Exhibit 10.2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CAMBRIDGE MEDICAL PROPERTIES, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") is made and
entered into as of November 21, 1997, by and among Health Care Property
Investors, Inc., a Maryland corporation (the "Managing Member"), and the Persons
whose names are set forth on Exhibit A as attached hereto (the "Non-Managing
Members" and together with the Managing Member, the "Members"), for the purpose
of forming Cambridge Medical Properties, LLC, a Delaware limited liability
company (the "Company").
WHEREAS, the Managing Member, the Company, and Cambridge Medical Center of
San Diego, LLC, a California limited liability company (the "Transferor"), have
entered into that certain Contribution Agreement dated as of the date hereof
(the "Contribution Agreement"), providing for the contribution of certain assets
to, and the acquisition of certain interests in, the Company;
WHEREAS, it is a condition to the closing of the transactions contemplated
by the Contribution Agreement that the parties hereto enter this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Limited Liability Company Act, as it may be
amended from time to time, and any successor to such statute.
"Actions" has the meaning set forth in Section 7.7 hereof.
"Additional Funds" has the meaning set forth in Section 4.3.A 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 Regulation Section 1.704-1(b) (2)(ii)(c) or the penultimate sentence
of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) increase such deficit by the items described in Regulations Section
1.704-1(b) (2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account Deficit" is intended
to comply with the provisions of Regulations Section 1.704-1(b) (2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjustment Factor" means 1.0; provided, however, that in the event that:
the Managing Member (i) declares or pays a dividend on its outstanding REIT
Shares in REIT Shares or makes a distribution to all Members of its outstanding
REIT Shares in REIT Shares, (ii) splits or subdivides its outstanding REIT
Shares or (iii) effects a reverse stock split or otherwise combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment
Factor shall be adjusted by multiplying the Adjustment Factor in effect
immediately prior to such adjustment by a fraction, (1) the numerator of which
shall be the number of REIT Shares issued and outstanding on the record date for
such dividend, distribution, split, subdivision, reverse split or combination
(assuming for such purposes that such dividend, distribution, split,
subdivision, reverse split or combination has occurred as of such time) and (2)
the denominator of which shall be the actual number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, split,
subdivision, reverse split or combination (assuming for such purposes that such
dividend, distribution, split, subdivision, reverse split or combination has not
occurred as of such time). Any adjustments to the Adjustment Factor shall
become effective immediately after the effective date of such event, retroactive
to the record date, if any, for such event.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly Controlling or Controlled by or under common Control with such
Person.
"Agreement" means this Amended and Restated Limited Liability Company
Agreement of Cambridge Medical Properties, LLC, as it may be amended,
supplemented or restated from time to time.
"Amortization" means the quarterly amortization of leasing commissions and
tenant improvements which are funded subsequent to the Effective Date (except
for tenant improvements, if any, included in the Capital Repairs) relating to
the Real Properties according to an amortization schedule (i) in the case of
leasing commissions, based on the term of the applicable lease(s) and (ii) in
the case of tenant improvements, based on the longest useful life acceptable for
amortization under generally accepted accounting principles of the applicable
portion(s) of the Real Properties.
"Amortization Shortfall" means the amount (if any) by which (i) all
Amortization accruing subsequent to the Effective Date exceeds (ii) the
aggregate amount previously distributed to the Managing Member pursuant to
Section 5.1.A(3) hereof.
"Appraisal" means, with respect to any assets, the written opinion of an
independent third party appraiser (who is a member of the American Institute of
Real Estate Appraisers, or any successor organization thereto, and has at least
five (5) years of experience in the valuation of medical office buildings in the
general location of the property being appraised), selected by the Managing
Member in good faith. Such opinion may be in the form of an opinion by such
independent third party appraiser 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 determined in accordance with generally accepted accounting
principles,
(2) Depreciation and all other noncash charges to the extent deducted
in determining net income or net loss for such period pursuant to the
foregoing clause (a)(1),
(3) the amount of any reduction in reserves of the Company
(including, without limitation, reductions resulting because the Managing
Member determines such amounts are no longer necessary), and
(4) all other cash received (including amounts previously accrued as
net income and amounts of deferred income but excluding any net amounts
borrowed by the Company for such period) that was not included in
determining net income or net loss for such period pursuant to the
foregoing clause (a)(1);
(b) less the sum, without duplication, of:
(1) all principal debt payments made during such period by the
Company,
(2) capital expenditures made by the Company during such period,
(3) all other expenditures and payments not deducted in determining
net income or net loss for such period pursuant to the foregoing clause
(a)(1) (including amounts paid in respect of expenses previously accrued),
(4) any amount included in determining net income or net loss for
such period pursuant to the foregoing clause (a)(1) that was not received
by the Company during such period, and
(5) the amount of any increase in reserves (including, without
limitation, working capital reserves) established during such period
(subject to the limitations set forth in Sections 7.3.B(9) and 7.3.B(10)
hereof) that the Managing Member determines in good faith are necessary or
appropriate for the conduct of the business of the Company.
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, (ii) any Capital Contributions,
whenever received, (iii) any of the items described in the foregoing clauses
(a) or (b) arising out of or resulting from the taxable disposition of any of
the Real Properties or (iv) the proceeds of Refinancing Debt.
"Bankruptcy Law" means Title II, U.S. Code or any similar federal or state
law for the relief of debtors.
"Beneficial Ownership" means ownership of REIT Shares by a Person who is or
would be treated as an owner of such REIT Shares either actually or
constructively through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(b) of the Code. The terms "Beneficially Own,"
"Beneficially Owned," "Beneficially Owns" and "Beneficial Owner" shall have the
correlative meanings.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California are authorized or required by
law to close.
"Capital Account" means, with respect to any Member, the Capital Account
maintained for such Member on the Company's books and records in accordance with
the following provisions:
(a) To each Member's Capital Account, there shall be added such
Member's Capital Contributions, such Member's allocable share of Net Income
and any items of income or gain specially allocated pursuant to Section 6.3
hereof, and the principal amount of any Company liabilities assumed by such
Member or that are secured by any property distributed to such Member.
(b) From each Member's Capital Account, there shall be subtracted the
amount of cash and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, such Member's
allocable share of Net Loss and any items of loss or deductions specially
allocated pursuant to Section 6.3 hereof, and the principal amount of any
liabilities of such Member assumed by the Company or that are secured by
any property contributed by such Member to the Company.
(c) In the event any interest in the Company is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent that it relates to
the Transferred interest.
(d) In determining the principal amount of any liability for purposes
of subsections (a) and (b) hereof, there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
(e) The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Sections 1.704-
1(b) and 1.704-2, and shall be interpreted and applied in a manner
consistent with such Regulations. If the Managing Member shall determine
that it is prudent to modify the manner in which the Capital Accounts are
maintained in order to comply with such Regulations, the Managing Member
may make such modification provided that such modification will not have a
material effect on the amounts distributable to any Member without such
Member's Consent. The Managing Member also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company capital reflected on the
Company's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b) (2)(iv)(q) and (ii) make any appropriate
modifications in the event that unanticipated events might otherwise cause
this Agreement not to comply with Regulations Section 1.704-1(b) or
Section 1.704-2.
"Capital Contribution" means, with respect to any Member, the amount of
money and the initial Gross Asset Value of any Contributed Property that such
Member contributes to the Company pursuant to Section 4.1 or Section 4.3 hereof.
"Capital Repairs" has the meaning set forth in the Contribution Agreement.
"Cash Amount" means an amount of cash equal to the product of (a) the Value
of a REIT Share and (b) the REIT Shares Amount determined as of the applicable
Valuation Date.
"Certificate" means the Certificate of Formation of the Company filed in
the office of the Secretary of State of the State of Delaware, as amended from
time to time in accordance with the terms hereof and the Act.
"Charter" means the Articles of Incorporation of the Managing Member, as
amended, supplemented or restated from time to time.
"Closing Price" means (i) the closing price of a REIT Share on the
principal exchange on which REIT Shares are then trading, if any, or (ii) if
REIT Shares are not traded on an exchange but are quoted on NASDAQ or a
successor quotation system, (1) the last sales price (if the REIT Shares are
then listed as a National Market Issue under the NASD National Market System) or
(2) the mean between the closing representative bid and asked prices (in all
other cases) for a REIT Share are as reported by NASDAQ or such successor
quotation system, (iii) if the REIT Shares are not publicly traded on an
exchange and not quoted on NASDAQ or a successor quotation system, the mean
between the closing bid and asked prices for a REIT Share as reported by a
reliable quotation service designated by the Managing Member, or (iv) .if there
are no publicly available closing bid and asked prices, the price of a REIT
Share determined by the Managing Member acting in good faith on the basis of
information which it considers, in its reasonable judgment, to be appropriate.
"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 reasonable discretion.
"Constructive Ownership" means ownership of REIT Shares, or any other
interest in an entity by a Person who is or would be treated as an owner thereof
either actually or constructively through the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the Code. The terms "Constructively
Own," "Constructively Owned," "Constructively Owns" and "Constructive Owner"
shall have the correlative meanings.
"Contributed Lease" has the meaning set forth in the Contribution
Agreement.
"Contributed Properties" means the "Properties" as that term is defined in
the Contribution Agreement.
"Contribution Agreement" means the Contribution Agreement dated as of
November 21, 1997 by and between the Managing Member, the Company and the
Transferor.
"Control" means, when used with respect to any Person, the possession
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have correlative meanings.
"Custodian" means any receiver, trustee, assignee, liquidator or other
similar official under any Bankruptcy Law.
"Debt" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
that, in accordance with generally accepted accounting principles, should be
capitalized.
"Depreciation" means, for each Fiscal Year or other applicable period, an
amount equal to the federal income tax depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such year or other
period, except that, if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
period, Depreciation shall be in an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that, if the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing
Member.
"Effective Date" means the date on which the transactions contemplated by
the Contribution Agreement are consummated at which time the contributions set
forth on Exhibit A that are to be effective on the Effective Date shall become
effective.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess LLC Units" means any LLC Units held by a Non-Managing Member to the
extent that, if such LLC Units were exchanged for the REIT Shares Amount
pursuant to Section 8.6 hereof, such Non-Managing Member would Beneficially Own
or Constructively Own REIT Shares in excess of the Ownership Limit.
"Exchange" has the meaning set forth in Section 8.6.A hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"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.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Member to
the Company shall be its fair market value, as agreed to by such Member and the
Managing Member, and set forth on Exhibit A with respect to that Member.
(b) The Gross Asset Values of all Company assets immediately prior to
the occurrence of any event described in clause (1), clause (2), clause (3), or
clause (4) hereof shall be adjusted to equal their respective gross fair market
values, as determined by the Managing Member using such reasonable method of
valuation as it may adopt, as of the following times:
(1) the acquisition of an additional interest in the Company (other
than in connection with the execution of this Agreement) by a new or
existing Member in exchange for more than a de minimis Capital
Contribution, if the Managing Member reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(2) the distribution by the Company to a Member of more than a de
minimis amount of Company property as consideration for an interest in the
Company, if the Managing Member reasonably determines that such adjustment
is necessary or appropriate to reflect the relative economic interests of
the Members in the Company;
(3) the liquidation of the Company within the meaning of Regulations
Section 1.704-1(b) (2)(ii)(g); and
(4) at such other times as the Managing Member shall reasonably
determine necessary or advisable in order to comply with Regulations
Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Company asset distributed to a Member
shall be the gross fair market value of such asset on the date of distribution
as determined by the distributee and the Managing Member, provided that, if the
distributee is the Managing Member or if the distributee and the Managing Member
cannot agree on such a determination, such gross fair market value shall be
determined by Appraisal.
(d) At the election of the Managing Member, the Gross Asset Values of
Company assets shall be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code Section 734(b) or Code
Section 743(b) , but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulations Section 1.704-
1(b) (2)(iv)(m); provided, however, that Gross Asset Values shall not be
adjusted pursuant to this subsection (d) to the extent that the Managing Member
reasonably determines that an adjustment pursuant to subsection (b) above is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this subsection (d).
(e) If the Gross Asset Value of a Company asset has been determined or
adjusted pursuant to subsection (a), subsection (b) or subsection (d) above,
such Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of computing Net Income and
Net Loss.
"Incapacity" or "Incapacitated" means, (i) as to any Member who is an
individual, death, total physical disability or entry by a court of competent
jurisdiction adjudicating such Member incompetent to manage his or her person or
his or her estate; (ii) as to any Member that is a corporation or limited
liability company, the filing of a certificate of dissolution, or its
equivalent, for the corporation or limited liability company or the revocation
of its charter; (iii) as to any Member that is a partnership, the dissolution
and commencement of winding up of the partnership; (iv) as to any Member that is
an estate, the distribution by the fiduciary of the estate's entire interest in
the Company; (v) as to any trustee of a trust that is a Member, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Member, the bankruptcy of such Member. For purposes of this definition,
bankruptcy of a Member shall be deemed to have occurred when (a) the Member
commences a voluntary proceeding seeking liquidation, reorganization or other
relief of or against such Member under any bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt
or insolvent, or a final and non-appealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Member, (c) the Member executes and delivers a general
assignment for the benefit of the Member's creditors, (d) the Member files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any proceeding of the
nature described in clause (b) above, (e) the Member seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Member or for all or any substantial part of the Member's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (g) the
appointment without the Member's consent or acquiescence of a trustee, receiver
or liquidator has not been vacated or stayed within 90 days of such appointment,
or (h) an appointment referred to in clause (g) above is not vacated within 90
days after the expiration of any such stay.
"Indemnitee" means any Person made a party to a proceeding by reason of its
status as (a) the Managing Member, (b) a Non-Managing Member, or (C) a director
of the Managing Member or a Non-Managing Member or an officer or employee of the
Company or the Managing Member or a Non-Managing Member.
"Initial Non-Managing Members" means the Non-Managing Members (or
successors in interest thereof) who acquired their Non-Managing Member Units in
exchange for the Real Properties on the Effective Date.
"Intended Liquidating Distributions" means, to the extent of the amounts
available for distribution to the Members upon the liquidation of the Company
pursuant to Article 13, the following amounts, and in the following priorities,
with respect to each Member:
(1) First, to the holders of the Non-Managing Member Units (whether
held by a Non-Managing Member or by the Managing Member), in accordance
with their relative Preferred Return Shortfalls, until, as a result of
distributions made to the holders of the Non-Managing Member Units for the
current and all prior fiscal quarters pursuant to Section 5.1.A(1) and this
paragraph (1), their Preferred Return Shortfalls are zero;
(2) Second, to the Managing Member, the Managing Member's Capital
Return Shortfall, until, as a result of distributions made to the Managing
Member for the current and all prior fiscal quarters pursuant to Section
5.1.A(2) and this paragraph (2), the Managing Member's Capital Return
Shortfall is zero;
(3) Third, to the holders of the Non-Managing Member Units (whether
held by a Non-Managing Member or by the Managing Member), in proportion to
the number of outstanding Non-Managing Member Units so held, 28.3% of the
Shared Appreciation Amounts relating to the Real Properties sold as
contemplated by Section 13.1.E during the Fiscal Year in which the
liquidating Event occurs or subsequent Fiscal Years;
(4) Fourth, to Managing Member, the balance of the Shared
Appreciation Amounts relating to the Real Properties sold as contemplated
by Section 13.1.E;
(5) Fifth, to the Managing Member, an amount equal to (i) the amount
of any tenant improvements and leasing commissions funded by the Managing
Member through additional Capital Contributions made pursuant to Section
4.3, subsequent to the Effective Date, less (ii) the amounts previously
distributed to the Managing Member pursuant to Sections 5.1.A(3) or
5.6.A(3);
(6) Sixth, to the holders of Non-Managing Member Units (whether held
by a Non-Managing Member or the Managing Member), in proportion to the
number of outstanding Non-Managing Member Units so held, the amount by
which (i) any amounts which were distributable to such member pursuant to
Section 5.6.A(1) relating to the Real Properties which were subject to a
taxable distribution in prior Fiscal Years, exceeds (ii) the amounts
previously distributed to such Member pursuant to Section 5.6.A(1) or
paragraph (3) or (6) of this definition relating to such properties;
(7) Seventh, to the Managing Member, the amount by which (i) any
amounts which were distributable to the Managing Member pursuant to Section
5.6.A(2) relating to the Real Properties which were subject to a taxable
disposition in prior Fiscal Years, exceeds (ii) the amounts previously
distributed to the Managing Member pursuant to Section 5.6.A(2) or
paragraph (4) of this paragraph (7) of this definition relating to such
properties; and
(8) Eighth, the remaining balance, if any, to the Members pro rata to
their holdings of LLC Units.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Liquidating Event" has the meaning set forth in Section 13.1 hereof.
"Liquidator" has the meaning set forth in Section 13.2.A hereof.
"LLC Distribution Date" means the date established by the Managing Member
subsequent to January 1, 1998 for the payment of actual distributions declared
by the Managing Member pursuant to Sections 5.1 and 5.2, which date shall be the
same as the date established by the Managing Member for the quarterly payment of
dividends to holders of REIT Shares.
"LLC Record Date" means the record date established by the Managing Member
subsequent to January 1, 1998 for the distribution of Available Cash pursuant to
Section 5.1 hereof, which record date shall be the same as the record date
established by the Managing Member for a dividend to holders of REIT Shares.
"LLC Units" means the Managing Member Units and the Non-Managing Member
Units, collectively.
"Loan and Security Agreement" means that certain Loan and Security
Agreement dated November 21, 1997 by and between Health Care Property
Investors, Inc. and the Non-Managing Member.
"Majority in Interest of the Non-Managing Members" means those Non-Managing
Members (other than the Managing Member in its capacity as a holder of Non-
Managing Member Units) holding in the aggregate more than 50% of the aggregate
outstanding Non-Managing Member Units (other than those held by the Managing
Member).
"Majority of Remaining Members" means Non-Managing Members owning a
majority of the Non-Managing Member Units held by Non-Managing Members.
"Managing Member" means Health Care Property Investors, Inc., a Maryland
corporation, in its capacity as a Member, or any successor Managing Member
designated pursuant to the terms of this Agreement.
"Managing Member's Capital Return" means an amount initially equal to zero,
and increased cumulatively on each LLC Record Date by an amount equal to the
Managing Member's Capital Contribution multiplied by the Capital Return
Adjustment Factor. The "Capital Return Adjustment Factor" shall be .0225 for
each of the first four LLC Record Dates occurring during the term of this
Agreement (the fourth such LLC Record Date and each fourth LLC Record Date
thereafter being referred to hereto as the "Fourth Record Date") and for each
LLC Record Date thereafter, the Capital Return Adjustment Factor in effect on
the most recent Fourth Record Date multiplied by 1.02, provided, however, that
the Capital Return Adjustment Factor for the first LLC Record Date occurring
after January 1, 1998 shall be .0225 multiplied by a fraction, the numerator of
which shall be the number of days in the period commencing on the Effective Date
and ending on December 31, 1997, and the denominator of which shall be the
number of days in the period commencing on October 1, 1997 and ending on
December 31, 1997. To illustrate the foregoing, set forth below are examples of
the Capital Return Adjustment Factor in effect on the designated LLC Record
Dates:
LLC Record Date Estimated Month and Capital Return
Occurring After Effective Date Year of LLC Record Date Adjustement Factor
- - ----------------------------- ----------------------- ------------------
First February 1998 .0100(1)
Second May 1998 .0225
Third August 1998 .0225
Fourth November 1998 .0225
Fifth February 1999 .0230(2)
Sixth May 1999 .0230
Seventh August 1999 .0230
Eighth November 1999 .0230
Ninth February 2000 .0235(3)
(1) .0225 x 41/92 = .01
(2) .0225 x 1.02 = .0230
(3) .0230 x 1.02 = .0235
"Managing Member's Capital Return Shortfall" means the sum of (a) the
amount (if any) by which (i) the Managing Member's Capital Return exceeds
(ii) the aggregate amount previously distributed to the Managing Member pursuant
to Section 5.1.A(2) hereof, plus (b) the cumulative interest accrued on the
excess described in the foregoing clause (a).
"Managing Member Unit" means a single unit of Membership Interest of the
Managing Member 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
Managing Member Units may (but need not in the sole and absolute discretion of
the Managing Member) be evidenced in the form of a Certificate for Managing
Member Units.
"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, Non-Managing Members and any Substitute Members, named as
Members in Exhibit A attached hereto, which Exhibit A may be amended from time
to time.
"Membership Interest" means an ownership interest in the Company
representing a Capital Contribution by a Member and includes any and all
benefits to which the holder of such a Membership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. A Membership Interest
may be expressed as a number of Managing Member Units or Non-Managing Member
Units, as applicable.
"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 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 6.3.A hereof shall be determined by
applying rules analogous to those set forth in this definition of "Net
Income" or "Net Loss."
"Non-Managing Member" means any Member other than the Managing Member
(except to the extent the Managing Member holds Non-Managing Member Units).
"Non-Managing Member Representative" means Jean-Claude Saada until a
successor Non-Managing Member Representative shall have been appointed pursuant
to Section 15.14 hereof and, thereafter, shall mean the person appointed and
then acting as the Non-Managing Member Representative hereunder.
"Non-Managing Member Unit" means a single unit of Membership Interest of
Non-Managing Member issued pursuant to Section 4.1 or Section 4.2 hereof, as the
same may be modified from time to time as provided in this Agreement. The
ownership of Non-Managing Member Units shall be evidenced in the form of a
certificate for Non-Managing Member Units.
"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.
"Ownership Limit" means 9.9% of the number of outstanding REIT Shares.
"Percentage Interest" means, with respect to each Member, its interest in
the Company determined by dividing the number of LLC Units held by such Member
by the total number of LLC Units then outstanding.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
"Preferred Return Per Unit" means with respect to each Non-Managing Member
Unit outstanding on a LLC Record Date an amount initially equal to zero, and
increased cumulatively on each LLC Record Date by an amount equal to the greater
of (a) $0.62 or (b) the product of (i) the cash dividend per REIT Share
declared by the Managing Member for holders of REIT Shares on that LLC Record
Date, multiplied by (ii) the Adjustment Factor in effect on that LLC Record
Date; provided, however, that the increase that shall occur in accordance with
the foregoing on the first LLC Record Date subsequent to January 1, 1998 shall
be the greater of (a) or (b) above multiplied by a fraction, the numerator of
which shall be the number of days in the period commencing on the Effective Date
and ending on December 31, 1997, and the denominator of which shall be the
number of days in the period commencing on October 1, 1997 and ending on
December 31, 1997.
"Preferred Return Shortfall" means, for any holder of Non-Managing Member
Units, the amount (if any) by which (i) the Preferred Return Per Unit with
respect to all Non-Managing Member Units held by such holder exceeds (ii) the
aggregate amount previously distributed with respect to such Non-Managing Member
Units pursuant to Section 5.1.A(1) hereof, plus (b) the cumulative interest
accrued thereon at the Prime Rate from the applicable LLC Record Date.
"Prime Rate" means on any date, a rate equal to the annual rate on such
date announced by the Bank of New York 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 the Bank of New York discontinues its use of such prime,
base or reference rate or ceases to exist, the Managing Member shall designate
the prime, base or reference rate of another state or federally chartered bank
based in New York to be used for the purpose of calculating the Prime Rate
hereunder (which rate shall be subject to limitation by all applicable usury
laws).
"Properties" means any assets and property of the Company such as, but not
limited to, interests in real property (including the Real Properties) and
personal property, including, without limitation, fee interests, interests in
ground leases, interests in limited liability companies, joint ventures or
partnerships, interests in mortgages, and Debt instruments as the Company may
hold from time to time.
"Qualified Transferee" means an "accredited investor" as defined in Rule
501 promulgated under the Securities Act.
"Real Properties" has the meaning set forth in Section 7.3.E(2) hereof.
"Reduction Date" has the meaning set forth in Section 5.6.B hereof.
"Reduction Units" has the meaning set forth in Section 5.6.B hereof.
"Refinancing Debt" means any Debt (other than indebtedness to the Managing
Member or any Affiliate of the Managing Member), the repayment of which is
secured by all or any portion of the Real Properties.
"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 Requirements" has the meaning set forth in Section 5.1 hereof.
"REIT Share" means a share of the Common Stock of the Managing Member, par
value $1.00 per share.
"REIT Shares Amount" means a number of REIT Shares equal to the product of
(a) the number of Tendered Units and (b) the Adjustment Factor; provided,
however, that, in the event that the Managing Member issues to all holders of
REIT Shares as of a certain record date rights, options, warrants or convertible
or exchangeable securities entitling the Managing Member's shareholders to
subscribe for or purchase REIT Shares, or any other securities or property
(collectively, the "Rights"), with the record date for such Rights issuance
falling within the period starting on the date of the Notice of Exchange and
ending on the day immediately preceding the Specified Exchange Date, which
Rights will not be distributed before the relevant Specified Exchange Date, then
the REIT Shares Amount shall also include such Rights that a Member of that
number of REIT Shares would be entitled to receive, expressed, where relevant
hereunder, in a number of REIT Shares determined by the Managing Member in good
faith.
"Related Party" means, with respect to any Person, any other Person whose
actual ownership, Beneficial Ownership or Constructive Ownership of shares of
the Managing Member's capital stock would be attributed to the first such Person
under either (i) Code Section 544 (as modified by Code Section 856(h)(1)(b) ) or
(ii) Code Section 318 (as modified by Code Section 856(d)(5)).
"Rights" has the meaning set forth in the definition of "REIT Shares
Amount."
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shared Appreciation Amount" means with respect to each Real Property which
is the subject of a taxable disposition, the amount by which the sales price
(net of commissions and other closing costs and expenses), exceeds the Shared
Appreciation Basis for such Real Property.
"Shared Appreciation Basis" means with respect to a Real Property the sum
of (i) the value of such Real Property as agreed between the Managing Member and
the Transferor and set forth on Exhibit C attached hereto, increased by 3%,
compounded annually, on each anniversary of the Effective Date, and (ii) the
amount of any capital additions, tenant improvements and leasing commissions
funded by the Managing Member as an additional Capital Contribution subsequent
to the Effective Date with respect to such Real Property.
"Specified Exchange Date" means the 10th Business Day after the receipt by
the Managing Member of a Notice of Exchange; provided, however, that no
Specified Exchange Date shall occur prior to the first anniversary of the
Effective Date.
"Substituted Member" means an Assignee who is admitted as a Member to the
Company pursuant to Section 11.4 hereof.
"Subsidiary" means, with respect to any Person other than the Company, 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; provided, however, that, with respect to
the Company, "Subsidiary" means solely a partnership or limited liability
company (taxed, for federal income tax purposes, as a partnership and not as an
association or publicly traded partnership taxable as a corporation) of which
the Company is a member unless the Managing Member has received an unqualified
opinion from independent counsel of recognized standing, or a ruling from the
IRS, that the ownership of shares of stock of a corporation or other entity will
not jeopardize the Managing Member's status as a REIT, in which event the term
"Subsidiary" shall include the corporation or other entity which is the subject
of such opinion or ruling.
"Tax Items" has the meaning set forth in Section 6.1 hereof.
"Tendered Units" has the meaning set forth in Section 8.6.A hereof.
"Tendering Party" has the meaning set forth in Section 8.6.A hereof.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Company or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Company.
"Transfer," when used with respect to an LLC Unit or all or any portion of
a Membership Interest, means any sale, assignment, bequest, conveyance, devise,
gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage,
exchange, transfer or other disposition or act of alienation, whether voluntary
or involuntary or by operation of law; provided, however, that, when the term is
used in Article 11 hereof, Transfer does not include any Exchange of LLC Units
by the Non-Managing Member pursuant to Section 8.6 hereof or any sale of Non-
Managing Member Units by an Initial Non-Managing Member to the Managing Member
pursuant to Section 2.2 of the Contribution Agreement, or any Transfer of Non-
Managing Member Units to the Managing Member pursuant to the Loan and Security
Agreement. The terms "Transferred" and "Transferring" have correlative
meanings.
"Transferor" means Cambridge Medical Center of San Diego, LLC, a California
limited liability company.
"Valuation Date" means (a) in the case of a tender of LLC Units for
Exchange, the date of the receipt by the Managing Member of the Notice of
Exchange with respect to those LLC Units or, if such date is not a Business Day,
the immediately preceding Business Day or (b) in any other case, the date
specified in this Agreement or, if such date is not a Business Day, the
immediately preceding Business Day.
"Value" means, on any Valuation Date, the average of the Closing Prices for
the ten (10) consecutive trading days ending on the trading day immediately
prior to the Valuation Date.
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Formation
The Company is a limited liability company formed pursuant to the
provisions of the Act for the purposes and upon the terms and subject to the
conditions set forth in this Agreement. Except as expressly provided herein,
the rights and obligations of the Members and the administration and termination
of the Company shall be governed by the Act.
Section 2.2. Name
The name of the Company is Cambridge Medical Properties, LLC. The Managing
Member may only change the name of the Company (a) without the Consent of the
Non-Managing Members in the event that (and shall change the name of the
Company, if so requested by Jean-Claude Saada, to a name that does not include
"Cambridge" in the event that) (i) the Management Agreement (as defined in the
Contribution Agreement) terminates or expires, (ii) Jean-Claude Saada, either
directly or indirectly through entities Controlled by him ceases to own a number
of Non-Managing Member Units equal to or greater than 20% of the number of Non-
Managing Member Units issued to Cambridge Medical Center of San Diego, LLC on
the Effective Date, or (iii) any Affiliate of Jean-Claude Saada which has at any
time been formed or conducted business under a name which includes "Cambridge"
(a) within the meaning of any Bankruptcy Law (aa) files a petition for relief or
otherwise commences a voluntary or involuntary case, (bb) consents to the entry
of an order for relief in an involuntary case, (cc) consents to the appointment
of a Custodian for itself or for all or substantially all of its property, (dd)
makes a general assessment for the benefit of creditors, or (ee) fails within
ninety (90) days to secure a dismissal of any order or decree for relief in an
involuntary case entered with respect to it, and (b) with the Consent of the
Non-Managing Members, which consent shall not be unreasonably withheld,
conditioned or delayed. In the event the Managing Member changes the name of
the Company to a name which does not include "Cambridge," the Company shall
quitclaim to Jean-Claude Saada all right, title and interest of the Company in
and to the name "Cambridge".
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, County of New Castle,
Delaware 19801, and the registered agent for service of process on the Company
in the State of Delaware at such registered office is The Corporation Trust
Company. The principal office of the Company is located at 4675 MacArthur
Court, Suite 900, Newport Beach, California 92660, or such other place as the
Managing Member may from time to time designate by notice to the Members. The
Company may maintain offices at such other place or places within or outside the
State of Delaware as the Managing Member deems advisable.
Section 2.4. [Intentionally Deleted]
Section 2.5. Term
The term of the Company commenced on November 18, 1997, the date that the
original Certificate of Formation of the Company was filed in the office of the
Secretary of State of Delaware in accordance with the Act, and shall continue
until November 30, 2012 unless extended by mutual agreement of the Members or
earlier terminated pursuant the provisions of Section 13 hereof or as otherwise
provided by law.
ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business
The sole purposes of the Company are (i) to acquire, own, manage, operate,
maintain, improve, expand, redevelop, encumber, sell or otherwise dispose of, in
accordance with the terms of this Agreement, the Contributed Properties, the
property subject to the Contributed Lease and any other Properties acquired by
the Company in a tax-free exchange transaction for a Property or Properties
owned by the Company and invest and ultimately distribute funds, including,
without limitation, funds obtained from owning or otherwise operating the
Contributed Properties and the proceeds from the sale or other disposition of
the Contributed Properties, all in the manner permitted by this Agreement, and
(ii) subject to and in accordance with the terms of this Agreement, to do
anything necessary or incidental to the foregoing. No Member, including the
Managing Member, shall have any authority to take any action on behalf of the
Company that is not consistent with the foregoing purposes.
Section 3.2. Powers
Subject to the express limitations set forth in this Agreement, 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, whether or not secured by mortgage, deed of trust, pledge or other
lien, acquire, own, manage, improve and develop real property, and lease, sell,
transfer and dispose of real property; provided, however, that notwithstanding
any other provision in this Agreement, the Managing Member may cause the Company
not to take, or to refrain from taking, any action that, in the judgment of the
Managing Member, in its sole and absolute discretion, (i) could adversely affect
the ability of the Managing Member to continue to qualify as a REIT, (ii) could
subject the Managing Member to any additional taxes under Code Section 857 or
Code Section 4981 or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Managing Member, its
securities or the Company, unless such action (or inaction) under clause (i),
clause (ii) or clause (iii) above shall have been specifically consented to by
the Managing Member in writing.
Section 3.3. Specified Purposes
The Company shall be a limited liability company only for the purposes
specified in Section 3.1 hereof, and this Agreement shall not be deemed to
create a company, venture or partnership between or among the Members with
respect to any activities whatsoever other than the activities within the
purposes of the Company as specified in Section 3.1 hereof. Except as otherwise
provided in this Agreement, no Member shall have any authority to act for, bind,
commit or assume any obligation or responsibility on behalf of the Company, its
properties or any other Member. No Member, in its capacity as a Member under
this Agreement, shall be responsible or liable for any indebtedness or
obligation of another Member, nor shall the Company be responsible or liable for
any indebtedness or obligation of any Member, incurred either before or after
the execution and delivery of this Agreement by such Member, except as to those
responsibilities, liabilities, indebtedness or obligations incurred pursuant to
and as limited by the terms of this Agreement and the Act.
Section 3.4. Representations and Warranties by the Members; Disclaimer of
Certain Representations
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 the
representation hereunder is being made on or prior to December 31, 1997, such
Member (other than the Managing Member) does not own, actually or constructively
under Code Section 318 (as modified by Code Section 856(d)(5)), any shares of
stock of the Managing Member, (v) if the representation hereunder is being made
subsequent to December 31, 1997, such Member (other than the Managing Member)
either (a) does not own, actually or constructively 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) does not own, actually or constructively under
Code Section 318 (as modified by Code Section 856(d)(5)), any interest in any
entity that is a tenant of either the Managing Member, the Company or any
partnership, venture or limited liability company of which the Managing Member
or the Company is a member, and (vi) this Agreement is binding upon, and
enforceable against, such Member in accordance with its terms.
B. Each Member that is not an individual (including, without limitation,
each 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 the representation hereunder is being
made on or prior to December 31, 1997, such Member (other than the Managing
Member) does not own, actually or constructively under Code Section 318 (as
modified by Code Section 856(d)(5)), any shares of stock of the Managing Member,
(v) if the representation hereunder is being made subsequent to December 31,
1997, such Member (other than the Managing Member) either (a) does not own,
actually or constructively under Code Section 318 (as modified by Code Section
856(d)(5)), more than 25% of the interests in capital of profits of the Company
or (b) does not own, actually or constructively under Code Section 318 (as
modified by Code Section 856(d)(5)), any interest in any entity that is a tenant
of either the Managing Member, the Company or any partnership, venture or
limited liability company of which the Managing Member or the Company is a
member, (vi) this Agreement is binding upon, and enforceable against, such
Member in accordance with its terms.
C. Each Member (including, without limitation, each Substituted Member as
a condition to becoming a Substituted Member) represents, warrants and agrees
that it has acquired and continues to hold its interest in the Company for its
own account for investment only and not for the purpose of, or with a view
toward, the resale or distribution of all or any part thereof, nor with a view
toward selling or otherwise distributing such interest or any part thereof at
any particular time or under any predetermined circumstances. Each Member
further represents and warrants that it is an "accredited investor" as defined
in Rule 501 promulgated under the Securities Act and is a sophisticated
investor, able and accustomed to handling sophisticated financial matters for
itself, particularly real estate investments, and that it has a sufficiently
high net worth that it does not anticipate a need for the funds that it has
invested in the Company in what it understands to be a highly speculative and
illiquid investment.
D. The representations and warranties contained in Sections 3.4.A, 3.4.B
and 3.4.C hereof shall survive the execution and delivery of this Agreement by
each Member (and, in the case of a Substituted Member, the admission of such
Substituted Member as a Member in the Company) and the dissolution, liquidation
and termination of the Company.
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 or operating the Company, conducting the business of 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, receiving or not receiving distributions from the
Company, exchanging LLC Units or being allocated Tax Items), cash flows, funds
from operations or yield, if any, in respect of the Company or the Managing
Member have been made by any Member or any employee or representative or
Affiliate of any Member, and that projections and any other information,
including, without limitation, financial and descriptive information and
documentation, that may have been in any manner submitted to such Member shall
not constitute any representation or warranty of any kind or nature, express or
implied.
ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Initial Members
At the time of their respective execution of this Agreement, the Members
shall make Capital Contributions as set forth in Exhibit A to this Agreement.
The Members shall own Managing Member Units and Non-Managing Member Units, as
applicable, in the amounts set forth on Exhibit A. Except as required by law or
as otherwise provided in Sections 4.2 and 4.3, no Member shall be required or
permitted to make any additional Capital Contributions or loans to the Company.
Section 4.2. Loans by Third Parties
The Company may not incur or assume Debt without the Consent of the Non-
Managing Members, except for Refinancing Debt.
Section 4.3. Additional Capital Contributions
A. General. The Managing Member may, at any time and from time to time,
determine that the Company requires additional funds ("Additional Funds") for
the operation of the Company. Additional Funds may be raised by the Company in
accordance with the terms of this Section 4.3. No Person, including, without
limitation, any Member or Assignee, shall have any preemptive, preferential,
participation or similar right or rights to subscribe for or acquire any
Membership Interest.
B. Additional Member Contributions. The Managing Member on behalf of the
Company and with the Consent of the Non-Managing Members may raise all or any
portion of the Additional Funds by making additional Capital Contributions.
Subject to the terms of this Section 4.3 and to the definition of "Gross Asset
Value," the Managing Member shall determine in good faith the amount, terms and
conditions of such additional Capital Contributions. In addition, the Managing
Member shall be solely responsible for making additional Capital Contributions
to the Company in amounts sufficient to fund all necessary capital additions,
tenant improvements and leasing commissions relating to the Real Properties.
The Managing Member shall receive additional Managing Member Units only in
consideration for additional capital contributions made by the Managing Member
in an aggregate amount in excess of Five Hundred Thousand Dollars ($500,000) to
fund capital additions that will add rentable space to the Properties.
C. Timing of Additional Capital Contributions. If additional Capital
Contributions are made by Members on any day other than the first day of a
Fiscal Year, then Net Income, Net Loss, each item thereof and all other items of
income, gain, loss, deduction and credit allocable among Members and Assignees
for such Fiscal Year, if necessary, shall be allocated among such Members and
Assignees by taking into account their varying interests during the Fiscal Year
in accordance with Code Section 706(d), using the "interim closing of the books"
or "daily proration" method or another permissible method selected by the
Managing Member.
Section 4.4. No Interest; No Return
Except as provided herein, 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. The Managing Member shall cause the Company to distribute quarterly on
the LLC Distribution Date all Available Cash generated by the Company during the
quarter most recently ended prior to the LLC Distribution Date as follows:
(1) First, to the holders of the Non-Managing Member Units (whether
held by a Non-Managing Member or the Managing Member), in accordance with
their relative Preferred Return Shortfalls, until the Preferred Return
Shortfall for each holder of Non-Managing Member Units is zero, provided,
however, that in the event the number of Non-Managing Member Units is
reduced pursuant to Section 5.6.B hereof, a distribution shall be made
under this Section 5.1.A(1) on the first (and only the first) LLC
Distribution Date occurring after such reduction to the holder or holders
of the Reduction Units in an amount determined by multiplying the amount
that would have been distributed on such LLC Distribution Date under this
Section 5.1.A(1) in respect of the Reduction Units had they been
outstanding on such LLC Distribution Date (the "Subsequent Distribution
Date") by a fraction, the numerator of which shall be the number of days in
the period commencing on the LLC Distribution Date most recently preceding
the Reduction Date (the "Prior Distribution Date") and ending on the
Reduction Date and the denominator of which shall be the number of days in
the period commencing on the Prior Distribution Date and ending on the
Subsequent Distribution Date.
(2) Second, to the Managing Member, the Managing Member's Capital
Return Shortfall, until the Managing Member's Capital Return Shortfall is
zero;
(3) Third, to the Managing Member the Amortization until the
Amortization Shortfall is zero; and
(4) Fourth, 17% of the remaining balance, if any, to the holders of
the Non-Managing Member Units (whether held by a Non-Managing Member or the
Managing Member) in proportion to their outstanding Non-Managing Member
Units as of the LLC Record Date; and 83% of such remaining balance to the
holder of the Managing Member Units as of the LLC Record Date.
Set forth on Exhibit D are examples of the application of the provisions of this
Section 5.1.A based upon assumed amounts of Available Cash and other assumptions
reflected in Exhibit D.
B. The Managing Member shall take such reasonable efforts, as determined
by it in its sole and absolute discretion and consistent with its qualification
as a REIT, to cause the Company to distribute sufficient amounts to enable the
Managing Member to pay stockholder dividends that will (a) satisfy the
requirements for qualifying as a REIT under the Code and Regulations ("REIT
Requirements"), and (b) except to the extent the Managing Member elects, in its
sole discretion, not to make such distributions, avoid any federal income or
excise tax liability of the Managing Member.
Section 5.2. Distributions in Kind
No right is given to any Member to demand and receive property other than
cash. The Managing Member may determine, in its sole and absolute discretion,
to make a distribution in kind to the Members of Company assets, and such assets
shall be distributed in such a fashion as to ensure that the fair market value
is distributed and allocated in accordance with Articles 5 and 6 hereof.
Section 5.3. Amounts Withheld
Each Member hereby authorizes the Company to withhold from or pay on behalf
of or with respect to such Member any amount of federal, state, local or foreign
taxes that the Managing Member determines that the Company is required to
withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Company pursuant to Code Section 1441,
Code Section 1442, Code Section 1445 or Code Section 1446. 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 reasonable
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 base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the Wall Street Journal,
plus four (4) percentage points (but not higher than the maximum lawful rate)
from the date such amount is due (i.e., 15 days after demand) until such amount
is paid in full. Each Member shall take such actions as the Company or the
Managing Member shall request in order to perfect or enforce the security
interest created hereunder.
Section 5.4. Distributions Upon Liquidation
Notwithstanding the other provisions of this Article 5, net proceeds from a
Terminating Capital Transaction and any other cash received or reductions in
reserves made after commencement of the liquidation of the Company shall be
distributed to the Members in accordance with Section 13.2 hereof.
Section 5.5. Restricted Distributions
Notwithstanding any provision to the contrary contained in this Agreement,
neither the Company nor the Managing Member, on behalf of the Company, shall
make a distribution to any Member on account of its Membership Interest or
interest in LLC Units if such distribution would violate Section 18-607 of the
Act or other applicable law.
Section 5.6. Distributions of Proceeds from Sale of Real Properties and
Refinancing Debt
A. In the event of a taxable disposition of some, but not all, of the
Real Properties and in the event the Company incurs Refinancing Debt, the
Managing Member shall cause the Company to distribute the net proceeds from such
Refinancing Debt, as the case may be, as follows:
(1) First, to the holders of the Non-Managing Member Units (whether held
by a Non-Managing Member or by the Managing Member) from the net proceeds of the
taxable disposition, in proportion to the number of outstanding Non-Managing
Member Units so held, 28.3% of the Shared Appreciation Amounts relating to the
Real Properties subject to the taxable disposition;
(2) Second, to the holders of the Managing Member Units from the net
proceeds of the taxable disposition, the balance of the Shared Appreciation
Amounts relating to the Real Properties subject to the taxable disposition;
(3) Third, to the Managing Member an amount equal to (i) the amount of any
tenant improvements and leasing commissions funded by the Managing Member
through additional Capital Contributions made pursuant to Section 4.3 subsequent
to the Effective Date with respect to the Real Property or Real Properties which
are the subject of the taxable disposition or secure the repayment of the
Refinancing Debt, less (ii) the amount distributed to the Managing Member under
Section 5.1.A(3) hereof in respect of the amount described in the foregoing
clause (i); and
(4) Fourth, the remaining balance, if any, to the Members pro rata to
their holdings of Managing Member Units and Non-Managing Member Units.
B. The number of LLC Units outstanding on the date of a distribution
pursuant to Section 5.6.A above will be reduced on the date of the distribution
(the "Reduction Date") by the aggregate number of LLC Units (the "Total Units")
determined by dividing the aggregate amount of the distributions so made by the
Value on the Reduction Date. The Non-Managing Member Units shall be reduced by
a number of LLC Units (rounded down to the nearest whole unit) (the "Reduction
Units") determined by multiplying the number of Total Units by a fraction, the
numerator of which is the total number of Non-Managing Member Units outstanding
and the denominator of which is the total number of Non-Managing Member Units
and Managing Member Units outstanding. The Reduction Units shall be allocated
(as closely as practicable in whole units) among the holders of Non-Managing
Member Units in accordance with their respective holdings of Non-Managing Member
Units. The Managing Member Units shall be reduced by a number of Managing
Member Units equal to the difference between the number of Total Units and the
number of Reduction Units. In no event, however, shall the number of Non-
Managing Member Units be reduced below nine (9) Non-Managing Member Units and in
no event shall the number of Managing Member Units be reduced below eighty-five
(85) Managing Member Units. To reflect the foregoing reduction, each Member
shall return to the Managing Member the certificate evidencing the Reduction
Units allocated to him or it or the Managing Member Units so reduced which will
be canceled and a new certificate evidencing the reduced number of Managing
Member Units or Non-Managing Member Units shall be immediately issued to such
Member by the Managing Member on behalf of the Company.
C. The Company shall have no obligation to incur Refinancing Debt for the
purposes of making distributions pursuant to this Section 5.6 or for any other
purpose.
Section 5.7. Offset
Except for offsets authorized by the Loan and Security Agreement, neither
the Company nor the Managing Member shall be entitled to offset against any
distribution payable to the Non-Managing Members pursuant to this Article 5 and
Article 13 any amounts owing or otherwise alleged to be owing to the Company or
the Managing Member; provided, however, that the Managing Member shall be
entitled, at its option, to offset against amounts otherwise payable to Non-
Managing Members hereunder (including, without limitation, amounts payable
pursuant to Section 5.1.A(1) hereof and Section 13.2 hereof) amounts authorized
for offset by the Loan and Security Agreement. Any amounts so offset pursuant
to the foregoing shall be deemed for all purposes to have been distributed or
paid to the Non-Managing Members as required by this Agreement, including for
purposes of calculating Preferred Return Shortfalls.
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 (collectively "Tax Items")
that is taken into account in computing Net Income or Net Loss.
Section 6.2. General Allocations
A. Operating Net Income and Net Loss. Except as otherwise provided in
Sections 6.2.C or 6.3:
(1) Net Income, other than Net Income attributable to a disposition
of any or all of the Real Properties, shall first be allocated to each Non-
Managing Member in an amount equal to the distributions received by such
Member pursuant to Section 5.1.A, less any amounts of Net Income previously
allocated to such Member pursuant to this Section 6.2.A(1).
(2) All remaining Net Income and Net Loss, other than Net Income or
Net Loss attributable to a disposition of any or all of the Real
Properties, shall be allocated to the Managing Member.
B. Net Income and Net Loss from the Disposition of Real Properties.
Except as otherwise provided in Sections 6.2.C or 6.3:
(1) Net Income attributable to a disposition of any or all of the
Real Properties shall be allocated to each Member in an amount equal to the
distributions received by such Member pursuant to Section 5.6.A(1) or (2),
less any amounts of Net Income previously allocated to such Member pursuant
to this Section 6.2.B(1).
(2) Thereafter, any remaining Net Income or Net Loss attributable to
the disposition of any or all of the Real Properties shall be allocated to
the Members in proportion to their LLC Units.
C. Net Income and Net Loss Upon Liquidation. If a Liquidating Event
occurs in a Fiscal Year, Net Income or Net Loss (or, if necessary, separate
items of income, gain, loss and deduction) for such Fiscal Year and any Fiscal
Years thereafter shall, subject to Section 6.3, be allocated among the Members
in such amounts and priorities so that the amounts distributed to each of the
Members pursuant to Section 13.2.A(3) upon the liquidation of the Company will
equal the Intended Liquidating Distributions.
D. Prorations. If the amount of Net Income or Net Loss available for
allocation under any subsection of Sections 6.2.A or B above is less than the
aggregate amount to be allocated pursuant to the applicable subsection (assuming
sufficient Net Income or Net Loss was available), such allocation shall be made
to the Members pro rata to the total amounts to be so allocated pursuant to such
subsection.
Section 6.3. Additional Allocation Provisions
A. Regulatory Allocations.
(1) Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of
Section 6.2 hereof, or any other provision of this Article 6, if there
is a net decrease in Company Minimum Gain during any Fiscal Year, each
Member shall be specially allocated items of Company income and gain
for such year (and, if necessary, subsequent years) in an amount equal
to such Member's share of the net decrease in Company Minimum Gain, as
determined under Regulations Section 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The
items to be allocated shall be determined in accordance with
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
6.3.A(1) is intended to qualify as a "minimum gain chargeback" within
the meaning of Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(2) Member Minimum Gain Chargeback. Except as otherwise provided
in Regulations Section 1.704-2(i)(4) or in Section 6.3.A(1) hereof, if
there is a net decrease in Member Minimum Gain attributable to a
Member Nonrecourse Debt during any Fiscal Year, each Member who has a
share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income
and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Member's share of the net decrease in Member
Minimum Gain attributable to such Member Nonrecourse Debt, determined
in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2).
This Section 6.3.A(2) is intended to qualify as a "chargeback of
partner nonrecourse debt minimum gain" within the meaning of
Regulations Section 1.704-2(i) and shall be interpreted consistently
therewith.
(3) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the
Member(s) who bears the economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions
are attributable, in accordance with Regulations Section 1.704-2(i).
(4) Qualified Income Offset. If any Member unexpectedly
receives an adjustment, allocation or distribution described in
Regulations Section 1.704-1(b) (2)(ii)(d)(4), (5) or (6), items of
Company income and gain shall be allocated, in accordance with
Regulations Section 1.704-1(b) (2)(ii)(d), to such Member in an amount
and manner sufficient to eliminate, to the extent required by such
Regulations, the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this
Section 6.3.A(4) shall be made if and only to the extent that such
Member would have an Adjusted Capital Account Deficit after all other
allocations provided in this Article 6 have been tentatively made as
if this Section 6.3.A(4) were not in the Agreement. It is intended
that this Section 6.3.A(4) qualify and be construed as a "qualified
income offset" within the meaning of Regulations Section 1.704-
1(b) (2)(ii)(d) and shall be interpreted consistently therewith.
(5) Limitation on Allocation of Net Loss. To the extent that any
allocation of Net Loss would cause or increase an Adjusted Capital
Account Deficit as to any Member, such allocation of Net Loss shall be
reallocated among the other Members in accordance with their
respective LLC Units, subject to the limitations of this Section
6.3.A(5).
(6) Section 754 Adjustment. To the extent that an adjustment to
the adjusted tax basis of any Company asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b) (2)(iv)(m)(2) or Regulations Section 1.704-
1(b) (2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Member in complete
liquidation of its interest in the Company, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such gain or loss shall be
specially allocated to the Members in accordance with their LLC Units
in the event that Regulations Section 1.704-1(b) (2)(iv)(m)(2)
applies, or to the Members to whom such distribution was made in the
event that Regulations Section 1.704-1(b) (2)(iv)(m)(4) applies.
(7) Curative Allocations. The allocations set forth in Sections
6.3.A(1) through (6) hereof (the "Regulatory Allocations") are
intended to comply with certain regulatory requirements, including the
requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Sections 6.1 and 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 items and the Regulatory Allocations to each Member shall be
equal to the net amount that would have been allocated to each such
Member if the Regulatory Allocations had not occurred.
B. Allocation of Excess Nonrecourse Liabilities. For purposes of
determining a Member's proportional share of the "excess nonrecourse
liabilities" of the Company within the meaning of Regulations Section 1.752
-3(a)(3), each Member's interest in Company profits shall be such Member's
Percentage Interest.
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 of the
Company's Tax Items shall be allocated among the Members in the same manner
as its correlative item of "book" income, gain, loss or deduction is
allocated pursuant to Sections 6.2 and 6.3 hereof.
B. Allocations Respecting Section 704(c) Revaluations.
Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property
that is contributed to the Company with a Gross Asset Value that varies
from its basis in the hands of the contributing Member immediately
preceding the date of contribution shall be allocated among the Members for
income tax purposes pursuant to the "traditional method" as described in
Regulations Section 1.704-3(b), utilizing the allocations set forth on
Exhibit C-1 (subject to modification upon the agreement of the Managing
Member and the Non-Managing Members). 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., pursuant to any
method permitted under Regulations Section 1.704-3 as selected by the
Managing Member
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.
Section 6.6. Amendments to Allocation to Reflect Issuance of Additional
Membership Interests
In the event that the Company issues additional Membership Interests to the
Managing or any Additional Member pursuant to Article 4 hereof, the Managing
Member shall make such revisions to this Article 6 as it determines are
necessary to reflect the terms of the issuance of such additional Membership
Interests, including making preferential allocations to certain classes of
Membership Interests.
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 at all
times act in good faith in exercising its powers hereunder. 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) 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 same by deed to secure debt,
mortgage, deed of trust or other lien or encumbrance on the Company's
assets) and the incurring of any obligations that it deems necessary for
the conduct of the activities of the Company;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Company;
(3) except as restricted pursuant to Section 7.3.E(2) hereof, the
acquisition, sale, transfer, exchange or other disposition of any assets of
the Company (including, but not limited to, the exercise or grant of any
conversion, option, privilege or subscription right or any other right
available in connection with any assets at any time held by the Company);
(4) except as restricted in this Agreement, 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 reasonably sees fit, including, without limitation, the
financing of the conduct or the operations of the Company and the repayment
of obligations of the Company;
(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, without limitation, (i) contracting with property managers
(including, without limitation, as to any Contributed Property or other
Property, contracting with the contributing or any other Member or its
Affiliates for property management services), contractors, developers,
consultants, accountants, legal counsel, other professional advisors and
other agents and the payment of their expenses and compensation out of the
Company's assets, and (ii) the execution, delivery and performance of the
Contribution Agreement and the agreements and instruments referred to
therein or contemplated thereby, including the Management Agreement (as
defined in the Contribution Agreement);
(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 including casualty, liability,
earthquake and other insurance on the Properties of the Company for the
benefit of the Company and the Members comparable in coverage to that
maintained by the Managing Member with respect to the properties it owns
and otherwise as it deems necessary or appropriate;
(10) 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;
(11) the determination of the fair market value of any Company
property distributed in kind using such reasonable method of valuation as
it may adopt; provided that such methods are otherwise consistent with the
requirements of this Agreement;
(12) 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;
(13) holding, managing, investing and reinvesting cash and other
assets of the Company;
(14) the collection and receipt of revenues and income of the Company;
(15) 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;
(16) 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;
(17) the maintenance of working capital and other reserves in such
amounts as the Managing Member deems appropriate and reasonable from time
to time, subject to the limitations set forth in Sections 7.3.B(9) and (10)
hereof;
(18) 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;
(19) the distribution of cash to acquire LLC Units held by a Member in
connection with a Member's exercise of its Exchange Right under Section 8.6
hereof; and
(20) 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, except as provided in
Section 7.3 hereof, the Managing Member is authorized to execute, deliver and
perform the above-mentioned agreements and transactions on behalf of the Company
without any further act, approval or vote of the Non-Managing Members,
notwithstanding any other provision of this Agreement (except as provided in
Section 7.3 hereof), the Act or any applicable law, rule or regulation. The
execution, delivery or performance by the Managing Member or the Company of any
agreement authorized or permitted under this Agreement shall not constitute a
breach by the Managing Member of any duty that the Managing Member may owe the
Company or the Members or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. At all times from and after the date hereof, the Managing Member may
cause the Company to obtain and maintain liability insurance for the Indemnities
hereunder.
D. In exercising its permitted authority under this Agreement, the
Managing Member may, but shall be under no obligation to, take into account the
tax consequences to any Member (including the Managing Member) of any action
taken by it. The Managing Member and the Company shall not have liability to a
Member under any circumstances as a result of an income tax liability incurred
by such Member as a result of an action (or inaction) by the Managing Member
pursuant to its authority under this Agreement so long as the action or inaction
is taken in good faith. The provisions of this Section 7.1.D shall not affect
the obligations of the Managing Member under Section 7.3.E hereof.
Section 7.2. Certificate of Formation
To the extent that such action is determined by the Managing Member to be
reasonable and necessary or appropriate, the Managing Member shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Company as a limited liability company under the laws of the State
of Delaware and each other state, the District of Columbia or any other
jurisdiction in which the Company may elect to do business or own property.
Subject to the terms of Section 8.5.A(4) hereof, the Managing Member shall not
be required, before or after filing, to deliver or mail a copy of the
Certificate or any amendment thereto to any Member. The Managing Member shall
use all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited liability company in the
State of Delaware and any other state, or the District of Columbia or other
jurisdiction in which the Company may elect to do business or own property.
Section 7.3. Restrictions on Managing Member's Authority
A. The Managing Member may not take any action in contravention of an
express prohibition or limitation of this Agreement, including, without
limitation:
(1) take any action that would make it impossible to carry on the
ordinary business of the Company, except as otherwise provided in this
Agreement;
(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 Member to liability as a
Managing Member in any jurisdiction or any other liability except as
provided herein or under the Act; or
(5) enter into any contract, mortgage, loan or other agreement that
expressly prohibits or restricts, or has the effect of prohibiting or
restricting, the ability of (a) the Managing Member or the Company from
satisfying its obligations under Section 8.6 hereof in full or (b) a
Member from exercising its rights to an Exchange in full, except, in either
case, with the written consent of such Member affected by the prohibition.
B. The Managing Member shall not, without the prior Consent of the Non-
Managing Members undertake or have the authority to do or undertake, on behalf
of the Company, any of the following actions or enter into any transaction which
would have the effect of such transactions:
(1) except as provided in Section 7.3.C, amend, modify or terminate
this Agreement other than to reflect the admission, substitution,
termination or withdrawal of Members pursuant to 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 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) incur any Debt other than Refinancing Debt;
(8) acquire any additional real property;
(9) establish any reserves during the one-year period commencing on
the Effective Date; or
(10) maintain any reserve at any time subsequent to the first
anniversary of the Effective Date in an amount in excess of the amount
computed by multiplying the number of rentable square feet contained in the
Properties by 50 cents.
C. Notwithstanding Section 7.3.B, the Managing Member shall have the
exclusive power to amend this Agreement as may be required to facilitate or
implement any of the following purposes:
(1) to add to the obligations of the Managing Member or surrender any
right or power granted to the Managing Member or any Affiliate of the
Managing Member for the benefit of the Non-Managing Members;
(2) to reflect the issuance of additional Membership Interests
pursuant to Section 4.3 or the admission, substitution, termination, or
withdrawal of Members in accordance with this Agreement and to amend
Exhibit A in connection with such admission, substitution or withdrawal;
(3) to reflect a change that is of an inconsequential nature and does
not adversely affect the Non-Managing Members in any material respect, or
to cure any ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions, or make other
changes with respect to matters arising under this Agreement that will not
be inconsistent with law or with the provisions of this Agreement;
(4) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling 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.
The Managing Member will provide at least ten (10) days' notice to the Non-
Managing Member Representative of any action to be taken under this Section
7.3.C before the action is taken.
D. Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement shall
not be amended with respect to any Member adversely affected, and no action may
be taken by the Managing Member, without the Consent of such Member adversely
affected if such amendment or action would (i) convert a Non-Managing Member's
interest in the Company into a Managing Member's interest, (ii) modify the
limited liability of a Non-Managing Member, (iii) alter rights of the Member to
receive distributions pursuant to Article 5 or Section 13.2.A(4), or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.3
and Section 7.3.C(3) hereof), (iv) materially alter or modify the rights to an
Exchange as set forth in Section 8.6, and related definitions hereof or (v)
amend this Section 7.3.D. Further, no amendment may alter the restrictions on
the Managing Member's authority set forth elsewhere in this Section 7.3 without
the Consent specified in such section. Any such amendment or action consented
to by any Member shall be effective as to that Member, notwithstanding the
absence of such consent by any other Member.
E. So long as the Initial Non-Managing Members own Non-Managing Member
Units representing at least 3% of the aggregate number of LLC Units issued on
the Effective Date, the Managing Member shall not, on behalf of the Company,
take any of the following actions without the prior Consent of the Non-Managing
Members:
(1) dissolve the Company for a period of five years from the
Effective Date; or
(2) except in connection with a tax-free transaction and except
pursuant to the Option Agreement (as defined in the Contribution
Agreement), sell, dispose, convey or otherwise transfer any of the real
properties (including any personal property related thereto) which the
Company acquired in connection with the transactions consummated pursuant
to the Contribution Agreement (collectively, the "Real Properties") for a
period of five years from the Effective Date.
Section 7.4. Compensation of the Managing Member
The Managing Member shall not be compensated for its services as the
manager 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).
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
Except as expressly permitted by this Agreement, neither the Managing
Member nor any of its Affiliates, directly or indirectly, shall sell, transfer
or convey any property to, or purchase any property from, or borrow funds from,
or lend funds to, the Company or engage in any other transaction with the
Company, except upon terms determined by the Managing Member in good faith to be
fair and reasonable and comparable to terms that could be obtained from an
unaffiliated party in an arm's length transaction.
Section 7.7. Indemnification
A. To the fullest extent permitted by applicable law, the Company shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
attorney's fees and other legal fees and expenses), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative, that
relate to the operations of the Company ("Actions") as set forth in this
Agreement in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise, for any indebtedness of the Company or any Subsidiary of the Company
(including, without limitation, any indebtedness which the Company or any
Subsidiary of the Company has assumed or taken subject to), and the Managing
Member is hereby authorized and empowered, on behalf of the Company, to enter
into one or more indemnity agreements consistent with the provisions of this
Section 7.7 in favor of any Indemnitee having or potentially having liability
for any such indebtedness. The termination of any proceeding by judgment, order
or settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 7.7.A. The termination
of any proceeding by conviction or upon a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, creates a
rebuttable presumption that the Indemnitee acted in a manner contrary to that
specified in this Section 7.7.A with respect to the subject matter of such
proceeding. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Company, and any insurance proceeds from the liability
policy covering the Managing Member and any Indemnitees, and neither the
Managing Member nor any Non-Managing Member shall have any obligation to
contribute to the capital of the Company or otherwise provide funds to enable
the Company to fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding or otherwise subject to or the focus of or is involved in any Action
shall be paid or reimbursed by the Company as incurred by the Indemnitee in
advance of the final disposition of the Action upon receipt by the Company of
(i) a written affirmation by the Indemnitee of the Indemnitee's good faith
belief that the standard of conduct necessary for indemnification by the Company
as authorized in Section 7.7.A has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
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. 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.
F. 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.
G. 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.
H. 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 and the Managing Member expressly acknowledge
that the Managing Member is acting for the benefit of the Company, the Members
and the Managing Member's shareholders collectively, that the Managing Member is
under no obligation to give priority to the separate interests of the Members or
the Managing Member's shareholders (including, without limitation, the tax
consequences to Members, Assignees or the Managing Member's shareholders) in
deciding whether to cause the Company to take (or decline to take) any actions
and that the Managing Member shall not be liable to the Company or to any Member
for monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Non-Managing Members in connection with such decisions, provided that
the Managing Member has acted in good faith and has not breached its express
covenants set forth in this Agreement.
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 7.10. 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.
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. All
Company assets shall be recorded as the property of the Company in its books and
records, irrespective of the name in which legal title to such Company assets is
held.
Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Company shall be entitled to assume that the Managing Member
has full power and authority, without the consent or approval of any other
Member or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Company and to enter into any contracts on behalf of the Company,
and take any and all actions on behalf of the Company, and such Person shall be
entitled to deal with the Managing Member as if it were the Company's sole party
in interest, both legally and beneficially. Each Non-Managing Member hereby
waives any and all defenses or other remedies that may be available against such
Person to contest, negate or disaffirm any action of the Managing Member in
connection with any such dealing. In no event shall any Person dealing with the
Managing Member or its representatives be obligated to ascertain that the terms
of this Agreement have been complied with or to inquire into the necessity or
expediency of any act or action of the Managing Member or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Company by the Managing Member or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Company and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Company.
ARTICLE 8.
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 8.1. Limitation of Liability
The Non-Managing Members shall have no liability under this Agreement
except as expressly provided in this Agreement or under the Act.
Section 8.2. Managing of Business
No Non-Managing Members or Assignee (other than the Managing Member, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the Managing Member, the Company or any of their Affiliates, in their capacity
as such) shall take part in the operations, management or control (within the
meaning of the Act) of the Company's business transact any business in the
Company's name or have the power to sign documents for or otherwise bind the
Company. The transaction of any such business by the Managing Member, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the Managing Member, the Company or any of their Affiliates, in their capacity
as such, shall not affect, impair 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 by a Member or its Affiliates with
the Managing Member, the Company or a Subsidiary (including, without limitation,
any employment agreement), any Member and any Assignee, officer, director,
employee, agent, trustee, Affiliate or shareholder of any Member shall be
entitled to and may have business interests and engage in business activities in
addition to those relating to the Company, including business interests and
activities that are in direct or indirect competition with the Company or that
are enhanced by the activities of the Company. Neither the Company nor any
Member shall have any rights by virtue of this Agreement in any business
ventures of any Member or Assignee. Subject to such agreements, none of the
Members nor any other Person shall have any rights by virtue of this Agreement
or the relationship established hereby in any business ventures of any other
Person (other than the Managing Member, to the extent expressly provided
herein), and such Person shall have no obligation pursuant to this Agreement,
subject to any agreements entered into by a Member or its Affiliates with the
Managing Member, the Company or a Subsidiary, to offer any interest in any such
business ventures to the Company, any Member or any such other Person, even if
such opportunity is of a character that, if presented to the Company, any Member
or such other Person, could be taken by such Person.
Section 8.4. Return of Capital
Except pursuant to the rights of Exchange set forth in Section 8.6 hereof,
no Member shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. Except to the
extent provided in Article 5, Article 6 and Article 13 hereof or 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, for a purpose reasonably related to such Non-Managing Member's
Membership Interest in the Company, 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; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Member and that each Member has agreed to contribute in
the future, and the date on which each became a Member.
B. The Company shall notify any Non-Managing Member of the then current
Adjustment Factor or any change made to the Adjustment Factor or to the REIT
Shares Amount within 30 days following such change or adjustment.
C. Notwithstanding any other provision of this Section 8.5, the Managing
Member may keep confidential from the Non-Managing Members, for such period of
time as the Managing Member determines in its sole and absolute discretion to be
reasonable, any information that (i) the Managing Member believes to be in the
nature of trade secrets or other information the disclosure of which the
Managing Member in good faith believes is not in the best interests of the
Company or could damage the Company or its business or (ii) the Company or the
Managing Member is required by law or by agreements with unaffiliated third
parties to keep confidential.
Section 8.6. Exchange Rights
A. On or after the date one year after the Effective Date, each Non-
Managing Member shall have the right (subject to the terms and conditions set
forth herein) to require the Managing Member to acquire all or a portion of the
Non-Managing Member Units held by such Non-Managing Member (such Non-Managing
Member Units being hereafter called "Tendered Units") in exchange
(an "Exchange") for, at the election of and in the sole and absolute discretion
of the Managing Member, either the Cash Amount or a number of REIT Shares equal
to the REIT Shares Amount payable on the Specified Exchange Date. Any Exchange
shall be exercised pursuant to a Notice of Exchange delivered to the Managing
Member by the Non-Managing Member exercising the Exchange right (the "Tendering
Party"). No Tendering Party shall be entitled to tender Non-Managing Member
Units pursuant hereto for exchange on a Specified Exchange Date in an amount
less than the lesser of (i) 1,000 Non-Managing Member Units, or (ii) all of the
Non-Managing Member Units then owned by the Tendering Party. On the Specified
Exchange Date, the Tendering Party shall sell the Tendered Units to the Managing
Member in exchange for, at the election of and in the sole and absolute
discretion of the Managing Member, either the Cash Amount or a number of REIT
Shares equal to the REIT Shares Amount. In the event that on the LLC
Distribution Date most recently preceding the Specified Exchange Date there
shall have been a Preferred Return Shortfall remaining in respect of the
Tendered Units following the payments made on such LLC Distribution Date
pursuant to Section 5.1 hereof, the Managing Member shall pay the Tendering
Party in cash on the Specified Exchange Date the amount of such Preferred Return
Shortfall remaining on such LLC Distribution Date in respect of the Tendered
Units. Any Tendered Units so acquired by the Managing Member pursuant to this
Section 8.6.A shall be held by the Managing Member as Non-Managing Member Units
with all the rights and preferences relating thereto as provided in this
Agreement. The Tendering Party shall submit (i) such information, certification
or affidavit as the Managing Member may reasonably require in connection with
the Ownership Limit and (ii) in the event the REIT Shares issuable upon such
Exchange are not registered for resale by the Tendering Party under the
Securities Act, such written representations, investment letters, legal opinions
or other instruments necessary, in the Managing Member's view, to effect
compliance with the Securities Act. If a Cash Amount is to be delivered upon
the Exchange, the Cash Amount shall be delivered as a certified check payable to
the Tendering Party or, in the Managing Member's sole discretion, in immediately
available funds. If REIT Shares are to be delivered upon the Exchange, the REIT
Shares Amount shall be delivered by the Managing Member as duly authorized,
validly issued, fully paid and nonassessable REIT Shares (and, if applicable,
Rights), free of any pledge, lien, encumbrance or restriction, other than the
Ownership Limit and, in the event the REIT Shares issuable upon such Exchange
are not registered for resale by the Tendering Party under the Securities Act,
the Securities Act and relevant state securities or "blue sky" laws. The
Tendering Party shall be deemed the owner of such REIT Shares and Rights for all
purposes, including, without limitation, rights to vote or consent, receive
dividends, and exercise rights, as of the Specified Exchange Date. REIT Shares
issued upon an acquisition of the Tendered Units by the Managing Member pursuant
to this Section 8.6.A may contain such legends regarding restrictions on
transfer or ownership to protect the Managing Member's tax status as a REIT and
in the event the REIT Shares issuable upon such Exchange are not registered for
resale by the Tendering Party under the Securities Act, restrictions under the
Securities Act and applicable state securities laws as the Managing Member in
good faith determines to be necessary or advisable in order to ensure compliance
with such laws.
B. Notwithstanding the provisions of Section 8.6.A hereof, no Non-
Managing Member shall have any right to tender for Exchange (whether for the
REIT Shares Amount or the Cash Amount) any Excess LLC Units held by such Non-
Managing Member. The Managing Member shall have no obligation to acquire Excess
LLC Units, whether for the REIT Shares Amount or the Cash Amount.
C. Notwithstanding anything herein to the contrary, with respect to any
Exchange pursuant to this Section 8.6 each Tendering Party shall continue to own
all LLC Units subject to any Exchange, and be treated as a Member with respect
to such LLC Units for all purposes of this Agreement, until such LLC Units are
transferred to the Managing Member and paid for or exchanged on the Specified
Exchange Date. Until a Specified Exchange Date and an acquisition of the
Tendered Units by the Managing Member pursuant to Section 8.6.A hereof, the
Tendering Party shall have no rights as a shareholder of the Managing Member
with respect to the REIT Shares issuable in connection with such acquisition.
D. In connection with an exercise of Exchange rights pursuant to this
Section 8.6, the Tendering Party shall submit the following to the Managing
Member, in addition to the Notice of Exchange:
(1) A written affidavit, dated the same date as, and accompanying,
the Notice of Exchange, (a) disclosing the actual and constructive
ownership, as determined for purposes of Code Sections 856(a)(6), 856(h),
856(d)(2)(b) and 856(d)(5), of REIT Shares by (i) such Tendering Party and
(ii) any Related Party and (b) representing that, after giving effect to
the Exchange, neither the Tendering Party nor any Related Party will own
REIT Shares in excess of the Ownership Limit;
(2) A written representation that neither the Tendering Party nor any
Related Party has any intention to acquire any additional REIT Shares prior
to the closing of the Exchange on the Specified Exchange Date; and
(3) An undertaking to certify, at and as a condition to the closing
of the Exchange that either (a) the actual and constructive ownership of
REIT Shares by the Tendering Party and any Related Party remain unchanged
from that disclosed in the affidavit required by Section 8.6.D(1) or (b)
after giving effect to the Exchange, neither the Tendering Party nor any
Related Party shall own REIT Shares in violation of the Ownership Limit.
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 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.
Section 9.2. Fiscal Year
The Fiscal Year of the Company shall be the calendar year.
Section 9.3. Reports
As soon as practicable, but in no event later than 90 days after the close
of each calendar quarter, the Managing Member shall cause to be mailed to each
Member of record as of the last day of the calendar quarter, a copy of the
general ledger of the Company covering the calendar quarter.
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.
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 interest of a Member shall be subject to the claims of
any creditor, to any spouse for alimony or support, or to legal process, and may
not be voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement.
B. No Membership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Membership Interest not made in
accordance with this Article 11 shall be null and void ab initio.
Section 11.2. Transfer of Managing Member's Membership Interest
A. Except in connection with a transaction described in Section 11.2.B,
the Managing Member shall not withdraw from the Company and shall not transfer
all or any portion of its interest in the Company without the Consent of all of
the Non-Managing Members, which may be given or withheld by each Non-Managing
Member in its sole and absolute discretion. Upon any transfer of the Membership
Interest of the Managing Member in accordance with the provisions of this
Section 11.2, the transferee shall become a Substitute Managing Member for all
purposes herein, and shall be vested with the powers and rights of the
transferor Managing Member, and shall be liable for all obligations and
responsible for all duties of the Managing Member, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Membership Interest so
acquired. It is a condition to any transfer otherwise permitted hereunder that
the transferee assumes, by operation of law or express agreement, all of the
obligations of the transferor Managing Member under this Agreement with respect
to such transferred Membership Interest, and such transfer shall relieve the
transferor Managing Member of its obligations under this Agreement accruing
subsequent to the date of such transfer. In the event the Managing Member
withdraws from the Company, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Incapacity of the Managing
Member, all of the remaining Members may elect to continue the Company business
by selecting a Substitute Managing Member in accordance with the Act.
B. The Managing Member shall not engage in any merger, consolidation or
other combination with or into another person, sale of all or substantially all
of its assets or any reclassification, recapitalization or change of its
outstanding equity interests (a "Termination Transaction"), unless either
(i) the Termination Transaction has been approved by the Consent of the Non-
Managing Members or (ii) in connection with the Termination Transaction, all
holders of LLC Units (other than the Managing Member) either will receive, or
will have the right to elect to receive, for each LLC Unit an amount of cash,
securities, or other property equal to the amount that would have been paid to
the holder had the LLC Unit been Exchanged for REIT Shares pursuant to Section
8.6 hereof immediately prior to the consummation of the Termination Transaction;
provided, however, that, if, in connection with the Termination Transaction, a
purchase, tender or exchange offer shall have been made to and accepted by the
holders of more than fifty percent (50%) of the outstanding REIT Shares, each
Member shall receive, or shall have the right to elect to receive, the greatest
amount of cash, securities, or other property which such Member would have
received had it exchanged its LLC Units for REIT Shares pursuant to Section 8.6
immediately prior to the expiration of such purchase, tender or exchange offer
and had thereupon accepted such purchase, tender or exchange offer.
Section 11.3. Non-Managing Members' Rights to Transfer
A. Right of First Refusal. If any Non-Managing Member proposes to
Transfer all or any portion of its Membership Interest for consideration, it
shall give notice thereof (the "Transfer Notice") to the Managing Member. The
Transfer Notice shall include the name and identity of the prospective
transferee, the date upon which such Transfer is to be consummated, which shall
not be more than 180 days after the date of the Transfer Notice, and the price
and terms on which the Non-Managing Member proposes to Transfer its Membership
Interest. For a period of ten (10) Business Days following its receipt of the
Transfer Notice, the Managing Member shall have an option to purchase the entire
Membership Interest offered at the price and on the terms set forth in the
Transfer Notice. The failure of the Managing Member to exercise its option
shall constitute a waiver thereof by the Managing Member with respect to the
transaction described in the Transfer Notice. Should the option be exercised by
the Managing Member, the sale to the Managing Member shall be consummated on or
before the later of (a) 30 days after the date on which the option was exercised
or (b) the date specified in the Transfer Notice as the date upon which the
proposed Transfer was to be consummated, for the price and on the terms set
forth in the Transfer Notice, and the transferring Non-Managing Member shall
execute and deliver all documents necessary to effectuate the Transfer of the
Membership Interest to the Managing Member. Should the option not be exercised
by the Managing Member, the Non-Managing Member may transfer the Membership
interested so offered, on or before the date specified in the Transfer Notice,
for the price, on the terms and to the transferee specified in the Transfer
Notice, subject to the limitations and provisions set forth in this Article 11.
Should such a Transfer not be timely consummated as aforesaid, then the
Membership Interest shall again become subject to the foregoing right of first
refusal. If the right of first refusal described in this Section 11.3.A is
exercised by the Managing Member, then the costs of the transaction, including
without limitation recording fees, escrow costs and attorneys' fees reasonably
incurred by the Company in connection with the Transfer, shall be shared equally
by the Managing Member and the transferring Non-Managing Member. If the
transferring Non-Managing Manager transfers its Membership Interest to a
purchaser other than the Managing Member, all costs of the transaction shall be
borne by the transferring Non-Managing Member. The transferring Non-Managing
Manager shall deliver all appropriate transfer documents, which shall be in form
and content satisfactory to the Managing Member.
B. Conditions to Transfer. It is a condition to any Transfer otherwise
permitted hereunder that the transferee assume by operation of law or express
agreement all of the obligations of the transferor Member under this Agreement
with respect to such Transferred Membership Interest. Notwithstanding the
foregoing, any transferee of any Transferred Membership Interest shall be
subject to the Ownership Limits and any and all ownership limitations contained
in the Charter. Any transferee, whether or not admitted as a Substituted
Member, shall take subject to the obligations of the transferor hereunder.
Unless admitted as a Substituted Member, no transferee, whether by a voluntary
Transfer, by operation of law or otherwise, shall have any rights hereunder,
other than the rights of an Assignee as provided in Section 11.5 hereof.
C. 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.
D. 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.
E. 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 could 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 could adversely affect the ability
of the Managing Member to continue to qualify as a REIT or could 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 (as determined in the sole discretion of the
Managing Member).
F. Transfers to Lenders. No Transfer of any LLC Units may be made to a
lender to the Company or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Company whose loan
constitutes a Nonrecourse Liability, without the consent of the Managing Member,
in its sole and absolute discretion; provided that, as a condition to such
consent, the lender will be required to enter into an arrangement with the
Company and the Managing Member to redeem or exchange for the REIT Shares Amount
any LLC Units in which a security interest is held simultaneously with the time
at which such lender would be deemed to be a member in the Company for purposes
of allocating liabilities to such lender under Code Section 752.
G. Pledge of Non-Managing Member Units. A Non-Managing Member shall be
entitled to pledge the Non-Managing Member Units owned by him or it to a lender
as security for a loan made by the lender to the Non-Managing Member. Subject
to compliance with the Ownership Limit and Section 11.3.F hereof, the Non-
Managing Member Units so pledged may be Transferred to the lender, and the
lender, at its option, shall become a Substituted Member in respect of the Non-
Managing Member Units so Transferred to it, upon foreclosure of the pledge or
other exercise of the rights of the lender as a secured party so long as the
lender represents to the Company and the Managing Member, in form and substance
satisfactory to the Managing Member in its reasonable discretion, that it is an
accredited investor within the meaning of Regulation D under the Securities Act
and that it is acquiring its interest in the Non-Managing Member Units for
investment only and not with a view to the distribution of the Non-Managing
Member Units in violation of the Securities Act.
H. Distribution of Non-Managing Member Units Upon Dissolution of
Cambridge Medical Center of San Diego, LLC. Cambridge Medical Center of San
Diego, LLC, a Non-Managing Member, shall be entitled to Transfer Non-Managing
Member Units held by it upon its dissolution and liquidation so long as each
party so receiving Non-Managing Member Units represents to the Company, in form
and substance satisfactory to the Managing Member in its reasonable discretion,
that it, he or she (i) is an "accredited investor" within the meaning of
Regulation D under the Securities Act, and (ii) is acquiring the Non-Managing
Member Units for investment only and not with a view to the distribution of the
Non-Managing Member Units in violation of the Securities Act.
Section 11.4. Substituted Members
A. No Member shall have the right to substitute a transferee (including
any transferees pursuant to Transfers permitted by Section 11.3 hereof) as a
Member in its place. The Managing Member shall, however, have the right to
consent to the admission of a transferee of the interest of a Member pursuant to
this Section 11.4 as a Substituted Member, which consent may be given or
withheld by the Managing Member in its sole and absolute discretion. The
Managing Member's failure or refusal to permit a transferee of any such
interests to become a Substituted Member shall not give rise to any cause of
action against the Company or any Member.
B. A transferee who has been admitted as a Substituted Member in
accordance with this Article 11 shall have all the rights and powers and be
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 (and any
other Member, as necessary).
Section 11.5. Assignees
If the Managing Member, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 hereof
as a Substituted Member, as described in Section 11.4 hereof, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited liability
company interest under the Act, including the right to receive distributions
from the Company and the share of Net Income, Net Loss 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 Member 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 withdraw from the Company other than (i) as
a result of a permitted Transfer of all of such Non-Managing Member's LLC Units
in accordance with this Article 11 and the transferee(s) of such LLC Units being
admitting to the Company as a Substituted Member or (ii) pursuant to an Exchange
by the Non-Managing Member of all of its LLC Units under Section 8.6 hereof.
B. Any Member who shall Transfer all of its LLC Units in a Transfer
(i) permitted pursuant to this Article 11 where such transferee was admitted as
a Substituted Member or (ii) pursuant to the exercise of its rights to effect an
Exchange of all of its LLC Units under Section 8.6 hereof, shall cease to be a
Member.
C. Transfers pursuant to this Article 11 (other than pledges pursuant to
Section 11.3.G Transfers upon dissolution pursuant to Section 11.3.H) may only
be made on the first day of a fiscal quarter of the Company, unless the Managing
Member otherwise agrees.
D. 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 and all
distributions of Available Cash thereafter attributable to such LLC Unit shall
be made to the transferee Member.
E. Notwithstanding anything to the contrary set forth herein, 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
Exchange or any other acquisition of LLC Units by the Company) be made:
(a) to any person or entity who lacks the legal right, power or
capacity to own a Membership Interest;
(b) in violation of applicable law;
(c) if such Transfer would, in the opinion of counsel to the Company
or the Managing Member, cause an increased tax liability to any other
Member or Assignee as a result of the termination of the Company, in either
case for federal or state income or franchise tax purposes (except as a
result of the Exchange of all LLC Units held by all Members);
(d) if such Transfer could, 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;
(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; or
(i) without the consent of the Managing Member, which may be given or
withheld in its sole discretion, if such Transfer would result in the
Company having more than 100 Members (including as Members those persons
indirectly owning an interest in the Company through a partnership, limited
liability company, S corporation or grantor trust (such entity, a "flow
through entity"), but only if substantially all of the value of such
person's interest in the flow through entity is attributable to the flow
through entity's interest (direct or indirect) in the Company).
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
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 Substituted Members
No Person shall be admitted to the Company as a Substituted 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.
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, in which
case the Managing Member shall have the right to purchase any outstanding Non-
Managing Member Units and any of the Company's Properties at their fair market
value at such time;
B. an event of withdrawal of the Managing Member, as defined in the Act
(other than an event of bankruptcy), unless, within 90 days after the
withdrawal, a Majority of Remaining Members agree in writing to continue the
business of the Company and to the appointment, effective as of the date of
withdrawal, of a substitute Managing Member;
C. subject to the provisions of Section 7.3.E hereof, an election to
dissolve the Company made by the Managing Member;
D. entry of a decree of judicial dissolution of the Company pursuant to
the provisions of the Act;
E. the sale of all or substantially all of the assets and properties of
the Company;
F. a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the Managing Member is bankrupt or insolvent, or a
final and non-appealable order for relief is entered by a court with appropriate
jurisdiction against the Managing Member, in each case under any Bankruptcy Law
as now or hereafter in effect, unless prior to or within ninety days after the
entry of such order or judgment a Majority of Remaining Members Consent in
writing to continue the business of the Company and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute Managing Member;
G. the Incapacity of the Managing Member, unless prior to or within 90
days after such Incapacity a Majority of Remaining Members agree in writing to
continue the business of the Company and to the appointment, effective as of a
date prior to the date of such Incapacity, of a substitute Managing Member; or
H. the Exchange of all LLC Units (other than those held by the Managing
Member).
Section 13.2. Winding Up
A. Upon the occurrence of a Liquidating Event, the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its creditors and Members.
After the occurrence of a Liquidating Event, no Member shall take any action
that is inconsistent with, or not necessary to or appropriate for, the winding
up of the Company's business and affairs. The Managing Member (or, in the event
that there is no remaining Managing Member, any Person elected by a Majority in
Interest of the Non-Managing Members (the Managing Member or such other Person
being referred to herein as the "Liquidator")) shall be responsible for
overseeing the winding up and dissolution of the Company and shall take full
account of the Company's liabilities and property, and the Company property
shall be liquidated as promptly as is consistent with obtaining the fair value
thereof, and the proceeds therefrom (which may, to the extent determined by the
Managing Member, include shares of stock in the Managing Member) shall be
applied and distributed in the following order:
(1) First, to the satisfaction of all of the Company's debts and
liabilities to creditors other than the Members and their Assignees
(whether by payment or the making of reasonable provision for payment
thereof);
(2) Second, to the satisfaction of all of the Company's debts and
liabilities to the Managing Member incurred with the consent of the Non-
Managing Members (whether by payment or the making of reasonable provision
for payment thereof), and to the satisfaction of all of the Company's debts
and liabilities to the other Members and any Assignees with the consent of
the Managing Member (whether by payment or the making of reasonable
provision for payment thereof), pro rata based upon the amount of the debts
and liabilities owing to the respective Managing Member, other Member and
Assignee; and
(3) The balance, if any, to the Members in accordance with and
proportion to their positive Capital Account balances, after giving effect
to all contributions, distributions and allocations for all periods,
including allocation made pursuant to Section 6.2.C to reflect Intended
Liquidating Distributions.
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 or all of the Company's assets would
be impractical or would cause undue loss to the Members, the Liquidator may, in
its sole and absolute discretion, defer for a reasonable time the liquidation of
any assets except those necessary to satisfy liabilities of the Company
(including to those Members as creditors) and/or distribute to the Members, in
lieu of cash, as tenants in common and in accordance with the provisions of
Section 13.2.A hereof, undivided interests in such Company assets as the
Liquidator deems not suitable for liquidation. Any such distributions in kind
shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Members, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.
C. In the event that the Company is "liquidated" within the meaning of
Regulations Section 1.704-1(b) (2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the Members and Assignees that have positive Capital
Accounts in compliance with Regulations Section 1.704-1(b) (2)(ii)(b) (2) to the
extent of, and in proportion to, their positive Capital Account balances. If
any Member has a deficit balance in its Capital Account (after giving effect to
all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Member shall have
no obligation to make any contribution to the capital of the Company with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any purpose whatsoever. In the sole and
absolute discretion of the Managing Member or the Liquidator, a pro rata portion
of the distributions that would otherwise be made to the Members pursuant to
this Article 13 may be withheld or escrowed to provide a reasonable reserve for
Company liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Company, provided that such
withheld or escrowed amounts shall be distributed to the Members in the manner
and order of priority set forth in Section 13.2.A hereof as soon as practicable.
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) except as provided in this Agreement, 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
Upon the completion of the liquidation of the Company cash and property as
provided in Section 13.2 hereof, the Company shall be terminated and the
Certificate and all qualifications of the Company as a foreign limited liability
company in jurisdictions other than the State of Delaware shall be cancelled and
such other actions as may be necessary to terminate the Company shall be taken.
Section 13.7. Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Company and the liquidation of its assets pursuant
to Section 13.2 hereof, in order to minimize any losses otherwise attendant upon
such winding-up, and the provisions of this Agreement shall remain in effect
between the Members during the period of liquidation.
Section 13.8. Liability of Liquidator
The Liquidator shall be indemnified and held harmless by the Company from
and against any and all claims, liabilities, costs, damages, and causes of
action of any nature whatsoever arising out of or incidental to the Liquidator's
taking of any action authorized under or within the scope of this Agreement;
provided, however, that the Liquidator shall not be entitled to indemnification,
and shall not be held harmless, where the claim, demand, liability, cost, damage
or cause of action at issue arises out of (i) a matter entirely unrelated to the
Liquidator's action or conduct pursuant to the provisions of this Agreement or
(ii) the proven willful misconduct or gross negligence of the Liquidator.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS
OF MEMBERS; AMENDMENTS; MEETINGS
Section 14.1. Procedures for Actions and Consents of Members
The actions requiring consent or approval of Non-Managing Members pursuant
to this Agreement, including Section 7.3 hereof, or otherwise pursuant to
applicable law, are subject to the procedures set forth in this Article 14.
Section 14.2. Amendments
Amendments to this Agreement consistent with the terms of this Agreement
may be proposed by the Managing Member or by a Majority in Interest of the Non-
Managing Members. Following such proposal, the Managing Member shall submit any
proposed amendment to the Members. The Managing Member shall seek the written
Consent of the Members on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that the Managing Member may deem
appropriate. The affirmative vote or consent, as applicable, of the holders of
a majority of the outstanding LLC Units is required for the approval of a
proposed amendment. For purposes of obtaining a written consent, the Managing
Member may require a response within a reasonable specified time, but not less
than 15 days, and failure to respond in such time period shall constitute a
consent that is consistent with the Managing Member's recommendation with
respect to the proposal; provided, however, that an action shall become
effective at such time as requisite consents are received even if prior to such
specified time.
Section 14.3. Meetings of the Members
A. Meetings of the Members may be called by the Managing Member and shall
be called upon the receipt by the Managing Member of a written request by a
Majority in Interest of the Non-Managing Members. The call shall state the
nature of the business to be transacted. Notice of any such meeting shall be
given to all Members not less than seven days nor more than 30 days prior to the
date of such meeting. The meeting shall be held at the headquarters office of
the Managing Member or at such other location as may be designated by the
Managing Member. 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. Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" or
"Sections" are to Articles and Sections of this Agreement.
Section 15.3. Pronouns and Plurals
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4. Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
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, the Contribution Agreement and the other agreements
executed on the Effective Date as provided in the Contribution Agreement contain
all of the understandings and agreements between and among the Members with
respect to the subject matter of this Agreement and the rights, interests and
obligations of the Members with respect to the Company.
Section 15.11 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.12. Limitation to Preserve REIT Status
Notwithstanding anything else to the contrary in this Agreement, to the extent
that any amount paid or credited to the Managing Member or its officers,
directors, employees or agents pursuant to Section 7.7 would constitute gross
income to the Managing Member for purposes of Sections 856(c)(2) or 856(c)(3) of
the Code (a "Managing Member Payment") then, notwithstanding any other provision
of this Agreement, the amount of such Managing Member Payments for any fiscal
year shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.17% of the
Managing Member's total gross income (but not including the amount of any
Managing Member Payments) for the fiscal year which is described in
subsections (a) through (H) of Section 856(c)(2) of the Code over (b) the
amount of gross income (within the meaning of Section 856(c)(2) of the
Code) derived by the Managing Member from sources other than those
described in subsections (a) through (H) of Section 856(c)(2) of the Code
(but not including the amount of any Managing Member Payments); or
(ii) an amount equal to the excess, if any, of (a) 25% of the Managing
Member's total gross income (but not including the amount of any Managing
Member Payments) for the fiscal year which is described in subsections
(a) through (i) of Section 856(c)(3) of the Code over (b) the amount of
gross income (within the meaning of Section 856(c)(3) of the Code) derived
by the Managing Member from sources other than those described in
subsections (a) through (i) of Section 856(c)(3) of the Code (but not
including the amount of any Managing Member Payments);
provided, however, that Managing Member Payments in excess of the amounts set
forth in subparagraphs (i) and (ii) 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 would not adversely affect the Managing Member's ability to
qualify as a REIT. To the extent Managing Member Payments may not be made in a
year due to the foregoing limitations, such Managing Member Payments shall carry
over and be treated as arising in the following year; provided, however, that
such amounts shall not carry over for more than five years, and if not paid
within such five year period, shall expire; provided, further, that (a) as
Managing Member Payments are made, such payments shall be applied first to carry
over amounts outstanding, if any and (b) with respect to carry over amounts for
more than one Fiscal Year, such payments shall be applied to the earliest Fiscal
Year first.
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.
Section 15.14. Non-Managing Member Representative
A. All actions taken by the Non-Managing Member Representative pursuant
to those provisions of this Agreement which authorize the Non-Managing Member
Representative to so act shall be binding upon all Non-Managing Members as if
they had individually taken such action and each Non-Managing Member, by
entering into or agreeing to be bound by the provisions of this Agreement,
authorize the Non-Managing Member Representative to take such actions on his,
her or its behalf and agree that the actions so taken shall be binding upon him,
her or it to the same extent as if he, she or it had taken the action directly.
B. The holders of a majority of the outstanding Non-Managing Members
Units shall be entitled to replace the Non-Managing Member Representative by
delivering to the Managing Member a written notice signed by the holders of a
majority of the outstanding Non-Managing Members Units stating (i) that the
notice is being provided to the Managing Member pursuant to this Section
15.14.B, (ii) that the Members signing the notice own of record on the books of
the Company a majority of the outstanding Non-Managing Members Units, (iii) that
the Members signing the notice desire to replace the person then serving as the
Non-Managing Member Representative with the person named in the notice, and
(iv) specifying the date on which the appointment of the named individual to
replace the then serving Non-Managing Member Representative shall be effective
(which shall be a date not earlier than the fourteenth day after the date on
which the notice shall have been delivered to the Managing Member). The
appointment of the new Non-Managing Member Representative specified in the
notice shall be effective on the date specified in the notice and upon
effectiveness, the individual previously serving as the Non-Managing Member
Representative shall cease to be entitled to act in that capacity under this
Agreement.
[Signatures appear on following page]
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the
date first written above.
MANAGING MEMBER:
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation
By:
Name:
Title:
NON-MANAGING MEMBERS:
CAMBRIDGE MEDICAL CENTER OF SAN DIEGO, LLC,
a California limited company
By: 8008 Frost, Inc., its Managing Member
By:
Name: Jean-Claude Saada
Title: President
EXHIBIT A
MEMBERS' CAPITAL CONTRIBUTIONS
Gross Asset Less Debt Non-
Value of Assumed or Managing Managing
Cash Contributed Taken Subject Member Member
Name of Member Contributions Property to by Company Units Units
- - ----------------------------------------------------------------------------------------------------------------------------
Managing Member $40,500,000 1,048,951
Health Care Property Investors, Inc.
Non Managing Members
Cambridge Medical Center of
San Diego, LLC $47,000,000 $40,500,000 168,350
Totals $40,500,000 $47,000,000 $40,500,000 1,048,951 168,350
EXHIBIT B
NOTICE OF EXCHANGE
To: Health Care Property Investors, Inc.
4675 MacArthur Court, Suite 900
Newport Beach, California 92660
The undersigned Member or Assignee hereby irrevocably tenders for Exchange
___________ LLC Units in Cambridge Medical Properties, LLC in accordance with
the terms of the Amended and Restated Limited Liability Company Agreement of
Cambridge Medical Properties, LLC, dated as of November ___, 1997 (the
"Agreement"), and the Exchange rights referred to therein. The undersigned
Member or Assignee:
(a) undertakes (i) to surrender such LLC Units and any certificate
therefor at the closing of the Exchange and (ii) to furnish to the Managing
Member, prior to the Specified Exchange Date, the documentation, instruments and
information required under Section 8.6.D of the Agreement;
(b) directs that, at the sole discretion of the Managing Member, either
(i) a certified check representing the Cash Amount deliverable upon closing of
the Exchange be delivered to the address specified below or (ii) a
certificate(s) representing the REIT Shares deliverable upon the closing of such
Exchange be delivered to the address specified below;
(c) represents, warrants, certifies and agrees that: (1) the undersigned
Member or Assignee has, and at the closing of the Exchange will have, good,
marketable and unencumbered title to such LLC Units, free and clear of the
rights or interests of any other person or entity, (2) the undersigned Member or
Assignee has, and at the closing of the Exchange will have, the full right,
power and authority to tender and surrender such LLC Units as provided herein,
(3) the undersigned Member or Assignee has obtained the consent or approval of
all persons and entities, if any, having the right to consent to or approve such
tender and surrender, and (4) such Exchange is in compliance with the provisions
of Section 8.6 of the Agreement; and
(d) acknowledges that it will continue to own such LLC Units until and
unless such Exchange transaction closes.
All capitalized terms used herein and not otherwise defined shall have the same
meaning ascribed to them respectively in the Agreement.
Dated:
---------------------------------
Name of Member or Assignee:
---------------------------------
(Signature of Member or Assignee)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip)
Signature Guaranteed by:
Issue REIT Shares in the name of: -------------------------
Please insert social security or identifying number: ---------------------
EXHIBIT C
Agreed Values of Real Properties
Property/ Rentable Initial Agreed
Property Type Square Feet Upon Values
- - ----------------- ----------- --------------
7910 Frost Street 20,355 $ 3,550,000
7920 Frost Street 24,820 3,950,000
7930 Frost Street 36,199 7,500,000
8008 Frost Street 46,438 11,100,000
8010 Frost Street 85,648 20,900,000
----------- -------------
TOTAL 213,460 $47,000,000
=========== =============
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CAMBRIDGE MEDICAL PROPERTIES, LLC
a Delaware limited liability company
Dated as of November 21, 1997
TABLE OF CONTENTS
Page
------
ARTICLE 1. DEFINED TERMS 1
ARTICLE 2. ORGANIZATIONAL MATTERS 17
Section 2.1. Formation 17
Section 2.2. Name 18
Section 2.3. Registered Office and Agent; Principal Place of
Business; Other Places of Business 18
Section 2.4. [Intentionally Deleted] 18
Section 2.5. Term 18
ARTICLE 3. PURPOSE 19
Section 3.1. Purpose and Business 19
Section 3.2. Powers 19
Section 3.3. Specified Purposes 19
Section 3.4. Representations and Warranties by the Members;
Disclaimer of Certain Representations 19
ARTICLE 4. CAPITAL CONTRIBUTIONS 22
Section 4.1. Capital Contributions of the Initial Members 22
Section 4.2. Loans by Third Parties 22
Section 4.3. Additional Capital Contributions 22
Section 4.4. No Interest; No Return 23
ARTICLE 5. DISTRIBUTIONS 23
Section 5.1. Requirement and Characterization of Distributions 23
Section 5.2. Distributions in Kind 23
Section 5.3. Amounts Withheld 23
Section 5.4. Distributions Upon Liquidation 24
Section 5.5. Restricted Distributions 24
Section 5.6. Distributions of Proceeds from Sale of Real
Properties and Refinancing Debt 24
Section 5.7. Offset 25
ARTICLE 6. ALLOCATIONS 25
Section 6.1. Timing and Amount of Allocations of Net Income
and Net Loss 25
Section 6.2. General Allocations 27
Section 6.3. Additional Allocation Provisions 28
Section 6.4. Tax Allocations 29
Section 6.5. Other Provisions 30
Section 6.6. Amendments to Allocation to Reflect Issuance
of Additional Membership Interests 29
ARTICLE 7. MANAGEMENT AND OPERATIONS OF BUSINESS 30
Section 7.1. Management 30
Section 7.2. Certificate of Formation 33
Section 7.3. Restrictions on Managing Member's Authority 34
Section 7.4. Compensation of the Managing Member 35
Section 7.5. Other Business of Managing Member 36
Section 7.6. Contracts with Affiliates 36
Section 7.7. Indemnification 36
Section 7.8. Liability of the Managing Member 37
Section 7.9. Other Matters Concerning the Managing Member 37
Section 7.10. Title to Company Assets 37
Section 7.11. Reliance by Third Parties 37
ARTICLE 8. RIGHTS AND OBLIGATIONS OF MEMBERS 37
Section 8.1. Limitation of Liability 37
Section 8.2. Managing of Business 37
Section 8.3. Outside Activities of Members 37
Section 8.4. Return of Capital 37
Section 8.5. Rights of Non-Managing Members Relating to the Company 37
Section 8.6. Exchange Rights 37
ARTICLE 9. BOOKS, RECORDS, ACCOUNTING AND REPORTS 37
Section 9.1. Records and Accounting 37
Section 9.2. Fiscal Year 37
Section 9.3. Reports 37
ARTICLE 10. TAX MATTERS 37
Section 10.1. Preparation of Tax Returns 37
Section 10.2. Tax Elections 37
Section 10.3. Tax Matters Partner 37
Section 10.4. Organizational Expenses 37
ARTICLE 11. TRANSFERS AND WITHDRAWALS 37
Section 11.1. Transfer 37
Section 11.2. Transfer of Managing Member's Membership Interest 37
Section 11.3. Non-Managing Members' Rights to Transfer 37
Section 11.4. Substituted Members 37
Section 11.5. Assignees 37
Section 11.6. General Provisions 37
ARTICLE 12. ADMISSION OF MEMBERS 37
Section 12.1. Admission of Successor Managing Member 37
Section 12.2. Amendment of Agreement and Certificate 37
Section 12.3. Limitation on Admission of Substituted Members 37
ARTICLE 13. DISSOLUTION, LIQUIDATION AND TERMINATION 37
Section 13.1. Dissolution 37
Section 13.2. Winding Up 37
Section 13.3. Deemed Distribution and Recontribution 37
Section 13.4. Rights of Members 37
Section 13.5. Notice of Dissolution 37
Section 13.6. Cancellation of Certificate 37
Section 13.7. Reasonable Time for Winding-Up 37
Section 13.8. Liability of Liquidator 37
ARTICLE 14. PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS;
AMENDMENTS; MEETINGS 37
Section 14.1. Procedures for Actions and Consents of Members 37
Section 14.2. Amendments 37
Section 14.3. Meetings of the Members 37
ARTICLE 15. GENERAL PROVISIONS 37
Section 15.1. Addresses and Notice 37
Section 15.2. Titles and Captions 37
Section 15.3. Pronouns and Plurals 37
Section 15.4. Further Action 37
Section 15.5. Binding Effect 37
Section 15.6. Creditors 37
Section 15.7. Waiver 37
Section 15.8. Counterparts 37
Section 15.9. Applicable Law 37
Section 15.10. Entire Agreement 37
Section 15.11. Invalidity of Provisions 37
Section 15.12. Limitation to Preserve REIT Status 37
Section 15.13. No Partition 37
Section 15.14. Non-Managing Member Representative 37
Exhibit A Member Information A-1
Exhibit B Notice of Exchange B-1
Exhibit C Agreed Values of Real Properties C-1
Exhibit C-1 Allocations C-1-1
Exhibit D Distribution Illustrations D-1