As filed with the Securities and Exchange Commission on September 27, 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 21, 1999
(Date of earliest event reported)
Inland Real Estate Corporation
(Exact name of registrant as specified in the charter)
Maryland 0-28382 36-3953261
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2901 Butterfield Road
Oak Brook, Illinois 60523
(Address of Principal Executive Offices)
(630) 218-8000
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
-1-
Item 2. Acquisition or Disposition of Assets
Since our Form 8-K filing on May 12, 1999, we have acquired seventeen
additional properties. As of the acquisition of the Ryan Company Retail
Portfolio on September 10, 1999, the aggregate purchase price of these
properties exceeds 10 percent of our total assets as of December 31, 1998, and
accordingly, we are filing this Form 8-K, which includes all properties
purchased to date which were not previously reported.
Randall Square, Geneva, Illinois
On May 21, 1999, we purchased the entire fee simple interest in a Community
Center located at Randall Road and Fargo Boulevard in Geneva, Illinois known as
"Randall Square." We purchased Randall Square from Dalan/Geneva, L.L.C., an
unaffiliated third party, for approximately $30,124,000 or approximately
$138.63 per square foot. We paid the purchase price for this property using
cash and cash equivalents. We believe the purchase price was fair and
reasonable based on, among other things, an appraisal from a third party that
we received and presented to our board of directors. Approximately $5,600,000
of this purchase price is being held in an escrow account until the seller
leases approximately 16,440 square feet of vacant space. Once a new tenant,
approved by our Advisor, begins paying rent, funds will be released from the
escrow to the seller based on a formula stated in the contract. Any funds
remaining in the escrow account at the end of a one year term will be remitted
to the Company. As of September 1, 1999, approximately $4,814,000 remains in
this escrow.
Randall Square, built in 1998/1999, is a one-story, multi-tenant retail
facility. Randall Square contains a total of approximately 217,304 leasable
square feet. As of September 1, 1999, Randall Square was 92% leased (100%
leased if the purchase price held in escrow is considered). In addition, we
received a master lease escrow for a period of one year in the event that
Factory Card Outlot should stop paying its rent. We considered a variety of
factors including location, demographics, tenant mix, price per square foot,
existing rental rates compared to market rates, and occupancy. We believe that
the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Randall
Square over the next few years. However, as part of the acquisition of this
property, the sellers placed approximately $485,000 in an escrow account to be
used for any defects on the property. This escrow expires on August 19, 2001.
The table below sets forth the occupancy rate at Randall Square expressed as a
percentage of total gross leasable area and the average annual base rent per
square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 88 10.35
-2-
Three tenants, Petsmart, a pet store, Bed, Bath & Beyond, a houseware store and
Marshalls, a discount clothing store, each lease more than 10% of the total
gross leasable area of the property. These leases require the tenants to pay
base annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Petsmart 27,360 13 10.20 Currently 01/31/04
10.80 02/01/04 01/31/09
11.28 02/01/09 01/31/14
Option 1 11.76 02/01/14 01/31/19
Option 2 12.24 02/01/19 01/31/24
Option 3 12.72 02/01/24 01/31/29
Option 4 13.20 02/01/29 01/31/34
Option 5 13.80 02/01/34 01/31/39
Bed, Bath &
Beyond 35,631 16 8.50 Currently 07/31/08
9.00 08/01/08 01/31/14
Option 1 9.50 02/01/14 01/31/19
Option 2 10.00 02/01/19 01/31/24
Option 3 10.50 02/01/24 01/31/29
Marshalls 30,638 14 7.34 Currently 08/31/03
7.83 09/01/03 08/31/08
Option 1 8.32 09/01/08 08/31/13
Option 2 8.81 09/01/13 08/31/18
Option 3 9.30 09/01/18 08/31/23
For federal income tax purposes, our depreciable basis in Randall Square will
be approximately $17,100,000. When we calculate depreciation expense, for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $185,375.
The real estate taxes payable were calculated based on a tax rate of 7.2055%.
-3-
On September 1, 1999, a total of 200,864 square feet was leased to nineteen
tenants at Randall Square. The following tables set forth information with
respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Petsmart 27,360 01/14 5/5 yr. 279,072 10.20
Factory Card
Outlot 13,000 12/08 2/5 yr. 165,750 12.75
Bed, Bath &
Beyond 35,631 01/14 3/5 yr. 302,863 8.50
Ulta 3 9,350 08/08 2/5 yr. 130,900 14.00
Old Navy 14,566 06/03 2/5 yr. 195,000 13.39
Marshalls 30,638 08/08 3/5 yr. 225,000 7.34
Shoe Carnival 12,000 01/09 2/5 yr. 156,000 13.00
Michaels 19,459 02/09 4/5 yr. 207,110 10.75
Dress Barn 9,000 01/09 3/5 yr. 126,000 14.00
Talbots 8,500 01/09 2/5 yr. 157,210 18.34
Men's Warehouse 4,800 12/08 3/5 yr. 93,600 19.50
Panera Bread 3,780 01/09 3/5 yr. 87,885 23.25
Funcoland 1,200 01/04 2/3 yr. 30,000 25.00
For Eyes 2,070 03/04 3/5 yr. 43,470 21.00
Gingiss 1,200 05/04 3/5 yr. 27,600 23.00
So Je Oh Cleaners 1,620 06/09 - 38,880 24.00
Ritz Camera 1,600 07/04 - 44,800 28.00
Batavia Cellular 1,590 04/04 2/5 yr. 36,570 23.00
Bedding Experts 3,500 12/03 2/5 yr. 70,000 20.00
KFC (Outlot) 11/13 45,150
Vacant 16,440
-4-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 2,455,745 - - -
2000 - - - 2,462,900 - - -
2001 - - - 2,463,098 - - -
2002 - - - 2,466,400 - - -
2003 2 18,066 265,000 2,477,067 14.67 8.99 10.70
2004 5 7,660 182,440 2,292,458 23.82 3.81 7.96
2005 - - - 2,118,064 - - -
2006 - - - 2,118,064 - - -
2007 - - - 2,118,064 - - -
2008 4 57,788 649,075 2,125,487 11.23 28.77 30.54
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value upon completion of construction and
stabilization of income for the Randall Square property, effective as of
February 1, 2000, of $30,500,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.
-5-
Eagle Food Store, Buffalo Grove, Illinois
On June 3, 1999, we purchased the entire fee simple interest in a single-user
retail center located at 350 McHenry Road in Buffalo Grove, Illinois known as
"Eagle Food Store-Buffalo Grove." We purchased Eagle Food Store-Buffalo Grove
from Eagle Food Centers, Inc., an unaffiliated third party, for approximately
$7,140,000 or approximately $125.72 per square foot. We paid the purchase
price for this property using cash and cash equivalents. We believe the
purchase price was fair and reasonable based on, among other things, an
appraisal from a third party that we received and presented to our board of
directors.
Eagle Food Store-Buffalo Grove, built in 1999, is a one-story, single-user
retail facility. Eagle Food Store-Buffalo Grove contains 56,192 leasable
square feet. As of September 1, 1999, Eagle Food Store-Buffalo Grove was 100%
leased. We considered a variety of factors including location, demographics,
tenant mix, price per square foot, existing rental rates compared to market
rates, and occupancy. We believe that the center is located within a vibrant
economic area.
We do not anticipate making any significant repairs and improvements to Eagle
Food Store-Buffalo Grove over the next few years. However, if we were to make
any repairs or improvements, pursuant to the leases, the center's tenants would
be obligated to pay a substantial portion of any monies spent on repairs and
improvements.
The table below sets forth the occupancy rate at Eagle Food Store-Buffalo Grove
expressed as a percentage of total gross leasable area and the average annual
base rent per square foot:
One tenant, Eagle Food Store, a grocery store, leases 100% of the total gross
leasable area of the property. This lease requires the tenant to pay base
annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Eagle Food 56,192 100 14.02 Currently 06/30/03
14.28 07/01/03 06/30/21
Option 1 15.70 07/01/21 06/30/26
Option 2 16.49 07/01/26 06/30/31
Option 3 17.31 07/01/31 06/30/36
Option 4 18.18 07/01/36 06/30/41
For federal income tax purposes, our depreciable basis in Eagle Food Store-
Buffalo Grove will be approximately $5,200,000. When we calculate depreciation
expense, for tax purposes, we will use the straight-line method. We depreciate
buildings and improvements based upon estimated useful lives of 40 years.
-6-
On September 1, 1999, a total of 56,192 square feet was leased to one tenant at
Eagle Food Store-Buffalo Grove. The following tables set forth information
with respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Eagle Food 56,192 06/21 4/5 yr. 788,055 14.02
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999- - - - 788,055 - - -
2002
2003 - - - 795,154 - - -
2004- - - - 802,254 - - -
2008
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received an appraisal prepared by an independent appraiser who is a member
in good standing of the American Institute of Real Estate Appraisers. The
appraisal reported a fair market value for the Eagle Food Store-Buffalo Grove
property, as of December 21, 1998, of $7,500,000. You should note that
appraisals are estimates of value and, therefore, you should not rely upon them
as a measure of true worth or realizable value.
-7-
Oak Forest Commons Phase III, Oak Forest, Illinois
On June 15, 1999, we purchased the entire fee simple interest in a Neighborhood
Retail Center located at the corner of 159th and Central in Oak Forest,
Illinois known as "Oak Forest Commons Phase III." We purchased Oak Forest
Commons Phase III from T-L Oak Forest Commons II, Inc., an unaffiliated third
party, for approximately $1,105,000 or approximately $148.84 per square foot.
We paid the purchase price for this property using cash and cash equivalents.
We believe the purchase price was fair and reasonable based on, among other
things, an appraisal from a third party that we received and presented to our
board of directors. We purchased the adjoining Oak Forest Commons Phase I and
II on March 5, 1998 for a purchase price of approximately $12,460,000.
Oak Forest Commons Phase III, built in 1999, is a one-story, multi-tenant
retail facility. Oak Forest Commons Phase III contains 7,424 leasable square
feet. As of September 1, Oak Forest Commons Phase III was 72% leased (95%
leased if the master lease, which lasts for one year, is considered). We
considered a variety of factors including location, demographics, tenant mix,
price per square foot, existing rental rates compared to market rates, and
occupancy. We believe that the center is located within a vibrant economic
area.
We do not anticipate making any significant repairs and improvements to Oak
Forest Commons Phase III over the next few years. However, if we were to make
any repairs or improvements, pursuant to the leases, the center's tenants would
be obligated to pay a substantial portion of any monies spent on repairs and
improvements.
Three tenants, Country Companies Insurance, an insurance agent, Dollar Store, a
discount retail store, and Jackson & Hewitt, consultants, each leases more than
10% of the total gross leasable area of the property. These leases require the
tenants to pay base annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Country Companies
Insurance 1,610 22 16.00 Currently 03/31/04
Option 1 18.00 04/01/04 03/31/09
Dollar Store 2,814 38 16.00 Currently 05/31/02
17.00 06/01/02 05/31/04
Option 1 18.50 06/01/04 05/31/07
19.50 06/01/07 05/31/09
Jackson & Hewitt 900 12 17.00 Currently 01/31/02
18.00 02/01/02 01/31/04
Option 1 19.00 02/01/04 01/31/07
20.00 02/01/07 01/31/09
-8-
For federal income tax purposes, our depreciable basis in Oak Forest Commons
Phase III will be approximately $830,000. When we calculate depreciation
expense, for tax purposes, we will use the straight-line method. We depreciate
buildings and improvements based upon estimated useful lives of 40 years.
On September 1, 1999, a total of 5,324 square feet was leased to three tenants
at Oak Forest Commons Phase III. The following tables set forth information
with respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Country Companies
Insurance 1,610 03/04 1/5 yr. 25,760 16.00
Dollar Store 2,814 05/04 1/5 yr. 45,024 16.00
Jackson & Hewitt 900 01/04 1/5 yr. 15,300 17.00
Vacant 2,100
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999-
2002 - - - 86,084 - - -
2003 - - - 89,798 - - -
2004 3 5,324 89,798 89,798 12.10 100 100
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Oak Forest Commons Phase III
property, as of June 8, 1999, of $1,150,000. You should note that appraisals
are estimates of value and, therefore, you should not rely upon them as a
measure of true worth or realizable value.
-9-
Oak Lawn Town Center, Oak Lawn, Illinois
On June 29, 1999, we purchased the entire fee simple interest in a Neighborhood
Retail Center located at 5129-5145 95th Street in Oak Lawn, Illinois known as
"Oak Lawn Town Center." We purchased Oak Lawn Town Center from Mill Creek
Development, Inc., an unaffiliated third party, for approximately $2,400,000 or
approximately $191.90 per square foot. We paid the purchase price for this
property using cash and cash equivalents. We believe the purchase price was
fair and reasonable based on, among other things, an appraisal from a third
party that we received and presented to our board of directors.
Oak Lawn Town Center, built in 1998, is a one-story, multi-tenant retail
facility. Oak Lawn Town Center contains 12,506 leasable square feet. As of
September 1, 1999, Oak Lawn Town Center was 100% leased. We considered a
variety of factors including its location next to the train station, available
parking, demographics, tenant mix, price per square foot, existing rental rates
compared to market rates, and occupancy. We believe that the center is located
within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Oak
Lawn Town Center over the next few years. However, if we were to make any
repairs or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
The table below sets forth the occupancy rate at Oak Lawn Town Center expressed
as a percentage of total gross leasable area and the average annual base rent
per square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 100 22.15
-10-
Tenants leasing more than 10% of the total gross leasable area of the property
are Bed Mart, a mattress and bed store, Starbucks Coffee, a coffee shop,
Hollywood Video, a video rental store and Southwestern Bell, a telephone store.
These leases require the tenants to pay base annual rent on a monthly basis as
follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Bed Mart 2,500 20 22.00 Currently 06/30/03
Option 1 24.00 07/01/03 06/30/08
Option 2 26.00 07/01/08 06/30/13
Starbucks Coffee 1,500 12 26.00 Currently 07/31/03
28.00 08/01/03 07/31/08
Option 1 30.00 08/01/08 07/31/13
Option 2 33.00 08/01/13 07/31/18
Hollywood Video 7,200 58 21.25 Currently 05/31/08
Options 1-4 * 06/01/08 05/31/28
*Option rent calculated based on CPI indexes.
Southwestern Bell 1,306 10 22.95 Currently 04/30/00
23.41 05/01/00 04/30/01
23.88 05/01/01 04/30/02
24.36 05/01/02 04/30/03
Options 1-10 * 05/01/03 04/30/13
*Rent per square foot increases by 2% during each of the ten one-year
option periods.
For federal income tax purposes, our depreciable basis in Oak Lawn Town Center
will be approximately $1,010,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
On September 1, 1999, a total of 12,506 square feet was leased to four tenants
at Oak Lawn Town Center. The following tables set forth information with
respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Bed Mart 2,500 06/03 2/5 yr. 55,008 22.00
Starbucks Coffee 1,500 07/08 2/5 yr. 39,000 26.00
Hollywood Video 7,200 05/08 4/5 yr. 153,000 21.25
Southwestern Bell 1,306 04/03 10/1 yr. 29,973 22.95
-11-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 276,785 - - -
2000 - - - 277,380 - - -
2001 - - - 277,987 - - -
2002 - - - 278,607 - - -
2003 2 3,806 86,815 280,065 22.81 30.43 31.00
2004 - - - 195,000 - - -
2005 - - - 195,000 - - -
2006 - - - 195,000 - - -
2007 - - - 195,000 - - -
2008 2 8,700 195,000 195,000 22.41 69.57 100.00
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Oak Lawn Town Center
property, as of August 11, 1998, of $2,450,000. You should note that
appraisals are estimates of value and, therefore, you should not rely upon them
as a measure of true worth or realizable value.
-12-
West River Crossings, Joliet, Illinois
On August 3, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Caton Farm Road and Essington Road in
Joliet, Illinois known as "West River Crossings." We purchased West River
Crossings from T-L West River Crossings, Inc., an unaffiliated third party, for
approximately $5,613,000 or approximately $172.96 per square foot. We paid the
purchase price for this property using cash and cash equivalents. We believe
the purchase price was fair and reasonable based on, among other things, an
appraisal from a third party that we received and presented to our board of
directors.
West River Crossings, built in 1999, is a one-story, multi-tenant retail
facility. West River Crossings contains 32,452 leasable square feet. As of
September 1, 1999, West River Crossings was 66% leased (95% leased if the
master lease, which lasts for one year, is considered). We considered a
variety of factors including location, demographics, tenant mix, price per
square foot, existing rental rates compared to market rates, and occupancy. We
believe that the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to West
River Crossings over the next few years. However, if we were to make any
repairs or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
Two tenants, Budget Golf, a golf supply store and Hollywood Video, a video
rental store, each lease more than 10% of the total gross leasable area of the
property. These leases require the tenants to pay base annual rent on a
monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Budget Golf 4,000 12 12.00 Currently 07/31/04
Option 1 13.50 08/01/04 07/31/07
14.50 08/01/07 07/31/09
Hollywood Video 5,600 17 17.25 Currently 01/31/04
19.32 02/01/04 01/31/09
Option 1 21.64 02/01/09 01/31/14
Option 2 24.24 02/01/14 01/31/19
For federal income tax purposes, our depreciable basis in West River Crossings
will be approximately $4,200,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
-13-
On September 1, 1999, a total of 21,562 square feet was leased to nine tenants
at West River Crossings. The following tables set forth information with
respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Cigarettes Cheaper 1,200 02/04 1/5 yr. 25,800 21.50
Budget Golf 4,000 07/04 1/5 yr. 48,000 12.00
Great Clips 1,200 03/04 1/5 yr. 30,000 25.00
En Lai Restaurant 1,600 04/09 2/5 yr. 27,200 17.00
Secret Nails 3,200 05/04 1/5 yr. 57,600 18.00
Hollywood Video 5,600 01/09 2/5 yr. 96,600 17.25
West River Cleaners 1,320 03/04 1/5 yr. 30,360 23.00
Burrito King 1,080 03/04 1/5 yr. 22,140 20.50
Computer
Renaissance 2,362 04/04 1/5 yr. 55,511 23.50
Vacant 10,890
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 391,002 - - -
2000 - - - 391,002 - - -
2001 - - - 391,002 - - -
2002 - - - 393,652 - - -
2003 - - - 401,690 - - -
2004 7 14,362 280,247 404,047 19.51 44.26 69.36
2005 - - - 136,992 - - -
2006 - - - 136,992 - - -
2007 - - - 136,992 - - -
2008 - - - 136,992 - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the West River Crossings
property, as of August 1, 1999, of $5,725,000. You should note that appraisals
are estimates of value and, therefore, you should not rely upon them as a
measure of true worth or realizable value.
-14-
Hickory Creek Market Place, Frankfort, Illinois
On August 4, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at LaGrange and LaPorte Roads in Frankfort,
Illinois known as "Hickory Creek Market Place." We purchased Hickory Creek
Market Place from T-L Hickory Creek Market Place, Inc., an unaffiliated third
party, for approximately $6,216,000 or approximately $176.33 per square foot.
We paid the purchase price for this property using cash and cash equivalents.
We believe the purchase price was fair and reasonable based on, among other
things, an appraisal from a third party that we received and presented to our
board of directors.
Hickory Creek Market Place, built in 1999, is a one-story, multi-tenant retail
facility. Hickory Creek Market Place contains 35,251 leasable square feet. As
of September 1, 1999, Hickory Creek Market Place was 64% leased (95% leased if
the master lease, which lasts for one year, is considered). We considered a
variety of factors including location, demographics, tenant mix, price per
square foot, existing rental rates compared to market rates, and occupancy. We
believe that the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Hickory
Creek Market Place over the next few years. However, if we were to make any
repairs or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
Two tenants, Seven Seas Tanning, a tanning center, and Rand's Hallmark, a card
store, each lease more than 10% of the total gross leasable area of the
property. These leases require the tenants to pay base annual rent on a
monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Seven Seas
Tanning 4,000 11 18.00 Currently 03/31/01
20.14 04/01/01 03/31/03
21.35 04/01/03 03/31/04
Option 1 22.63 04/01/04 03/31/06
24.00 04/01/06 03/31/08
25.43 04/01/08 03/31/09
Rand's Hallmark 5,000 14 12.00 Currently 02/28/03
13.00 03/01/03 02/28/05
Option 1 14.00 03/01/05 02/28/08
15.00 03/01/08 02/28/10
Option 2 18.00 03/01/10 02/28/15
For federal income tax purposes, our depreciable basis in Hickory Creek Market
Place will be approximately $4,600,000. When we calculate depreciation
expense, for tax purposes, we will use the straight-line method. We depreciate
buildings and improvements based upon estimated useful lives of 40 years.
-15-
On September 1, 1999, a total of 22,730 square feet was leased to eleven
tenants at Hickory Creek Market Place. The following tables set forth
information with respect to the amount of and expiration of the leases at this
center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
GNC 1,280 04//04 1/5 yr. 23,040 18.00
Sears Optical 1,280 05/04 1/5 yr. 23,040 18.00
Sally Beauty 1,600 04/04 1/5 yr. 26,400 16.50
Great Clips 1,200 03/04 1/5 yr. 28,800 24.00
Seven Seas Tanning 4,000 03/04 1/5 yr. 74,000 18.50
Rand's Hallmark 5,000 02/05 2/5 yr. 60,000 12.00
Tobacco House 1,440 03/04 1/5 yr. 27,360 19.00
Axes Music 1,440 07/04 1/5 yr. 27,360 19.00
Distinctive Gold
Jewelry 3,040 03/09 1/10 yr. 60,800 20.00
One Hour Cleaners 1,400 04/04 1/5 yr. 29,400 21.00
Happy Nails 1,050 04/04 - 23,100 22.00
Vacant 12,521
-16-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 403,300 - - -
2000 - - - 403,300 - - -
2001 - - - 403,300 - - -
2002 - - - 412,660 - - -
2003 - - - 419,686 - - -
2004 9 14,690 303,726 429,526 20.68 41.67 70.71
2005 1 5,000 65,000 125,800 13.00 14.18 51.67
2006 - - - 64,600 - - -
2007 - - - 64,600 - - -
2008 - - - 64,600 - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Hickory Creek Market Place
property, as of August 1, 1999, of $6,400,000. You should note that appraisals
are estimates of value and, therefore, you should not rely upon them as a
measure of true worth or realizable value.
-17-
The Ryan Company Retail Portfolio
On September 10, 1999, we consummated a joint venture transaction with the Ryan
Company, a Delaware corporation. To effect the transaction, we formed two
Delaware limited liability companies. Inland Ryan L.L.C., owns and operates
eight of the nine properties acquired from the Ryan Company: Bally's Total
Fitness, Burnsville Crossing, Byerly's Burnsville Center, Park Place Center,
The Quarry, Rainbow Maple Grove, Riverdale Commons and Shingle Creek. Inland
Ryan Cliff Lake, L.L.C., owns and operates the remaining property acquired from
the Ryan Company, Cliff Lake Center. Inland Ryan Cliff Lake L.L.C. is owned
99% by Inland Ryan L.L.C. and 1% by Inland Real Estate Corporation. A detailed
description of the properties follows.
Pursuant to the Inland Ryan L.L.C. operating agreement and the Inland Ryan
Cliff Lake L.L.C. operating agreement, the Ryan Company contributed the nine
properties with a total value of approximately $99,427,000 and with outstanding
debt of approximately $65,500,000, resulting in net equity of approximately
$33,927,000. For their net equity in the properties, the Ryan Company received
cash of approximately $11,227,000 and approximately $22,700,000 of Inland Ryan
L.L.C. membership interests, which equates to a 23% ownership interest in
Inland Ryan L.L.C. Inland Real Estate Corporation provided the remaining
equity to Inland Ryan L.L.C. in the form of cash in the approximate amount of
$71,604,000 and received a 77% interest in the Inland Ryan L.L.C. From this
cash contribution, approximately $60,377,000 was used to retire existing
construction loans on the properties.
As part of this transaction, Inland Ryan L.L.C. secured financing totaling
approximately $51,600,000. Financing totaling $10,654,300 was obtained and
secured by four of the Inland Ryan L.L.C. properties. These loans require
interest only payments at a floating rate based on the 30 day LIBOR index plus
1.3% (current note rate of 6.68%) and mature on October 1, 2004. Financing
totaling $35,781,000 was obtained from a second lender and was secured by the
remaining four properties held by Inland Ryan L.L.C. These loans require
interest only payments at a floating rate based on the 90 day LIBOR index plus
1.5% (current note rate of 7.0025%) and also mature on October 1, 2004. The
Inland Ryan Cliff Lake L.L.C. assumed the existing debt on the Cliff Lake
property of approximately $5,123,000 which terms include a fixed interest rate
of 7.86% and maturity in January, 2008.
In accordance with the Inland Ryan L.L.C. operating agreement, the Ryan Company
will earn a preferred return of 7.375% per annum on their equity in Inland Ryan
L.L.C. The remaining cash flow, after the payment to Inland Ryan L.L.C., will
go to the Company, the managing member, up to a 10% return on their equity.
Any remaining cash flow after this payment will be split 99% to the managing
member and 1% to the Ryan Company, the non-managing member. The Ryan Company
has a right to liquidate up to 1/2 of their equity in Inland Ryan L.L.C. after
January 1, 2001 and the remaining balance after June 30, 2002.
-18-
Bally's Total Fitness, St. Paul, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a single-
user retail center located at 1166 University Avenue in St. Paul, Minnesota
known as "Bally's Total Fitness." We purchased Bally's Total Fitness from Ryan
Midway LP, an unaffiliated third party, for approximately $6,291,000 or
approximately $146.30 per square foot. We believe the purchase price was fair
and reasonable based on, among other things, an appraisal from a third party
that we received and presented to our board of directors.
Bally's Total Fitness, built in 1988, is a two-story, single-tenant health and
fitness facility. Bally's Total Fitness contains 43,000 leasable square feet.
As of September 10, 1999, Bally's Total Fitness was 100% leased.
We do not anticipate making any significant repairs and improvements to Bally's
Total Fitness over the next few years. However, if we were to make any repairs
or improvements, pursuant to the lease, the center's tenant would be obligated
to pay a substantial portion of any monies spent on repair and improvements.
The table below sets forth the occupancy rate at Bally's Total Fitness
expressed as a percentage of total gross leasable area and the average annual
base rent per square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 100 13.96
1997 100 13.96
1996 100 13.96
1995 100 13.96
1994 100 13.96
One tenant, Landlord's Total Fitness, leases 100% of the total gross leasable
area of the property. This lease requires the tenant to pay base annual rent
on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Landlord's Total
Fitness 43,000 100 15.36 Currently 09/30/03
Option 1 16.89 10/01/03 09/30/08
Option 2 18.58 10/01/08 09/30/13
Option 3 20.44 10/01/13 09/30/18
-19-
For federal income tax purposes, our depreciable basis in Bally's Total Fitness
will be approximately $4,718,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $87,049.
On September 10, 1999, a total of 43,000 square feet was leased to one tenant
at Bally's Total Fitness. The following tables set forth information with
respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Landlord's Total
Fitness 43,358 09/03 3/5 yr. 660,261 15.36
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999-
2002 - - - 660,480 - - -
2003 1 43,000 660,480 660,480 15.36 100 100
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Bally's Total Fitness
property, as of August 10, 1999, of $6,400,000. You should note that
appraisals are estimates of value and, therefore, you should not rely upon them
as a measure of true worth or realizable value.
-20-
Burnsville Crossing, Burnsville, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Interstate Hwy. 35E and County Road No.
42 Interchange in Burnsville, Minnesota known as "Burnsville Crossing." We
purchased Burnsville Crossing from Ryan/Flying Cloud L.P., an unaffiliated
third party, for approximately $5,716,000 or approximately $62.80 per square
foot. We paid the purchase price for this property using cash and cash
equivalents. We believe the purchase price was fair and reasonable based on,
among other things, an appraisal from a third party that we received and
presented to our board of directors.
Burnsville Crossing, built in 1989 (Petsmart in 1997), is a one-story, multi-
tenant retail facility. Burnsville Crossing contains 91,015 leasable square
feet. As of September 10, 1999, Burnsville Crossing was 100% leased (100%
leased if the master lease, which lasts for five years, is considered). We
considered a variety of factors including location, demographics, tenant mix,
price per square foot, existing rental rates compared to market rates, and
occupancy. We believe that the center is located within a vibrant economic
area.
We do not anticipate making any significant repairs and improvements to
Burnsville Crossing over the next few years. However, if we were to make any
repairs or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
The table below sets forth the occupancy rate at Burnsville Crossing expressed
as a percentage of total gross leasable area and the average annual base rent
per square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 62 10.06
1997 61 6.55
1996 93 4.93
1995 79 9.77
1994 85 8.81
-21-
Two tenants, Petsmart, a pet supply store and Schneiderman's, a furniture
store, each lease more than 10% of the total gross leasable area of the
property. These leases require the tenants to pay base annual rent on a
monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Petsmart 26,040 29 11.51 Currently 01/31/03
12.26 02/01/03 01/31/08
13.01 02/01/08 01/31/13
Option 1 13.76 02/01/13 01/31/18
Option 2 14.51 02/01/18 01/31/23
Option 3 15.26 02/01/23 01/31/28
Option 4 16.01 02/01/28 01/31/33
Schneiderman's 26,955 30 4.00 Currently 10/31/09
For federal income tax purposes, our depreciable basis in Burnsville Crossing
will be approximately $4,287,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $172,033.
On September 10, 1999, a total of 91,015 square feet was leased to fourteen
tenants at Burnsville Crossing. The following tables set forth information
with respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Clatti's 7,800 04/03 - 105,300 13.50
Golden Tan 3,600 07/04 1/5 yr. 31,500 8.75
Norwest Financial 2,100 12/99 - 26,250 12.50
Cabinets, Etc. 1,400 04/01 - 11,900 8.50
Viking Enterprises 1,400 08/01 - 12,950 9.25
Shaw Industries 4,640 09/02 1/5 yr. 41,760 9.00
Petsmart 26,040 01/13 5/5 yr. 299,720 11.51
Tuesday Morning 6,040 01/03 1/5 yr. 37,146 6.15
Hummingbird Travel 1,200 09/03 - 11,700 9.75
Boy Scouts of
America 1,800 03/09 - 19,350 10.75
Shear Madness 2,100 11/01 1/5 yr. 17,850 8.50
Sweet Celebrations 4,140 07/04 1/5 yr. 33,120 8.00
Aerial Beauty Supply 1,800 04/04 1/5 yr. 14,400 8.00
Schneiderman's 26,955 10/09 - 107,820 4.00
-22-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1 2,100 26,250 770,766 12.50 2.31 3.41
2000 - - - 745,516 - - -
2001 3 4,900 44,100 757,586 9.00 5.38 5.82
2002 1 4,640 46,400 721,696 10.00 5.10 6.43
2003 3 15,040 164,046 680,666 10.91 16.52 24.10
2004 3 9,540 89,730 540,920 9.41 10.48 16.59
2005 - - - 450,020 - - -
2006 - - - 450,020 - - -
2007 - - - 450,020 - - -
2008 - - - 450,020 - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Burnsville Crossing
property, as of August 10, 1999, of $6,800,000. You should note that
appraisals are estimates of value and, therefore, you should not rely upon them
as a measure of true worth or realizable value.
-23-
Byerly's Burnsville Center, Burnsville, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Corner of Portland Avenue and County Road
No. 42 Interchange in Burnsville, Minnesota known as "Byerly's Burnsville
Center." We purchased Byerly's Burnsville Center from Ryan Retail Burnsville
L.P., an unaffiliated third party, for approximately $5,832,000 or
approximately $76.55 per square foot. We believe the purchase price was fair
and reasonable based on, among other things, an appraisal from a third party
that we received and presented to our board of directors.
Byerly's Burnsville Center, built in 1988, is a one-story, multi-tenant retail
facility. Byerly's Burnsville Center contains 76,190 leasable square feet. As
of September 10, 1999, Byerly's Burnsville Center was 100% leased.
We do not anticipate making any significant repairs and improvements to
Byerly's Burnsville Center over the next few years. However, if we were to
make any repairs or improvements, pursuant to the leases, the center's tenants
would be obligated to pay a substantial portion of any monies spent on repairs
and improvements.
The table below sets forth the occupancy rate at Byerly's Burnsville Center
expressed as a percentage of total gross leasable area and the average annual
base rent per square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 100 11.71
1997 100 10.14
1996 100 9.99
1995 98 10.17
1994 98 9.95
-24-
Two tenants, Byerly's, a grocery store, and Zany Brainy, a toy store, each
lease more than 10% of the total gross leasable area of the property. These
leases require the tenants to pay base annual rent on a monthly basis as
follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Byerly's 54,876 72 9.99 Currently 09/30/08
Zany Brainy 11,280 15 11.30 Currently 07/31/04
For federal income tax purposes, our depreciable basis in Byerly's Burnsville
Center will be approximately $4,374,000. When we calculate depreciation
expense, for tax purposes, we will use the straight-line method. We depreciate
buildings and improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $253,531.
On September 10, 1999, a total of 76,190 square feet was leased to seven
tenants at Byerly's Burnsville Center. The following tables set forth
information with respect to the amount of and expiration of the leases at this
center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Byerly's 54,876 09/08 - 509,999 9.99
Nail & Hair Design 1,200 04/02 - 15,600 13.00
Pilgrim Cleaners 2,420 09/08 - 45,738 18.90
Great Clips 1,540 10/99 - 26,950 17.50
US Health &
Nutrition 1,674 10/00 - 22,599 13.50
Mill Creek
Furnishing 3,200 09/02 - 41,600 13.00
Zany Brainy 11,280 07/04 - 127,464 11.30
-25-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1 1,540 26,950 786,350 17.50 2.02 3.43
2000 1 1,674 23,436 762,657 14.00 2.20 3.07
2001 - - - 744,841 - - -
2002 2 4,400 56,800 747,261 12.91 5.78 7.60
2003 - - - 692,881 - - -
2004 1 11,280 127,464 692,881 11.30 14.81 18.40
2005 - - - 565,417 - - -
2006 - - - 565,417 - - -
2007 - - - 565,417 - - -
2008 2 57,296 565,417 565,417 9.87 75.20 100.00
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Byerly's Burnsville Center
property, as of August 10, 1999, of $7,200,000. You should note that
appraisals are estimates of value and, therefore, you should not rely upon them
as a measure of true worth or realizable value.
-26-
Cliff Lake Center, Eagan, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Interstate 35E along Cliff Road in Eagan,
Minnesota known as "Cliff Lake Center." We purchased Cliff Lake Center from
Ryan Cliff Lake LLC, an unaffiliated third party, for approximately $5,553,000
or approximately $74.82 per square foot. We believe the purchase price was
fair and reasonable based on, among other things, an appraisal from a third
party that we received and presented to our board of directors.
Cliff Lake Center, built in 1988, is a one-story, multi-tenant retail
facility. Cliff Lake Center contains 74,215 leasable square feet. As of
September 10, 1999, Cliff Lake Center was 94% leased (100% leased if the master
lease, which lasts for five years, is considered). We considered a variety of
factors including location, demographics, tenant mix, price per square foot,
existing rental rates compared to market rates, and occupancy. We believe that
the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Cliff
Lake Center over the next few years. However, if we were to make any repairs
or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
The table below sets forth the occupancy rate at Cliff Lake Center expressed as
a percentage of total gross leasable area and the average annual base rent per
square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 94 10.85
1997 100 11.78
1996 100 11.05
1995 100 10.23
1994 100 9.84
-27-
One tenant, Silas Creek Retail leases more than 10% of the total gross leasable
area of the property. This tenant has vacated the space although they continue
to pay base annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Silas Creek
Retail 11,833 16 7.00 Currently 11/30/00
For federal income tax purposes, our depreciable basis in Cliff Lake Center
will be approximately $4,160,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1998 for the tax year ended 1998 are $282,056.
On September 10, 1999, a total of 70,073 square feet was leased to twenty-seven
tenants at Cliff Lake Center. The following tables set forth information with
respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Perrier Liquors 4,200 02/01 63,504 15.12
Pilgrim Cleaners 1,400 04/09 23,100 16.50
Fast Frames 1,400 10/00 18,550 13.25
Montessori 4,406 04/02 26,436 6.00
GNC 1,400 06/03 16,800 12.00
Tobacco, Etc. 2,566 01/04 28,226 11.00
Kokomo Tan 1,000 10/01 12,500 12.50
Professional
Veterinary 1,055 10/01 14,506 13.75
Great Clips 1,200 03/04 21,600 18.00
Ritz Camera 1,200 08/01 16,800 14.00
Pakmail Center 1,200 11/04 14,400 12.00
West Coast Video 3,605 07/06 34,248 9.50
Anna Chung's
Restaurant 1,862 08/00 32,324 17.36
Davanni's
Restaurant 3,444 09/04 1/5 yr. 50,799 14.75
Hair Performers 1,400 09/02 16,800 12.00
Ravey's Hallmark 4,200 02/00 2/5 yr. 29,400 7.00
Radio Shack 2,120 11/99 24,910 11.75
VT Jewelers 680 07/00 9,180 13.50
Oscar Nails 1,400 04/00 16,800 12.00
Hobby Town 2,120 08/00 22,260 10.50
Dr. Rauchwater 1,480 07/01 1/5 yr. 16,280 11.00
Unique Software 2,400 02/00 33,600 14.00
-28-
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
International Tours 1,200 04/00 13,452 11.21
Golf America 6,606 05/02 82,575 12.50
Silas Creek Retail 11,833 11/00 82,831 7.00
Wild Bird 2,824 07/09 31,064 11.00
Gymboree 1,872 07/09 20,592 11.00
Vacant 4,142
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1 2,120 24,910 773,537 11.75 2.86 3.22
2000 9 27,095 263,924 747,832 9.74 36.51 35.29
2001 5 8,935 101,760 491,012 11.39 12.04 20.72
2002 3 12,412 105,478 370,183 8.50 16.72 28.49
2003 - - - 236,546 - - -
2004 4 8,410 109,225 219,629 12.99 11.33 49.73
2005 - - - 110,404 - - -
2006 1 3,605 34,248 111,804 9.50 4.86 30.63
2007 - - - 77,556 - - -
2008 - - - 77,556 - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Cliff Lake Center property,
as of August 10, 1999, of $6,800,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.
-29-
Park Place Center, St. Louis Park, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Interstate 394 and Minnesota Hwy. 100
Interchange in St. Louis Park, Minnesota known as "Park Place Center." We
purchased Park Place Center from Ryan MPLS, LLC, an unaffiliated third party,
for approximately $12,816,000 or approximately $150.78 per square foot. We
believe the purchase price was fair and reasonable based on, among other
things, an appraisal from a third party that we received and presented to our
board of directors.
Park Place Center, built in 1997, is a one-story, multi-tenant retail
facility. Park Place Center contains 84,999 leasable square feet. As of
September 10, 1999, Park Place Center was 100% leased. We considered a variety
of factors including location, demographics, tenant mix, price per square foot,
existing rental rates compared to market rates, and occupancy. We believe that
the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Park
Place Center over the next few years. However, if we were to make any repairs
or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
The table below sets forth the occupancy rate at Park Place Center expressed as
a percentage of total gross leasable area and the average annual base rent per
square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 94 12.39
1997 93 N/A
-30-
Two tenants, Petsmart, a pet supply store, and Office Max, an office supply
store, each leases more than 10% of the total gross leasable area of the
property. This lease requires the tenant to pay base annual rent on a monthly
basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Petsmart 26,165 31 14.28 Currently 01/31/03
15.03 02/01/03 01/31/08
15.78 02/01/08 01/31/13
Option 1 16.53 02/01/13 01/31/18
Option 2 17.28 02/01/18 01/31/23
Option 3 18.03 02/01/23 01/31/28
Option 4 18.78 02/01/28 01/31/33
Option 5 19.53 02/01/33 01/31/38
Office Max 36,560 43 12.16 Currently 06/30/02
12.66 07/01/02 06/30/07
13.16 07/01/07 06/30/12
Option 1 13.66 07/01/12 06/30/17
Option 2 14.16 07/01/17 06/30/22
Option 3 14.66 07/01/22 06/30/27
Option 4 15.16 07/01/27 06/30/32
For federal income tax purposes, our depreciable basis in Park Place Center
will be approximately $9,612,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $352,187.
On September 10, 1999, a total of 84,999 square feet was leased to twelve
tenants at Park Place Center. The following tables set forth information with
respect to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Petsmart 26,165 07/13 5/5 yr. 373,636 14.28
Office Max 36,560 06/12 4/5 yr. 444,570 12.16
Lakeshore Learning 7,475 04/08 2/5 yr. 132,308 17.70
Breugger's Bagel Co 2,160 04/07 2/5 yr. 42,120 19.50
Caribou Coffee 1,500 05/07 2/5 yr. 28,125 18.75
Great Clips 1,000 04/07 2/5 yr. 19,500 19.50
GNC 1,300 04/02 1/5 yr. 24,700 19.00
Mobile Phone Co. 1,000 06/00 1/3 yr. 21,000 21.00
Quizno's 1,400 04/02 2/5 yr. 25,550 18.25
Dairy Queen 2,095 04/08 1/10 yr. 42,424 20.25
Lee Ann Chin 2,904 04/08 1/10 yr. 61,129 21.05
Apple One
Employment 1,440 07/03 1/3 yr. 26,928 18.70
-31-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 1,241,989 - - -
2000 1 1,000 21,000 1,241,989 21.00 1.18 1.69
2001 - - - 1,223,009 - - -
2002 2 2,700 51,550 1,225,104 19.09 3.18 4.21
2003 1 1,440 28,368 1,197,919 19.70 1.69 2.37
2004 - - - 1,202,375 - - -
2005 - - - 1,202,375 - - -
2006 - - - 1,202,375 - - -
2007 3 4,660 95,110 1,204,470 20.41 5.48 7.90
2008 3 12,474 253,251 1,127,640 20.30 14.68 22.46
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Park Place Center property,
as of August 10, 1999, of $13,250,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.
-32-
The Quarry, Minneapolis, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Southwestern Corner of U.S. Interstate
35W and New Brighton Blvd. in Minneapolis, Minnesota known as "The Quarry." We
purchased The Quarry from Ryan MPLS, LLC, an unaffiliated third party, for
approximately $31,341,000 or approximately $107.83 per square foot. We believe
the purchase price was fair and reasonable based on, among other things, an
appraisal from a third party that we received and presented to our board of
directors.
The Quarry, built in 1997, is a one-story, multi-tenant retail facility. The
Quarry contains 290,658 leasable square feet. As of September 10, 1999, The
Quarry was 99% leased (100% leased if the master lease, which lasts for five
years, is considered). We considered a variety of factors including location,
demographics, tenant mix, price per square foot, existing rental rates compared
to market rates, and occupancy. We believe that the center is located within a
vibrant economic area.
We do not anticipate making any significant repairs and improvements to The
Quarry over the next few years. However, if we were to make any repairs or
improvements, pursuant to the leases, the center's tenants would be obligated
to pay a substantial portion of any monies spent on repairs and improvements.
The table below sets forth the occupancy rate at The Quarry expressed as a
percentage of total gross leasable area and the average annual base rent per
square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 99 10.13
1997 84 N/A
-33-
Two tenants, Home Depot, a home improvement store, and Rainbow Foods, a grocery
store, each lease more than 10% of the total gross leasable area of the
property. These leases require the tenants to pay base annual rent on a
monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Home Depot 130,000 45 8.69 Currently 01/31/08
9.56 02/01/08 01/31/18
Option 1 10.00 02/01/18 01/31/23
Option 2 10.43 02/01/23 01/31/28
Option 3 10.87 02/01/28 01/31/33
Option 4 11.30 02/01/33 01/31/38
Rainbow Foods 64,130 22 9.25 Currently 08/31/02
9.90 09/01/02 08/31/07
10.40 09/01/07 08/31/12
10.90 09/01/12 09/30/17
Option 1 11.40 10/01/17 09/30/22
Option 2 11.90 10/01/22 09/30/27
Option 3 12.40 10/01/27 09/30/32
For federal income tax purposes, our depreciable basis in The Quarry will be
approximately $23,500,000. When we calculate depreciation expense, for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $1,068,699.
On September 10, 1999, a total of 287,818 square feet was leased to twelve
tenants at The Quarry. The following tables set forth information with respect
to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Rainbow Foods 64,130 09/17 3/5 yr. 593,203 9.25
Home Depot 130,000 01/18 4/5 yr. 1,129,700 8.69
Petsmart 26,260 01/13 5/5 yr. 310,131 11.81
Office Max 23,500 11/12 4/5 yr. 271,425 11.55
Old Navy 16,480 03/08 2/5 yr. 221,656 13.45
Video Update 7,500 09/07 2/5 yr. 134,175 17.89
Party City 12,168 10/07 2/5 yr. 166,702 13.70
Lee Ann Chin 2,480 12/07 2/5 yr. 67,605 27.26
GNC 1,240 10/02 1/5 yr. 22,320 18.00
Cost Cutters 1,240 10/02 4/5 yr. 26,040 21.00
Mail Boxes, Etc. 1,240 11/02 1/5 yr. 23,560 19.00
Cousin Subs 1,580 07/04 - 23,305 14.75
Vacant 2,840
-34-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 2,989,821 - - -
2000 - - - 2,992,301 - - -
2001 - - - 2,994,793 - - -
2002 3 3,720 78,132 2,996,033 21.00 1.28 2.61
2003 - - - 3,014,448 - - -
2004 1 1,580 23,305 3,034,028 14.75 .54 .77
2005 - - - 3,010,723 - - -
2006 - - - 3,010,723 - - -
2007 3 22,148 395,000 3,010,723 17.83 7.62 13.12
2008 1 16,480 238,136 2,659,539 14.45 5.67 8.95
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the The Quarry property, as of
August 10, 1999, of $32,000,000. You should note that appraisals are estimates
of value and, therefore, you should not rely upon them as a measure of true
worth or realizable value.
-35-
Rainbow Maple Grove, Maple Grove, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at I-94 and County Road 30 in Maple Grove,
Minnesota known as "Rainbow Maple Grove." We purchased Rainbow Maple Grove
from Ryan MPLS, LLC, an unaffiliated third party, for approximately $7,916,000
or approximately $100.04 per square foot. We believe the purchase price was
fair and reasonable based on, among other things, an appraisal from a third
party that we received and presented to our board of directors.
Rainbow Maple Grove, built in 1998, is a one-story, multi-tenant retail
facility. Rainbow Maple Grove contains 79,130 leasable square feet. As of
September 10, 1999, Rainbow Maple Grove was 81% leased (100% leased if the
master lease, which lasts for five years, is considered). We considered a
variety of factors including location, demographics, tenant mix, price per
square foot, existing rental rates compared to market rates, and occupancy. We
believe that the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Rainbow
Maple Grove over the next few years. However, if we were to make any repairs
or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
The table below sets forth the occupancy rate at Rainbow Maple Grove expressed
as a percentage of total gross leasable area and the average annual base rent
per square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 81 3.67
-36-
One tenant, Rainbow Foods, a grocery store, leases more than 10% of the total
gross leasable area of the property. This lease requires the tenant to pay
base annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Rainbow Foods 64,130 81 12.25 Currently 08/31/03
12.90 09/01/03 08/31/08
13.55 09/01/08 08/31/13
14.20 09/01/13 09/30/18
Option 1 14.85 10/01/18 09/30/23
Option 2 15.50 10/01/23 09/30/28
Option 3 16.15 10/01/28 09/30/33
Option 4 16.80 10/01/33 09/30/38
Option 5 17.45 10/01/33 09/30/43
Option 6 18.10 10/01/43 09/30/48
For federal income tax purposes, our depreciable basis in Rainbow Maple Grove
will be approximately $5,940,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $73,449.
On September 10, 1999, a total of 64,130 square feet was leased to one tenant
at Rainbow Maple Grove. The following tables set forth information with
respect to the amount of and expiration of the lease at this Neighborhood
Retail Center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Rainbow Foods 64,130 09/18 6/5 yr. 785,593 12.25
Vacant 15,000
-37-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 769,560 - - -
2000 - - - 785,593 - - -
2001 - - - 785,593 - - -
2002 - - - 785,593 - - -
2003 - - - 785,593 - - -
2004 - - - 827,277 - - -
2005 - - - 827,277 - - -
2006 - - - 827,277 - - -
2007 - - - 827,277 - - -
2008 - - - 827,277 - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Rainbow Maple Grove
property, as of August 10, 1999, of $9,600,000. You should note that
appraisals are estimates of value and, therefore, you should not rely upon them
as a measure of true worth or realizable value.
-38-
Riverdale Commons, Coon Rapids, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at US Highway 10 and Main Street Interchange
in Coon Rapids, Minnesota known as "Riverdale Commons." We purchased Riverdale
Commons from Ryan MPLS, LLC, an unaffiliated third party, for approximately
$19,506,000 or approximately $115.98 per square foot. We believe the purchase
price was fair and reasonable based on, among other things, an appraisal from a
third party that we received and presented to our board of directors.
Riverdale Commons, built in 1998, is a one-story, multi-tenant retail
facility. Riverdale Commons contains 168,184 leasable square feet. As of
September 10, 1999, Riverdale Commons was 95% leased (100% leased if the master
lease, which lasts for five years, is considered). We considered a variety of
factors including location, demographics, tenant mix, price per square foot,
existing rental rates compared to market rates, and occupancy. We believe that
the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to
Riverdale Commons over the next few years. However, if we were to make any
repairs or improvements, pursuant to the leases, the center's tenants would be
obligated to pay a substantial portion of any monies spent on repairs and
improvements.
The table below sets forth the occupancy rate at Riverdale Commons expressed as
a percentage of total gross leasable area and the average annual base rent per
square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 100 2.41
-39-
Tenants leasing more than 10% of the total square footage include Rainbow
Foods, a grocery store, Office Max, an office supply store and Wickes
Furniture, a furniture store. These leases require the tenant to pay base
annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Rainbow Foods 64,061 38 9.80 Currently 08/31/03
10.45 09/01/03 08/31/08
11.10 09/01/08 08/31/13
11.75 09/01/13 08/31/18
Option 1 12.40 09/01/18 08/31/23
Option 2 13.05 09/01/23 08/31/28
Option 3 13.70 09/01/28 08/31/33
Option 4 14.35 09/01/33 08/31/38
Option 5 15.00 09/01/38 08/31/43
Option 6 15.65 09/01/43 08/31/48
Office Max 23,584 14 11.25 Currently 11/30/03
11.75 12/01/03 11/30/08
12.25 12/01/08 11/30/13
Option 1 12.75 12/01/13 11/30/18
Option 2 13.25 12/01/18 11/30/23
Option 3 13.75 12/01/23 11/30/28
Option 4 14.25 12/01/28 11/30/33
Wickes Furniture 35,000 21 10.90 Currently 07/31/04
11.00 08/01/04 07/31/09
11.50 08/01/09 07/31/14
Option 1 12.25 08/01/14 07/31/19
Option 2 13.00 08/01/19 07/31/24
Option 3 13.75 08/01/24 07/31/29
For federal income tax purposes, our depreciable basis in Riverdale Commons
will be approximately $14,700,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $527,252.
On September 10, 1999, a total of 159,305 square feet was leased to ten tenants
at Riverdale Commons. The following tables set forth information with respect
to the amount of and expiration of the leases at this Neighborhood Retail
Center:
-40-
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Rainbow Foods 64,061 08/18 6/5 yr. 627,798 9.80
Golf America 4,970 09/03 1/5 yr 69,580 14.00
Petco 15,000 01/14 3/11 yr. 161,250 10.75
Office Max 23,584 11/13 4/5 yr 265,320 11.25
Party City 11,122 08/08 2/5 yr. 152,371 13.70
Wickes Furniture 35,000 07/14 3/5 yr. 381,500 10.90
Cost Cutters 1,239 07/04 1/5 yr. 23,541 19.00
Sally Beauty
Supply 1,240 04/04 2/5 yr. 21,700 17.50
Mobile Phone Co. 1,292 07/02 1/2 yr. 22,610 17.50
Starbucks Coffee 1,797 07/09 1/5 yr. 32,346 18.00
Vacant 8,879
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - $1,758,016 - - -
2000 - - - 1,758,016 - - -
2001 - - - 1,758,016 - - -
2002 1 1,292 22,610 1,758,636 17.50 .77 1.29
2003 1 4,970 69,580 1,750,591 14.00 2.96 3.97
2004 2 2,531 46,480 1,745,564 18.36 1.50 2.66
2005 - - - 1,702,584 - - -
2006 - - - 1,707,077 - - -
2007 - - - 1,707,077 - - -
2008 1 11,122 163,493 1,718,327 14.70 6.61 9.51
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Riverdale Commons property,
as of August 10, 1999, of $20,200,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.
-41-
Shingle Creek, Brooklyn Center, Minnesota
On September 10, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at Summit Drive and Shingle Creek Parkway in
Brooklyn Center, Minnesota known as "Shingle Creek." We purchased Shingle
Creek from Ryan Shingle Creek L.P., an unaffiliated third party, for
approximately $3,470,000 or approximately $87.88 per square foot. We believe
the purchase price was fair and reasonable based on, among other things, an
appraisal from a third party that we received and presented to our board of
directors.
Shingle Creek, built in 1986, is a one-story, multi-tenant retail facility.
Shingle Creek contains 39,486 leasable square feet. As of September 10, 1999,
Shingle Creek was 73% leased (100% leased if the master lease, which lasts for
five years, is considered). We considered a variety of factors including
location, demographics, tenant mix, price per square foot, existing rental
rates compared to market rates, and occupancy. We believe that the center is
located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Shingle
Creek over the next few years. However, if we were to make any repairs or
improvements, pursuant to the leases, the center's tenants would be obligated
to pay a substantial portion of any monies spent on repairs and improvements.
The table below sets forth the occupancy rate at Shingle Creek expressed as a
percentage of total gross leasable area and the average annual base rent per
square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 66 15.79
1997 82 14.13
1996 81 14.09
1995 81 14.27
1994 75 14.35
-42-
One tenant, Panera Bread, a bakery, leases more than 10% of the total gross
leasable area of the property. This lease requires the tenant to pay base
annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Panera Bread 4,217 11 12.15 Currently 07/31/04
For federal income tax purposes, our depreciable basis in Shingle Creek will be
approximately $2,600,000. When we calculate depreciation expense, for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 years.
Real estate taxes payable in 1999 for the tax year ended 1998 are $139,744.
On September 10, 1999, a total of 28,876 square feet was leased to sixteen
tenants at Shingle Creek. The following tables set forth information with
respect to the amount of and expiration of the leases at this Neighborhood
Retail Center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Payless Shoes 2,857 07/02 - 34,284 12.00
Life Uniform 1,250 02/00 - 26,088 20.87
Ritz Camera 1,976 07/04 - 23,712 12.00
Michaels Boot &
Shoe 1,202 07/00 - 14,424 12.00
Great Clips 1,202 02/00 - 20,434 17.00
Sterling Optical 1,213 02/01 - 20,621 17.00
Disc Go Round 1,613 05/02 - 19,356 12.00
Funcoland 1,613 12/00 - 22,582 14.00
Mail Boxes, Etc. 1,591 07/00 - 22,672 14.25
Lee Ann Chin 2,959 11/01 - 73,383 24.80
Pizza Hut 3,040 06/01 - 54,720 18.00
Tobacco Warehouse 933 09/02 - 11,196 12.00
AAA Minneapolis 1,053 02/02 - 10,530 10.00
Coffee O'Bagel 1,104 04/02 - 16,008 14.50
H & R Block 1,053 05/02 - 16,848 16.00
Panera Bread 4,217 07/04 - 51,237 12.15
Vacant 10,610
-43-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 438,094 - - -
2000 5 6,857 106,200 438,701 15.49 17.37 24.21
2001 3 7,212 149,331 334,763 20.71 18.26 44.61
2002 6 8,613 112,903 187,851 13.11 21.81 60.10
2003 - - - 74,949 - - -
2004 2 6,193 74,949 74,949 12.10 15.68 100.00
2005 - - - - - - -
2006 - - - - - - -
2007 - - - - - - -
2008 - - - - - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Shingle Creek property, as
of August 10, 1999, of $3,780,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.
-44-
United Audio Center, Schaumburg, Illinois
On September 13, 1999, we purchased the entire fee simple interest in a single-
user retail center located at 935 E. Golf Road in Schaumburg, Illinois known as
"United Audio Center." We purchased United Audio Center from 78th Street
Properties, LLC, an unaffiliated third party, for approximately $2,485,000 or
approximately $248.80 per square foot. We paid the purchase price for this
property using cash and cash equivalents. We believe the purchase price was
fair and reasonable based on, among other things, an appraisal from a third
party that we received and presented to our board of directors.
United Audio Center, built in 1998, is a one-story, single-user retail
facility. United Audio Center contains 9,988 leasable square feet. As of
September 13, 1999, United Audio Center was 100% leased. We considered a
variety of factors including location, demographics, tenant, price per square
foot and existing rental rate compared to market rates. We believe that the
center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to United
Audio Center over the next few years. However, if we were to make any repairs
or improvements, pursuant to the lease, the center's tenant would be obligated
to pay a substantial portion of any monies spent on repairs and improvements.
The table below sets forth the occupancy rate at United Audio Center expressed
as a percentage of total gross leasable area and the average annual base rent
per square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 100 27.80
One tenant, United Audio, leases 100% of the total gross leasable area of the
property. This lease requires the tenant to pay base annual rent on a monthly
basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
United Audio 9,988 100 27.80 Currently 06/30/03
30.58 07/01/03 06/30/08
33.67 07/01/08 06/30/13
Option 1 37.00 07/01/13 06/30/18
Option 2 40.70 07/01/18 06/30/23
-45-
For federal income tax purposes, our depreciable basis in United Audio Center
will be approximately $1,800,000. When we calculate depreciation expense, for
tax purposes, we will use the straight-line method. We depreciate buildings
and improvements based upon estimated useful lives of 40 years.
On September 13, 1999, a total of 9,988 square feet was leased to one tenant at
United Audio Center. The following tables set forth information with respect
to the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
United Audio 9,988 06/13 2/5 yr. 277,666 27.80
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999-
2002 - - - 277,666 - - -
2003 - - - 291,549 - - -
2004-
2007 - - - 305,433 - - -
2008 - - - 320,714 - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the United Audio Center
property, as of August 8, 1999, of $2,500,000. You should note that appraisals
are estimates of value and, therefore, you should not rely upon them as a
measure of true worth or realizable value.
-46-
Rose Plaza West, Naperville, Illinois
On September 16, 1999, we purchased the entire fee simple interest in a
Neighborhood Retail Center located at the southwest corner of 75th and
Millbrook in Naperville, Illinois known as "Rose Plaza West." We purchased
Rose Plaza West from Naper Center, LLC, an unaffiliated third party, for
approximately $2,763,600 or approximately $191.15 per square foot. We paid the
purchase price for this property using cash and cash equivalents. We believe
the purchase price was fair and reasonable based on, among other things, an
appraisal from a third party that we received and presented to our board of
directors.
Rose Plaza West, built in 1997, is a single-story multi-tenant retail
facility. Rose Plaza West contains 14,458 leasable square feet. As of
September 16, 1999, Rose Plaza West was 100% leased. We considered a variety
of factors including location, demographics, tenant mix, price per square foot,
existing rental rates compared to market rates, and occupancy. We believe that
the center is located within a vibrant economic area.
We do not anticipate making any significant repairs and improvements to Rose
Plaza West over the next few years. However, if we were to make any repairs or
improvements, pursuant to the leases, the center's tenants would be obligated
to pay a substantial portion of any monies spent on repairs and improvements.
The table below sets forth the occupancy rate at Rose Plaza West expressed as a
percentage of total gross leasable area and the average annual base rent per
square foot:
Occupancy Rate Effective
as of Annual Rental
December 31, Rate Per Leasable
Year Ending of Each Year Square Ft
December 31, (%) ($)
------------ ------------ -------------
1998 100 18.48
1997 85 4.44
-47-
Five tenants, Hollywood Video, a video rental store, Papa John's, a carry out
pizza restaurant, Caribou Coffee, a coffee shop, Signature Cleaners, a dry-
cleaning store and Elegant Salon, a beauty shop, each lease more than 10% of
the total gross leasable area of the property. These leases require the
tenants to pay base annual rent on a monthly basis as follows:
Base Rent
Per Square
Approximate Foot Per
GLA % of Total Annum Lease Term
Lessee Leased GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Papa John's 1,518 11 17.00 Currently 10/31/01
18.00 11/01/01 10/31/02
Caribou Coffee 1,640 11 24.00 Currently 07/31/02
27.60 08/01/02 07/31/07
Hollywood Video 7,000 49 17.75 Currently 06/30/07
Signature Cleaners 2,090 14 23.39 Currently 07/31/00
* * 07/31/07
Elegant Salon 2,210 15 19.00 Currently 04/30/00
20.00 05/01/00 04/30/03
*Base rent per square foot increases annually by 3% per year through the term
of the lease.
For federal income tax purposes, our depreciable basis in Rose Plaza West will
be approximately $2,000,000. When we calculate depreciation expense, for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 years.
Real estate taxes paid in 1999 for the tax year ended 1998 were $29,249. The
real estate taxes payable were calculated by multiplying the assessed value by
an equalizer of 1.016% and a tax rate of 6.4393%.
On September 16, 1999, a total of 14,458 square feet was leased to five tenants
at Rose Plaza West. The following tables set forth information with respect to
the amount of and expiration of the leases at this center:
Approximate Current Rent per
GLA Lease Renewal Annual Rent Square Foot
Lessee Leased Ends Option ($) ($)
------ ---------- ----- ------ ----------- -----------
Papa John's 1,518 10/02 - 25,806 17.00
Caribou Coffee 1,640 07/07 - 39,360 24.00
Hollywood Video 7,000 06/07 - 124,250 17.75
Signature Cleaners 2,090 07/07 - 48,885 23.39
Elegant Salon 2,210 04/03 - 41,990 19.00
-48-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 279,571 - - -
2000 - - - 281,034 - - -
2001 - - - 284,749 - - -
2002 1 1,518 27,324 288,534 18.00 10.50 9.47
2003 1 2,210 44,200 268,723 20.00 15.29 16.45
2004 - - - 226,174 - - -
2005 - - - 227,867 - - -
2006 - - - 229,622 - - -
2007 3 10,730 231,420 231,420 21.57 74.21 100.00
2008 - - - - - - -
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received a letter appraisal prepared by an independent appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers.
The appraisal reported a fair market value for the Rose Plaza West property, as
of August 1, 1998, of $2,785,000. You should note that appraisals are
estimates of value and, therefore, you should not rely upon them as a measure
of true worth or realizable value.
-49-
Item 5. Other Events
Rose Plaza East, Naperville, Illinois
We anticipate purchasing the entire fee simple interest a property known as
"Rose Plaza East" located in Naperville, Illinois. Rose Plaza East was
constructed in 1997. It is a single-story, multi-tenant Neighborhood Retail
Center containing a total of 11,658 leasable square feet. We anticipate
purchasing the Rose Plaza East for approximately $2,170,000.
Bohl Farm Marketplace, Crystal Lake, Illinois
Inland Ryan L.L.C. anticipates acquiring an additional property from the Ryan
Company known as "Bohl Farm Marketplace" located in Crystal Lake, Illinois.
Bohl Farm Marketplace is currently under construction. It is a single-story,
multi-tenant Neighborhood Retail Center containing a total of 97,216 leasable
square feet. We anticipate purchasing Bohl Farm Marketplace for approximately
$14,948,000 using cash and membership units in Inland Ryan L.L.C.
Item 7. Financial Statements and Exhibits
To be subsequently filed.
-50-
SIGNATURE
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Inland Real Estate Corporation
(Registrant)
By:/s/ KELLY TUCEK
Kelly Tucek
Chief Financial and Accounting Officer
Date: September 27 , 1999
EXIBITS
10.1 Limited Liability Company Agreement of Inland Ryan L.L.C.
10.2 Limited Liability Company Agreement of Inland Ryan Cliff Lake L.L.C.
-51-
LIMITED LIABILITY COMPANY AGREEMENT
OF
INLAND RYAN, LLC
a Delaware limited liability company
Dated as of September ____, 1999
LIMITED LIABILITY COMPANY AGREEMENT
OF
INLAND RYAN, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") of INLAND RYAN, LLC, a Delaware limited liability
company (the "Company"), dated as of ____________, 1999, is
entered into by and among Inland Real Estate Corporation, a
Maryland corporation (the "Managing Member"), and Ryan MPLS, LLC,
a Minnesota limited liability company, Ryan CL, a Minnesota
limited liability company, Ryan Midway Limited Partnership, a
Minnesota limited partnership, Ryan/Flying Cloud Associates
Limited Partnership, a Minnesota limited partnership, Ryan Cliff
Lake, LLC, a Minnesota limited liability company, and Ryan
Shingle Creek Limited Partnership, a Minnesota limited
partnership and Ryan Retail Burnsville Limited Partnership, a
Minnesota limited partnership, (individually, a "Non-Managing
Member" and collectively, the "Non-Managing Members" and together
with the Managing Member, the "Members").
WHEREAS, Managing Member and Non-Managing Members
(together with Ryan Companies US, Inc.) entered into an agreement
dated July 7, 1999, as amended, (the "Contribution Agreement")
providing for the contribution by Non-Managing Members of certain
property therein described, (the "Property") to a newly formed
single purpose entity in exchange for certain interests in such
entity; and
WHEREAS, it is a requirement of the Contribution
Agreement that the Members enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes,
unless otherwise clearly indicated to the contrary, applied to
the terms used in this Agreement.
"Act" means the Delaware Limited Liability Company Act,
as it may be amended from time to time, and any successor to such
statute.
"Actions" has the meaning set forth in Section 7.7
hereof.
"Adjusted Capital Account Deficit" means, with respect
to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:
(a) decrease such deficit by any amounts that
such Member is obligated to restore pursuant to this
Agreement or by operation of law upon liquidation of such
Member's Membership Interest or is deemed to be obligated to
restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)
or the penultimate sentence of each of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
(b) increase such deficit by the items described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
The foregoing definition of "Adjusted Capital Account Deficit" is
intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"Affiliate" means, with respect to any Person, any
Person directly or indirectly controlling or controlled by or
under common control with such Person. For the purposes of this
definition, "control" when used with respect to any Person means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Limited Liability Company
Agreement of Inland Ryan, LLC, as it may be amended,
supplemented or restated from time to time.
"Appraisal" means, with respect to any assets, the
written opinion of an independent third party experienced in the
valuation of similar assets, selected by the Managing Member in
good faith. Such opinion may be in the form of an opinion by
such independent third party that the value for such property or
asset as set by the Managing Member is fair, from a financial
point of view, to the Company.
"Appraised Value" means, with respect to any asset,
including any Contributed Property, the value of such asset as
determined by Appraisal.
"Assignee" means a Person to whom one or more LLC Units
have been Transferred in a manner permitted under this Agreement,
but who has not become a Substituted Member, and who has the
rights set forth in Section 11.5 hereof.
"Available Cash" means, with respect to any period for
which such calculation is being made,
(a) the sum, without duplication, of:
(1) the Company's Net Income or Net Loss (as
the case may be) for such period,
(2) Depreciation and all other noncash
charges to the extent deducted in determining Net Income
or Net Loss for such period,
(3) the amount of any reduction in reserves
of the Company referred to in clause (b)(6)
below (including, without limitation, reductions
resulting because the Managing Member determines such
amounts are no longer necessary),
(4) the excess, if any, of the net cash
proceeds from the sale, exchange, disposition,
financing or refinancing of Company property for such
period over the gain (or loss, as the case may be)
recognized from such sale, exchange, disposition,
financing or refinancing during such period, and
(5) all other cash received (including
amounts previously accrued as Net Income and
amounts of deferred income) or any net amounts borrowed
by the Company for such period that was not included in
determining Net Income or Net Loss for such period;
(b) less the sum, without duplication, of:
(1) all debt payments including, but not
limited to, principal and interest payments and other
amounts required to be paid pursuant to documents
evidencing the debt made during such period by the
Company,
(2) capital expenditures made by the Company
during such period,
(3) INTENTIONALLY DELETED.
(4) all other expenditures and payments not
deducted in determining Net Income or Net Loss
for such period (including amounts paid in respect of
expenses previously accrued and payments made in
connection with any guaranty of Affiliate
indebtedness),
(5) any amount included in determining Net
Income or Net Loss for such period that was not
received by the Company during such period, and
(6) the amount of any increase in reserves
(including, without limitation, working capital
reserves) established during such period that the
Managing Member determines are necessary or appropriate
in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include
(i) any cash received or reductions in reserves, or take into
account any disbursements made, or reserves established, after
dissolution and the commencement of the liquidation and winding
up of the Company or (ii) any Capital Contributions, whenever
received.
"Bankruptcy Law" means Title II, U.S. Code or any
similar federal or state law for the relief of debtors.
"Business Days" means any day except a Saturday, Sunday
or other day on which commercial banks in the State of Illinois
are authorized or required by law to close.
"Capital Account" means, with respect to any Member,
the Capital Account maintained for such Member on the Company's
books and records in accordance with the following provisions:
(a) To each Member's Capital Account, there shall
be added such Member's Capital Contributions,
such Member's allocable share of Net Income and any
items of income or gain specially allocated pursuant to
Section 6.3 hereof, and the principal amount of any
Company liabilities assumed by such Member or that are
secured by any property distributed to such Member.
(b) From each Member's Capital Account, there
shall be subtracted the amount of cash and the
Gross Asset Value of any property distributed to such
Member pursuant to any provision of this Agreement,
such Member's allocable share of Net Loss and any items
of loss or deductions specially allocated pursuant to
Section 6.3 hereof, and the principal amount of any
liabilities of such Member assumed by the Company or
that are secured by any property contributed by such
Member to the Company.
(c) In the event any interest in the Company is
transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent that it
relates to the transferred interest.
(d) In determining the principal amount of any
liability for purposes of subsections (a) and
(b) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of
the Code and Regulations.
(e) The provisions of this Agreement relating to
the maintenance of Capital Accounts are intended
to comply with Regulations Sections 1.704-1(b) and
1.704-2, and shall be interpreted and applied in a
manner consistent with such Regulations. If the
Managing Member shall determine that it is prudent to
modify the manner in which the Capital Accounts are
maintained in order to comply with such Regulations,
the Managing Member may make such modification provided
that notwithstanding any other provision in this
Agreement such modification will not have a material
effect on the amounts distributable to any Member
without such Member's Consent. The Managing Member
also shall (i) make any adjustments that are necessary
or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company
capital reflected on the Company's balance sheet, as
computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g) and (ii) make
any appropriate modifications in the event that
unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-
1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any
Member, the amount of money and the initial Gross Asset Value of
any Contributed Property that such Member contributes to the
Company pursuant to Section 4.1 hereof (net of any liability that
the Company assumes or takes subject to in connection with such
contribution).
"Cash Amount" means an amount of cash equal to the
product of the LLC Units times $1.00 per each LLC Unit.
"Certificate" means the Certificate of Formation of the
Company filed in the office of the Secretary of State of the
State of Delaware, as amended from time to time in accordance
with the terms hereof and the Act.
"Charter" means the Articles of Incorporation of the
Managing Member, as amended, supplemented or restated from time
to time.
"Code" means the Internal Revenue Code of 1986, as
amended and in effect from time to time or any successor statute
thereto, as interpreted by the applicable Regulations thereunder.
Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding
provision of future law.
"Company" means the limited liability company formed
under the Act and pursuant to this Agreement, and any successor
thereto.
"Company Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2) for the phrase "partnership
minimum gain," and the amount of Company Minimum Gain, as well as
any net increase or decrease in Company Minimum Gain, for a
Fiscal Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"Consent" means the consent to, approval of, or vote on
a proposed action by a Member given in accordance with Article 14
hereof.
"Consent of the Non-Managing Members" means the Consent
of a Majority in Interest of the Non-Managing Members, which
Consent shall be obtained prior to the taking of any action for
which it is required by this Agreement and, except as otherwise
provided in this Agreement, may be given or withheld by a
Majority in Interest of the Non-Managing Members, in their
absolute discretion.
"Contributed Property" means each Property or other
asset, in such form as may be permitted by the Act, but excluding
cash, contributed or deemed contributed to the Company.
"Contribution Agreement" means the Asset Contribution
Agreement dated as of July 7, 1999, as amended, by and between
the Managing Member and the Non-Managing Members, and joined in
by Ryan Companies US, Inc.
"Custodian" means any receiver, trustee, assignee,
liquidator or other similar official under any Bankruptcy Law.
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services;
(ii) all amounts owed by such Person to banks or other Persons in
respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment
or other performance of obligations by such Person; (iii) all
indebtedness for borrowed money or for the deferred purchase
price of property or services secured by any lien on any property
owned by such Person, to the extent attributable to such Person's
interest in such property, even though such Person has not
assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person that, in accordance with generally
accepted accounting principles, should be capitalized.
"Depreciation" means, for each Fiscal Year or other
applicable period, an amount equal to the federal income tax
depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period,
except that, if the Gross Asset Value of an asset differs from
its adjusted basis for federal income tax purposes at the
beginning of such year or period, Depreciation shall be in an
amount that bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization or
other cost recovery deduction for such year or other period bears
to such beginning adjusted tax basis; provided, however, that, if
the federal income tax depreciation, amortization or other cost
recovery deduction for such year or period is zero, Depreciation
shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Managing
Member.
"Effective Date" means the date on which the Initial
Closing contemplated by the Contribution Agreement is
consummated.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Exchange" has the meaning set forth in Section 8.6.A
hereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC
promulgated thereunder.
"Family Members" means, as to a Person that is an
individual, (a) such Person's spouse, (b) such Person's
ancestors, (c) such Person's descendants (whether by blood or by
adoption), (d) such Person's brothers and sisters, (e) inter
vivos or testamentary trusts of which only such Person or his
spouse, ancestors, descendants (whether by blood or by adoption),
brothers or sisters are beneficiaries and (f) any partnership or
limited liability company all of whose partners or members
consist of such Person or his spouse, ancestors, descendants
(whether by blood or by adoption), brothers or sisters or inter
vivos or testamentary trusts of which only such Person or his
spouse, ancestors, descendants (whether by blood or by adoption),
brothers or sisters are beneficiaries.
"Fiscal Year" means the fiscal year of the Company,
which shall be the calendar year.
"Funding Debt" means any Debt incurred by or on behalf
of the Managing Member for the purpose of providing funds to the
Company.
"Gross Asset Value" means with respect to any asset,
the asset's adjusted basis for federal income tax purposes,
except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be its
Allocated Value, as agreed to by such Member and the
Managing Member pursuant to the Contribution Agreement and
set forth on Exhibit A with respect to that Member.
(b) The Gross Asset Values of all Company assets
immediately prior to the occurrence of any event
described in clause (1) or clause (2) hereof shall be
adjusted to equal their respective gross fair market values,
as determined by Appraisal, as of the following times:
(1) the liquidation of the Company within
the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g); and
(2) at such other times as the Managing
Member shall reasonably determine necessary or
advisable in order to comply with Regulations Sections
1.704-1(b) and 1.704-2
(c) The Gross Asset Value of any Company asset
distributed to a Member shall be the gross fair market
value of such asset on the date of distribution as
determined by the distributee and the Managing Member,
provided that, if the distributee is the Managing Member or
if the distributee and the Managing Member cannot agree on
such a determination, such gross fair market value shall be
determined by Appraisal.
(d) The Gross Asset Values of Company assets
shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to
Code Section 734(a) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph
(d) to the extent that the Managing Member reasonably
determines that an adjustment pursuant to subsection (b)
above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment
pursuant to this subsection (d).
(e) If the Gross Asset Value of a Company asset
has been determined or adjusted pursuant to subsection
(a), subsection (b) or subsection (d) above, such Gross
Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes
of computing Net Income and Net Loss.
"Incapacity" or "Incapacitated" means, (i) as to
any Member who is an individual, death, total physical disability
or entry by a court of competent jurisdiction of an order
adjudicating such Member incompetent to manage his or her person
or his or her estate; (ii) as to any Member that is a corporation
or limited liability company, the filing of a certificate of
dissolution, or its equivalent, for the corporation or limited
liability company or the revocation of its charter prior to
consummation of a Permitted Transfer; (iii) as to any Member that
is a partnership, the dissolution and commencement of winding up
of the partnership prior to consummation of a Permitted Transfer;
(iv) as to any Member that is an estate, the distribution by the
fiduciary of the estate's entire interest in the Company; (v) as
to any trustee of a trust that is a Member, the termination of
the trust (but not the substitution of a new trustee); or (vi) as
to any Member, the bankruptcy of such Member. For purposes of
this definition, bankruptcy of a Member shall be deemed to have
occurred when (a) the Member commences a voluntary proceeding
seeking liquidation, reorganization or other relief of or against
such Member under any bankruptcy, insolvency or other similar law
now or hereafter in effect, (b) the Member is adjudged as
bankrupt or insolvent, or a final and nonappealable order for
relief under any bankruptcy, insolvency or similar law now or
hereafter in effect has been entered against the Member, (c) the
Member executes and delivers a general assignment for the benefit
of the Member's creditors, (d) the Member files an answer or
other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any
proceeding of the nature described in clause (b) above, (e) the
Member seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator for the Member or for all or any
substantial part of the Member's properties, (f) any proceeding
seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in
effect has not been dismissed within 120 days after the
commencement thereof, (g) the appointment without the Member's
consent or acquiescence of a trustee, receiver or liquidator has
not been vacated or stayed within 90 days of such appointment, or
(h) an appointment referred to in clause (g) above is not vacated
within 90 days after the expiration of any such stay. The
foregoing definition of "bankruptcy" is intended to replace and
shall supersede and replace the definition of "Bankruptcy" set
forth in Sections 18-101(1) and 18-304 of the Act.
"Indemnitee" means (i) any Person made a party to a
proceeding by reason of its status as (A) a Member or any
Affiliate or member or partner of such Member or Affiliate or (B)
a director, officer or employee of the Company, a Member or
Affiliate or member or partner of such Member or Affiliate and
(ii) such other Persons (including Affiliates of any Member or
the Company) as the Managing Member may designate from time to
time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"IRS" means the Internal Revenue Service, which
administers the internal revenue laws of the United States.
"Liquidating Event" has the meaning set forth in
Section 13.1 hereof.
"Liquidator" has the meaning set forth in Section
13.2.A hereof.
"LLC Distribution Date" means the first Business Day of
each month during the term of this Agreement.
"LLC Record Date" means the record date for the actual
distribution of cash pursuant to Section 5.1 hereof, which record
date shall be the date five (5) days prior to each LLC
Distribution Date.
"LLC Unit" means a single Membership Interest issued
pursuant to Section 4.1 hereof, as the same may be modified from
time to time as provided in this Agreement. The ownership of an
LLC Unit may (but need not, in the sole and absolute discretion
of the Managing Member) be evidenced in the form of a
certificate.
"LLC Units" means more than one (1) LLC Unit.
"Loan" has the meanings set forth in Section 7.1.C
hereof.
"Majority in Interest of the Non-Managing Members"
means those Non-Managing Members (excluding any Affiliates of the
Managing Member who are Non-Managing Members) holding in the
aggregate more than 50% of the aggregate outstanding LLC Units
held by all the Non-Managing Members (excluding any Affiliate of
the Managing Member who are Non-Managing Members).
"Majority of Remaining Members" means Non-Managing
Members owning (a) a majority of the profits interests in the
Company held by all Non-Managing Members, determined and
allocated based on any reasonable estimate of profits from the
relevant date to the projected termination of the Company and
taking into account present and future allocations of profits
under the Agreement as it is in effect on the relevant date, and
(b) a majority of the capital interests in the Company,
determined as of the relevant date under the Agreement, owned by
all Non-Managing Members.
"Managing Member" means Inland Real Estate Corporation,
a Maryland corporation in its capacity as a Member, or any
successor Managing Member designated pursuant to the terms of
this Agreement.
"Managing Member Preferred Return" means an amount
equivalent to interest at the rate of 10% per annum on the Cash
Amount allocated to the Managing Member form time to time.
"Managing Member Preferred Return Shortfall" means with
respect to the LLC Units held by the Managing Member the excess
(if any) of (i) the cumulative Managing Member Preferred Return
with respect to all LLC Units held by the Managing Member over
(ii) the aggregate amount previously distributed with respect to
such LLC Units pursuant to clauses (5) and (6) of Section 5.1.A
hereof excluding any Managing Member Preferred Return for the
month in which the Managing Member Preferred Return Shortfall is
calculated.
"Member Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain
that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with
Regulations Section 1.704-2(i) with respect to "partner
nonrecourse debt minimum gain."
"Member Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4) for the phrase "partner
nonrecourse debt."
"Member Nonrecourse Deductions" has the meaning set
forth in Regulations Section 1.704-2(i)(2) for the phrase
"partner nonrecourse deductions," and the amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt
for a Fiscal Year shall be determined in accordance with the
rules of Regulations Section 1.704-2(i)(2).
"Members" means the Persons owning Membership
Interests, including the Managing Member and any Substitute
Members who have been admitted to the Company as Members of the
Company in accordance with this Agreement and named as Members in
Exhibit A hereto.
"Membership Interest" means a limited liability company
interest in the Company based upon the number of LLC Units owned
by a Member and includes any and all benefits to which the holder
of such a Membership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply
with the terms and provisions of this Agreement. A Membership
Interest may be expressed as a number of LLC Units and the LLC
Units representing the Membership Interest of any Person will be
equal to the Capital Contribution of such Member divided by
$1.00.
"Net Income" or "Net Loss" means, for each Fiscal Year
of the Company, an amount equal to the Company's taxable income
or loss for such year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(a) Any income of the Company that is exempt from
federal income tax and not otherwise taken into
account in computing Net Income (or Net Loss) pursuant
to this definition of "Net Income" or "Net Loss" shall
be added to (or subtracted from, as the case may be)
such taxable income (or loss);
(b) Any expenditure of the Company described in
Code Section 705(a)(2)(B) or treated as a Code
Section 705(a)(2)(B) expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Net Income
(or Net Loss) pursuant to this definition of "Net
Income" or "Net Loss," shall be subtracted from (or
added to, as the case may be) such taxable income (or
loss);
(c) In the event that the Gross Asset Value of
any Company asset is adjusted pursuant to
subsection (b) or subsection (c) of the definition of
"Gross Asset Value," the amount of such adjustment
shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net
Income or Net Loss;
(d) In lieu of the depreciation, amortization and
other cost recovery deductions that would otherwise be
taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation
for such Fiscal Year.
(e) To the extent that an adjustment to the
adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or Code Section 743(b)
is required pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's
interest in the Company, the amount of such adjustment
shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into
account for purposes of computing Net Income or Net
Loss; and
(f) Notwithstanding any other provision of this
definition of "Net Income" or "Net Loss," any
item of income, gain, loss or deduction specially
allocated pursuant to Section 6.3.A hereof shall not be
taken into account in computing Net Income or Net Loss.
The amounts of the items of Company income, gain, loss
or deduction available to be allocated pursuant to
Section 6.2.A(3) or Section 6.3.A hereof shall be
determined by applying rules analogous to those set
forth in this definition of "Net Income" or "Net Loss."
"Net Worth" means the "Total Stockholders' Equity" of
the Managing Member as determined in accordance with the
methodology used in Managing Member's Amended Consolidated
Balance Sheet for the year ended December 31, 1998.
"No Transfer Period" means a period of five (5) years
commencing on the Effective Date.
"Non-Managing Member" means any Member other than the
Managing Member.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse
Deductions for a Fiscal Year shall be determined in accordance
with the rules of Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Notice of Exchange" means the Notice of Exchange
substantially in the form of Exhibit B attached to this
Agreement.
"Percentage Interest" means as to a Member holding a
Membership Interest, its interest in the Company as determined by
dividing the LLC Units owned by such Member by the total number
of LLC Units then outstanding as specified in Exhibit A attached
hereto, as such Exhibit may be amended from time to time.
"Permitted Transfer" has the meaning set forth in
Section 11.3.A hereof.
"Person" means an individual or a corporation,
partnership, trust, unincorporated organization, association,
limited liability company or other entity.
"Preferred Return" means an amount equivalent to
interest at the rate of 7.375% per annum on the Cash Amount
allocated to the Non-Managing Members from time to time;
provided, however, that if at any time prior to July 1, 2002, the
Non-Managing Members have received a Cash Amount in connection
with an Exchange pursuant to Section 8.6 in an aggregate of
$9,912,700 as proceeds for their Tendered Units, such rate shall
be reduced to 7.00% per annum; and further provided if a Notice
of Exchange has not been delivered identifying a Specified
Exchange Date with respect to all remaining LLC Units held by the
Non-Managing Members on or before August 31, 2004, then the
Preferred Return will be reduced to 4% per annum until an
Exchange of all of the Non-Managing Members is subsequently
completed.
"Preferred Return Shortfall" means, for any holder of
LLC Units (other than the Managing Member), the excess (if any)
of (i) the cumulative Preferred Return with respect to all LLC
Units held by such holder over (ii) the aggregate amount
previously distributed with respect to such LLC Units pursuant to
clauses (1) and (2) of Section 5.1.A hereof, excluding any
Preferred Return for the month in which the Preferred Return
Shortfall is calculated.
"Prime Rate" means on any date, a rate equal to the
annual rate on such date announced by LaSalle National Bank in
Chicago, Illinois to be its prime, base or reference rate for 90-
day unsecured loans to its corporate borrowers of the highest
credit standing but in no event greater than the maximum rate
then permitted under applicable law. If LaSalle National Bank
discontinues its use of such prime, base or reference rate or
ceases to exist, the Managing Member shall designate the prime,
base or reference rate of another state or federally chartered
bank based in Chicago, Illinois to be used for the purpose of
calculating the Prime Rate hereunder (which rate shall be subject
to limitation by all applicable usury laws).
"Properties" means any assets and property of the
Company such as, but not limited to, interests in real property
(including each Property which is contributed to the Company
pursuant to the Contribution Agreement) and personal property,
including, without limitation, fee interests, interests in ground
leases, interests in limited liability companies, joint ventures
or partnerships, interests in mortgages, and Debt instruments as
the Company may hold from time to time.
"Property" means any individual property which is to be
contributed to the Company pursuant to the Contribution
Agreement.
"Regulations" means the applicable income tax
regulations under the Code, whether such regulations are in
proposed, temporary or final form, as such regulations may be
amended from time to time (including corresponding provisions of
succeeding regulations).
"Regulatory Allocations" has the meaning set forth in
Section 6.3.A(7) hereof.
"REIT" means a real estate investment trust qualifying
under Code Section 856, et seq.
"REIT Member" means a Member or Assignee that is, or
has made an election to qualify as, a REIT.
"REIT Payment" has the meaning set forth in Section
15.12 hereof.
"REIT Requirements" has the meaning set forth in
Section 5.1 hereof.
"Related Party" means, with respect to any Person, any
other Person whose ownership of shares of the Managing Member's
capital stock would be attributed to the first such Person under
Code Section 544 (as modified by Code Section 856(h)(1)(B)).
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
"Specified Exchange Date" has the meaning set forth in
Section 8.6.A hereof.
"Substituted Member" means an Assignee who is admitted
as a Member to the Company pursuant to Section 11.4 hereof.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of (i) the voting
power of the voting equity securities or (ii) the outstanding
equity interests is owned, directly or indirectly, by such
Person.
"Tax Items" has the meaning set forth in Section 6.4.A
hereof.
"Tenant Schedule" means a schedule, to be prepared by
the Managing Member and timely provided to any Member making the
representation required pursuant to Section 3.4.A(v) or Section
3.4.B(v) that lists all of the entities that are a tenant of
either the Managing Member, the Company or any partnership,
venture or limited liability company of which the Managing Member
of the Company is a member. The Tenant Schedule shall be amended
from time to time as necessary to reflect any changes to the list
of the foregoing entities.
"Tendered Units" has the meaning set forth in Section
8.6.A hereof.
"Tendering Party" has the meaning set forth in Section
8.6.A hereof.
"Terminating Capital Transaction" means any sale or
other disposition of all or substantially all of the assets of
the Company or a related series of transactions that, taken
together, result in the sale or other disposition of all or
substantially all of the assets of the Company.
"Termination Payment" has the meaning set forth in
Section 11.2.B hereof.
"Transfer," when used with respect to an LLC Unit or
all or any portion of a Membership Interest, means any sale,
assignment, bequest, conveyance, devise, gift (outright or in
trust), pledge, encumbrance, hypothecation, mortgage, exchange,
transfer or other disposition or act of alienation, whether
voluntary or involuntary or by operation of law; provided,
however, that, when the term is used in Article 11 hereof,
Transfer does not include any Exchange of LLC Units by any Non-
Managing Member pursuant to Section 8.6 hereof. The terms
"Transferred" and "Transferring" have correlative meanings.
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Formation
The Company is a limited liability company formed
pursuant to the provisions of the Act for the purposes and upon
the terms and subject to the conditions set forth in this
Agreement. Except as expressly provided herein, the rights and
obligations of the Members and the administration and termination
of the Company shall be governed by the Act. Each Person listed
on Exhibit A hereto on the date hereof is admitted to the Company
as a Member of the Company effective as of the date hereof upon
its execution of a counterpart of this Agreement.
Section 2.2. Name
The name of the Company is Inland Ryan, LLC. The
Company's business may be conducted under any other name or names
deemed advisable by the Managing Member, including the name of
the Managing Member or any Affiliate thereof. The Managing
Member in its sole and absolute discretion may change the name of
the Company at any time and from time to time in accordance with
applicable law and shall notify the Members of such change in the
next regular communication to the Members.
Section 2.3. Registered Office and Agent; Principal
Place of Business; Other Places of Business
The address of the registered office of the Company in
the State of Delaware is located at 1209 Orange Street,
Wilmington, Delaware 19801. The registered agent for service of
process on the Company in the State of Delaware at such
registered office is CT Corporation Systems, Inc. The principal
office of the Company is located at 2901 Butterfield Road, Oak
Brook, Illinois 60523 or such other place as the Managing Member
may from time to time designate by notice to the Members. The
Company may maintain offices at such other place or places within
or outside the State of Illinois and Delaware as the Managing
Member deems advisable.
Section 2.4. Power of Attorney
A. Each Member (other than the Managing Member) and
each Assignee hereby irrevocably constitutes and appoints the
Managing Member, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in
each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file
and record in the appropriate public offices (a) all
certificates, documents and other instruments (including,
without limitation, this Agreement and the Certificate and
all amendments or restatements thereof) that the Managing
Member or any Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of
the Company as a limited liability company in the State of
Delaware and in all other jurisdictions in which the Company
may conduct business or own property; (b) all instruments
that the Managing Member or any Liquidator deems appropriate
or necessary to reflect any amendment, change, modification
or restatement of this Agreement in accordance with its
terms; (c) all conveyances and other instruments or
documents that the Managing Member or any Liquidator deems
appropriate or necessary to reflect the dissolution and
liquidation of the Company pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation; (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Member pursuant
to, or other events described in, Articles 11, 12 or 13
hereof or the Capital Contribution of any Member; and (e)
all certificates, documents and other instruments relating
to the determination of the rights, preferences and
privileges of Membership Interests; and
(2) execute, swear to, acknowledge and file all
certificates and other instruments appropriate or necessary,
in the sole and absolute discretion of the Managing Member
or any Liquidator, to make, evidence, or confirm any vote,
consent, approval, agreement or other action which is made
or given by the Members hereunder or is consistent with the
terms of this Agreement or appropriate or necessary, in the
sole discretion of the Managing Member or any Liquidator, to
effectuate the terms or intent of this Agreement.
Nothing contained in this Section 2.4 shall be construed as
authorizing the Managing Member or any Liquidator to amend this
Agreement except in accordance with Article 14 hereof or as may
be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared
to be irrevocable and a special power coupled with an interest,
in recognition of the fact that each of the Members and Assignees
will be relying upon the power of the Managing Member to act as
contemplated by this Agreement, and it shall survive and not be
affected by the subsequent Incapacity of any Member (other than
the Managing Member) or Assignee and the Transfer of all or any
portion of such Member's (other than the Managing Member's) or
Assignee's LLC Units or Membership Interest and shall extend to
such Member's (other than the Managing Member's) or Assignee's
heirs, successors, assigns and personal representatives. Each
Member (other than the Managing Member) or Assignee shall execute
and deliver to the Managing Member or any Liquidator, within 15
days after receipt of the Managing Member's or Liquidator's
request therefor, such further designation, powers of attorney
and other instruments as the Managing Member or the Liquidator,
as the case may be, deems necessary to effectuate this Agreement
and the purposes of the Company.
2.5. Term
The term of the Company commenced on August 11, 1999
being the date that the original Certificate was filed in the
office of the Secretary of State of Delaware in accordance with
the Act, and shall continue until December 31, 2040 unless
extended by unanimous agreement of the Members or earlier
terminated pursuant to the provisions of Section 13 hereof or as
otherwise provided by law.
ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business
The purpose and nature of the business to be conducted
by the Company is (i) to conduct the business of owning,
operating and disposing each Property, provided, however, that
such business shall be limited to and conducted in such a manner
as to permit the Managing Member at all times to be classified as
a REIT for federal income tax purposes, unless the Managing
Member ceases to qualify as a REIT for reasons other than the
conduct of the business of the Company, and (ii) to do anything
necessary or incidental to the foregoing subject to the terms,
conditions, restrictions and requirements contained in this
Agreement. As such, the Company is a single purpose limited
liability company, and such is the intention of the Members. In
connection with the foregoing, and without limiting the Managing
Member's right in its sole discretion to cease qualifying as a
REIT, the Members acknowledge that the Managing Member's current
status as a REIT inures to the benefit of all the Members and not
solely the Managing Member or its Affiliates. The Members
acknowledge the existence of the Contribution Agreement and the
Company and each Member agrees to comply with and be bound by the
obligations set forth in the Contribution Agreement.
Section 3.2. Powers
Subject to the restrictions contained in this Agreement
including, but not limited to Section 7.3 hereof, the Company is
empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for
the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the
Company including, without limitation, full power and authority,
directly or through its ownership interest in other entities, to
enter into, perform and carry out contracts of any kind, borrow
money and issue evidences of indebtedness and guaranty
indebtedness of the Managing Member and other Affiliates (whether
or not Funding Debt), whether or not secured by mortgage, deed of
trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of
real property; provided, however, that notwithstanding any other
provision in this Agreement, the Managing Member may cause the
Company not to take, or to refrain from taking, any action
(except for the payment of the Preferred Return, the Preferred
Return Shortfall or the Cash Amount in connection with an
Exchange pursuant to Section 8.6) that, in the judgment of the
Managing Member, in its sole and absolute discretion, (i) could
subject the Managing Member to any additional taxes under Code
Section 857 or Code Section 4981 or (iii) could violate any law
or regulation of any governmental body or agency having
jurisdiction over the Managing Member, its securities or the
Company, unless such action (or inaction) under clause (i),
clause (ii) or clause (iii) above shall have been specifically
consented to by the Managing Member in writing.
Section 3.3 Specified Purposes
The Company shall be a limited liability company only
for the purposes specified in Section 3.1 hereof, and this
Agreement shall not be deemed to create a joint venture or
partnership between or among the Members with respect to any
activities whatsoever other than the activities within the
purposes of the Company as specified in Section 3.1 hereof.
Except as otherwise provided in this Agreement, no Member shall
have any authority to act for, bind, commit or assume any
obligation or responsibility on behalf of the Company, its
properties or any other Member. No Member, in its capacity as a
Member under this Agreement, shall be responsible or liable for
any indebtedness or obligation of another Member or any
indebtedness or obligation of the Company or the Company's
employees or agents. The Company shall not be responsible or
liable for any indebtedness or obligation of any Member, incurred
either before or after the execution and delivery of this
Agreement by such Member, except as to those responsibilities,
liabilities, indebtedness or obligations incurred pursuant to and
as limited by the terms of this Agreement and the Act.
Section 3.4. Representations and Warranties by the
Members
A. Each Member that is an individual (including,
without limitation, each Substituted Member as a condition to
becoming a Substituted Member) represents and warrants to the
Company, the Managing Member and each other Member that (i) such
Member has the legal capacity to enter into this agreement and
perform such Member's obligations hereunder, (ii) the
consummation of the transactions contemplated by this Agreement
to be performed by such Member will not result in a breach or
violation of, or a default under, any material agreement by which
such Member or any of such Member's property is bound, or any
statute, regulation, order or other law to which such Member is
subject, (iii) such Member is neither a "foreign person" within
the meaning of Code Section 1445(f) nor a "foreign partner"
within the meaning of Code Section 1446(e), (iv) if such Member
has been timely provided a Tenant Schedule, such Member (other
than the Managing Member), except as otherwise disclosed in
writing to the Managing Member, either (A) does not own, directly
or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)) more than 25% of the
interests in capital or profits of the Company or (B) (1) does
not own, directly or indirectly or by attribution under Code
Section 318 (as modified by Code Section 856(d)(5)) any shares of
stock of the Managing Member and (2) does not own directly or
indirectly or by attribution under Code Section 318 (as modified
by Code Section 856(d)(5)) any interest in any entity that is
listed on the Tenant Schedule, and (v) this Agreement is binding
upon, and enforceable against, such Member in accordance with its
terms.
B. Each Member that is not an individual (including,
without limitation, each Substituted Member as a condition to
becoming a Substituted Member) represents and warrants to the
Company, the Managing Member and each other Member that (i) all
transactions contemplated by this Agreement to be performed by it
have been duly authorized by all necessary action, including,
without limitation, that of its managing member(s) (or, if there
is no managing member, a majority in interest of all members),
committee(s), trustee(s), general partner(s), beneficiaries,
directors and shareholder(s), as the case may be, as required,
(ii) the consummation of such transactions will not result in a
breach or violation of, or a default under, its partnership or
operating agreement, trust agreement, charter or bylaws, as the
case may be, any material agreement by which such Member or any
of such Member's properties or any of its partners, members,
beneficiaries, trustees or shareholders, as the case may be, is
or are bound, or any statute, regulation, order or other law to
which such Member or any of its partners, members, trustees,
beneficiaries or shareholders, as the case may be, is or are
subject, (iii) such Member is neither a "foreign person" within
the meaning of Code Section 1445(f) nor a "foreign partner"
within the meaning of Code Section 1446(e), (iv) if such Member
has been timely provided a Tenant Schedule, such Member (other
than the Managing Member), except as otherwise disclosed in
writing to the Managing Member, either (A) does not own, directly
or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)) more than 25% of the
interests in capital or profits of the Company or (B) (1) does
not own, directly or indirectly or by attribution under Code
Section 318 (as modified by Code Section 856(d)(5)) any shares of
stock of the Managing Member and (2) does not own directly or
indirectly or by attribution under Code Section 318 (as modified
by Code Section 856(d)(5)) any interest in any entity that is
listed on the Tenant Schedule, and (v) this Agreement is binding
upon, and enforceable against, such Member in accordance with its
terms.
C. Each Member (including, without limitation, each
Substituted Member as a condition to becoming a Substituted
Member) represents, warrants and agrees that it has acquired and
continues to hold its interest in the Company for its own account
for investment only and not for the purpose of, or with a view
toward, the resale or distribution of all or any part thereof,
nor with a view toward selling or otherwise distributing such
interest or any part thereof at any particular time or under any
predetermined circumstances without prejudice, however, to each
Member's right at all times to sell or otherwise dispose of all
or any part of such Member's interest in the Company in
accordance with the terms of this Agreement. Each Member further
represents and warrants that it is a sophisticated investor,
able and accustomed to handling sophisticated financial matters
for itself, particularly real estate investments, and that it has
a sufficiently high net worth that it does not anticipate a need
for the funds that it has invested in the Company in what it
understands to be a highly speculative and illiquid investment.
D. The representations and warranties contained in
Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the
execution and delivery of this Agreement by each Member (and, in
the case of a Substituted Member, the admission of such
Substituted Member as a Member in the Company) and the
dissolution, liquidation and termination of the Company. The
Managing Member may, in its sole and absolute discretion on
behalf of the Company and its Members, grant waivers and
exceptions to the representations and warranties contained in
Sections 3.4.A, 3.4.B and 3.4.C hereof, but any such waiver or
exception must be in writing, must refer to this Section 3.4.D
and must describe with particularity the representation or
warranty as to which such waiver or exception shall apply.
E. Each Member (including, without limitation, each
Substituted Member as a condition to becoming a Substituted
Member) hereby represents that it has consulted and been advised
by its legal counsel and tax advisor in connection with, and
acknowledges that no representations as to potential profit, tax
consequences of any sort (including, without limitation, the tax
consequences resulting from forming the Company, executing this
Agreement, consummating the transaction provided for in or
contemplated by the Contribution Agreement, making a Capital
Contribution, being admitted to the Company or being allocated
Tax Items), cash flows, funds from operations or yield, if any,
in respect of the Company or the Managing Member have been made
by any Member or any employee or representative or Affiliate of
any Member, and that projections and any other information,
including, without limitation, financial and descriptive
information and documentation, that may have been in any manner
submitted to such Member shall not constitute any representation
or warranty of any kind or nature, express or implied.
ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Initial
Members
At the time of their respective execution of this
Agreement, the Members shall make Capital Contributions as set
forth in Exhibit A to this Agreement. Each Member shall receive
one LLC Unit for each $1.00 of Capital Contributions made by such
Member. The Members shall own LLC Units in the amounts set forth
in Exhibit A and shall have a Percentage Interest as set forth in
Exhibit A, which Percentage Interest shall be adjusted in Exhibit
A from time to time by the Managing Member to the extent
necessary to accurately reflect Exchanges, Capital Contributions,
or similar events having an effect on a Member's Percentage
Interest. No Non-Managing Member shall be required or permitted
to make any additional Capital Contributions or loans to the
Company. Notwithstanding the foregoing, a Non-Managing Member
may increase its interest in the Company by the Capital
Contribution of Undeveloped Property or Development Property, or
the achievement of the right to receive Earnout Amounts in
accordance with the terms of the Contribution Agreement. In such
event, the LLC Units of such Non-Managing Member will be
increased by the Contribution Value of the Undeveloped Property
and the Development Property and by the Earnout Amount for each
Earnout Property, respectively, as determined in accordance with
Sections 3.4, 3.5 and 3.6 of the Contribution Agreement, and the
Managing Member shall so acknowledge in writing. All capitalized
terms in this Section 4.1 if not otherwise defined in this
Agreement shall have the meanings as set forth in the
Contribution Agreement.
Section 4.2. Loans by Third Parties
Subject to the provisions of Section 7.1 and 7.3
hereof, the Company may incur or assume Debt, or enter into other
similar credit, guarantee, financing or refinancing arrangements,
for any purpose upon such terms as the Managing Member determines
appropriate; provided, however, that the Company shall not incur
or assume any Debt under which a breach, violation or default
would be deemed to occur by virtue of the Transfer of any
Membership Interest by a Non-Managing Member; provided, further,
that any Debt shall be nonrecourse to each Member unless the
Member to whom any Debt would be recourse otherwise agrees.
Notwithstanding the foregoing, the Company may be liable on a
recourse basis for the normal and customary exceptions to the
nonrecourse provisions as may be set forth in documents
evidencing a Debt.
Section 4.3. No Interest; No Return
No Member shall be entitled to interest on its Capital
Contribution or on such Member's Capital Account. Except as
provided herein or by law, no Member shall have any right to
demand or receive the return of its Capital Contribution from the
Company.
ARTICLE 5.
DISTRIBUTIONS
Section 5.1. Requirement and Characterization of
Distributions
A. General. The Managing Member shall cause the
Company to distribute on the LLC Distribution Date all (or with
respect to amounts distributed pursuant to the following clause
(5), such portion as the Managing Member may in its discretion
determine) Available Cash generated by the Company during such
period to the Members on the LLC Record Date for such period as
follows: (1) first, to the Non-Managing Members, pro rata in
accordance with their relative Preferred Return Shortfall, until
the Preferred Return Shortfall for each Non-Managing Member is
zero; and (2) secondly, the Preferred Return to the Non-Managing
Members in accordance with such Non-Managing Members' Percentage
Interest in the Company; (3) thirdly, interest (at the rate set
forth below in Section 5.1.B) on any Preferred Return Shortfall
or Cash Amount not paid at the time required by this Agreement;
(4) fourthly, court costs and legal fees incurred by any Non-
Managing Member to collect any Preferred Return Shortfall or Cash
Amount not paid at the time required by this Agreement or to
enforce the Managing Member's or Company's obligations set forth
in this Agreement; (5) fifthly, the Managing Member's Preferred
Return Shortfall until it is zero; (6) sixthly, the Managing
Member's Preferred Return in accordance with the Managing
Member's Percentage Interest in the Company; and (7) thereafter
99% to the Managing Member and 1% to the Non-Managing Members in
accordance with such Non-Managing Members' Percentage Interest in
the Company.. The Preferred Return payable to the Non-Managing
Members may be reduced to the extent of any failure of a Non-
Managing Member to make any payment required to be made to the
Managing Member or the Company under the Contribution Agreement
and the Non-Managing Members hereby grant the Managing Member and
the Company the right of setoff against amounts otherwise payable
to the Non-Managing Members hereunder; provided, however, the
Managing Member's and Company's right of setoff is limited to:
(i) amounts for which a Non-Managing Member is responsible
pursuant to Section 6.4 of the Contribution Agreement and (ii)
amounts necessary to pay for claims made by any third party
against the Managing Member or the Company relating to the
actions of a Non-Managing Member in connection to a Property
including, but not limited to, offsets of rent by any tenant as a
result of the acts of a Non-Managing Member, provided that the
Managing Member shall have notified the Non-Managing Member of
such claims and afforded the Non-Managing Member an opportunity
to settle the claims.
B. Conduct of Company Operations to Maintain Level of
Distributions. The Managing Member intends to use reasonable
efforts to cause the Company to operate in a manner (including,
without limitation, incurring Debt, establishing and maintaining
cash reserves, and undertaking and financing recurring and non-
recurring capital expenditures) that enables the Company to make
the distributions required pursuant to clauses (1), (2), (3),
(4), (5) and (6) of Section 5.1.A above. To the extent necessary
to make the distributions required by clauses (1), (2), (3) and
(4) of Section 5.1.A above, the Managing Member will loan the
Company sufficient funds from time to time, on terms reasonably
acceptable to the Managing Member. In the event the Company
fails to distribute the Preferred Return or any portion thereof
on any LLC Distribution Date (unless such nonpayment is pursuant
to a setoff in accordance with Section 5.1.A above), any unpaid
portion of the Preferred Return due to the Non-Managing Members
shall accrue interest from and after the date such amount is due
until the date such amount is paid in full at a variable
interest rate equal to the Prime Rate plus two percent (2%).
Subject to the Company's right of setoff as set forth in this
Agreement, Managing Member absolutely and unconditionally
guaranties to each Non-Managing Member the payment in full of the
Preferred Return on each LLC Distribution Date, together with
interest thereon as above provided, and further agrees to pay all
cost of collection including attorneys' fees. The Non-Managing
Members must notify the Managing Member, in writing, of its
failure to make a payment of a Preferred Return on any LLC
Distribution Date and the Managing Member will be allowed ten
(10) days after such notice to cure its failure to make such
payment. If the Managing Member fails to cure the nonpayment of
such full Preferred Return within such ten (10)-day period, then
the Non-Managing Members may, at their option, and
notwithstanding the limitations as to timing of an Exchange as
set forth in Section 8.6, at any time thereafter exercise their
rights to Exchange all of their LLC Units for a Cash Amount in
accordance with Section 8.6.
Section 5.2. Distributions in Kind
No right is given to any Member to demand and receive
property other than cash.
Section 5.3. Amounts Withheld
Each Member hereby authorizes the Company to withhold
from or pay on behalf of or with respect to such Member any
amount of federal, state, local or foreign taxes that the
Managing Member determines that the Company is required to
withhold or pay with respect to any amount distributable or
allocable to such Member pursuant to this Agreement, including,
without limitation, any taxes required to be withheld or paid by
the Company pursuant to Code Section 1441, Code Section 1442,
Code Section 1445 or Code Section 1446; provided, however, the
Managing Member, on behalf of the Company, shall make such
filings with state and local authorities in accordance with
customary business practices to minimize or eliminate any
withholding requirement. Any amount paid on behalf of or with
respect to a Member shall constitute a loan by the Company to
such Member, which loan shall be repaid by such Member within 15
days after notice from the Managing Member that such payment must
be made unless (i) the Company withholds such payment from a
distribution that would otherwise be made to the Member or (ii)
the Managing Member determines, in its sole and absolute
discretion, that such payment may be satisfied out of the
Available Cash of the Company that would, but for such payment,
be distributed to the Member. Any amounts withheld pursuant to
the foregoing clauses (i) or (ii) shall be treated as having been
distributed to such Member. Each Member hereby unconditionally
and irrevocably grants to the Company a security interest in such
Member's Membership Interest to secure such Member's obligation
to pay to the Company any amounts required to be paid pursuant to
this Section 5.3. In the event that a Member fails to pay any
amounts owed to the Company pursuant to this Section 5.3 when
due, the Managing Member may, in its sole and absolute
discretion, elect to make the payment to the Company on behalf of
such defaulting Member, and in such event shall be deemed to have
loaned such amount to such defaulting Member and shall succeed to
all rights and remedies of the Company as against such defaulting
Member (including, without limitation, the right to receive
distributions). Any amounts payable by a Member hereunder shall
bear interest at the Prime Rate plus four (4) percentage points
(but not higher than the maximum lawful rate) from the date such
amount is due (i.e., 15 days after demand) until such amount is
paid in full. Each Member shall take such actions as the Company
or the Managing Member shall request in order to perfect or
enforce the security interest created hereunder.
Section 5.4. Distributions Upon Liquidation
Notwithstanding the other provisions of this Article 5,
net proceeds from a Terminating Capital Transaction and any other
cash received or reductions in reserves made after commencement
of the liquidation of the Company shall be distributed in
accordance with Section 13.2 hereof
Section 5.5. Restricted Distributions
Notwithstanding any provision to the contrary contained
in this Agreement, neither the Company nor the Managing Member,
on behalf of the Company, shall make a distribution to any Member
on account of its Membership Interest or interest in LLC Units if
such distribution would violate the Act or other applicable law.
ARTICLE 6.
ALLOCATIONS
Section 6.1. Timing and Amount of Allocations of Net
Income and Net Loss
Net Income and Net Loss of the Company shall be
determined and allocated with respect to each Fiscal Year of the
Company as of the end of each such year. Except as otherwise
provided in this Article 6, an allocation to a Member of a share
of Net Income or Net Loss shall be treated as an allocation of
the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.
Section 6.2. General Allocations.
Except as otherwise provided in this Article 6:
A. Net Income. Net Income for any Fiscal Year shall
be allocated, for purposes of adjusting the Capital Accounts of
the Members, in accordance with the following order of priority:
(1) First, to the Non-Managing Members, pari
passu, until the cumulative amount of Net Income allocated to
such Members pursuant to this Section 6.2.A(1) for the current
and all prior fiscal years is equal to the sum of the Preferred
Return accrued through the current year plus any additional
amounts distributed, or to be distributed, to the Non-Managing
Member pursuant to clauses (3) and (4) of Section 5.1.A.
(2) Second, to the Managing Member until the
cumulative amount of Net Income allocated to the Managing Member
pursuant to this Section 6.2.A(1) for the current and all prior
fiscal years is equal to the sum of the Managing Member Preferred
Return accrued through the current year plus any additional
amounts distributed, or to be distributed, to the Managing Member
pursuant to clauses (5) and (6) of Section 5.1.A.
(3) Third, all remaining amounts of Net Income
shall be allocated 99% to the Managing Member and 1% to the Non-
Managing Members.
B. Net Loss. Net Loss for any Fiscal Year shall be
allocated, for purposes of adjusting the Capital Accounts of the
Members, pro rata to each Member in accordance with their
relative positive Capital Account balances (calculated for this
purpose by adding to such Member's Capital Account such Member's
share of Company Minimum Gain and Member Minimum Gain).
Notwithstanding the foregoing, any determination of Net Loss
shall not reduce or increase the Preferred Return or Managing
Member Preferred Return or lower the amount of any Member's LLC
Units.
Section 6.3. Additional Allocation Provisions
A. Regulatory Allocations
(1) Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding
the provisions of Section 6.2 hereof, or any other provision
of this Article 6, if there is a net decrease in Company
Minimum Gain during any Fiscal Year, each Member shall be
specially allocated items of Company income and gain for
such year (and, if necessary, subsequent years) in an amount
equal to such Member's share of the net decrease in Company
Minimum Gain, as determined under Regulations Section 1.704-
2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be
allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
6.3.A(l) is intended to qualify as a "minimum gain
chargeback" within the meaning of Regulations Section 1.704-
2(f) and shall be interpreted consistently therewith.
(2) Member Minimum Gain Chargeback. Except as
otherwise provided in Regulations Section 1.704-2(i)(4) or
in Section 6.3.A(1) hereof, if there is a net decrease in
Member Minimum Gain attributable to a Member Nonrecourse
Debt during any Fiscal Year, each Member who has a share of
the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member's share
of the net decrease in Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to
the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-
2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is intended
to qualify as a "charge back of partner nonrecourse debt
minimum gain" within the meaning of Regulations Section
1.704-2(i) and shall be interpreted consistently therewith.
(3) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions for any Fiscal Year shall be
specially allocated to the Member(s) who bears the
economic risk of loss with respect to the Member Nonrecourse
Debt to which such Member Nonrecourse Deductions are
attributable, in accordance with Regulations Section 1.704-
2(i).
(4) Qualified Income Offset. If any Member
unexpectedly receives an adjustment, allocation or
distribution described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and
gain shall be allocated, in accordance with Regulations
Section 1.704-1(b)(2)(ii)(d), to such Member in an amount
and manner sufficient to eliminate, to the extent required
by such Regulations, the Adjusted Capital Account Deficit of
such Member as quickly as possible, provided that an
allocation pursuant to this Section 6.3.A(4) shall be made
if and only to the extent that such Member would have an
Adjusted Capital Account Deficit after all other allocations
provided in this Article 6 have been tentatively made as if
this Section 6.3.A(4) were not in the Agreement. It is
intended that this Section 6.3.A(4) qualify and be construed
as a "qualified income offset" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(5) Limitation on Allocation of Net Loss. To the
extent that any allocation of Net Loss would cause or
increase an Adjusted Capital Account Deficit as to any
Member, such allocation of Net Loss shall be reallocated
among the other Members in accordance with their respective
LLC Units, subject to the limitations of this Section
6.3.A(5).
(6) Section 754 Adjustment. To the extent that
an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regulations Section 1.704-
1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Member
in complete liquidation of its interest in the Company, the
amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases
such basis), and such gain or loss shall be specially
allocated to the Members in accordance with their LLC Units
in the event that Regulations Section 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Members to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(7) Curative Allocations. The allocations set
forth in Sections 6.3.A(l) through (6) hereof (the
"Regulatory Allocations") are intended to comply with
certain regulatory requirements, including the requirements
of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Section 6.2 hereof, the
Regulatory Allocations shall be taken into account in
allocating other items of income, gain, loss and deduction
among the Members so that, to the extent possible without
violating the requirements giving rise to the Regulatory
Allocations, the net amount of such allocations of other
item and the Regulatory Allocations to each Member shall be
equal to the net amount that would have been allocated to
each such Member if the Regulatory Allocations had not
occurred.
Section 6.4. Tax Allocations
A. In General. Except as otherwise provided in this
Section 6.4, for income tax purposes under the Code and the
Regulations, each Company item of income, gain, loss and
deduction (collectively, "Tax Items") shall be allocated among
the Members in the same manner as its correlative item of "book"
income, gain, loss or deduction is allocated pursuant to Sections
6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c)
Revaluations. Notwithstanding Section 6.4.A hereof, Tax Items
with respect to Property that is contributed to the Company with
a Gross Asset Value that varies from its basis in the hands of
the contributing Member immediately preceding the date of
contribution shall be allocated among the Members for income tax
purposes pursuant to the method as described in Regulations
Section 1.704-3(d) that is chosen by the Managing Member. In the
event that the Gross Asset Value of any Company asset is adjusted
pursuant to subsection (b) of the definition of "Gross Asset
Value" (provided in Article 1 hereof), subsequent allocations of
Tax Items with respect to such asset shall take account of the
variation, if any, between the adjusted basis of such asset and
its Gross Asset Value in the same manner as under Code Section
704(c) and the applicable Regulations and this Section 6.4.B.
Section 6.5. Other Provisions
A. Other Allocations. In the event that (i) any
modifications are made to the Code or any Regulations, (ii) any
changes occur in any case law applying or interpreting the Code
or any Regulations, (iii) the IRS changes or clarifies the manner
in which it applies or interprets the Code or any Regulations or
any case law applying or interpreting the Code or any Regulations
or (iv) the IRS adjusts the reporting of any of the transactions
contemplated by this Agreement which, in each case, either (a)
requires allocations of items of income, gain, loss, deduction or
credit or (b) requires reporting of any of the transactions
contemplated by this Agreement in a manner different from that
set forth in this Article 6, the Managing Member is hereby
authorized to make new allocations or report any such
transactions (as the case may be) in reliance of the foregoing,
and such new allocations and reporting shall be deemed to be made
pursuant to the fiduciary duty of the Managing Member to the
Company and the other Members, and no such new allocation or
reporting shall give rise to any claim or cause of action by any
Member.
B. Consistent Tax Reporting. The Members acknowledge
and are aware of
the income tax consequences of the allocations made by this
Article 6 and hereby agree to be bound by the provisions of this
Article 6 in reporting their shares of Net Income, Net Loss and
other items of income, gain, loss, deduction and credit for
federal, state and local income tax purposes.
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1. Management
A. Except as otherwise expressly provided in this
Agreement, the Managing Member, in its capacity as a Member of
the Company under the Act, shall have sole and complete charge
and management over the business and affairs of the Company, in
all respects and in all matters. The Managing Member shall be an
agent of the Company's business, and the actions of the Managing
Member taken in such capacity and in accordance with this
Agreement shall bind the Company. The Managing Member shall at
all times be a Member of the Company. Except as otherwise
expressly provided in this Agreement or required by any non-
waivable provisions of applicable law, the Non-Managing Members
shall not participate in the control of the Company, shall have
no right, power or authority to act for or on behalf of, or
otherwise bind, the Company and shall have no right to vote on or
consent to any other matter, act, decision or document involving
the Company or its business. The Managing Member may not be
removed by the Members with or without cause, except with the
consent of the Managing Member. In addition to the powers now or
hereafter granted a manager of a limited liability company under
applicable law or that are granted to the Managing Member under
any other provision of this Agreement, the Managing Member,
subject to the other provisions hereof including the limitations
on the authority of the Managing Member set forth in Section 7.3,
shall have full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the
Company, to exercise all powers set forth in Section 3.2 hereof
and to effectuate the purposes set forth in Section 3.1 hereof,
including, without limitation:
(1) except as expressly restricted in this
Article 7, the making of any expenditures, the lending or
borrowing of money (including, without limitation, making
prepayments on loans and borrowing money to permit the
Company to make distributions to its Members in such amounts
as will permit the Managing Member (so long as the Managing
Member qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any excise
tax pursuant to Code Section 4981) and to make distributions
to its shareholders sufficient to permit the Managing Member
to maintain REIT status or otherwise to satisfy the REIT
Requirements), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness (including the
securing of any of the foregoing by deed to secure debt,
mortgage, deed of trust or other lien or encumbrance on the
Company's assets and the execution of agreements, documents
and instruments evidencing Managing Member Loans) and the
incurring of any obligations that it deems necessary for the
conduct of the activities of the Company;
(2) the making of tax, regulatory and other
filings, or rendering of periodic or other reports to
governmental or other agencies having jurisdiction over the
business or assets of the Company;
(3) except as restricted pursuant to Section
7.3.E(2) hereof, the acquisition, sale, transfer, exchange
or other disposition of any assets of the Company
(including, but not limited to, the exercise or grant of any
conversion, option, privilege or subscription right or any
other right available in connection with any assets at any
time held by the Company) or the merger, consolidation,
reorganization or other combination of the Company with or
into another entity or the conversion of the Company to any
other entity or the transfer of the Company to another
jurisdiction;
(4) except as restricted pursuant to Section
7.1.C hereof, the mortgage, pledge, encumbrance or
hypothecation of any assets of the Company (including,
without limitation, any Contributed Property), the use of
the assets of the Company (including, without limitation,
cash on hand) for any purpose consistent with the terms of
this Agreement which the Managing Member believes will
directly benefit the Company and on any terms that the
Managing Member sees fit, including, without limitation, the
financing of the conduct or the operations of the Managing
Member or the Company, the lending of funds to other Persons
(including, without limitation, the Managing Member, if
necessary to permit the financing or capitalization of a
subsidiary of the Managing Member or the Company) and the
repayment of obligations of the Company, any of its
Subsidiaries and any other Person in which it has an equity
investment;
(5) the management, operation, leasing,
landscaping, repair, alteration, demolition, replacement or
improvement of any Property, including, without limitation.
any Contributed Property, or other asset of the Company or
any Subsidiary;
(6) the negotiation, execution and performance of
any contracts, leases, conveyances or other instruments
that the Managing Member considers useful or necessary to
the conduct of the Company's operations or the
implementation of the Managing Member's powers under this
Agreement, including contracting with asset managers,
property managers, loan servicers (including, without
limitation, as to any Contributed Property or other
Property, contracting with the Managing Member or its
Affiliates for asset management, property management or
mortgage loan servicing services at rates not to exceed 95%
of the rate that is charged by non-affiliated parties; it
being agreed that an asset management fee of one percent
(1%) of the initial Gross Asset Value of the Property, and a
property management fee of four and one-half percent (4.5%)
of the Company's gross collected revenues, and a mortgage
loan servicing fee of eight tenths of one percent (.8%) of
the loan balance are acceptable annual rates), contractors,
developers, consultants, accountants, legal counsel, other
professional advisors and other agents and the payment of
their expenses and compensation out of the Company's assets;
(7) the distribution of Company cash or other
Company assets in accordance with this Agreement, the
holding, management, investment and reinvestment of cash and
other assets of the Company, and the collection and receipt
of revenues, rents and income of the Company;
(8) the selection and dismissal of employees of
the Company or the Managing Member (including, without
limitation, employees having titles or offices such as
"president," "vice president," "secretary" and "treasurer'),
and agents, outside attorneys, accountants, consultants and
contractors of the Company or the Managing Member and the
determination of their compensation and other terms of
employment or hiring;
(9) the maintenance of such insurance for the
benefit of the Company and the Members as it deems necessary
or appropriate including casualty, liability and other
insurance on the Properties of the Company;
(10) [INTENTIONALLY DELETED];
(11) the control of any matters affecting the
rights and obligations of the Company, including the
settlement, compromise, submission to arbitration or any
other form of dispute resolution, or abandonment, of any
claim, cause of action, liability, debt or damages, due or
owing to or from the Company, the commencement or defense of
suits, legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, and the
representation of the Company in all suits or legal
proceedings, administrative proceedings, arbitrations or
other forms of dispute resolution, the incurring of legal
expense, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by
law;
(12) the undertaking of any action in connection
with the Company's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, contributing or loaning Company funds to,
incurring indebtedness on behalf of, or guaranteeing the
obligations of any such Persons);
(13) the determination of the fair market value of
any Company property distributed in kind as determined by an
Appraisal which amount shall be equal to the Appraised
Value;
(14) the enforcement of any rights against any
Member pursuant to representations, warranties, covenants
and indemnities relating to such Member's contribution of
property or assets to the Company;
(15) the collection and receipt of revenues and
income of the Company;
(16) the exercise, directly or indirectly, through
any attorney-in-fact acting under a general or limited power
of attorney, of any right, including the right to vote,
appurtenant to any asset or investment held by the Company;
(17) the exercise of any of the powers of the
Managing Member enumerated in this Agreement on behalf of or
in connection with any Subsidiary of the Company or any
other Person in which the Company has a direct or indirect
interest, or jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the
Managing Member enumerated in this Agreement on behalf of
any Person in which the Company does not have an interest
pursuant to contractual or other arrangements with such
Person;
(19) the maintenance of working capital and other
reserves in such amounts as the Managing Member, in its sole
and absolute discretion, deems appropriate and reasonable
from time to time;
(20) the making, execution and delivery of any and
all deeds, leases, notes, deeds to secure debt, mortgages,
deeds of trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases or
legal instruments or agreements in writing necessary or
appropriate in the judgment of the Managing Member for the
accomplishment of any of the powers of the Managing Member
enumerated in this Agreement; and
(21) the amendment and restatement of Exhibit A
hereto to reflect accurately at all times the Capital
Accounts, LLC Units, and Percentage Interests of the Members
as the same are adjusted from time to time to the extent
necessary to reflect redemptions, Capital Contributions, the
issuance of LLC Units, the admission of any Substituted
Member or otherwise, as long as the matter or event being
reflected in Exhibit A hereto otherwise is authorized by
this Agreement.
B. Each of the Non-Managing Members agrees that the
Managing Member is authorized to execute, deliver and perform the
above-mentioned agreements and transactions on behalf of the
Company without any further act, approval or vote of the Non-
Managing Members, notwithstanding any other provision of this
Agreement (except as expressly provided in this Agreement), the
Act or any applicable law, rule or regulation. The execution,
delivery or performance by the Managing Member or the Company of
any agreement authorized or permitted under this Agreement shall
not constitute a breach by the Managing Member of any duty that
the Managing Member may owe the Company or the Members or any
other Persons under this Agreement or of any duty stated or
implied by law or equity.
C. At all times from and after the date hereof, the
Managing Member may cause the Company to obtain and maintain (i)
casualty, liability and other insurance on the properties of the
Company and (ii) liability insurance for the Indemnitees
hereunder.
D. In exercising its authority under this Agreement,
the Managing Member may, but (except as otherwise provided in
this Article 7 hereof) shall be under no obligation, to take into
account the tax consequences to any Member (including the
Managing Member) of any action taken by it. The Managing Member
and the Company shall not have liability to a Member under any
circumstances as a result of an income tax liability incurred by
such Member as a result of an action (or inaction) by the
Managing Member pursuant to its authority under this Agreement so
long as the action or inaction is taken in good faith.
Section 7.2. Certificate of Formation
The Managing Member is hereby designated an "authorized
person" within the meaning of the Act and to the extent that such
action is determined by the Managing Member to be reasonable and
necessary or appropriate, the Managing Member shall file
amendments to and restatements of the Certificate and do all the
things to maintain the Company as a limited liability company
under the laws of the State of Delaware. Subject to the terms
of Section 8.5.A(4) hereof, the Managing Member shall not be
required, before or after filing, to deliver or mail a copy of
the Certificate or any amendment thereto to any Member. The
Managing Member shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be reasonable
and necessary or appropriate for the formation, continuation,
qualification and operation of a limited liability company in the
State of Delaware and any other state, or other jurisdiction in
which the Company may elect to do business or own property.
Section 7.3. Restrictions on Managing Member's
Authority
A. The Managing Member may not take any action in
contravention of an express prohibition or limitation of this
Agreement, including, without limitation:
(1) take any action that would make it impossible
to carry on the ordinary business of the Company;
(2) possess Company property, or assign any
rights in specific Company property, for other than a
Company purpose except as otherwise provided in this
Agreement;
(3) admit a Person as a Member, except as
otherwise provided in this Agreement;
(4) perform any act that would subject a Non-
Managing Member to liability as a Managing Member in any
jurisdiction or any other liability except as expressly
provided in this Agreement or under the Act; or
(5) enter into any contract, mortgage, loan or
other agreement that expressly prohibits or restricts the
ability of (a) the Managing Member or the Company from
satisfying its obligations under Section 5.1 or 8.6 hereof
in full or (b) a Member from exercising its rights to an
Exchange in full, except, in either case, with the written
consent of such Member affected by the prohibition.
B. The Managing Member shall not, without the prior
Consent of the Non-Managing Members undertake or have the
authority to do or undertake, on behalf of the Company, any of
the following actions or enter into any transaction which would
have the effect of such transactions:
(1) except as provided in Section 7.3.C and
Section 7.1.A(21), amend, modify or terminate this Agreement
other than to reflect the admission, substitution,
termination or withdrawal of Members pursuant to Article 11
or Article 12 hereof,
(2) make a general assignment for the benefit of
creditors or appoint or acquiesce in the appointment of a
custodian, receiver or trustee for all or any part of the
assets of the Company;
(3) institute any proceeding for bankruptcy on
behalf of the Company;
(4) confess a judgment against the Company;
(5) approve or acquiesce to the Transfer of the
Membership Interest of the Managing Member to any Person
other than the Company;
(6) admit into the Company any Additional or
Substitute Managing Member;
(7) except as otherwise expressly provided in
this Agreement and except for the addition of new Members in
connection with a Capital Contribution of Undeveloped
Property and Development Property pursuant to the terms of
the Contribution Agreement, take any action to admit or
accept any new or additional Members.
C. Notwithstanding Section 7.3.B, the Managing Member
shall have the exclusive power to amend this Agreement as may be
required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the Managing
Member or surrender any right or power granted to the
Managing Member or any Affiliate of the Managing Member for
the benefit of the Non-Managing Members;
(2) to reflect the issuance of additional
Membership Interests pursuant to the admission,
substitution, termination, or withdrawal of Members in
accordance with this Agreement and to amend Exhibit A in
connection with such admission, substitution or withdrawal;
provided, however, that the foregoing shall not be construed
as allowing the Managing Member to admit any Additional
Members to the Company without the consent of the Non-
Managing Members;
(3) to reflect a change that is of an
inconsequential nature and does not adversely affect the Non-
Managing Members in any material respect, or to cure any
ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other
provisions, or make other changes with respect to matters
arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(4) to satisfy any requirements, conditions, or
guidelines contained in any order, directive or regulation
of a federal or state agency or contained in federal or
state law;
(5) to reflect such changes as are reasonably
necessary for the Managing Member to maintain its status as
a REIT or to satisfy the REIT Requirements; and
(6) to modify, as set forth in the definition of
"Capital Account," the manner in which Capital Accounts
are computed; provided, however, under no circumstances may
any such modification change the amount or the timing of any
amount to be received by any Member under this Agreement.
The Managing Member will provide notice to the Non-Managing
Members when any action under this Section 7.3.C is taken.
D. Notwithstanding Section 7.3.B and 7.3.C hereof or
any other provision in this Agreement to the contrary, this
Agreement shall not be amended with respect to any Member
adversely affected, and no action may be taken by the Managing
Member, without the Consent of such Member adversely affected if
such amendment or action would (i) convert a Non-Managing
Member's interest in the Company into a managing member's
interest (except as the result of the Managing Member acquiring
such interest), (ii) modify the limited liability of a Non-
Managing Member, (iii) alter rights of the Member to receive
distributions pursuant to Article 5 or Section 13.2.A(4), or the
allocations specified in Article 6 (except as permitted pursuant
to Section 7.3.C(3) hereof), (iv) alter or modify the rights to
an Exchange as set forth in Section 8.6, and related definitions
hereof or (v) amend this Section 7.3.D. Further, no amendment
may alter the restrictions on the Managing Member's authority set
forth elsewhere in this Section 7.3 without the Consent specified
in such section. Any such amendment or action consented to by
any Member shall be effective as to that Member, notwithstanding
the absence of such consent by any other Member.
E. The Managing Member shall not, on behalf of the
Company, take any of the following actions without the prior
Consent of the Non-Managing Members:
(1) to the fullest extent permitted by law,
dissolve the Company, other than incident to a Termination
Transaction (as defined in Section 11.2); or
(2) except in connection with a financing
permitted hereunder, sell, dispose, convey or otherwise
transfer any Property during the No-Transfer Period.
(3) except for a loan or loans on behalf of the
Company to be secured by the Properties which do not exceed
seventy percent (70%) of the Appraised Value on any Property
or in a total amount which does not exceed fifty percent
(50%), in the aggregate, of the Appraised Values of the
Properties (except for the Property commonly known as Cliff
Lake Shopping Center which will not be subject to either the
individual Property or the aggregate loan limitation ) at
the time such financing is obtained, mortgage or otherwise
encumber the Properties or an individual Property during the
No-Transfer Period.
If Managing Member breaches any such restriction, the Non-
Managing Members shall have the right at any time thereafter to
Exchange all or any portion of their LLC Units, in addition to
pursuing all other remedies available to them by reason of such
breach.
Section 7.4. Reimbursement of the Managing Member
A. The Managing Member shall not be compensated for
its services as the Managing Member of the Company.
Distributions, payments and allocations to which the Managing
Member may be entitled in its capacity as the Managing Member
shall not constitute compensation for services rendered by the
Managing Member as provided in this Agreement (including the
provisions of Articles 5 and 6 hereof).
B. Subject to Sections 7.4.C and 15.12 hereof, the
Company shall be liable, and shall reimburse the Managing Member
on a monthly basis (or such other basis as the Managing Member
may determine in its sole and absolute discretion), for all sums
expended in connection with the Company's business. Any such
reimbursements shall be in addition to any reimbursement of the
Managing Member as a result of indemnification pursuant to
Section 7.7 hereof
C. To the extent practicable, Company expenses shall
be billed directly to and paid by the Company. Subject to
Sections 7.1.C and 15.12 hereof, reimbursements to the Managing
Member or any of its Affiliates by the Company shall be allowed,
however, for the actual cost to the Managing Member or any of its
Affiliates of operating and other expenses of the Company,
including, without limitation, the actual cost of goods,
materials and administrative services related to (i) Company
operations, (ii) Company accounting, (iii) communications with
Members, (iv) legal services, (v) tax services, (vi) computer
services, (vii) risk management, (viii) mileage and travel
expenses and (ix) such other related operational and
administrative expenses as are necessary for the prudent
organization and operation of the Company. "Actual cost of goods
and materials" means the actual cost to the Managing Member or
any of its Affiliates of goods and materials used for or by the
Company obtained from entities not affiliated with the Managing
Member, and "actual cost of administrative services" means the
pro rata cost of personnel (as if such persons were employees of
the Company) providing administrative services to the Company.
The cost for such services to be reimbursed to the Managing
Member or any Affiliate thereof shall be the lesser of the
Managing Member's or Affiliate's actual cost, or the amount the
Company would be required to pay to independent parties for
comparable administrative services in the same geographic
location. The foregoing provisions shall not be deemed to limit
the right of the Managing Member to cause the Company to pay a
property management fee and an asset management fee to its
Affiliates as provided in Section 7.1.A(6) hereof.
D. The Managing Member shall also be reimbursed for
all expenses it incurs relating to any issuance of additional
Membership Interests or Debt of the Company (including, without
limitation, all costs, expenses, damages and other payments
resulting from or arising in connection with litigation related
to the foregoing), all of which expenses are considered by the
Members to constitute expenses of, and for the benefit of, the
Company.
To the extent that reimbursements to the Managing Member or any
of its Affiliates by the Company pursuant to this Section 7.4
would constitute gross income to the Managing Member for purposes
of Code Section 856(c)(2) or 856(c)(3), then such amounts shall
be treated as "guaranteed payments" within the meaning of Code
Section 707(c).
Section 7.5. Other Business of Managing Member
The Managing Member shall devote to the Company such
time as may be necessary for the performance of its duties as
Managing Member, but the Managing Member is not required, and is
not expected, to devote its full time to the performance of such
duties. The Managing Member may engage independently or with
others in other business ventures of every nature and
description, including, without limitation, the ownership of
other properties and the making or management of other
investments. Nothing in this Agreement shall be deemed to
prohibit the Managing Member or any Affiliate of the Managing
Member from dealing, or otherwise engaging in business with,
Persons transacting business with the Company, or from providing
services related to the purchase, sale, financing, management,
development or operation of real or personal property and
receiving compensation therefor, not involving any rebate or
reciprocal arrangement that would have the effect of
circumventing any restriction set forth herein upon dealings with
the Managing Member or any Affiliate of the Managing Member.
Neither the Company nor any Member shall have any right by virtue
of this Agreement or the relationship created hereby in or to
such other ventures or activities or to the income or proceeds
derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Company, shall not be deemed
wrongful or improper.
Section 7.6. Contracts with Affiliates
A. Subject to Section 7.6.B below, the Company may
lend or contribute to Persons in which it has an equity
investment, and such Persons may borrow funds from the Company,
on terms and conditions established in the sole and absolute
discretion of the Managing Member. The foregoing authority shall
not create any right or benefit in favor of any Person.
B. Neither the Managing Member nor any of its
Affiliates, directly or indirectly, shall sell, transfer or
convey any Property to, or purchase any property from, or borrow
funds from, or lend funds to, the Company or engage in any other
transactions with the Company, except upon terms determined by
the Managing Member in good faith to be fair and reasonable and
comparable to terms that could be obtained from an unaffiliated
party in an arm's length transaction.
C. The Managing Member in its sole and absolute
discretion and without the approval of the Non-Managing Members,
may propose and adopt on behalf of the Company employee benefit
plans funded by the Company for the benefit of employees of the
Managing Member, the Company, Subsidiaries of the Company or any
Affiliate of any of them in respect of services performed,
directly or indirectly, for the benefit of the Company or any of
the Company's Subsidiaries.
D. The Managing Member is expressly authorized to
enter into, in the name and on behalf of the Company, a right of
first opportunity arrangement and other conflict avoidance
agreements with various Affiliates of the Company and the
Managing Member, on such terms as the Managing Member, in its
sole and absolute discretion, believes are advisable.
Section 7.7. Indemnification
A. To the fullest extent permitted by applicable law,
the Company shall indemnify each Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several,
expenses (including, without limitation, attorney's fees and
other legal fees and expenses), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or
investigative, that relate to the operations of the Company
("Actions") as set forth in this Agreement in which such
Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise
to the proceeding and either was committed in bad faith or was
the result of active and deliberate dishonesty; (ii) the
Indemnitee actually received an improper personal benefit in
money, property or services; or (iii) in the case of any criminal
proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Without limitation the
foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guaranty or otherwise, for any
indebtedness of the Company or any Subsidiary of the Company
(including, without limitation, any indebtedness which the
Company or any Subsidiary of the Company has assumed or taken
subject to), and the Managing Member is hereby authorized and
empowered, on behalf of the Company, to enter into one or more
indemnity agreements consistent with the provisions of this
Section 7.7 in favor of any Indemnitee having or potentially
having liability for any such indebtedness. The termination of
any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.7.A. The
termination of any proceeding by conviction or upon a plea of
nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption
that the Indemnitee acted in a manner contrary to that specified
in this Section 7.7.A with respect to the subject matter of such
proceeding such that the Indemnitee is not entitled to
indemnification under this Section 7.7. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets
of the Company and any insurance proceeds from the liability
policy covering the Managing Member and any Indemnitees, and
neither the Managing Member nor any Non-Managing Member shall
have any obligation to contribute to the capital of the Company
or otherwise provide funds to enable the Company to fund its
obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who
is a party to a proceeding or otherwise subject to or the focus
of or is involved in any Action shall be paid or reimbursed by
the Company as incurred by the Indemnitee in advance of the final
disposition of the Action upon receipt by the Company of (i) a
written affirmation by the Indemnitee of the Indemnitee's good
faith belief that the standard of conduct necessary for
indemnification by the Company as authorized in Section 7.7.A has
been met, and (ii) a written undertaking by or on behalf of the
Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7
shall be in addition to any other rights to which an Indemnitee
or any other Person may be entitled under any agreement pursuant
to any vote of the Members, as a matter of law or otherwise, and
shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement
with such Indemnitee or in the writing pursuant to which such
Indemnitee is indemnified.
D. The Company may, but shall not be obligated to,
purchase and maintain insurance, on behalf of any of the
Indemnitees and such other Persons as the Managing Member shall
determine, against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with
the Company's activities, regardless of whether the Company would
have the power to indemnify such Person against such liability
under the provisions of this Agreement.
E. For purposes of this Section 7.7, (i) the Company
shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by
it of its duties to the Company also imposes duties on, or
otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee
with respect to an employee benefit plan pursuant to applicable
law shall constitute fines within the meaning of this Section 7.7
and (iii) actions taken or omitted by the Indemnitee with respect
to an employee benefit plan in the performance of its duties for
a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the
Company.
F. In no event may an Indemnitee subject any of the
Members to personal liability by reason of the indemnification
provisions set forth in this Agreement.
G. An Indemnitee shall not be denied indemnification
in whole or in part under this Section 7.7 because the Indemnitee
had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for
the benefit of any other Persons. Any amendment, modification or
repeal of this Section 7.7 or any provision hereof shall be
prospective only and shall not in any way affect the limitations
on the Company's liability to any Indemnitee under this Section
7.7 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
I. If and to the extent any reimbursements to the
Managing Member pursuant to this Section 7.7 constitute gross
income to the Managing Member (as opposed to the repayment of
advances made by the Managing Member on behalf of the Company)
such amounts shall constitute guaranteed payments within the
meaning of Code Section 707(c), shall be treated consistently
therewith by the Company and all Members, and shall not be
treated as distributions for purposes of computing the Members'
Capital Accounts.
Section 7.8. Liability of the Managing Member
A. Notwithstanding anything to the contrary set forth
in this Agreement, neither the Managing Member nor any of its
directors or officers shall be liable or accountable in damages
or otherwise to the Company, any Members or any Assignees for
losses sustained, liabilities incurred or benefits not derived as
a result of errors in judgment or mistakes of fact or law or of
any act or omission if the Managing Member or such director or
officer acted in good faith.
B. The Non-Managing Members expressly acknowledge
that the Managing Member is acting for the benefit of the
Company, the Members and the Managing Member's shareholders
collectively, that the Managing Member is (except as otherwise
provided in this Agreement, including, but not limited to, the
restrictions on the Managing Member's power and authority
pursuant to this Article 7) under no obligation to give priority
to the separate interests of the Members or the Managing Member's
shareholders (including, without limitation, the tax consequences
to Members, Assignees or the Managing Member's shareholders) in
deciding whether to cause the Company to take (or decline to
take) any actions and that the Managing Member shall not be
liable to the Company or to any Member for monetary damages for
losses sustained, liabilities incurred, or benefits not derived
by Non-Managing Members in connection with such decisions,
provided that the Managing Member has acted in good faith.
C. Subject to its obligations and duties as Managing
Member set forth in Section 7.1.A hereof, the Managing Member may
exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either
directly or by or through its employees or agents. The Managing
Member shall not be responsible for any misconduct or negligence
on the part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this
Section 7.8 or any provision hereof shall be prospective only and
shall not in any way affect the limitations on the Managing
Member's, and its officers' and directors', liability to the
Company and the Non-Managing Members under this Section 7.8 as in
effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise
or be asserted.
Section 7.9. Other Matters Concerning the Managing
Member
A. The Managing Member may rely and shall be
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture or other paper
or document believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties.
B. The Managing Member may consult with legal
counsel, accountants, appraisers, management consultants,
investment bankers, architects, engineers, environmental
consultants and other consultants and advisers selected by it,
and any act taken or omitted to be taken in reliance upon the
opinion of such Persons as to matters that the Managing Member
reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such
opinion.
C. The Managing Member shall have the right, in
respect of any of its powers or obligations hereunder, to act
through any of its duly authorized officers and a duly appointed
attorney or attorneys-in-fact. Each such attorney shall, to the
extent provided by the Managing Member in the power of attorney,
have full power and authority to do and perform all and every act
and duty that is permitted or required to be done by the Managing
Member hereunder.
D. Notwithstanding any other provisions of this
Agreement or the Act, any action of the Managing Member on behalf
of the Company or any decision of the Managing Member to refrain
from acting on behalf of the Company undertaken in the good faith
belief that such action or omission is necessary or advisable in
order (i) to protect the ability of the Managing Member to
continue to qualify as a REIT, (ii) for the Managing Member
otherwise to satisfy the REIT Requirements or (iii) to allow the
Managing Member to avoid incurring any liability for taxes under
Section 857 or Section 4981 of the Code, is expressly authorized
under this Agreement and is deemed approved by all of the Non-
Managing Members.
E. In connection with any pledge by a Non-Managing
Member of its LLC Units to a lending institution pursuant to
Section 11.3 hereof, the Managing Member agrees to cooperate in
providing to the Non-Managing Member the following documents as
may reasonably be requested by the lending institution from time
to time and upon ten (10) days prior notice from the requesting
Non-Managing Member: (i) a certificate from the Managing Member
certifying that as of a specific date there have been no
amendments to its organizational documents or this Agreement;
(ii) certified copies of the Certificate and the organizational
documents of the Managing Member; (iii) good standing
certificates for the Managing Member and the Company; and (iv) a
letter from the Managing Member acknowledging the pledge by the
Non-Managing Member of its LLC Units. The Non-Managing Member
requesting any of the foregoing shall pay the reasonable expenses
incurred by the Company and the Managing Member in providing any
of the foregoing.
F. Until such time as the Non-Managing Members have
Exchanged all of their LLC Units, the Managing Member and any
Substitute Managing Member will at all times maintain a minimum
Net Worth equal to ten (10) times the value of the LLC Units
($1.00 per LLC Unit) held by the Non-Managing Members from time
to time. If the Managing Member and any Substitute Managing
Member at any time fail to maintain such minimum Net Worth, the
Non-Managing Members shall have the right at any time thereafter
to Exchange all or any portion of their LLC Units.
Section 7.10. Title to Company Assets
Title to Company assets, whether real, personal or
mixed and whether tangible or intangible, shall be deemed to be
owned by the Company as an entity, and no Member, individually or
collectively with other Members or Persons, shall have any
ownership interest in such Company assets or any portion thereof.
Title to any or all of the Company assets shall be held in the
name of the Company, the Managing Member or one or more nominees,
as the Managing Member may determine, including Affiliates of the
Managing Member as may be required to complete financing and to
otherwise comply with the intent of the Contribution Agreement
and this Agreement. The Managing Member hereby declares and
warrants that any Company assets for which legal title is held in
the name of the Managing Member or any nominee or Affiliate of
the Managing Member shall be held by the Managing Member for the
use and benefit of the Company in accordance with the provisions
of this Agreement. All Company assets shall be recorded as the
property of the Company in its books and records, irrespective of
the name in which legal title to such Company assets is held.
Section 7.11. Reliance by Third Parties
Notwithstanding anything to the contrary in this
Agreement, any Person dealing with the Company shall be entitled
to assume that, except for the actions identified in Section
7.3.E hereof, the Managing Member has full power and authority,
without the consent or approval of any other Member or Person, to
encumber, sell or otherwise use in any manner any and all assets
of the Company and to enter into any contracts on behalf of the
Company, and take any and all actions on behalf of the Company,
and such Person shall be entitled to deal with the Managing
Member as if it were the Company's sole party in interest, both
legally and beneficially. In no event shall any Person dealing
with the Managing Member or its representatives be obligated to
ascertain that the terms of this Agreement have been complied
with or to inquire into the necessity or expediency of any act or
action of the Managing Member or its representatives. Each and
every certificate, document or other instrument executed on
behalf of the Company by the Managing Member or its
representatives shall be conclusive evidence in favor of any and
every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and
effect (ii) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so
for and on behalf of the Company and (iii) such certificate,
document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is
binding upon the Company.
ARTICLE 8.
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 8.1. Limitation of Liability
The Non-Managing Members shall have no liability under
this Agreement except for their obligations to make Capital
Contributions pursuant to Section 4.1, the Managing Member's
rights of offset as expressly set forth in Section 5.1.A, the
payments described in Section 5.3 and as expressly provided
under the Act.
Section 8.2. Managing of Business
No Non-Managing Members or Assignee (other than the
Managing Member, any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the Managing Member, the
Company or any of their Affiliates, in their capacity as such)
shall take part in the operations, management or control (within
the meaning of the Act) of the Company's business, transact any
business in the Company's name or have the power to sign
documents for or otherwise bind the Company. The transaction of
any such business by the Managing Member, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of
the Managing Member, the Company or any of their Affiliates, in
their capacity as such, shall not affect, impair or eliminate the
limitations on the liability of the Non-Managing Members or
Assignees under this Agreement.
Section 8.3. Outside Activities of Members
Subject to any agreements entered into pursuant to
Section 7.6 hereof and any other agreements entered into by a
Member or a partner or member of such Member or its Affiliates
with the Managing Member, the Company or a Subsidiary (including,
without limitation, any employment agreement), any Member and any
Assignee, officer, director, employee, agent, trustee, Affiliate,
partner, member or shareholder of any Member shall be entitled to
and may have business interests and engage in business activities
in addition to those relating to the Company, including business
interests and activities that are in direct or indirect
competition with the Company or that are enhanced by the
activities of the Company. Neither the Company nor any Member
shall have any rights by virtue of this Agreement in any business
ventures of any Member or Assignee. Subject to such agreements,
none of the Members nor any other Person shall have any rights by
virtue of this Agreement or the relationship established hereby
in any business ventures of any other Person (other than the
Managing Member, to the extent expressly provided herein), and
such Person shall have no obligation pursuant to this Agreement,
subject to Section 7.6 hereof and any other agreements entered
into by a Member or a partner or member of such Member or its
Affiliates with the Managing Member, the Company or a Subsidiary,
to offer any interest in any such business ventures to the
Company, any Member or any such other Person, even if such
opportunity is of a character that, if presented to the Company,
any Member or such other Person, could be taken by such Person.
Section 8.4. Return of Capital
Except pursuant to the rights of Exchange set forth in
Section 8.6 hereof, no Member shall be entitled to the withdrawal
or return of its Capital Contribution, except to the extent of
distributions made pursuant to this Agreement or upon termination
of the Company as provided herein. Except as otherwise expressly
provided in this Agreement, no Member or Assignee shall have
priority over any other Member or Assignee either as to the
return of Capital Contributions or as to profits, losses,
distributions or credits.
Section 8.5. Rights of Non-Managing Members Relating
to the Company
A. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.C
hereof, each Non-Managing Member shall have the right, upon
written demand and at such Non-Managing Member's own expense:
(1) to obtain a copy of (i) the most recent
annual and quarterly reports filed with the SEC by the
Managing Member pursuant to the Exchange Act and (ii) each
report or other written communication sent to the
shareholders of the Managing Member,
(2) to obtain a copy of the Company's federal,
state and local income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last
known business, residence or mailing address of each Member,
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with
executed copies of all powers of attorney pursuant to which
this Agreement, the Certificate and all amendments thereto
have been executed;
(5) to obtain true and full information regarding
the amount of cash and a description and statement of any
other property or services contributed by each Member and
that each Member has agreed to contribute in the future, and
the date on which each became a Member; and
(6) to obtain true and full information in
connection with the Company operations.
B. Notwithstanding any other provision of this
Section 8.5, the Managing Member may keep confidential from the
Non-Managing Members, for such period of time as the Managing
Member determines in its reasonable discretion, any information
that (i) the Managing Member reasonably believes to be in the
nature of trade secrets or other information the disclosure of
which the Managing Member in good faith believes is not in the
best interests of the Company or could damage the Company or its
business or (ii) the Company or the Managing Member is required
by law or by agreements with unaffiliated third parties to keep
confidential.
Section 8.6. Exchange Rights
A. Each Non-Managing Member shall have the right
after January 1, 2001, (subject to the terms and conditions set
forth herein) to require the Managing Member to acquire all or a
portion of the LLC Units held by such Non-Managing Member (such
LLC Units being hereafter called "Tendered Units") in exchange
(an "Exchange") for the Cash Amount, payable on the tenth (10th)
Business Day following the giving of a Notice of Exchange to the
Managing Member (a "Specified Exchange Date"). Any Exchange
shall be exercised pursuant to a Notice of Exchange given to the
Managing Member by a Non-Managing Member exercising the Exchange
right (the "Tendering Party"). On the Specified Exchange Date,
the Tendering Party shall sell the Tendered Units (but not in an
amount in excess of one-half (1/2) of the total of the value of
the LLC Units ($1.00 per LLC Unit) held from time to time and
including adjustments to the Non-Managing Members LLC Units in
accordance with Section 4.1 by the Non-Managing Members prior to
June 30, 2002) to the Managing Member in exchange for the Cash
Amount computed as of the Specified Exchange Date. In addition,
subject to Section 18.607 of the Act, the Managing Member shall
cause the Company to pay the Tendering Party the amount of any
Preferred Return Shortfall outstanding as of the Specified
Exchange Date with respect to the Tendered Units. The Cash
Amount and any such Preferred Return Shortfall shall be delivered
at the option of the Tendering Party by wire transferred funds or
as a certified check payable to the Tendering Party. If a
Notice of Exchange has not been delivered identifying a Specified
Exchange Date with respect to all remaining LLC Units held by the
Non-Managing Members on or before August 31, 2004, then, at the
Managing Members sole and exclusive option, the Managing Member
can require the completion of an Exchange of all remaining LLC
Units held by the Non-Managing Members not later than ten (10)
days following delivery of written notice to the Non-Managing
Members from the Managing Member of its exercise of its rights
hereunder.
B. Notwithstanding anything herein to the contrary,
with respect to any Exchange pursuant to this Section 8.6:
(1) Without the Consent of the Managing Member,
no Non-Managing Member may effect an Exchange for less
than 1,000 LLC Units or, if the Non-Managing Member holds
less than 1,000 LLC Units, less than all of the LLC Units
held by such Non-Managing Member.
(2) Each Tendering Party shall continue to own
all LLC Units subject to any Exchange, and be treated as a
Member with respect to such LLC Units for all purposes of
this Agreement, until such LLC Units are transferred to the
Managing Member and paid for on the Specified Exchange Date.
C. In the event the Managing Member fails to pay the
Cash Amount required to be paid pursuant to an Exchange in
accordance with this Section on any Specified Exchange Date
(unless any portion of such Cash Amount is setoff in accordance
with the terms and conditions of Section 5.1.A), any unpaid
portion of the Cash Amount due to the Non-Managing Members shall
accrue interest from and after the date such amount is due until
the date such amount is paid in full at a variable interest rate
equal to the Prime Rate plus two percent (2%). Managing Member
shall also be liable for all costs of collection incurred by the
Non-Managing Members, including court costs and reasonable
attorneys' fees. The Non-Managing Member will notify the
Managing Member, in writing, of its failure to make a payment of
the Cash Amount as required by this Section 8.6 and the Managing
Member will be allowed ten (10) days after receipt of such notice
to cure its failure to make such payment. If the Managing Member
fails to cure the nonpayment of such Cash Amount within such ten
(10)-day period, then the Non-Managing Members may, at their
option, and notwithstanding the limitations as to timing of an
Exchange as set forth in this Section 8.6, at any time thereafter
exercise their rights to Exchange all of the LLC Units in
accordance with the terms and conditions of this Section 8.6.
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting
A. The Managing Member shall keep or cause to be kept
at the principal office of the Company those records and
documents required to be maintained by the Act and other books
and records deemed by the Managing Member to be appropriate with
respect to the Company's business, including, without limitation,
all books and records necessary to provide to the Members any
information, lists and copies of documents required to be
provided pursuant to Section 8.5 and 9.3 hereof. Any records
maintained by or on behalf of the Company in the regular course
of its business may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so
maintained are convertible into clearly legible written form
within a reasonable period of time.
B. The books of the Company shall be maintained, for
financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles, or on
such other basis as the Managing Member determines to be
necessary or appropriate. To the extent permitted by sound
accounting practices and principles, the Company and the Managing
Member may operate with integrated or consolidated accounting
records, operations and principles.
Section 9.2. Fiscal Year
The Fiscal Year of the Company shall be the calendar
year.
Section 9.3. Reports
A. As soon as practicable, but in no event later than
105 days after the close of each Fiscal Year, the Managing Member
shall cause to be mailed to each Member, of record as of the
close of the Fiscal Year, an annual report containing financial
statements of the Company, and the Managing Member (unless such
statements are prepared on a consolidated basis), for such Fiscal
Year, presented in accordance with generally accepted accounting
principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the
Managing Member.
B. As soon as practicable, but in no event later than
60 days after the close of each calendar quarter (except the last
calendar quarter of each year), the Managing Member shall cause
to be mailed to each Member, of record as of the last day of the
calendar quarter, a report containing unaudited financial
statements of the Company, or of the Managing Member, if such
statements are prepared solely on a consolidated basis with the
Managing Member, and such other information as may be required by
applicable law or regulation or as the Managing Member determines
to be appropriate.
ARTICLE 10.
TAX MATTERS
Section 10.1. Preparation of Tax Returns
The Managing Member shall arrange for the preparation
and timely filing of all returns with respect to Company income,
gains, deductions, losses and other items required of the
Company for federal and state income tax purposes and shall use
all reasonable efforts to furnish, within 90 days of the close of
each taxable year, the tax information reasonably required by
Members for federal and state income tax reporting purposes.
Section 10.2. Tax Elections
Except as otherwise provided herein, the Managing
Member shall, in its sole and absolute discretion, determine
whether to make any available election pursuant to the Code,
including, without limitation, the election under Section 754 of
the Code. The Managing Member shall have the right to seek to
revoke any such election (including, without limitation, any
election under Code Sections 754) upon the Managing Member's
determination in its sole and absolute discretion that such
revocation is in the best interests of the Members.
Section 10.3. Tax Matters Partner
A. The Managing Member shall be designated and shall
operate as "Tax Matters Partner" (as defined in Code Section
6231), to oversee or handle matters relating to the taxation of
the Company and shall notify each Member of any material proposed
adjustment to any income tax return of the Company.
B. The Member designated as "Tax Matters Partner" may
make all elections for federal income and all other tax purposes
(including, without limitation, pursuant to Code Section 754).
C. Income tax returns of the Company shall be
prepared by such certified public accountant(s) as the Managing
Member shall retain at the expense of the Company.
Section 10.4. Organizational Expenses
The Company shall elect to deduct expenses, if any,
incurred by it in organizing the Company ratably over a 60-month
period as provided in Code Section 709.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer
A. No part of the Membership Interest of a Member may
be voluntarily alienated or encumbered except as may be
specifically provided for in this Agreement.
B. No Membership Interest shall be Transferred, in
whole or in part, except in accordance with the terms and
conditions set forth in Article 7 or this Article 11. Any
Transfer or purported Transfer of a Membership Interest not made
in accordance with this Article 11 shall be null and void.
Section 11.2. Transfer of Managing Member's Membership
Interest
A. Except in connection with a transaction described
in Section 11.2.B or in connection with a transfer by the
Managing Member of substantially all of its assets and
liabilities to a partnership or limited liability company in
connection with a reorganization of the Managing Member into an
UPREIT structure (an "UPREIT Reorganization"), the Managing
Member shall not resign from the Company and shall not Transfer
all or any portion of its interest in the Company without the
Consent of all of the Non-Managing Members, which may be given or
withheld by each Non-Managing Member in it sole and absolute
discretion. Upon any transfer of the Membership Interest of the
Managing Member in accordance with the provisions of this Section
11.2, the transferee shall become a Substitute Managing Member
for all purposes herein, and shall be vested with the powers and
rights of the transferor Managing Member, and shall be liable for
all obligations and responsible for all duties of the Managing
Member, once such transferee has executed such instruments as may
be necessary to effectuate such admission and to confirm the
agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Membership
Interest so acquired. It is a condition to any Transfer
otherwise permitted hereunder that the transferee assumes, by
operation of law or express agreement, all of the obligations of
the transferor Managing Member under this Agreement with respect
to such Transferred Membership Interest, and (provided that the
transferor satisfies the Net Worth requirement set forth below)
such Transfer shall relieve the transferor Managing Member of its
obligations under this Agreement accruing subsequent to the date
of such Transfer. In the event the Managing Member resigns from
the Company, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Incapacity of the
Managing Member, a Majority of Remaining Non-Managing Members may
elect to continue the Company business by selecting a substitute
Managing Member in accordance with Section 13.1.B. In the event
of an UPREIT Reorganization, any Cash Amount payable in
accordance with Section 8.6 hereof shall be payable by the
partnership or limited liability company to which the Managing
Member transfers its assets in the UPREIT Reorganization. In the
event of an UPREIT Reorganization, the substitute Managing Member
shall at all times retain a minimum Net Worth equal to ten (10)
times the value of the LLC Units ($1.00 per LLC Unit) held by the
Non-Managing Members from time to time.
B. The Managing Member shall not engage in any
merger, consolidation or other combination with or into another
person, sale of all or substantially all of its assets or any
reclassification, recapitalization or change of its outstanding
equity interests (a "Termination Transaction," unless the
Termination Transaction has been approved by the Consent of the
Non-Managing Members. In no event will a Termination Transaction
result in the Managing Member or any Substitute Managing Member
at any time retaining less than a minimum Net Worth equal to ten
(10) times the value of the LLC Units ($1.00 per LLC Unit) held
by the Non-Managing Members from time to time.
Section 11.3. Non-Managing Members' Rights to Transfer
A. General. No Non-Managing Member shall Transfer
all or any portion of its Membership Interest, or any of such Non-
Managing Members economic rights as a Non-Managing Member, to any
transferee without the consent of the Managing Member, which
consent may be withheld in its sole and absolute discretion;
provided, however, that any Non-Managing Member may, at any time,
without the consent of the Managing Member, Transfer all or part
of its Membership Interest (i) to effectuate a pledge of its LLC
Units to secure repayment of a loan, provided such pledge of LLC
Units is subject to the Managing Member's setoff rights in
accordance with Section 5.1.A; (ii) in the case of a Member which
is an individual, to any Family Member, any trust (whether or not
revocable) of which such Non-Managing Member or such Non-Managing
Member's Family Members are the sole beneficiaries, (iii) in the
case of a Member which is not an individual, to any of the
Persons who were partners, stockholders, members or owners of the
Member as of the Effective Date, (iv) pursuant to a gift or other
transfer without consideration, (v) pursuant to the applicable
laws of descent or distribution, (vi) to another Member, (vii)
subject to the provisions of Section 11.6, pursuant to a grant of
a security interest, pledge or other encumbrance effected in a
bona fide transaction or as a result of the exercise of remedies
related to the security interest, pledge or other encumbrance
(other than, in each case, to a lender to the Company or a Person
who is related to a lender to the Company) or (viii) to any
Affiliate, provided that the Non-Managing Member transferor
provide the Company with a legal opinion in a form reasonably
acceptable to the Managing Member that such transfer would not
cause the exemption from registrations under the Securities Act
relied upon by the Company in issuing the LLC Units to no longer
be available. Any Transfer permitted by this proviso is referred
to as a "Permitted Transfer." It is a condition to any Transfer
otherwise permitted hereunder that the transferee assume by
operation of law or express agreement all of the obligations of
the transferor Member under this Agreement with respect to such
Transferred Membership Interest and that the transferee
acknowledge the Managing Member's rights of setoff distributions
otherwise payable with respect to the Transferred Membership
Interest in accordance with Section 5.1.A. Any transferee,
whether or not admitted as a Substituted Member, shall take
subject to the obligations of the transferor hereunder. Unless
admitted as a Substituted Member, no transferee, whether by a
voluntary Transfer, by operation of law or otherwise, shall have
any rights hereunder, other than the rights of an Assignee as
provided in Section 11.5 hereof.
B. Incapacity. If a Non-Managing Member is subject
to Incapacity, the executor, administrator, trustee, committee,
guardian, conservator or receiver of such Non-Managing Member's
estate shall have all the rights of a Non-Managing Member, but
not more rights than those enjoyed by other Non-Managing Members,
for the purpose of settling or managing the estate, and such
power as the Incapacitated Non-Managing Member possessed to
Transfer all or any part of its interest in the Company. The
Incapacity of a Non-Managing Member, in and of itself, shall not
dissolve or terminate the Company.
C. Opinion of Counsel. In connection with any
Transfer of a Membership Interest, the Managing Member shall have
the right to receive an opinion of counsel reasonably
satisfactory to it to the effect that the proposed Transfer may
be effected without registration under the Securities Act and
will not otherwise violate any federal or state securities laws
or regulations applicable to the Company or the Membership
Interests Transferred. If, in the opinion of such counsel, such
Transfer would require the filing of a registration statement
under the Securities Act or would otherwise violate any federal
or state securities laws or regulations applicable to the Company
or the LLC Units, the Managing Member may prohibit any Transfer
by a Member of Membership Interests otherwise permitted under
this Section 11.3.
D. Adverse Tax Consequences. No Transfer by a
Member of its Membership Interests (excluding any Exchange
pursuant to Section 8.6) may be made to any Person if (i) in the
opinion of legal counsel for the Company, it would result in the
Company being treated as an association taxable as a corporation
for federal income tax or for state income or franchise tax
purposes, (ii) in the opinion of legal counsel for the Company,
it would adversely affect the ability of the Managing Member to
continue to qualify as a REIT or would subject the Managing
Member to any additional taxes under Code Section 857 or Code
Section 4981 or (iii) such Transfer is effectuated through an
"established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Code
Section 7704.
E. Transfers to Lenders. No Transfer of any LLC
Units may be made to a lender to the Company or any Person who is
related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Company whose loan constitutes
a Nonrecourse Liability, without the consent of the Managing
Member, in its sole and absolute discretion; provided that, as a
condition to such consent, the lender will be required to enter
into an arrangement with the Company and the Managing Member to
redeem or exchange for the Cash Amount any LLC Units in which a
security interest is held simultaneously with the time at which
such lender would be deemed to be a member in the Company for
purposes of allocating liabilities to such lender under Code
Section 752.
Section 11.4. Substituted Members
A. No Member shall have the right to substitute a
transferee (excluding any transferees pursuant to Transfers
permitted by Section 11.3 hereof, each of whom shall be a
Substituted Member) as a Member in its place. The Managing
Member shall, however, have the right to consent to the admission
of a transferee of the interest of a Member pursuant to this
Section 11.4 as a Substituted Member, which consent may be given
or withheld by the Managing Member in it sole and absolute
discretion. The Managing Member's failure or refusal to permit a
transferee of any such interests to become a Substituted Member
shall not give rise to any cause of action against the Company or
any Member.
B. A transferee who has been admitted as a
Substituted Member in accordance with this Article 11 shall have
all the rights and powers and be subject to all the restrictions
and liabilities of a Member under this Agreement. The admission
of any transferee as a Substituted Member shall be subject to the
transferee executing and delivering to the Company an acceptance
of all of the terms and conditions of this Agreement (including
without limitation, the provisions of Section 2.4 and such other
documents or instruments as may be required to effect the
admission).
C. Upon the admission of a Substituted Member, the
Managing Member shall amend Exhibit A to reflect the name,
address, Capital Account, number of LLC Units and Percentage
Interest of such Substituted Member and to eliminate or adjust,
if necessary, the name, address, Capital Account, number of LLC
Units and Percentage Interest of the predecessor of such
Substituted Member (any other Member, as necessary).
Section 11.5. Assignees
If the Managing Member does not consent to the
admission of any permitted transferee under Section 11.3 hereof
as a Substituted Member, as described in Section 11.4 hereof
after compliance by the Non-Managing Member and its transferees
of all the requirements set forth in Section 11.3, such
transferee shall be considered an Assignee for purposes of this
Agreement. An Assignee shall be entitled to all the rights of an
assignee of a limited liability company interest under the Act,
including the right to receive distributions from the Company and
the share of Net Income, Net Losses and other items of income,
gain, loss, deduction and credit of the Company attributable to
the LLC Units assigned to such transferee, the rights to
Transfer the LLC Units provided in this Article 11, and the
right of Exchange provided in Section 8.6, but shall not be
deemed to be a holder of LLC Units for any other purpose under
this Agreement, and shall not be entitled to effect a Consent or
vote with respect to such LLC Units on any matter presented to
the Members for approval (such right to Consent or vote, to the
extent provided in this Agreement or under the Act, fully
remaining with the transferor Member). In the event that any
such transferee desires to make a further assignment of any such
LLC Units, such transferee shall be subject to all the provisions
of this Article 11 to the same extent and in the same manner as
any Members desiring to make an assignment of LLC Units. The
Managing Member shall have no liability under any circumstance
with respect to any Assignee as to which it does not have notice.
Section 11.6. General Provisions
A. No Non-Managing Member may resign from the Company
other than as a result of (i) a permitted Transfer of all of such
Non-Managing Member's LLC Units in accordance with this Article
11 and the transferee(s) of such LLC Units being admitted to the
Company as a Substituted Member or (ii) pursuant to an Exchange
by the Managing Member of all of its LLC Units under Section 8.6
hereof.
B. Any Member who shall (i) Transfer all of its LLC
Units in a Transfer permitted pursuant to this Article 11 where
such transferee was admitted as a Substituted Member or (ii)
exercise its rights to effect an Exchange of all of its LLC
Units under Section 8.6 hereof, shall cease to be a Member.
C. All distributions of Available Cash attributable
to an LLC Unit with respect to which the LLC Record Date is
before the date of a Transfer or an Exchange of the LLC Unit
shall be made to the transferor Member or the exchanging Member,
as the case may be, and, in the case of a Transfer other than an
Exchange, all distributions of Available Cash thereafter
attributable to such LLC Unit shall be made to the transferee
Member.
D. In addition to any other restrictions on Transfer
herein contained, in no event may any Transfer or assignment of a
Membership Interest by any Member (including any acquisition of
LLC Units by the Company) be made:
(a) to any person or entity who lacks the legal
right, power or capacity to own a Membership Interest;
(b) in violation of applicable law;
(c) if such Transfer would, in the opinion of
counsel to the Company or the Managing Member, cause an
increased tax liability to any other Member of Assignee as a
result of the termination of the Company, in either case for
federal or state income or franchise tax purposes (except as
a result of the Exchange of all LLC Units held by all
Members);
(d) if such Transfer would, in the opinion of
legal counsel to the Company, cause the Company either
(i) to cease to be classified as a partnership or (ii) to be
classified as a publicly traded partnership treated as a
corporation, in either case for federal or state income tax
purposes (except as a result of the Exchange of all LLC
Units held by all Members);
(e) if such Transfer would cause the Company to
become, with respect to any employee benefit plan
subject to Title I of ERISA, a "party-in-interest" (as
defined in ERISA Section 3(14)) or a "disqualified person"
(as defined in Code Section 4975(c));
(f) if such Transfer would, in the opinion of
legal counsel to the Company, cause any portion of the
assets of the Company to constitute assets of any employee
benefit plan pursuant to Department of Labor Regulations
Section 2510.2-101;
(g) if such Transfer causes the Company (as
opposed to the Managing Member) to become a reporting
company under the Exchange Act; or
(h) if such Transfer subjects the Company to
regulation under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or ERISA, each as amended.
ARTICLE 12.
ADMISSION OF MEMBERS
Section 12.1. Admission of Successor Managing Member
A successor to all of the Managing Member's Membership
Interest pursuant to Section 11.2 hereof who is proposed to be
admitted as a successor Managing Member shall be admitted to the
Company as the Managing Member, effective immediately upon such
Transfer. Any such successor shall carry on the business of the
Company without dissolution. In each case, the admission shall
be subject to the successor Managing Member executing and
delivering to the Company an acceptance of all of the terms,
conditions and applicable obligations of this Agreement and such
other documents or instruments as may be required to effect the
admission.
Section 12.2. Amendment of Agreement and Certificate
of Membership
For the admission to the Company of any Member, the
Managing Member shall take all steps necessary and appropriate
under the Act to amend the records of the Company and, if
necessary, to prepare as soon as practical an amendment of this
Agreement (including an amendment of Exhibit A) and, if required
by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted
pursuant to Section 2.4 hereof.
Section 12.3. Limitation on Admission of Members
A. No Person shall be admitted to the Company as a
Substituted Member or an Additional Member if, in the opinion of
legal counsel for the Company, it would result in the Company
being treated as a corporation for federal income tax purposes or
otherwise cause the Company to become a reporting company under
the Exchange Act.
B. Except as provided in Section 4.1, the Managing
Member shall not permit the Company to issue additional LLC
Units.
ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1. Dissolution
The Company shall not be dissolved by the admission of
Substituted Members or by the admission of a successor Managing
Member in accordance with the terms of this Agreement. Upon the
withdrawal of the Managing Member, any successor Managing Member
shall continue the business of the Company without dissolution.
However, the Company shall dissolve, and its affairs shall be
wound up, upon the first to occur of any of the following (each a
"Liquidating Event"):
A. the expiration of its term as provided in Section
2.5 hereof;
B. the resignation, dissolution, termination or
Incapacity of the Managing Member unless within 90 days after the
occurrence of such event, a Majority of Remaining Members agree
in writing to continue the business of the Company and to the
appointment, effective as of the date of such event, of a
substitute Managing Member.
C. entry of a decree of judicial dissolution of the
Company pursuant to the provisions of the Act;
D. after the sale of all or substantially all of the
assets and properties of the Company for cash or marketable
securities;
E. the Exchange of all LLC Units (other than those
of the Managing Member); or
F. at any time there are no Members of the Company,
unless the Company is continued in accordance with the Act.
Section 13.2. Winding Up
A. Upon the occurrence of a Liquidating Event, the
Company shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets and
satisfying the claims of its creditors and Members. After the
occurrence of a Liquidating Event, no Member shall take any
action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Company's business and
affairs. The Managing Member (or, in the event that there is no
remaining Managing Member, any Person elected by a Majority in
Interest of the Non-Managing Members (the Managing Member or such
other Person being referred to herein as the "Liquidator")) shall
be responsible for overseeing the winding up and dissolution of
the Company and shall take full account of the Company's
liabilities and property, and the Company property shall be
liquidated as promptly as is consistent with obtaining the fair
value thereof, and the proceeds therefrom (which may, to the
extent determined by the Managing Member, include shares of stock
in the Managing Member) shall be applied and distributed in the
following order:
(1) First, to the satisfaction of all of the
Company's debts and liabilities to creditors other than
the Members and their Assignees (whether by payment or the
making of reasonable provision of payment thereof);
(2) Second, to the satisfaction of any Preferred
Return Shortfall pro rata until the Preferred Return
Shortfall for each Non-Managing Member is zero;
(3) Third, to the satisfaction of any Preferred
Return then due or owing to a Non-Managing Member in
accordance with such Non-Managing Members Percentage
Interest in the Company;
(4) Fourth, to the satisfaction of any interest
(at the rate set forth in Section 5.1.B) on any Preferred
Return Shortfall or Cash Amount which is not paid at the
time required by this Agreement and court costs and legal
fees necessary to collect any Preferred Return, Preferred
Return Shortfall or Cash Amount or necessary to enforce the
Managing Member's or Company's obligations set forth in this
Agreement;
(5) Fifth, to the satisfaction of any Cash Amount
payable to a Tendering Party in connection with an Exchange;
(6) Sixth, to the satisfaction of all of the
Company's debts and liabilities to the Managing Member
(whether by payment or the making of reasonable provision
for payment thereof), including, but not limited to, amounts
due as reimbursements under Section 7.4 hereof;
(7) Seventh, to the satisfaction of all of the
Company's debts and liabilities of the other Members and
any Assignees (whether by payment or the making of
reasonable provision for payment thereof); and
(8) The balance, if any, to the Members and any
Assignees in accordance with and proportion to their
positive Capital Account balances, after giving effect to
all contributions, distributions and allocations for all
periods including the year of liquidation.
The Managing Member shall not receive any additional compensation
for any services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A
hereof that require liquidation of the assets of the Company, but
subject to the order of priorities set forth therein, if prior to
or upon dissolution of the Company the Liquidator determines that
an immediate sale of part of all of the Company's assets would be
impractical or would cause undue loss to the Members, the
Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those
necessary to satisfy liabilities of the Company (including to
those Members as creditors) and/or distribute to the Members, in
lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2.A hereof, undivided interests in such
Company assets as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made only
if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Members,
and shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing
the operation of such properties at such time. The Liquidator
shall determine by Appraisal the fair market value of any
property distributed in kind.
C. In the event that the Company is "liquidated"
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this Article 13 to the
Members and Assignees that have positive Capital Accounts in
compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) to
the extent of, and in proportion to, their positive Capital
Account balances subject to 13.2.A(4). If any Member has a
deficit balance in its Capital Account (after giving effect to
all contributions, distributions and allocations for all taxable
years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any contribution to
the capital of the Company with respect to such deficit, and such
deficit shall not be considered a debt owed to the Company or to
any other Person for any purpose whatsoever. In the sole and
absolute discretion of the Managing Member or the Liquidator, a
pro rata portion of the distributions that would otherwise be
made to the Members pursuant to this Article 13 may be withheld
or escrowed to provide a reasonable reserve for Company
liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the
Company, provided that such withheld or escrowed amounts shall be
distributed to the Members in the manner and order of priority
set forth in Section 13.2.A hereof as soon as practicable.
Section 13.3. Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13,
in the event that the Company is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating
Event has occurred, the Company's Property shall not be
liquidated, the Company's liabilities shall not be paid or
discharged and the Company's affairs shall not be wound up.
Instead, for federal and state income tax purposes, the Company
shall be deemed to have distributed its assets in kind to the
Members, who shall be deemed to have assumed and taken such
assets subject to all Company liabilities, all in accordance with
their respective Capital Accounts. Immediately thereafter, the
Members shall be deemed to have recontributed the Company assets
in kind to the Company, which shall be deemed to have assumed and
taken such assets subject to all such liabilities.
Section 13.4. Rights of Members
Except as otherwise provided in this Agreement, (a)
each Member shall look solely to the assets of the Company for
the return of its Capital Contribution, (b) no Member shall have
the right or power to demand or receive property other than cash
from the Company and (c) no Member shall have priority over any
other Member as to the return of its Capital Contributions,
distributions or allocations.
Section 13.5. Notice of Dissolution
In the event that a Liquidating Event occurs or an
event occurs that would, but for an election or objection by one
or more Members pursuant to Section 13.1 hereof, result in a
dissolution of the Company, the Managing Member shall, within 30
days thereafter, provide written notice thereof to each of the
Members and, in the Managing Member's sole and absolute
discretion or as required by the Act, to all other parties with
whom the Company regularly conducts business (as determined in
the sole and absolute discretion of the Managing Member), and the
Managing Member may, or, if required by the Act, shall, publish
notice thereof in a newspaper of general circulation in each
place in which the Company regularly conduct business (as
determined in the sole and absolute discretion of the Managing
Member).
Section 13.6. Cancellation of Certificate of Formation
Upon the completion of the liquidation of the Company
cash and property as provided in Section 13.2 hereof, the Company
shall be terminated and the Certificate and all qualifications of
the Company as a foreign limited liability company in
jurisdictions other than the State of Delaware shall be canceled
and such other actions as may be necessary to terminate the
Company shall be taken.
Section 13.7. Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly
winding-up of the business and affairs of the Company and the
liquidation of its assets pursuant to Section 13.2 hereof, in
order to minimize any losses otherwise attendant upon such
winding-up, and the provisions of this Agreement shall remain in
effect between the Members during the period of liquidation.
Section 13.8. Liability of Liquidator
The Liquidator shall be indemnified and held harmless
by the Company from and against any and all claims, liabilities,
costs, damages, and causes of action of any nature whatsoever
arising out of or incidental to the Liquidator's taking of any
action authorized under or within the scope of this Agreement;
provided, however, that the Liquidator shall not be entitled to
indemnification, and shall not be held harmless, where the claim,
demand, liability, cost, damage or cause of action at issue
arises out of (i) a matter entirely unrelated to the Liquidator's
action or conduct pursuant to the provisions of this Agreement or
(ii) the proven willful misconduct or gross negligence of the
Liquidator.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS
Section 14.1. Procedures for Actions and Consents of
Members
The actions requiring consent or approval of Non-
Managing Members pursuant to this Agreement, including Section
7.3 hereof, or otherwise pursuant to applicable law, are subject
to the procedures set forth in this Article 14.
Section 14.2. Amendments
Amendments to this Agreement requiring the approval of
the Non-Managing Members may be proposed by the Managing Member
or by a Majority in Interest of the Non-Managing Members.
Following such proposal, the Managing Member shall submit any
proposed amendment to the Members. The Managing Member shall
seek the written Consent of the Members on the proposed amendment
or shall call a meeting to vote thereon and to transact any other
business that the Managing Member may deem appropriate. The
affirmative vote or consent, as applicable, of the Managing
Member and a Majority in Interest of the Non-Managing Members is
required for the approval of such proposed amendment. For
purposes of obtaining a written consent, the Managing Member may
require a response within a reasonable specified time, but not
less than 15 days. Failure to respond in such time period shall
not constitute a consent that is consistent with the Managing
Member's recommendation with respect to the proposal; provided,
however, that an action shall become effective at such time as
requisite consents are received even if prior to such specified
time.
Section 14.3. Meetings of the Members
A. Meetings of the Members may be called by the
Managing Member and shall be called upon the receipt by the
Managing Member of a written request by a Majority in Interest of
the Non-Managing Members. The call shall state the nature of the
business to be transacted. Notice of any such meeting shall be
given to all Members not less than seven days nor more than 30
days prior to the date of such meeting. Members may vote in
person or by proxy at such meeting. Whenever the vote or Consent
of Members is permitted or required under this Agreement, such
vote or Consent may be given at a meeting of Members or may be
given in accordance with the procedure prescribed in Section
14.3.B hereof.
B. Any action required or permitted to be taken at a
meeting of the Members may be taken without a meeting if a
written consent setting forth the action so taken is signed by
Members holding a majority of the LLC Units (or such other
percentage as is expressly required by this Agreement for the
action in question). Such consent may be in one instrument or in
several instruments, and shall have the same force and effect as
a vote of Members holding a majority of the LLC Units (or such
other percentage as is expressly required by this Agreement).
Such consent shall be filed with the Managing Member. An action
so taken shall be deemed to have been taken at a meeting held on
the effective date so certified.
C. Each Member may authorize any Person or Persons to
act for it by proxy on all matters in which a Member is entitled
to participate, including waiving notice of any meeting, or
voting or participating at a meeting. Every proxy must be signed
by the Member or its attorney-in-fact. No proxy shall be valid
after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy (or there is receipt of a proxy
authorizing a later date). Every proxy shall be revocable at the
pleasure of the Member executing it, such revocation to be
effective upon the Company's receipt of written notice of such
revocation from the Member executing such proxy.
D. Each meeting of Members shall be conducted by the
Managing Member or such other Person as the Managing Member may
appoint pursuant to such rules for the conduct of the meeting as
the Managing Member or such other Person deems appropriate in its
sole and absolute discretion. Without limitation, meetings of
Members may be conducted in the same manner as meetings of the
Managing Member's shareholders and may be held at the same time
as, and as part of, the meetings of the Managing Member's
shareholders.
ARTICLE 15.
GENERAL PROVISIONS
Section 15.1. Addresses and Notice
Any notice, demand, request or report required or
permitted to be given or made to a Member or Assignee under this
Agreement shall be in writing and shall be deemed given or made
when delivered in person or when sent by first class United
States mail or by other means of written communication (including
by telecopy, facsimile, or commercial courier service ) (i) in
the case of a Member, to that Member at the address set forth in
Exhibit A or such other address of which the Member shall notify
the Managing Member in writing and (ii) in the case of an
Assignee, to the address of which such Assignee shall notify the
managing Member in writing.
Section 15.2. Title and Captions
All article or section titles or captions in this
Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or
describe the scope or intent of any provisions hereof. Except as
specifically provided otherwise, references to "Articles" or
"Sections" are to Articles and Sections of this Agreement.
Section 15.3. Pronouns and Plurals
Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns,
pronouns and verbs shall include the plural and vice versa.
Section 15.4. Further Action
The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this
Agreement.
Section 15.5. Binding Effect
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted
assigns.
Section 15.6. Creditors
Other than as expressly set forth herein with respect
to Indemnitees, none of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of
the Company.
Section 15.7. Waiver
No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a
breach thereof shall constitute waiver of any such breach or any
other covenant, duty, agreement or condition.
Section 15.8. Counterparts
This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all the
parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart.
Section 15.9. Applicable Law
This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of
Delaware, without regard to the principles of conflicts of law.
In the event of a conflict between any provision of this
Agreement and any non-mandatory provision of the Act, the
provisions of this Agreement shall control and take precedence.
Section 15.10. Entire Agreement
This Agreement together with the Contribution Agreement
contains all of the understandings and agreements between and
among the Members with respect to the subject matter of this
Agreement and the rights, interest and obligations of the members
with respect to the Company.
Section 15.11. Invalidity of Provisions
If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
Section 15.12. Limitation to Preserve REIT Status
Notwithstanding anything else in this Agreement, to the
extent that the amount paid, credited, distributed or reimbursed
by the Company to, for or with respect to any REIT Member or its
officers, directors, employees or agents, whether as a
reimbursement, fee, expense or indemnity (a "REIT Payment"),
would constitute gross income to the REIT Member for purposes of
Code Section 856(c)(2) or Code Section 856(c)(3), then,
notwithstanding any other provision of this Agreement, at the
option of the Managing Member, the amount of such REIT Payments,
as selected by the Managing Member in its discretion from among
items of potential distribution, reimbursement, fees, expenses
and indemnities, shall be reduced for any Fiscal Year so that the
REIT Payments, as so reduced, to, for or with respect to such
REIT Member shall not exceed the lesser of:
(a) an amount equal to the excess, if any, of (i)
four and nine-tenths percent (4.9%) of the REIT Member's
total gross income (but excluding the amount of any REIT
Payments) for the Fiscal Year that is described in
subsections (A) through (H) of Code Section 856(c)(2) over
(ii) the amount of gross income (within the meaning of Code
Section 856(c)(2)) derived by the REIT Member from sources
other than those described in subsections (A) through (H) of
Code Section 856(c)(2) (but not including the amount of any
REIT Payments); or
(b) an amount equal to the excess, if any, of (i)
24% of the REIT Member's total gross income (but excluding
the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (I) of Code Section
856(c)(3) over (ii) the amount of gross income (within the
meaning of Code Section 856(c)(3)) derived by the REIT
Member from sources other than those described in
subsections (A) through (I) of Code Section 856(c)(3) (but
not including the amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts
set forth in clauses (a) and (b) above may be made if the
Managing Member, as a condition precedent, obtains an opinion of
tax counsel that the receipt of such excess amounts shall not
adversely affect the REIT Member's ability to qualify as a REIT.
To the extent that REIT Payments may not be made in a Fiscal Year
as a consequence of the limitations set forth in this Section
15.12, such REIT Payments shall carry over and shall be treated
as arising in the following Fiscal Year. The purpose of the
limitations contained in this Section 15.12 is to prevent any
REIT Member from failing to qualify as a REIT under the Code by
reason of such REIT Member's share of items, including
distributions, reimbursements, fees, expenses or indemnities,
receivable directly or indirectly from the Company, and this
Section 15.12 shall be interpreted and applied to effectuate such
purpose.
Section 15.13. No Partition
No Member nor any successor-in-interest to a Member
shall have the right while this Agreement remains in effect to
have any property of the Company partitioned, or to file a
complaint or institute to any proceeding at law or in equity to
have such property of the Company partitioned, and each Member,
on behalf of itself and its successors and assigns hereby waives
any such right. It is the intention of the Members that the
rights of the parties hereto and their successors-in-interest to
Company property, as among themselves, shall be governed by the
terms of this Agreement, and that the rights of the Members and
their successors-in-interest shall be subject to the limitations
and restrictions as set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the date first written above.
MANAGING MEMBER:
INLAND REAL ESTATE CORPORATION
By: /s/ Lou Quilici
Its: Authorized Agent
NON-MANAGING MEMBERS:
Ryan Midway Limited Partnership
Ryan/Flying Cloud Associates Limited Partnership
Ryan Retail Burnsville Limited Partnership
and Ryan Shingle Creek Limited Partnership
By: Ryan Properties, Inc., Their General Partner
By: /s/ Timothy M. Gray
Name: Timothy M. Gray
Title: Vice President
Ryan MPLS, LLC
Ryan CL, LLC
Ryan Cliff Lake, LLC
By: /s/ Timothy M. Gray
Name: Timothy M. Gray
Title: Their Chief manager
LIMITED LIABILITY COMPANY AGREEMENT
OF
INLAND RYAN CLIFF LAKE, LLC
a Delaware limited liability company
Dated as of September ___, 1999
LIMITED LIABILITY COMPANY AGREEMENT
OF
INLAND RYAN CLIFF LAKE, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this
"Agreement") of INLAND RYAN CLIFF LAKE, LLC, a Delaware limited
liability company (the "Company"), dated as of September __,
1999, is entered into by and among Inland Real Estate
Corporation, a Maryland corporation (the "Managing Member"), and
Inland Ryan, LLC (the "Non-Managing Member" and together with the
Managing Member, the "Members").
NOW THEREFORE, in consideration of the mutual covenants
and agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes,
unless otherwise clearly indicated to the contrary, applied to
the terms used in this Agreement.
"Act" means the Delaware Limited Liability Company Act,
as it may be amended from time to time, and any successor to such
statute.
"Actions" has the meaning set forth in Section 7.7
hereof.
"Adjusted Capital Account Deficit" means, with respect
to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:
(a) decrease such deficit by any amounts that
such Member is obligated to restore pursuant to this
Agreement or by operation of law upon liquidation of such
Member's Membership Interest or is deemed to be obligated to
restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c)
or the penultimate sentence of each of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
(b) increase such deficit by the items described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
The foregoing definition of "Adjusted Capital Account Deficit" is
intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
"Affiliate" means, with respect to any Person, any
Person directly or indirectly controlling or controlled by or
under common control with such Person. For the purposes of this
definition, "control" when used with respect to any Person means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Limited Liability Company
Agreement of Inland Ryan Cliff Lake, LLC, as it may be amended,
supplemented or restated from time to time.
"Appraisal" means, with respect to any assets, the
written opinion of an independent third party experienced in the
valuation of similar assets, selected by the Managing Member in
good faith. Such opinion may be in the form of an opinion by
such independent third party that the value for such property or
asset as set by the Managing Member is fair, from a financial
point of view, to the Company.
"Appraised Value" means, with respect to any asset,
including any Contributed Property, the value of such asset as
determined by Appraisal.
"Assignee" means a Person to whom one or more LLC Units
have been Transferred in a manner permitted under this Agreement,
but who has not become a Substituted Member, and who has the
rights set forth in Section 11.5 hereof.
"Available Cash" means, with respect to any period for
which such calculation is being made,
(a) the sum, without duplication, of:
(1) the Company's Net Income or Net Loss (as
the case may be) for such period,
(2) Depreciation and all other noncash
charges to the extent deducted in determining Net Income
or Net Loss for such period,
(3) the amount of any reduction in reserves
of the Company referred to in clause (b)(6)
below (including, without limitation, reductions
resulting because the Managing Member determines such
amounts are no longer necessary),
(4) the excess, if any, of the net cash
proceeds from the sale, exchange, disposition,
financing or refinancing of Company property for such
period over the gain (or loss, as the case may be)
recognized from such sale, exchange, disposition,
financing or refinancing during such period, and
(5) all other cash received (including
amounts previously accrued as Net Income and
amounts of deferred income) or any net amounts borrowed
by the Company for such period that was not included in
determining Net Income or Net Loss for such period;
(b) less the sum, without duplication, of:
(1) all debt payments including, but not
limited to, principal and interest payments and other
amounts required to be paid pursuant to documents
evidencing the debt made during such period by the
Company,
(2) capital expenditures made by the Company
during such period,
(3) INTENTIONALLY DELETED.
(4) all other expenditures and payments not
deducted in determining Net Income or Net Loss
for such period (including amounts paid in respect of
expenses previously accrued and payments made in
connection with any guaranty of Affiliate
indebtedness),
(5) any amount included in determining Net
Income or Net Loss for such period that was not
received by the Company during such period, and
(6) the amount of any increase in reserves
(including, without limitation, working capital
reserves) established during such period that the
Managing Member determines are necessary or appropriate
in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include
(i) any cash received or reductions in reserves, or take into
account any disbursements made, or reserves established, after
dissolution and the commencement of the liquidation and winding
up of the Company or (ii) any Capital Contributions, whenever
received.
"Bankruptcy Law" means Title II, U.S. Code or any
similar federal or state law for the relief of debtors.
"Business Days" means any day except a Saturday, Sunday
or other day on which commercial banks in the State of Illinois
are authorized or required by law to close.
"Capital Account" means, with respect to any Member,
the Capital Account maintained for such Member on the Company's
books and records in accordance with the following provisions:
(a) To each Member's Capital Account, there shall
be added such Member's Capital Contributions,
such Member's allocable share of Net Income and any
items of income or gain specially allocated pursuant to
Section 6.3 hereof, and the principal amount of any
Company liabilities assumed by such Member or that are
secured by any property distributed to such Member.
(b) From each Member's Capital Account, there
shall be subtracted the amount of cash and the
Gross Asset Value of any property distributed to such
Member pursuant to any provision of this Agreement,
such Member's allocable share of Net Loss and any items
of loss or deductions specially allocated pursuant to
Section 6.3 hereof, and the principal amount of any
liabilities of such Member assumed by the Company or
that are secured by any property contributed by such
Member to the Company.
(c) In the event any interest in the Company is
transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent that it
relates to the transferred interest.
(d) In determining the principal amount of any
liability for purposes of subsections (a) and
(b) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of
the Code and Regulations.
(e) The provisions of this Agreement relating to
the maintenance of Capital Accounts are intended
to comply with Regulations Sections 1.704-1(b) and
1.704-2, and shall be interpreted and applied in a
manner consistent with such Regulations. If the
Managing Member shall determine that it is prudent to
modify the manner in which the Capital Accounts are
maintained in order to comply with such Regulations,
the Managing Member may make such modification provided
that notwithstanding any other provision in this
Agreement such modification will not have a material
effect on the amounts distributable to any Member
without such Member's Consent. The Managing Member
also shall (i) make any adjustments that are necessary
or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company
capital reflected on the Company's balance sheet, as
computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g) and (ii) make
any appropriate modifications in the event that
unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-
1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any
Member, the amount of money and the initial Gross Asset Value of
any Contributed Property that such Member contributes to the
Company pursuant to Section 4.1 hereof (net of any liability that
the Company assumes or takes subject to in connection with such
contribution).
"Cash Amount" means an amount of cash equal to the
product of the LLC Units times $1.00 per each LLC Unit.
"Certificate" means the Certificate of Formation of the
Company filed in the office of the Secretary of State of the
State of Delaware, as amended from time to time in accordance
with the terms hereof and the Act.
"Charter" means the Articles of Incorporation of the
Managing Member, as amended, supplemented or restated from time
to time.
"Code" means the Internal Revenue Code of 1986, as
amended and in effect from time to time or any successor statute
thereto, as interpreted by the applicable Regulations thereunder.
Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding
provision of future law.
"Company" means the limited liability company formed
under the Act and pursuant to this Agreement, and any successor
thereto.
"Company Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2) for the phrase "partnership
minimum gain," and the amount of Company Minimum Gain, as well as
any net increase or decrease in Company Minimum Gain, for a
Fiscal Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(d).
"Consent" means the consent to, approval of, or vote on
a proposed action by a Member given in accordance with Article 14
hereof.
"Consent of the Non-Managing Member" means the Consent
of the Non-Managing Member, which Consent shall be obtained prior
to the taking of any action for which it is required by this
Agreement and, except as otherwise provided in this Agreement,
may be given or withheld by the Non-Managing Member, in its
absolute discretion.
"Contributed Property" means the Property or other
asset, in such form as may be permitted by the Act, but excluding
cash, contributed or deemed contributed to the Company.
"Contribution Agreement" means the Asset Contribution
Agreement dated as of July 7, 1999, as amended, by and between
the Members of the Non-Managing Member, and joined in by Ryan
Companies US, Inc.
"Custodian" means any receiver, trustee, assignee,
liquidator or other similar official under any Bankruptcy Law.
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services;
(ii) all amounts owed by such Person to banks or other Persons in
respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment
or other performance of obligations by such Person; (iii) all
indebtedness for borrowed money or for the deferred purchase
price of property or services secured by any lien on any property
owned by such Person, to the extent attributable to such Person's
interest in such property, even though such Person has not
assumed or become liable for the payment thereof; and (iv) lease
obligations of such Person that, in accordance with generally
accepted accounting principles, should be capitalized.
"Depreciation" means, for each Fiscal Year or other
applicable period, an amount equal to the federal income tax
depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period,
except that, if the Gross Asset Value of an asset differs from
its adjusted basis for federal income tax purposes at the
beginning of such year or period, Depreciation shall be in an
amount that bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization or
other cost recovery deduction for such year or other period bears
to such beginning adjusted tax basis; provided, however, that, if
the federal income tax depreciation, amortization or other cost
recovery deduction for such year or period is zero, Depreciation
shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Managing
Member.
"Effective Date" means the date on which the Initial
Closing contemplated by the Contribution Agreement is
consummated.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC
promulgated thereunder.
"Family Members" means, as to a Person that is an
individual, (a) such Person's spouse, (b) such Person's
ancestors, (c) such Person's descendants (whether by blood or by
adoption), (d) such Person's brothers and sisters, (e) inter
vivos or testamentary trusts of which only such Person or his
spouse, ancestors, descendants (whether by blood or by adoption),
brothers or sisters are beneficiaries and (f) any partnership or
limited liability company all of whose partners or members
consist of such Person or his spouse, ancestors, descendants
(whether by blood or by adoption), brothers or sisters or inter
vivos or testamentary trusts of which only such Person or his
spouse, ancestors, descendants (whether by blood or by adoption),
brothers or sisters are beneficiaries.
"Fiscal Year" means the fiscal year of the Company,
which shall be the calendar year.
"Funding Debt" means any Debt incurred by or on behalf
of the Managing Member for the purpose of providing funds to the
Company.
"Gross Asset Value" means with respect to any asset,
the asset's adjusted basis for federal income tax purposes,
except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be its
Allocated Value, as agreed to by such Member and the
Managing Member pursuant to the Contribution Agreement and
set forth on Exhibit A with respect to that Member.
(b) The Gross Asset Values of all Company assets
immediately prior to the occurrence of any event
described in clause (1) or clause (2) hereof shall be
adjusted to equal their respective gross fair market values,
as determined by Appraisal, as of the following times:
(1) the liquidation of the Company within
the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g); and
(2) at such other times as the Managing
Member shall reasonably determine necessary or
advisable in order to comply with Regulations Sections
1.704-1(b) and 1.704-2
(c) The Gross Asset Value of any Company asset
distributed to a Member shall be the gross fair market
value of such asset on the date of distribution as
determined by the distributee and the Managing Member,
provided that, if the distributee is the Managing Member or
if the distributee and the Managing Member cannot agree on
such a determination, such gross fair market value shall be
determined by Appraisal.
(d) The Gross Asset Values of Company assets
shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to
Code Section 734(a) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph
(d) to the extent that the Managing Member reasonably
determines that an adjustment pursuant to subsection (b)
above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment
pursuant to this subsection (d).
(e) If the Gross Asset Value of a Company asset
has been determined or adjusted pursuant to subsection
(a), subsection (b) or subsection (d) above, such Gross
Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes
of computing Net Income and Net Loss.
"Incapacity" or "Incapacitated" means, (i) as to
any Member who is an individual, death, total physical disability
or entry by a court of competent jurisdiction of an order
adjudicating such Member incompetent to manage his or her person
or his or her estate; (ii) as to any Member that is a corporation
or limited liability company, the filing of a certificate of
dissolution, or its equivalent, for the corporation or limited
liability company or the revocation of its charter prior to
consummation of a Permitted Transfer; (iii) as to any Member that
is a partnership, the dissolution and commencement of winding up
of the partnership prior to consummation of a Permitted Transfer;
(iv) as to any Member that is an estate, the distribution by the
fiduciary of the estate's entire interest in the Company; (v) as
to any trustee of a trust that is a Member, the termination of
the trust (but not the substitution of a new trustee); or (vi) as
to any Member, the bankruptcy of such Member. For purposes of
this definition, bankruptcy of a Member shall be deemed to have
occurred when (a) the Member commences a voluntary proceeding
seeking liquidation, reorganization or other relief of or against
such Member under any bankruptcy, insolvency or other similar law
now or hereafter in effect, (b) the Member is adjudged as
bankrupt or insolvent, or a final and nonappealable order for
relief under any bankruptcy, insolvency or similar law now or
hereafter in effect has been entered against the Member, (c) the
Member executes and delivers a general assignment for the benefit
of the Member's creditors, (d) the Member files an answer or
other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any
proceeding of the nature described in clause (b) above, (e) the
Member seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator for the Member or for all or any
substantial part of the Member's properties, (f) any proceeding
seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in
effect has not been dismissed within 120 days after the
commencement thereof, (g) the appointment without the Member's
consent or acquiescence of a trustee, receiver or liquidator has
not been vacated or stayed within 90 days of such appointment, or
(h) an appointment referred to in clause (g) above is not vacated
within 90 days after the expiration of any such stay. The
foregoing definition of "bankruptcy" is intended to replace and
shall supersede and replace the definition of "Bankruptcy" set
forth in Sections 18-101(1) and 18-304 of the Act.
"Indemnitee" means (i) any Person made a party to a
proceeding by reason of its status as (A) a Member or any
Affiliate or member or partner of such Member or Affiliate or (B)
a director, officer or employee of the Company, a Member or
Affiliate or member or partner of such Member or Affiliate and
(ii) such other Persons (including Affiliates of any Member or
the Company) as the Managing Member may designate from time to
time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"IRS" means the Internal Revenue Service, which
administers the internal revenue laws of the United States.
"Liquidating Event" has the meaning set forth in
Section 13.1 hereof.
"Liquidator" has the meaning set forth in Section
13.2.A hereof.
"LLC Distribution Date" means the first Business Day of
each month during the term of this Agreement.
"LLC Record Date" means the record date for the actual
distribution of cash pursuant to Section 5.1 hereof, which record
date shall be the date five (5) days prior to each LLC
Distribution Date.
"LLC Unit" means a single Membership Interest issued
pursuant to Section 4.1 hereof, as the same may be modified from
time to time as provided in this Agreement. The ownership of an
LLC Unit may (but need not, in the sole and absolute discretion
of the Managing Member) be evidenced in the form of a
certificate.
"LLC Units" means more than one (1) LLC Unit.
"Loan" has the meanings set forth in Section 7.1.C
hereof.
"Managing Member" means Inland Real Estate Corporation,
a Maryland corporation in its capacity as a Member, or any
successor Managing Member designated pursuant to the terms of
this Agreement.
"Member Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain
that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with
Regulations Section 1.704-2(i) with respect to "partner
nonrecourse debt minimum gain."
"Member Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4) for the phrase "partner
nonrecourse debt."
"Member Nonrecourse Deductions" has the meaning set
forth in Regulations Section 1.704-2(i)(2) for the phrase
"partner nonrecourse deductions," and the amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt
for a Fiscal Year shall be determined in accordance with the
rules of Regulations Section 1.704-2(i)(2).
"Members" means the Persons owning Membership
Interests, including the Managing Member and any Substitute
Members who have been admitted to the Company as Members of the
Company in accordance with this Agreement and named as Members in
Exhibit A hereto.
"Membership Interest" means a limited liability company
interest in the Company based upon the number of LLC Units owned
by a Member and includes any and all benefits to which the holder
of such a Membership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply
with the terms and provisions of this Agreement. A Membership
Interest may be expressed as a number of LLC Units and the LLC
Units representing the Membership Interest of any Person will be
equal to the Capital Contribution of such Member divided by
$1.00.
"Net Income" or "Net Loss" means, for each Fiscal Year
of the Company, an amount equal to the Company's taxable income
or loss for such year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(a) Any income of the Company that is exempt from
federal income tax and not otherwise taken into
account in computing Net Income (or Net Loss) pursuant
to this definition of "Net Income" or "Net Loss" shall
be added to (or subtracted from, as the case may be)
such taxable income (or loss);
(b) Any expenditure of the Company described in
Code Section 705(a)(2)(B) or treated as a Code
Section 705(a)(2)(B) expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Net Income
(or Net Loss) pursuant to this definition of "Net
Income" or "Net Loss," shall be subtracted from (or
added to, as the case may be) such taxable income (or
loss);
(c) In the event that the Gross Asset Value of
any Company asset is adjusted pursuant to
subsection (b) or subsection (c) of the definition of
"Gross Asset Value," the amount of such adjustment
shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net
Income or Net Loss;
(d) In lieu of the depreciation, amortization and
other cost recovery deductions that would otherwise be
taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation
for such Fiscal Year.
(e) To the extent that an adjustment to the
adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or Code Section 743(b)
is required pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's
interest in the Company, the amount of such adjustment
shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into
account for purposes of computing Net Income or Net
Loss; and
(f) Notwithstanding any other provision of this
definition of "Net Income" or "Net Loss," any
item of income, gain, loss or deduction specially
allocated pursuant to Section 6.3.A hereof shall not be
taken into account in computing Net Income or Net Loss.
The amounts of the items of Company income, gain, loss
or deduction available to be allocated pursuant to
Section 6.2.A(3) or Section 6.3.A hereof shall be
determined by applying rules analogous to those set
forth in this definition of "Net Income" or "Net Loss."
"Net Worth" means the "Total Stockholders' Equity" of
the Managing Member as determined in accordance with the
methodology used in Managing Member's Amended Consolidated
Balance Sheet for the year ended December 31, 1998.
"Non-Managing Member" means any Member other than the
Managing Member.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse
Deductions for a Fiscal Year shall be determined in accordance
with the rules of Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"No Transfer Period" means a period of five (5) years
commencing on the Effective Date.
"Percentage Interest" means as to a Member holding a
Membership Interest, its interest in the Company as determined by
dividing the LLC Units owned by such Member by the total number
of LLC Units then outstanding as specified in Exhibit A attached
hereto, as such Exhibit may be amended from time to time.
"Permitted Transfer" has the meaning set forth in
Section 11.3.A hereof.
"Person" means an individual or a corporation,
partnership, trust, unincorporated organization, association,
limited liability company or other entity.
"Prime Rate" means on any date, a rate equal to the
annual rate on such date announced by LaSalle National Bank in
Chicago, Illinois to be its prime, base or reference rate for 90-
day unsecured loans to its corporate borrowers of the highest
credit standing but in no event greater than the maximum rate
then permitted under applicable law. If LaSalle National Bank
discontinues its use of such prime, base or reference rate or
ceases to exist, the Managing Member shall designate the prime,
base or reference rate of another state or federally chartered
bank based in Chicago, Illinois to be used for the purpose of
calculating the Prime Rate hereunder (which rate shall be subject
to limitation by all applicable usury laws).
"Properties" means any assets and property of the
Company such as, but not limited to, interests in real property
(including the Property) and personal property, including,
without limitation, fee interests, interests in ground leases,
interests in limited liability companies, joint ventures or
partnerships, interests in mortgages, and Debt instruments as the
Company may hold from time to time.
"Property" means Cliff Lake Centre, Egan, Minnesota,
which is to be contributed to the Non-Managing Member pursuant to
the Contribution Agreement and to be contributed by the Non-
Managing Member to the Company pursuant to this Agreement.
"Regulations" means the applicable income tax
regulations under the Code, whether such regulations are in
proposed, temporary or final form, as such regulations may be
amended from time to time (including corresponding provisions of
succeeding regulations).
"Regulatory Allocations" has the meaning set forth in
Section 6.3.A(7) hereof.
"REIT" means a real estate investment trust qualifying
under Code Section 856, et seq.
"REIT Member" means a Member or Assignee that is, or
has made an election to qualify as, a REIT.
"REIT Payment" has the meaning set forth in Section
15.12 hereof.
"REIT Requirements" has the meaning set forth in
Section 5.1 hereof.
"Related Party" means, with respect to any Person, any
other Person whose ownership of shares of the Managing Member's
capital stock would be attributed to the first such Person under
Code Section 544 (as modified by Code Section 856(h)(1)(B)).
"Ryan" means Ryan Cliff Lake, LLC, a Minnesota limited
liability company and its successors and assigns.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
"Specified Exchange Date" has the meaning set forth in
Section 8.6.A hereof.
"Substituted Member" means an Assignee who is admitted
as a Member to the Company pursuant to Section 11.4 hereof.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of (i) the voting
power of the voting equity securities or (ii) the outstanding
equity interests is owned, directly or indirectly, by such
Person.
"Tax Items" has the meaning set forth in Section 6.4.A
hereof.
"Tenant Schedule" means a schedule, to be prepared by
the Managing Member and timely provided to any Member making the
representation required pursuant to Section 3.4.A(v) or Section
3.4.B(v) that lists all of the entities that are a tenant of
either the Managing Member, the Company or any partnership,
venture or limited liability company of which the Managing Member
of the Company is a member. The Tenant Schedule shall be amended
from time to time as necessary to reflect any changes to the list
of the foregoing entities.
"Terminating Capital Transaction" means any sale or
other disposition of all or substantially all of the assets of
the Company or a related series of transactions that, taken
together, result in the sale or other disposition of all or
substantially all of the assets of the Company.
"Termination Payment" has the meaning set forth in
Section 11.2.B hereof.
"Transfer," when used with respect to an LLC Unit or
all or any portion of a Membership Interest, means any sale,
assignment, bequest, conveyance, devise, gift (outright or in
trust), pledge, encumbrance, hypothecation, mortgage, exchange,
transfer or other disposition or act of alienation, whether
voluntary or involuntary or by operation of law. The terms
"Transferred" and "Transferring" have correlative meanings.
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Formation
The Company is a limited liability company formed
pursuant to the provisions of the Act for the purposes and upon
the terms and subject to the conditions set forth in this
Agreement. Except as expressly provided herein, the rights and
obligations of the Members and the administration and termination
of the Company shall be governed by the Act. Each Person listed
on Exhibit A hereto on the date hereof is admitted to the Company
as a Member of the Company effective as of the date hereof upon
its execution of a counterpart of this Agreement.
Section 2.2. Name
The name of the Company is Inland Ryan Cliff Lake, LLC.
The Company's business may be conducted under any other name or
names deemed advisable by the Managing Member, including the name
of the Managing Member or any Affiliate thereof. The Managing
Member in its sole and absolute discretion may change the name of
the Company at any time and from time to time in accordance with
applicable law and shall notify the Members of such change in the
next regular communication to the Members.
Section 2.3. Registered Office and Agent; Principal
Place of Business; Other Places of Business
The address of the registered office of the Company in
the State of Delaware is located at 1209 Orange Street,
Wilmington, Delaware 19801. The registered agent for service of
process on the Company in the State of Delaware at such
registered office is CT Corporation Systems, Inc. The principal
office of the Company is located at 2901 Butterfield Road, Oak
Brook, Illinois 60523 or such other place as the Managing Member
may from time to time designate by notice to the Members. The
Company may maintain offices at such other place or places within
or outside the State of Illinois and Delaware as the Managing
Member deems advisable.
Section 2.4. Power of Attorney
A. Each Member (other than the Managing Member) and
each Assignee hereby irrevocably constitutes and appoints the
Managing Member, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in
each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file
and record in the appropriate public offices (a) all
certificates, documents and other instruments (including,
without limitation, this Agreement and the Certificate and
all amendments or restatements thereof) that the Managing
Member or any Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of
the Company as a limited liability company in the State of
Delaware and in all other jurisdictions in which the Company
may conduct business or own property; (b) all instruments
that the Managing Member or any Liquidator deems appropriate
or necessary to reflect any amendment, change, modification
or restatement of this Agreement in accordance with its
terms; (c) all conveyances and other instruments or
documents that the Managing Member or any Liquidator deems
appropriate or necessary to reflect the dissolution and
liquidation of the Company pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation; (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Member pursuant
to, or other events described in, Articles 11, 12 or 13
hereof or the Capital Contribution of any Member; and (e)
all certificates, documents and other instruments relating
to the determination of the rights, preferences and
privileges of Membership Interests; and
(2) execute, swear to, acknowledge and file all
certificates and other instruments appropriate or necessary,
in the sole and absolute discretion of the Managing Member
or any Liquidator, to make, evidence, or confirm any vote,
consent, approval, agreement or other action which is made
or given by the Members hereunder or is consistent with the
terms of this Agreement or appropriate or necessary, in the
sole discretion of the Managing Member or any Liquidator, to
effectuate the terms or intent of this Agreement.
Nothing contained in this Section 2.4 shall be construed as
authorizing the Managing Member or any Liquidator to amend this
Agreement except in accordance with Article 14 hereof or as may
be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared
to be irrevocable and a special power coupled with an interest,
in recognition of the fact that each of the Members and Assignees
will be relying upon the power of the Managing Member to act as
contemplated by this Agreement, and it shall survive and not be
affected by the subsequent Incapacity of any Member (other than
the Managing Member) or Assignee and the Transfer of all or any
portion of such Member's (other than the Managing Member's) or
Assignee's LLC Units or Membership Interest and shall extend to
such Member's (other than the Managing Member's) or Assignee's
heirs, successors, assigns and personal representatives. Each
Member (other than the Managing Member) or Assignee shall execute
and deliver to the Managing Member or any Liquidator, within 15
days after receipt of the Managing Member's or Liquidator's
request therefor, such further designation, powers of attorney
and other instruments as the Managing Member or the Liquidator,
as the case may be, deems necessary to effectuate this Agreement
and the purposes of the Company.
2.5. Term
The term of the Company commenced on August 11, 1999
being the date that the original Certificate was filed in the
office of the Secretary of State of Delaware in accordance with
the Act, and shall continue until December 31, 2040 unless
extended by unanimous agreement of the Members or earlier
terminated pursuant to the provisions of Section 13 hereof or as
otherwise provided by law.
ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business
The sole purpose and nature of the business to be
conducted by the Company is (i) to conduct the business of
owning, operating and disposing the Property, provided, however,
that such business shall be limited to and conducted in such a
manner as to permit the Managing Member at all times to be
classified as a REIT for federal income tax purposes, unless the
Managing Member ceases to qualify as a REIT for reasons other
than the conduct of the business of the Company, and (ii) to do
anything necessary or incidental to the foregoing subject to the
terms, conditions, restrictions and requirements contained in
this Agreement. As such, the Company is a single purpose limited
liability company, and such is the intention of the Members. In
connection with the foregoing, and without limiting the Managing
Member's right in its sole discretion to cease qualifying as a
REIT, the Members acknowledge that the Managing Member's current
status as a REIT inures to the benefit of all the Members and not
solely the Managing Member or its Affiliates. The Company
covenants and agrees to retain its status as a single purpose
entity and will not own any property other than the Property.
Section 3.2. Powers
Subject to the restrictions contained in this Agreement
including, but not limited to Section 7.3 hereof, the Company is
empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for
the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the
Company including, without limitation, full power and authority,
directly or through its ownership interest in other entities, to
enter into, perform and carry out contracts of any kind, borrow
money and issue evidences of indebtedness and guaranty
indebtedness of the Managing Member and other Affiliates (whether
or not Funding Debt), whether or not secured by mortgage, deed of
trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of
real property; provided, however, that notwithstanding any other
provision in this Agreement, the Managing Member may cause the
Company not to take, or to refrain from taking, any action that,
in the judgment of the Managing Member, in its sole and absolute
discretion, (i) could subject the Managing Member to any
additional taxes under Code Section 857 or Code Section 4981 or
(iii) could violate any law or regulation of any governmental
body or agency having jurisdiction over the Managing Member, its
securities or the Company, unless such action (or inaction) under
clause (i), clause (ii) or clause (iii) above shall have been
specifically consented to by the Managing Member in writing.
Section 3.3 Specified Purposes
The Company shall be a limited liability company only
for the purposes specified in Section 3.1 hereof, and this
Agreement shall not be deemed to create a joint venture or
partnership between or among the Members with respect to any
activities whatsoever other than the activities within the
purposes of the Company as specified in Section 3.1 hereof.
Except as otherwise provided in this Agreement, no Member shall
have any authority to act for, bind, commit or assume any
obligation or responsibility on behalf of the Company, its
properties or any other Member. No Member, in its capacity as a
Member under this Agreement, shall be responsible or liable for
any indebtedness or obligation of another Member or any
indebtedness or obligation of the Company or the Company's
employees or agents. The Company shall not be responsible or
liable for any indebtedness or obligation of any Member, incurred
either before or after the execution and delivery of this
Agreement by such Member, except as to those responsibilities,
liabilities, indebtedness or obligations incurred pursuant to and
as limited by the terms of this Agreement and the Act.
Section 3.4. Representations and Warranties by the
Members
A. Each Member that is an individual (including,
without limitation, each Substituted Member as a condition to
becoming a Substituted Member) represents and warrants to the
Company, the Managing Member and each other Member that (i) such
Member has the legal capacity to enter into this agreement and
perform such Member's obligations hereunder, (ii) the
consummation of the transactions contemplated by this Agreement
to be performed by such Member will not result in a breach or
violation of, or a default under, any material agreement by which
such Member or any of such Member's property is bound, or any
statute, regulation, order or other law to which such Member is
subject, (iii) such Member is neither a "foreign person" within
the meaning of Code Section 1445(f) nor a "foreign partner"
within the meaning of Code Section 1446(e), (iv) if such Member
has been timely provided a Tenant Schedule, such Member (other
than the Managing Member), except as otherwise disclosed in
writing to the Managing Member, either (A) does not own, directly
or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)) more than 25% of the
interests in capital or profits of the Company or (B) (1) does
not own, directly or indirectly or by attribution under Code
Section 318 (as modified by Code Section 856(d)(5)) any shares of
stock of the Managing Member and (2) does not own directly or
indirectly or by attribution under Code Section 318 (as modified
by Code Section 856(d)(5)) any interest in any entity that is
listed on the Tenant Schedule, and (v) this Agreement is binding
upon, and enforceable against, such Member in accordance with its
terms.
B. Each Member that is not an individual (including,
without limitation, each Substituted Member as a condition to
becoming a Substituted Member) represents and warrants to the
Company, the Managing Member and each other Member that (i) all
transactions contemplated by this Agreement to be performed by it
have been duly authorized by all necessary action, including,
without limitation, that of its managing member(s) (or, if there
is no managing member, a majority in interest of all members),
committee(s), trustee(s), general partner(s), beneficiaries,
directors and shareholder(s), as the case may be, as required,
(ii) the consummation of such transactions will not result in a
breach or violation of, or a default under, its partnership or
operating agreement, trust agreement, charter or bylaws, as the
case may be, any material agreement by which such Member or any
of such Member's properties or any of its partners, members,
beneficiaries, trustees or shareholders, as the case may be, is
or are bound, or any statute, regulation, order or other law to
which such Member or any of its partners, members, trustees,
beneficiaries or shareholders, as the case may be, is or are
subject, (iii) such Member is neither a "foreign person" within
the meaning of Code Section 1445(f) nor a "foreign partner"
within the meaning of Code Section 1446(e), (iv) if such Member
has been timely provided a Tenant Schedule, such Member (other
than the Managing Member), except as otherwise disclosed in
writing to the Managing Member, either (A) does not own, directly
or indirectly or by attribution under Code Section 318 (as
modified by Code Section 856(d)(5)) more than 25% of the
interests in capital or profits of the Company or (B) (1) does
not own, directly or indirectly or by attribution under Code
Section 318 (as modified by Code Section 856(d)(5)) any shares of
stock of the Managing Member and (2) does not own directly or
indirectly or by attribution under Code Section 318 (as modified
by Code Section 856(d)(5)) any interest in any entity that is
listed on the Tenant Schedule, and (v) this Agreement is binding
upon, and enforceable against, such Member in accordance with its
terms.
C. Each Member (including, without limitation, each
Substituted Member as a condition to becoming a Substituted
Member) represents, warrants and agrees that it has acquired and
continues to hold its interest in the Company for its own account
for investment only and not for the purpose of, or with a view
toward, the resale or distribution of all or any part thereof,
nor with a view toward selling or otherwise distributing such
interest or any part thereof at any particular time or under any
predetermined circumstances without prejudice, however, to each
Member's right at all times to sell or otherwise dispose of all
or any part of such Member's interest in the Company in
accordance with the terms of this Agreement. Each Member further
represents and warrants that it is a sophisticated investor,
able and accustomed to handling sophisticated financial matters
for itself, particularly real estate investments, and that it has
a sufficiently high net worth that it does not anticipate a need
for the funds that it has invested in the Company in what it
understands to be a highly speculative and illiquid investment.
D. The representations and warranties contained in
Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the
execution and delivery of this Agreement by each Member (and, in
the case of a Substituted Member, the admission of such
Substituted Member as a Member in the Company) and the
dissolution, liquidation and termination of the Company. The
Managing Member may, in its sole and absolute discretion on
behalf of the Company and its Members, grant waivers and
exceptions to the representations and warranties contained in
Sections 3.4.A, 3.4.B and 3.4.C hereof, but any such waiver or
exception must be in writing, must refer to this Section 3.4.D
and must describe with particularity the representation or
warranty as to which such waiver or exception shall apply.
E. Each Member (including, without limitation, each
Substituted Member as a condition to becoming a Substituted
Member) hereby represents that it has consulted and been advised
by its legal counsel and tax advisor in connection with, and
acknowledges that no representations as to potential profit, tax
consequences of any sort (including, without limitation, the tax
consequences resulting from forming the Company, executing this
Agreement, consummating the transaction provided for in or
contemplated by the Contribution Agreement, making a Capital
Contribution, being admitted to the Company or being allocated
Tax Items), cash flows, funds from operations or yield, if any,
in respect of the Company or the Managing Member have been made
by any Member or any employee or representative or Affiliate of
any Member, and that projections and any other information,
including, without limitation, financial and descriptive
information and documentation, that may have been in any manner
submitted to such Member shall not constitute any representation
or warranty of any kind or nature, express or implied.
ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Initial
Members
At the time of their respective execution of this
Agreement, the Members shall make Capital Contributions as set
forth in Exhibit A to this Agreement. Each Member shall receive
one LLC Unit for each $1.00 of Capital Contributions made by such
Member. The Members shall own LLC Units in the amounts set forth
in Exhibit A and shall have a Percentage Interest as set forth in
Exhibit A, which Percentage Interest shall be adjusted in Exhibit
A from time to time by the Managing Member to the extent
necessary to accurately reflect Capital Contributions, or similar
events having an effect on a Member's Percentage Interest. The
Non-Managing Member shall not be required or permitted to make
any additional Capital Contributions or loans to the Company.
Section 4.2. Loans by Third Parties
Subject to the provisions of Section 7.1 and 7.3
hereof, the Company may incur or assume Debt, or enter into other
similar credit, guarantee, financing or refinancing arrangements,
for any purpose upon such terms as the Managing Member determines
appropriate; provided, however, that the Company shall not incur
or assume any Debt under which a breach, violation or default
would be deemed to occur by virtue of the Transfer of any
Membership Interest by a Non-Managing Member; provided, further,
that any Debt shall be nonrecourse to each Member unless the
Member to whom any Debt would be recourse otherwise agrees.
Notwithstanding the foregoing, the Company may be liable on a
recourse basis for the normal and customary exceptions to the
nonrecourse provisions as may be set forth in documents
evidencing a Debt.
Section 4.3. No Interest; No Return
No Member shall be entitled to interest on its Capital
Contribution or on such Member's Capital Account. Except as
provided herein or by law, no Member shall have any right to
demand or receive the return of its Capital Contribution from the
Company.
ARTICLE 5.
DISTRIBUTIONS
Section 5.1. Requirement and Characterization of
Distributions
A. General. The Managing Member shall cause the
Company to distribute on the LLC Distribution Date all (or with
respect to amounts distributed pursuant to the following clause
(5), such portion as the Managing Member may in its discretion
determine) Available Cash generated by the Company during such
period to the Members on the LLC Record Date for such period as
follows: 1% to the Managing Member and 99% to the Non-Managing
Member.
B. Conduct of Company Operations to Maintain Level of
Distributions. The Managing Member intends to use reasonable
efforts to cause the Company to operate in a manner (including,
without limitation, incurring Debt, establishing and maintaining
cash reserves, and undertaking and financing recurring and non-
recurring capital expenditures) that enables the Company to make
the distributions required pursuant to Section 5.1.A above.
Section 5.2. Distributions in Kind
No right is given to any Member to demand and receive
property other than cash.
Section 5.3. Amounts Withheld
Each Member hereby authorizes the Company to withhold
from or pay on behalf of or with respect to such Member any
amount of federal, state, local or foreign taxes that the
Managing Member determines that the Company is required to
withhold or pay with respect to any amount distributable or
allocable to such Member pursuant to this Agreement, including,
without limitation, any taxes required to be withheld or paid by
the Company pursuant to Code Section 1441, Code Section 1442,
Code Section 1445 or Code Section 1446; provided, however, the
Managing Member, on behalf of the Company, shall make such
filings with state and local authorities in accordance with
customary business practices to minimize or eliminate any
withholding requirement. Any amount paid on behalf of or with
respect to a Member shall constitute a loan by the Company to
such Member, which loan shall be repaid by such Member within 15
days after notice from the Managing Member that such payment must
be made unless (i) the Company withholds such payment from a
distribution that would otherwise be made to the Member or (ii)
the Managing Member determines, in its sole and absolute
discretion, that such payment may be satisfied out of the
Available Cash of the Company that would, but for such payment,
be distributed to the Member. Any amounts withheld pursuant to
the foregoing clauses (i) or (ii) shall be treated as having been
distributed to such Member. Each Member hereby unconditionally
and irrevocably grants to the Company a security interest in such
Member's Membership Interest to secure such Member's obligation
to pay to the Company any amounts required to be paid pursuant to
this Section 5.3. In the event that a Member fails to pay any
amounts owed to the Company pursuant to this Section 5.3 when
due, the Managing Member may, in its sole and absolute
discretion, elect to make the payment to the Company on behalf of
such defaulting Member, and in such event shall be deemed to have
loaned such amount to such defaulting Member and shall succeed to
all rights and remedies of the Company as against such defaulting
Member (including, without limitation, the right to receive
distributions). Any amounts payable by a Member hereunder shall
bear interest at the Prime Rate plus four (4) percentage points
(but not higher than the maximum lawful rate) from the date such
amount is due (i.e., 15 days after demand) until such amount is
paid in full. Each Member shall take such actions as the Company
or the Managing Member shall request in order to perfect or
enforce the security interest created hereunder.
Section 5.4. Distributions Upon Liquidation
Notwithstanding the other provisions of this Article 5,
net proceeds from a Terminating Capital Transaction and any other
cash received or reductions in reserves made after commencement
of the liquidation of the Company shall be distributed in
accordance with Section 13.2 hereof
Section 5.5. Restricted Distributions
Notwithstanding any provision to the contrary contained
in this Agreement, neither the Company nor the Managing Member,
on behalf of the Company, shall make a distribution to any Member
on account of its Membership Interest or interest in LLC Units if
such distribution would violate the Act or other applicable law.
ARTICLE 6.
ALLOCATIONS
Section 6.1. Timing and Amount of Allocations of Net
Income and Net Loss
Net Income and Net Loss of the Company shall be
determined and allocated with respect to each Fiscal Year of the
Company as of the end of each such year. Except as otherwise
provided in this Article 6, an allocation to a Member of a share
of Net Income or Net Loss shall be treated as an allocation of
the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.
Section 6.2. General Allocations.
Except as otherwise provided in this Article 6:
A. Net Income. Net Income for any Fiscal Year shall
be allocated, for purposes of adjusting the Capital Accounts of
the Members, in accordance with the following order of priority:
1% to the Managing Member and 99% to the Non-Managing
Member.
B. Net Loss. Net Loss for any Fiscal Year shall be
allocated, for purposes of adjusting the Capital Accounts of the
Members, pro rata to each Member in accordance with their
relative positive Capital Account balances (calculated for this
purpose by adding to such Member's Capital Account such Member's
share of Company Minimum Gain and Member Minimum Gain).
Section 6.3. Additional Allocation Provisions
A. Regulatory Allocations
(1) Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding
the provisions of Section 6.2 hereof, or any other provision
of this Article 6, if there is a net decrease in Company
Minimum Gain during any Fiscal Year, each Member shall be
specially allocated items of Company income and gain for
such year (and, if necessary, subsequent years) in an amount
equal to such Member's share of the net decrease in Company
Minimum Gain, as determined under Regulations Section 1.704-
2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto. The items to be
allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
6.3.A(l) is intended to qualify as a "minimum gain
chargeback" within the meaning of Regulations Section 1.704-
2(f) and shall be interpreted consistently therewith.
(2) Member Minimum Gain Chargeback. Except as
otherwise provided in Regulations Section 1.704-2(i)(4) or
in Section 6.3.A(1) hereof, if there is a net decrease in
Member Minimum Gain attributable to a Member Nonrecourse
Debt during any Fiscal Year, each Member who has a share of
the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Member's share
of the net decrease in Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to
the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-
2(i)(4) and 1.704-2(j)(2). This Section 6.3.A(2) is intended
to qualify as a "charge back of partner nonrecourse debt
minimum gain" within the meaning of Regulations Section
1.704-2(i) and shall be interpreted consistently therewith.
(3) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions for any Fiscal Year shall be
specially allocated to the Member(s) who bears the
economic risk of loss with respect to the Member Nonrecourse
Debt to which such Member Nonrecourse Deductions are
attributable, in accordance with Regulations Section 1.704-
2(i).
(4) Qualified Income Offset. If any Member
unexpectedly receives an adjustment, allocation or
distribution described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and
gain shall be allocated, in accordance with Regulations
Section 1.704-1(b)(2)(ii)(d), to such Member in an amount
and manner sufficient to eliminate, to the extent required
by such Regulations, the Adjusted Capital Account Deficit of
such Member as quickly as possible, provided that an
allocation pursuant to this Section 6.3.A(4) shall be made
if and only to the extent that such Member would have an
Adjusted Capital Account Deficit after all other allocations
provided in this Article 6 have been tentatively made as if
this Section 6.3.A(4) were not in the Agreement. It is
intended that this Section 6.3.A(4) qualify and be construed
as a "qualified income offset" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(5) Limitation on Allocation of Net Loss. To the
extent that any allocation of Net Loss would cause or
increase an Adjusted Capital Account Deficit as to any
Member, such allocation of Net Loss shall be reallocated
among the other Members in accordance with their respective
LLC Units, subject to the limitations of this Section
6.3.A(5).
(6) Section 754 Adjustment. To the extent that
an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regulations Section 1.704-
1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Member
in complete liquidation of its interest in the Company, the
amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases
such basis), and such gain or loss shall be specially
allocated to the Members in accordance with their LLC Units
in the event that Regulations Section 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Members to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(7) Curative Allocations. The allocations set
forth in Sections 6.3.A(l) through (6) hereof (the
"Regulatory Allocations") are intended to comply with
certain regulatory requirements, including the requirements
of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Section 6.2 hereof, the
Regulatory Allocations shall be taken into account in
allocating other items of income, gain, loss and deduction
among the Members so that, to the extent possible without
violating the requirements giving rise to the Regulatory
Allocations, the net amount of such allocations of other
item and the Regulatory Allocations to each Member shall be
equal to the net amount that would have been allocated to
each such Member if the Regulatory Allocations had not
occurred.
Section 6.4. Tax Allocations
A. In General. Except as otherwise provided in this
Section 6.4, for income tax purposes under the Code and the
Regulations, each Company item of income, gain, loss and
deduction (collectively, "Tax Items") shall be allocated among
the Members in the same manner as its correlative item of "book"
income, gain, loss or deduction is allocated pursuant to Sections
6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c)
Revaluations. Notwithstanding Section 6.4.A hereof, Tax Items
with respect to Property that is contributed to the Company with
a Gross Asset Value that varies from its basis in the hands of
the contributing Member immediately preceding the date of
contribution shall be allocated among the Members for income tax
purposes pursuant to the method as described in Regulations
Section 1.704-3(d) that is chosen by the Managing Member. In the
event that the Gross Asset Value of any Company asset is adjusted
pursuant to subsection (b) of the definition of "Gross Asset
Value" (provided in Article 1 hereof), subsequent allocations of
Tax Items with respect to such asset shall take account of the
variation, if any, between the adjusted basis of such asset and
its Gross Asset Value in the same manner as under Code Section
704(c) and the applicable Regulations and this Section 6.4.B.
Section 6.5. Other Provisions
A. Other Allocations. In the event that (i) any
modifications are made to the Code or any Regulations, (ii) any
changes occur in any case law applying or interpreting the Code
or any Regulations, (iii) the IRS changes or clarifies the manner
in which it applies or interprets the Code or any Regulations or
any case law applying or interpreting the Code or any Regulations
or (iv) the IRS adjusts the reporting of any of the transactions
contemplated by this Agreement which, in each case, either (a)
requires allocations of items of income, gain, loss, deduction or
credit or (b) requires reporting of any of the transactions
contemplated by this Agreement in a manner different from that
set forth in this Article 6, the Managing Member is hereby
authorized to make new allocations or report any such
transactions (as the case may be) in reliance of the foregoing,
and such new allocations and reporting shall be deemed to be made
pursuant to the fiduciary duty of the Managing Member to the
Company and the other Members, and no such new allocation or
reporting shall give rise to any claim or cause of action by any
Member.
B. Consistent Tax Reporting. The Members acknowledge
and are aware of
the income tax consequences of the allocations made by this
Article 6 and hereby agree to be bound by the provisions of this
Article 6 in reporting their shares of Net Income, Net Loss and
other items of income, gain, loss, deduction and credit for
federal, state and local income tax purposes.
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1. Management
A. Except as otherwise expressly provided in this
Agreement, the Managing Member, in its capacity as a Member of
the Company under the Act, shall have sole and complete charge
and management over the business and affairs of the Company, in
all respects and in all matters. The Managing Member shall be an
agent of the Company's business, and the actions of the Managing
Member taken in such capacity and in accordance with this
Agreement shall bind the Company. The Managing Member shall at
all times be a Member of the Company. Except as otherwise
expressly provided in this Agreement or required by any non-
waivable provisions of applicable law, the Non-Managing Member
shall not participate in the control of the Company, shall have
no right, power or authority to act for or on behalf of, or
otherwise bind, the Company and shall have no right to vote on or
consent to any other matter, act, decision or document involving
the Company or its business. The Managing Member may not be
removed by the Members with or without cause, except with the
consent of the Managing Member. In addition to the powers now or
hereafter granted a manager of a limited liability company under
applicable law or that are granted to the Managing Member under
any other provision of this Agreement, the Managing Member,
subject to the other provisions hereof including the limitations
on the authority of the Managing Member set forth in Section 7.3,
shall have full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the
Company, to exercise all powers set forth in Section 3.2 hereof
and to effectuate the purposes set forth in Section 3.1 hereof,
including, without limitation:
(1) except as expressly restricted in this
Article 7, the making of any expenditures, the lending or
borrowing of money (including, without limitation, making
prepayments on loans and borrowing money to permit the
Company to make distributions to its Members in such amounts
as will permit the Managing Member (so long as the Managing
Member qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any excise
tax pursuant to Code Section 4981) and to make distributions
to its shareholders sufficient to permit the Managing Member
to maintain REIT status or otherwise to satisfy the REIT
Requirements), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness (including the
securing of any of the foregoing by deed to secure debt,
mortgage, deed of trust or other lien or encumbrance on the
Company's assets and the execution of agreements, documents
and instruments evidencing Managing Member Loans) and the
incurring of any obligations that it deems necessary for the
conduct of the activities of the Company;
(2) the making of tax, regulatory and other
filings, or rendering of periodic or other reports to
governmental or other agencies having jurisdiction over the
business or assets of the Company;
(3) except as restricted pursuant to Section
7.3.E(2) hereof, the acquisition, sale, transfer, exchange
or other disposition of any assets of the Company
(including, but not limited to, the exercise or grant of any
conversion, option, privilege or subscription right or any
other right available in connection with any assets at any
time held by the Company) or the merger, consolidation,
reorganization or other combination of the Company with or
into another entity or the conversion of the Company to any
other entity or the transfer of the Company to another
jurisdiction;
(4) except as restricted pursuant to Section
7.1.C hereof, the mortgage, pledge, encumbrance or
hypothecation of any assets of the Company (including,
without limitation, any Contributed Property), the use of
the assets of the Company (including, without limitation,
cash on hand) for any purpose consistent with the terms of
this Agreement which the Managing Member believes will
directly benefit the Company and on any terms that the
Managing Member sees fit, including, without limitation, the
financing of the conduct or the operations of the Managing
Member or the Company, the lending of funds to other Persons
(including, without limitation, the Managing Member, if
necessary to permit the financing or capitalization of a
subsidiary of the Managing Member or the Company) and the
repayment of obligations of the Company, any of its
Subsidiaries and any other Person in which it has an equity
investment;
(5) the management, operation, leasing,
landscaping, repair, alteration, demolition, replacement or
improvement of any Property, including, without limitation.
any Contributed Property, or other asset of the Company or
any Subsidiary;
(6) the negotiation, execution and performance of
any contracts, leases, conveyances or other instruments
that the Managing Member considers useful or necessary to
the conduct of the Company's operations or the
implementation of the Managing Member's powers under this
Agreement, including contracting with asset managers,
property managers, loan servicers (including, without
limitation, as to any Contributed Property or other
Property, contracting with the Managing Member or its
Affiliates for asset management, property management or
mortgage loan servicing services at rates not to exceed 95%
of the rate that is charged by non-affiliated parties; it
being agreed that an asset management fee of one percent
(1%) of the initial Gross Asset Value of the Property, and a
property management fee of four and one-half percent (4.5%)
of the Company's gross collected revenues, and a mortgage
loan servicing fee of eight tenths of one percent (.8%) of
the loan balance are acceptable annual rates), contractors,
developers, consultants, accountants, legal counsel, other
professional advisors and other agents and the payment of
their expenses and compensation out of the Company's assets;
(7) the distribution of Company cash or other
Company assets in accordance with this Agreement, the
holding, management, investment and reinvestment of cash and
other assets of the Company, and the collection and receipt
of revenues, rents and income of the Company;
(8) the selection and dismissal of employees of
the Company or the Managing Member (including, without
limitation, employees having titles or offices such as
"president," "vice president," "secretary" and "treasurer'),
and agents, outside attorneys, accountants, consultants and
contractors of the Company or the Managing Member and the
determination of their compensation and other terms of
employment or hiring;
(9) the maintenance of such insurance for the
benefit of the Company and the Members as it deems necessary
or appropriate including casualty, liability and other
insurance on the Properties of the Company;
(10) [INTENTIONALLY DELETED];
(11) the control of any matters affecting the
rights and obligations of the Company, including the
settlement, compromise, submission to arbitration or any
other form of dispute resolution, or abandonment, of any
claim, cause of action, liability, debt or damages, due or
owing to or from the Company, the commencement or defense of
suits, legal proceedings, administrative proceedings,
arbitrations or other forms of dispute resolution, and the
representation of the Company in all suits or legal
proceedings, administrative proceedings, arbitrations or
other forms of dispute resolution, the incurring of legal
expense, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by
law;
(12) the undertaking of any action in connection
with the Company's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, contributing or loaning Company funds to,
incurring indebtedness on behalf of, or guaranteeing the
obligations of any such Persons);
(13) the determination of the fair market value of
any Company property distributed in kind as determined by an
Appraisal which amount shall be equal to the Appraised
Value;
(14) the enforcement of any rights against any
Member pursuant to representations, warranties, covenants
and indemnities relating to such Member's contribution of
property or assets to the Company;
(15) the collection and receipt of revenues and
income of the Company;
(16) the exercise, directly or indirectly, through
any attorney-in-fact acting under a general or limited power
of attorney, of any right, including the right to vote,
appurtenant to any asset or investment held by the Company;
(17) the exercise of any of the powers of the
Managing Member enumerated in this Agreement on behalf of or
in connection with any Subsidiary of the Company or any
other Person in which the Company has a direct or indirect
interest, or jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the
Managing Member enumerated in this Agreement on behalf of
any Person in which the Company does not have an interest
pursuant to contractual or other arrangements with such
Person;
(19) the maintenance of working capital and other
reserves in such amounts as the Managing Member, in its sole
and absolute discretion, deems appropriate and reasonable
from time to time;
(20) the making, execution and delivery of any and
all deeds, leases, notes, deeds to secure debt, mortgages,
deeds of trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases or
legal instruments or agreements in writing necessary or
appropriate in the judgment of the Managing Member for the
accomplishment of any of the powers of the Managing Member
enumerated in this Agreement; and
(21) the amendment and restatement of Exhibit A
hereto to reflect accurately at all times the Capital
Accounts, LLC Units, and Percentage Interests of the Members
as the same are adjusted from time to time to the extent
necessary to reflect redemptions, Capital Contributions, the
issuance of LLC Units, the admission of any Substituted
Member or otherwise, as long as the matter or event being
reflected in Exhibit A hereto otherwise is authorized by
this Agreement.
B. The Non-Managing Member hereby agrees that the
Managing Member is authorized to execute, deliver and perform the
above-mentioned agreements and transactions on behalf of the
Company without any further act, approval or vote of the Non-
Managing Member, notwithstanding any other provision of this
Agreement (except as expressly provided in this Agreement), the
Act or any applicable law, rule or regulation. The execution,
delivery or performance by the Managing Member or the Company of
any agreement authorized or permitted under this Agreement shall
not constitute a breach by the Managing Member of any duty that
the Managing Member may owe the Company or the Members or any
other Persons under this Agreement or of any duty stated or
implied by law or equity.
C. At all times from and after the date hereof, the
Managing Member may cause the Company to obtain and maintain (i)
casualty, liability and other insurance on the properties of the
Company and (ii) liability insurance for the Indemnitees
hereunder.
D. In exercising its authority under this Agreement,
the Managing Member may, but (except as otherwise provided in
this Article 7 hereof) shall be under no obligation, to take into
account the tax consequences to any Member (including the
Managing Member) of any action taken by it. The Managing Member
and the Company shall not have liability to a Member under any
circumstances as a result of an income tax liability incurred by
such Member as a result of an action (or inaction) by the
Managing Member pursuant to its authority under this Agreement so
long as the action or inaction is taken in good faith.
Section 7.2. Certificate of Formation
The Managing Member is hereby designated an "authorized
person" within the meaning of the Act and to the extent that such
action is determined by the Managing Member to be reasonable and
necessary or appropriate, the Managing Member shall file
amendments to and restatements of the Certificate and do all the
things to maintain the Company as a limited liability company
under the laws of the State of Delaware. Subject to the terms
of Section 8.5.A(4) hereof, the Managing Member shall not be
required, before or after filing, to deliver or mail a copy of
the Certificate or any amendment thereto to any Member. The
Managing Member shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be reasonable
and necessary or appropriate for the formation, continuation,
qualification and operation of a limited liability company in the
State of Delaware and any other state, or other jurisdiction in
which the Company may elect to do business or own property.
Section 7.3. Restrictions on Managing Member's
Authority
A. The Managing Member may not take any action in
contravention of an express prohibition or limitation of this
Agreement, including, without limitation:
(1) take any action that would make it impossible
to carry on the ordinary business of the Company;
(2) possess Company property, or assign any
rights in specific Company property, for other than a
Company purpose except as otherwise provided in this
Agreement;
(3) admit a Person as a Member, except as
otherwise provided in this Agreement;
(4) perform any act that would subject a Non-
Managing Member to liability as a Managing Member in any
jurisdiction or any other liability except as expressly
provided in this Agreement or under the Act; or
(5) enter into any contract, mortgage, loan or
other agreement that expressly prohibits or restricts the
ability of (a) the Managing Member or the Company from
satisfying its obligations under Section 5.1 or 8.6 hereof
in full.
B. The Managing Member shall not, without the prior
Consent of the Non-Managing Member and the consent of Ryan
undertake or have the authority to do or undertake, on behalf of
the Company, any of the following actions or enter into any
transaction which would have the effect of such transactions:
(1) except as provided in Section 7.3.C and
Section 7.1.A(21), amend, modify or terminate this Agreement
other than to reflect the admission, substitution,
termination or withdrawal of Members pursuant to Article 11
or Article 12 hereof,
(2) make a general assignment for the benefit of
creditors or appoint or acquiesce in the appointment of a
custodian, receiver or trustee for all or any part of the
assets of the Company;
(3) institute any proceeding for bankruptcy on
behalf of the Company;
(4) confess a judgment against the Company;
(5) approve or acquiesce to the Transfer of the
Membership Interest of the Managing Member to any Person
other than the Company;
(6) admit into the Company any Additional or
Substitute Managing Member;
(7) except as otherwise expressly provided in
this Agreement, take any action to admit or accept any new
or additional Members.
C. Notwithstanding Section 7.3.B, the Managing Member
shall have the exclusive power to amend this Agreement as may be
required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the Managing
Member or surrender any right or power granted to the
Managing Member or any Affiliate of the Managing Member for
the benefit of the Non-Managing Member;
(2) to reflect the issuance of additional
Membership Interests pursuant to the admission,
substitution, termination, or withdrawal of Members in
accordance with this Agreement and to amend Exhibit A in
connection with such admission, substitution or withdrawal;
provided, however, that the foregoing shall not be construed
as allowing the Managing Member to admit any Additional
Members to the Company without the consent of the Non-
Managing Member;
(3) to reflect a change that is of an
inconsequential nature and does not adversely affect the Non-
Managing Member in any material respect, or to cure any
ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other
provisions, or make other changes with respect to matters
arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(4) to satisfy any requirements, conditions, or
guidelines contained in any order, directive or regulation
of a federal or state agency or contained in federal or
state law;
(5) to reflect such changes as are reasonably
necessary for the Managing Member to maintain its status as
a REIT or to satisfy the REIT Requirements; and
(6) to modify, as set forth in the definition of
"Capital Account," the manner in which Capital Accounts
are computed; provided, however, under no circumstances may
any such modification change the amount or the timing of any
amount to be received by any Member under this Agreement.
The Managing Member will provide notice to the Non-Managing
Member when any action under this Section 7.3.C is taken.
D. Notwithstanding Section 7.3.B and 7.3.C hereof or
any other provision in this Agreement to the contrary, this
Agreement shall not be amended with respect to any Member
adversely affected, and no action may be taken by the Managing
Member, without the Consent of such Member adversely affected if
such amendment or action would (i) convert the Non-Managing
Member's interest in the Company into a managing member's
interest (except as the result of the Managing Member acquiring
such interest), (ii) modify the limited liability of the Non-
Managing Member, (iii) alter rights of the Member to receive
distributions pursuant to Article 5 or Section 13.2.A(4), or the
allocations specified in Article 6 (except as permitted pursuant
to Section 7.3.C(3) hereof), (iv) alter or modify the rights to
an Exchange as set forth in Section 8.6, and related definitions
hereof or (v) amend this Section 7.3.D. Further, no amendment
may alter the restrictions on the Managing Member's authority set
forth elsewhere in this Section 7.3 without the Consent specified
in such section. Any such amendment or action consented to by
any Member shall be effective as to that Member, notwithstanding
the absence of such consent by any other Member.
E. The Managing Member shall not, on behalf of the
Company, take any of the following actions without the prior
Consent of the Non-Managing Member and the Consent of Ryan:
(1) to the fullest extent permitted by law,
dissolve the Company, other than incident to a Termination
Transaction (as defined in Section 11.2); or
(2) sell, dispose, convey or otherwise transfer
the Property during the No-Transfer Period.
If Managing Member breaches any such restrictions, Ryan
shall have the right at any time thereafter to exchange all or
any portion of its LLC Units in Non-Managing Member pursuant to
and in accordance with the terms of the Limited Liability Company
Agreement of Non-Managing Member, in addition to pursuing all
other remedies available to it by reason of such breach.
Section 7.4. Reimbursement of the Managing Member
A. The Managing Member shall not be compensated for
its services as the Managing Member of the Company.
Distributions, payments and allocations to which the Managing
Member may be entitled in its capacity as the Managing Member
shall not constitute compensation for services rendered by the
Managing Member as provided in this Agreement (including the
provisions of Articles 5 and 6 hereof).
B. Subject to Sections 7.4.C and 15.12 hereof, the
Company shall be liable, and shall reimburse the Managing Member
on a monthly basis (or such other basis as the Managing Member
may determine in its sole and absolute discretion), for all sums
expended in connection with the Company's business. Any such
reimbursements shall be in addition to any reimbursement of the
Managing Member as a result of indemnification pursuant to
Section 7.7 hereof
C. To the extent practicable, Company expenses shall
be billed directly to and paid by the Company. Subject to
Sections 7.1.C and 15.12 hereof, reimbursements to the Managing
Member or any of its Affiliates by the Company shall be allowed,
however, for the actual cost to the Managing Member or any of its
Affiliates of operating and other expenses of the Company,
including, without limitation, the actual cost of goods,
materials and administrative services related to (i) Company
operations, (ii) Company accounting, (iii) communications with
Members, (iv) legal services, (v) tax services, (vi) computer
services, (vii) risk management, (viii) mileage and travel
expenses and (ix) such other related operational and
administrative expenses as are necessary for the prudent
organization and operation of the Company. "Actual cost of goods
and materials" means the actual cost to the Managing Member or
any of its Affiliates of goods and materials used for or by the
Company obtained from entities not affiliated with the Managing
Member, and "actual cost of administrative services" means the
pro rata cost of personnel (as if such persons were employees of
the Company) providing administrative services to the Company.
The cost for such services to be reimbursed to the Managing
Member or any Affiliate thereof shall be the lesser of the
Managing Member's or Affiliate's actual cost, or the amount the
Company would be required to pay to independent parties for
comparable administrative services in the same geographic
location. The foregoing provisions shall not be deemed to limit
the right of the Managing Member to cause the Company to pay a
property management fee and an asset management fee to its
Affiliates as provided in Section 7.1.A(6) hereof.
D. The Managing Member shall also be reimbursed for
all expenses it incurs relating to any issuance of additional
Membership Interests or Debt of the Company (including, without
limitation, all costs, expenses, damages and other payments
resulting from or arising in connection with litigation related
to the foregoing), all of which expenses are considered by the
Members to constitute expenses of, and for the benefit of, the
Company.
To the extent that reimbursements to the Managing Member or any
of its Affiliates by the Company pursuant to this Section 7.4
would constitute gross income to the Managing Member for purposes
of Code Section 856(c)(2) or 856(c)(3), then such amounts shall
be treated as "guaranteed payments" within the meaning of Code
Section 707(c).
Section 7.5. Other Business of Managing Member
The Managing Member shall devote to the Company such
time as may be necessary for the performance of its duties as
Managing Member, but the Managing Member is not required, and is
not expected, to devote its full time to the performance of such
duties. The Managing Member may engage independently or with
others in other business ventures of every nature and
description, including, without limitation, the ownership of
other properties and the making or management of other
investments. Nothing in this Agreement shall be deemed to
prohibit the Managing Member or any Affiliate of the Managing
Member from dealing, or otherwise engaging in business with,
Persons transacting business with the Company, or from providing
services related to the purchase, sale, financing, management,
development or operation of real or personal property and
receiving compensation therefor, not involving any rebate or
reciprocal arrangement that would have the effect of
circumventing any restriction set forth herein upon dealings with
the Managing Member or any Affiliate of the Managing Member.
Neither the Company nor any Member shall have any right by virtue
of this Agreement or the relationship created hereby in or to
such other ventures or activities or to the income or proceeds
derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Company, shall not be deemed
wrongful or improper.
Section 7.6. Contracts with Affiliates
A. Subject to Section 7.6.B below, the Company may
lend or contribute to Persons in which it has an equity
investment, and such Persons may borrow funds from the Company,
on terms and conditions established in the sole and absolute
discretion of the Managing Member. The foregoing authority shall
not create any right or benefit in favor of any Person.
B. Neither the Managing Member nor any of its
Affiliates, directly or indirectly, shall sell, transfer or
convey any Property to, or purchase any property from, or borrow
funds from, or lend funds to, the Company or engage in any other
transactions with the Company, except upon terms determined by
the Managing Member in good faith to be fair and reasonable and
comparable to terms that could be obtained from an unaffiliated
party in an arm's length transaction.
C. The Managing Member in its sole and absolute
discretion and without the approval of the Non-Managing Member,
may propose and adopt on behalf of the Company employee benefit
plans funded by the Company for the benefit of employees of the
Managing Member, the Company, Subsidiaries of the Company or any
Affiliate of any of them in respect of services performed,
directly or indirectly, for the benefit of the Company or any of
the Company's Subsidiaries.
D. The Managing Member is expressly authorized to
enter into, in the name and on behalf of the Company, a right of
first opportunity arrangement and other conflict avoidance
agreements with various Affiliates of the Company and the
Managing Member, on such terms as the Managing Member, in its
sole and absolute discretion, believes are advisable.
Section 7.7. Indemnification
A. To the fullest extent permitted by applicable law,
the Company shall indemnify each Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several,
expenses (including, without limitation, attorney's fees and
other legal fees and expenses), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or
investigative, that relate to the operations of the Company
("Actions") as set forth in this Agreement in which such
Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise
to the proceeding and either was committed in bad faith or was
the result of active and deliberate dishonesty; (ii) the
Indemnitee actually received an improper personal benefit in
money, property or services; or (iii) in the case of any criminal
proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Without limitation the
foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guaranty or otherwise, for any
indebtedness of the Company or any Subsidiary of the Company
(including, without limitation, any indebtedness which the
Company or any Subsidiary of the Company has assumed or taken
subject to), and the Managing Member is hereby authorized and
empowered, on behalf of the Company, to enter into one or more
indemnity agreements consistent with the provisions of this
Section 7.7 in favor of any Indemnitee having or potentially
having liability for any such indebtedness. The termination of
any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.7.A. The
termination of any proceeding by conviction or upon a plea of
nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption
that the Indemnitee acted in a manner contrary to that specified
in this Section 7.7.A with respect to the subject matter of such
proceeding such that the Indemnitee is not entitled to
indemnification under this Section 7.7. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets
of the Company and any insurance proceeds from the liability
policy covering the Managing Member and any Indemnitees, and
neither the Managing Member nor any Non-Managing Member shall
have any obligation to contribute to the capital of the Company
or otherwise provide funds to enable the Company to fund its
obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who
is a party to a proceeding or otherwise subject to or the focus
of or is involved in any Action shall be paid or reimbursed by
the Company as incurred by the Indemnitee in advance of the final
disposition of the Action upon receipt by the Company of (i) a
written affirmation by the Indemnitee of the Indemnitee's good
faith belief that the standard of conduct necessary for
indemnification by the Company as authorized in Section 7.7.A has
been met, and (ii) a written undertaking by or on behalf of the
Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7
shall be in addition to any other rights to which an Indemnitee
or any other Person may be entitled under any agreement pursuant
to any vote of the Members, as a matter of law or otherwise, and
shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement
with such Indemnitee or in the writing pursuant to which such
Indemnitee is indemnified.
D. The Company may, but shall not be obligated to,
purchase and maintain insurance, on behalf of any of the
Indemnitees and such other Persons as the Managing Member shall
determine, against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with
the Company's activities, regardless of whether the Company would
have the power to indemnify such Person against such liability
under the provisions of this Agreement.
E. For purposes of this Section 7.7, (i) the Company
shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by
it of its duties to the Company also imposes duties on, or
otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee
with respect to an employee benefit plan pursuant to applicable
law shall constitute fines within the meaning of this Section 7.7
and (iii) actions taken or omitted by the Indemnitee with respect
to an employee benefit plan in the performance of its duties for
a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the
Company.
F. In no event may an Indemnitee subject any of the
Members to personal liability by reason of the indemnification
provisions set forth in this Agreement.
G. An Indemnitee shall not be denied indemnification
in whole or in part under this Section 7.7 because the Indemnitee
had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for
the benefit of any other Persons. Any amendment, modification or
repeal of this Section 7.7 or any provision hereof shall be
prospective only and shall not in any way affect the limitations
on the Company's liability to any Indemnitee under this Section
7.7 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
I. If and to the extent any reimbursements to the
Managing Member pursuant to this Section 7.7 constitute gross
income to the Managing Member (as opposed to the repayment of
advances made by the Managing Member on behalf of the Company)
such amounts shall constitute guaranteed payments within the
meaning of Code Section 707(c), shall be treated consistently
therewith by the Company and all Members, and shall not be
treated as distributions for purposes of computing the Members'
Capital Accounts.
Section 7.8. Liability of the Managing Member
A. Notwithstanding anything to the contrary set forth
in this Agreement, neither the Managing Member nor any of its
directors or officers shall be liable or accountable in damages
or otherwise to the Company, any Members or any Assignees for
losses sustained, liabilities incurred or benefits not derived as
a result of errors in judgment or mistakes of fact or law or of
any act or omission if the Managing Member or such director or
officer acted in good faith.
B. The Non-Managing Member expressly acknowledges
that the Managing Member is acting for the benefit of the
Company, the Members and the Managing Member's shareholders
collectively, that the Managing Member is (except as otherwise
provided in this Agreement, including, but not limited to, the
restrictions on the Managing Member's power and authority
pursuant to this Article 7) under no obligation to give priority
to the separate interests of the Members or the Managing Member's
shareholders (including, without limitation, the tax consequences
to Members, Assignees or the Managing Member's shareholders) in
deciding whether to cause the Company to take (or decline to
take) any actions and that the Managing Member shall not be
liable to the Company or to any Member for monetary damages for
losses sustained, liabilities incurred, or benefits not derived
by the Non-Managing Member in connection with such decisions,
provided that the Managing Member has acted in good faith.
C. Subject to its obligations and duties as Managing
Member set forth in Section 7.1.A hereof, the Managing Member may
exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either
directly or by or through its employees or agents. The Managing
Member shall not be responsible for any misconduct or negligence
on the part of any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this
Section 7.8 or any provision hereof shall be prospective only and
shall not in any way affect the limitations on the Managing
Member's, and its officers' and directors', liability to the
Company and the Non-Managing Member under this Section 7.8 as in
effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise
or be asserted.
Section 7.9. Other Matters Concerning the Managing
Member
A. The Managing Member may rely and shall be
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture or other paper
or document believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties.
B. The Managing Member may consult with legal
counsel, accountants, appraisers, management consultants,
investment bankers, architects, engineers, environmental
consultants and other consultants and advisers selected by it,
and any act taken or omitted to be taken in reliance upon the
opinion of such Persons as to matters that the Managing Member
reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such
opinion.
C. The Managing Member shall have the right, in
respect of any of its powers or obligations hereunder, to act
through any of its duly authorized officers and a duly appointed
attorney or attorneys-in-fact. Each such attorney shall, to the
extent provided by the Managing Member in the power of attorney,
have full power and authority to do and perform all and every act
and duty that is permitted or required to be done by the Managing
Member hereunder.
D. Notwithstanding any other provisions of this
Agreement or the Act, any action of the Managing Member on behalf
of the Company or any decision of the Managing Member to refrain
from acting on behalf of the Company undertaken in the good faith
belief that such action or omission is necessary or advisable in
order (i) to protect the ability of the Managing Member to
continue to qualify as a REIT, (ii) for the Managing Member
otherwise to satisfy the REIT Requirements or (iii) to allow the
Managing Member to avoid incurring any liability for taxes under
Section 857 or Section 4981 of the Code, is expressly authorized
under this Agreement and is deemed approved by the Non-Managing
Member.
Section 7.10. Title to Company Assets
Title to Company assets, whether real, personal or
mixed and whether tangible or intangible, shall be deemed to be
owned by the Company as an entity, and no Member, individually or
collectively with other Members or Persons, shall have any
ownership interest in such Company assets or any portion thereof.
Title to any or all of the Company assets shall be held in the
name of the Company, the Managing Member or one or more nominees,
as the Managing Member may determine, including Affiliates of the
Managing Member as may be required to complete financing and to
otherwise comply with the intent of the Contribution Agreement
and this Agreement. The Managing Member hereby declares and
warrants that any Company assets for which legal title is held in
the name of the Managing Member or any nominee or Affiliate of
the Managing Member shall be held by the Managing Member for the
use and benefit of the Company in accordance with the provisions
of this Agreement. All Company assets shall be recorded as the
property of the Company in its books and records, irrespective of
the name in which legal title to such Company assets is held.
Section 7.11. Reliance by Third Parties
Notwithstanding anything to the contrary in this
Agreement, any Person dealing with the Company shall be entitled
to assume that, except for the actions identified in Section
7.3.E hereof, the Managing Member has full power and authority,
without the consent or approval of any other Member or Person, to
encumber, sell or otherwise use in any manner any and all assets
of the Company and to enter into any contracts on behalf of the
Company, and take any and all actions on behalf of the Company,
and such Person shall be entitled to deal with the Managing
Member as if it were the Company's sole party in interest, both
legally and beneficially. In no event shall any Person dealing
with the Managing Member or its representatives be obligated to
ascertain that the terms of this Agreement have been complied
with or to inquire into the necessity or expediency of any act or
action of the Managing Member or its representatives. Each and
every certificate, document or other instrument executed on
behalf of the Company by the Managing Member or its
representatives shall be conclusive evidence in favor of any and
every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and
effect (ii) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so
for and on behalf of the Company and (iii) such certificate,
document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is
binding upon the Company.
ARTICLE 8.
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 8.1. Limitation of Liability
The Non-Managing Member shall have no liability under
this Agreement except for its obligations to make Capital
Contributions pursuant to Section 4.1, the Managing Member's
rights of offset as expressly set forth in Section 5.1.A, the
payments described in Section 5.3 and as expressly provided
under the Act.
Section 8.2. Managing of Business
The Non-Managing Member or Assignee (other than the
Managing Member, any of its Affiliates or any officer, director,
employee, partner, agent or trustee of the Managing Member, the
Company or any of their Affiliates, in their capacity as such)
shall not take part in the operations, management or control
(within the meaning of the Act) of the Company's business,
transact any business in the Company's name or have the power to
sign documents for or otherwise bind the Company. The
transaction of any such business by the Managing Member, any of
its Affiliates or any officer, director, employee, partner, agent
or trustee of the Managing Member, the Company or any of their
Affiliates, in their capacity as such, shall not affect, impair
or eliminate the limitations on the liability of the Non-Managing
Member or Assignees under this Agreement.
Section 8.3. Outside Activities of Members
Subject to any agreements entered into pursuant to
Section 7.6 hereof and any other agreements entered into by a
Member or a partner or member of such Member or its Affiliates
with the Managing Member, the Company or a Subsidiary (including,
without limitation, any employment agreement), any Member and any
Assignee, officer, director, employee, agent, trustee, Affiliate,
partner, member or shareholder of any Member shall be entitled to
and may have business interests and engage in business activities
in addition to those relating to the Company, including business
interests and activities that are in direct or indirect
competition with the Company or that are enhanced by the
activities of the Company. Neither the Company nor any Member
shall have any rights by virtue of this Agreement in any business
ventures of any Member or Assignee. Subject to such agreements,
none of the Members nor any other Person shall have any rights by
virtue of this Agreement or the relationship established hereby
in any business ventures of any other Person (other than the
Managing Member, to the extent expressly provided herein), and
such Person shall have no obligation pursuant to this Agreement,
subject to Section 7.6 hereof and any other agreements entered
into by a Member or a partner or member of such Member or its
Affiliates with the Managing Member, the Company or a Subsidiary,
to offer any interest in any such business ventures to the
Company, any Member or any such other Person, even if such
opportunity is of a character that, if presented to the Company,
any Member or such other Person, could be taken by such Person.
Section 8.4. Return of Capital
No Member shall be entitled to the withdrawal or return
of its Capital Contribution, except to the extent of
distributions made pursuant to this Agreement or upon termination
of the Company as provided herein. Except as otherwise expressly
provided in this Agreement, no Member or Assignee shall have
priority over any other Member or Assignee either as to the
return of Capital Contributions or as to profits, losses,
distributions or credits.
Section 8.5. Rights of Non-Managing Member Relating
to the Company
A. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.C
hereof, the Non-Managing Member shall have the right, upon
written demand and at the Non-Managing Member's own expense:
(1) to obtain a copy of (i) the most recent
annual and quarterly reports filed with the SEC by the
Managing Member pursuant to the Exchange Act and (ii) each
report or other written communication sent to the
shareholders of the Managing Member,
(2) to obtain a copy of the Company's federal,
state and local income tax returns for each Fiscal Year;
(3) to obtain a current list of the name and last
known business, residence or mailing address of each Member,
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with
executed copies of all powers of attorney pursuant to which
this Agreement, the Certificate and all amendments thereto
have been executed;
(5) to obtain true and full information regarding
the amount of cash and a description and statement of any
other property or services contributed by each Member and
that each Member has agreed to contribute in the future, and
the date on which each became a Member; and
(6) to obtain true and full information in
connection with the Company operations.
B. Notwithstanding any other provision of this
Section 8.5, the Managing Member may keep confidential from the
Non-Managing Member, for such period of time as the Managing
Member determines in its reasonable discretion, any information
that (i) the Managing Member reasonably believes to be in the
nature of trade secrets or other information the disclosure of
which the Managing Member in good faith believes is not in the
best interests of the Company or could damage the Company or its
business or (ii) the Company or the Managing Member is required
by law or by agreements with unaffiliated third parties to keep
confidential.
Section 8.6. INTENTIONALLY OMITTED
ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. Records and Accounting
A. The Managing Member shall keep or cause to be kept
at the principal office of the Company those records and
documents required to be maintained by the Act and other books
and records deemed by the Managing Member to be appropriate with
respect to the Company's business, including, without limitation,
all books and records necessary to provide to the Members any
information, lists and copies of documents required to be
provided pursuant to Section 8.5 and 9.3 hereof. Any records
maintained by or on behalf of the Company in the regular course
of its business may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so
maintained are convertible into clearly legible written form
within a reasonable period of time.
B. The books of the Company shall be maintained, for
financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles, or on
such other basis as the Managing Member determines to be
necessary or appropriate. To the extent permitted by sound
accounting practices and principles, the Company and the Managing
Member may operate with integrated or consolidated accounting
records, operations and principles.
Section 9.2. Fiscal Year
The Fiscal Year of the Company shall be the calendar
year.
Section 9.3. Reports
A. As soon as practicable, but in no event later than
105 days after the close of each Fiscal Year, the Managing Member
shall cause to be mailed to each Member, of record as of the
close of the Fiscal Year, and to Ryan, an annual report
containing financial statements of the Company, and the Managing
Member (unless such statements are prepared on a consolidated
basis), for such Fiscal Year, presented in accordance with
generally accepted accounting principles, such statements to be
audited by a nationally recognized firm of independent public
accountants selected by the Managing Member.
B. As soon as practicable, but in no event later than
60 days after the close of each calendar quarter (except the last
calendar quarter of each year), the Managing Member shall cause
to be mailed to each Member, of record as of the last day of the
calendar quarter, and to Ryan, a report containing unaudited
financial statements of the Company, or of the Managing Member,
if such statements are prepared solely on a consolidated basis
with the Managing Member, and such other information as may be
required by applicable law or regulation or as the Managing
Member determines to be appropriate.
ARTICLE 10.
TAX MATTERS
Section 10.1. Preparation of Tax Returns
The Managing Member shall arrange for the preparation
and timely filing of all returns with respect to Company income,
gains, deductions, losses and other items required of the
Company for federal and state income tax purposes and shall use
all reasonable efforts to furnish, within 90 days of the close of
each taxable year, the tax information reasonably required by
Members for federal and state income tax reporting purposes.
Section 10.2. Tax Elections
Except as otherwise provided herein, the Managing
Member shall, in its sole and absolute discretion, determine
whether to make any available election pursuant to the Code,
including, without limitation, the election under Section 754 of
the Code. The Managing Member shall have the right to seek to
revoke any such election (including, without limitation, any
election under Code Sections 754) upon the Managing Member's
determination in its sole and absolute discretion that such
revocation is in the best interests of the Members.
Section 10.3. Tax Matters Partner
A. The Managing Member shall be designated and shall
operate as "Tax Matters Partner" (as defined in Code Section
6231), to oversee or handle matters relating to the taxation of
the Company and shall notify each Member of any material proposed
adjustment to any income tax return of the Company.
B. The Member designated as "Tax Matters Partner" may
make all elections for federal income and all other tax purposes
(including, without limitation, pursuant to Code Section 754).
C. Income tax returns of the Company shall be
prepared by such certified public accountant(s) as the Managing
Member shall retain at the expense of the Company.
Section 10.4. Organizational Expenses
The Company shall elect to deduct expenses, if any,
incurred by it in organizing the Company ratably over a 60-month
period as provided in Code Section 709.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer
A. No part of the Membership Interest of a Member may
be voluntarily alienated or encumbered except as may be
specifically provided for in this Agreement.
B. No Membership Interest shall be Transferred, in
whole or in part, except in accordance with the terms and
conditions set forth in Article 7 or this Article 11. Any
Transfer or purported Transfer of a Membership Interest not made
in accordance with this Article 11 shall be null and void.
Section 11.2. Transfer of Managing Member's Membership
Interest
Except in connection with a transfer by the Managing
Member of substantially all of its assets and liabilities to a
partnership or limited liability company in connection with a
reorganization of the Managing Member into an UPREIT structure
(an "UPREIT Reorganization"), the Managing Member shall not
resign from the Company and shall not Transfer all or any portion
of its interest in the Company without the Consent of the Non-
Managing Member and of Ryan, which may be given or withheld by
Non-Managing Member and Ryan in their sole and absolute
discretion. Upon any transfer of the Membership Interest of the
Managing Member in accordance with the provisions of this Section
11.2, the transferee shall become a Substitute Managing Member
for all purposes herein, and shall be vested with the powers and
rights of the transferor Managing Member, and shall be liable for
all obligations and responsible for all duties of the Managing
Member, once such transferee has executed such instruments as may
be necessary to effectuate such admission and to confirm the
agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Membership
Interest so acquired. It is a condition to any Transfer
otherwise permitted hereunder that the transferee assumes, by
operation of law or express agreement, all of the obligations of
the transferor Managing Member under this Agreement with respect
to such Transferred Membership Interest, and (provided that the
transferor satisfies the Net Worth requirement set forth below)
such Transfer shall relieve the transferor Managing Member of its
obligations under this Agreement accruing subsequent to the date
of such Transfer. In the event the Managing Member resigns from
the Company, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Incapacity of the
Managing Member, the Non-Managing Member may elect to continue
the Company business by selecting a substitute Managing Member in
accordance with Section 13.1.B.
Section 11.3. Non-Managing Member's Rights to Transfer
A. General. No Non-Managing Member shall Transfer
all or any portion of its Membership Interest, or any of such Non-
Managing Member's economic rights as a Non-Managing Member, to
any transferee without the consent of the Managing Member, which
consent may be withheld in its sole and absolute discretion;
provided, however, that the Non-Managing Member may, at any time,
without the consent of the Managing Member, Transfer all or part
of its Membership Interest (i) in the case of a Member which is
an individual, to any Family Member, any trust (whether or not
revocable) of which such Non-Managing Member or such Non-Managing
Member's Family Members are the sole beneficiaries, (ii) in the
case of a Member which is not an individual, to any of the
Persons who were partners, stockholders, members or owners of the
Member as of the Effective Date, (iii) pursuant to a gift or
other transfer without consideration, (iv) pursuant to the
applicable laws of descent or distribution, (v) to another
Member, (vi) subject to the provisions of Section 11.6, pursuant
to a grant of a security interest, pledge or other encumbrance
effected in a bona fide transaction or as a result of the
exercise of remedies related to the security interest, pledge or
other encumbrance (other than, in each case, to a lender to the
Company or a Person who is related to a lender to the Company) or
(vii) to any Affiliate, provided that the Non-Managing Member
transferor provide the Company with a legal opinion in a form
reasonably acceptable to the Managing Member that such transfer
would not cause the exemption from registrations under the
Securities Act relied upon by the Company in issuing the LLC
Units to no longer be available. Any Transfer permitted by this
proviso is referred to as a "Permitted Transfer." It is a
condition to any Transfer otherwise permitted hereunder that the
transferee assume by operation of law or express agreement all of
the obligations of the transferor Member under this Agreement
with respect to such Transferred Membership Interest. Any
transferee, whether or not admitted as a Substituted Member,
shall take subject to the obligations of the transferor
hereunder. Unless admitted as a Substituted Member, no
transferee, whether by a voluntary Transfer, by operation of law
or otherwise, shall have any rights hereunder, other than the
rights of an Assignee as provided in Section 11.5 hereof.
B. Incapacity. If the Non-Managing Member is
subject to Incapacity, the executor, administrator, trustee,
committee, guardian, conservator or receiver of such Non-Managing
Member's estate shall have all the rights of a Non-Managing
Member, but not more rights than those enjoyed by other Non-
Managing Members, for the purpose of settling or managing the
estate, and such power as the Incapacitated Non-Managing Member
possessed to Transfer all or any part of its interest in the
Company. The Incapacity of a Non-Managing Member, in and of
itself, shall not dissolve or terminate the Company.
C. Opinion of Counsel. In connection with any
Transfer of a Membership Interest, the Managing Member shall have
the right to receive an opinion of counsel reasonably
satisfactory to it to the effect that the proposed Transfer may
be effected without registration under the Securities Act and
will not otherwise violate any federal or state securities laws
or regulations applicable to the Company or the Membership
Interests Transferred. If, in the opinion of such counsel, such
Transfer would require the filing of a registration statement
under the Securities Act or would otherwise violate any federal
or state securities laws or regulations applicable to the Company
or the LLC Units, the Managing Member may prohibit any Transfer
by a Member of Membership Interests otherwise permitted under
this Section 11.3.
D. Adverse Tax Consequences. No Transfer by a
Member of its Membership Interests (excluding any Exchange
pursuant to Section 8.6) may be made to any Person if (i) in the
opinion of legal counsel for the Company, it would result in the
Company being treated as an association taxable as a corporation
for federal income tax or for state income or franchise tax
purposes, (ii) in the opinion of legal counsel for the Company,
it would adversely affect the ability of the Managing Member to
continue to qualify as a REIT or would subject the Managing
Member to any additional taxes under Code Section 857 or Code
Section 4981 or (iii) such Transfer is effectuated through an
"established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Code
Section 7704.
E. Transfers to Lenders. No Transfer of any LLC
Units may be made to a lender to the Company or any Person who is
related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Company whose loan constitutes
a Nonrecourse Liability, without the consent of the Managing
Member, in its sole and absolute discretion; provided that, as a
condition to such consent, the lender will be required to enter
into an arrangement with the Company and the Managing Member to
redeem or exchange for the Cash Amount any LLC Units in which a
security interest is held simultaneously with the time at which
such lender would be deemed to be a member in the Company for
purposes of allocating liabilities to such lender under Code
Section 752.
Section 11.4. Substituted Members
A. No Member shall have the right to substitute a
transferee (excluding any transferees pursuant to Transfers
permitted by Section 11.3 hereof, each of whom shall be a
Substituted Member) as a Member in its place. The Managing
Member shall, however, have the right to consent to the admission
of a transferee of the interest of a Member pursuant to this
Section 11.4 as a Substituted Member, which consent may be given
or withheld by the Managing Member in it sole and absolute
discretion. The Managing Member's failure or refusal to permit a
transferee of any such interests to become a Substituted Member
shall not give rise to any cause of action against the Company or
any Member.
B. A transferee who has been admitted as a
Substituted Member in accordance with this Article 11 shall have
all the rights and powers and be subject to all the restrictions
and liabilities of a Member under this Agreement. The admission
of any transferee as a Substituted Member shall be subject to the
transferee executing and delivering to the Company an acceptance
of all of the terms and conditions of this Agreement (including
without limitation, the provisions of Section 2.4 and such other
documents or instruments as may be required to effect the
admission).
C. Upon the admission of a Substituted Member, the
Managing Member shall amend Exhibit A to reflect the name,
address, Capital Account, number of LLC Units and Percentage
Interest of such Substituted Member and to eliminate or adjust,
if necessary, the name, address, Capital Account, number of LLC
Units and Percentage Interest of the predecessor of such
Substituted Member (any other Member, as necessary).
Section 11.5. Assignees
If the Managing Member does not consent to the
admission of any permitted transferee under Section 11.3 hereof
as a Substituted Member, as described in Section 11.4 hereof
after compliance by the Non-Managing Member and its transferees
of all the requirements set forth in Section 11.3, such
transferee shall be considered an Assignee for purposes of this
Agreement. An Assignee shall be entitled to all the rights of an
assignee of a limited liability company interest under the Act,
including the right to receive distributions from the Company and
the share of Net Income, Net Losses and other items of income,
gain, loss, deduction and credit of the Company attributable to
the LLC Units assigned to such transferee, the rights to
Transfer the LLC Units provided in this Article 11, and the
right of Exchange provided in Section 8.6, but shall not be
deemed to be a holder of LLC Units for any other purpose under
this Agreement, and shall not be entitled to effect a Consent or
vote with respect to such LLC Units on any matter presented to
the Members for approval (such right to Consent or vote, to the
extent provided in this Agreement or under the Act, fully
remaining with the transferor Member). In the event that any
such transferee desires to make a further assignment of any such
LLC Units, such transferee shall be subject to all the provisions
of this Article 11 to the same extent and in the same manner as
any Members desiring to make an assignment of LLC Units. The
Managing Member shall have no liability under any circumstance
with respect to any Assignee as to which it does not have notice.
Section 11.6. General Provisions
A. The Non-Managing Member may not resign from the
Company other than as a result of (i) a permitted Transfer of all
of such Non-Managing Member's LLC Units in accordance with this
Article 11 and the transferee(s) of such LLC Units being
admitted to the Company as a Substituted Member.
B. Any Member who shall (i) Transfer all of its LLC
Units in a Transfer permitted pursuant to this Article 11 where
such transferee was admitted as a Substituted Member shall cease
to be a Member.
C. All distributions of Available Cash attributable
to an LLC Unit with respect to which the LLC Record Date is
before the date of a Transfer shall be made to the transferor
Member or the exchanging Member, as the case may be, and, in the
case of a Transfer, all distributions of Available Cash
thereafter attributable to such LLC Unit shall be made to the
transferee Member.
D. In addition to any other restrictions on Transfer
herein contained, in no event may any Transfer or assignment of a
Membership Interest by any Member (including any acquisition of
LLC Units by the Company) be made:
(a) to any person or entity who lacks the legal
right, power or capacity to own a Membership Interest;
(b) in violation of applicable law;
(c) if such Transfer would, in the opinion of
counsel to the Company or the Managing Member, cause an
increased tax liability to any other Member of Assignee as a
result of the termination of the Company, in either case for
federal or state income or franchise tax purposes;
(d) if such Transfer would, in the opinion of
legal counsel to the Company, cause the Company either
(i) to cease to be classified as a partnership or (ii) to be
classified as a publicly traded partnership treated as a
corporation, in either case for federal or state income tax
purposes;
(e) if such Transfer would cause the Company to
become, with respect to any employee benefit plan
subject to Title I of ERISA, a "party-in-interest" (as
defined in ERISA Section 3(14)) or a "disqualified person"
(as defined in Code Section 4975(c));
(f) if such Transfer would, in the opinion of
legal counsel to the Company, cause any portion of the
assets of the Company to constitute assets of any employee
benefit plan pursuant to Department of Labor Regulations
Section 2510.2-101;
(g) if such Transfer causes the Company (as
opposed to the Managing Member) to become a reporting
company under the Exchange Act; or
(h) if such Transfer subjects the Company to
regulation under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or ERISA, each as amended.
ARTICLE 12.
ADMISSION OF MEMBERS
Section 12.1. Admission of Successor Managing Member
A successor to all of the Managing Member's Membership
Interest pursuant to Section 11.2 hereof who is proposed to be
admitted as a successor Managing Member shall be admitted to the
Company as the Managing Member, effective immediately upon such
Transfer. Any such successor shall carry on the business of the
Company without dissolution. In each case, the admission shall
be subject to the successor Managing Member executing and
delivering to the Company an acceptance of all of the terms,
conditions and applicable obligations of this Agreement and such
other documents or instruments as may be required to effect the
admission.
Section 12.2. Amendment of Agreement and Certificate
of Membership
For the admission to the Company of any Member, the
Managing Member shall take all steps necessary and appropriate
under the Act to amend the records of the Company and, if
necessary, to prepare as soon as practical an amendment of this
Agreement (including an amendment of Exhibit A) and, if required
by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted
pursuant to Section 2.4 hereof.
Section 12.3. Limitation on Admission of Members
A. No Person shall be admitted to the Company as a
Substituted Member or an Additional Member if, in the opinion of
legal counsel for the Company, it would result in the Company
being treated as a corporation for federal income tax purposes or
otherwise cause the Company to become a reporting company under
the Exchange Act.
B. Except as provided in Section 4.1, the Managing
Member shall not permit the Company to issue additional LLC
Units.
ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1. Dissolution
The Company shall not be dissolved by the admission of
Substituted Members or by the admission of a successor Managing
Member in accordance with the terms of this Agreement. Upon the
withdrawal of the Managing Member, any successor Managing Member
shall continue the business of the Company without dissolution.
However, the Company shall dissolve, and its affairs shall be
wound up, upon the first to occur of any of the following (each a
"Liquidating Event"):
A. the expiration of its term as provided in Section
2.5 hereof;
B. the resignation, dissolution, termination or
Incapacity of the Managing Member unless within 90 days after the
occurrence of such event, a Majority of Remaining Members agree
in writing to continue the business of the Company and to the
appointment, effective as of the date of such event, of a
substitute Managing Member.
C. entry of a decree of judicial dissolution of the
Company pursuant to the provisions of the Act;
D. after the sale of all or substantially all of the
assets and properties of the Company for cash or marketable
securities;
E. the Exchange of all LLC Units (other than those
of the Managing Member); or
F. at any time there are no Members of the Company,
unless the Company is continued in accordance with the Act.
Section 13.2. Winding Up
A. Upon the occurrence of a Liquidating Event, the
Company shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets and
satisfying the claims of its creditors and Members. After the
occurrence of a Liquidating Event, no Member shall take any
action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Company's business and
affairs. The Managing Member (or, in the event that there is no
remaining Managing Member, any Person elected by the Non-Managing
Member (the Managing Member or such other Person being referred
to herein as the "Liquidator")) shall be responsible for
overseeing the winding up and dissolution of the Company and
shall take full account of the Company's liabilities and
property, and the Company property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined
by the Managing Member, include shares of stock in the Managing
Member) shall be applied and distributed in the following order:
(1) First, to the satisfaction of all of the
Company's debts and liabilities to creditors other than
the Members and their Assignees (whether by payment or the
making of reasonable provision of payment thereof);
(2) Second, to the satisfaction of all of the
Company's debts and liabilities to the Non-Managing
Member (whether by payment or the making of reasonable
provision for payment thereof);
(3) Third, to the satisfaction of all of the
Company's debts and liabilities to the Managing Member
(whether by payment or the making of reasonable
provision for payment thereof); and
(4) The balance, if any, to the Members and any
Assignees in accordance with and proportion to their
positive Capital Account balances, after giving effect to
all contributions, distributions and allocations for all
periods including the year of liquidation.
The Managing Member shall not receive any additional compensation
for any services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A
hereof that require liquidation of the assets of the Company, but
subject to the order of priorities set forth therein, if prior to
or upon dissolution of the Company the Liquidator determines that
an immediate sale of part of all of the Company's assets would be
impractical or would cause undue loss to the Members, the
Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those
necessary to satisfy liabilities of the Company (including to
those Members as creditors) and/or distribute to the Members, in
lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2.A hereof, undivided interests in such
Company assets as the Liquidator deems not suitable for
liquidation. Any such distributions in kind shall be made only
if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Members,
and shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing
the operation of such properties at such time. The Liquidator
shall determine by Appraisal the fair market value of any
property distributed in kind.
C. In the event that the Company is "liquidated"
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this Article 13 to the
Members and Assignees that have positive Capital Accounts in
compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) to
the extent of, and in proportion to, their positive Capital
Account balances subject to 13.2.A(4). If any Member has a
deficit balance in its Capital Account (after giving effect to
all contributions, distributions and allocations for all taxable
years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any contribution to
the capital of the Company with respect to such deficit, and such
deficit shall not be considered a debt owed to the Company or to
any other Person for any purpose whatsoever. In the sole and
absolute discretion of the Managing Member or the Liquidator, a
pro rata portion of the distributions that would otherwise be
made to the Members pursuant to this Article 13 may be withheld
or escrowed to provide a reasonable reserve for Company
liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the
Company, provided that such withheld or escrowed amounts shall be
distributed to the Members in the manner and order of priority
set forth in Section 13.2.A hereof as soon as practicable.
Section 13.3. Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13,
in the event that the Company is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating
Event has occurred, the Company's Property shall not be
liquidated, the Company's liabilities shall not be paid or
discharged and the Company's affairs shall not be wound up.
Instead, for federal and state income tax purposes, the Company
shall be deemed to have distributed its assets in kind to the
Members, who shall be deemed to have assumed and taken such
assets subject to all Company liabilities, all in accordance with
their respective Capital Accounts. Immediately thereafter, the
Members shall be deemed to have recontributed the Company assets
in kind to the Company, which shall be deemed to have assumed and
taken such assets subject to all such liabilities.
Section 13.4. Rights of Members
Except as otherwise provided in this Agreement, (a)
each Member shall look solely to the assets of the Company for
the return of its Capital Contribution, (b) no Member shall have
the right or power to demand or receive property other than cash
from the Company and (c) no Member shall have priority over any
other Member as to the return of its Capital Contributions,
distributions or allocations.
Section 13.5. Notice of Dissolution
In the event that a Liquidating Event occurs or an
event occurs that would, but for an election or objection by one
or more Members pursuant to Section 13.1 hereof, result in a
dissolution of the Company, the Managing Member shall, within 30
days thereafter, provide written notice thereof to each of the
Members and, in the Managing Member's sole and absolute
discretion or as required by the Act, to all other parties with
whom the Company regularly conducts business (as determined in
the sole and absolute discretion of the Managing Member), and the
Managing Member may, or, if required by the Act, shall, publish
notice thereof in a newspaper of general circulation in each
place in which the Company regularly conduct business (as
determined in the sole and absolute discretion of the Managing
Member).
Section 13.6. Cancellation of Certificate of Formation
Upon the completion of the liquidation of the Company
cash and property as provided in Section 13.2 hereof, the Company
shall be terminated and the Certificate and all qualifications of
the Company as a foreign limited liability company in
jurisdictions other than the State of Delaware shall be canceled
and such other actions as may be necessary to terminate the
Company shall be taken.
Section 13.7. Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly
winding-up of the business and affairs of the Company and the
liquidation of its assets pursuant to Section 13.2 hereof, in
order to minimize any losses otherwise attendant upon such
winding-up, and the provisions of this Agreement shall remain in
effect between the Members during the period of liquidation.
Section 13.8. Liability of Liquidator
The Liquidator shall be indemnified and held harmless
by the Company from and against any and all claims, liabilities,
costs, damages, and causes of action of any nature whatsoever
arising out of or incidental to the Liquidator's taking of any
action authorized under or within the scope of this Agreement;
provided, however, that the Liquidator shall not be entitled to
indemnification, and shall not be held harmless, where the claim,
demand, liability, cost, damage or cause of action at issue
arises out of (i) a matter entirely unrelated to the Liquidator's
action or conduct pursuant to the provisions of this Agreement or
(ii) the proven willful misconduct or gross negligence of the
Liquidator.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS
Section 14.1. Procedures for Actions and Consents of
Members
The actions requiring consent or approval of the Non-
Managing Member and/or Ryan pursuant to this Agreement, including
Section 7.3 hereof, or otherwise pursuant to applicable law, are
subject to the procedures set forth in this Article 14.
Section 14.2. Amendments
Amendments to this Agreement requiring the approval of
the Non-Managing Member and/or Ryan may be proposed by the
Managing Member or the Non-Managing Member. Following such
proposal, the Managing Member shall submit any proposed amendment
to the Members and to Ryan. The Managing Member shall seek the
written Consent of the Members and Ryan on the proposed amendment
or shall call a meeting to vote thereon and to transact any other
business that the Managing Member may deem appropriate. The
affirmative vote or consent, as applicable, of the Managing
Member, Ryan and the Non-Managing Member is required for the
approval of such proposed amendment. For purposes of obtaining a
written consent, the Managing Member may require a response
within a reasonable specified time, but not less than 15 days.
Failure to respond in such time period shall not constitute a
consent that is consistent with the Managing Member's
recommendation with respect to the proposal; provided, however,
that an action shall become effective at such time as requisite
consents are received even if prior to such specified time.
Section 14.3. Meetings of the Members
A. Meetings of the Members may be called by the
Managing Member and shall be called upon the receipt by the
Managing Member of a written request by the Non-Managing Member.
The call shall state the nature of the business to be transacted.
Notice of any such meeting shall be given to all Members not less
than seven days nor more than 30 days prior to the date of such
meeting. Members may vote in person or by proxy at such meeting.
Whenever the vote or Consent of Members is permitted or required
under this Agreement, such vote or Consent may be given at a
meeting of Members or may be given in accordance with the
procedure prescribed in Section 14.3.B hereof.
B. Any action required or permitted to be taken at a
meeting of the Members may be taken without a meeting if a
written consent setting forth the action so taken is signed by
Members holding a majority of the LLC Units (or such other
percentage as is expressly required by this Agreement for the
action in question). Such consent may be in one instrument or in
several instruments, and shall have the same force and effect as
a vote of Members holding a majority of the LLC Units (or such
other percentage as is expressly required by this Agreement).
Such consent shall be filed with the Managing Member. An action
so taken shall be deemed to have been taken at a meeting held on
the effective date so certified.
C. Each Member may authorize any Person or Persons to
act for it by proxy on all matters in which a Member is entitled
to participate, including waiving notice of any meeting, or
voting or participating at a meeting. Every proxy must be signed
by the Member or its attorney-in-fact. No proxy shall be valid
after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy (or there is receipt of a proxy
authorizing a later date). Every proxy shall be revocable at the
pleasure of the Member executing it, such revocation to be
effective upon the Company's receipt of written notice of such
revocation from the Member executing such proxy.
D. Each meeting of Members shall be conducted by the
Managing Member or such other Person as the Managing Member may
appoint pursuant to such rules for the conduct of the meeting as
the Managing Member or such other Person deems appropriate in its
sole and absolute discretion. Without limitation, meetings of
Members may be conducted in the same manner as meetings of the
Managing Member's shareholders and may be held at the same time
as, and as part of, the meetings of the Managing Member's
shareholders.
ARTICLE 15.
GENERAL PROVISIONS
Section 15.1. Addresses and Notice
Any notice, demand, request or report required or
permitted to be given or made to a Member or Assignee under this
Agreement shall be in writing and shall be deemed given or made
when delivered in person or when sent by first class United
States mail or by other means of written communication (including
by telecopy, facsimile, or commercial courier service ) (i) in
the case of a Member, to that Member at the address set forth in
Exhibit A or such other address of which the Member shall notify
the Managing Member in writing and (ii) in the case of an
Assignee, to the address of which such Assignee shall notify the
managing Member in writing.
Section 15.2. Title and Captions
All article or section titles or captions in this
Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or
describe the scope or intent of any provisions hereof. Except as
specifically provided otherwise, references to "Articles" or
"Sections" are to Articles and Sections of this Agreement.
Section 15.3. Pronouns and Plurals
Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns,
pronouns and verbs shall include the plural and vice versa.
Section 15.4. Further Action
The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this
Agreement.
Section 15.5. Binding Effect
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted
assigns.
Section 15.6. Creditors
Other than as expressly set forth herein with respect
to Indemnitees, none of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of
the Company.
Section 15.7. Waiver
No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a
breach thereof shall constitute waiver of any such breach or any
other covenant, duty, agreement or condition.
Section 15.8. Counterparts
This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all the
parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart.
Section 15.9. Applicable Law
This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of
Delaware, without regard to the principles of conflicts of law.
In the event of a conflict between any provision of this
Agreement and any non-mandatory provision of the Act, the
provisions of this Agreement shall control and take precedence.
Section 15.10. Entire Agreement; Ryan as Beneficiary
This Agreement together with the Contribution Agreement
contains all of the understandings and agreements between and
among the Members with respect to the subject matter of this
Agreement and the rights, interest and obligations of the members
with respect to the Company. Ryan is intended to be a third-
party beneficiary of this Agreement.
Section 15.11. Invalidity of Provisions
If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
Section 15.12. Limitation to Preserve REIT Status
Notwithstanding anything else in this Agreement, to the
extent that the amount paid, credited, distributed or reimbursed
by the Company to, for or with respect to any REIT Member or its
officers, directors, employees or agents, whether as a
reimbursement, fee, expense or indemnity (a "REIT Payment"),
would constitute gross income to the REIT Member for purposes of
Code Section 856(c)(2) or Code Section 856(c)(3), then,
notwithstanding any other provision of this Agreement, at the
option of the Managing Member, the amount of such REIT Payments,
as selected by the Managing Member in its discretion from among
items of potential distribution, reimbursement, fees, expenses
and indemnities, shall be reduced for any Fiscal Year so that the
REIT Payments, as so reduced, to, for or with respect to such
REIT Member shall not exceed the lesser of:
(a) an amount equal to the excess, if any, of (i)
four and nine-tenths percent (4.9%) of the REIT Member's
total gross income (but excluding the amount of any REIT
Payments) for the Fiscal Year that is described in
subsections (A) through (H) of Code Section 856(c)(2) over
(ii) the amount of gross income (within the meaning of Code
Section 856(c)(2)) derived by the REIT Member from sources
other than those described in subsections (A) through (H) of
Code Section 856(c)(2) (but not including the amount of any
REIT Payments); or
(b) an amount equal to the excess, if any, of (i)
24% of the REIT Member's total gross income (but excluding
the amount of any REIT Payments) for the Fiscal Year that is
described in subsections (A) through (I) of Code Section
856(c)(3) over (ii) the amount of gross income (within the
meaning of Code Section 856(c)(3)) derived by the REIT
Member from sources other than those described in
subsections (A) through (I) of Code Section 856(c)(3) (but
not including the amount of any REIT Payments);
provided, however, that REIT Payments in excess of the amounts
set forth in clauses (a) and (b) above may be made if the
Managing Member, as a condition precedent, obtains an opinion of
tax counsel that the receipt of such excess amounts shall not
adversely affect the REIT Member's ability to qualify as a REIT.
To the extent that REIT Payments may not be made in a Fiscal Year
as a consequence of the limitations set forth in this Section
15.12, such REIT Payments shall carry over and shall be treated
as arising in the following Fiscal Year. The purpose of the
limitations contained in this Section 15.12 is to prevent any
REIT Member from failing to qualify as a REIT under the Code by
reason of such REIT Member's share of items, including
distributions, reimbursements, fees, expenses or indemnities,
receivable directly or indirectly from the Company, and this
Section 15.12 shall be interpreted and applied to effectuate such
purpose.
Section 15.13. No Partition
No Member nor any successor-in-interest to a Member
shall have the right while this Agreement remains in effect to
have any property of the Company partitioned, or to file a
complaint or institute to any proceeding at law or in equity to
have such property of the Company partitioned, and each Member,
on behalf of itself and its successors and assigns hereby waives
any such right. It is the intention of the Members that the
rights of the parties hereto and their successors-in-interest to
Company property, as among themselves, shall be governed by the
terms of this Agreement, and that the rights of the Members and
their successors-in-interest shall be subject to the limitations
and restrictions as set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement as of the date first written above.
MANAGING MEMBER:
INLAND REAL ESTATE CORPORATION
By: /s/ Lou Quilici
Its: Authorized Agent
NON-MANAGING MEMBER:
Inland Ryan, LLC
By: Inland Real Estate Corporation,
its Managing Member
By: /s/ Lou Quilici
Name: Lou Quilici
Title: Authorized Agent
