Exhibit 10.16
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
HCPI/UTAH, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") is made
and entered into as of January 20, 1999, 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 HCPI/Utah, LLC, a Delaware limited liability company (the "Company").
WHEREAS, the Managing Member, the Company, and each of the parties
identified on the signature page of that certain Contribution Agreement dated as
of the date hereof (the "Contribution Agreement") (collectively, the
"Transferor"), have entered into 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 into
this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties 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 4.4.A hereof.
"Additional Member" means a Person admitted to the Company as a Member
pursuant to Section 4.2 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.
"Aggregate Sharing Amount" means, with respect to any taxable
disposition of a Real Property, an amount equal to the excess, if any, of (i)
the Property Appreciation with respect to all Real Properties being sold or
previously sold by the Company; over (ii) the Unit Appreciation with respect to
all Real Properties being sold or previously sold by the Company.
"Agreement" means this Amended and Restated Limited Liability Company
Agreement of HCPI/Utah LLC, as it may be amended, supplemented or restated from
time to time.
"Appraisal" means, with respect to any assets, the written opinion of
an independent third party experienced in the valuation of similar assets 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 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 GAAP,
(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, but not limited to,
Capital Contributions, 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 that the Managing Member determines are necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include (i) any cash
received or reductions in reserves, or take into account any disbursements made,
or reserves established, after dissolution and the commencement of the
liquidation and winding up of the Company, (ii) Disposition Proceeds or (iii)
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.
"Built-in Gain" means the excess of the gross fair market value of one
or more of the Real Properties or Successor Properties over the adjusted tax
basis of such property or properties (as the case may be) for federal income tax
purposes, as determined as of the Effective Date, as reduced from time to time
in accordance with applicable provisions of the Code and Regulations.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California or Salt Lake City, Utah are
authorized or required by law to close.
"Call Notice" means a written notice to the Non-Managing Members
informing them of the Managing Member's election to call their Non-Managing
Member Units pursuant to Section 13.2 hereof.
"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 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
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) above 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 change
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, Section 4.2 or
Section 4.4 hereof.
"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 the closing price of a REIT Share on the New
York Stock Exchange.
"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.
"Contribution Agreement" means the Contribution Agreement of even date
herewith, by and between the Managing Member, the Company and the parties
identified on the signature page thereto.
"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 GAAP, 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.
"Dissolution Protection Period" means the period beginning on the
Effective Date and ending either (i) on the date on which the Initial Threshold
Test has been satisfied, if the Initial Threshold Test is satisfied at any time
prior to the third (3rd) anniversary of the Effective Date or (ii) on the date
on which the Subsequent Threshold Test is satisfied if the Initial Threshold
Test is not satisfied at any time prior to the third (3rd) anniversary of the
Effective Date.
"Disposition Proceeds" means the net proceeds (including a reduction
for any amount used for the repayment of any Debt and the payment of any costs
related thereto) received by the Company upon the taxable disposition of some,
but not all, of the Real Properties.
"Effective Date" means the date on which the transactions contemplated
by the Contribution Agreement to be consummated on the Initial Closing Date are
consummated at which time the contributions set forth on Exhibit A that are to
be effective on the Effective Date shall become effective. With respect to any
future contributions, the Effective Date shall be the date that such
contributions are completed.
"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 or otherwise
in violation of the Charter.
"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.
"Existing Indebtedness" has the meaning set forth in Section 7.3E(3)
hereof.
"First Exchange Date" means the first anniversary of the Initial
Closing Date or, if such day is not a Business Day, the next following Business
Day.
"First Traunch Non-Managing Member Units" has the meaning set forth in
Section 8.6.A hereof.
"Fiscal Year" means the fiscal year of the Company, which shall be the
calendar year.
"Flip-Over Event" means the occurrence of a merger of the Managing
Member with and into another Person or the consolidation of the Managing Member
with another Person, or the merger of another Person with and into the Managing
Member or the sale or transfer of assets of the Managing Member to another
Person if, as a result of such merger, consolidation or transfer of assets the
holder of Rights issued under the Rights Agreement would be entitled under
Section 13 of the Rights Agreement (or a comparable provision in the event the
Rights Agreement is amended) to purchase shares of common stock of such other
Person (including the Managing Member as the successor to such other Person or
as the surviving corporation) (the "Successor Person").
"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
but including, without limitation, acquisitions pursuant to
Section 4.2 hereof or contributions or deemed contributions by the
Managing Member pursuant to Section 4.4 hereof) 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.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the United States accounting profession, which are applicable to the facts
and circumstances on the date of determination.
"HCPI/Davis North I, LLC" shall mean HCPI/Davis North I, LLC, a
Delaware limited liability company and subsidiary of the Company.
"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 (i) any Person made a party to a proceeding by
reason of its status as (a) the Managing Member or (b) a director of the
Managing Member or an officer or employee of the Company or the Managing Member
and (ii) such other Persons (including Affiliates of the Managing Member or the
Company) as the Managing Member may designate from time to time (whether before
or after the event giving rise to potential liability), in its sole and absolute
discretion.
"Initial Closing Date" has the meaning set forth in the Contribution
Agreement.
"Initial Non-Managing Members" means the Non-Managing Members who
acquired their Non-Managing Member Units in exchange for the Real Properties or
the ninety nine percent (99%) non-managing member interest in HCPI/Davis North
I, LLC.
"Initial Threshold Test" means a test which will be satisfied on the
date on which ninety percent (90%) of the LLC Units issued by the Company to the
Initial Non-Managing Members have been disposed of pursuant to a Taxable
Disposition or series of Taxable Dispositions.
"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 13.3.A hereof.
"LLC Distribution Date" means the date established by the Managing
Member 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 payment of dividends to holders of
REIT Shares.
"LLC Record Date" means the record date established by the Managing
Member 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.
"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 Shortfall" has the meaning set forth in Section
5.1.A(2) hereof.
"Managing Member Unit" means a single unit of Membership Interest of
the Managing Member issued pursuant to Article 4 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 Additional and 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."
"NMM Sharing Amount" means, with respect to any taxable disposition of
a Real Property, the product equal to (i) the Sharing Amount multiplied by (ii)
the NMM Sharing Percentage.
"NMM Sharing Percentage" means a percentage equal to 1% multiplied by
a fraction with the numerator equal to the number of Non-Managing Member Units
then outstanding and the denominator equal to the number of Non-Managing Member
Units issued by the Company to all Initial Non-Managing Members; provided,
however, any NMM Units reduced pursuant to Section 8.6.D hereof shall be
subtracted from the denominator of such fraction.
"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 Steven B. Ostler 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
issued to a Non-Managing Member pursuant to Section 4.1 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.
"One Hundred Member Limit" has the meaning set forth in Section 11.6.E
hereof.
"Ownership Limit" means 9.9% of the number or value (whichever is more
restrictive) of outstanding REIT Shares. The number of REIT Shares shall be
determined by the Board of Directors of the Managing Member, in good faith,
which determination shall be conclusive for all purposes hereof.
"Payment Quarter" has the meaning set forth in Section 5.1.A hereof.
"Percentage Interest" means, as to a Member holding a Membership
Interest, its interest in the Company as determined by dividing the LLC Units
owned by such Member by the total number of LLC Units then outstanding as
specified in Exhibit A attached hereto, as it may be modified or supplemented
from time to time.
"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
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 December 31, 1998 shall be the foregoing product of
(i) and (ii) above multiplied by a fraction, the numerator of which shall be the
number of days in the period commencing on the date hereof and ending on March
31, 1999, and the denominator of which shall be the number of days in the period
commencing on January 1, 1999 and ending on March 31, 1999.
"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), Section 5.6.A(1) or
Section 5.6.B(1) hereof, together with cumulative interest accruing thereon at
the Prime Rate from the applicable LLC Record Date to the date of distribution.
"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.
"Property Appreciation" means, with respect to a taxable disposition
of a Real Property, the excess of the sales price paid in such disposition
(including amounts paid through the assumption of debt) over the initial Gross
Asset Value of such Real Property.
"Real Properties" has the meaning set forth in Section 7.3.E(2)
hereof.
"Recourse Debt Amount" means a number equal to (i) $22,000,000 minus
(ii) the amount of nonrecourse debt of the Company allocable to the Non-Managing
Members, as determined from time to time in the reasonable discretion of the Non
Managing Member Representative and communicated to the Company and the Managing
Member, but which number shall in no event be less than zero. The Non-Managing
Member Representative has informed the Managing Member and the Company that the
amount of nonrecourse debt of the Company allocable to the Non-Managing Members
as of the date of this Agreement is Twenty-Five Million Two Hundred Four
Thousand Dollars ($25,204,000.00).
"Reduction" has the meaning set forth in Section 8.6.D hereof.
"Reduction Date" has the meaning set forth in Section 8.6.D hereof.
"Reduction Units" has the meaning set forth in Section 8.6.D 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.
"Refinancing Debt Proceeds" means the net proceeds from any
Refinancing Debt incurred by the Company which remain after the repayment of any
Debt with proceeds of the Refinancing Debt and all costs related to the
Refinancing Debt.
"Regulations" means the applicable income tax regulations under the
Code, whether such regulations are in proposed, temporary or final form, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 6.3.A(7)
hereof.
"REIT" means a real estate investment trust qualifying under Code
Section 856, et seq.
"REIT Member" means a Member or Assignee that is, or has made an
election to qualify as, a REIT.
"REIT Payment" has the meaning set forth in Section 15.12 hereof.
"REIT Requirements" has the meaning set forth in Section 5.1.B 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 Rights to
all holders of REIT Shares as of a certain record date, 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 holder 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. So long as the holder of Tendered Units is
not an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
those terms are defined in the Rights Agreement), the number of REIT Shares
referenced in the preceding sentence shall be adjusted for the issuance,
distribution and triggering of exercisability of the Rights governed by the
Rights Agreement (so long as the Rights shall not previously have been redeemed
or expired pursuant to the Rights Agreement) which adjustment shall be satisfied
by issuing, together with the REIT Shares Amount, either (i) if Rights may be
issued under the Rights Agreement, the aggregate number of Rights issuable under
the Rights Agreement with respect to a number of REIT Shares equal to the REIT
Shares Amount, or (ii) in the event Rights may no longer be issued under the
Rights Agreement, a number of REIT Shares necessary to reflect equitably the
dilution in REIT Shares resulting from the exercise of Rights (but only if the
REIT Shares Amount is issued subsequent to the occurrence of an event that
results in a reduction in the purchase price attributable to the Rights in the
manner provided in Section 11(a)(ii) of the Rights Agreement (or any comparable
provision in the event the Rights Agreement is amended), and prior to a Flip-
Over Event), or (iii) if the REIT Shares Amount is issued concurrently with or
subsequent to a Flip-Over Event, the number of shares of common stock of the
Successor Person necessary to reflect equitably the dilution in REIT Shares
resulting from the exercise of Rights.
"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)).
"Replacement Indebtedness" has the meaning set forth in Section
7.3.E(3) hereof.
"Rights" means 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.
"Rights Agreement" means the Rights Agreement, dated as of July 5,
1990, by and between the Managing Member and Manufacturers Hanover Trust Company
of California, as the same may be supplemented or amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Second Exchange Date" means that date which is one year after the
last Non-Managing Member Unit is issued pursuant to the Contribution Agreement
or, if such day is not a Business Day, the next following Business Day.
"Second Traunch Non-Managing Member Units" has the meaning set forth
in Section 8.6.A hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Sharing Amount" means, with respect to any taxable disposition of a
Real Property, the excess, if any, of the Aggregate Sharing Amount over the
Sharing Amounts, if any, previously used for purposes of calculating Reduction
Units pursuant to Section 8.6.D.
"Sharing Percentage" means, with respect to a Non-Managing Member or
Assignee, its share of the NMM Sharing Percentage based on its share of the Non-
Managing Member Units and, with respect to the Managing Member, one hundred
percent (100%) minus the NMM Sharing Percentage.
"Specified Exchange Date" means (A) in the case of an Exchange
pursuant to Section 8.6.A hereof, (i) the First Exchange Date if a Notice of
Exchange is received by the Managing Member not less than thirty (30) days prior
to the First Exchange Date in respect of any First Traunch Non-Managing Member
Unit, (ii) the sixtieth (60th) calendar day (or, if such day is not a Business
Day, the next following Business Day) after the receipt by the Managing Member
of a Notice of Exchange if such notice is received by the Managing Member
pursuant to the provisions of Section 8.6.A hereof more than sixty (60) calendar
days prior to the Second Exchange Date in respect of any Second Traunch Non-
Managing Member Unit, (iii) the Second Exchange Date if a Notice of Exchange is
received by the Managing Member less than sixty (60) but not less than thirty
(30) calendar days prior to the Second Exchange Date in respect of any Second
Traunch Non-Managing Member Unit, or (iv) in all other events, the thirtieth
(30th) calendar day (or, if such day is not a Business Day, the next following
Business Day) after the receipt by the Managing Member of a Notice of Exchange;
provided, however, that, notwithstanding any other provisions set forth herein,
in no event shall a Specified Exchange Date as to any LLC Unit occur prior to
the first anniversary of the issuance of such LLC Unit by the Company; provided,
further, that the Specified Exchange Date, as well as the closing of an Exchange
on any Specified Exchange Date, may be deferred, in the Managing Member's sole
and absolute discretion, for such time (but in any event not more than 150 days
in the aggregate) as may reasonably be required to effect, as applicable, (i)
necessary funding arrangements, (ii) compliance with the Securities Act or other
law (including, but not limited to, (a) state "blue sky" or other securities
laws and (b) the expiration or termination of the applicable waiting period, if
any, under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended)
and (iii) satisfaction or waiver of other commercially reasonable and customary
closing conditions and requirements for a transaction of such nature, and (B) in
the case of the delivery of a Call Notice pursuant to Section 13.2 hereof, the
10th calendar day (or, if such day is not a Business Day, the next following
Business Day) after the mailing to the applicable Non-Managing Members of a Call
Notice.
"Subsequent Threshold Test" means a test which will be satisfied on
the date on which eighty percent (80%) of the LLC Units issued by the Company to
the Initial Non-Managing Members have been disposed of pursuant to a Taxable
Disposition or series of Taxable Dispositions.
"Substituted Member" means an Assignee who is admitted as a Member to
the Company pursuant to Section 11.4 hereof. The term "Substituted Member"
shall not include any Additional Member.
"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.
"Subsidiary Operating Agreement" shall mean the Amended and Restated
Limited Liability Company Operating Agreement of HCPI/Davis North I, LLC.
"Successor Person" has the meaning set forth in the definition of
Flip-Over Event.
"Successor Properties" means real properties acquired by the Company
in connection with a Tax-Free Disposition of any Real Property or Successor
Property.
"Tax-Free Disposition" means the disposition of property in a
transaction that is not subject to tax under the Code, including by virtue of
the provisions of Section 1031 of the Code.
"Tax Items" has the meaning set forth in Section 6.1 hereof.
"Tax Protection Period" means the period of time beginning on the
Effective Date and ending on the first to occur of (i) the twentieth (20th)
anniversary of the Effective Date or (ii) the date on which the Subsequent
Threshold Test has been satisfied; provided, however, that notwithstanding the
foregoing, (x) with respect to the Real Properties listed on Schedule 1.1, the
tenth (10th) or the thirteenth (13th) anniversary (as indicated with respect to
each such Real Property on such Schedule 1.1) shall be substituted for the
twentieth (20th) anniversary in this definition and (y) with respect to the
Company's and the Managing Member's obligations pursuant to Section 7.3.E(3)
hereof, the tenth (10th) anniversary shall be substituted for the twentieth
(20th) anniversary in this definition.
"Taxable Disposition" means a transaction or event in which a LLC Unit
has either (a) been disposed of in a taxable transaction (including, without
limitation, any Exchange pursuant 8.6.A hereof) or (b) otherwise received a
"step up" in tax basis to its fair market value at the time of such "step up"
(e.g., as a result of the death of a holder of LLC Units who is an individual).
"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. The terms
"Transferred" and "Transferring" have correlative meanings.
"Transferor" shall have the meaning set forth in the Recitals.
"Transferred Properties" means the "Properties" as that term is
defined in the Contribution Agreement, except for the Property known as "Davis
North I" which is to be contributed to HCPI/Davis North I, LLC and shall also
mean a ninety-nine percent (99%) membership interest in HCPI/Davis North I, LLC.
"Unit Amount" means, with respect to a taxable disposition of a Real
Property, a number of LLC Units equal to the product of (i) the number of LLC
Units outstanding at the time of such disposition, and (ii) the Unit Portion.
"Unit Appreciation" means, with respect to any taxable disposition of
a Real Property, the product of the (i) Unit Amount and (ii) excess of the Value
at the time of such disposition over $33.50.
"Unit Portion" means, with respect to a taxable disposition of a Real
Property, a number determined by dividing (i) the net cash flow (ignoring
payments made by the Company under any Debt related to such Property) produced
by such Real Property for the twelve month period immediately prior to such
disposition, by (ii) the net cash flow (ignoring payments made by the Company
under any Debt related to all Real Properties) produced by all Real Properties
held by the Company for the twelve month period immediately prior to such
disposition.
"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) for purposes of Section 8.6.D
hereof, the Reduction Date or, if the Reduction Date is not a Business Day, the
immediately preceding Business Day, (c) for purposes of Section 13.2 hereof, the
date the Call Notice is delivered or, if such day is not a Business Day, the
immediately preceding Business Day, or (d) 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 second 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 HCPI/Utah, LLC. The Company's business may
be conducted under any other name or names deemed advisable by the Managing
Member, including the name of the Managing Member or any Affiliate thereof. The
Managing Member in its sole and absolute discretion may change the name of the
Company at any time and from time to time in accordance with applicable law and
shall notify the Members of such change in the next regular communication to the
Members.
Section 2.3. Registered Office and Agent; Principal Place of
Business; Other Places of Business
The address of the registered office of the Company in the State of
Delaware is located at c/o The Corporation Trust Company, Corporation Trust
Center, 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, Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. 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. Power of Attorney
A. Each Member (other than the Managing Member) and each Assignee
hereby irrevocably constitutes and appoints the Managing Member, any Liquidator,
and authorized officers and attorneys in fact of each, and each of those acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the Managing
Member or any Liquidator deems appropriate or necessary to form, qualify or
continue the existence or qualification of the Company as a limited
liability company in the State of Delaware and in all other jurisdictions
in which the Company may conduct business or own property; (b) all
instruments that the Managing Member or any Liquidator deems appropriate or
necessary to reflect any amendment, change, modification or restatement of
this Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the Managing Member or any Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation of the
Company pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all instruments relating to
the admission, withdrawal, removal or substitution of any Member pursuant
to, or other events described in, Articles 11, 12 or 13 hereof or the
Capital Contribution of any Member; and (e) all certificates, documents and
other instruments relating to the determination of the rights, preferences
and privileges of Membership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
Managing Member or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Members hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the
Managing Member or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained in this Section 2.4 shall be construed as
authorizing the Managing Member or any Liquidator to amend this Agreement except
in accordance with Article 14 hereof or as may be otherwise expressly provided
for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Members and Assignees will be relying upon the power of
the Managing Member to act as contemplated by this Agreement, and it shall
survive and not be affected by the subsequent Incapacity of any Member or
Assignee and the Transfer of all or any portion of such Member's or Assignee's
LLC Units or Membership Interest and shall extend to such Member's or Assignee's
heirs, successors, assigns and personal representatives. Each such Member or
Assignee hereby agrees to be bound by any representation made by the Managing
Member or any Liquidator, acting in good faith pursuant to such power of
attorney; and each such Member or Assignee hereby waives any and all defenses
which may be available to contest, negate or disaffirm the action of the
Managing Member or any Liquidator, taken in good faith under such power of
attorney. Each Member or Assignee shall execute and deliver to the Managing
Member or any Liquidator, within 15 days after receipt of the Managing Member's
or Liquidator's request therefor, such further designation, powers of attorney
and other instruments as the Managing Member or the Liquidator, as the case may
be, deems necessary to effectuate this Agreement and the purposes of the
Company.
Section 2.5. Term
The term of the Company commenced on October 27, 1998, the date that
the original Certificate was filed in the office of the Secretary of State of
Delaware in accordance with the Act, and shall continue until December 31, 2058
unless extended by mutual agreement of the Members or earlier terminated
pursuant the provisions of Article 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 Transferred
Properties and any other Properties acquired by the Company and to invest and
ultimately distribute funds, including, without limitation, funds obtained from
owning or otherwise operating the Transferred Properties and any other
Properties acquired by the Company and the proceeds from the sale or other
disposition of the Transferred Properties and any other Properties acquired by
the Company, 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.
Section 3.2. Powers
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 to take any action to avoid a result that, 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 Additional Member or Substituted Member as a condition to becoming an
Additional Member or 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) such Member (other
than the Managing Member) either (a) does not Constructively Own more than 25%
of the interests in capital or profits of the Company or (b) does not
Constructively Own 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 direct or indirect
owner, and (v) this Agreement is binding upon, and enforceable against, such
Member in accordance with its terms.
B. Each Member that is not an individual (including, without
limitation, each Additional Member or Substituted Member as a condition to
becoming an Additional Member or 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) such Member (other than the Managing Member) either
(a) does not Constructively Own more than 25% of the interests in capital of
profits of the Company or (b) does not Constructively Own 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 direct or indirect owner, and (v) this Agreement is binding
upon, and enforceable against, such Member in accordance with its terms.
C. Each Member (including, without limitation, each Additional
Member or Substituted Member as a condition to becoming an Additional Member or
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(a)
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 an Additional Member or a
Substituted Member, the admission of such Additional Member or Substituted
Member as a Member in the Company) and the dissolution, liquidation and
termination of the Company.
E. Each Member (including, without limitation, each Additional
Member or Substituted Member as a condition to becoming an Additional Member or
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 the Company, any Member or any employee or representative or Affiliate of the
Company or 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, as provided by the Contribution Agreement or as otherwise provided in
Sections 4.1, 4.2 and 4.4 hereof, no Member shall be required or permitted to
make any additional Capital Contributions or loans to the Company.
Section 4.2. Additional Members
The Managing Member is authorized to admit one or more Additional
Members to the Company from time to time, in accordance with the provisions of
Section 12.2 hereof, on terms and conditions and for such Capital Contributions
as may be established by the Managing Member in its reasonable discretion.
Except as set forth in Section 12.2, no action or consent by the Non-Managing
Members shall be required in connection with the admission of any Additional
Members. The provisions of Section 12.2 shall govern the acquisition by the
Company in the future of additional Properties by means of Capital Contributions
by other Persons, which Capital Contributions shall be set forth in Exhibit A.
As a condition to being admitted to the Company, each Additional Member shall
execute an agreement to be bound by the terms and conditions of this Agreement.
Section 4.3. Loans
Subject to the provisions of Sections 4.4 and 7.3.E(3) hereof, the
Company may incur or assume Debt, enter into other similar credit, guarantee,
financing or refinancing arrangements, repay or prepay Debt, for any purpose
(including, without limitation, in connection with any further acquisition of
Properties from any Person), upon such terms as the Managing Member determines
appropriate.
Section 4.4. Additional Funding and 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 4.4 or the terms of Section 4.3
hereof. 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 except as otherwise provided in
the Contribution Agreement.
B. Additional Contributions. The Managing Member on behalf of the
Company may raise all or any portion of the Additional Funds by making
additional Capital Contributions. Subject to the terms of this Section 4.4 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
(i) fund all necessary capital additions, tenant improvements and leasing
commissions relating to the Real Properties, except for the Unidentified and
Unpaid Tenant Improvement Costs (as such term is defined in the Contribution
Agreement) which are required to be funded by a Non-Managing Member pursuant to
the Contribution Agreement; and (ii) repay any mortgage Debt which encumbers any
of the Properties as of the date of this Agreement and which the Managing Member
elects to cause the Company to repay as permitted under this Agreement. The
Managing Member shall receive that number of additional Managing Member Units in
consideration for additional Capital Contributions made by the Managing Member
equal to the initial Gross Asset Value of the additional capital contribution
(or, in the event of a contribution of cash, the amount of cash so contributed)
divided by the Value as of the date of such contribution.
C. Timing of Additional Capital Contributions. If additional
Capital Contributions are made by a Member 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 for
such Fiscal Year, if necessary, shall be allocated among such Members 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 4.5. 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 (the "Payment Quarter") as follows:
(1) First, to the holders of the Non-Managing Member Units, in
accordance with their relative Preferred Return Shortfalls at the end of
the Payment Quarter, until the Preferred Return Shortfall for each holder
of Non-Managing Member Units at the end of the Payment Quarter is zero,
provided, however, that in the event a Reduction Date occurs during any
Payment Quarter, a distribution shall be made under this Section 5.1.A(1)
on the LLC Distribution Date associated with such Payment Quarter to the
holder or holders of the Reduction Units in an amount determined by
multiplying the amount that would have been distributed on the LLC
Distribution Date under Section 5.1.A(1) in respect of the Reduction Units
had they been outstanding on the last day of such Payment Quarter by a
fraction, the numerator of which shall be the number of days beginning on
the first day of the Payment Quarter relating to the LLC Distribution Date
and ending on the Reduction Date and the denominator of which shall be the
number of days in the Payment Quarter in which the Reduction Date occurs.
(2) Second, to the Managing Member until the Managing Member has
received an amount equal to the excess (the "Managing Member Shortfall"),
if any, of (A) the amount of cash that must be distributed to the Managing
Member such that aggregate distributions of cash pursuant to Sections
5.1.A(1), 5.1.A(2), 5.6.A(1) and 5.6.B(1) shall have been made to all
Members pro rata to the Members' Percentage Interests, over (B) the sum of
all prior distributions to the Managing Member pursuant to this Section
5.1.A(2) and Sections 5.6.A(1) and 5.6.B(1).
(3) Thereafter, all Available Cash remaining after the
distributions provided for in Section 5.1.A(1) and 5.1.A.(2) above shall be
distributed to the Members in proportion to their Sharing Percentages.
B. The Managing Member may 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 make distributions in
accordance with Section 5.1.A and Section 5.6 in 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) 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, with the Consent of the Non-
Managing Members, 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 sole and absolute
discretion, that such payment may be satisfied out of the Available Cash of the
Company that would, but for such payment, be distributed to the Member. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Member. Each Member hereby unconditionally
and irrevocably grants to the Company a security interest in such Member's
Membership Interest to secure such Member's obligation to pay to the Company any
amounts required to be paid pursuant to this Section 5.3. In the event that a
Member fails to pay any amounts owed to the Company pursuant to this Section 5.3
when due, the Managing Member may, in its sole and absolute discretion, elect to
make the payment to the Company on behalf of such defaulting Member, and in such
event shall be deemed to have loaned such amount to such defaulting Member and
shall succeed to all rights and remedies of the Company as against such
defaulting Member (including, without limitation, the right to receive
distributions). Any amounts payable by a Member hereunder shall bear interest
at the 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 13.3 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, the Managing Member shall cause the Company to (i) reinvest
the Disposition Proceeds to the extent the Managing Member elects to do so and
in the amount determined by the Managing Member to be appropriate (and to hold
the Disposition Proceeds in an interest bearing account pending such
reinvestment) and (ii) if the Managing Member elects to distribute all or any
portion of the Disposition Proceeds, distribute such portions of the Disposition
Proceeds, to the extent thereof, as follows:
(1) First, to the holders of LLC Units in accordance with their
Preferred Return Shortfalls until the Preferred Return Shortfall for each
holder of Non-Managing Member Units is zero, and then to the Managing
Member to the extent of its Managing Member Shortfall;
(2) Second, to the holders of LLC Units pro rata to their
holdings of LLC Units but only to the extent that such distribution would
not cause the number of LLC Units held by the Non-Managing Members to be
reduced below zero pursuant to the provisions of Section 8.6.D hereof; and
(3) Third, the remaining balance of the Disposition Proceeds, if
any, to the Managing Member.
B. Upon the incurrence of Refinancing Debt, the Managing Member
shall cause the Company to (i) reinvest the Refinancing Debt Proceeds to the
extent the Managing Member elects to do so and in the amount determined by the
Managing Member to be appropriate (and to hold the Refinancing Debt Proceeds in
an interest bearing account pending such reinvestment) and (ii) if the Managing
Member elects to distribute all or any portion of the Refinancing Debt Proceeds,
distribute such portion of the Refinancing Debt Proceeds, to the extent thereof,
as follows:
(1) First, to the holders of the Non-Managing Member Units in
accordance with their Preferred Return Shortfalls until the Preferred
Return Shortfall for each holder of Non-Managing Member Units is zero and
then to the Managing Member to the extent of its Managing Member Shortfall;
(2) Second, the remaining balance of the Refinancing Debt
Proceeds, if any, to the Managing Member.
C. The Managing Member shall have no obligation to incur Refinancing
Debt for the purpose of making distributions pursuant to this Section 5.6 or for
any other purpose, except as provided in Section 7.3.E(3) and Section 7.3.E(4).
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, Depreciation, and Net Loss. Except as
otherwise provided in Sections 6.2.B, 6.2.C or 6.3:
(1) Net Loss with respect to any Fiscal Year of the Company,
other than Net Loss attributable to a disposition of any or all of the Real
Properties, and other than Net Loss attributable to a Liquidating Event,
shall be allocated to the Members and Assignees in proportion to their
Sharing Percentages.
(2) Net Income with respect to any Fiscal Year of the Company,
other than Net Income attributable to a disposition of any or all of the
Real Properties, and other than Net Income attributable to a Liquidating
Event, shall be allocated as follows:
(a) First, to each Member or Assignee in proportion to, and
to the extent of, the amount that cumulative Net Loss previously
allocated to such Member or Assignee pursuant to Section 6.2.A(1)
exceeds the cumulative amount of Net Income previously allocated to
such Member or Assignee pursuant to this Section 6.2.A(2)(a); and
(b) Thereafter, to each Member or Assignee in an amount
that will cause such allocation, together with the amount of all
previous allocations of Net Income under this Section 6.2.A(2)(b) and
Section 6.2.B(2)(b), to be pro rata to the cumulative distributions
received by such Member or Assignee pursuant to Sections 5.1.A,
5.6.A(1) and 5.6.B(1) for the current and all prior Fiscal Years.
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 Loss attributable to a disposition of any or all of the Real
Properties shall be allocated to the Members and Assignees in proportion to
their Sharing Percentages.
(2) Net Income attributable to a disposition of any or all of the
Real Properties shall be allocated as follows:
(a) First, to each Member or Assignee in proportion to, and to
the extent of, the amount that cumulative Net Loss previously allocated to
such Member or Assignee pursuant to Section 6.2.B(1) exceeds the cumulative
amount of Net Income previously allocated to such Member or Assignee
pursuant to this Section 6.2.B(2)(a);
(b) Second, to each Member or Assignee in an amount that will
cause such allocation, together with the amount of all previous allocations
of Net Income under this Section 6.2.B(2)(b) and Section 6.2.A(2)(b) to be
pro rata to the cumulative distributions received by such Member or
Assignee pursuant to Sections 5.1.A, 5.6.A(1) and 5.6.B(1) for the current
and all prior Fiscal Years; and
(c) Thereafter, to each Member or Assignee pro rata to such
Member's or Assignee's Percentage Interest.
C. Net Income and Net Loss Upon Liquidation. If a Liquidating Event
occurs in a Fiscal Year, or if the number of LLC Units held by the Non-Managing
Members have been reduced (pursuant to Section 8.6.D or otherwise) to zero, 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, as follows:
(1) First, to holders of Non-Managing Member Units, pro rata to
their Percentage Interests, in such amounts as will cause, to the greatest
extent possible, each such holder's Capital Account per Non-Managing Member
Unit (if any) to be equal to the sum of (a) such holder's Preferred Return
Shortfall per unit, (b) the product of (i) the Value of a REIT Share (with
the date of the liquidating distribution being the Valuation Date), and
(ii) the Adjustment Factor (with the product set forth in (b) being equal
to zero if the number of outstanding Non-Managing Member Units has been
reduced (pursuant to Section 8.6.D, or otherwise) to zero), and (c) an
amount equal to (x) the NMM Sharing Amount, calculated as if all of the
Real Properties then owned by the Company were sold in a taxable
transaction at their fair market values, divided by (y) the total number of
Non-Managing Member Units then outstanding; and
(2) Thereafter, to the Managing Member.
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). 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,
in the opinion of an independent tax counsel, 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 OPERATION 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) except as restricted pursuant to Section 7.3.E, 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 stockholders 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 sees fit, including, without limitation, the financing of
the conduct or the operations of the Company, the lending of funds to other
Persons (including, without limitation, the Managing Member (if necessary
to permit the financing or capitalization of a subsidiary of the Managing
Member or the Company)) and the repayment of obligations of the Company;
(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, subject to any management agreements to
which the Company is a party;
(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) and the Loan Assumption Documents;
(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 (i) liability
insurance for the Indemnitees hereunder and (ii) 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 exercise of any of the powers of the Managing Member
enumerated in this Agreement on behalf of any Person in which the Company
does not have an interest pursuant to contractual or other arrangements
with such Person;
(18) the maintenance of working capital and other reserves in
such amounts as the Managing Member deems appropriate and reasonable from
time to time;
(19) 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;
(20) 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
(21) the amendment and restatement of Exhibit A hereto to reflect
accurately at all times the Capital Accounts, LLC Units, and Percentage
Interests of the Members as the same are adjusted from time to time to the
extent necessary to reflect redemptions, Capital Contributions, the
issuance of or reduction in the number 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 establish and maintain working capital reserves in such
amounts as the Managing Member, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
D. Except as otherwise expressly provided in this Agreement, 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.
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 commercially 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) 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
(4) 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, (b) a Member
from exercising its rights to an Exchange in full, or (c) the Company to
make distributions of Available Cash as required by Article 5 hereof,
except, in any such case, with the written consent of any Member affected
by the prohibition or restriction.
B. The Managing Member shall not, without the prior Consent of the
Non-Managing Members undertake or have the authority to do or undertake, on
behalf of the Company, any of the following actions or enter into any
transaction which would have the effect of such transactions:
(1) except as provided in Section 7.3.C and except in connection
with a dissolution or termination of the Company permitted by Section
7.3.E, 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) approve or acquiesce to the Transfer of the Membership
Interest of the Managing Member to any Person other than the Company;
(3) admit into the Company any Additional Managing Member or
Substitute Managing Member;
(4) 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;
(5) institute any proceeding for bankruptcy on behalf of the
Company;
(6) confess a judgment against the Company in an amount in
excess of $5,000,000; or
(7) act on behalf of the Company in the Company's capacity as
the non-managing member of HCPI/Davis North I, LLC; provided, however, that
the Managing Member shall be authorized to (i) appoint a new managing
member of HCPI/Davis North I, LLC upon the Incapacity of the managing
member of HCPI/Davis North I, LLC, (ii) cause HCPI/Davis North I, LLC to be
merged into HCPI Utah, Inc. as set forth in Section 13.2 of the Subsidiary
Operating Agreement, and (iii) cause the Company to make Capital
Contributions to HCPI/Davis I, LLC in accordance with the Subsidiary
Operating Agreement without first obtaining the Consent of the Non-Managing
Members.
C. Notwithstanding Section 7.3.B, the Managing Member shall have the
exclusive power to amend this Agreement as may be required to facilitate or
implement any of the following purposes:
(1) to reflect the issuance of additional Membership Interests
pursuant to Section 4.4, to reflect the admission, substitution,
termination, or withdrawal of Members in accordance with this Agreement and
to amend Exhibit A in connection therewith and to reflect the redemption or
other reduction in the number of LLC Units outstanding pursuant to Section
5.6 hereof and as otherwise permitted by this Agreement;
(2) 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;
(3) 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;
(4) 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
(5) to modify, as set forth in the definition of "Capital
Account," the manner in which Capital Accounts are computed.
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 13.3.A(4), or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.4
and Section 7.3.C(1) 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. Except as otherwise permitted by Section 11.2, the Managing
Member shall not, on behalf of the Company, take any of the following actions
during the Tax Protection Period without the prior Consent of the Non-Managing
Members:
(1) cause or permit the Company (i) to merge, consolidate or
combine with or into any other partnership, limited partnership, limited
liability company, corporation or other person, (ii) to sell or otherwise
dispose of all or substantially all of its assets or (iii) to reclassify or
change its outstanding equity interests;
(2) sell, dispose, convey or otherwise transfer any of the real
properties the Company acquired in connection with the transactions
consummated pursuant to the Contribution Agreement (collectively, the "Real
Properties") or any Successor Properties, in a transaction that causes
holders of Non-Managing Member Units to recognize taxable income under the
Code on account of a Built-in Gain, other than a casualty loss, taking by
eminent domain or pursuant to the exercise of a purchase option granted to
a Person pursuant to any document or instrument executed pursuant to the
Contribution Agreement; provided that the Company shall use commercially
reasonable efforts to apply the proceeds of any such casualty or taking to
the restoration or replacement of such Real Properties or Successor
Properties in a transaction qualifying under Code Section 1033; or
(3) (A) replace or refinance any nonrecourse indebtedness set
forth on Schedule 7.3 encumbering the Real Properties ("Existing
Indebtedness"), unless such indebtedness is replaced or refinanced with
other indebtedness satisfying the requirements set forth below
("Replacement Indebtedness"), (B) prepay the Existing Indebtedness or any
Replacement Indebtedness, including Replacement Indebtedness assumed or
taken subject to in a transaction qualifying under Code Section 1031, and
(C) convert the Existing Indebtedness or Replacement Indebtedness from
nonrecourse indebtedness to recourse indebtedness; provided, however, the
above limitations shall not prevent (i) regularly scheduled periodic
principal payments on Existing Indebtedness or Replacement Indebtedness
(including full payment at maturity) and (ii) the replacement, prepayment,
or refinancing of the Existing Indebtedness or any Replacement
Indebtedness, provided such replacement, prepayment, or refinancing shall
be made with Replacement Indebtedness. Any Replacement Indebtedness shall
(x) be nonrecourse, (y) not require principal repayments during such period
that are greater than the payments required on the Existing Indebtedness
replaced by such debt during such period, and (z) be secured solely by the
Real Property or Properties which secure the Existing Indebtedness or the
Replacement Indebtedness that is being refinanced. The determination of
whether indebtedness is recourse or nonrecourse shall be determined under
Code Section 752.
(4) The Non-Managing Members shall have the option from time to
time during the Tax Protection Period to guarantee debt of the Company (or
enter into a reimbursement agreement with respect to debt of the Company)
in an amount up to the Recourse Debt Amount. If a Non-Managing Member
elects to guarantee debt as described in this Section 7.3.E(4), the
Company, the Managing Member, and such Non-Managing Member agree to enter
into a reimbursement agreement in the form attached hereto as Exhibit C.
The Company shall be required to ensure that there is a sufficient level of
debt available to all Non-Managing Members for such guarantees, but not
greater in the aggregate, than the Recourse Debt Amount. The Company may
incur or repay such indebtedness from time to time as it so chooses;
provided, however, if the Company intends to repay, in whole or in part, or
to substitute other debt for, indebtedness of the Company that one or more
Non-Managing Members has guaranteed (or with respect to which one or more
Non-Managing Members has entered into a reimbursement agreement) in
accordance with this Section 7.3.E(4), the Company shall provide notice to
the Non-Managing Member Representative prior to such repayment or
substitution and such additional information as the Non-Managing Member
Representative shall reasonably request to permit such Non-Managing
Member(s) to decide whether or not to enter into different and/or
additional guarantees or reimbursement agreements (as the case may be).
The notice described in the immediately preceding sentence shall be deemed
to have been satisfied so long as the Company provides notice to the Non-
Managing Member Representative at least fifteen (15) calendar days prior to
any such repayment or substitution of indebtedness.
In the event that the prior Consent of the Non-Managing Members is not
required for the Managing Member, on behalf of the Company, to take or engage in
any of the actions described in the foregoing subparagraphs (1) and (2), the
Managing Member may take such action only after providing the Non-Managing
Members with not less than 30 days notice of its intention to do so.
F. Except as otherwise permitted by Section 11.2, the Managing
Member shall not, on behalf of the Company, take any action to dissolve or
otherwise terminate the Company during the Dissolution Protection Period. In
the event the Managing Member intends to dissolve or otherwise terminate the
Company following the Dissolution Protection Period, it shall give not less than
thirty (30) days notice to that effect to the Non-Managing Member prior to
taking such action. In the event the Managing Member provides the Non-Managing
Members notice of its intent to dissolve or otherwise terminate the Company
after June 30th of any year, the closing of the termination or dissolution shall
not occur prior to January 1 of the subsequent year.
Section 7.4. Compensation of the Managing Member
A. 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).
B. Subject to Sections 7.4.C and 15.12 hereof, the Company shall be
liable, and shall reimburse the Managing Member on a monthly basis (or such
other basis as the Managing Member may determine in its sole and absolute
discretion), for all sums expended in connection with the Company's business.
Any such reimbursements shall be in addition to any reimbursement of the
Managing Member as a result of indemnification pursuant to Section 7.7 hereof.
C. To the extent practicable, Company expenses shall be billed
directly to and paid by the Company. Subject to Section 15.12 hereof,
reimbursements to the Managing Member or any of its Affiliates by the Company
shall be allowed, however, for the actual cost to the Managing Member or any of
its Affiliates of operating and other expenses of the Company, including,
without limitation, the actual cost of goods, materials and administrative
services related to (i) Company operations, (ii) company accounting, (iii)
communications with Members, (iv) legal services, (v) tax services, (vi)
computer services, (vii) risk management, (viii) mileage and travel expenses and
(ix) such other related operational and administrative expenses as are necessary
for the prudent organization and operation of the Company. "Actual cost of
goods and materials" means the actual cost to the Managing Member or any of its
Affiliates of goods and materials used for or by the Company obtained from
entities not affiliated with the Managing Member, and "actual cost of
administrative services" means the pro rata cost of personnel (as if such
persons were employees to the Company) providing administrative services to the
Company. The cost for such services to be reimbursed to the Managing Member or
any Affiliate thereof shall be the lesser of the Managing Member's or
Affiliate's actual cost, or the amount the Company would be required to pay to
independent parties for comparable administrative services in the same
geographic location.
D. The Managing Member shall also be reimbursed for all expenses it
incurs relating to any issuance of additional Membership Interests, Debt of the
Company, or rights, options, warrants or convertible or exchangeable securities
of the Company pursuant to Article VIII hereof (including, without limitation,
all costs, expenses, damages and other payments resulting from or arising in
connection with litigation related to any of the foregoing), all of such
expenses are considered by the Members to constitute expenses of, and for the
benefit of, the Company.
To the extent that reimbursements to the Managing Member or any of its
Affiliates by the Company pursuant to this Section 7.4 would constitute gross
income to the Managing Member for purposes of Code Section 856(c)(2) or
856(c)(3), then such amounts shall be treated as "guaranteed payments" within
the meaning of Code Section 707(c).
Section 7.5. Other Business of Managing Member
The Managing Member shall devote to the Company such time as may be
necessary for the performance of its duties as Managing Member, but the Managing
Member is not required, and is not expected, to devote its full time to the
performance of such duties. The Managing Member may engage independently or
with others in other business ventures of every nature and description,
including, without limitation, the ownership of other properties and the making
or management of other investments. Nothing in this Agreement shall be deemed
to prohibit the Managing Member or any Affiliate of the Managing Member from
dealing, or otherwise engaging in business with, Persons transacting business
with the Company, or from providing services related to the purchase, sale,
financing, management, development or operation of real or personal property and
receiving compensation therefor, not involving any rebate or reciprocal
arrangement that would have the effect of circumventing any restriction set
forth herein upon dealings with the Managing Member or any Affiliate of the
Managing Member. Neither the Company nor any Member shall have any right by
virtue of this Agreement or the relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived therefrom, and the
pursuit of such ventures, even if competitive with the business of the Company,
shall not be deemed wrongful or improper.
Section 7.6. Contracts with Affiliates
A. Subject to Section 7.6.B below, the Company may lend or
contribute to Persons in which it has an equity investment, and such Persons may
borrow funds from the Company, on terms and conditions established in the sole
and absolute discretion of the Managing Member. The foregoing authority shall
not create any right or benefit in favor of any Person.
B. The Managing Member or any of its Affiliates, directly or
indirectly, shall be permitted to 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, but only 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, except as otherwise expressly permitted by this
Agreement.
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 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 7.9. Other Matters Concerning the Managing Member
A. The Managing Member may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it in good faith to be genuine and to have been signed
or presented by the proper party or parties.
B. The Managing Member may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters that the Managing Member reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
C. The Managing Member shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the Managing Member in the power of attorney,
have full power and authority to do and perform all and every act and duty that
is permitted or required to be done by the Managing Member hereunder.
D. Notwithstanding any other provisions of this Agreement or the
Act, any action of the Managing Member on behalf of the Company or any decision
of the Managing Member to refrain from acting on behalf of the Company
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Managing Member to continue
to qualify as a REIT, (ii) for the Managing Member otherwise to satisfy the REIT
Requirements or (iii) to allow the Managing Member to avoid incurring any
liability for taxes under Section 857 or Section 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the Non-
Managing Members.
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 with a
statement of the purpose of such 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 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 First Exchange 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 those Non-Managing
Member Units held by such Non-Managing Member which were issued by the Company
on the Initial Closing Date (the "First Traunch Non-Managing Member Units"), and
on or after the Second Exchange 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 those Non-Managing Member Units
held by such Non-Managing Members which were issued by the Company at any time
after the Initial Closing Date (the "Second Traunch Non-Managing Member Units")
(all 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.
Notwithstanding the foregoing, a third party lender that has acquired a
Membership Interest upon the foreclosure of debt secured by such Membership
Interest in accordance with Section 11.3.A hereof shall have the right to tender
such Non-Managing Member Units for Exchange (subject to the terms and conditions
set forth herein) and require the Managing Member to acquire all of those Non-
Managing Member Units which were acquired by such lender pursuant to such
foreclosure and which were issued by the Company at least one year prior to the
related Specified Exchange Date regardless of whether the Second Exchange Date
will have occurred by the related 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"). 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. 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 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 other restrictions provided in
the Charter or the Bylaws of the Managing Member in the event the REIT Shares
issuable upon such Exchange are not registered for resale 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 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 anything herein to the contrary, with respect to
any Exchange pursuant to this Section 8.6:
(1) The consummation of any Exchange shall be subject to the
expiration or termination of the applicable waiting period, if any, under
the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended.
(2) Each Tendering Party shall continue to own all LLC Units
subject to any Exchange, and be treated as a Member with respect to such
LLC Units for all purposes of this Agreement, until such LLC Units are
Transferred to the Managing Member and paid for 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.
C. 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 have actual or Constructive Ownership of a number of REIT Shares
that is 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.C(1) or (b) after giving effect to the Exchange, neither the
Tendering Party nor any Related Party shall have actual or Constructive
Ownership of a number of REIT Shares that is in violation of the Ownership
Limit.
D. The number of LLC Units outstanding on the date of a distribution
pursuant to Section 5.6.A(2) 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 (i) the excess, if any, of (a) the aggregate amount of
the distributions so made pursuant to Section 5.6.A(2) over (b) the NMM Sharing
Amount divided by the aggregate of the Non-Managing Members' Percentage
Interests by (ii) the Value on the Reduction Date. The Non-Managing Member
Units shall be reduced (each such reduction a "Reduction") by a number of LLC
Units (rounded down to the nearest whole unit) (the "Reduction Units")
determined by dividing (i) the excess of (a) the aggregate amount of
distributions made on the Reduction Date to Non-Managing Members and Assignees
pursuant to Section 5.6.A(2), over (b) the NMM Sharing Amount by (ii) the Value
on the Reduction Date. 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. 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. In the event the number of outstanding Non-
Managing Member Units held by a Non-Managing Member or Assignee is reduced
(pursuant to this Section 8.6.D or otherwise) to zero, such Non-Managing Member
or Assignee shall cease to have an interest in the Company (other than the right
to receive final distributions and allocations resulting from the liquidation of
their interest).
Section 8.7. Fiduciary Duties
Pursuant to the terms of a Management Agreement, The Boyer Company,
L.C. has been retained by the Company as manager and non-exclusive leasing agent
for the Transferred Properties and as a result has certain duties and
obligations to the Company in its capacity as manager of the Transferred
Properties, whether specifically provided for in the Management Agreement or
otherwise imposed by law. The Boyer Company, L.C. is not currently a Non-
Managing Member of the Company but may hereafter be admitted as such in
accordance with and subject to the terms hereof. Accordingly, in the event the
Boyer Company, L.C. shall be admitted as a Non-Managing Member of the Company,
it is agreed that no additional or special duties or obligations shall be
imposed upon The Boyer Company, L.C. as a manager merely by virtue of its status
as a Non-Managing Member that would not otherwise be imposed on it as the
manager of the Transferred Properties, provided, however, that nothing set forth
in this Section 8.7 shall be deemed to modify or diminish any fiduciary duties
or obligations that The Boyer Company, L.C. may owe to the Company or its
Members in connection with its status as a Non-Managing Member.
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 GAAP, or on such
other basis as the Managing Member determines to be necessary or appropriate.
To the extent permitted by sound accounting practices and principles, the
Company and the Managing Member may operate with integrated or consolidated
accounting records, operations and principles.
Section 9.2. Fiscal Year
The Fiscal Year of the Company shall be the calendar year.
Section 9.3. Reports
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 and a copy of the
general ledger of HCPI/Davis North I, LLC.
Section 9.4. Cooperation Regarding Tax Matters Relating to
Contributed Properties
A. In connection with the issuance of Non-Managing Member Units to
any contributor of property to the Company (each, a "Contributor"), including
the issuance of Non-Managing Member Units to the Initial Non-Managing Members
upon the contributions of the Transferred Properties to the Company pursuant to
the Contribution Agreement, each Contributor shall deliver to the Company at or
prior to the effective date of such issuance, at the Contributor's sole cost and
expense, the following information prepared as of the date of such anticipated
contribution.
(1) depreciation and amortization schedules for the assets
constituting the property or properties to be contributed to the Company
(collectively, the "Contributed Properties"), as kept for both book and tax
purposes, showing original basis and accumulated depreciation or
amortization;
(2) basis information (computed for both book and tax purposes,
if different) for all assets that are components of the Contributed
Properties;
(3) the adjusted basis of the Contributor and any constituent
partners or members of the Contributor in their interests in the Company;
and
(4) calculations of the estimated amounts of gain to be realized
and recognized by the Contributor (if any) as a result of the transactions
involving the Contributed Properties in accordance with this Agreement and
showing the method by which such amounts are calculated.
B. The Company is relying on the information provided or to be
provided to it under this Section 9.4 as to the adjusted tax basis of the
Contributed Properties and the relevant depreciation schedules thereto in
determining the amount of Built-in Gain on a going forward basis.
C. Each Contributor shall provide reasonable assistance to the
Company and the Company to enable the Company and the Managing Member to prepare
their tax returns. The Contributor shall deliver to the Company copies of its
final federal, state and local tax returns (including information returns),
including associated Schedules K-1, for the tax year in which the contribution
of the Contributed Properties occurs, including any amendments thereto, and to
notify the Company, in writing, of any audits of such return, or of any audits
for other tax years that could affect the amounts shown on the returns for the
tax year in which the Closing occurs. Copies of such returns shall be provided
to the Company in draft form at least ten (10) days before they are filed, and
in final form upon filing. The Contributor shall also provide to the Company,
promptly upon receipt, any notice that it receives from any of its direct or
indirect constituent partners or members that such partner(s) or member(s)
intends to prepare its tax returns in a manner inconsistent with the returns
filed by the Contributor. The Contributor understands and agrees that the tax
returns filed by the Contributor will be substantially consistent with the
information provided to the Company pursuant to this Section 9.4.
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 commercially 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; provided, however, that the Consent of
the Non-Managing Members shall be required to settle any administrative
proceeding or institute or settle any litigation with respect to tax issues if
such action (i) is reasonably likely to affect materially the Non-Managing
Members, and (ii) does not relate to the Managing Member's tax status as a REIT.
B. 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, 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 for each LLC Unit, or will
be entitled to receive, for each LLC Unit (in lieu of the REIT Shares Amount)
upon an Exchange of the LLC Unit pursuant to Section 8.6 hereof, 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 subject, in the event of an Exchange of the LLC Unit pursuant to
Section 8.6 hereof subsequent to the consummation of the Termination
Transaction, to further adjustment to the extent provided in this Agreement to
compensate for the dilutive effect of certain transactions described herein;
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. General. No Non-Managing Member shall Transfer all or any
portion of its Membership Interest, or any of such Non-Managing Member's
economic rights as a Non-Managing Member, to any transferee without first
offering such Membership Interest to the Managing Member and otherwise obtaining
the consent of the Managing Member, which consent (i) may be withheld in its
sole and absolute discretion with respect to taxable Transfers, and (ii) with
respect to non-taxable Transfers, shall not be unreasonably withheld; provided,
however, that notwithstanding the foregoing or any other provisions of this
Agreement, any Non-Managing Member may, without the consent of the Managing
Member, (x) pledge all or any portion of its Membership Interest to a lender to
such Member to secure indebtedness to such lender and Transfer such Membership
Interest to such lender upon foreclosure of the debt secured by such Membership
Interest, so long as any such pledge or other Transfer would not otherwise
violate the provisions of this Agreement or (y) transfer all or any portion of
its Membership Interest or economic rights as a Non-Managing Member to a partner
of such Non-Managing Member in liquidation of such partner's interest in such
Non-Managing Member, to a family member of such Non-Managing Member or to an
organization described in Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the
Code, so long as any such Transfer would not otherwise violate the provisions of
this Agreement.
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. 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.
Section 11.4. Substituted Members
A. Each Non-Managing 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 so long as the Transfer of such
Non-Managing Member's LLC Units is otherwise made pursuant to the terms and in
satisfaction of the conditions of this Agreement, specifically including the
provisions of Section 11.3 and Sections 11.4.B and C. hereof.
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 receipt of written notice from a Non-Managing Member that
the transferee of its LLC Units is to be admitted by the Company as 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 upon the Transfer of its LLC Units, the transferring Non-Managing
Member does not substitute the transferee as a Member in its place 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 Non-Managing 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; (ii) pursuant to the exercise of its
rights to effect an Exchange of all of its LLC Units under Section 8.6 hereof;
(iii) pursuant to a Reduction; or (iv) pursuant to a combination of Transfers of
the types specified in the foregoing (i) - (iii), shall cease to be a Member.
C. Transfers pursuant to this Article 11 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
redemption or 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) without the consent of the Managing Member, which may be
granted or withheld in its sole and absolute discretion 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 in the case of a Terminating
Capital Transaction or as a result of the Exchange of LLC Units pursuant to
Section 8.6 hereof);
(d) without the consent of the Managing Member, which may be
granted or withheld in its sole and absolute discretion if such Transfer
could, as determined in the sole discretion of the Managing Member, (i)
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) adversely affect the ability of the Managing Member to
continue to qualify as a REIT or would subject the Managing Member to any
additional taxes under Code Section 857 or Code Section 4981 or (iii) such
Transfer could be treated as having been effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Code Section 7704, or such
Transfer fails to satisfy a "safe-harbor" preventing such treatment (as set
forth in Treasury Regulations under Code Section 7704 or any successor
provision);
(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
granted or withheld in its sole and absolute 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) (the "One Hundred Member Limit").
F. No Non-Managing Member will take or allow any Affiliate to take
any action that would cause a violation of the One Hundred Member Limit.
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. Admission of Additional Members
A. A Person (other than an existing Member) who makes a Capital
Contribution to the Company in accordance with this Agreement shall be admitted
to the Company as an Additional Member, only upon furnishing to the Managing
Member (i) evidence of acceptance, in form and substance satisfactory to the
Managing Member, of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Section 2.4
hereof, and (ii) such other documents or instruments as may be required in the
sole and absolute discretion of the Managing Member in order to effect such
Person's admission as an Additional Member.
B. Notwithstanding anything to the contrary in this Section 12.2,
except pursuant to the transactions contemplated by the Contribution Agreement,
no Person shall be admitted as an Additional Member without the Consent of the
Non-Managing Members and Managing Member, which may be given or withheld by each
Non-Managing Member and Managing Member in its sole and absolute discretion.
The admission of any Person as an Additional Member shall become effective on
the date upon which the name of such Person is recorded on the books and records
of the Company, following the Consent of the Non-Managing Members and Managing
Member to such admission.
C. If any Additional Member is admitted to the Company 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 shall be allocated
among such Additional Member and all other 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" method or another
permissible method selected by the Managing Member. Solely for purposes of
making such allocations, each of such items for the calendar month in which an
admission of any Additional Member occurs shall be allocated among all the
Members and Assignees including such Additional Member, in accordance with the
principles described in Section 11.6.C hereof. All distributions of Available
Cash with respect to which the LLC Record Date is before the date of such
admission shall be made solely to Members and Assignees other than the
Additional Member, and all distributions of Available Cash thereafter shall be
made to all the Members and Assignees including such Additional Member.
Section 12.3. 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 12.4. Limitation on Admission of Members
No Person shall be admitted to the Company as a Substituted Member or
an Additional Member if, in the opinion of legal counsel for the Company, it
would result in the Company being treated as a corporation for federal income
tax purposes or otherwise cause the Company to become a reporting company under
the Exchange Act.
ARTICLE 13.
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1. Dissolution
The Company shall not be dissolved by the admission of Substituted
Members or Additional 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 cause the holders of Non-
Managing Member Units to Exchange their Non-Managing Member Units in accordance
with Section 13.2;
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 90 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) or, at the election of the Managing Member, which election may
be made it its sole and absolute discretion, at any time after the end of the
Dissolution Protection Period.
Section 13.2. Exchange of Non-Managing Member Units
Notwithstanding anything in this Agreement to the contrary, on or
after such time as the Managing Member has the right to dissolve the Company, or
at any time with respect to Members that are an organization described in
Sections 170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code, the Managing Member
may, in its sole and absolute discretion, require each Non-Managing Member (by
delivering a Call Notice to such Non-Managing Member) to tender all of its Non-
Managing Member Units to the Managing Member in exchange for, at the election of
and in the sole and absolute discretion of the Managing Member, either (i) an
amount of cash equal to the sum of (a) the Cash Amount and (b) the NMM Sharing
Amount, calculated as if all of the Real Properties then owned by the Company
were sold in a taxable transaction at their fair market values, or (ii) a number
of REIT Shares equal to the sum of (a) the REIT Shares Amount payable on the
Specified Exchange Date and otherwise in accordance with the procedures and
provisions set forth in Section 8.6.A, and (b) a number of REIT Shares with a
value equal to the amount set forth in Section 13.2(i)(b).
Section 13.3. 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 (whether by payment or the making of
reasonable provision for payment thereof);
(3) Third, to the satisfaction of all of the Company's debts and
liabilities to the other Members and any Assignees incurred 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 Member or Assignee;
and
(4) The balance, if any, to the Members and any Assignees in
accordance with and proportion to their positive Capital Account balances,
after giving effect to all contributions, distributions and allocations for
all periods.
The Managing Member shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.3.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 13.3.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 13.3.A
hereof as soon as practicable.
Section 13.4. 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 13.5. 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 13.6. 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 13.7. Cancellation of Certificate
Upon the completion of the liquidation of the Company's cash and
property as provided in Section 13.3 hereof, the Company shall be terminated and
the Certificate and all qualifications of the Company as a foreign limited
liability company in jurisdictions other than the State of Delaware shall be
canceled and such other actions as may be necessary to terminate the Company
shall be taken.
Section 13.8. 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 13.3 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 13.9. 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
Except for amendments to Exhibit A as provided in Sections 7.3.C,
11.4.C and 12.3 hereof, amendments to 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 in this Agreement, to the extent any
amount paid, credited or reimbursed to the Managing Member or its officers,
directors, employees or agents, whether as a reimbursement, fee, expense or
indemnity (a "REIT Payment"), would constitute gross income to the Managing
Member for purposes of Sections 856(c)(2) or 856(c)(3) of the Code, then,
notwithstanding any other provision of this Agreement, the amount of such REIT
Payments, as selected by the Managing Member in its discretion from among items
of potential reimbursement, fees, expenses and indemnities, shall be reduced for
any Fiscal Year so that the REIT Payments, as so reduced, to, for or with
respect to such REIT Member shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) four and
seventeen one-hundredths percent (4.17%) of the Managing Member's total
gross income (but not including the amount of any REIT Payments) for the
Fiscal Year that 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 REIT
Payments); or
(ii) an amount equal to the excess, if any, of (a) twenty-five
percent (25%) of the Managing Member's total gross income (but not
including the amount of any REIT Payments) for the Fiscal Year that 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 REIT Payments);
provided, however, that REIT 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 that REIT Payments may not be made in a Fiscal
Year as a consequence of the limitations set forth in this Section 15.12, such
REIT Payments shall carry over and be treated as arising in the following Fiscal
Year; provided, however, that such amount shall not carry over for more than
five (5) years, and if not paid within such five (5) year period, shall expire;
provided, further, that (a) as REIT 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 payment 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: /s/ Edward J. Henning
Name: Edward J. Henning
Title: Senior Vice President,
General Counsel and
Corporate Secretary
NON-MANAGING MEMBERS: BOYER-ST. MARKS MEDICAL ASSOCIATES, LTD.,
a Utah limited partnership
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its General Partner
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER MCKAY-DEE ASSOCIATES, LTD.,
a Utah limited partnership
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its General Partner
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
NON-MANAGING MEMBER'S (CON'T)
BOYER ST. MARK'S MEDICAL
ASSOCIATES #2, LTD., a Utah limited
partnership
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its General Partner
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER-OGDEN MEDICAL ASSOCIATES, LTD.,
a Utah limited partnership
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its General Partner
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER-OGDEN MEDICAL ASSOCIATES NO. 2,
LTD., a Utah limited partnership
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its General Partner
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
NON-MANAGING MEMBER'S (CON'T)
BOYER-SALT LAKE INDUSTRIAL CLINIC ASSOCIATES,
LTD., a Utah limited partnership
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its General Partner
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER PRIMARY CARE CLINIC ASSOCIATES, LTD. #2, a
Utah limited partnership
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its General Partner
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER CENTERVILLE CLINIC COMPANY, L.C.,
a Utah limited liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
NON-MANAGING MEMBER'S (CON'T)
BOYER GRANTSVILLE MEDICAL, L.C.,
a Utah limited liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER ELKO, L.C., a Utah limited
liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER IOMEGA, L.C., a Utah limited
liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
NON-MANAGING MEMBER'S (CON'T)
BOYER PROVIDENCE MEDICAL ASSOCIATES,
L.C., a Utah limited liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER CASTLE DALE MEDICAL CLINIC, L.L.C., a Utah
limited liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
BOYER SPRINGVILLE, L.C., a Utah limited
liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
NON-MANAGING MEMBER'S (CON'T)
BOYER DESERT SPRINGS, L.C., a Utah limited
liability company
By: THE BOYER COMPANY, L.C.,
a Utah limited liability company,
its Managing Member
By: /s/ H. Roger Boyer
Name: H. Roger Boyer
Its: Chairman and Manager
SCHEDULE 1.1
REDUCED TAX PROTECTION PERIOD PROPERTY
St. Mark's I*
Ogden Women's Center
Salt Lake Industrial Clinic
Wasatch Family
Centerville
Grantsville
Old Mill
Elko
Creekside
Castle Dale
Springville
Northwest
* = 13th anniversary of Effective Date, all others = 10th
anniversary of Effective Date
SCHEDULE 7.3
EXISTING INDEBTEDNESS
Principal Amount
of Loan at
Property Lender Initial Closing
- -----------------------------------------------------------------
Centerville Bankers Security Life Insurance
Society ($925,469)
St. Mark's I Aid Association for Lutherans ($5,904,458)
St. Mark's II Ohio National Life Insurance
Company ($9,318,793)
Wasatch Family Bankers Security Life Insurance
Society ($1,099,822)
EXHIBIT A
MEMBERS' CAPITAL CONTRIBUTIONS
Non-Managing Members
Address:
c/o The Boyer Company, L.C.
127 South 500 East, Suite 310
Salt Lake City, Utah 84102
Attention: Steven B. Ostler
Telephone No.: (801) 521-4781
Facsimile No.: (801) 521-4793
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Attention: Kenneth M. Doran, Esq.
Telephone No.: (213) 229-7000
Facsimile No.: (213) 229-7520
with a copy to:
Parr, Waddoups, Brown, Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111-1536
Attention: David E. Gee, Esq.
Telephone No.: (801) 532-7840
Facsimile No.: (801) 532-7750
Gross Asset Net Asset
Value Value
of of
Member Contribution Contribution Contribution Unit Value Units
- ----------------------------------------------------------------------------------------------------------
Boyer Castle Dale Castle Dale $1,800,000 $552,538 $32.00 17,267
Boyer Centerville Centerville $1,520,000 $536,717 $32.00 16,772
Boyer Elko Elko $2,620,000 $832,395 $32.00 26,012
Boyer Desert Springs Granger, Tatum $21,250,000 $3,652,897 $32.00 114,153
Boyer Grantsville Grantsville $410,000 $170,806 $32.00 5,338
Boyer Ogden Medical Ogden Medical $4,220,000 $25,145 $32.00 786
Boyer Ogden Medical #2 Ogden Women's $2,300,000 $1,171,029 $32.00 36,595
Boyer Salt Lake SLIC $885,000 $395,210 $32.00 12,350
Boyer St. Mark's Medical St. Mark's I $10,700,000 $3,352,905 $32.00 104,778
Boyer McKay-Dee 60% Undivided Interest in
St. Mark's II $8,880,000 $2,281,455 $32.00 71,295
Boyer St. Mark's #2 40% Undivided Interest in
St. Mark's II $5,920,000 $1,520,970 $32.00 47,530
Boyer Iomega Timpanogos $8,100,000 $2,377,577 $32.00 74,299
Boyer Springville Springville $1,500,000 $1,461,700 $32.00 45,678
Boyer Primary Care Wasatch Family $1,800,000 $652,622 $32.00 20,394
Total Non-Managing Member Units 593,249
Mananging Member
Address:
Health Care Property Investors, Inc.
4675 MacArthur Court, Suite 900
Newport Beach, California 92660
Attention: Edward J. Henning, Esq.
Telephone No.: (949) 221-0600
Facsimile No.: (949) 221-0607
with a copy to:
Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
Attention: David C. Meckler, Esq.
Telephone No.: (714) 540-1235
Facsimile No.: (714) 755-8290
Health Care Property Investors Cash $18,432,350 $18,432,350 $32.00 576,011
Total Non-Managing Member Units 576,011
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 HCPI/Utah, LLC in
accordance with the terms of the Amended and Restated Limited
Liability Company Agreement of HCPI/Utah, LLC, dated as of
___________, 1998 (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
FORM OF REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT (this "Agreement") is entered
into as of _____________, 1998, by and between
__________________, a __________________ (the "Reimbursor"), and
HCPI/Utah, LLC, a Delaware limited liability company (the
"Reimburse").
RECITALS
A. Pursuant to a Contribution Agreement and Escrow
Instructions, dated _____________, 1998 (the "Contribution
Agreement") by and among the Health Care Property Investors,
Inc., a Maryland Corporation (the "Managing Member"), Reimbursee,
the Reimbursor, The Boyer Company, L.C. a Utah limited liability
company, and the other parties named therein, the Reimbursor
contributed (the "Contribution") property to the Reimbursee in
exchange for membership interests ("LLC Units") in the
Reimbursee.
B. Pursuant to the Amended and Restated Limited Liability
Company Agreement of the Reimbursee, dated as of ______________,
1998, the Reimbursee agreed to maintain certain indebtedness (the
"Required Indebtedness").
C. [The Managing Manager/__________________, a
_________________] ("Lender"), made a certain loan (the "Loan")
to the Reimbursee, which Loan is evidenced by a Note dated
______________, 199____ in an aggregate principal amount not to
exceed $______________ (the "Note"). [The Loan is guaranteed by
the Managing Member]. All of the documents or agreements
evidencing or securing or otherwise relating to the Loan shall be
referred to herein as the "Loan Documents."
D. The Reimbursor intends to pay to the Lender up to a
certain amount in the event the Lender has exhausted its remedies
against the Reimbursee's assets [and the Managing Member must
pay, directly or indirectly, to the Lender (or bear the economic
risk of loss for) / the Lender bears the economic risk of loss
for) any portion of the Note.
E. Each of the partners of the Reimbursor listed on Exhibit A
hereto (the "Partners") has agreed, pursuant to a Partner
Reimbursement Agreement dated of even date herewith, to reimburse
the Reimbursor for his or her respective share of the amount of
any payment made by the Reimbursor hereunder.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Reimbursor and
the Reimbursee hereby agree as follows:
AGREEMENT
1. Term. This Agreement shall terminate on
______________, _____ [maturity date of Note], provided, however,
(i) this Agreement shall terminate at the time that the
Reimbursor ceases to own any LLC Units, except that if at such
time the Loan is in default under the terms of the Loan Documents
this Agreement shall not terminate until such default is cured
under the terms of the Loan Documents, (ii) if the Reimbursor
distributes to the Partners some, but not all, of the LLC Units
received in the Contribution, the obligations of the Reimbursor
under this Agreement shall terminate as to that portion of the
Reimbursable Amount allocable to the LLC Units so distributed,
and (iii) if the Reimbursor redeems some, but not all, of the LLC
Units received in the Contribution, and distributes the proceeds
in redemption of a Partner's interest in the Reimbursor, the
obligations of the Reimbursor under this Agreement shall
terminate as to that portion of the Reimbursable Amount allocable
to the LLC Units so redeemed, so that in either case (ii) or
(iii) the Reimbursor shall be liable for the Reimbursement
Obligations hereunder only to the extent that the Reimbursable
Amount is allocable to the LLC Units retained by the Reimbursor.
2. Reimbursement Obligations.
(a) The maximum liability of the Reimbursor pursuant to this
Agreement is $__________ (such amount is referred to herein as
the "Reimbursable Amount").
(b) The Reimbursor hereby agrees to pay to the Lender [(or
reimburse the Managing Member if the Managing Member has paid to
the Lender)] the Shortfall Amount (as defined below) after the
Lender has fully and completely exhausted its remedies against
the Reimbursee's assets. No demand shall be made under this
Agreement for the Shortfall Amount until such time as the Lender
shall have fully and completely exhausted its remedies against
the Reimbursee's assets (including any real and personal property
securing the repayment of the Loan). The "Shortfall Amount"
shall be such portion of the Reimbursement Amount equal to the
excess of (x) the Reimbursement Amount over (y) the sum of all
amounts obtained and the fair market value of all property
obtained by Lender in proceedings against the Reimbursee under
the Loan Documents. The Reimbursor's obligations to pay the
Shortfall Amount set forth in this Section 2 shall be referred to
herein as the "Reimbursement Obligations."
3. Liability for Reimbursement Obligations.
(a) The Reimbursor shall be liable with respect to the full
amount of any Reimbursement Obligations in any period during
which the Reimbursor continues to hold all of the LLC Units
received in the Contribution.
(b) If the Reimbursor distributes to the Partners some, but not
all, of the LLC Units received in the Contribution, the
Reimbursor shall be liable for the Reimbursement Obligations to
the extent that the Reimbursable Amount is allocable to the LLC
Units that it retains.
4. Partners' Respective Shares of Reimbursable Amount;
Agreements by Partners to Reimburse Directly with Respect to
Distributed Units.
(a) Each Partner's respective share of the Reimbursable Amount
is set forth on Exhibit B hereto. Such percentage also shall be
used to determine the amount of the Reimbursable Amount allocable
to LLC Units distributed in full redemption of any such Partner's
interest (for purposes of determining that portion of the
Reimbursable Amount allocable to the LLC Units retained by the
Reimbursor under Section 3(b) hereof).