Exhibit 10.14
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
GGPLP L.L.C.
TABLE OF CONTENTS
PAGE
ARTICLE I Definitions; Etc........................................... 1
1.1 Definitions................................................... 1
1.2 Exhibits, Etc................................................. 15
1.3 Pronouns and Headings......................................... 16
ARTICLE II Continuation............................................... 16
2.1 Continuation.................................................. 16
2.2 Name.......................................................... 16
2.3 Character of the Business..................................... 16
2.4 Location of the Principal Place of Business................... 17
2.5 Registered Agent and Registered Office........................ 17
ARTICLE III Term....................................................... 17
3.1 Commencement.................................................. 17
3.2 Dissolution................................................... 17
ARTICLE IV Classes of Units........................................... 17
4.1 Common Units.................................................. 17
4.2 Preferred Units............................................... 18
4.3 Establishment of Series A Preferred Units..................... 18
4.4 No Third Party Beneficiary.................................... 32
4.5 No Interest; No Return; No Withdrawal......................... 33
4.6 No Other Capital Contributions................................ 33
4.7 Establishment and Issuance of Series B Preferred Units........ 33
ARTICLE V Allocations and Other Tax and Accounting Matters........... 33
5.1 Allocations................................................... 33
5.2 Distributions................................................. 33
5.3 Books of Account.............................................. 34
5.4 Reports....................................................... 34
5.5 Tax Elections and Returns..................................... 34
5.6 Tax Matters Member............................................ 34
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TABLE OF CONTENTS
(continued)
PAGE
5.7 Withholding................................................... 34
ARTICLE VI Rights, Duties and Restrictions of the Managing Member..... 35
6.1 Expenditures by Company....................................... 35
6.2 Powers and Duties of Managing Member.......................... 35
6.3 Proscriptions................................................. 38
6.4 Title Holder.................................................. 38
6.5 Compensation of the Managing Member........................... 38
6.6 Waiver and Indemnification.................................... 38
6.7 Operation in Accordance with REIT Requirements................ 39
6.8 Duties and Conflicts.......................................... 39
ARTICLE VII Dissolution, Liquidation and Winding-Up.................... 40
7.1 Accounting.................................................... 40
7.2 Distribution on Dissolution................................... 40
7.3 Timing Requirements........................................... 40
7.4 Sale of Company Assets........................................ 41
7.5 Distributions in Kind......................................... 41
7.6 Documentation of Liquidation.................................. 41
7.7 Negative Capital Accounts..................................... 41
ARTICLE VIII Transfer of Units.......................................... 41
8.1 Managing Member Transfer...................................... 41
8.2 Transfers by Other Members.................................... 42
8.3 Restrictions on Transfer...................................... 42
8.4 Bankruptcy of a Member........................................ 43
ARTICLE IX Arbitration of Disputes.................................... 43
9.1 Arbitration................................................... 43
9.2 Procedures.................................................... 43
9.3 Binding Character............................................. 44
9.4 Exclusivity................................................... 44
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TABLE OF CONTENTS
(continued)
PAGE
9.5 No Alteration of Agreement.................................... 44
ARTICLE X General Provisions......................................... 45
10.1 Notices....................................................... 45
10.2 Successors.................................................... 45
10.3 Effect and Interpretation..................................... 45
10.4 Counterparts.................................................. 45
10.5 Members Not Agents............................................ 45
10.6 Entire Understanding; Etc..................................... 45
10.7 Amendments.................................................... 45
10.8 Severability.................................................. 45
10.9 Trust Provision............................................... 45
10.10 Issuance of Certificates Representing Units................... 46
10.11 Specific Performance.......................................... 46
10.12 Power of Attorney............................................. 46
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B-1
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
GGPLP L.L.C.
THIS SECOND AMENDED AND RESTATED OPERATING AGREEMENT is made and
entered into this 17th day of April, 2002, by and among the undersigned parties.
W I T N E S S E T H:
WHEREAS, a Delaware limited liability company known as GGPLP L.L.C.
(the "Company") exists pursuant to the Delaware Limited Liability Company Act
and that certain Amended and Restated Operating Agreement dated as of May 25,
2000 (the "Original Agreement"), among GGP Limited Partnership, a Delaware
limited partnership (the "Operating Partnership"), GGP American Properties Inc.,
a Delaware corporation, Caledonian Holding Company, Inc., a Delaware
corporation, Goldman Sachs 2000 Exchange Place Fund, L.P. (the "GS 2000 Exchange
Fund"), and General Growth Properties, Inc., a Delaware corporation ("GGPI");
WHEREAS, the GS 2000 Exchange Fund has previously assigned its
preferred units of membership interest in the Company to GSEP 2000 Realty Corp.,
a Delaware corporation (the "GS 2000 REIT");
WHEREAS, concurrently herewith, GSEP 2002 Realty Corp., a Delaware
corporation (the "GS 2002 REIT"), is contributing $50,000,000 to the capital of
the Company and, in exchange therefor, the Company is issuing to the GS 2002
REIT Series B Preferred Units (as defined below); and
WHEREAS, the parties hereto, being all of the existing members of the
Company and the GS 2002 REIT, desire to amend and restate the Original Agreement
in its entirety to reflect such capital contribution, to effect the creation and
issuance of the Series B Preferred Units and to reflect the transfer referred to
in the second recital hereof and the other understandings among the parties
hereto in respect of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, do hereby amend and restate the Original
Agreement to read in its entirety as follows:
ARTICLE I
DEFINITIONS; ETC.
1.1 DEFINITIONS. Except as otherwise herein expressly provided, the
following terms and phrases shall have the meanings set forth below (such
definitions to be equally applicable to the singular and plural forms of the
terms so defined):
1
"Accountants" shall mean the firm or firms of independent certified
public accountants selected by the Managing Member on behalf of the Company and
the Property Partnerships.
"Act" shall mean the Limited Liability Company Act as enacted in the
State of Delaware, as the same has been amended and as the same may hereafter be
amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of any relevant fiscal year and after giving effect to the following
adjustments:
(a) credit to such Capital Account any amounts which such Member
is obligated or treated as obligated to restore with respect to any
deficit balance in such Capital Account pursuant to Section
1.704-1(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated
to restore with respect to any deficit balance pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the requirements of the alternate test for economic
effect contained in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith
"Adjusted Consolidated Tangible Net Worth" shall mean, as of the time
of determination, the Consolidated Tangible Net Worth at such time less any
Reserve Amount at such time.
"Administrative Expenses" shall mean (i) all administrative and
operating costs and expenses incurred by the Company, (ii) all administrative,
operating and other costs and expenses incurred by the Property Partnerships,
which expenses are being assumed by the Company pursuant to Section 6.1, (iii) a
pro rata portion (as determined in the reasonable judgment of the Managing
Member) of administrative costs and expenses of the Managing Member and GGPI,
including salaries paid to officers of the Managing Member and GGPI and
accounting and legal expenses undertaken by the Managing Member and GGPI on
behalf or for the benefit of the Company, and (iv) to the extent not included in
clause (iii) above, a pro rata portion (as determined in the reasonable
discretion of the Managing Member) of REIT Expenses.
"Affiliate" shall mean, with respect to any Member (or as to any other
Person the affiliates of whom are relevant for purposes of any of the provisions
of this Agreement), (i) any member of the Immediate Family of such Member; (ii)
any trustee or beneficiary of a Member; (iii) any legal representative,
successor, or assignee of such Member or any Person referred to in the preceding
clauses (i) and (ii); (iv) any trustee of any trust for the benefit of such
Member or any Person referred to in the preceding clauses (i) through (iii); or
(v) any Person which directly or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such Member or any
Person referred to in the preceding clauses (i) through (iv).
2
"Agreement" shall mean this Amended and Restated Operating Agreement,
as originally executed and as amended, modified, supplemented or restated from
time to time, as the context requires.
"Approved Replacement Property" means, with respect to a Property being
sold, conveyed, transferred or otherwise disposed of, a real estate asset with a
fair market value of at least 90% of the fair market value of the Property being
sold, conveyed, transferred or disposed of.
"Bankruptcy" shall mean, with respect to any Member or the Company, (i)
the commencement by such Member or the Company of any proceeding seeking relief
under any provision or chapter of the federal Bankruptcy Code or any other
federal or state law relating to insolvency, bankruptcy or reorganization, (ii)
an adjudication that such Member or the Company is insolvent or bankrupt; (iii)
the entry of an order for relief under the federal Bankruptcy Code with respect
to such Member or the Company, (iv) the filing of any such petition or the
commencement of any such case or proceeding against such Member or the Company,
unless such petition and the case or proceeding initiated thereby are dismissed
within ninety (90) days from the date of such filing, (v) the filing of an
answer by such Member or the Company admitting the allegations of any such
petition, (vi) the appointment of a trustee, receiver or custodian for all or
substantially all of the assets of such Member or the Company unless such
appointment is vacated or dismissed within ninety (90) days from the date of
such appointment but not less than five (5) days before the proposed sale of any
assets of such Member or the Company, (vii) the insolvency of such Member or the
Company or the execution by such Member or the Company of a general assignment
for the benefit of creditors, (viii) the convening by such Member or the Company
of a meeting of its creditors, or any class thereof, for purposes of effecting a
moratorium upon or extension or composition of its debts, (ix) the failure of
such Member or the Company to pay its debts as they mature, (x) the levy,
attachment, execution or other seizure of substantially all of the assets of
such Member or the Company where such seizure is not discharged within thirty
(30) days thereafter, or (xi) the admission by such Member or the Company in
writing of its inability to pay its debts as they mature or that it is generally
not paying its debts as they become due.
"Business Day" shall mean a day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
"Capital Account" shall mean, with respect to any Member, the separate
"book" account which the Company shall establish and maintain for such Member in
accordance with Section 704(b) of the Code and Section 1.704-1(b)(2)(iv) of the
Regulations and such other provisions of Section 1.704-1(b) of the Regulations
that must be complied with in order for the Capital Accounts to be determined in
accordance with the provisions of said Regulations. In furtherance of the
foregoing, the Capital Accounts shall be maintained in compliance with Section
1.704-1(b)(2)(iv) of the Regulations; and the provisions hereof shall be
interpreted and applied in a manner consistent therewith. In the event that any
Units are transferred in accordance with the terms of this Agreement, the
Capital Account, at the time of the transfer, of the transferor attributable to
the transferred Units shall carry over to the transferee.
3
"Capital Contribution" shall mean, with respect to any Member, the
amount of money and the initial Gross Asset Value of any property other than
money contributed to the Company with respect to the Units held by such Member
(net of liabilities to which such property is subject).
"Certificate" shall mean the Certificate of Formation establishing the
Company, as filed with the office of the Delaware Secretary of State, as it may
be amended from time to time in accordance with the terms of this Agreement and
the Act.
"Charter" shall mean the certificate of incorporation of GGPI, as filed
with the office of the Delaware Secretary of State, as it may be amended from
time to time.
"Closing Price" on any date shall mean the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Common
Shares are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Common Shares are listed or admitted to trading or, if the Common Shares are not
listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System or, if such system is no
longer in use, the principal other automated quotations system that may then be
in use or, if the Common Shares are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Shares as such person is selected
from time to time by the Board of Directors of GGPI.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Shares" shall mean the shares of the common stock, par value
$.10 per share, of GGPI.
"Common Unit Record Date" shall mean the record date established by the
Managing Member for a distribution of Net Operating Cash Flow pursuant to
Section 5.2.
"Common Units" shall mean all Units other than Preferred Units.
"Company" shall have the meaning set forth in the preliminary recitals
hereto.
"Consent of the Holders of Common Units" shall mean the written consent
of the holders of a Majority-In-Interest of the Common Units, which Consent
shall be obtained prior to the taking of any action for which it is required by
this Agreement and may be given or withheld by the holders of a
Majority-In-Interest of the Common Units, unless otherwise expressly provided
herein, in their sole and absolute discretion.
"Consolidated Group" means the Company and all Subsidiaries.
4
"Consolidated Group Pro Rata Share" shall mean, with respect to any
Investment Affiliate, the percentage of the aggregate equity ownership interests
held by the Consolidated Group in such Investment Affiliate, determined by
calculating the greater of (i) the percentage of the issued and outstanding
stock, partnership interests or membership interests in such Investment
Affiliate held by the Consolidated Group in the aggregate and (ii) the
percentage of the total book value of such Investment Affiliate that would be
received by the Consolidated Group in the aggregate upon liquidation of such
Investment Affiliate after repayment in full of all Indebtedness of such
Investment Affiliate.
"Consolidated Interest Expense" shall mean, for any period, without
duplication, the sum of (a) the amount of interest expense, determined in
accordance with GAAP, of the Consolidated Group for such period related to
Consolidated Outstanding Indebtedness for such period plus (b) the Consolidated
Group Pro Rata Share of any interest expense, determined in accordance with
GAAP, of any Investment Affiliate, for such period, whether recourse or
non-recourse (in the case of each of clause (a) or (b), excluding prepayment
fees, premiums or penalties and net of amortization of deferred costs associated
with new financings or refinancings of existing Indebtedness).
"Consolidated Outstanding Indebtedness" shall mean, as of any date of
determination, without duplication, the sum of (a) all Indebtedness of the
Consolidated Group outstanding at such date, determined on a consolidated basis
in accordance with GAAP, plus (b) the applicable Consolidated Group Pro Rata
Share of any Indebtedness of each Investment Affiliate outstanding at such date
other than Indebtedness of such Investment Affiliate to a member of the
Consolidated Group, less (c) with respect to each Subsidiary in which the
Company does not directly or indirectly hold a 100% ownership interest, a
percentage of any Indebtedness of such Subsidiary which is included under clause
(a) of this definition and which is not guaranteed by the Company equal to the
percentage ownership interest in such consolidated Subsidiary which is not held
directly or indirectly by the Company on such date. Notwithstanding anything to
the contrary contained herein, Parent Indebtedness shall not be included in the
calculation of Consolidated Outstanding Indebtedness.
"Consolidated Tangible Net Worth" shall mean, as of any date of
determination, the excess, without duplication, of (a) the total fair market
value of the assets (including cash and cash equivalents) of the Consolidated
Group and the applicable Consolidated Group Pro Rata Shares of the assets of the
Investment Affiliates as of such date over (b) Consolidated Outstanding
Indebtedness as of such date; provided, that for purposes of this definition,
the determination of total assets shall exclude (a) all assets which in
accordance with GAAP should be classified as intangible assets (such as
goodwill, patents, trademarks, copyrights, franchises, unamortized debt
discount, capitalized research and development costs, capitalized software costs
and organization costs), (b) cash held in a sinking or other similar fund
established for the purpose of redemption or other retirement of capital stock
and (c) to the extent not already deducted from total assets, reserves for
depreciation, depletion, obsolescence or amortization of properties and other
reserves or appropriations of retained earnings which have been established or
which a prudent owner and operator should establish in connection with the
business of operating and maintaining the Company properties. For purposes of
the calculation of Consolidated Tangible Net Worth, (a) the fair market value of
income producing real property
5
shall be the quotient of four times the Net Operating Income of such property
for the most recently completed calendar quarter divided by an 8.25%
capitalization rate, (b) the fair market value of any raw land, vacant
out-parcel or real estate under construction shall equal the aggregate sums
expended therefor (including without limitation land acquisition costs)
(provided, however, that (i) the fair market value of the land portion of those
assets which are listed on Schedule 1 to the Term Loan Agreement shall be as set
forth on such Schedule 1 and (ii) no amount shall be included under this clause
(b) with respect to real estate under construction if the Company has included
income therefrom in the calculation of Net Operating Income unless the
construction in question involves renovation or expansion of a property that is
otherwise completed, open for business and operational, the construction in
question will not materially interrupt, limit or impair such ongoing business
and operations and the inclusion of such income in the calculation of Net
Operating Income and such costs and/or other amounts under this clause (b) is
not duplicative) and (c) the fair market value of any other asset shall be the
lesser of cost and fair market value (as determined in good faith by the
Managing Member) thereof.
"Control" shall have the meaning provided in the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Current Per Share Market Price" shall mean, as of any date, the
average of the Closing Price for the twenty consecutive Trading Days ending on
such date.
"Demand Notice" shall have the meaning set forth in Section 9.2.
"Depreciation" shall mean, with respect to any asset of the Company for
any fiscal year or other period, the depreciation, depletion or amortization, as
the case may be, allowed or allowable for Federal income tax purposes in respect
of such asset for such fiscal year or other period; provided, however, that if
there is a difference between the Gross Asset Value and the adjusted tax basis
of such asset, Depreciation shall mean "book depreciation, depletion or
amortization" as determined under Section 1.704-1(b)(2)(iv)(g)(3) of the
Regulations.
"Entity" shall mean any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative, association or other entity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time (or any corresponding provisions of succeeding
laws).
"Event" shall have the meaning set forth in Section 4.3(c).
"Excess Units" shall have the meaning set forth in Section
4.3(g)(i)(F).
"Financial Statements" shall mean financial statements (balance sheet,
statement of income, statement of partners' equity and statement of cash flows)
prepared in accordance with generally accepted accounting principles.
"Fixed Charges" shall mean, for any period (without duplication), the
sum of (a) Consolidated Interest Expense for such period plus (b) the aggregate
of all scheduled principal
6
payments on Consolidated Outstanding Indebtedness during such period (excluding
balloon, bullet or similar payments of principal due upon the stated maturity of
Indebtedness) plus (c) the aggregate of all dividends paid or accrued on any
shares of Preferred Stock issued by members of the Consolidated Group and the
Consolidated Group Pro Rata Share of all dividends paid or accrued on any shares
of Preferred Stock issued by Investment Affiliates (provided that dividends paid
or accrued on shares of Preferred Stock owned by the Company or any Subsidiary
that is 100% owned by the Company shall be excluded from the amount calculated
under clause (c) of this definition and with respect to dividends on Preferred
Stock owned by a consolidated Subsidiary of the Company in which the Company
does not directly or indirectly hold a 100% ownership interest, a percentage of
the paid or accrued dividends attributable to such consolidated Subsidiary shall
be excluded from the amount calculated under clause (c) of this definition equal
to the percentage ownership interest in such consolidated Subsidiary which is
held directly or indirectly by the Company).
"GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time.
"GGPI" shall mean General Growth Properties, Inc., a Delaware
corporation and the general partner of the Managing Member.
"Gross Asset Value" shall mean, with respect to any asset of the
Company, such asset's adjusted basis for Federal income tax purposes, except as
follows:
(a) the initial Gross Asset Value of (i) the assets contributed by
each Member to the Company prior to the date hereof is the gross fair
market value of such contributed assets as indicated in the books and
records of the Company as of the date hereof, and (ii) any asset
hereafter contributed by a Member (including the Managing Member),
other than money, is the gross fair market value thereof as reasonably
determined by the Managing Member using such reasonable method of
valuation as the Managing Member may adopt;
(b) if the Managing Member reasonably determines that an adjustment
is necessary or appropriate to reflect the relative economic interests
of the Members, the Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
reasonably determined by the Managing Member, as of the following
times:
(i) a Capital Contribution (other than a de minimis Capital
Contribution) to the Company by a new or existing Member as
consideration for Units;
(ii) the distribution by the Company to a Member of more than
a de minimis amount of Company property as consideration for the
redemption of Units; and
(iii) the liquidation of the Company within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations;
7
(c) the Gross Asset Values of Company assets distributed to
any Member shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) as reasonably determined by
the Managing Member as of the date of distribution; and
(d) the Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Sections 734(b) or 743(b) of the Code,
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m)
of the Regulations (See Exhibit A); provided, however, that Gross Asset
Values shall not be adjusted pursuant to this paragraph to the extent
that the Managing Member reasonably determines that an adjustment
pursuant to paragraph (b) above is necessary or appropriate in
connection with a transaction that would otherwise result in an
adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Company's assets for purposes of
computing Net Income and Net Loss. Any adjustment to the Gross Asset Values of
Company property shall require an adjustment to the Members' Capital Accounts;
as for the manner in which such adjustments are allocated to the Capital
Accounts, see paragraph (c) of the definition of Net Income and Net Loss in the
case of adjustment by Depreciation, and paragraph (e) of said definition in all
other cases.
"Guarantee" shall mean, with respect to any Person and without
duplication, any direct or indirect obligation, contingent or otherwise, of such
Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person in any manner. "Guaranteed" has a meaning
correlative to the term "Guarantee."
"Immediate Family" shall mean, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law and children-in-law.
"Indebtedness" shall mean, with respect to any Person at any date,
without duplication, (a) all indebtedness of such Person for borrowed money
including without limitation any repurchase obligation or liability of such
Person with respect to securities, accounts or notes receivable sold by such
Person, (b) all obligations of such Person for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices),
to the extent such obligations constitute indebtedness for purposes of GAAP, (c)
any other indebtedness of such Person which is evidenced by a note, bond,
debenture or similar instrument, (d) all capitalized lease obligations of such
Person, (e) all obligations of such Person in respect of acceptances issued or
created for the account of such Person, (f) all guarantee obligations of such
Person (excluding in any calculation of Consolidated Outstanding Indebtedness,
guarantee obligations of one member of the Consolidated Group in respect of
primary obligations of any other member of the Consolidated Group) (g) all
reimbursement obligations of such Person for letters of credit and other
contingent liabilities, and (h) all liabilities secured by any lien (other than
liens for taxes not yet due and payable) on any property owned by such Person
even though such Person has not
8
assumed or otherwise become liable for the payment thereof. Notwithstanding the
foregoing, any indebtedness between or among the Company and any of its
Subsidiaries or among the Subsidiaries and the Consolidated Group Pro Rata Share
of any indebtedness between or among the Company or any Subsidiary and any
Investment Affiliate or among Investment Affiliates shall not be treated as
Indebtedness.
"Investment Affiliate" means any Person in which the Consolidated
Group, directly or indirectly, has an ownership interest, whose financial
results are not consolidated under GAAP with the financial results of the
Consolidated Group.
"Junior Units" shall have the meaning set forth in Section 4.3(b)(i).
"JV" shall mean any Subsidiary or Investment Affiliate in which both
the Company and the Operating Partnership directly or indirectly have ownership
interests; provided, however, that, for purposes of this definition, (a) the
ownership by the Operating Partnership of an indirect interest in such Entity
through the Company shall not be taken into account and (b) the ownership of any
other direct and/or indirect interest of not more than 1% of the total ownership
interests in such Entity shall not be taken into account.
"JV Indebtedness" shall mean, with respect to any JV at any date, the
Indebtedness of such JV on such date.
"Lien" shall mean any liens, security interests, mortgages, deeds of
trust, charges, claims, encumbrances, pledges, options, rights of first offer or
first refusal and any other rights or interests of others of any kind or nature,
actual or contingent, or other similar encumbrances of any nature whatsoever.
"Liquidating Trustee" shall mean such individual or Entity as is
selected as the Liquidating Trustee hereunder by the Managing Member, which
individual or Entity may include the Managing Member or an Affiliate of the
Managing Member, provided such Liquidating Trustee agrees in writing to be bound
by the terms of this Agreement. The Liquidating Trustee shall be empowered to
give and receive notices, reports and payments in connection with the
dissolution, liquidation and/or winding-up of the Company and shall hold and
exercise such other rights and powers as are necessary or required to permit all
parties to deal with the Liquidating Trustee in connection with the dissolution,
liquidation and/or winding-up of the Company.
"Majority-In-Interest of the Common Units" shall mean holders of more
than fifty percent (50%) of then issued and outstanding Common Units.
"Management Agreement" shall mean a property management agreement with
respect to the property management of each Property entered into (a) with
respect to any Property in which the Company directly holds or acquires
ownership of a fee or leasehold interest, between the Company, as owner, and the
Property Manager, or such other property manager as the Managing Member shall
engage, as manager, and (b) with respect to all Properties other than those
described in (a) above, between each Property Partnership, as owner, and the
Property Manager, or such other property manager as the Managing Member shall
engage, as such agreement may be amended, modified or supplemented from time to
time.
9
"Managing Member" shall mean the Operating Partnership, its duly
admitted successors and assigns and any other Person who is a Managing Member of
the Company at the time of reference thereto. The Managing Member may not be
removed as Managing Member for any reason.
"Members" shall mean the Persons listed under the caption "Members" on
the signature pages hereto, their permitted successors or assigns or any Person
who, at the time of reference thereto, is a member of the Company, including the
holders of Common Units and Preferred Units on the date thereof.
"Minimum Gain Attributable to Partner Nonrecourse Debt" shall mean
"partner nonrecourse debt minimum gain" as determined in accordance with
Regulation Section 1.704-2(i)(2).
"Net Financing Proceeds" shall mean the cash proceeds received by the
Company in connection with any borrowing or refinancing of borrowing by or on
behalf of the Company or by or on behalf of any Property Partnership (whether or
not secured), after deduction of all costs and expenses incurred by the Company
or the Property Partnership in connection with such borrowing, and after
deduction of that portion of such proceeds used to repay any other indebtedness
of the Company or Property Partnerships, or any interest or premium thereon.
"Net Income or Net Loss" shall mean, for each fiscal year or other
applicable period, an amount equal to the Company's net income or loss for such
year or period as determined for federal income tax purposes by the Accountants,
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a) of the Code shall be included in taxable income or
loss), with the following adjustments: (a) by including as an item of gross
income any tax-exempt income received by the Company; (b) by treating as a
deductible expense any expenditure of the Company described in Section
705(a)(2)(B) of the Code (including amounts paid or incurred to organize the
Company (unless an election is made pursuant to Code Section 709(b)) or to
promote the sale of interests in the Company and by treating deductions for any
losses incurred in connection with the sale or exchange of Company property
disallowed pursuant to Section 267(a)(1) or Section 707(b) of the Code as
expenditures described in Section 705(a)(2)(B) of the Code); (c) in lieu of
depreciation, depletion, amortization, and other cost recovery deductions taken
into account in computing total income or loss, there shall be taken into
account Depreciation; (d) gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of such
property rather than its adjusted tax basis; and (e) in the event of an
adjustment of the Gross Asset Value of any Company asset which requires that the
Capital Accounts of the Company be adjusted pursuant to Regulation Section
1.704-1(b)(2)(iv)(e), (f) and (m), the amount of such adjustment is to be taken
into account as additional Net Income or Net Loss pursuant to Exhibit A.
"Net Operating Cash Flow" shall mean, with respect to any fiscal period
of the Company, the excess, if any, of "Receipts" over "Expenditures." For
purposes hereof, the term "Receipts" means the sum of all cash receipts of the
Company from all sources for such period, including Net Sale Proceeds and Net
Financing Proceeds but excluding Capital Contributions, and any amounts held as
reserves as of the last day of such period which the Managing Member reasonably
deems to
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be in excess of necessary reserves as determined below. The term "Expenditures"
means the sum of (a) all cash expenses or expenditures of the Company for such
period, (b) the amount of all payments of principal and interest on account of
any indebtedness of the Company, or amounts due on such indebtedness during such
period (in the case of clauses (a) and (b), excluding expenses or expenditures
paid from previously established reserves or deducted in computing Net Financing
Proceeds or Net Sales Proceeds), and (c) such additional cash reserves as of the
last day of such period as the Managing Member deems necessary for any capital
or operating expenditure permitted hereunder.
"Net Operating Income" shall mean, (a) with respect to any property of
the Company or any Subsidiary for any calendar quarter, the sum of "net
operating income" of the Consolidated Group (as determined by GAAP) attributable
to such property for such calendar quarter determined without regard to any
percentage rent or temporary rent, plus the product of 25% and the percentage
rent and temporary rent for such calendar quarter and the immediately preceding
three calendar quarters and (b) with respect to any property of an Investment
Affiliate for any calendar quarter, the Consolidated Group Pro Rata Share of
"Net Operating Income" of such Investment Affiliate attributable to such
property, calculated in the same manner as in clause (a) of this paragraph.
"Net Sale Proceeds" means the cash proceeds received by the Company in
connection with a sale of any asset by or on behalf of the Company or by or on
behalf of a Property Partnership after deduction of any costs or expenses
incurred by the Company or a Property Partnership, or payable specifically out
of the proceeds of such sale (including, without limitation, any repayment of
any indebtedness required to be repaid as a result of such sale or which the
Managing Member elects to repay out of the proceeds of such sale, together with
accrued interest and premium, if any, thereon and any sales commissions or other
costs and expenses due and payable to any Person in connection with a sale,
including to a Member or its Affiliates).
"19.95% Limit" shall have the meaning set forth in Section
4.3(g)(i)(D).
"Nonrecourse Deductions" shall have the meaning set forth in Sections
1.704-2(b)(1) and (c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Original Agreement" shall have the meaning set forth in the
preliminary recitals hereto.
"Parent Group" shall mean the Operating Partnership, any of the
subsidiaries of the Operating Partnership and any other Person in which the
Operating Partnership, directly or indirectly, has an ownership interest (other
than members of the Consolidated Group and the Investment Affiliates).
"Parent Indebtedness" shall mean, as of the time of determination, the
then outstanding aggregate Indebtedness of the Parent Group but excluding
Indebtedness allocated to the members of the Consolidated Group and/or the
Investment Affiliates pursuant to (a) any of the sharing agreements referred to
on Schedule 3.aa to the Purchase Agreement and/or (b) the letter
11
agreement dated the date hereof, between the Company and the Operating
Partnership, relating to the Term Loan Agreement.
"Parity Units" shall have the meaning set forth in Section 4.3(b).
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Section 1.704-2(i)(2) of the Regulations.
"Partnership Minimum Gain" shall have the meaning set forth in Section
1.704-2(b)(2) of the Regulations.
"Person" or "person" shall mean any individual or Entity.
"Preferred Stock" shall mean, with respect to any Person, shares of
capital stock of, or other equity interests in, such Person which are entitled
to preference or priority over any other capital stock of, or other equity
interest in, such Person in respect of the payment of dividends or distribution
of assets upon liquidation or both.
"Preferred Units" shall mean the Series A Preferred Units, the Series B
Preferred Units and any other series of preferred units of membership interest
in the Company that are established and issued from time to time in accordance
with the terms hereof.
"Prime Rate" shall mean the prime rate announced from time to time by
Wells Fargo Bank, N.A. or any successor thereof.
"Property" shall mean a Shopping Center Project in which the Company or
any Property Partnership, directly or indirectly, acquires ownership of a fee or
leasehold interest.
"Property Manager" shall mean General Growth Management, Inc., a
Delaware corporation, or its successors or assigns.
"Property Partnership" shall mean and include any partnership, limited
liability company or other Entity in which the Company directly or indirectly is
or becomes a partner, member or other equity participant and which has been or
is formed for the purpose of directly or indirectly acquiring, developing or
owning a Property or a proposed Property.
"Property Partnership Interests" shall mean and include the interest of
the Company or any other Entity as a partner, member or other equity participant
in any Property Partnership.
"PTP" shall have the meaning set forth in Section 4.3(g)(i)(C).
"Purchase Agreement" shall mean that certain Purchase Agreement dated
the date hereof, among the Company, the Operating Partnership, GGPI, the GS 2002
REIT and the Goldman Sachs 2002 Exchange Place Fund, L.P.
12
"Qualified Entity" shall mean a partnership, limited liability company
or other Entity that is organized under the laws of any state and that is not
taxable as a corporation for U.S. federal income tax purposes.
"Qualified Individual" shall have the meaning set forth in Section 9.2.
"Regulations" shall mean the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Regulatory Allocations" shall have the meaning set forth in Exhibit A.
"REIT" shall mean a real estate investment trust as defined in Section
856 of the Code.
"REIT Expenses" shall mean (i) costs and expenses relating to the
formation and continuity of existence of GGPI and its subsidiaries (which
subsidiaries shall, for purposes of this definition, be included within the
definition of GGPI), including taxes, fees and assessments associated therewith,
any and all costs, expenses or fees payable to any director or trustee of GGPI
or such subsidiaries, (ii) costs and expenses relating to any offer or
registration of securities by GGPI and all statements, reports, fees and
expenses incidental thereto, including underwriting discounts and selling
commissions applicable to any such offer of securities, (iii) costs and expenses
associated with the preparation and filing of any periodic reports by GGPI under
federal, state or local laws or regulations, including filings with the SEC,
(iv)costs and expenses associated with compliance by GGPI with laws, rules and
regulations promulgated by any regulatory body, including the SEC, and (v) all
other operating or administrative costs of GGPI incurred in the ordinary course
of its business.
"REIT Preferred Shares" shall mean 8.95% Cumulative Redeemable
Preferred Stock, Series B, par value $100 per share, of GGPI.
"REIT Requirements" shall have the meaning set forth in Section 5.2.
"Requesting Party" shall have the meaning set forth in Section 9.2.
"Reserve Amount" shall mean, as at any time, without duplication, the
sum of (i) the amount of all Parent Indebtedness then Guaranteed by any member
of the Consolidated Group or any Investment Affiliate and (ii) the amount of all
Parent Indebtedness collateralized by Liens on property or assets of any member
of the Consolidated Group or any Investment Affiliate.
"Responding Party" shall have the meaning set forth in Section 9.2.
"SEC" shall mean the United States Securities and Exchange Commission.
"Section 704(c) Tax Items" shall have the meaning set forth in Exhibit
A.
"Series A Accumulated Preferred Unit Distributions" shall have the
meaning set forth in Section 4.3(d)(ii).
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"Series A Common Exchange Rate" shall have the meaning set forth in
Section 4.3(g)(i)(B).
"Series A Exchange Price" shall have the meaning set forth in Section
4.3(g)(i)(E).
"Series A Preferred Exchange Rate" shall have the meaning set forth in
Section 4.3(g)(i)(A).
"Series A Preferred Unit Distribution" shall have the meaning set forth
in Section 4.3(d)(i).
"Series A Preferred Unit Distribution Payment Date" shall have the
meaning set forth in Section 4.3(d)(i).
"Series A Preferred Units" shall have the meaning set forth in Section
4.3(a).
"Series A Redemption Date" shall have the meaning set forth in Section
4.3(h)(iii).
"Series A Redemption Price" shall have the meaning set forth in Section
4.3(h)(i).
"Series A Third Party Redemption Date" shall have the meaning set forth
in Section 4.3(h)(ii).
"Series B Accumulated Preferred Unit Distributions" shall have the
meaning set forth in Section 4(b) of Schedule B.
"Series B Common Exchange Rate" shall have the meaning set forth in
Section 7(a)(ii) of Schedule B.
"Series B Event" shall have the meaning set forth in Section 3 of
Schedule B.
"Series B Excess Units" shall have the meaning set forth in Section
7(a)(vi) of Schedule B.
"Series B Exchange Price" shall have the meaning set forth in Section
7(a)(v) of Schedule B.
"Series B Junior Units" shall have the meaning set forth in Section
2(a) of Schedule B.
"Series B Parity Units" shall have the meaning set forth in Section
2(b) of Schedule B.
"Series B Preferred Exchange Rate" shall have the meaning set forth in
Section 7(a)(i) of Schedule B.
"Series B Preferred Unit Distribution" shall have the meaning set forth
in Section 4(a) of Schedule B.
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"Series B Preferred Unit Distribution Payment Date" shall have the
meaning set forth in Section 4(a) of Schedule B.
"Series B Preferred Units" shall have the meaning set forth in Section
4.7.
"Series B Redemption Date" shall have the meaning set forth in Section
8(c) of Schedule B.
"Series B Redemption Price" shall have the meaning set forth in Section
8(a) of Schedule B.
"Series B Third Party Redemption Date" shall have the meaning set forth
in Section 8(b) of Schedule B.
"Series G Preferred REIT Shares" shall have the meaning set forth in
Section 7(a)(i) of Schedule B.
"Shopping Center Project" shall mean any shopping center, including
construction and improvement activities undertaken with respect thereto and
off-site improvements, on-site improvements, structures, buildings and/or
related parking and other facilities.
"Subsidiaries" shall mean all Entities in which the Company has a
direct or indirect interest and that would be consolidated with the Company for
financial accounting purposes under GAAP.
"Substituted Member" shall have the meaning set forth in Section 8.2.
"Tax Items" shall have the meaning set forth in Exhibit A.
"Term Loan Agreement" shall mean that certain Term Loan Agreement dated
as of July 31, 2000, among the Company and the Operating Partnership, as
borrowers, Bankers Trust Company, as administrative agent and a lender, and the
other parties thereto from time to time as agents and/or lenders.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Shares are listed or admitted to trading
is open for the transaction of business or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, shall mean any
Business Day.
"Units" shall mean the units of membership interest in the Company
established and issued from time to time in accordance with the terms hereof,
including without limitation Common Units and Preferred Units. The number and
designation of all Units held by each Member as of the date hereof is set forth
opposite such Member's name on Schedule A.
1.2 EXHIBITS, ETC. References to an "Exhibit" or to a "Schedule" are,
unless otherwise specified, to one of the Exhibits or Schedules attached to this
Agreement, and references to an "Article" or a "Section" are, unless otherwise
specified, to one of the Articles or
15
Sections of this Agreement. Each Exhibit and Schedule attached hereto and
referred to herein is hereby incorporated herein by reference.
1.3 PRONOUNS AND HEADINGS. As used herein, all pronouns shall include
the masculine, feminine and neuter, and all defined terms shall include the
singular and plural thereof wherever the context and facts require such
construction. The headings, titles and subtitles herein are inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof. Any references in this Agreement to "including" shall be
deemed to mean "including without limitation".
ARTICLE II
CONTINUATION
2.1 CONTINUATION. The Company was formed as a limited liability company
under the Act on May 17, 2000 by the filing of the Certificate with the Delaware
Secretary of State on such date. The Members agree that the rights and
liabilities of the Members shall be as provided in this Agreement (which amends
and restates and supercedes the Original Agreement in its entirety) and, to the
extent not provided herein, in the Act. The Managing Member shall cause such
notices, instruments, documents, or certificates as may be required by
applicable law or which may be necessary to enable the Company to conduct its
business and to own its properties in the Company name to be filed or recorded
in all appropriate public offices.
2.2 NAME. The business of the Company shall be conducted under the name
of "GGPLP L.L.C." or such other name as the Managing Member may select, and all
transactions of the Company, to the extent permitted by applicable law, shall be
carried on and completed in such name.
2.3 CHARACTER OF THE BUSINESS. The purpose of the Company shall be to
acquire, hold, own, develop, construct, improve, maintain, operate, sell, lease,
transfer, encumber, convey, exchange, and otherwise dispose of or deal with
Properties; to acquire, hold, own, develop, construct, improve, maintain,
operate, sell, lease, transfer, encumber, convey, exchange, and otherwise
dispose of or deal with real and personal property of all kinds; to exercise all
of the powers of a partner, member or other equity participant in Property
Partnerships; to acquire, own, deal with and dispose of Property Partnership
Interests; to undertake such other activities as may be necessary, advisable,
desirable or convenient to the business of the Company, and to engage in such
other ancillary activities as shall be necessary or desirable to effectuate the
foregoing purposes. The Company shall have all powers necessary or desirable to
accomplish the purposes enumerated. In connection with and without limiting the
foregoing, but subject to all of the terms, covenants, conditions and
limitations contained in this Agreement and any other agreement entered into by
the Company, the Company shall have full power and authority, directly or
through its interests in Property Partnerships, to enter into, perform, and
carry out contracts of any kind, to borrow money and to issue evidences of
indebtedness, whether or not secured by mortgage, trust deed, pledge or other
Lien, and, directly or indirectly, to acquire and construct additional
Properties.
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2.4 LOCATION OF THE PRINCIPAL PLACE OF BUSINESS. The location of the
principal place of business of the Company shall be at 110 North Wacker Drive,
Chicago, Illinois 60606, or at such other location as shall be selected by the
Managing Member from time to time in its sole discretion.
2.5 REGISTERED AGENT AND REGISTERED OFFICE. The Company shall maintain
a registered agent and registered office as is required by the Act.
ARTICLE III
TERM
3.1 COMMENCEMENT. The Company heretofore commenced business as a
limited liability company.
3.2 DISSOLUTION. The Company shall continue until dissolved upon the
occurrence of the earliest of the following events:
(a) The dissolution, termination, retirement or Bankruptcy of
the Managing Member unless the Company is continued as provided in
Section 8.1;
(b) The sale or other disposition of all or substantially all
the assets of the Company unless the Managing Member elects to continue
the Company business for the purpose of the receipt and the collection
of indebtedness or the collection of any other consideration to be
received in exchange for the assets of the Company (which activities
shall be deemed to be part of the winding up of the affairs of the
Company);
(c) Dissolution required by operation of law; or
(d) December 31, 2075.
ARTICLE IV
CLASSES OF UNITS
4.1 COMMON UNITS. The Company has issued to the Members (other than the
GS 2000 REIT and the GS 2002 REIT) the number of common units of membership
interest in the Company (the "Common Units") set forth opposite their names on
Schedule A, and, in exchange therefor, such Members have contributed to the
Company as their Capital Contributions the cash and other property set forth in
the books and records of the Company. The Common Units have such rights as are
described herein. The Managing Member may, without the consent of the other
Members, issue additional Common Units to itself and others from time to time
for such consideration as it deems is appropriate. The Managing Member shall be
authorized to amend this Agreement to reflect the issuance of Common Units in
accordance with this Section 4.1 without the joinder of any other Member.
17
4.2 PREFERRED UNITS. The Managing Member shall have the right, without
the consent of the other Members (except as otherwise provided herein), to
establish and issue from time to time series of preferred units of membership
interest in the Company ("Preferred Units") and to establish from time to time
the number of Preferred Units to be included in each such series, to fix the
designation, powers, preferences and rights of the Preferred Units of each such
series and the qualifications, limitations and restrictions thereof and to
determine the consideration to be paid from time to time for the Preferred Units
in each such series. Except as otherwise provided herein, Preferred Units that
are cancelled or redeemed or purchased by the Company may, at the election of
the Managing Member, either (a) be reissued by the Company or (b) be cancelled.
The Managing Member shall be authorized to amend this Agreement to effect the
provisions of this Section 4.2 without the joinder of any other Member (except
as otherwise provided herein).
4.3 ESTABLISHMENT OF SERIES A PREFERRED UNITS.
(a) ESTABLISHMENT OF SERIES A PREFERRED UNITS. A series of
preferred units of the Company designated as the "8.95% Series A
Cumulative Redeemable Preferred Units" (the "Series A Preferred Units")
was previously established and has such preferences and other rights as
are described herein. The maximum number of Series A Preferred Units
which may be issued by the Company from time to time shall be 700,000.
The Company heretofore issued 700,000 Series A Preferred Units, the
current holder of which is the GS 2000 REIT, in exchange for a Capital
Contribution of $175,000,000. Series A Preferred Units shall not have
any relative, participating, optional or other special rights and
powers other than as set forth herein. Series A Preferred Units that
are redeemed or purchased by the Company shall be cancelled and may not
be reissued.
(b) RANK OF THE SERIES A PREFERRED UNITS. The Series A
Preferred Units shall, with respect to distribution rights and rights
upon liquidation, dissolution or winding up of the Company, rank as
follows:
(i) senior to all classes or series of Common Units
and all other series of Preferred Units other than (A) each series of
Preferred Units referred to in Section 4.3(b)(iii) and (B) each series
of Preferred Units the express terms of which provide that such series
ranks on parity with the Series A Preferred Units (the Common Units and
Preferred Units ranking junior to the Series A Preferred Units with
respect to distribution rights and rights upon liquidation, dissolution
and winding up, collectively, "Junior Units");
(ii) on parity with each series of Preferred Units
which provides by its express terms that it ranks on parity with the
Series A Preferred Units as to distribution rights and rights upon
liquidation, dissolution and winding-up of the Company ("Parity Units")
(and if the distribution rates, distribution payment dates or
redemption or liquidation prices per Unit are different from those of
the Series A Preferred Units, the units of such class or series and the
Series A Preferred Units shall be entitled to the receipt of
distributions and the amounts distributable upon liquidation,
dissolution and
18
winding-up in proportion to their respective amounts of accrued and unpaid
distributions per unit or liquidation preferences, without preference or
priority one over the other); and
(iii) junior to any class or series of Preferred Units that is
hereafter established, that provides by its express terms that it ranks senior
to the Series A Preferred Units and that is approved in accordance with the
provisions of Section 4.3(c).
(c) VOTING. The Company shall not, without the affirmative vote or
consent of the holders of at least fifty-one percent (51%) of the Series A
Preferred Units outstanding at such time, (i) authorize or create, or increase
the authorized or issued amount of, any class or series of Units ranking senior
to the Series A Preferred Units with respect to payments of distributions or
rights upon liquidation, dissolution or winding up of the Company or reclassify
any Common Units into Preferred Units ranking senior to or on parity with the
Series A Preferred Units with respect to the payment of distributions or
distribution of assets upon liquidation, dissolution or winding-up of the
Company, (ii) issue additional Series A Preferred Units or (iii) amend, alter or
repeal this Section 4.3 or any other provisions of this Agreement, whether by
merger, consolidation or otherwise (an "Event") so as to negate the provisions
of clause (i) or (ii) of this paragraph or materially and adversely affect any
right, preference, privilege or voting power of the holders of the Series A
Preferred Units. Notwithstanding anything to the contrary contained herein, (A)
with respect to the occurrence of any of the Events set forth in clause (iii) of
this paragraph, so long as Series A Preferred Units remain outstanding with the
terms thereof materially unchanged (taking into account that, upon the
occurrence of such Event, the Company may not be the surviving entity) and the
surviving entity is a Qualified Entity, the occurrence of any such Event shall
not be deemed to materially and adversely affect such rights, preferences,
privileges or voting power of holders of the Series A Preferred Units and (B)
the authorization or creation of, or the increase in the authorized or issued
amount of, the Common Units or any other series of Preferred Units, in either
case which rank junior to or on parity with the Series A Preferred Units (and
any amendments to this Agreement to effect such increase, creation or issuance),
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers or otherwise require the vote or consent of the
holders of the Series A Preferred Units.
For purposes of the provisions of this Section 4.3(c), each Series A
Preferred Unit shall have one (1) vote.
Notwithstanding anything to the contrary contained herein, the
foregoing voting provisions shall not apply if, prior to the time when the act
with respect to which such vote would otherwise be required shall be effected,
all outstanding Series A Preferred Units shall have been exchanged or redeemed.
Except as provided herein, the holders of Series A Preferred Units
shall have no voting or consent rights or other rights to participate in the
management of the Company or to receive notices of meetings.
19
(d) DISTRIBUTIONS.
(i) PAYMENT OF DISTRIBUTIONS. Each holder of Series A
Preferred Units will be entitled to receive, when, as and if declared by the
Managing Member, out of Net Operating Cash Flow and subject to the right to
payment of the holders of Preferred Units ranking senior to or on parity with
the Series A Preferred Units, cumulative preferential cash distributions per
Series A Preferred Unit at the rate per annum of 8.95% of the $250 base
liquidation preference thereof (or $5.59375 per quarter) (the "Series A
Preferred Unit Distribution"). Series A Preferred Unit Distributions with
respect to any Series A Preferred Units shall be cumulative, shall accrue from
the date of the issuance of such Series A Preferred Units and will be payable
(A) quarterly when, as and if authorized and declared by the Managing Member, in
arrears, on the 15th day of January, April, July and October of each year and
(B) in the event of an exchange or redemption of Series A Preferred Units, on
the exchange or redemption date, as applicable (each a "Series A Preferred Unit
Distribution Payment Date"), commencing on the first of such payment dates to
occur following their original date of issuance. The amount of distribution per
Series A Preferred Unit accruing in each full quarterly distribution period
shall be computed by dividing the annual distribution rate by four. The amount
of distributions payable for the initial distribution period or any other period
shorter or longer than a full quarterly distribution period on the Series A
Preferred Units will be computed on the basis of twelve 30-day months and a
360-day year and the actual number of days elapsed in such a thirty (30) day
month. If any Series A Preferred Unit Distribution Payment Date is not a
Business Day, then payment of the Series A Preferred Unit Distribution to be
made on such date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of such delay), except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day (without any deduction),
in each case with the same force and effect as if made on such date. Series A
Preferred Unit Distributions will be made to the holders of Series A Preferred
Units of record on the relevant record dates, which will be fifteen (15) days
prior to the relevant Series A Preferred Unit Distribution Payment Date.
(ii) DISTRIBUTIONS CUMULATIVE. Notwithstanding the foregoing,
Series A Preferred Unit Distributions will accrue whether or not the terms and
provisions of this Agreement or any other agreement of the Company at any time
prohibit the current payment of distributions, whether or not the Company has
revenues, whether or not there are funds legally available for the payment of
such distributions and whether or not such distributions are authorized. Accrued
but unpaid Series A Preferred Unit Distributions will accumulate as of the
Series A Preferred Unit Distribution Payment Date on which they first become
payable. Any accrued but unpaid Series A Preferred Unit Distributions that are
not paid on or prior to the date that they first become payable are hereinafter
referred to as "Series A Accumulated Preferred Unit Distributions". No interest
or sum of money in lieu of interest will be payable in respect of any Series A
Accumulated Preferred Unit Distributions. Series A Accumulated Preferred Unit
Distributions may be declared and paid at any time, without reference to any
regular Series A Preferred Unit Distribution Payment Date.
20
(iii) PRIORITY AS TO DISTRIBUTIONS.
(A) So long as any Series A Preferred Units are outstanding,
no distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect to any
Parity Units, nor shall any cash or other property be set aside for or
applied to the purchase, redemption or other acquisition for
consideration of any Series A Preferred Units or any Parity Units,
unless, in each case, all Series A Accumulated Preferred Unit
Distributions have been paid in full (or have been declared and a sum
sufficient for such payment has been set aside therefor) or when Series
A Accumulated Preferred Unit Distributions are not paid in full or
declared and a sum sufficient for such payment is not set apart, as
aforesaid, all distributions declared upon Series A Preferred Units and
all distributions declared upon any other series or class or classes of
Parity Units shall be declared ratably in proportion to the respective
amounts of distributions accumulated and unpaid on the Series A
Preferred Units and such Parity Units.
(B) So long as any Series A Preferred Units are outstanding,
no distribution of cash or other property (other than distributions
paid solely in Junior Units or options, warrants or other rights to
subscribe for or purchase Junior Units) shall be authorized, declared,
paid or set apart for payment on or with respect to any class or series
of Junior Units nor shall any cash or other property be set aside for
or applied to the purchase, redemption or other acquisition for
consideration of any Junior Units (other than consideration paid solely
in Junior Units or options, warrants or other rights to subscribe for
or purchase Junior Units) unless, in each case, all Series A
Accumulated Preferred Unit Distributions have been paid in full or set
apart for payment.
(C) So long as there are Series A Accumulated Preferred Unit
Distributions (and a sum sufficient for full payment of Series A
Accumulated Preferred Unit Distributions is not so set apart), all
future Series A Preferred Unit Distributions shall be authorized and
declared so that the amount of Series A Preferred Unit Distributions
per Series A Preferred Unit shall in all cases bear to each other the
same ratio that Series A Accumulated Preferred Unit Distributions per
Series A Preferred Unit bear to each other.
(D) Notwithstanding anything to the contrary set forth herein,
distributions on Units held by the Managing Member ranking junior to or
on parity with the Series A Preferred Units may be made, without
preserving the priority of distributions described in Section
4.3(d)(iii)(A) and (B), but only to the extent such distributions are
required to preserve the REIT status of GGPI.
(iv) NO FURTHER RIGHTS. Holders of Series A Preferred Units shall not
be entitled to any distributions, whether payable in cash, other property or
otherwise, in excess of the Series A Preferred Unit Distributions (and any
Series A Accumulated Preferred Unit Distributions) described herein.
21
(e) LIQUIDATION PREFERENCE. (i) In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
before any payment or distribution of the assets of the Company shall be made to
or set apart for the holders of Junior Units, each holder of the Series A
Preferred Units shall be entitled to receive an amount equal to such holder's
Capital Account in respect of its Series A Preferred Units; but the holders of
Series A Preferred Units shall not be entitled to any further payment. If, upon
any such liquidation, dissolution or winding up of the Company, the assets of
the Company, or proceeds thereof, distributable to the holders of Series A
Preferred Units, shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other Parity Units, then such assets,
or the proceeds thereof, shall be distributed among the holders of the Series A
Preferred Units and the holders of any such other Parity Units ratably in
accordance with the respective amounts that would be payable on such Series A
Preferred Units and any such other Parity Units if all amounts payable thereon
were paid in full. For the purposes of this Section 4.3(e), none of (i) a
consolidation or merger of the Company with or into one or more entities, (ii) a
merger of an entity with or into the Company, (iii) a statutory share exchange
by the Company or (iv) a sale, lease or conveyance of all or substantially all
of the Company's assets shall be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, of the Company.
(ii) Subject to the rights of the holders of Parity Units,
after payment shall have been made in full to the holders of the Series A
Preferred Units as provided in this Section, any series or class or classes of
Junior Units shall, subject to any respective terms and provisions applying
thereto, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series A Preferred Units shall not be
entitled to share therein.
(f) TRANSFER BY HOLDERS OF SERIES A PREFERRED UNITS. Notwithstanding
anything to the contrary contained herein, a holder of Series A Preferred Units
may sell, assign or otherwise transfer all or part of its Series A Preferred
Units without the consent of the Managing Member; provided, however, that no
such sale, conveyance or other transfer may be made unless the requirements of
Section 8.3 (other than Section 8.3(b)) and the second and fourth sentences of
Section 8.2 are satisfied with respect to such sale, conveyance or other
transfer.
(g) EXCHANGE RIGHTS.
(i) RIGHT TO EXCHANGE.
(A) Series A Preferred Units will be exchangeable in
whole but not in part with GGPI at any time on or after May 25, 2010,
at the option of the holders of at least fifty-one percent (51%) of all
outstanding Series A Preferred Units for authorized but previously
unissued REIT Preferred Shares (and in the event such option is
exercised, such exercise and the Exchange Notice given in connection
therewith shall be deemed to apply to all issued and outstanding Series
A Preferred Units and the holders thereof). Each holder of Series A
Preferred
22
Units will be entitled to receive for each Series A Preferred
Unit held by it a number of REIT Preferred Shares equal to the quotient
of the Capital Account per Series A Preferred Unit of such holder of
Series A Preferred Units (adjusted to reflect fair market value through
the exchange date) divided by $1,000 (the "Series A Preferred Exchange
Rate"). This exchange right is only exercisable if, at the time of
exercise, the fair market value of the Company's assets exceeds the
Company's liabilities (and any preferred security claims senior to the
Series A Preferred Units) by an amount at least equal to twice the sum
of (1) the aggregate Capital Accounts of all holders of Series A
Preferred Units plus (2) the aggregate Capital Accounts of all holders
of Parity Units. The GS 2000 REIT hereby agrees to the amendment of the
terms of the REIT Preferred Shares to reflect the changes reflected on
Exhibit B.
(B) The Series A Preferred Units will be exchangeable
with GGPI at any time on or after May 25, 2005, in whole but not in
part, at the option of the holders of at least fifty-one percent (51%)
of all outstanding Series A Preferred Units, for authorized but
previously unissued Common Shares if at any time Series A Accumulated
Preferred Unit Distributions exist with respect to the Series A
Preferred Units in an amount equal to the amount that should have been
distributed in six (6) prior quarterly distribution periods, whether or
not consecutive, at the following exchange rate: for each Series A
Preferred Unit, a number of Common Shares equal to the quotient of (x)
the sum of $250 and the Series A Accumulated Preferred Unit
Distributions with respect thereto (but only up to an amount equal to
the amount distributable for six (6) quarterly distribution periods)
divided by (y) $37.25 (as adjusted to reflect any splits, combinations
or the like after the date hereof) (the "Series A Common Exchange
Rate") (and in the event such option is exercised, such exercise and
the Exchange Notice given in connection therewith shall be deemed to
apply to all issued and outstanding Series A Preferred Units and the
holders thereof).
(C) Series A Preferred Units will be exchangeable at
any time, in whole but not in part, with GGPI at the option of the
holders of at least fifty-one percent (51%) of all outstanding Series A
Preferred Units for authorized but previously unissued REIT Preferred
Shares at the Series A Preferred Exchange Rate upon receipt by a holder
or holders of Series A Preferred Units of (A) notice from the Managing
Member that the Managing Member or an Affiliate of the Managing Member
has taken the position that the Company is, or upon the consummation of
an identified event in the immediate future will be, a "publicly traded
partnership", taxable as a corporation (a "PTP") within the meaning of
Section 7704 of the Code or (B) an opinion rendered by independent
counsel familiar with such matters addressed to a holder or holders of
Series A Preferred Units, that the Company is or likely is, or upon the
occurrence of an imminent identified event will be or likely will be, a
PTP (and in the event such option is exercised, such exercise and the
Exchange Notice given in connection therewith shall be deemed to apply
to all issued and outstanding Series A Preferred Units
23
and the holders thereof). This exchange right is exercisable only under
the circumstances described in the last sentence of Section
4.3(g)(i)(A).
(D) Series A Preferred Units will be exchangeable
with GGPI at any time in whole but not in part, at the option of a
holder for authorized but previously unissued Common Shares at the
Series A Common Exchange Rate if such holder concludes based on results
or projected results that there exists (in the reasonable judgment of
such holder as confirmed by an opinion of nationally recognized
independent counsel or accounting firm) an imminent and substantial
risk that such holder's interest in the Company represents or will
represent more than nineteen and ninety-five one hundredths percent
(19.95%) of the total profits or capital interests in the Company for a
taxable year (the "19.95% Limit") (determined in accordance with
Treasury Regulations Section 1.731-2(e)(4)) (and in the event such
option is exercised, such exercise and the Exchange Notice given in
connection therewith shall only apply to all issued and outstanding
Series A Preferred Units of the exercising holder).
(E) Notwithstanding anything to the contrary set
forth in Sections 4.3(g)(i)(A) through (D), if an Exchange Notice (as
defined herein) has been delivered to the Managing Member and GGPI,
then the Managing Member or GGPI may at its option, within ten (10)
Business Days after receipt of the Exchange Notice, elect to purchase
or cause the Company to redeem all or a portion of the outstanding
Series A Preferred Units (for which Exchange Notices have been
delivered or are deemed to have been delivered) for cash or Common
Shares, in each case at the Series A Exchange Price per Series A
Preferred Unit as of the date the Exchange Notice is sent. The "Series
A Exchange Price" of an outstanding Series A Preferred Unit shall
equal: (1) in the event that the holders of the Series A Preferred
Units are exchanging such Unit for Common Shares, the product of the
number of Common Shares issued in respect of such Preferred Unit
multiplied by the Current Per Share Market Price, or (2) in the event
that the holders of the Series A Preferred Units are exchanging such
Unit for REIT Preferred Shares, the pro rata portion of the Capital
Account (as adjusted and booked up or down immediately prior to such
purchase or redemption) allocable to that Series A Preferred Unit. If
such election is made with respect to fewer than all of the outstanding
Series A Preferred Units, the number of Series A Preferred Units held
by each holder of Series A Preferred Units to be redeemed or purchased
shall equal such holder's pro rata share (based on the percentage of
the aggregate number of outstanding Series A Preferred Units that the
total number of Series A Preferred Units held by such holder of Series
A Preferred Units represents) of the aggregate number of Series A
Preferred Units being redeemed. An election by the Managing Member or
GGPI under this Section shall be effected by delivering notice thereof
to the holders identified in the Exchange Notice.
(F) If an exchange of all Series A Preferred Units
pursuant to Sections 4.3(g)(i)(A) through (D) would violate the
provisions on ownership
24
limitation of GGPI set forth in its Charter and such ownership
limitation is not waived by GGPI, each holder of Series A Preferred
Units shall be entitled to exchange that number of Series A Preferred
Units which would comply with the provisions on the ownership
limitation of GGPI and any Series A Preferred Units not so exchanged
(the "Excess Units") shall be redeemed by the Company for cash in an
amount determined in the manner set forth in subsection (E).
(ii) PROCEDURE FOR EXCHANGE AND/OR REDEMPTION OF SERIES A PREFERRED
UNITS.
(A) Any exchange right shall be exercised pursuant to
a written notice of exchange (the "Exchange Notice") delivered to the
Managing Member and GGPI by holders of Series A Preferred Units owning
at least fifty-one percent (51%) of the outstanding Series A Preferred
Units (or by a holder of Series A Preferred Units in the case of an
exchange pursuant to Section 4.3(g)(i)(D) hereof) by fax and certified
mail postage prepaid. The Exchange Notice shall specify the name or
names of the holders of Series A Preferred Units that are exercising
(or are deemed to have exercised) the exchange rights and the number of
Series A Preferred Units as to which such rights are being exercised
(or are deemed to have been exercised). The closing of the exchange or
redemption pursuant to this Section 4.3(g) shall occur within fifteen
(15) Business Days following the giving of the Exchange Notice. At the
closing, the exchanging holder(s) shall deliver such instruments of
transfer and other documents as GGPI or the Managing Member may
reasonably request and GGPI and/or the Company shall deliver to the
exchanging holder certificates representing the REIT Preferred Shares
or Common Shares and/or the cash redemption price. Notwithstanding
anything to the contrary contained herein, any and all Series A
Preferred Units to be exchanged for Common Shares or REIT Preferred
Shares pursuant to this Section shall be so exchanged in a single
transaction at one time. As a condition to exchange, each holder of
Series A Preferred Units shall make such customary representations as
may be reasonably necessary for the Managing Member or GGPI to
establish that the issuance of Common Shares or REIT Preferred Shares
pursuant to the exchange shall not be required to be registered under
the Securities Act of 1933, as amended, or any applicable state
securities laws. Any Common Shares or REIT Preferred Shares issued
pursuant to this Section shall be delivered as shares which are duly
authorized, validly issued, fully paid and nonassessable, free of any
pledge, lien, encumbrance or restriction other than those provided in
the Charter or the by-laws of GGPI, the Securities Act and relevant
state securities or blue sky laws and any Series A Preferred Units as
to which the exchange right has been exercised shall be free of any
pledge, lien, encumbrance or restriction other than those provided in
this Agreement, the Securities Act and relevant state securities or
blue sky laws (and the parties shall make representations and
warranties to the other to such effect). The certificates representing
the Common Shares or REIT Preferred Shares issued upon exchange of the
Series A Preferred Units shall, in addition to any legend required by
the Charter, contain the following legend:
25
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR (B) IF THE CORPORATION HAS BEEN
FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS
EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE
RULES AND REGULATIONS THEREUNDER.
Notwithstanding anything to the contrary contained herein and
at the request of a majority of the holders of Series A Preferred
Shares that have exercised (or are deemed to have exercised) the
exchange right pursuant to this Section 4.3(g), GGPI shall cause
depositary shares to be issued to such holders upon the closing of the
exchange in lieu of REIT Preferred Shares, each depositary share (1) to
have a face amount of $25 (or such other amount as may be specified by
holders of a majority of the Series A Preferred Units prior to any such
exchange) and (2) to represent a fraction of a REIT Preferred Share the
denominator of which is $1,000 and the numerator of which is the face
amount of such depositary share. At the request of holders of a
majority of the Series A Preferred Units, the Company shall take such
actions as are necessary to provide for such depositary shares to be
issued immediately upon exchange of Series A Preferred Units for REIT
Preferred Shares.
(B) In the event of an exchange of Series A Preferred
Units, an amount equal to the Series A Accumulated Preferred Unit
Distributions to the date of exchange on any Series A Preferred Units
tendered for exchange shall continue to accrue on such Series A
Preferred Units, which remain outstanding following such exchange, with
the Managing Member as the holder of such Series A Preferred Units
(GGPI having contributed the Series A Preferred Units to the Managing
Member). Fractional REIT Preferred Shares or Common Shares are not to
be issued upon exchange but, in lieu thereof, the Managing Member will
pay a cash adjustment based upon either (i) the fair market value of
the REIT Preferred Shares on the day prior to the exchange date as
determined in good faith by the Board of Directors of the Managing
Member or (ii) the Current Per Share Market Price of the Common Shares
as of the date immediately prior to the exchange date, as the case may
be.
(iii) ADJUSTMENT OF EXCHANGE PRICE. In case GGPI shall be a party to
any transaction (including, without limitation, a merger, consolidation,
statutory share
26
exchange, tender offer for all or substantially all of GGPI's Common Shares or
sale of all or substantially all of GGPI's assets), in each case as a result of
which the REIT Preferred Shares or Common Shares will be converted into the
right to receive shares of capital stock, other securities or other property
(including cash or any combination thereof), each Series A Preferred Unit will
thereafter be exchangeable into the kind and amount of shares of capital stock
and other securities and property receivable (including cash or any combination
thereof) upon the consummation of such transaction by a holder of that number of
REIT Preferred Shares or Common Shares or fraction thereof into which one (1)
Series A Preferred Unit was exchangeable immediately prior to such transaction.
GGPI may not become a party to any such transaction unless the terms thereof are
consistent with the foregoing.
(iv) NO OTHER EXCHANGE RIGHTS. The Series A Preferred Units
are not convertible into or redeemable or exchangeable for any other property or
securities of GGPI, the Managing Member, the Company or any other Person at the
option of any holder of Series A Preferred Units except as expressly provided in
this Section 4.3(g).
(h) REDEMPTION.
(i) The Series A Preferred Units shall not be redeemable prior
to May 25, 2005. On and after May 25, 2005, the Managing Member may, at its
option, cause the Company to redeem the Series A Preferred Units in whole or in
part, as set forth herein, subject to the provisions described below, at a
redemption price, payable in cash, in an amount equal to $250 per Series A
Preferred Unit being redeemed (the "Series A Redemption Price"). Upon any such
redemption, the Company shall also pay any accumulated and unpaid distributions
owing in respect of the Series A Preferred Units being redeemed.
(ii) Such Series A Preferred Units as are not held by the
Managing Member may be redeemed by the Company on or after May 25, 2005, in
whole or in part, at any time or from time to time, upon not less than 30 nor
more than 60 days' written notice. If fewer than all of the outstanding Series A
Preferred Units that are not held by the Managing Member are to be redeemed, the
Series A Preferred Units to be redeemed from each holder (other than the
Managing Member) shall be selected pro rata (as nearly as practicable without
creating fractional units). Any notice of redemption delivered pursuant to this
Section 4.3(h) will be mailed by the Company, by certified mail, postage
prepaid, not less than 30 nor more than 60 days prior to the date upon which
such redemption is to occur (the "Series A Third Party Redemption Date"),
addressed to each holder of record of the Series A Preferred Units at their
respective addresses as they appear on the records of the Company. No failure to
give or defect in such notice shall affect the validity of the proceedings for
the redemption of any Series A Preferred Units. In addition to any information
required by law, each such notice shall state: (a) the Series A Third Party
Redemption Date, (b) the amount payable per Series A Preferred Unit upon
redemption, including the Series A Redemption Price and any amount payable
pursuant to Section 4.3(h)(iv) hereof, (c) the aggregate number of Series A
Preferred Units to be redeemed and, if fewer than all of the outstanding Series
A Preferred Units
27
are to be redeemed, the number of Series A Preferred Units to be redeemed held
by such holder, which number shall equal such holder's pro rata share (based on
the percentage of the aggregate number of outstanding Series A Preferred Units
not held by the Managing Member that the total number of Series A Preferred
Units held by such holder represents and determined as nearly as practicable
without creating fractional interests) of the aggregate number of Series A
Preferred Units to be redeemed, (d) the place or places where the instrument of
transfer is to be surrendered for payment of the amount payable upon redemption
and (e) that payment of such amount will be made upon presentation and surrender
of the instrument of transfer in the form provided by the Managing Member. If
the Company gives a notice of redemption in respect of Series A Preferred Units
pursuant to this Section 4.3(h), then, by 12:00 noon, New York City time, on the
Series A Third Party Redemption Date, the Company will deposit irrevocably in
trust for the benefit of the holders of Series A Preferred Units being redeemed
funds sufficient to pay the applicable amount payable with respect to such
Series A Preferred Units and will give irrevocable instructions and authority to
pay such amount to the holders of the Series A Preferred Units upon surrender of
the Series A Preferred Units and such instruments of transfer by such holders at
the place designated in the notice of redemption. Any Series A Preferred Units
surrendered shall be free and clear of all Liens and the holders thereof shall
make representations and warranties to such effect.
(iii) Such Series A Preferred Units as may be held by the
Managing Member may be redeemed, in whole or in part, at the option of the
Managing Member, at any time, upon payment by the Company to the Managing Member
of the Series A Redemption Price and any amount payable pursuant to Section
4.3(h)(iv) hereof with respect to such Series A Preferred Units; provided that
GGPI shall redeem an equivalent number of REIT Preferred Shares to the extent
that there are REIT Preferred Shares issued and outstanding. Such redemption of
Series A Preferred Units shall occur substantially concurrently with the
redemption by GGPI of such REIT Preferred Shares (such date is herein referred
to collectively with the Third Party Redemption Date as the "Series A Redemption
Date").
(iv) Upon any redemption of Series A Preferred Units, the
Company shall pay any accumulated and unpaid distributions for any distribution
period, or any other period shorter than a full distribution period, ending on
or prior to the Redemption Date. On and after the Redemption Date, distributions
will cease to accumulate on the Series A Preferred Units called for redemption,
unless the Company defaults in payment therefor. If any date fixed for
redemption of Series A Preferred Units is not a Business Day, then payment of
the Series A Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the Series A Redemption Price is
improperly withheld or refused and not paid by the Company, distributions on
such Series A Preferred Units will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of
28
calculating the applicable Series A Redemption Price. Except as provided
above, the Company shall make no payment or allowance for unpaid distributions,
whether or not in arrears, on Series A Preferred Units called for redemption
under this Section 4.3(h).
(v) If full cumulative distributions on the Series A Preferred
Units and any other Parity Units for distribution periods ending on or prior to
the date of redemption have not been paid or declared and set apart for payment,
the Series A Preferred Units may not be redeemed in part and the Company may not
purchase, redeem or otherwise acquire Series A Preferred Units or any Parity
Units other than in exchange for Junior Units.
(vi) As promptly as practicable after the surrender of any
such Series A Preferred Units so redeemed, such Series A Preferred Units shall
be exchanged for the amount of cash (without interest thereon) payable therefor
pursuant to Section 4.3(h). If fewer than all the Series A Preferred Units
represented by any physical certificate are redeemed, then the Company shall
issue new certificates representing the unredeemed Series A Preferred Units
without cost to the holder thereof.
(i) OTHER MATTERS. As long as any of the Series A Preferred Units are
outstanding, the Company shall comply with the following:
(i) DIVIDENDS. The Company shall not make any distributions on
the Common Units or any other Junior Units or redeem any such Units unless at
the time such distribution or redemption is made, and after giving effect to
such distribution or redemption, each of the following conditions shall be met:
(A) Consolidated Tangible Net Worth to Reserve Amount. The
ratio of the Consolidated Tangible Net Worth to the Reserve Amount is
at least 2.0 to 1.0;
(B) Adjusted Consolidated Tangible Net Worth. The ratio of
the Adjusted Consolidated Tangible Net Worth to the sum of (i) the
Capital Accounts of all Preferred Units plus (ii) the amount of accrued
Preferred Unit distributions (whether or not declared or paid) for
which allocations have not as yet been reflected in the Capital
Accounts is at least 1.0 to 1.0;
(C) Loan to Value Ratio. The ratio of (x) the Consolidated
Outstanding Indebtedness to (y) the Consolidated Tangible Net Worth is
no greater than 0.75 to 1.0;
provided, however, that the foregoing shall not prohibit the Company from making
distributions (including distributions in redemption of Common Units) to the
holders of Common Units in any calendar year in an aggregate amount no greater
than the minimum amount a real estate investment trust would be required to
distribute under Section 857(a)(1)(A) of the Code for such calendar year (in
order to avoid being taxed as a Subchapter C corporation), if such real estate
investment trust owned all of the Common Units and had no income from any source
other than the Common Units.
29
(ii) AFFILIATE TRANSACTIONS.
(A) Except as expressly provided elsewhere in this Agreement,
the Company shall not, nor will it permit any of its Subsidiaries to,
enter into any transaction (including, without limitation, the purchase
or sale of any property or service) with, or make any payment or
transfer to, any Affiliate of the Company except in the ordinary course
of business and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Company or such Subsidiary than the
Company or such Subsidiary would obtain in a comparable arms-length
transaction (but this paragraph shall not restrict the making of
distributions by the Company).
(B) The Company shall not, and shall not permit any of its
Subsidiaries or Investment Affiliates to, create, incur, assume or
permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect thereof, pursuant
to any arrangement relating to Parent Indebtedness, except for Liens
arising out of any arrangement referred to on Schedule 3.aa to the
Purchase Agreement (which arrangements are hereby approved) but only to
the extent that the Parent Indebtedness outstanding at any time
relating to such arrangement does not exceed the maximum amount of
Parent Indebtedness that may be incurred in connection with such
arrangement in accordance with the terms thereof as of April 17, 2002
(but nothing contained herein shall prohibit the extension of such
arrangements in accordance with the existing extension options relating
thereto).
(C) The Company shall not, and shall not permit any of its
Subsidiaries or Investment Affiliates to, incur, assume or permit to
exist any Guarantee of Parent Indebtedness by any member of the
Consolidated Group or any Investment Affiliate other than Guarantees
arising out of any arrangement referred to on Schedule 3.aa to the
Purchase Agreement (which arrangements are hereby approved) but only to
the extent that the Parent Indebtedness outstanding at any time
relating to such arrangement does not exceed the maximum amount of
Parent Indebtedness that may be incurred in connection with such
arrangement in accordance with the terms thereof as of April 17, 2002
(but nothing contained herein shall prohibit the extension of such
arrangements in accordance with the existing extension options relating
thereto).
(D) With respect to any JV, (i) the Company shall not, and
shall not permit any of its Subsidiaries or Investment Affiliates
(other than such JV) to, incur, assume or permit to exist any Guarantee
of JV Indebtedness by any member of the Consolidated Group or any
Investment Affiliate (other than such JV) other than a Guarantee of no
more than the Company's pro rata portion (based on the Company's direct
or indirect percentage ownership interest in such JV) of such JV
Indebtedness; (ii) the Company shall not, and shall not permit any of
its Subsidiaries or Investment Affiliates (other than such JV) to,
incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter
30
acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect thereof, pursuant
to any arrangement relating to JV Indebtedness; (iii) the Company shall
not permit such JV to create, incur, assume or permit to exist any Lien
on any property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts receivable)
or rights in respect thereof, pursuant to any arrangement relating to
Indebtedness of another Entity (other than a member of the Consolidated
Group or an Investment Affiliate, in either case that is not another
JV); and (iv) the Company shall not permit such JV to create, incur or
assume any Guaranty pursuant to any arrangement relating to
Indebtedness of another Entity (other than a member of the Consolidated
Group or an Investment Affiliate, in either case that is not another
JV).
(iii) CONSOLIDATED TANGIBLE NET WORTH. The Company shall provide the
holders of Series A Preferred Units prompt written notice in the event
Consolidated Tangible Net Worth is or is reasonably likely to be less than $600
million as of the last day of any quarter.
(iv) ASSET TRANSFER. Without the prior written consent of the
holders of at least fifty-one percent (51%) of Series A Preferred Units, the
Company shall not, and shall not permit any of its Subsidiaries to sell, convey,
transfer or otherwise dispose of any Property (i) to any Affiliate of the
Company (other than Subsidiaries of the Company) or (ii) to any person that is
not an Affiliate of the Company, unless simultaneously therewith, the Company or
such Subsidiary acquires an Approved Replacement Property or the following
requirements are met:
(A) the net income of the Company for the most recently
completed twelve months, calculated in accordance with GAAP on a pro
forma basis as though such Property had been sold, transferred,
conveyed or otherwise disposed of prior to the beginning of such
period, would be at least $90 million; and
(B) after giving effect to any such sale, conveyance, transfer
or other disposition, the Consolidated Tangible Net Worth would not be
less than $1 billion; and
(C) after giving effect to any such sale, conveyance, transfer
or other disposition, the interest of no holder of Series A Preferred
Units would represent more than 17.5% of the total profits or capital
interests in the Company immediately following such sale, conveyance,
transfer or other disposition (determined in accordance with Treasury
Regulation Section 1.731-2(e)(4)).
The Company shall give the holders of the Series A Preferred Units notice of any
such sale, transfer or other disposition.
Notwithstanding anything to the contrary contained herein, the
provisions of this Section 4.3(i)(iv) shall not apply to (i) the conveyance of
any Property or any part thereof
31
to any Person in connection with a foreclosure or eminent domain
proceeding or deed in lieu thereof, (ii) the sale, exchange or other
disposition of all or substantially all of the properties of the
Company and its Subsidiaries, (iii) the grant of an easement or
right-of-way, (iv) the lease of the Properties in the ordinary course
of business, (v) the sale to any department store or retailer of the
portion of the property occupied or proposed to be occupied by it
(including parking area and other surrounding area), (vi) the mortgage
of any Property or (vii) the other sale, conveyance, transfer or other
disposal of a portion of a Property or interests therein in the
ordinary course of business, and no notice need be given to the holders
of the Series A Preferred Units in connection with a transaction
described in this sentence.
(v) NET OPERATING INCOME. The Company shall provide the
holders of Series A Preferred Units prompt written notice in the event
aggregate Net Operating Income for any two consecutive calendar
quarters from all properties owned in fee simple or ground leased by
the Company, a Subsidiary, or an Investment Affiliate is, or is
reasonably likely to be, less than 2.1 times the portion of the
Consolidated Interest Expense for such two fiscal quarters attributable
to debt, as of the last day of any fiscal quarter.
(vi) FIXED CHARGE COVERAGE. The Company shall provide the
holders of Series A Preferred Units prompt written notice in the event
the ratio of (i) aggregate Net Operating Income for any two consecutive
calendar quarters from all properties owned in fee simple or ground
leased by the Company, a Subsidiary or an Investment Affiliate, to (ii)
Fixed Charges determined on a consolidated basis for such two
calendar-quarter period, is or is reasonably likely to be, less than
1.8 to 1 at the end of such two calendar-quarter period.
(vii) EFFECT OF BREACH. In the event of any material breach of
any of the covenants set forth in this Section 4.3(i), the holders of
Series A Preferred Units shall have all rights at law. The occurrence
of any matter for which notice is required to be given in accordance
with Section 4.3(i)(iii), (v) or (vi) shall not in and of itself
constitute a breach hereof; however, the failure to provide written
notice in accordance with each such section is a breach of this
Agreement.
4.4 NO THIRD PARTY BENEFICIARY. No creditor or other third party having
dealings with the Company shall have the right to enforce the right or
obligation of any Member to make Capital Contributions or loans or to pursue any
other right or remedy hereunder or at law or in equity, it being understood and
agreed that the provisions of this Agreement shall be solely for the benefit of,
and may be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the Members herein
set forth to make Capital Contributions or loans to the Company shall be deemed
an asset of the Company for any purpose by any creditor or other third party,
nor may such rights or obligations be sold, transferred or assigned by the
Company or pledged or encumbered by the Company to secure any debt or other
obligation of the Company or of any of the Members.
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4.5 NO INTEREST; NO RETURN; NO WITHDRAWAL. No Member shall be entitled
to interest on its Capital Contribution or on its 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. No Member may withdraw
from the Company without the prior written consent of the Managing Member, other
than as expressly provided in this Agreement.
4.6 NO OTHER CAPITAL CONTRIBUTIONS. No Member shall have any obligation
to make any additional Capital Contribution to the Company.
4.7 ESTABLISHMENT AND ISSUANCE OF SERIES B PREFERRED UNITS. A new
series of Preferred Units designated as the "8.95% Series B Cumulative
Redeemable Preferred Units" (the "Series B Preferred Units") is hereby
established and shall have such rights, preferences, limitations and
qualifications as are described on Schedule B, attached hereto and by this
reference made a part hereof (in addition to the rights, preferences,
limitations and qualifications contained elsewhere in this Agreement, to the
extent applicable). The maximum number of Series B Preferred Units which may be
issued by the Company from time to time shall be 200,000. Concurrently herewith,
the Company is issuing to the GS 2002 REIT 200,000 Series B Preferred Units in
exchange for a Capital Contribution by the GS 2002 REIT of $50,000,000. The GS
2002 REIT is hereby admitted as a Member in respect of the Series B Preferred
Units issued to it, and the GS 2002 REIT hereby agrees to be bound by the
provisions of this Agreement, as the same may be amended from time to time, with
respect to such Series B Preferred Units. Series B Preferred Units shall not
have any relative, participating, optional or other special rights and powers
other than as set forth herein. Series B Preferred Units that are redeemed or
purchased by the Company shall be cancelled and may not be reissued.
ARTICLE V
ALLOCATIONS AND OTHER TAX AND ACCOUNTING MATTERS
5.1 ALLOCATIONS. The Net Income, Net Loss and/or other Company items
shall be allocated pursuant to the provisions of Exhibit A hereto.
5.2 DISTRIBUTIONS.
(a) Subject to the rights of holders of Preferred Units, the
Managing Member shall, from time to time as determined by the Managing
Member (but in any event not less frequently than quarterly), cause the
Company to distribute all or a portion of Net Operating Cash Flow to
the holders of the Common Units who are such on the relevant Common
Unit Record Date in such amounts as the Managing Member shall
determine; provided, however, that all such distributions shall be made
pro rata in accordance with the number of Common Units then owned by
the Members; and provided further, that notwithstanding the foregoing,
the Managing Member shall use its best efforts to cause the Company to
distribute sufficient amounts to enable GGPI to pay shareholder
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 GGPI.
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(b) The Company shall pay distributions in respect of each series of
Preferred Units as provided in Section 4.3 hereof, Schedule B and/or any
amendment hereto relating to such series of Preferred Units.
5.3 BOOKS OF ACCOUNT. At all times during the continuance of the
Company, the Managing Member shall maintain or cause to be maintained full,
true, complete and correct books of account in accordance with generally
accepted accounting principles wherein shall be entered particulars of all
monies, goods or effects belonging to or owing to or by the Company, or paid,
received, sold or purchased in the course of the Company's business, and all of
such other transactions, matters and things relating to the business of the
Company as are usually entered in books of account kept by persons engaged in a
business of a like kind and character. In addition, the Company shall keep all
records as required to be kept pursuant to the Act. The books and records of
account shall be kept at the principal office of the Company, and each Member
shall at all reasonable times have access to such books and records and the
right to inspect the same.
5.4 REPORTS. The Managing Member shall cause to be submitted to the
other Members, promptly following the end of the last calendar year, copies of
Financial Statements prepared on a consolidated basis for the Company and the
Property Partnerships. The Company shall also cause to be prepared such reports
and/or information as are necessary for GGPI to determine its qualification as a
REIT and its compliance with the REIT Requirements.
5.5 TAX ELECTIONS AND RETURNS.
(a) All elections required or permitted to be made by the
Company under any applicable tax law shall be made by the Managing
Member in its sole discretion, including without limitation an election
on behalf of the Company pursuant to Section 754 of the Code to adjust
the basis of the Company property in the case of transfers of Units,
and the Managing Member shall not be required to make any such
election.
(b) The Managing Member shall cause the Accountants to prepare
and file all state and federal tax returns on a timely basis.
5.6 TAX MATTERS MEMBER. The Managing Member is hereby designated as the
Tax Matters Member of the Company, which has the meaning of "Tax Matters
Partner" as specified in Section 6231(a)(7) of the Code; provided, however, in
exercising its authority as Tax Matters Member it shall be limited by the
provisions of this Agreement affecting tax aspects of the Company;
5.7 WITHHOLDING. Each Member hereby authorizes the Company to withhold
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 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
Sections 1441, 1442, 1445 or 1446 of the Code. 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 due within fifteen (15) days after repayment is demanded of
such Member and shall be repaid
34
through withholding of subsequent distributions to such Member. Any amounts
payable by a Member hereunder shall bear interest at the lesser of (a) the Prime
Rate and (b) the maximum lawful rate of interest on such obligation, such
interest to accrue from the date such amount is due (i.e., fifteen (15) days
after demand) until such amount is paid in full. To the extent the payment or
accrual of withholding tax results in a federal, state or local tax credit to
the Company, such credit shall be allocated to the Member to whose distribution
the tax is attributable.
ARTICLE VI
RIGHTS, DUTIES AND RESTRICTIONS OF THE MANAGING MEMBER
6.1 EXPENDITURES BY COMPANY. The Managing Member is hereby authorized
to pay compensation for accounting, administrative, legal, technical, management
and other services rendered to the Company. All of the aforesaid expenditures
shall be made on behalf of the Company, and the Managing Member shall be
entitled to reimbursement by the Company for any expenditures incurred by it on
behalf of the Company which shall be made other than out of the funds of the
Company. The Company also shall assume, and pay when due, all Administrative
Expenses.
6.2 POWERS AND DUTIES OF MANAGING MEMBER. The Managing Member shall be
responsible for the management of the Company's business and affairs. Except as
otherwise herein expressly provided, the Managing Member shall have, and is
hereby granted, full, complete and exclusive power, authority and discretion
under all circumstances to manage the business of the Company and to take all
actions for and on behalf of the Company and in its name as the Managing Member
shall, in its sole and absolute discretion, deem necessary or appropriate to
carry out the purposes for which the Company was organized. Except as otherwise
expressly provided herein and without limiting the foregoing, the Managing
Member shall have the right, power and authority:
(a) To manage, control, invest, reinvest, acquire by purchase,
lease or otherwise, sell, contract to purchase or sell, grant, obtain,
or exercise options to purchase, options to sell or conversion rights,
assign, transfer, convey, deliver, endorse, exchange, pledge, mortgage,
abandon, improve, repair, maintain, insure, lease for any term and
otherwise deal with any and all property of whatsoever kind and nature,
and wheresoever situated, in furtherance of the purposes of the
Company;
(b) To acquire, directly or indirectly, interests in real
estate of any kind and of any type, and any and all kinds of interests
therein, and to determine the manner in which title thereto is to be
held; to manage, insure against loss, protect and subdivide any of the
real estate, interests therein or parts thereof; to improve, develop or
redevelop any such real estate; to participate in the ownership and
development of any property; to dedicate for public use, to vacate any
subdivisions or parts thereof, to resubdivide, to contract to sell, to
grant options to purchase or lease, to sell on any terms; to convey, to
mortgage, pledge or otherwise encumber said property, or any part
thereof; to lease said property or any part thereof from time to time,
upon any terms and for any period of time, and to renew or extend
leases, to amend, change or modify the terms and provisions of any
leases and
35
to grant options to lease and options to renew leases and options to
purchase; to partition or to exchange said real property, or any part
thereof, for other real or personal property; to grant easements or
charges of any kind; to release, convey or assign any right, title or
interest in or about or easement appurtenant to said property or any
part thereof; to construct and reconstruct, remodel, alter, repair, add
to or take from buildings on said premises; to insure any Person having
an interest in or responsibility for the care, management or repair of
such property; to direct the trustee of any land trust to mortgage,
lease, convey or contract to convey the real estate held in such land
trust or to execute and deliver deeds, mortgages, notes, and any and
all documents pertaining to the property subject to such land trust or
in any matter regarding such trust; to execute assignments of all or
any part of the beneficial interest in such land trust;
(c) To employ, engage or contract with or dismiss from
employment or engagement Persons to the extent deemed necessary by the
Managing Member for the operation and management of the Company
business, including but not limited to, the engagement of the Property
Manager pursuant to the Management Agreements and the employment or
engagement of other contractors, subcontractors, engineers, architects,
surveyors, mechanics, consultants, accountants, attorneys, insurance
brokers, real estate brokers and others;
(d) To enter into contracts on behalf of the Company;
(e) To borrow money, procure loans and advances from any
Person for Company purposes, and to apply for and secure, from any
Person, credit or accommodations; to contract liabilities and
obligations, direct or contingent and of every kind and nature with or
without security; and to repay, discharge, settle, adjust, compromise,
or liquidate any such loan, advance, credit, obligation or liability;
(f) To pledge, hypothecate, mortgage, assign, deposit,
deliver, enter into sale and leaseback arrangements or otherwise give
as security or as additional or substitute security, or for sale or
other disposition any and all Company property, tangible or intangible,
including, but not limited to, real estate and beneficial interests in
land trusts, and to make substitutions thereof, and to receive any
proceeds thereof upon the release or surrender thereof; to sign,
execute and deliver any and all assignments, deeds and other contracts
and instruments in writing; to authorize, give, make, procure, accept
and receive moneys, payments, property, notices, demands, vouchers,
receipts, releases, compromises and adjustments; to waive notices,
demands, protests and authorize and execute waivers of every kind and
nature; to enter into, make, execute, deliver and receive written
agreements, undertakings and instruments of every kind and nature; to
give oral instructions and make oral agreements; and generally to do
any and all other acts and things incidental to any of the foregoing or
with reference to any dealings or transactions which any attorney may
deem necessary, proper or advisable;
(g) To acquire and enter into any contract of insurance which
the Managing Member deems necessary or appropriate for the protection
of the Company, for the
36
conservation of the Company's assets or for any purpose convenient or beneficial
to the Company;
(h) To conduct any and all banking transactions on behalf of the
Company; to adjust and settle checking, savings, and other accounts with such
institutions as the Managing Member shall deem appropriate; to draw, sign,
execute, accept, endorse, guarantee, deliver, receive and pay any checks,
drafts, bills of exchange, acceptances, notes, obligations, undertakings and
other instruments for or relating to the payment of money in, into, or from any
account in the Company's name; to execute, procure, consent to and authorize
extensions and renewals of the same; to make deposits and withdraw the same and
to negotiate or discount commercial paper, acceptances, negotiable instruments,
bills of exchange and dollar drafts;
(i) To demand, sue for, receive, and otherwise take steps to collect or
recover all debts, rents, proceeds, interests, dividends, goods, chattels,
income from property, damages and all other property, to which the Company may
be entitled or which are or may become due the Company from any Person; to
commence, prosecute or enforce, or to defend, answer or oppose, contest and
abandon all legal proceedings in which the Company is or may hereafter be
interested; and to settle, compromise or submit to arbitration any accounts,
debts, claims, disputes and matters which may arise between the Company and any
other Person and to grant an extension of time for the payment or satisfaction
thereof on any terms, with or without security;
(j) To make arrangements for financing, including the taking of all
action deemed necessary or appropriate by the Managing Member to cause any
approved loans to be closed;
(k) To take all reasonable measures necessary to insure compliance by
the Company with applicable arrangements, and other contractual obligations and
arrangements entered into by the Company from time to time in accordance with
the provisions of this Agreement, including periodic reports as required to
lenders and using all due diligence to insure that the Company is in compliance
with its contractual obligations;
(l) To maintain the Company's books and records;
(m) To prepare and deliver, or cause to be prepared and delivered by
the Company's Accountants, all financial and other reports with respect to the
operations of the Company, and preparation and filing of all Federal and state
tax returns and reports; and
(n) Any and all other actions that the Managing Member, in its sole and
absolute discretion, may deem necessary or appropriate in furtherance of the
business of the Company.
The Managing Member shall not have any obligations hereunder except to
the extent that Company funds are reasonably available to it for the performance
of such duties, and nothing herein
37
contained shall be deemed to authorize or require the Managing Member, in its
capacity as such, to expend its individual funds for payment to third parties or
to undertake any individual liability or obligation on behalf of the Company.
Subject to the terms of Section 4.3 and the terms of any other Preferred Units,
the merger or consolidation of the Company with or into another Entity shall be
authorized by the Consent of the Holders of Common Units.
6.3 PROSCRIPTIONS. The Managing Member shall not have the authority to:
(a) Do any act in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the
Company (other than a sale of all or substantially all of the Company
assets or the dissolution of the Company, each of which is within the
power and authority of the Managing Member and do not require the
consent of the Members;
(b) Possess any Company property or assign rights in specific
Company property for other than Company purposes; or
(c) Do any act in contravention of applicable law.
Nothing herein contained shall impose any obligation on any Person or firm doing
business with the Company to inquire as to whether or not the Managing Member
has properly exercised its authority in executing any contract, lease, mortgage,
deed or other instrument or document on behalf of the Company, and any such
third Person shall be fully protected in relying upon such authority.
6.4 TITLE HOLDER. To the extent allowable under applicable law, title
to all or any part of the properties of the Company may be held in the name of
the Company or any other individual, corporation, partnership, trust or
otherwise, the beneficial interest in which shall at all times be vested in the
Company. Any such title holder shall perform any and all of its respective
functions to the extent and upon such terms and conditions as may be determined
from time to time by the Managing Member.
6.5 COMPENSATION OF THE MANAGING MEMBER. The Managing Member shall not
be entitled to any compensation for services rendered to the Company solely in
its capacity as Managing Member except with respect to reimbursement for those
costs and expenses constituting Administrative Expenses.
6.6 WAIVER AND INDEMNIFICATION.
(a) Neither the Managing Member nor any Person acting on its
behalf, pursuant hereto, shall be liable, responsible or accountable in
damages or otherwise to the Company or to any Member for any acts or
omissions performed or omitted to be performed by them (whether on,
prior to or after the date hereof) within the scope of the authority
conferred upon the Managing Member by this Agreement and the Act;
provided that (i) the Managing Member's or such other Person's conduct
or omission to act was taken in good faith and in the belief that such
conduct or omission was in the best interests of the Company and (ii)
the Managing Member or such other Person shall not be guilty of fraud,
willful misconduct or gross negligence. The Company shall, and hereby
38
does, indemnify and hold harmless the Managing Member and its
Affiliates and any individual acting on their behalf from any loss,
damage, claim or liability, including, but not limited to, reasonable
attorneys' fees and expenses, incurred by them by reason of any act
performed or omitted to be performed by them (whether on, prior to or
after the date hereof) in accordance with the standards set forth above
or in enforcing the provisions of this indemnity; provided, however, no
Member shall have any personal liability with respect to the foregoing
indemnification, any such indemnification to be satisfied solely out of
the assets of the Company.
(b) Any Person entitled to indemnification under this
Agreement shall be entitled to receive, upon application therefor,
advances to cover the costs of defending any proceeding against such
Person; provided, however, that such advances shall be repaid to the
Company, without interest, if such Person is found by a court of
competent jurisdiction upon entry of a final judgment not to be
entitled to such indemnification. All rights of the indemnitee
hereunder shall survive the dissolution of the Company. The
indemnification rights contained in this Agreement shall be cumulative
of, and in addition to, any and all rights, remedies and recourse to
which the person seeking indemnification shall be entitled, whether at
law or at equity. Indemnification pursuant to this Agreement shall be
made solely and entirely from the assets of the Company and no Member
shall be liable therefor.
(c) The provisions of this Section 6.6 also shall apply to the
Liquidating Trustee and the Tax Matters Member.
6.7 OPERATION IN ACCORDANCE WITH REIT REQUIREMENTS. The Members
acknowledge and agree that the Company shall be operated in a manner that will
enable GGPI to (a) satisfy the REIT Requirements and (b) avoid the imposition of
any federal income or excise tax liability. The Company shall avoid taking any
action, or permitting any Property Partnership to take any action, which would
result in GGPI ceasing to satisfy the REIT Requirements or would result in the
imposition of any federal income or excise tax liability on GGPI.
6.8 DUTIES AND CONFLICTS. The Managing Member only shall be required to
devote such time to the management of the business of the Company as it deems
necessary to promote the interests of the Company. Each Member recognizes that
the other Members (including the Managing Member) and their Affiliates have or
may hereafter have other business interests, activities and investments, some of
which may be in conflict or competition with the business or properties of the
Company, and that such Persons are entitled to carry on such other business
interests, activities and investments. The Members (including the Managing
Member) and their Affiliates may engage in or possess an interest in any other
business or venture of any kind, independently or with others, on their own
behalf or on behalf of other entities with which they are affiliated or
associated, and such persons may engage in any activities, whether or not
competitive with the Company, without any obligation to offer any interest in
such activities to the Company or to any Member. Neither the Company nor any
Member shall have any right, by virtue of this Agreement, in or to such
activities, or the income or profits derived therefrom, and the pursuit of such
activities, even if competitive with the business of the Company, shall not be
deemed wrongful or improper. Without limiting the foregoing, each Member
recognizes that (a)
39
the Managing Member and/or its Affiliates (other than the Company and its
Subsidiaries) own, independently and/or with others, direct and/or indirect
interests in Shopping Center Projects in which the Company and its Subsidiaries
have no interest and which may be in conflict or competition with the business
or properties of the Company and its Subsidiaries, (b) the Managing Member
intends to continue to conduct and expand such business and activities and (c)
the Managing Member and its Affiliates (other than the Company and its
Subsidiaries) are entitled to carry on such other business and activities and
own such properties without any obligation to offer any interest in such
business, activities or properties to the Company or to any Member.
ARTICLE VII
DISSOLUTION, LIQUIDATION AND WINDING-UP
7.1 ACCOUNTING. In the event of the dissolution, liquidation and
winding-up of the Company, a proper accounting (which shall be certified) shall
be made of the Capital Account of each Member and of the Net Profits or Net
Losses of the Company from the date of the last previous accounting to the date
of dissolution. Financial statements presenting such accounting shall include a
report of a certified public accountant selected by the Liquidating Trustee.
7.2 DISTRIBUTION ON DISSOLUTION. In the event of the dissolution and
liquidation of the Company for any reason, the assets of the Company shall be
liquidated for distribution in the following rank and order:
(a) Payment of creditors of the Company (other than Members)
in the order of priority as provided by law;
(b) Establishment of reserves as provided by the Managing
Member to provide for contingent liabilities, if any;
(c) Payment of debts of the Company to Members, if any, in the
order of priority provided by law; and
(d) Payment to holders of Units in accordance with their
Capital Accounts.
Whenever the Liquidating Trustee reasonably determines that any
reserves established pursuant to paragraph (b) above are in excess of the
reasonable requirements of the Company, the amount determined to be excess shall
be distributed to the Members in accordance with the above provisions.
7.3 TIMING REQUIREMENTS. In the event that the Company is "liquidated"
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and
all distributions to the Members pursuant to Section 7.2(d) hereof shall be made
no later than the later to occur of (i) the last day of the taxable year of the
Company in which such liquidation occurs or (ii) ninety (90) days after the date
of such liquidation.
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7.4 SALE OF COMPANY ASSETS. In the event of the liquidation of the
Company in accordance with the terms of this Agreement, the Liquidating Trustee
may sell Company or Property Partnership property if the Liquidating Trustee has
in good faith solicited bids from unrelated third parties and obtained
independent appraisals before making any such sale; provided, however, all
sales, leases, encumbrances or transfers of Company assets shall be made by the
Liquidating Trustee solely on an "arm's-length" basis, at the best price and on
the best terms and conditions as the Liquidating Trustee in good faith believes
are reasonably available at the time and under the circumstances and on a
non-recourse basis to the Members. The liquidation of the Company shall not be
deemed finally terminated until the Company shall have received cash payments in
full with respect to obligations such as notes, installment sale contracts or
other similar receivables received by the Company in connection with the sale of
Company assets and all obligations of the Company have been satisfied. The
Liquidating Trustee shall continue to act to enforce all of the rights of the
Company pursuant to any such obligations until paid in full.
7.5 DISTRIBUTIONS IN KIND. In the event that it becomes necessary to
make a distribution of Company property in kind, the Managing Member may
transfer and convey such property to the distributees as tenants in common,
subject to any liabilities attached thereto, so as to vest in them undivided
interests in the whole of such property in proportion to their respective rights
to share in the proceeds of the sale of such property (other than as a creditor)
in accordance with the provisions of Section 7.2 hereof.
7.6 DOCUMENTATION OF LIQUIDATION. Upon the completion of the
dissolution and liquidation of the Company, the Company shall terminate and the
Liquidating Trustee shall have the authority to execute and record any and all
documents or instruments required to effect the dissolution, liquidation and
termination of the Company.
7.7 NEGATIVE CAPITAL ACCOUNTS. No Member shall be liable to the Company
or to any other Member for any deficit or negative balance which may exist in
its Capital Account.
ARTICLE VIII
TRANSFER OF UNITS
8.1 MANAGING MEMBER TRANSFER. The Managing Member shall not withdraw
from the Company and shall not sell, assign, pledge, encumber or otherwise
dispose of all or any portion of its Units without (i) the Consent of the
Holders of Common Units; and (ii) the consent of the holders of at least
fifty-one percent (51%) of the outstanding Series A Preferred Units, which
consent may not be unreasonably withheld (except that the Managing Member may
sell, assign or transfer its interest to an Affiliate without the consent of the
Members). Upon any transfer of Units in accordance with the provisions of this
Section 8.1, the transferee Managing Member shall become 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 Units so acquired. It
is a condition to any
41
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 Units and no such
transfer (other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor Managing Member are assumed by a
successor corporation by operation of law) shall relieve the transferor Managing
Member of its obligations under this Agreement without the Consent of the
Holders of the Common Units, in their reasonable discretion. In the event the
Managing Member withdraws from the Company, in violation of this Agreement or
otherwise, or dissolves or terminates or upon the Bankruptcy of the Managing
Member, a Majority in Interest of the Common Units and the holders of at least
fifty-one percent (51%) of the outstanding Series A Preferred Units, voting
separately as separate classes, may elect to continue the Company business by
selecting a substitute Managing Member.
8.2 TRANSFERS BY OTHER MEMBERS. Except as otherwise provided herein, no
Member (other than the Managing Member) shall have the right to transfer all or
a portion of its Units to any Person without the written consent of the Managing
Member, which consent may be given or withheld in the sole discretion of the
Managing Member. 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 Member under this Agreement with respect to such
transferred Units and no such transfer (other than pursuant to a statutory
merger or consolidation wherein all obligations and liabilities of the
transferor Member are assumed by a successor corporation by operation of law)
shall relieve the transferor Member of its obligations under this Agreement
without the approval of the Managing Member, which may be given or withheld in
its sole discretion. Upon such transfer, the transferee shall be admitted as a
substituted member of the Company (the "Substituted Member") and shall succeed
to all of the rights of the transferor Member under this Agreement in the place
and stead of such transferor Member. 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 rights
hereunder, other than to receive such portion of the distributions made by the
Company as are allocable to the Units transferred.
8.3 RESTRICTIONS ON TRANSFER. In addition to any other restrictions on
transfer herein contained, in no event may any transfer or assignment of Units
by any Member be made (a) to any Person who lacks the legal right, power or
capacity to own Units; (b) in violation of any provision of any mortgage or
trust deed (or the note or bond secured thereby) constituting a Lien against a
Property or any part thereof, or other instrument, document or agreement to
which the Company or any Property Partnership is a party or otherwise bound; (c)
in violation of applicable law; (d) unless such assignment or transfer is made
pursuant to an effective registration statement under the Securities Act of
1933, as amended, or is exempt from registration thereunder; (e) of any
component portion of a Unit, such as the Capital Account, or rights to Net
Operating Cash Flow, separate and apart from all other components of such Unit,
(f) in the event such transfer would cause GGPI to cease to comply with the REIT
Requirements, (g) if such transfer would cause a termination of the Company for
federal income tax purposes, (h) if such transfer would, in the opinion of
counsel to the Company, cause the Company to cease to be classified as a
partnership for Federal income tax purposes, cause the Company to fail to
satisfy the safe harbor
42
requirements of Section 1.7704-1(j) of the Regulations during 2002 or cause the
Company to have more than 100 partners within the meaning of Reg.
Section1.7704-1(h), (i) if such transfer would cause the Company to become, with
respect to any employee benefit plan subject to Title 1 of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), or (j) if such transfer
would, in the opinion of 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 2510.3-101.
8.4 BANKRUPTCY OF A MEMBER. The Bankruptcy of any Member (other than
the Managing Member) shall not cause a dissolution of the Company, but the
rights of such Member to share in the Net Profits or Net Losses of the Company
and to receive distributions of Company funds shall, on the happening of such
event, devolve on its successors or assigns, subject to the terms and conditions
of this Agreement, and the Company shall continue as a limited liability
company. However, in no event shall such assignee(s) become a Substituted Member
without the written consent of the Managing Member.
ARTICLE IX
ARBITRATION OF DISPUTES
9.1 ARBITRATION. Notwithstanding anything to the contrary contained in
this Agreement, all claims, disputes and controversies between the parties
hereto (including, without limitation, any claims, disputes and controversies
between the Company and any one or more of the Members and any claims, disputes
and controversies between any one or more Members) arising out of or in
connection with this Agreement or the Company shall be resolved by binding
arbitration in (x) New York, New York with respect to any dispute involving the
Series A Preferred Units or the Series B Preferred Units and (y) with respect to
all other disputes, Chicago, Illinois, in accordance with this Article IX and,
to the extent not inconsistent herewith, the Expedited Procedures and Commercial
Arbitration Rules of the American Arbitration Association.
9.2 PROCEDURES. Any arbitration called for by this Article IX shall be
conducted in accordance with the following procedures:
(a) The Company or any Member (the "Requesting Party") may
demand arbitration pursuant to Section 9.1 at any time by giving
written notice of such demand (the "Demand Notice") to all other
Members and (if the Requesting Party is not the Company) to the Company
which Demand Notice shall describe in reasonable detail the nature of
the claim, dispute or controversy.
(b) Within fifteen (15) days after the giving of a Demand
Notice, the Requesting Party, on the one hand, and each of the other
Members and/or the Company against whom the claim has been made or with
respect to which a dispute has arisen (collectively, the "Responding
Party"), on the other hand, shall select and designate in writing to
the other party one reputable, disinterested individual (a "Qualified
Individual") willing to act as an arbitrator of the claim, dispute or
controversy in
question. Each of the Requesting Party and the Responding Party shall
use their best efforts to select a lawyer or retired judge having no
affiliation with any of the parties as their respective Qualified
Individual. Within fifteen (15) days after the foregoing selections
have been made, the arbitrators so selected shall jointly select a
lawyer or retired judge having no affiliation with any of the parties
as the third Qualified Individual willing to act as an arbitrator of
the claim, dispute or controversy in question. In the event that the
two arbitrators initially selected are unable to agree on a third
arbitrator within the second fifteen (15) day period referred to above,
then, on the application of either party, the American Arbitration
Association shall promptly select and appoint a lawyer or retired judge
having no affiliation with any of the parties as the Qualified
Individual to act as the third arbitrator. The three arbitrators
selected pursuant to this subsection (b) shall constitute the
arbitration panel for the arbitration in question.
(c) The presentations of the parties hereto in the arbitration
proceeding shall be commenced and completed within sixty (60) days
after the selection of the arbitration panel pursuant to subsection (b)
above, and the arbitration panel shall render its decision in writing
within thirty (30) days after the completion of such presentations. Any
decision concurred in by any two (2) of the arbitrators shall
constitute the decision of the arbitration panel, and unanimity shall
not be required.
(d) The arbitration panel shall have the discretion to include
in its decision a direction that all or part of the attorneys' fees and
costs of any party or parties and/or the costs of such arbitration be
paid by any other party or parties. On the application of a party
before or after the initial decision of the arbitration panel, and
proof of its attorneys' fees and costs, the arbitration panel shall
order the other party to make any payments directed pursuant to the
preceding sentence.
9.3 BINDING CHARACTER. Any decision rendered by the arbitration panel
pursuant to this Article IX shall be final and binding on the parties hereto,
and judgment thereon may be entered by any state or federal court of competent
jurisdiction.
9.4 EXCLUSIVITY. Arbitration shall be the exclusive method available
for resolution of claims, disputes and controversies described in Section 9.1,
and the Company and its Members stipulate that the provisions hereof shall be a
complete defense to any suit, action, or proceeding in any court or before any
administrative or arbitration tribunal with respect to any such claim,
controversy or dispute. The provisions of this Article IX shall survive the
dissolution of the Company. Notwithstanding the foregoing, the parties may seek
injunctive relief or similar relief from a court of competent jurisdiction in
New York, New York before an arbitration panel has been appointed.
9.5 NO ALTERATION OF AGREEMENT. Nothing contained herein shall be
deemed to give the arbitrators any authority, power or right to alter, change,
amend, modify, add to, or subtract from any of the provisions of this Agreement.
44
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. Except as otherwise provided herein, all notices, offers
or other communications required or permitted to be given pursuant to this
Agreement shall be in writing and may be personally served, delivered by
nationally recognized overnight courier, telecopied or sent by registered or
certified United States mail, postage prepaid and properly addressed, and shall
be deemed to have been given when delivered in person or by nationally
recognized courier or registered or certified U.S. mail or upon receipt of
telecopy by the appropriate party. For purposes of this Section 10.1, the
addresses of the parties hereto shall be as set forth opposite their names on
the signature pages thereto. The address of any party hereto may be changed by a
notice in writing given in accordance with the provisions hereof.
10.2 SUCCESSORS. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of all Members, and their
legal representatives, heirs, successors and permitted assigns, except as
expressly herein otherwise provided.
10.3 EFFECT AND INTERPRETATION. This Agreement shall be governed by and
construed in conformity with the laws of the State of Delaware (without regard
to its conflicts of law principles, which might result in the application of the
laws of any other jurisdiction).
10.4 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which shall constitute one and the
same document and all signatures need not appear on the same page.
10.5 MEMBERS NOT AGENTS. Nothing contained herein shall be construed to
constitute any Member the agent of another Member, except as specifically
provided herein, or in any manner to limit the Members in the carrying on of
their own respective businesses or activities.
10.6 ENTIRE UNDERSTANDING; ETC. This Agreement constitutes the entire
agreement and understanding among the Members and supersedes any prior
understandings and/or written or oral agreements among them respecting the
subject matter within (including without limitation the Original Agreement).
10.7 AMENDMENTS. Except as otherwise provided herein (including the
provisions of Section 4.3), this Agreement may not be amended, and no provision
may be waived, except by a written instrument signed by the holders of a
Majority in Interest of the Common Units.
10.8 SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those to which it is held invalid by such court, shall not be affected thereby.
10.9 TRUST PROVISION. This Agreement, to the extent executed by the
trustee of a trust, is executed by such trustee solely as trustee and not in a
separate capacity. Nothing herein
45
contained shall create any liability on, or require the performance of any
covenant by, any such trustee individually, nor shall anything contained herein
subject the individual personal property of any trustee to any liability.
10.10 ISSUANCE OF CERTIFICATES REPRESENTING UNITS. The Managing Member
may, in its sole discretion, issue certificates representing all or a portion of
the Units of one or more Members and, in such event, the Managing Member shall
establish such rules and regulations relating to issuances and reissuances of
certificates upon transfer of Units, the division of Units among multiple
certificates and the loss, theft, destruction or mutilation of certificates as
the Managing Member reasonably deems appropriate.
10.11 SPECIFIC PERFORMANCE. The parties agree that irreparable damage
will result in the event that this Agreement is not specifically enforced, and
the parties agree that any damages available at law for a breach of this
Agreement would not be an adequate remedy. Therefore, the provisions hereof and
the obligations of the parties hereunder shall be enforceable in a court of
equity or other tribunal with jurisdiction by a decree of specific performance,
and appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not exclusive and
shall be in addition to any other remedies which a party may have under this
Agreement or otherwise.
10.12 POWER OF ATTORNEY. Each Member (other than the holders of Series
A Preferred Units or Series B Preferred Units) hereby irrevocably constitutes
and appoints the Managing Member his or its true and lawful attorney-in-fact, in
his or its name, place and stead with full power of substitution, to consent to,
make, execute, sign, acknowledge, swear to, record and file, on behalf of such
Member and/or on behalf of the Company, the following:
(a) this Agreement, any certificate of foreign limited
liability company, any certificate of doing business under an assumed
name, and any other certificates or instruments which may be required
to be filed by the Company or such Member under the laws of the State
of Delaware or any other jurisdiction the laws of which may be
applicable;
(b) a certificate of cancellation of the Certificate of
Formation of the Company and such other instruments or documents as may
be deemed necessary or desirable by said attorneys upon the termination
of the Company;
(c) any and all amendments or restatements of the documents
described in subsections (a) and (b) above, provided such amendments
are either required by law, are necessary to correct statements herein
or therein, or are consistent with this Agreement (including without
limitation any amendments referred to in Sections 4.1 and 4.2); and
(d) any and all such other documents as may be deemed
necessary or desirable by said attorney to carry out fully the
provisions of this Agreement and as are consistent with the terms
hereof.
46
The foregoing grant of authority: (i) is a special power of attorney
coupled with an interest, is irrevocable and shall survive the death or
incapacity of each member and (ii) shall survive the delivery of an assignment
by a Member of the whole or any portion of his or its Units.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
47
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, and GGPI has executed this Agreement solely for the purpose of
binding itself under Section 4.3(g), as of the date and year first above
written.
MANAGING MEMBER:
GGP LIMITED PARTNERSHIP,
a Delaware limited partnership
By: General Growth Properties, Inc., a Delaware
corporation, its general partner
By: /s/ Bernard Freibaum
-----------------------------------
Name: Bernard Freibaum
------------------------------
Title: Executive Vice President
----------------------------
110 North Wacker Drive
Chicago, Illinois 60606
Attention: John Bucksbaum
OTHER MEMBERS:
CALEDONIAN HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ Bernard Freibaum
----------------------------------------
Name: Bernard Freibaum
---------------------------------
Title: Vice President
--------------------------------
110 North Wacker Drive
Chicago, Illinois 60606
Attention: John Bucksbaum
48
GGP AMERICAN PROPERTIES INC.,
a Delaware corporation
By: /s/ Bernard Freibaum
----------------------------------------
Name: Bernard Freibaum
---------------------------------
Title: Vice President
--------------------------------
110 North Wacker Drive
Chicago, Illinois 60606
Attention: John Bucksbaum
GSEP 2000 REALTY CORP.
By: /s/ Eric Lane
----------------------------------------
Name: Eric Lane
---------------------------------
Title: President and CEO
--------------------------------
c/o Goldman, Sachs & Co.
One New York Plaza
New York, New York 10004
Attention: Eric Lane
GSEP 2002 REALTY CORP.
By: /s/ Eric Lane
----------------------------------------
Name: Eric Lane
---------------------------------
Title: President and CEO
--------------------------------
c/o Goldman, Sachs & Co.
One New York Plaza, 40th Floor
New York, New York 10004
Attention: Eric Lane
49
GENERAL GROWTH PROPERTIES, INC.,
a Delaware corporation
By: /s/ Bernard Freibaum
----------------------------------------
Name: Bernard Freibaum
---------------------------------
Title: Executive Vice President
--------------------------------
110 North Wacker Drive
Chicago, Illinois 60606
Attention: John Bucksbaum
50
EXHIBIT A
TO THE
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF
GGPLP L.L.C.
ALLOCATIONS
1. Allocation of Net Income and Net Loss.
(a) Net Income. Except as otherwise provided herein, Net Income for any
fiscal year or other applicable period shall be allocated in the following order
and priority:
(1) First, to each Member holding Common Units in proportion
to, and to the extent of, the excess of (i) the cumulative amount of
Net Loss allocated with respect to such Common Units pursuant to
paragraph (b)(5) below for all prior periods over (ii) the cumulative
amount of Net Income allocated with respect to such Common Units
pursuant to this paragraph (a)(1) for all prior periods;
(2) Second, to each Member holding Preferred Units until the
cumulative Net Income allocated with respect to each Preferred Unit
pursuant to this paragraph (a)(2) for such period and all prior periods
equals the cumulative Net Loss allocated with respect to each such
Preferred Unit pursuant to paragraph (b)(4) below for all prior periods
(such allocation to be among the Members holding Preferred Units in the
reverse order that such Net Loss was allocated to them);
(3) Third, to each Member holding Preferred Units in
proportion to, and to the extent of, the excess of (i) the cumulative
amount of accrued distributions with respect to such Preferred Units
for such period and all prior periods (whether or not declared or paid)
over (ii) the cumulative amount of Net Income allocated with respect to
such Preferred Units pursuant to this paragraph (a)(3) for all prior
periods (net of the cumulative Net Loss, if any, allocated with respect
to such Preferred Units pursuant to paragraph (b)(3) hereof for all
prior periods);
(4) Fourth, to each Member holding Common Units until the
cumulative Net Income allocated with respect to each Common Unit
pursuant to this paragraph (a)(4) for such period and all prior periods
equals the cumulative Net Loss allocated with respect to each such
Common Unit pursuant to paragraph (b)(2) below for all prior periods
(such allocation to be among the Members holding Common Units in the
reverse order that such Net Loss was allocated to them); and
(5) Thereafter, the balance of the Net Income, if any, shall
be allocated among the Members holding Common Units in proportion to
the number of Common Units held by them.
A-1
(b) Net Loss. Except as otherwise provided herein, Net Loss of the
Company for each fiscal year or other applicable period shall be allocated as
follows:
(1) First, to the Members holding Common Units, until the
cumulative amount of Net Loss allocated with respect to each Common
Unit under this paragraph (b)(1) for such period and all prior periods
equals the cumulative amount of Net Income allocated to such Common
Unit pursuant to paragraph (a)(5) for all prior periods;
(2) Second, to the holders of Common Units in proportion to
the number of Common Units held by them (provided, however, that to the
extent any Net Loss allocated to a Member holding Common Units under
this paragraph (b)(2) would cause such Member (hereinafter, a
"Restricted Member") to have an Adjusted Capital Account Deficit as of
the end of the fiscal year to which such Net Loss relates, such Net
Loss shall not be allocated to such Restricted Member but shall
instead, to the extent possible, be allocated to the other Member(s)
holding Common Units (hereinafter, the "Permitted Members") pro rata in
accordance with the Common Units held by all Permitted Members (for
this purpose, a Member's Adjusted Capital Account Deficit shall be
determined by considering only those adjustments to such Member's
capital account (including any adjustments for capital contributed)
that were made in respect of the Member's Common Units));
(3) Third, to the Members holding Preferred Units in
proportion to, and to the extent of, the excess of (i) the cumulative
Net Income allocated with respect to each Preferred Unit pursuant to
paragraph (a)(3) hereof for all prior periods over (ii) the cumulative
distributions made with respect to each such Preferred Unit pursuant to
Section 5.2(b) of the Agreement for the current and all prior periods;
(4) Fourth, to the Members holding Preferred Units in
proportion to the number of Preferred Units held by them (provided,
however, that to the extent any Net Loss allocated to a Member holding
Preferred Units under this paragraph (b)(2) would cause such Member
(hereinafter, a "Restricted Preferred Member") to have an Adjusted
Capital Account Deficit as of the end of the fiscal year to which such
Net Loss relates, such Net Loss shall not be allocated to such
Restricted Preferred Member but shall instead, to the extent possible,
be allocated to the other Member(s) holding Preferred Units
(hereinafter, the "Permitted Preferred Members") pro rata in accordance
with the Preferred Units held by all Permitted Preferred Members (for
this purpose, a Member's Adjusted Capital Account Deficit shall be
determined by considering only those adjustments to such Member's
capital account (including any adjustments for capital contributed)
that were made in respect of the Member's Preferred Units)); and
(5) Fifth, to the holders of Common Units in proportion to the
number of Common Units held by them.
2. Special Allocations.
Notwithstanding any provisions of paragraph 1 of this Exhibit A, the
following special allocations shall be made in the following order:
A-2
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a
net decrease in Partnership Minimum Gain for any Company fiscal year (except as
a result of conversion or refinancing of Company indebtedness, certain capital
contributions or revaluation of the Company property as further outlined in
Regulation Sections 1.704-2(d)(4), (f)(2) or (f)(3)), 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 that Member's share of the
net decrease in Partnership Minimum Gain. The items to be so allocated shall be
determined in accordance with Regulation Section 1.704-2(f). This paragraph (a)
is intended to comply with the minimum gain chargeback requirement in said
section of the Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this paragraph (a) shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant hereto.
(b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there is
a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during
any fiscal year (other than due to the conversion, refinancing or other change
in the debt instrument causing it to become partially or wholly nonrecourse,
certain capital contributions, or certain revaluations of Company property as
further outlined in Regulation Section 1.704-2(i)(4)), 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 that Member's share of the
net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt. The
items to be so allocated shall be determined in accordance with Regulation
Section 1.704-2(i)(4) and (j)(2). This paragraph (b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt
contained in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this paragraph (b) shall be made
in proportion to the respective amounts required to be allocated to each Member
pursuant hereto.
(c) Qualified Income Offset. In the event a Member unexpectedly
receives any adjustments, allocations or distributions described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), and such Member has an Adjusted
Capital Account Deficit, items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate the
Adjusted Capital Account Deficit as quickly as possible. This paragraph (c) is
intended to constitute a "qualified income offset" under Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
or other applicable period shall be allocated among the Members holding Common
Units in proportion to the number of Common Units held.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any fiscal year or other applicable period shall be specially allocated to the
Member that bears the economic risk of loss for the debt (i.e., the Partner
Nonrecourse Debt) to which such Partner Nonrecourse Deductions are attributable
(as determined under Regulation Section 1.704-2(b)(4) and (i)(1)).
(f) Curative Allocations. The Regulatory Allocations shall be taken
into account in allocating other items of income, gain, loss, and deduction
among the Members so that, to the
A-3
extent possible, the cumulative net amount of allocations of Company items under
paragraphs 1 and 2 of this Exhibit A shall be equal to the net amount that would
have been allocated to each Member if the Regulatory Allocations had not
occurred. This paragraph (f) is intended to minimize to the extent possible and
to the extent necessary any economic distortions which may result from
application of the Regulatory Allocations and shall be interpreted in a manner
consistent therewith. For purposes hereof, "Regulatory Allocations" shall mean
the allocations provided for by subsections (a) through (e) of this Section 2.
3. Tax Allocations.
(a) Generally. Subject to paragraphs (b) and (c) hereof, items of
income, gain, loss, deduction and credit to be allocated for income tax purposes
(collectively, "Tax Items") shall be allocated among the Members on the same
basis as their respective book items.
(b) Sections 1245/1250 Recapture. If any portion of gain from the sale
of property is treated as ordinary income by virtue of the application of Code
Sections 1245 or 1250 ("Affected Gain"), then (A) such Affected Gain shall be
allocated among the Members in the same proportion that the depreciation and
amortization deductions giving rise to the Affected Gain were allocated and (B)
other Tax Items of gain of the same character that would have been recognized,
but for the application of Code Sections 1245 and/or 1250, shall be allocated
away from those Members who are allocated Affected Gain pursuant to Clause (A)
so that, to the extent possible, the other Members are allocated the same
amount, and type, of capital gain that would have been allocated to them had
Code Sections 1245 and/or 1250 not applied. For purposes hereof, in order to
determine the proportionate allocations of depreciation and amortization
deductions for each fiscal year or other applicable period, such deductions
shall be deemed allocated on the same basis as Net Income and Net Loss for such
respective period.
(c) Allocations Respecting Section 704(c) and Revaluations; Curative
Allocations Resulting from the Ceiling Rule. Notwithstanding paragraph (b)
hereof, Tax Items with respect to Company property that is subject to Code
Section 704(c) and/or Regulation Section 1.704-3 (collectively "Section 704(c)
Tax Items") shall be allocated in accordance with said Code Section and/or
Regulation Section 1.704-3, as the case may be. The allocation of Tax Items
shall be in accordance with the "traditional method" set forth in Regulation
Section 1.704-3(b)(1), unless otherwise determined by the Managing Member, and
shall be subject to the ceiling rule stated in Regulation Section 1.704-3(b)(1).
The Managing Member is authorized to specially allocate Tax Items (other than
the Section 704(c) Tax Items) to cure for the effect of the ceiling rule.
A-4
SCHEDULE A
TO THE
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF
GGPLP L.L.C.
MEMBERS
Member Common Units Preferred Units
GGP Limited Partnership 911,000 0
Caledonian Holding Company, Inc. 29,600 0
GGP American Properties Inc. 58,500 0
GSEP 2000 Realty Corp. 0 700,000 Series A Preferred Units
GSEP 2002 Realty Corp. 0 200,000 Series B Preferred Units
A-1
SCHEDULE B
TO THE
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF
GGPLP L.L.C.
DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B PREFERRED UNITS
1. DESIGNATION AND NUMBER; ETC. The Series B Preferred Units have been
established and shall have such rights, preferences, limitations and
qualifications as are described herein (in addition to the rights, preferences,
limitations and qualifications contained in the Agreement to the extent
applicable). The authorized number of Series B Preferred Units shall be 200,000.
Notwithstanding anything to the contrary contained herein, in the event of a
conflict between the provisions of this Schedule B and any other provision of
the Agreement, the provisions of this Schedule B shall control. Series B
Preferred Units shall not have any relative, participating, optional or other
special rights and powers other than as set forth herein.
2. RANK OF THE SERIES B PREFERRED UNITS. The Series B Preferred Units
shall, with respect to distribution rights and rights upon liquidation,
dissolution or winding up of the Company, rank as follows:
(a) senior to all classes or series of Common Units and all other
series of Preferred Units other than each series of Preferred Units referred to
in Section 2(b) or (c) hereof (the Common Units and the Preferred Units ranking
junior to the Series B Preferred Units with respect to distribution rights and
rights upon liquidation, dissolution and winding up, collectively, "Series B
Junior Units");
(b) on parity with the Series A Preferred Units and each other series
of Preferred Units which provides by its express terms that it ranks on parity
with the Series B Preferred Units as to distribution rights and rights upon
liquidation, dissolution and winding-up of the Company (the "Series B Parity
Units") (and if the distribution rates, distribution payment dates or redemption
or liquidation prices per Unit are different from those of the Series B
Preferred Units, the units of such class or series and the Series B Preferred
Units shall be entitled to the receipt of distributions and the amounts
distributable upon liquidation, dissolution and winding-up in proportion to
their respective amounts of accrued and unpaid distributions per unit or
liquidation preferences, without preference or priority one over the other); and
(c) junior to any class or series of Preferred Units that is hereafter
established, that provides by its express terms that it ranks senior to the
Series B Preferred Units and that is approved in accordance with the provisions
of Section 3 hereof.
3. VOTING. The Company shall not, without the affirmative vote or
consent of the holders of at least fifty-one percent (51%) of the Series B
Preferred Units outstanding at such time, (a) authorize or create, or increase
the authorized or issued amount of, any class or series of Units ranking senior
to the Series B Preferred Units with respect to payments of distributions or
rights upon liquidation, dissolution or winding up of the Company or reclassify
any Common Units into Preferred Units ranking senior to or on parity with the
Series B Preferred Units with
B-1
respect to the payment of distributions or distribution of assets upon
liquidation, dissolution or winding-up of the Company, (b) issue additional
Series B Preferred Units or (c) amend, alter or repeal this Section 3 or any
other provisions of this Schedule B or the Agreement, whether by merger,
consolidation or otherwise (a "Series B Event"), so as to negate the provisions
of clause (a) or (b) of this paragraph or materially and adversely affect any
right, preference, privilege or voting power of the holders of the Series B
Preferred Units. Notwithstanding anything to the contrary contained herein, (A)
with respect to the occurrence of any of the Series B Events set forth in clause
(c) of this paragraph, so long as Series B Preferred Units remain outstanding
with the terms thereof materially unchanged (taking into account that, upon the
occurrence of such Series B Event, the Company may not be the surviving entity)
and the surviving entity is a Qualified Entity, the occurrence of any such
Series B Event shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting power of holders of the Series B
Preferred Units and (B) the authorization or creation of, or the increase in the
authorized or issued amount of, the Common Units or any other series of
Preferred Units, in either case which rank junior to or on parity with the
Series B Preferred Units (and any amendments to the Agreement to effect such
increase, creation or issuance), shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers or otherwise
require the vote or consent of the holders of the Series B Preferred Units.
For purposes of the provisions of this Section 3, each Series B
Preferred Unit shall have one (1) vote.
Notwithstanding anything to the contrary contained herein, the
foregoing voting provisions shall not apply if, prior to the time when the act
with respect to which such vote would otherwise be required shall be effected,
all outstanding Series B Preferred Units shall have been exchanged or redeemed.
Except as provided herein or in the Agreement, the holders of Series B
Preferred Units shall have no voting or consent rights or other rights to
participate in the management of the Company or to receive notices of meetings.
4. DISTRIBUTIONS.
(a) PAYMENT OF DISTRIBUTIONS. Each holder of Series B Preferred Units
will be entitled to receive, when, as and if declared by the Managing Member,
out of Net Operating Cash Flow and subject to the right to payment of the
holders of Preferred Units ranking senior to or on parity with the Series B
Preferred Units, cumulative preferential cash distributions per Series B
Preferred Unit at the rate per annum of 8.95% of the $250 base liquidation
preference thereof (or $5.59375 per quarter) (the "Series B Preferred Unit
Distribution"). Series B Preferred Unit Distributions with respect to any Series
B Preferred Units shall be cumulative, shall accrue from the date of the
issuance of such Series B Preferred Units and will be payable (i) quarterly
when, as and if authorized and declared by the Managing Member, in arrears, on
the 15th day of January, April, July and October of each year and (ii) in the
event of an exchange or redemption of Series B Preferred Units, on the exchange
or redemption date, as applicable (each a "Series B Preferred Unit Distribution
Payment Date"), commencing on the first of such payment dates to occur following
their original date of issuance. The amount of distribution per Series B
B-2
Preferred Unit accruing in each full quarterly distribution period shall be
computed by dividing the annual distribution rate by four. The amount of
distributions payable for the initial distribution period or any other period
shorter or longer than a full quarterly distribution period on the Series B
Preferred Units will be computed on the basis of twelve 30-day months and a
360-day year and the actual number of days elapsed in such a thirty (30) day
month. If any Series B Preferred Unit Distribution Payment Date is not a
Business Day, then payment of the Series B Preferred Unit Distribution to be
made on such date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of such delay), except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day (without any deduction),
in each case with the same force and effect as if made on such date. Series B
Preferred Unit Distributions will be made to the holders of Series B Preferred
Units of record on the relevant record dates, which will be fifteen (15) days
prior to the relevant Series B Preferred Unit Distribution Payment Date.
(b) DISTRIBUTIONS CUMULATIVE. Notwithstanding the foregoing, Series B
Preferred Unit Distributions will accrue whether or not the terms and provisions
of the Agreement or any other agreement of the Company at any time prohibit the
current payment of distributions, whether or not the Company has revenues,
whether or not there are funds legally available for the payment of such
distributions and whether or not such distributions are authorized. Accrued but
unpaid Series B Preferred Unit Distributions will accumulate as of the Series B
Preferred Unit Distribution Payment Date on which they first become payable. Any
accrued but unpaid Series B Preferred Unit Distributions that are not paid on or
prior to the date that they first become payable are hereinafter referred to as
"Series B Accumulated Preferred Unit Distributions". No interest or sum of money
in lieu of interest will be payable in respect of any Series B Accumulated
Preferred Unit Distributions. Series B Accumulated Preferred Unit Distributions
may be declared and paid at any time, without reference to any regular Series B
Preferred Unit Distribution Payment Date.
(c) PRIORITY AS TO DISTRIBUTIONS.
(i) So long as any Series B Preferred Units are outstanding,
no distribution of cash or other property shall be authorized,
declared, paid or set apart for payment on or with respect to any
Series B Parity Units, nor shall any cash or other property be set
aside for or applied to the purchase, redemption or other acquisition
for consideration of any Series B Preferred Units or any Series B
Parity Units, unless, in each case, all Series B Accumulated Preferred
Unit Distributions have been paid in full (or have been declared and a
sum sufficient for such payment has been set aside therefor) or when
Series B Accumulated Preferred Unit Distributions are not paid in full
or a sum sufficient for such payment is not set apart, as aforesaid,
all distributions declared upon Series B Preferred Units and all
distributions declared upon any other series or class or classes of
Series B Parity Units shall be declared ratably in proportion to the
respective amounts of distributions accumulated and unpaid on the
Series B Preferred Units and such Series B Parity Units.
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(ii) So long as any Series B Preferred Units are outstanding,
no distribution of cash or other property (other than distributions
paid solely in Series B Junior Units or options, warrants or other
rights to subscribe for or purchase Series B Junior Units) shall be
authorized, declared, paid or set apart for payment on or with respect
to any class or series of Series B Junior Units nor shall any cash or
other property be set aside for or applied to the purchase, redemption
or other acquisition for consideration of any Series B Junior Units
(other than consideration paid solely in Series B Junior Units or
options, warrants or other rights to subscribe for or purchase Series B
Junior Units) unless, in each case, all Series B Accumulated Preferred
Unit Distributions have been paid in full or set apart for payment.
(iii) So long as there are Series B Accumulated Preferred Unit
Distributions (and a sum sufficient for full payment of Series B
Accumulated Preferred Unit Distributions is not so set apart), all
future Series B Preferred Unit Distributions shall be authorized and
declared so that the amount of Series B Preferred Unit Distributions
per Series B Preferred Unit shall in all cases bear to each other the
same ratio that Series B Accumulated Preferred Unit Distributions per
Series B Preferred Unit bear to each other.
(iv) Notwithstanding anything to the contrary set forth
herein, distributions on Units held by the Managing Member ranking
junior to or on parity with the Series B Preferred Units may be made,
without preserving the priority of distributions described in Sections
4(c)(i) and (ii) hereof, but only to the extent such distributions are
required to preserve the REIT status of GGPI.
(d) NO FURTHER RIGHTS. Holders of Series B Preferred Units shall not be
entitled to any distributions, whether payable in cash, other property or
otherwise, in excess of the Series B Preferred Unit Distributions (and any
Series B Accumulated Preferred Unit Distributions) described herein.
5. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, before any payment or distribution of
the assets of the Company shall be made to or set apart for the holders of
Series B Junior Units, each holder of the Series B Preferred Units shall be
entitled to receive an amount equal to such holder's Capital Account in respect
of its Series B Preferred Units; but the holders of Series B Preferred Units
shall not be entitled to any further payment. If, upon any such liquidation,
dissolution or winding up of the Company, the assets of the Company, or proceeds
thereof, distributable to the holders of Series B Preferred Units, shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other Series B Parity Units, then such assets, or the proceeds
thereof, shall be distributed among the holders of the Series B Preferred Units
and the holders of any such other Series B Parity Units ratably in accordance
with the respective amounts that would be payable on such Series B Preferred
Units and any such other Series B Parity Units if all amounts payable thereon
were paid in full. For the purposes of this Section 5, none of (i) a
consolidation or merger of the Company with or into one or more entities, (ii) a
merger of an entity with or into the Company, (iii) a statutory share exchange
by the Company or
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(iv) a sale, lease or conveyance of all or substantially all of the Company's
assets shall be deemed to be a liquidation, dissolution or winding up, voluntary
or involuntary, of the Company.
(b) Subject to the rights of the holders of Series B Parity Units,
after payment shall have been made in full to the holders of the Series B
Preferred Units as provided in this Section, any series or class or classes of
Series B Junior Units shall, subject to any respective terms and provisions
applying thereto, be entitled to receive any and all assets remaining to be paid
or distributed, and the holders of the Series B Preferred Units shall not be
entitled to share therein.
6. TRANSFER BY HOLDERS OF SERIES B PREFERRED UNITS. Notwithstanding
anything to the contrary contained herein, a holder of Series B Preferred Units
may sell, assign or otherwise transfer all or part of its Series B Preferred
Units without the consent of the Managing Member; provided, however, that no
such sale, conveyance or other transfer may be made unless the requirements of
Section 8.3 of the Agreement (other than Section 8.3(b) thereof) and the second
and fourth sentences of Section 8.2 of the Agreement are satisfied with respect
to such sale, conveyance or other transfer.
7. EXCHANGE RIGHTS.
(a) RIGHT TO EXCHANGE.
(i) Series B Preferred Units will be exchangeable in whole but
not in part with GGPI at any time on or after April 17, 2012, at the
option of the holders of at least fifty-one percent (51%) of all
outstanding Series B Preferred Units, for authorized but previously
unissued 8.95% Cumulative Redeemable Preferred Stock, Series G, par
value $100 per share, of GGPI ("Series G REIT Preferred Shares") (and
in the event such option is exercised, such exercise and the Series B
Exchange Notice given in connection therewith shall be deemed to apply
to all issued and outstanding Series B Preferred Units and the holders
thereof). Each holder of Series B Preferred Units will be entitled to
receive for each Series B Preferred Unit held by it a number of Series
G REIT Preferred Shares equal to the quotient of the Capital Account
per Series B Preferred Unit of such holder of Series B Preferred Units
(adjusted to reflect fair market value through the exchange date)
divided by $1,000 (the "Series B Preferred Exchange Rate"). This
exchange right is only exercisable if, at the time of exercise, the
fair market value of the Company's assets exceeds the Company's
liabilities (and any preferred security claims senior to the Series B
Preferred Units) by an amount at least equal to twice the sum of (1)
the aggregate Capital Accounts of all holders of Series B Preferred
Units plus (2) the aggregate Capital Accounts of all holders of Series
B Parity Units.
(ii) The Series B Preferred Units will be exchangeable with
GGPI at any time on or after April 17, 2007, in whole but not in part,
at the option of the holders of at least fifty-one percent (51%) of all
outstanding Series B Preferred Units, for authorized but previously
unissued Common Shares if at any time Series B Accumulated Preferred
Unit Distributions exist with respect to the Series B Preferred Units
in an amount equal to the amount that should have been distributed in
six (6) prior quarterly distribution periods, whether or not
consecutive, at the following exchange rate: for each Series B
Preferred
B-5
Unit, a number of Common Shares equal to the quotient of (x) the sum of
$250 and the Series B Accumulated Preferred Unit Distributions with
respect thereto (but only up to an amount equal to the amount
distributable for six (6) quarterly distribution periods) divided by
(y) $54.26 (as adjusted to reflect any splits, combinations or the like
after the date hereof) (the "Series B Common Exchange Rate") (and in
the event such option is exercised, such exercise and the Series B
Exchange Notice given in connection therewith shall be deemed to apply
to all issued and outstanding Series B Preferred Units and the holders
thereof).
(iii) [INTENTIONALLY OMITTED].
(iv) Series B Preferred Units will be exchangeable with GGPI
at any time in whole but not in part, at the option of a holder
thereof, for authorized but previously unissued Common Shares at the
Series B Common Exchange Rate if such holder concludes, based on
results or projected results, that there exists (in the reasonable
judgment of such holder as confirmed by an opinion of nationally
recognized independent counsel or accounting firm) an imminent and
substantial risk that such holder's interest in the Company represents
or will represent more than the 19.95% Limit (and in the event such
option is exercised, such exercise and the Series B Exchange Notice
given in connection therewith shall only apply to all issued and
outstanding Series B Preferred Units of the exercising holder).
(v) Notwithstanding anything to the contrary set forth in
Sections 7(a)(i) through (iv), if a Series B Exchange Notice has been
delivered to the Managing Member and GGPI, then the Managing Member or
GGPI may at its option, within ten (10) Business Days after receipt of
the Series B Exchange Notice, elect to purchase or cause the Company to
redeem all or a portion of the outstanding Series B Preferred Units
(for which Series B Exchange Notices have been delivered or are deemed
to have been delivered) for cash or Common Shares, in each case at the
Series B Exchange Price per Series B Preferred Unit as of the date the
Series B Exchange Notice is sent. The "Series B Exchange Price" of an
outstanding Series B Preferred Unit shall equal: (A) in the event that
the holders of the Series B Preferred Units are exchanging such Unit
for Common Shares, the product of the number of Common Shares issued in
respect of such Preferred Unit multiplied by the Current Per Share
Market Price, or (B) in the event that the holders of the Series B
Preferred Units are exchanging such Unit for Series G REIT Preferred
Shares, the pro rata portion of the Capital Account (as adjusted and
booked up or down immediately prior to such purchase or redemption)
allocable to that Series B Preferred Unit. If such election is made
with respect to fewer than all of the outstanding Series B Preferred
Units, the number of Series B Preferred Units held by each holder of
Series B Preferred Units to be redeemed or purchased shall equal such
holder's pro rata share (based on the percentage of the aggregate
number of outstanding Series B Preferred Units that the total number of
Series B Preferred Units held by such holder of Series B Preferred
Units represents) of the aggregate number of Series B Preferred Units
being redeemed. An election by the Managing Member or GGPI under this
Section shall be effected by delivering notice thereof to the holders
identified in the Series B Exchange Notice.
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(vi) If an exchange of all Series B Preferred Units pursuant
to Sections 7(a)(i) through (iv) would violate the provisions on
ownership limitation of GGPI set forth in its Charter and such
ownership limitation is not waived by GGPI, each holder of Series B
Preferred Units shall be entitled to exchange that number of Series B
Preferred Units which would comply with the provisions on the ownership
limitation of GGPI and any Series B Preferred Units not so exchanged
(the "Series B Excess Units") shall be redeemed by the Company for cash
in an amount determined in the manner set forth in subsection (v).
(b) PROCEDURE FOR EXCHANGE AND/OR REDEMPTION OF SERIES B PREFERRED
UNITS.
(i) Any exchange right shall be exercised pursuant to a
written notice of exchange (the "Series B Exchange Notice") delivered
to the Managing Member and GGPI by holders of Series B Preferred Units
owning at least fifty-one percent (51%) of the outstanding Series B
Preferred Units (or by a holder of Series B Preferred Units in the case
of an exchange pursuant to Section 7(a)(iv) hereof) by fax and
certified mail postage prepaid. The Series B Exchange Notice shall
specify the name or names of the holders of Series B Preferred Units
that are exercising (or are deemed to have exercised) the exchange
rights and the number of Series B Preferred Units as to which such
rights are being exercised (or are deemed to have been exercised). The
closing of the exchange or redemption pursuant to this Section 7 shall
occur within fifteen (15) Business Days following the giving of the
Series B Exchange Notice. At the closing, the exchanging holder(s)
shall deliver such instruments of transfer and other documents as GGPI
or the Managing Member may reasonably request and GGPI and/or the
Company shall deliver to the exchanging holder certificates
representing the Series G REIT Preferred Shares or Common Shares and/or
the cash redemption price. Notwithstanding anything to the contrary
contained herein, any and all Series B Preferred Units to be exchanged
for Common Shares or Series G REIT Preferred Shares pursuant to this
Section shall be so exchanged in a single transaction at one time. As a
condition to exchange, each holder of Series B Preferred Units shall
make such customary representations as may be reasonably necessary for
the Managing Member or GGPI to establish that the issuance of Common
Shares or Series G REIT Preferred Shares pursuant to the exchange shall
not be required to be registered under the Securities Act of 1933, as
amended, or any applicable state securities laws. Any Common Shares or
Series G REIT Preferred Shares issued pursuant to this Section shall be
delivered as shares which are duly authorized, validly issued, fully
paid and nonassessable, free of any pledge, lien, encumbrance or
restriction other than those provided in the Charter or the by-laws of
GGPI, the Securities Act and relevant state securities or blue sky laws
and any Series B Preferred Units as to which the exchange right has
been exercised shall be free of any pledge, lien, encumbrance or
restriction other than those provided in the Agreement, the Securities
Act and relevant state securities or blue sky laws (and the parties
shall make representations and warranties to the other to such effect).
The certificates representing the Common Shares or Series G REIT
Preferred Shares issued upon exchange of the Series B Preferred Units
shall, in addition to any legend required by the Charter, contain the
following legend:
B-7
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR (B) IF THE
CORPORATION HAS BEEN FURNISHED WITH A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER OF THE SHARES
REPRESENTED HEREBY, OR OTHER EVIDENCE SATISFACTORY TO
THE CORPORATION, THAT SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION
5 OF THE ACT AND THE RULES AND REGULATIONS
THEREUNDER.
Notwithstanding anything to the contrary contained herein and
at the request of a majority of the holders of Series B Preferred
Shares that have exercised (or are deemed to have exercised) the
exchange right pursuant to this Section 7, GGPI shall cause depositary
shares to be issued to such holders upon the closing of the exchange in
lieu of Series G REIT Preferred Shares, each depositary share (1) to
have a face amount of $25 (or such other amount as may be specified by
holders of a majority of the Series B Preferred Units prior to any such
exchange) and (2) to represent a fraction of a Series G REIT Preferred
Share the denominator of which is $1,000 and the numerator of which is
the face amount of such depositary share. At the request of holders of
a majority of the Series B Preferred Units, the Company shall take such
actions as are necessary to provide for such depositary shares to be
issued immediately upon exchange of Series B Preferred Units for Series
G REIT Preferred Shares.
(ii) In the event of an exchange of Series B Preferred Units,
an amount equal to the Series B Accumulated Preferred Unit
Distributions to the date of exchange on any Series B Preferred Units
tendered for exchange shall continue to accrue on such Series B
Preferred Units, which remain outstanding following such exchange, with
the Managing Member as the holder of such Series B Preferred Units
(GGPI having contributed the Series B Preferred Units to the Managing
Member). Fractional Series G REIT Preferred Shares or Common Shares are
not to be issued upon exchange but, in lieu thereof, the Managing
Member will pay a cash adjustment based upon either (i) the fair market
value of the Series G REIT Preferred Shares on the day prior to the
exchange date as determined in good faith by the Board of Directors of
the Managing Member or (ii) the Current Per Share Market Price of the
Common Shares as of the date immediately prior to the exchange date, as
the case may be.
(c) ADJUSTMENT OF EXCHANGE PRICE. In case GGPI shall be a party to any
transaction (including, without limitation, a merger, consolidation, statutory
share exchange, tender offer for all or substantially all of GGPI's Common
Shares or sale of all or substantially all of GGPI's assets), in each case as a
result of which the Series G REIT Preferred Shares or Common Shares will be
converted into the right to receive shares of capital stock, other securities or
other
B-8
property (including cash or any combination thereof), each Series B Preferred
Unit will thereafter be exchangeable into the kind and amount of shares of
capital stock and other securities and property receivable (including cash or
any combination thereof) upon the consummation of such transaction by a holder
of that number of Series G REIT Preferred Shares or Common Shares or fraction
thereof into which one (1) Series B Preferred Unit was exchangeable immediately
prior to such transaction. GGPI may not become a party to any such transaction
unless the terms thereof are consistent with the foregoing.
(d) NO OTHER EXCHANGE RIGHTS. The Series B Preferred Units are not
convertible into or redeemable or exchangeable for any other property or
securities of GGPI, the Managing Member, the Company or any other Person at the
option of any holder of Series B Preferred Units except as expressly provided in
this Section 7.
8. REDEMPTION.
(a) The Series B Preferred Units shall not be redeemable prior to April
17, 2007. On and after April 17, 2007, the Managing Member may, at its option,
cause the Company to redeem the Series B Preferred Units in whole or in part, as
set forth herein, subject to the provisions described below, at a redemption
price, payable in cash, in an amount equal to $250 per Series B Preferred Unit
being redeemed (the "Series B Redemption Price"). Upon any such redemption, the
Company shall also pay any accumulated and unpaid distributions owing in respect
of the Series B Preferred Units being redeemed.
(b) Such Series B Preferred Units as are not held by the Managing
Member may be redeemed by the Company on or after April 17, 2007, in whole or in
part, at any time or from time to time, upon not less than 30 nor more than 60
days' written notice. If fewer than all of the outstanding Series B Preferred
Units that are not held by the Managing Member are to be redeemed, the Series B
Preferred Units to be redeemed from each holder (other than the Managing Member)
shall be selected pro rata (as nearly as practicable without creating fractional
units). Any notice of redemption delivered pursuant to this Section 8 will be
mailed by the Company, by certified mail, postage prepaid, not less than 30 nor
more than 60 days prior to the date upon which such redemption is to occur (the
"Series B Third Party Redemption Date"), addressed to each holder of record of
the Series B Preferred Units at their respective addresses as they appear on the
records of the Company. No failure to give or defect in such notice shall affect
the validity of the proceedings for the redemption of any Series B Preferred
Units. In addition to any information required by law, each such notice shall
state: (i) the Series B Third Party Redemption Date, (ii) the amount payable per
Series B Preferred Unit upon redemption, including the Series B Redemption Price
and any amount payable pursuant to Section 8(d) hereof, (iii) the aggregate
number of Series B Preferred Units to be redeemed and, if fewer than all of the
outstanding Series B Preferred Units are to be redeemed, the number of Series B
Preferred Units to be redeemed held by such holder, which number shall equal
such holder's pro rata share (based on the percentage of the aggregate number of
outstanding Series B Preferred Units not held by the Managing Member that the
total number of Series B Preferred Units held by such holder represents and
determined as nearly as practicable without creating fractional interests) of
the aggregate number of Series B Preferred Units to be redeemed, (iv) the place
or places where the instrument of transfer is to be surrendered for payment of
the amount payable
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upon redemption and (v) that payment of such amount will be made upon
presentation and surrender of the instrument of transfer in the form provided by
the Managing Member. If the Company gives a notice of redemption in respect of
Series B Preferred Units pursuant to this Section 8, then, by 12:00 noon, New
York City time, on the Series B Third Party Redemption Date, the Company will
deposit irrevocably in trust for the benefit of the holders of Series B
Preferred Units being redeemed funds sufficient to pay the applicable amount
payable with respect to such Series B Preferred Units and will give irrevocable
instructions and authority to pay such amount to the holders of the Series B
Preferred Units upon surrender of the Series B Preferred Units and such
instruments of transfer by such holders at the place designated in the notice of
redemption. Any Series B Preferred Units surrendered shall be free and clear of
all Liens and the holders thereof shall make representations and warranties to
such effect.
(c) Such Series B Preferred Units as may be held by the Managing Member
may be redeemed, in whole or in part, at the option of the Managing Member, at
any time, upon payment by the Company to the Managing Member of the Series B
Redemption Price and any amount payable pursuant to Section 8(d) hereof with
respect to such Series B Preferred Units; provided that GGPI shall redeem an
equivalent number of Series G REIT Preferred Shares to the extent that there are
Series G REIT Preferred Shares issued and outstanding. Such redemption of Series
B Preferred Units shall occur substantially concurrently with the redemption by
GGPI of such Series G REIT Preferred Shares (such date is herein referred to
collectively with the Series B Third Party Redemption Date as the "Series B
Redemption Date").
(d) Upon any redemption of Series B Preferred Units, the Company shall
pay any accumulated and unpaid distributions for any distribution period, or any
other period shorter than a full distribution period, ending on or prior to the
Series B Redemption Date. On and after the Series B Redemption Date,
distributions will cease to accumulate on the Series B Preferred Units called
for redemption, unless the Company defaults in payment therefor. If any date
fixed for redemption of Series B Preferred Units is not a Business Day, then
payment of the Series B Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption. If payment of the Series B Redemption Price
is improperly withheld or refused and not paid by the Company, distributions on
such Series B Preferred Units will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating the
applicable Series B Redemption Price. Except as provided above, the Company
shall make no payment or allowance for unpaid distributions, whether or not in
arrears, on Series B Preferred Units called for redemption under this Section 8.
(e) If full cumulative distributions on the Series B Preferred Units
and any other Parity Units for distribution periods ending on or prior to the
date of redemption have not been paid or declared and set apart for payment, the
Series B Preferred Units may not be redeemed in part and the Company may not
purchase, redeem or otherwise acquire Series B Preferred Units or any Series B
Parity Units other than in exchange for Series B Junior Units.
B-10
(f) As promptly as practicable after the surrender of any such Series B
Preferred Units so redeemed, such Series B Preferred Units shall be exchanged
for the amount of cash (without interest thereon) payable therefor pursuant to
Section 8. If fewer than all the Series B Preferred Units represented by any
physical certificate are redeemed, then the Company shall issue new certificates
representing the unredeemed Series B Preferred Units without cost to the holder
thereof.
9. OTHER MATTERS. As long as any of the Series B Preferred Units are
outstanding, the Company shall comply with the following:
(a) DIVIDENDS. The Company shall not make any distributions on the
Common Units or any other Series B Junior Units or redeem any such Units unless
at the time such distribution or redemption is made, and after giving effect to
such distribution or redemption, each of the following conditions shall be met:
(i) Consolidated Tangible Net Worth to Reserve Amount. The
ratio of the Consolidated Tangible Net Worth to the Reserve Amount is
at least 2.0 to 1.0;
(ii) Adjusted Consolidated Tangible Net Worth. The ratio of
the Adjusted Consolidated Tangible Net Worth to the sum of (i) the
Capital Accounts of all Preferred Units plus (ii) the amount of accrued
Preferred Unit distributions (whether or not declared or paid) for
which allocations have not as yet been reflected in the Capital
Accounts is at least 1.0 to 1.0;
(iii) Loan to Value Ratio. The ratio of (x) the Consolidated
Outstanding Indebtedness to (y) the Consolidated Tangible Net Worth is
no greater than 0.75 to 1.0;
provided, however, that the foregoing shall not prohibit the Company from making
distributions (including distributions in redemption of Common Units) to the
holders of Common Units in any calendar year in an aggregate amount no greater
than the minimum amount a real estate investment trust would be required to
distribute under Section 857(a)(1)(A) of the Code for such calendar year (in
order to avoid being taxed as a Subchapter C corporation), if such real estate
investment trust owned all of the Common Units and had no income from any source
other than the Common Units.
(b) AFFILIATE TRANSACTIONS.
(i) Except as expressly provided elsewhere in the Agreement,
the Company shall not, nor will it permit any of its Subsidiaries to,
enter into any transaction (including, without limitation, the purchase
or sale of any property or service) with, or make any payment or
transfer to, any Affiliate of the Company except in the ordinary course
of business and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Company or such Subsidiary than the
Company or such Subsidiary would obtain in a comparable arms-length
transaction (but this paragraph shall not restrict the making of
distributions by the Company).
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(ii) The Company shall not, and shall not permit any of its
Subsidiaries or Investment Affiliates to, create, incur, assume or
permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect thereof, pursuant
to any arrangement relating to Parent Indebtedness, except for Liens
arising out of any arrangement referred to on Schedule 3.aa to the
Purchase Agreement (which arrangements are hereby approved) but only to
the extent that the Parent Indebtedness outstanding at any time
relating to such arrangement does not exceed the maximum amount of
Parent Indebtedness that may be incurred in connection with such
arrangement in accordance with the terms thereof as of April 17, 2002
(but nothing contained herein shall prohibit the extension of such
arrangements in accordance with the existing extension options relating
thereto).
(iii) The Company shall not, and shall not permit any of its
Subsidiaries or Investment Affiliates to, incur, assume or permit to
exist any Guarantee of Parent Indebtedness by any member of the
Consolidated Group or any Investment Affiliate other than Guarantees
arising out of any arrangement referred to on Schedule 3.aa to the
Purchase Agreement (which arrangements are hereby approved) but only to
the extent that the Parent Indebtedness outstanding at any time
relating to such arrangement does not exceed the maximum amount of
Parent Indebtedness that may be incurred in connection with such
arrangement in accordance with the terms thereof as of April 17, 2002
(but nothing contained herein shall prohibit the extension of such
arrangements in accordance with the existing extension options relating
thereto).
(iv) With respect to any JV, (i) the Company shall not, and
shall not permit any of its Subsidiaries or Investment Affiliates
(other than such JV) to, incur, assume or permit to exist any Guarantee
of JV Indebtedness by any member of the Consolidated Group or any
Investment Affiliate (other than such JV) other than a Guarantee of no
more than the Company's pro rata portion (based on the Company's direct
or indirect percentage ownership interest in such JV) of such JV
Indebtedness; (ii) the Company shall not, and shall not permit any of
its Subsidiaries or Investment Affiliates (other than such JV) to,
incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect thereof,
pursuant to any arrangement relating to JV Indebtedness; (iii) the
Company shall not permit such JV to create, incur, assume or permit to
exist any Lien on any property or asset now owned or hereafter acquired
by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect thereof, pursuant to any arrangement
relating to Indebtedness of another Entity (other than a member of the
Consolidated Group or an Investment Affiliate, in either case that is
not another JV); and (iv) the Company shall not permit such JV to
create, incur or assume any Guaranty pursuant to any arrangement
relating to Indebtedness of another Entity (other than a member of the
Consolidated Group or an Investment Affiliate, in either case that is
not another JV).
B-12
(c) CONSOLIDATED TANGIBLE NET WORTH. The Company shall provide the
holders of Series B Preferred Units prompt written notice in the event
Consolidated Tangible Net Worth is or is reasonably likely to be less than $600
million as of the last day of any quarter.
(d) ASSET TRANSFER. Without the prior written consent of the holders of
at least fifty-one percent (51%) of Series B Preferred Units, the Company shall
not, and shall not permit any of its Subsidiaries to sell, convey, transfer or
otherwise dispose of any Property (i) to any Affiliate of the Company (other
than Subsidiaries of the Company) or (ii) to any person that is not an Affiliate
of the Company, unless simultaneously therewith, the Company or such Subsidiary
acquires an Approved Replacement Property or the following requirements are met:
(i) the net income of the Company for the most recently
completed twelve months, calculated in accordance with GAAP on a pro
forma basis as though such Property had been sold, transferred,
conveyed or otherwise disposed of prior to the beginning of such
period, would be at least $90 million; and
(ii) after giving effect to any such sale, conveyance,
transfer or other disposition, the Consolidated Tangible Net Worth
would not be less than $1 billion; and
(iii) after giving effect to any such sale, conveyance,
transfer or other disposition, the interest of no holder of Series B
Preferred Units would represent more than 17.5% of the total profits or
capital interests in the Company immediately following such sale,
conveyance, transfer of other disposition (determined in accordance
with Treasury Regulation Section 1.731-2(e)(4)).
The Company shall give the holders of the Series B Preferred Units notice of any
such sale, transfer or other disposition.
Notwithstanding anything to the contrary contained herein, the
provisions of this Section 9(d) shall not apply to (i) the conveyance of any
Property or any part thereof to any Person in connection with a foreclosure or
eminent domain proceeding or deed in lieu thereof, (ii) the sale, exchange or
other disposition of all or substantially all of the properties of the Company
and its Subsidiaries, (iii) the grant of an easement or right-of-way, (iv) the
lease of the Properties in the ordinary course of business, (v) the sale to any
department store or retailer of the portion of the property occupied or proposed
to be occupied by it (including parking area and other surrounding area), (vi)
the mortgage of any Property or (vii) the other sale, conveyance, transfer or
other disposal of a portion of a Property or interests therein in the ordinary
course of business, and no notice need be given to the holders of the Series B
Preferred Units in connection with a transaction described in this sentence.
(e) NET OPERATING INCOME. The Company shall provide the holders of
Series B Preferred Units prompt written notice in the event aggregate Net
Operating Income for any two consecutive calendar quarters from all properties
owned in fee simple or ground leased by the Company, a Subsidiary, or an
Investment Affiliate is, or is reasonably likely to be, less than 2.1 times the
portion of the Consolidated Interest Expense for such two fiscal quarters
attributable to debt, as of the last day of any fiscal quarter.
B-13
(f) FIXED CHARGE COVERAGE. The Company shall provide the holders of
Series B Preferred Units prompt written notice in the event the ratio of (i)
aggregate Net Operating Income for any two consecutive calendar quarters from
all properties owned in fee simple or ground leased by the Company, a Subsidiary
or an Investment Affiliate, to (ii) Fixed Charges determined on a consolidated
basis for such two calendar-quarter period, is or is reasonably likely to be,
less than 1.8 to 1 at the end of such two calendar-quarter period.
(g) EFFECT OF BREACH. In the event of any material breach of any of the
covenants set forth in this Section 9, the holders of Series B Preferred Units
shall have all rights at law. The occurrence of any matter for which notice is
required to be given in accordance with Section 9(c), (e) or (f) shall not in
and of itself constitute a breach hereof; however, the failure to provide
written notice in accordance with each such section is a breach of this
Agreement.
B-14