specified event shall
be deemed to have occurred at the close of business on the date of its
occurrence.
(m) WHEN ADJUSTMENTS NOT REQUIRED. If the Company shall fix a record
date for the purpose of determining the holders of its Common Stock entitled to
receive a dividend or distribution hereof and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver
such dividend or distribution, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(n) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of Company shall be required to make a determination in good faith of
the fair value of any item under this Section 11, such determination may be
challenged in good faith by any registered Holder, and any dispute shall be
resolved by an investment banking or valuation firm of recognized national
standing selected by Company and acceptable to a majority of Holders.
12. NOTICES OF RECORD DATE, ETC.
In the event of:
(a) any taking by the Company of a record of the holders of any
securities issuable upon exercise of this Warrant for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right,
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(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any sale, transfer or
other disposition of all or substantially all the property, business or assets
of the Company to, or consolidation or merger of, the Company with or into any
person,
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company, or
(d) any proposed issue or grant by the Company to the holders of any
securities issuable upon exercise of this Warrant of any shares of stock of any
class or any other securities, or any right or warrant to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities, then, and in each such event, the Company will mail to the holder
hereof a notice specifying: (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount,
character and date which such holders shall be entitled to such dividend,
distribution or right; (ii) the date on which any such reorganization,
reclassification, recapitalization, sale, transfer, disposition, consolidation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as to which the holders of record of Warrant Stock shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable on such reorganization, reclassification, recapitalization,
sale, transfer, disposition, consolidation, merger, dissolution, liquidation or
winding-up; (iii) the amount and character of any stock or other securities, or
rights or warrants with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made; and (iv) in reasonable
detail, the facts, including the proposed date, concerning any other such event.
Such notice shall be delivered to the Holder hereof at the last address of
Holder appearing on the books of Company at least thirty (30) days prior to the
date therein specified.
13. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the holder hereof that:
(a) during the period this Warrant is outstanding, the Company will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise of this
Warrant in full;
(b) the issuance of this Warrant shall constitute full authority to the
Company's officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for the shares of Warrant Stock
issuable upon exercise of this Warrant;
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(c) the Company has all requisite legal and corporate power to execute
and deliver this Warrant, to sell and issue the Warrant Stock hereunder and to
carry out and perform its obligations under the terms of this Warrant;
(d) all corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of this Warrant by the Company, the authorization, sale, issuance
and delivery of the Warrant Stock issuable upon exercise of the Warrant, the
grant of registration rights as provided herein and the performance of the
company's obligations hereunder has been taken; and
(e) the Warrant Stock, when issued in compliance with the provisions of
this Warrant will be validly issued, fully paid and nonassessable, and free of
any liens, preemptive rights or encumbrances and will be issued in compliance
with all applicable federal and state securities laws.
14. COOPERATION
The Company will not by any action, including, without limitation, by
amendment of its Charter or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder of the Warrant against impairment.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Warrant Stock or as a stockholder of Company, whether
such liability is asserted by Company or by creditors of Company.
16. MISCELLANEOUS
(a) REMEDIES. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate. Accordingly, it
is agreed that the holder of this Warrant shall be entitled to specific
performance, an injunction, restraining order or other equitable relief to
prevent breaches of this agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof. Such remedies shall be cumulative and non-exclusive and shall
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be in addition to any other rights and remedies the parties may have under the
Agreement.
(b) SEVERABILITY. In the event that any provision of this Warrant, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this Warrant
will continue in full force and effect and the application of such provision to
other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Warrant with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
(c) SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 7
hereof, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder.
(d) STOCK AND WARRANT TRANSFER BOOKS. Company will not at any time,
except upon dissolution, liquidation or winding up of Company, close its stock
transfer books or Warrant Transfer Books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
(e) NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If Company fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
(f) AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of Company and
a majority of Holders, provided that no such Warrant may be modified or amended
to reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof.
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(g) HEADINGS. The headings used in this Warrant are for the convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.
(h) GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officers.
Dated: November 30, 1999 STORAGE USA, INC.
By: /s/ Christopher P. Marr
------------------------
Christopher P. Marr
Its: Chief Financial Officer
Attest:
/s/ John W. McConomy
- -------------------------
John W. McConomy
Secretary
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NOTICE OF EXERCISE
To: STORAGE USA, INC.
(1) The undersigned hereby elects to purchase ___________ shares of
common stock of STORAGE USA, INC. pursuant to the terms of the attached Warrant,
and has tendered herewith payment of the purchase price in full by wire
transfer.
(2) Please issue a certificate or certificates representing said shares
in the name of the undersigned.
(3) The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
except in compliance with applicable federal and state securities laws and that
the aforesaid shares are subject.
- ------------------------- ------------------------
(Date) (Signature)
Signature Guaranteed:
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[STORAGE USA LOGO]
JOHN W. McCONOMY
Executive Vice President & General Counsel
November 12, 1999
VIA FACSIMILE: 011441715345795
Mr. Scott Hartman
Senior Vice President, CFO
Security Capital U.S. Realty Mgmt.
7 Clifford St.
London W1X2US
RE: Storage USA, Inc. Joint Ventures with
General Electric Capital Corporation ("GECC")
Dear Scott:
In connection with the proposed transaction involving joint ventures
between SUSA Partnership, L.P. and a GECC affiliate (the "Joint Ventures"),
Storage USA, Inc. ("Storage USA") proposes to issue General Electric Capital
Corporation a warrant (the "Warrant") to acquire 1,250,000 shares of Storage USA
Common Stock. The Warrant is being issued to GECC in partial consideration of
the participation of the GECC affiliate in the Joint Ventures, and has not been
assigned a separate value by the parties. The forms of the Warrant and Warrant
Purchase Agreement are attached as Exhibit A.
Section 4.2 of the Strategic Alliance Agreement (the "Strategic Alliance
Agreement"), dated as of March 19, 1996, by and among Storage USA, SUSA
Partnership, L.P., Security Capital U.S. Realty ("U.S. Realty") and Security
Capital Holdings S.A. ("Holdings"), as amended, grants certain participation
rights to U.S. Realty and Holdings with respect to issuances of capital stock of
Storage USA, including securities like the Warrant. Capitalized terms used but
not defined in this letter have the meanings ascribed to them in the Strategic
Alliance Agreement.
In recognition of the difficulty of valuing the Warrant and to preserve the
participation rights of U.S. Realty and Holdings in connection with the issuance
of the Warrant, we agree that, in lieu of such rights, Investor shall have the
right to participate, on the terms set forth in this letter, in any issuance of
capital stock of Storage USA pursuant to any exercise of the Warrant to the same
extent that it would be entitled to participate in such issuance pursuant to
Section 4.2(a) of the Strategic Alliance Agreement.
STORAGE USA, INC.
SUITE 1300 . 165 MADISON AVENUE . MEMPHIS, TENNESSEE 38103
Phone: 901-252-2074 Fax: 901-252-2174 Email: [email protected]
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Specifically, Storage USA shall promptly notify U.S. Realty and Holdings in
writing of each exercise of the Warrant, in whole or in part, including the date
of such exercise (each, an "Exercise Date") and the number of shares purchased.
At any time within 30 days after its receipt of such notice, Investor may
exercise its participation rights under this letter with respect to such
issuance by informing Storage USA in writing of its exercise of such partici-
pation rights and the number of shares to be purchased. Each such notice by
Investor will constitute a Participation Notice. The purchase price for each
share of Storage USA Common Stock to be purchased shall be at a price equal to
the average of the closing market price of Storage USA Common Stock on the New
York Stock Exchange (or other principal exchange or quotation system on which
the Common Stock is then listed or quoted) for the five (5) days prior to the
applicable Exercise Date. The closing of such purchase shall occur on a date to
be mutually agreed upon, but not later than the fifth business day after the
receipt by Storage USA of the Participation Notice. At the closing, Storage USA
shall deliver to Investor certificates representing the shares to be purchased
against delivery of the purchase price by wire transfer of same day funds. The
purchased shares will be duly and validly issued, fully-paid and nonassessable
and will constitute Registrable Securities for purposes of the Registration
Rights Agreement, dated as of March 19, 1996, by and among Storage USA, Holdings
and U.S. Realty.
The rights granted pursuant to this agreement will expire simultaneously
with the expiration of the Participation Rights under Section 4.2 of the
Strategic Alliance Agreement.
The agreements described above are subject to the consummation of the Joint
Ventures and the issuance by Storage USA of the Warrant.
If the foregoing is acceptable to you, please so indicate by executing a
copy of this letter below and returning it to me by facsimile and overnight
mail.
STORAGE USA, INC.
By: /s/ John W. McConomy
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Name: John W. McConomy
Title: Exec. Vice President and General Counsel
SUSA PARTNERSHIP, L.P.
By: Storage USA, Inc. General Partner
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By: /s/ John W. McConomy
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Name: John W. McConomy
Title: Exec. Vice President and General Counsel
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cc: Ms. Caroline McBride
Agreed:
Security Capital U.S. Realty
By: /s/ W. Scott Hartman
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Name: W. Scott Hartman
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Title: Senior Vice President/CFO
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Date: 17 November 1999
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Security Capital Holdings S.A.
By: /s/ W. Scott Hartman
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Name: W. Scott Hartman
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Title: Senior Vice President/CFO
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Date: 17 November 1999
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EXHIBIT A
[Form of Warrant and Warrant Purchase Agreement]
