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EXHIBIT 10.51
LIMITED LIABILITY COMPANY AGREEMENT
OF
NORTHEAST OFFICE VENTURE, LIMITED LIABILITY COMPANY
A DELAWARE LIMITED LIABILITY COMPANY
AMONG
THE GEORGETOWN COMPANY,
LIMITED OVAL OFFICE I, INC.
AND
M/I SCHOTTENSTEIN HOMES, INC.
DATED, EXECUTED AND DELIVERED: ________ __, 1995
TO BE EFFECTIVE: SEPTEMBER 5, 1995
THE INTERESTS CREATED BY THIS AGREEMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR WITH THE SECURITIES AUTHORITIES OF ANY STATE
UNDER ANY STATE SECURITIES LAWS. AS A CONSEQUENCE, THE INTERESTS MAY NOT BE
SOLD, ASSIGNED, CONVEYED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED BY A
HOLDER THEREOF EXCEPT: (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
REGISTERING THE INTERESTS UNDER THE SECURITIES ACT AND/OR UNDER APPLICABLE STATE
SECURITIES LAWS, OR (2) PURSUANT TO AN OPINION OF COUNSEL WHICH HAS BEEN
OBTAINED BY SUCH HOLDER AND WHICH IS SATISFACTORY TO THE MANAGER, OR PURSUANT TO
SUCH OTHER EVIDENCE WHICH HAS BEEN OBTAINED BY THE HOLDER AND WHICH IS
SATISFACTORY TO THE MANAGER, THAT SUCH REGISTRATION UNDER THE SECURITIES ACT
AND/OR UNDER APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED FOR SUCH HOLDER TO
LAWFULLY EFFECT SUCH SUBSEQUENT SALE, ASSIGNMENT, CONVEYANCE, PLEDGE,
HYPOTHECATION OR OTHER TRANSFER.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions...............................................................................1
ARTICLE II
FORMATION AND NAME; BUSINESS OFFICE; REGISTERED OFFICE AND REGISTERED AGENT;
PURPOSE; PARTNERSHIP STATUS; POWERS; AND TERM
2.1 Formation and Name........................................................................10
2.2 Business Office...........................................................................11
2.3 Registered Office and Registered Agent....................................................11
2.4 Purpose...................................................................................11
2.5 Partnership Status........................................................................11
2.6 Powers....................................................................................11
2.7 Term......................................................................................12
ARTICLE III
MEMBERS AND CAPITAL
3.1 Members...................................................................................12
3.2 No Priority Among Members.................................................................13
3.3 No Interest on Capital Contributions; No Withdrawal of Capital............................13
3.4 Capital Accounts..........................................................................13
3.5 No Requirement to Restore Deficit in Capital Account......................................13
3.6 Subsequent Contributions..................................................................13
3.7 Loans by Members..........................................................................17
3.8 Representations of Members................................................................17
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1 Allocation of Operating Profits and Operating Losses......................................18
4.2 Allocations of Profits and Losses from a Capital Transaction..............................18
4.3 Special Allocations and Other Provisions Relating to Allocations..........................18
4.4 Distributions of Net Cash Receipts........................................................23
4.5 Distributions of Proceeds From Capital Transactions When Company Not Liquidated...........24
4.6 Distributions of Liquidation Proceeds Upon Liquidation....................................24
4.7 Distributions in Kind on Liquidation......................................................25
4.8 Certain Provisions of the Act Superseded..................................................25
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ARTICLE V
POWER, AUTHORITY, RIGHTS, DUTIES AND OBLIGATIONS OF THE MANAGER
5.1 Management of Company.....................................................................26
5.2 Construction of the Improvements..........................................................26
5.3 The Lease.................................................................................28
5.4 Operating and Capital Improvement Budgets.................................................29
5.5 Construction Loan and Permanent Loan......................................................31
5.6 Specific Rights and Powers of Manager.....................................................32
5.7 Agreements; Laws and Permits..............................................................33
5.8 Approval of Members.......................................................................33
5.9 Compensation of the Manager...............................................................35
5.10 Other Activities of Members..............................................................35
5.11 Indemnification..........................................................................36
5.12 Tax Matters Member.......................................................................36
5.13 Property Management Agent................................................................36
5.14 Certain Provisions of the Act Superseded.................................................37
ARTICLE VI
RIGHTS, DUTIES AND OBLIGATIONS OF MEMBERS
6.1 Rights of Members Other Than the Manager to Participate in the Management or
Control of the Business...................................................................37
6.2 Limited Liability of Members..............................................................37
6.3 Meetings..................................................................................37
6.4 Consent of the Members....................................................................37
ARTICLE VII
TRANSFERS OF INTERESTS OR RETIREMENT; FIRST OFFER PROVISIONS; PURCHASE RIGHTS UPON DEFAULT;
CONTINUATION AFTER RETIREMENT OF MEMBERS
7.1 Limitations on Transfers and Retirement; Certain Permitted Transfers......................38
7.2 Right of First Offer......................................................................39
7.3 Purchase Rights Upon Default..............................................................43
7.4 Additional Restrictions on Assignments or Transfers.......................................44
7.5 Requirements for Substitution.............................................................45
7.6 Obligations and Rights of Transferees.....................................................45
7.7 Distributions and Allocations in Respect of Transferred Percentage Interests..............46
7.8 Continuation After Retirement of Member..................................................46
7.9 Restrictions Reasonable...................................................................46
7.10 Certain Provisions of the Act Superseded.................................................47
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ARTICLE VIII
REMOVAL OF MANAGER; ADMISSION OF SUBSTITUTE MANAGER
8.1 Removal of Manager........................................................................47
8.2 Admission of Substitute Manager...........................................................47
8.3 Manager Upon Purchase of Certain Percentage Interests.....................................47
ARTICLE IX
PROCEDURE ON DISSOLUTION
9.1 Liquidation...............................................................................48
9.2 Operations During Liquidation.............................................................48
9.3 Time for Liquidation......................................................................48
9.4 Manager Not Liable for Return of Capital Contributions....................................48
9.5 Termination...............................................................................48
ARTICLE X
BOOKS AND RECORDS; BANK ACCOUNTS
10.1 Maintenance of Books and Accounting Method...............................................49
10.2 Fiscal Year..............................................................................49
10.3 Reports to the Members...................................................................49
10.4 Inspection by Members....................................................................50
10.5 Banking..................................................................................50
10.6 Tax Elections; Special Basis Adjustments.................................................50
10.7 Cost Segregation Analysis................................................................50
ARTICLE XI
AMENDMENTS
11.1 Unanimous Consent of the Members.........................................................51
ARTICLE XII
GENERAL PROVISIONS
12.1 No Third Party Beneficiaries.............................................................51
12.2 Non-Waiver...............................................................................51
12.3 Additional Documents and Instruments.....................................................51
12.4 Severability.............................................................................51
12.5 Notices and Consents.....................................................................52
12.6 Entire Agreement.........................................................................53
12.7 Provisions Binding.......................................................................53
12.8 Captions.................................................................................53
12.9 Definitions..............................................................................53
12.10 Counterparts............................................................................53
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12.11 Word Meanings...........................................................................53
12.12 Applicable Law..........................................................................54
12.13 Choice of Venue and Consent to Jurisdiction and Venue...................................54
SCHEDULE A--Members, Capital Contributions and Interests SCHEDULE B--Legal
Description of the Land SCHEDULE C--Form of Certificate of Formation SCHEDULE
D--Location of Certain Real Property in Proximity to the Land SCHEDULE
E--Preliminary Budget
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LIMITED LIABILITY COMPANY AGREEMENT OF
NORTHEAST OFFICE VENTURE, LIMITED LIABILITY COMPANY
THIS LIMITED LIABILITY COMPANY AGREEMENT OF NORTHEAST OFFICE VENTURE,
LIMITED LIABILITY COMPANY (this "Agreement"), dated,
executed and delivered as of the ___ day of ________, 1995, to be effective
September 5, 1995, by and among The Georgetown Company, a New York general
partnership ("Georgetown"), Limited Oval Office I, Inc., a Delaware corporation
("Limited"), and M/I Schottenstein Homes, Inc., an Ohio corporation ("M/I").
W I T N E S S E T H:
WHEREAS, the Members desire to enter into this Agreement, to cause a
certificate of formation to be filed with the Secretary of State of the State of
Delaware to form a limited liability company under the laws of the State of
Delaware and to reflect certain agreements among themselves;
WHEREAS, this Agreement shall constitute the "limited liability company
agreement" of the Company within the meaning of that term as used in the Act;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
ACCOUNTANTS means such firm of independent certified public accountants
as may be unanimously selected from time to time by the Members.
ACT means the Delaware Limited Liability Company Act, Delaware Code
Title 6, Sections 18-101, et seq., as the same may be amended from time to time,
or the corresponding provisions of any subsequent Delaware law governing limited
liability companies.
ADJUSTED CAPITAL ACCOUNT DEFICIT means the deficit balance, if any, in a
Member's Capital Account at the time in question, after (i) reducing the amount
of such deficit by the amount, if any, of such Member's deficit restoration
obligation and by the amount, if any, that such Member is deemed to be obligated
to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Allocation Regulations, and (ii) increasing the amount of
such deficit by the amount, if any, of the items described in paragraphs (4),
(5) and (6) of Section 1.704-1(b)(2)(ii)(d) of the Allocation Regulations. The
determination of a Member's Adjusted Capital Account Deficit is
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made for purposes of Section 1.704-1(b)(2)(ii)(d) of the Allocation Regulations
and shall be made consistently therewith.
AFFILIATE, in reference to a Person, means (i) any other Person directly
or indirectly controlling, controlled by or under common control with such
Person, (ii) any other Person owning or controlling ten percent (10%) or more of
the outstanding voting securities of such Person, (iii) any officer, director,
member, manager or partner of such Person and (iv) if such Person is an officer,
director, member, manager or partner of any Entity, any Entity for which such
Person acts in any such capacity.
AGREEMENT means this Limited Liability Company Agreement, as the same
may be modified, amended, supplemented and/or restated from time to time in
accordance with its terms and applicable law.
ALLOCATION REGULATIONS means the Income Tax Regulations promulgated
under Code Section 704(b) (regarding partners' distributive shares of
partnership tax items), as currently in effect, and as modified and clarified by
amendment, successor regulation, ruling, court decision or other Income Tax
Regulation relating to partners' distributive shares.
APPRAISED VALUE has the meaning specified in Section 7.3(b).
BANKRUPTCY, in reference to a Member, means that event and date when:
(i) such Member makes an assignment for the benefit of creditors; (ii) such
Member files a voluntary petition in bankruptcy; (iii) such Member is
adjudicated a bankrupt or insolvent; (iv) such Member files a petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law, or
regulation; (v) such Member files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against it in
any proceeding of the type referred to in clause (iv); (vi) such Member seeks,
consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of such Member or of all or any substantial part of its property;
(vii) ninety (90) days or more have elapsed after the commencement of any
proceeding against such Member seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law,
or regulation, if the proceeding has not been dismissed prior thereto; (viii)
ninety (90) days or more have elapsed after the appointment without its consent
or acquiescence of a trustee, receiver, or liquidator of such Member or of all
or any substantial part of its property, if such appointment has not been
vacated or stayed prior thereto; or (ix) ninety (90) days have elapsed after the
expiration of any such stay, if such appointment has not been vacated.
BASE AMOUNT has the meaning specified in Section 3.6(b)(iii).
BUILDING means the building to be constructed by the Company on the Land
as part of the Improvements and the Tenant Improvements, to be leased to M/I
pursuant to the Lease, as more particularly provided in this Agreement, together
with all alterations and additions thereto and all restorations and replacements
thereof.
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CAPITAL ACCOUNT has the meaning specified in Section 3.4.
CAPITAL CONTRIBUTION means the total amount of cash and/or property
contributed or agreed to be contributed to the Company by each Member as shown
in Schedule A which is attached hereto and made a part hereof, as such Schedule
A may be modified, supplemented or amended from time to time in accordance with
this Agreement and applicable law, exclusive of any interest paid with respect
to deferred installments of such amounts, plus any other contributions to the
capital of the Company made by a Member pursuant to the terms of this Agreement,
in respect of the interest of such Member in the Company. Any reference in this
Agreement to the Capital Contribution of a Member shall include a Capital
Contribution previously made by any predecessor Member with respect to the
Company interest owned by such Member.
CAPITAL PROCEEDS means the proceeds received by the Company as the
result of a Capital Transaction.
CAPITAL TRANSACTION means any of the following events: (a) a refinancing
or recasting of any Mortgage Loan or any secondary financing of the Property or
any portion thereof; (b) a sale (other than sales of personal property being
replaced with like property), lease (other than of space in the Property in the
ordinary course of business), condemnation award or other disposition of all or
part of the Property; (c) the receipt of insurance proceeds by the Company
(other than proceeds of rental or business interruption insurance) as a result
of the occurrence of a casualty; or (d) any other event of a capital nature
resulting in the receipt by the Company of revenues other than in the ordinary
course of business.
CASH NEEDS has the meaning specified in Section 3.6.
CASH NEEDS CONTRIBUTION has the meaning specified in Section 3.6(a).
CASH NEEDS NOTICE has the meaning specified in Section 3.6(a).
CERTIFICATE OF FORMATION means the Certificate of Formation of the
Company filed with the Secretary of State of the State of Delaware on September
5, 1995 as required by Section 18-201 of the Act, in the form attached hereto as
Schedule C and made a part hereof, as amended and/or restated from time to time
in accordance with the terms of this Agreement and applicable law.
CODE means the Internal Revenue Code of 1986, as amended, or the
corresponding provisions of any subsequent federal income tax law.
COMPANY means Northeast Office Venture, Limited Liability Company, a
Delaware limited liability company.
COMPANY MINIMUM GAIN means "partnership minimum gain" as set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Allocation Regulations.
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COMPLETION DATE means the date on which the Improvements shall have been
substantially completed in accordance with the terms of the Lease.
CONSTRUCTION LOAN means the construction loan that will provide the debt
financing for the construction of the Improvements and the landscaping of the
Property, referred to in Section 5.5.
CONSTRUCTION MANAGER has the meaning specified in Section 5.2(d).
CONTRIBUTION AGREEMENT means that certain Capital Contribution and Real
Estate Purchase and Sale Agreement, dated as of even date herewith, among
Limited, Georgetown and M/I pursuant to which Georgetown and M/I shall
contribute cash and Limited shall contribute cash together with the Land and the
Other Interests to the Company.
CONTRIBUTING MEMBER has the meaning specified in Section 3.6(b).
DEFAULT AMOUNT has the meaning specified in Section 3.6(b)(v).
DEFAULT PURCHASE RIGHT has the meaning specified in Section 7.3(a).
DESIGN ARCHITECT has the meaning specified in Section 5.2(b).
DEVELOPMENT AGREEMENT means that certain Development Agreement, dated as
of even date herewith, between MORSO Holding Co., a Delaware corporation, and
the Company.
DEVELOPMENT BUDGET has the meaning specified in Section 5.2(f).
DEVELOPMENT EXPENSES means the following costs and expenses incurred by
the Company and approved in advance by all of the Members in connection with the
development, construction and completion of the Improvements and the landscaping
of the Property:
(i) costs and expenses incurred in connection with the
acquisition of the Land and the Other Interests pursuant to the terms of the
Contribution Agreement (including, without limitation, title insurance, survey
fees, recording fees, closing fees and brokerage fees with non-affiliated
brokers);
(ii) costs and expenses incurred in connection with the obtaining
of the Construction Loan and the Permanent Loan, including, without limitation,
for each such loan, closing fees and other charges or expenses of the lender
payable by the Company in respect of such loan, appraisal fees, deposits,
recording taxes and charges, title insurance premiums, fees and disbursements of
lenders' attorneys and similar expenses;
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(iii) architects', engineers', consultants', attorneys',
accountants' and other experts' fees and disbursements incurred in connection
with the formation of the Company, the obtaining of zoning, building code and
other requisite variances, licenses, permits and approvals and the development,
design, construction, mortgaging and leasing of the Improvements and the
landscaping of the Property;
(iv) all costs of labor (including, without limitation, salaries,
fringe benefits and bonuses) and materials incurred in connection with the
construction of the Improvements (including, without limitation, tenant
improvement costs or allowances provided to tenants in connection with the
construction and installation of tenant improvements) and the landscaping of the
Property;
(v) real estate taxes, insurance premiums and interest and other
charges payable under the Construction Loan or the Permanent Loan;
(vi) interest payable under loans (other than the Construction
Loan and the Permanent Loan) prior to the commencement date under the Lease; and
(vii) any other costs and expenses that are usually and
customarily incurred in connection with the development, construction and
leasing of office space in the Columbus, Ohio metropolitan area.
DUE DATE has the meaning specified in Section 3.6(b).
ELECTING MEMBER has the meaning specified in Section 7.2(a).
ENTITY means any limited liability company, general partnership, limited
partnership, corporation, joint venture, trust, real estate investment trust,
business trust, estate or association.
FIRST OFFER CLOSING has the meaning specified in Section 7.2(d).
FIRST OFFER CLOSING DATE has the meaning specified in Section 7.2(d).
FIRST OFFER INTEREST has the meaning specified in Section 7.2(a).
FIRST OFFER PERIOD has the meaning specified in Section 7.2(a).
FIRST OFFER PRICE has the meaning specified in Section 7.2(c).
FIRST OFFER PROCEDURES has the meaning specified in Section 7.2(a).
FPAA has the meaning specified in Section 5.12.
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GOVERNMENTAL AUTHORITIES shall mean all federal, state, county,
municipal and local governments, and all departments, commissions, boards,
bureaus, agencies and offices thereof, having or claiming jurisdiction over all
or any portion of the Property.
IMPROVEMENTS means all of the following now or hereafter erected in, on,
over or under the Land: all buildings (including, without limitation, the
Building), structures and improvements, together with all walkway and road
improvements, parking areas and facilities, landscaping improvements of whatever
nature, utility and sewerage lines and all apparatus, machinery, devices,
fixtures, appurtenances and equipment for the proper operation and maintenance
of the foregoing and all alterations and additions thereto and restorations and
replacements thereof; provided, however, that the Improvements shall not include
the Tenant Improvements.
INCAPACITY means, with respect to any Member who is an individual, any
adjudication by a court of competent jurisdiction of such Member's incompetence
to manage his person or his estate.
INCOME TAX REGULATIONS means those regulations promulgated under the
Code. Whenever reference is made to any Income Tax Regulation, unless otherwise
specified, such reference shall be deemed to include any amendments or successor
regulations thereto.
INITIATING NOTICE has the meaning specified in Section 7.2(a).
LAND means that certain real property located in Franklin County, Ohio
and more particularly described on Schedule B attached hereto and made a part
hereof, and any and all other real property hereafter acquired by the Company.
LAWS means all present and future laws, ordinances, statutes,
administrative and judicial orders, rules, regulations and requirements of all
Governmental Authorities that may be applicable to the Property or any portion
thereof.
LEASE means the lease, dated as of even date herewith, between the
Company, as landlord, and M/I, as tenant, pursuant to which M/I will lease
virtually all of the Property, as it may be amended from time to time.
LOSSES means the net losses of the Company for federal income tax
purposes (or as may be otherwise required to comply with the Allocation
Regulations) as determined as of the close of the Company's fiscal year and,
when the context requires, related items of deduction or loss, tax preference,
credits and depreciation, provided that "Losses" shall include items described
in Code Section 705(a)(2)(B) or required by the Income Tax Regulations to be
treated as so described.
MANAGER means Georgetown, so long as it is the Manager in accordance
with this Agreement, and any Member admitted as a substitute Manager as provided
herein. In the event there is at any time more than one Manager, unless the
context otherwise requires, the term "Manager" shall refer to any one Manager
and to all such Managers.
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MEMBER means each Person identified as a Member on Schedule A hereto, as
such Schedule A may be modified, supplemented or amended from time to time in
accordance with this Agreement and applicable law, and any Person who may be
admitted as an additional or Substitute Member as provided herein. Unless the
context otherwise requires, the term "Member" shall refer to any one Member and
to all such Members.
MEMBER LOAN shall mean a loan made by a Member to the Company in
accordance with the provisions of this Agreement.
MEMBER NONRECOURSE DEBT means "partner nonrecourse debt" as set forth in
Section 1.704-2(b)(4) of the Allocation Regulations.
MEMBER NONRECOURSE DEBT MINIMUM GAIN means "partner nonrecourse debt
minimum gain" as set forth in Sections 1.704-2(i)(2) and (3) and 1.704-2(d) of
the Allocation Regulations.
MORTGAGE means any mortgage or deed of trust encumbering the Property or
any portion thereof in accordance with the terms of this Agreement, as the same
may be amended or modified. The term "Mortgage" also shall mean and include the
note secured by such mortgage or deed of trust, any collateral security
documents, including, without limitation, financing statements, security
agreements and any assignments of leases and rents, executed in connection with
such mortgage or deed of trust, and the loan agreement, if any, pursuant to
which such documents were executed.
MORTGAGE LOAN means any loan secured by a Mortgage.
NET CASH RECEIPTS means the cash from all operations of the Company (but
not including Capital Proceeds or Capital Contributions) after the payment of
all expenses (including, without limitation, all administrative, asset
management and management fees) and other disbursements (including, without
limitation, capital investments in the Property and interest and principal
payments on loans -- excluding Member Loans) except that (i) amounts expended or
reserved for capital improvements, reasonable working capital needs, contingent
or unforeseen liabilities, replacement of equipment, fixtures and personalty,
amounts paid into replacement reserves, and sinking funds, all as determined by
the Manager, shall be reserved and deducted; and (ii) expenses paid out of a
reserve, to the extent previously deducted under clause (i), shall be added.
NON-CONTRIBUTING MEMBER has the meaning specified in Section 3.6(b).
NONRECOURSE DEDUCTIONS has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Allocation Regulations. The amount of
Nonrecourse Deductions for a Company fiscal year equals the excess, if any, of
the net increase, if any, in the amount of Company Minimum Gain during that
fiscal year over the aggregate amount of any distributions during that fiscal
year of proceeds of a
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Nonrecourse Liability that are allocable to an increase in Company Minimum
Gain, determined according to the provisions of Sections 1.704-2(b)(1) and
1.704-2(c) of the Allocation Regulations.
NONRECOURSE LIABILITY has the meaning set forth in Section 1.704-2(b)(3)
of the Allocation Regulations and Section 1.752-1(a)(2) of the Income Tax
Regulations.
OPERATING LOSSES means Losses from Company operations and not from
Capital Transactions.
OPERATING PROFITS means Profits from Company operations and not from
Capital Transactions.
OPTION ELECTION NOTICE has the meaning specified in Section 7.2(b).
OTHER INTERESTS means all of Limited's right, title and interest in and
to all leases, contracts, agreements, permits, plans, specifications, drawings,
studies, reports, assessments, security and other deposits and other tangible
and intangible personal property pertaining to the Land.
OTHER MEMBER has the meaning specified in Section 7.2(b).
PERCENTAGE INTERESTS means the interests in the Company of the Members,
representing the Capital Contributions and the percentage interests as set forth
on Schedule A attached hereto, including such Members' respective shares of, and
rights to receive distributions and allocations of, the business, property,
assets, capital, profits and losses of the Company, subject to and as provided
in this Agreement and the Act. The holder of a Percentage Interest shall have no
right to participate in the management of the business and affairs of the
Company under the terms of this Agreement unless such holder is also a Member.
PERMANENT LOAN means the permanent Mortgage Loan that will refinance the
Construction Loan, referred to in Section 5.5.
PERMITS means all certificates of occupancy, licenses, authorizations,
variances, permits and approvals required pursuant to all applicable Laws or
otherwise necessary for the lawful construction, use, occupancy and operation of
the Property.
PERSON means any natural person or Entity.
PERSONALTY means all apparatus, machinery, devices, utility facilities,
fixtures, appurtenances, equipment, furniture, furnishings, appliances and other
items of personal property used in connection with the operation, maintenance
and occupancy of the Improvements, the Tenant Improvements and/or the Land now
or hereafter owned or leased by the Company.
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PHASE I WORK means the work identified as "Infrastructure" in the
Development Agreement.
PLANS has the meaning specified in Section 5.2(e).
PRELIMINARY BUDGET has the meaning specified in Section 5.2(a) and is
attached hereto and made a part hereof as Schedule E.
PRIME RATE means the prime commercial lending rate of interest announced
from time to time by Bank One , Columbus, N.A.
PROFITS means the net profits of the Company for federal income tax
purposes (or as may otherwise be required to comply with the Allocation
Regulations) as determined as of the close of the Company's fiscal year, and,
when the context requires, related items of income or gain, provided that
Profits shall include income exempt from tax.
PROJECT ARCHITECT has the meaning specified in Section 5.2(c).
PROPERTY means the Land, the Improvements, the Tenant Improvements and
the Personalty.
PURCHASE OPTION has the meaning specified in Section 7.2(b).
PURCHASING MEMBER has the meaning specified in Section 7.2(d).
REQUESTED CONTRIBUTION has the meaning specified in Section 3.6(a).
REQUESTED FUNDS has the meaning specified in Section 3.6(a).
RETIREMENT means, with respect to any Member: (i) the death, Incapacity,
or Bankruptcy of such Member; (ii) the Member's retirement, resignation,
expulsion or other withdrawal from the Company; (iii) the assignment by the
Member of all of the Member's Percentage Interest in compliance with this
Agreement (other than (A) an assignment merely of its right to receive
distributions or (B) a pledge, hypothecation, or other collateral assignment of
its rights before the time such pledge, hypothecation or other collateral
assignment becomes absolute); (iv) if such Member is a trustee of a trust, the
termination of the trust but not merely the substitution of a new trustee; (v)
if such Member is a corporation, the filing of a certificate of dissolution, or
its equivalent, for said corporation, or the revocation of its charter; (vi) if
such Member is a separate limited liability company or partnership, the
dissolution and termination of such separate limited liability company or
partnership; or (vii) if such Member is an estate, the distribution by the
fiduciary of the estate's entire interest in the Company.
SECRETARY OF STATE means the Secretary of State of the State of
Delaware.
SECTION 7.3(A) NOTICE DATE has the meaning specified in Section 7.3(b).
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SELLING MEMBER has the meaning specified in Section 7.2(d).
STATED VALUATION PRICE has the meaning specified in Section 7.2(a).
SUBSTITUTE MEMBER means any Person who acquires a Percentage Interest
from a Member and is admitted to the Company as a Member.
TAX MATTERS MEMBER has the meaning specified in Section 5.12.
TENANT DEFAULT PERIOD has the meaning specified in Section 6.4(b).
TENANT IMPROVEMENTS has the meaning specified in the Lease.
TOTAL BUDGETED DEVELOPMENT EXPENSES shall mean the aggregate amount of
Development Expenses specified in the Development Budget including, without
limitation, the amount allocated to "contingency."
UNCONTROLLABLE EXPENSE has the meaning specified in Section 5.4(c).
ARTICLE II
FORMATION AND NAME; BUSINESS OFFICE; REGISTERED OFFICE AND REGISTERED AGENT;
PURPOSE; PARTNERSHIP STATUS; POWERS; AND TERM
2.1 FORMATION AND NAME. The Company was formed upon the execution by the
Manager and the filing of the original Certificate of Formation with the
Secretary of State in accordance with the provisions of the Act, under the name
of Northeast Office Venture, Limited Liability Company. The Members hereby
approve the Certificate of Formation and ratify the execution, delivery and
filing of the Certificate of Formation by the Manager. Promptly after the filing
of the Certificate of Formation in the Office of the Secretary of State and the
execution and delivery of this Agreement, the Manager shall duly complete and
file with the Ohio Secretary of State an Application for Registration of Foreign
Limited Liability Company (Form LFA) in respect of the Company. The Company
shall not engage in, transact or do business in any jurisdiction other than the
State of Ohio, without the consent of all of the Members. The Manager shall,
from time to time, execute or cause to be executed all such additional
applications, certificates, registrations, or other documents, and cause to be
performed all such filing, recording, publishing, or other acts as may be
necessary to comply with the requirements of law applicable to the formation and
operation of the Company under the laws of the State of Delaware and the
operation of the Company as a foreign limited liability company in the State of
Ohio.
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2.2 BUSINESS OFFICE. The business office of the Company at which its
books and records shall be kept shall be maintained at 667 Madison Avenue, 23rd
Floor, New York, New York 10021, or at such other location as the Manager may
from time to time determine. The Manager shall provide written notice to the
Members of any change in the location of the business office of the Company.
2.3 REGISTERED OFFICE AND REGISTERED AGENT. The registered office of the
Company required by the Act to be maintained in the State of Delaware shall be
the office of the registered agent named in the Certificate of Formation or such
other office as the Manager may from time to time determine and designate in the
manner required by law. The registered agent of the Company required by the Act
shall be the registered agent named in the Certificate of Formation or such
other registered agent as may from time to time be determined and designated by
the Manager in the manner required by law. The Manager shall provide written
notice to the Members of any change in such registered office or registered
agent of the Company.
2.4 PURPOSE. The purposes of the Company are to acquire, invest in,
develop, construct, rehabilitate, maintain, operate, lease, improve, repair,
replace, hold, mortgage, encumber, own, sell, convert, exchange, manage,
finance, refinance and otherwise deal with the Property.
2.5 PARTNERSHIP STATUS. It is intended that the Company be treated as a
partnership for federal and state income tax purposes (but not for non-tax
purposes). Accordingly, this Agreement shall be construed in a manner that
ensures the Company's classification as a partnership for federal and state
income tax purposes at all times, and any provision of this Agreement that would
have the effect of preventing the Company from being classified as a partnership
for federal and state income tax purposes shall be null and void. The Members
shall take all actions, and execute, acknowledge and deliver all documents,
which in the judgment of the Manager, or in the opinion of counsel satisfactory
to the Manager, are necessary or desirable to obtain and/or maintain the
Company's classification as a partnership for such purposes at all times.
2.6 POWERS. In furtherance of the Company's purposes, the Company shall
have all powers of a limited liability company under the Act, including, without
limitation, the powers:
(a) to acquire, improve, develop, construct, rehabilitate,
repair, replace, mortgage, hold, sell, own, lease, operate, maintain, convert,
exchange, and otherwise deal with the Property and any other real and/or
personal property now or hereafter acquired by the Company and in interests
therein as may be necessary or desirable to carry out the development,
construction, rehabilitation, operation, leasing and maintenance of any of the
Property and/or the purposes of the Company;
(b) to borrow money, including (but not limited to) loans from
any Members or Affiliates of Members, to further the purposes of the Company; to
issue evidences of indebtedness in respect thereof and to secure the same by
deed of trust, mortgage or pledge or grant of lien on or other security interest
in the Property or any other assets of the Company;
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(c) to refinance, prepay (in whole or in part), recast, modify,
renew, extend and/or restructure any Mortgage Loan or any other indebtedness of
the Company and to execute any documents in connection therewith;
(d) to employ management agents, including Affiliates of any of
the Members, to manage the Property, and to pay compensation for such services;
(e) to operate, provide and manage such other businesses and
services as the Manager determines to be necessary or desirable in connection
with any of the Property or the purposes of the Company; and
(f) to do all things, carry on any activities and enter into,
perform, modify, supplement or terminate any contracts necessary, in connection
with or incidental to the furtherance of the purposes of the Company, so long as
such things, activities and contracts may be lawfully done, carried on or
entered into by the Company under the laws of the State of Delaware and under
the terms of this Agreement.
2.7 TERM. The term of the Company shall commence with the filing
of the Certificate of Formation with the office of the Secretary of State. The
Company shall continue until dissolved upon the occurrence of the earliest of:
(a) December 31, 2046; (b) the passage of 90 days from the sale or other
disposition of all or substantially all of the assets of the Company unless the
Members elect to continue the Company for the sole purpose of collecting the
proceeds of such sale or other disposition; (c) the Retirement of a Member
unless the Company is continued as provided in Section 7.8; (d) the unanimous
written agreement of all Members to dissolve the Company; (e) at any time when
there are less than two (2) Members of the Company, unless the Company's
business is continued pursuant to Section 7.8 and the sole remaining Member
admits an additional or Substitute Member to the Company; or (f) the entry of a
judicial decree of dissolution; and shall terminate as soon as the winding up of
its affairs upon such dissolution has been completed. The provisions of this
Section 2.7 are intended to and shall, to the fullest extent permitted by law,
supersede the provisions of the Act regarding the dissolution of limited
liability companies.
ARTICLE III
MEMBERS AND CAPITAL
3.1 MEMBERS. The Members have contributed to the capital of the Company
the amount of cash and/or property set forth opposite their respective names in
Schedule A in consideration for their respective interests in the Company as set
forth in Schedule A and as described herein. The Members agree that the fair
value of the portion of the Land and the Other Interests to be contributed by
Limited to the Company pursuant to the Contribution Agreement is equal to the
amount designated as such on Exhibit A. Subject to the provisions of Section
3.6, no further contribution of capital shall be required of any Member. To and
until the Completion
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Date, the obligations of Limited under this Agreement shall be guaranteed by an
Affiliate of Limited satisfactory to Georgetown and M/I.
3.2 NO PRIORITY AMONG MEMBERS. No Member shall have priority over any
other Member either as to the return of its original Capital Contribution or as
to distributions by the Company, except as specifically provided in this
Agreement.
3.3 NO INTEREST ON CAPITAL CONTRIBUTIONS; NO WITHDRAWAL OF CAPITAL. No
interest shall be paid by the Company to any Member with respect to any Capital
Contribution. Except as otherwise specifically set forth in this Agreement, no
Member shall have the right to (a) demand or receive property other than cash in
return for its Capital Contribution or as distributions of income, (b) withdraw
any part of its Capital Contribution (regardless of whether or not such Member
has withdrawn from the Company), or (c) receive any funds or property of the
Company.
3.4 CAPITAL ACCOUNTS. A single Capital Account shall be established,
determined and maintained for each Member on the books and records of the
Company in accordance with the provisions of the Allocation Regulations. The
property of the Company shall be revalued on the books of the Company in any
case in which such revaluation is required by the Allocation Regulations and may
be revalued in any case where such revaluation is permitted by the Allocation
Regulations and such revaluation is determined to be appropriate by all of the
Members. In the event any Company property is revalued on the books of the
Company in accordance with the Allocation Regulations, the Members' Capital
Accounts shall be adjusted in accordance with the Allocation Regulations to
reflect such revaluations and for allocations to them of Profits and Losses, and
items thereof, as computed for book purposes, with respect to such property. In
the event the property of the Company is revalued on the books of the Company,
all Company property shall be valued for such purpose at its fair market value,
as determined by all of the Members.
3.5 NO REQUIREMENT TO RESTORE DEFICIT IN CAPITAL ACCOUNT. Nothing
contained in this Agreement shall be construed to require any Member to restore
any deficit in its Capital Account.
3.6 SUBSEQUENT CONTRIBUTIONS. It is understood that the Company may from
time to time require funds following the date of this Agreement to meet its Cash
Needs for the ongoing operation, maintenance, development and improvement of the
Property. As used herein, "Cash Needs" of the Company shall mean and include any
cash needs or requirements of the Company subsequent to the date of this
Agreement: (i) for which sufficient funds are not available to it from (a) gross
revenues generated by the Company's operations, (b) Mortgage Loans and other
loans made to the Company, (c) contributions made by the Members to the capital
of the Company pursuant to Section 3.1 and (d) reserves set aside to meet such
needs and (ii) which have been or are to be incurred by the Manager on behalf of
the Company within the scope of its authority under this Agreement and are
necessary to meet operating expenses, leasing expenses, construction costs and
other capital expenses and other items which, in accordance with generally
accepted accounting principles, are capitalized and not expensed, to repay the
principal and interest on the Construction Loan, the Permanent Loan and other
loans made to the Company in
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accordance with the provisions hereof and to pay any other expenses or
obligations on behalf of the Company. In order to help ensure that the Company
will have funds in amounts sufficient to meet its Cash Needs at all times from
and after the date of this Agreement, the Members hereby agree as follows:
(a) Determination of Cash Needs by Members and Notice to Members.
If at any time the Members unanimously determine, in the exercise of reasonable
business judgment and good faith, that funds are required to meet Cash Needs of
the Company, the Manager shall, subject to the provisions of Section 5.8, use
its best efforts to arrange for the Company to borrow from third parties all of
the required funds, such borrowing preferably to be on a nonrecourse basis (and,
if not, on a recourse basis) to the Members (and any Affiliates thereof) and
otherwise on terms reasonably acceptable to all of the Members. If and to the
extent that the Members unanimously determine in good faith that the required
funds cannot be borrowed on such terms, the Manager shall, by notice (the "Cash
Needs Notice") to the Members, specify the amount of what the Members
unanimously believe to be the Cash Needs of the Company (the "Requested Funds")
at such time for the period mentioned below and call upon each Member to advance
to the Company its proportionate share, determined in proportion to each
Member's respective Percentage Interests at the time the Cash Needs Notice is
given, of the Requested Funds (each Member's "Requested Contribution"). The Cash
Needs Notice given to the Members shall be accompanied by documentation
reasonably confirming the actual or estimated amount of such Cash Needs of the
Company (in the amount of the Requested Funds) for the period for which such
demand is being made and itemizing how the Requested Funds will be applied.
Within twenty (20) days after the date of the Cash Needs Notice, each Member
shall advance as a capital contribution to the Company its Requested
Contribution. Any funds advanced by any Member to the Company pursuant to this
Section 3.6(a) and not refunded to such Member shall, subject to the provisions
of Section 3.6(b) below, constitute contributions to the capital of the Company
("Cash Needs Contributions").
(b) Remedies for Failure to Advance Funds. If in any instance any
Member (including any guarantor of such Member's obligations hereunder) shall
fail to advance all or any part of its Requested Contribution by the twentieth
(20th) day (the "Due Date" with respect to such Requested Contribution) after
the date of the Cash Needs Notice that calls for such advance, then the Member
that has failed to make such advance in full shall be deemed the
"Non-Contributing Member". In such event, each of the other Members (the
"Contributing Members") that have advanced at least the full amount of their
respective Requested Contributions, shall have the following rights and remedies
(which rights and remedies, except as otherwise provided herein, shall be the
only rights and remedies available to the Contributing Members with respect to
such failure by the Non-Contributing Member):
(i) Election of Remedies. This Section 3.6(b) provides
alternative courses of action by Contributing Members in the case of a failure
by a Member to make an advance called for under a Cash Needs Notice. If there is
more than one Non-Contributing Member, any Contributing Member need not elect
the same alternative with respect to each
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Non-Contributing Member. If there is more than one Contributing Member electing
an alternative with respect to a Non-Contributing Member, the Contributing
Members making such election must each elect the same alternative with respect
to the unpaid funds payable by such Non-Contributing Member without any
obligation to elect such alternative with respect to any other Non-Contributing
Member. If there is more than one Contributing Member that so elects, then each
Contributing Member shall provide an equal amount of the funds to be loaned or
contributed, as the case may be, pursuant to the provisions of this Section
3.6(b), unless such Contributing Members elect otherwise pursuant to a written
agreement.
(ii) Election of Total Refund in the Event of Total
Failure to Advance. If the Non-Contributing Member shall have advanced none of
its share of the Requested Funds on or before the Due Date, each Contributing
Member shall be relieved of any obligation to advance any portion of its
Requested Contribution and shall be entitled, if it so elects, to receive a
refund from the Company of all amounts that it may theretofore have advanced to
the Company pursuant to the Cash Needs Notice.
(iii) Election of Partial Refund in the Event of Partial
Failure to Advance. If the Non-Contributing Member shall have advanced part, but
not all, of its Requested Contribution on or before the Due Date, each
Contributing Member shall be relieved of any obligation to advance any portion
of its share of the Requested Funds in excess of the amount calculated by
multiplying its Percentage Interest by the Base Amount (as defined below) and
shall be entitled, if it so elects, to receive a refund from the Company of all
amounts that it may theretofore have advanced to the Company pursuant to the
Cash Needs Notice in excess of the amount calculated by multiplying its
Percentage Interest by the Base Amount. As used herein, the term "Base Amount"
shall mean the amount of the Requested Funds actually contributed by the
Non-Contributing Member on or before the Due Date, divided by the Percentage
Interest of the Non-Contributing Member.
(iv) Election of Right to Advance Funds as a Member Loan.
Provided a Contributing Member has advanced an amount equal to its Requested
Contribution, such Contributing Member shall be entitled, but shall not be
obligated, within sixty (60) days after the date of the Cash Needs Notice, to
advance to the Company (it being understood that any refund to which a
Contributing Member is entitled pursuant to Section 3.6(b)(ii) or 3.6(b)(iii)
above, as applicable, which such Contributing Member does not elect to receive
shall constitute an advance to the Company for the purposes of this Section
3.6(b)(iv)) an amount equal to all or any part of the excess of (i) the
Requested Funds over (ii) the Base Amount, if any, and such advance shall
constitute a Member Loan to the Company, which Member Loan shall bear interest,
compounded annually, at an annual rate equal to the Prime Rate plus 5% and shall
be repayable in accordance with Sections 4.4, 4.5 and 4.6. At any time after a
Member Loan has been made by such Contributing Member (whether or not such
Contributing Member has given the thirty (30) day notice provided for in Section
3.6(b)(v) below, and if such notice has been given, prior to the expiration of
the thirty (30) day period provided for in such Section 3.6(b)(v)), the
Non-Contributing Member may make the curative payment to such Contributing
Member
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provided for in the first sentence of Section 3.6(b)(v) below with the
consequences set forth in such Section.
(v) Conversion of Member Loan to Percentage Interests;
Termination of Certain Rights. Subject to the last sentence of this Section
3.6(b)(v), if a Contributing Member has made a Member Loan by virtue of the
provisions of Section 3.6(b)(iv), it may, at its option, exercisable by such
Contributing Member's giving at least thirty (30) days' notice to the
Non-Contributing Member at any time after the later to occur of the date on
which such Contributing Member has so made a Member Loan and the Due Date, elect
to convert the outstanding amount of such Member Loan (the "Default Amount")
into a Cash Needs Contribution to the Company in the amount of the Default
Amount and, if the Non-Contributing Member fails within such thirty (30) day
period to pay to such Contributing Member an amount equal to the Default Amount,
together with the accrued and unpaid interest thereon, then, effective as of the
expiration of such thirty (30) day period:
(A) the Default Amount shall be converted from a
Member Loan into a Cash Needs Contribution;
(B) the Percentage Interest of the
Non-Contributing Member shall be decreased by the full and fractional number of
percentage points equal to the quotient achieved when the Default Amount is
divided by $12,500, and the Percentage Interest of the Contributing Member
converting such Member Loan shall be increased by the same full and fractional
number of percentage points; and
(C) all rights of the Non-Contributing Member to
consent to or approve of any action, except (I) to consent to the admission of
Substitute Members pursuant to Section 7.5(b) and (II) to consent to the
continuation of the Company's business and reformation of the Company following
the Retirement of a Member pursuant to Section 7.8, shall be suspended.
Any interest that has accrued on such Member Loan prior to its conversion to a
Cash Needs Contribution shall be paid to the Contributing Member making such
Member Loan in accordance with Sections 4.4, 4.5 and 4.6. If the
Non-Contributing Member pays to such Contributing Member an amount equal to the
Default Amount, together with the accrued and unpaid interest thereon, within or
prior to the commencement of the thirty (30) day period provided for in this
Section 3.6(b)(v), the Default Amount shall constitute a Cash Needs Contribution
of the Non-Contributing Member.
(vi) General Provisions. The provisions of this Section
3.6(b) shall be applicable each time that any Member shall fail to advance
pursuant to Section 3.6(a) all or any portion of its Requested Contribution on
or before the Due Date.
(c) No Other Capital Contributions Required. Except as expressly
provided in this Article III, no Member shall be required to make any Capital
Contributions or loans to the
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Company. In no event shall any Member have any personal liability for the making
of any Capital Contributions or loans pursuant to this Agreement, it being
agreed that the sole remedies for a Member's failure to make any such Capital
Contributions or loans shall be those provided for in this Article III.
3.7 LOANS BY MEMBERS. Any Member may, but is not obligated to, loan to
the Company such sums as the Manager determines to be appropriate for the
conduct of the Company's business, upon the written consent of all of the
Members. Any such Member Loans shall be made on such terms and for such
maturities as are consented to by all of the Members.
3.8 REPRESENTATIONS OF MEMBERS
(a) Each Member represents and warrants to each other Member and
the Company as follows: (i) it is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization; (ii) it has
full power and authority to execute, deliver and perform its obligations under
this Agreement; (iii) it has duly authorized, executed and delivered this
Agreement and has duly authorized the performance of its obligations under this
Agreement; and (iv) its authorization, execution, delivery and performance under
this Agreement do not and will not conflict with any organizational document,
agreement or law applicable to it or by which it is bound.
(b) Each Member further represents and warrants to the Company
that it is acquiring its Percentage Interest for its own account and not with a
view toward the gifting, distribution or resale thereof, and each Member agrees
that it will not sell or offer to sell all or any portion of its Percentage
Interest, or negotiate in respect thereof with any person or persons whomsoever,
so as thereby to bring the transaction in which it acquired its Percentage
Interest or any other offering of interests in the Company within the provisions
of Section 5 of the Securities Act of 1933, as amended, or the registration
requirement of any other federal or state securities statute.
(c) Each Member further represents and warrants to each other
Member and the Company that (i) it has been given access to all information
concerning the Company, the Land, the Other Interests and the terms and
conditions of the Percentage Interest it is purchasing hereby; (ii) it and its
separate counsel have had the opportunity to fully negotiate the terms and
conditions of this Agreement; (iii) it understands and acknowledges that the
Percentage Interest it is purchasing hereby are speculative securities and
involve a high degree of risk and that no federal or state agency has made any
finding or determination as to the fairness for public or private investment in,
nor any recommendations or endorsement of, such Percentage Interest as an
investment; (iv) it has such knowledge and experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment
in such Percentage Interest; and (v) its financial situation is such that it can
afford the risks of an investment in such Percentage Interest.
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ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1 ALLOCATION OF OPERATING PROFITS AND OPERATING LOSSES. Except as
otherwise specifically provided herein to the contrary, Operating Profits and
Operating Losses for any fiscal year shall be allocated to the Members in
proportion to their respective Percentage Interests.
4.2 ALLOCATIONS OF PROFITS AND LOSSES FROM A CAPITAL TRANSACTION.
(a) Allocation of Profits from a Capital Transaction. After
giving effect to any special allocations pursuant to Section 4.3 and any
allocations of Operating Profits and Operating Losses pursuant to Section 4.1,
Profits from a Capital Transaction shall be allocated in the following order of
priority:
(i) First, to the Members with deficit Capital Account
balances, if any, pro rata in accordance with such deficit balances, until all
of such deficit balances are increased to zero;
(ii) Thereafter, to the Members in proportion to their
respective Percentage Interests.
(b) Allocation of Losses from a Capital Transaction. After giving
effect to any special allocations pursuant to Section 4.3, Losses from a Capital
Transaction shall be allocated in the following order of priority:
(i) First, to the Members with positive Capital Account
balances, if any, pro rata in accordance with such balances, until all such
positive balances are reduced to zero; and
(ii) Thereafter, to the Members in proportion to their
respective Percentage Interests.
4.3 SPECIAL ALLOCATIONS AND OTHER PROVISIONS RELATING TO ALLOCATIONS.
In the event of any conflict between the general allocation provisions set forth
in Sections 4.1 and 4.2 and the provisions of this Section 4.3, the provisions
of this Section 4.3 shall be controlling.
(a) Company Minimum Gain Chargeback. Notwithstanding any other
provision of this Article IV, if there is a net decrease in Company Minimum Gain
during any Company fiscal year, the minimum gain chargeback requirement of
Section 1.704-2(f) of the Allocation Regulations shall apply and this Section
4.3(a) shall be interpreted consistently therewith. To the extent permitted by
such Section of the Allocation Regulations and for purposes of this Section
4.3(a) only, each Member's Adjusted Capital Account Deficit shall be
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determined prior to any other allocations pursuant to this Article IV with
respect to such fiscal year and without regard to any net decrease in Member
Nonrecourse Debt Minimum Gain during such fiscal year.
(b) Chargeback of Member Nonrecourse Debt Minimum Gain.
Notwithstanding any other provision of this Article IV except Section 4.3(a), if
there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to
a Member Nonrecourse Debt during any fiscal year, the chargeback of "partner
nonrecourse debt minimum gain" requirement of Section 1.704-2(i)(4) of the
Allocation Regulations shall apply and this Section 4.3(b) shall be interpreted
consistently therewith. This Section 4.3(b) is intended to comply with the
"partner minimum gain chargeback requirement" in such Section of the Allocation
Regulations and shall be interpreted consistently therewith. Solely for purposes
of this Section 4.3(b), each Member's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to this Article IV with
respect to such fiscal year, other than allocations pursuant to Section 4.3(a)
hereof.
(c) Qualified Income Offset. In the event any Member's unexpected
receipt of any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of
the Allocation Regulations causes such Member to have (or increases) an Adjusted
Capital Account Deficit, items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Allocation Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 4.3(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article IV have been tentatively made as
if this Section 4.3(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Company fiscal year which is in excess
of the sum of (i) such Member's deficit restoration obligation, if any, and (ii)
the amount, if any, such Member is deemed to be obligated to restore pursuant to
the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Allocation Regulations, each such Member shall be specially allocated items of
Company income and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this Section 4.3(d) shall be made only
if and to the extent that such Member would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this Article IV
have been made as if Section 4.3(c) hereof and this Section 4.3(d) were not in
the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
year or other period shall be allocated (with the Members intending to satisfy
the reasonable consistency requirement contained in the Allocation Regulations
as a result of this allocation) to the Members in proportion to their respective
Percentage Interests.
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(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any fiscal year or other period shall be specially allocated to
the Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Allocation Regulations Section 1.704-2.
(g) Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Allocation Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Allocation Regulations.
(h) Curative Allocations.
(i) The "Regulatory Allocations" consist of the "Basic
Regulatory Allocations," as defined in Section 4.3(h)(ii) hereof, the
"Nonrecourse Regulatory Allocations," as defined in Section 4.3(h)(iii) hereof,
and the "Member Nonrecourse Regulatory Allocations," as defined in Section
4.3(h)(iv) hereof.
(ii) The "Basic Regulatory Allocations" consist of
allocations pursuant to Sections 4.3(c), (d) and (g) hereof. Notwithstanding any
other provision of this Agreement, other than the Regulatory Allocations, the
Basic Regulatory Allocations shall be taken into account in allocating items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other items and the Basic
Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each such Member if the Basic Regulatory
Allocations had not occurred. For purposes of applying the foregoing sentence,
allocations pursuant to this Section 4.3(h)(ii) shall only be made with respect
to allocations pursuant to Section 4.3(g) hereof to the extent the Manager
reasonably determines that such allocations will otherwise be inconsistent with
the economic agreement among the parties to this Agreement.
(iii) The "Nonrecourse Regulatory Allocations" consist of
all allocations pursuant to Sections 4.3(a) and (e) hereof. Notwithstanding any
other provision of this Agreement, other than the Regulatory Allocations, the
Nonrecourse Regulatory Allocations shall be taken into account in allocating
items of income, gain, loss, and deduction among the Members so that, to the
extent possible, the net amount of such allocations of other items and the
Nonrecourse Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to each such Member if the Nonrecourse
Regulatory Allocations had not occurred. For purposes of applying the foregoing
sentence (A) no allocations pursuant to this Section 4.3(h)(iii) shall be made
prior to the calendar year during which there is a net decrease in
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Company Minimum Gain, and then only to the extent necessary to avoid any
potential economic distortions caused by such net decrease in Company Minimum
Gain, and (B) allocations pursuant to this Section 4.3(h)(iii) shall be deferred
with respect to allocations pursuant to Section 4.3(e) hereof to the extent the
Manager reasonably determines that such allocations are likely to be offset by
subsequent allocations pursuant to Section 4.3(a) hereof.
(iv) The "Member Nonrecourse Regulatory Allocations"
consist of all allocations pursuant to Section 4.3(b) and (f) hereof.
Notwithstanding any other provision of this Agreement, other than the Regulatory
Allocations, the Member Nonrecourse Regulatory Allocations shall be taken into
account in allocating items of income, gain, loss, and deduction among the
Members so that, to the extent possible, the net amount of such allocations of
other items and the Member Nonrecourse Regulatory Allocations to each Member
shall be equal to the net amount that would have been allocated to each such
Member if the Member Nonrecourse Regulatory Allocations had not occurred. For
purposes of applying the foregoing sentence (A) no allocations pursuant to this
Section 4.3(h)(iv) shall be made with respect to allocations pursuant to Section
4.3(f) relating to a particular Member Nonrecourse Debt prior to the calendar
year during which there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to such Member Nonrecourse Debt, and then only to the extent
necessary to avoid any potential economic distortions caused by such net
decrease in Member Nonrecourse Debt Minimum Gain, and (B) allocations pursuant
to this Section 4.3(h)(iv) shall be deferred with respect to allocations
pursuant to Section 4.3(f) hereof relating to a particular Member Nonrecourse
Debt to the extent the Manager reasonably determines that such allocations are
likely to be offset by subsequent allocations pursuant to Section 4.3(b) hereof.
(v) The Manager shall have reasonable discretion, with
respect to each calendar year, to (A) apply the provisions of Section
4.3(h)(ii), (iii) and (iv) hereof in whatever order is likely to minimize the
economic distortions that might otherwise result from the Regulatory
Allocations, and (B) divide all allocations pursuant to Sections 4.3(h)(ii),
(iii) and (iv) hereof among the Members in a manner that is likely to minimize
such economic distortions.
(i) Manager's Fees. If the deduction of all or any part of any
fee paid by the Company to the Manager or its Affiliates is disallowed by
recharacterizing such fee as a distribution to such Manager, the Manager shall
be, to the extent permitted by the Code, allocated items of Company income and
gain for the taxable year in which such disallowed deduction was claimed by the
Company in the amount of such disallowed deduction.
(j) Section 704(c) Override.
(i) In accordance with Code Section 704(c) and the Income
Tax Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its value at the time of contribution to the Company.
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(ii) In the event that the book value of any Company
property is adjusted in accordance with the Allocation Regulations, subsequent
allocations of income, gain, loss and deduction with respect to such property
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its book value in the same manner as under
Section 704(c) of the Code and the Income Tax Regulations thereunder, to the
extent required by the Allocation Regulations.
(iii) Any elections or other decisions relating to such
allocations shall be made by the Manager, based upon the advice of the
Accountants, in a manner consistent with the Allocation Regulations and in a
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section and Code Section 704(c) are solely for tax
purposes and shall not be taken into account for purposes of determining
"Profits" or "Losses" or adjustments to Capital Accounts.
(k) Special Allocation Relative to Interest. Subject to the other
provisions of this Section 4.3, any Company deduction or basis increase arising
from or in connection with any interest which is deemed to have been paid by the
Company to a Member in connection with any funds contributed to the Company by
such Member, whether as Member or in its separate capacity, shall be allocated
to such Member for all tax, accounting and other purposes.
(l) Tax Credits. The basis (or cost) of any Company Code Section
38 property shall be allocated among the Members in accordance with Section
1.46-3(f)(2)(i) of the Income Tax Regulations. All tax credits (other than the
investment tax credit) shall be allocated among the Members in accordance with
applicable law.
(m) Tax Credit Recapture. In the event Company Code Section 38
property is disposed of during any taxable year, Profits for such taxable year
(and, to the extent such Profits are insufficient, Profits for subsequent
taxable years) in an amount equal to the excess, if any, of (i) the reduction in
the adjusted tax basis (or cost) of such property pursuant to Code Section
50(c), over (ii) any increase in the adjusted tax basis of such property
pursuant to Code Section 50(c) caused by the disposition of such property, shall
be excluded from the Profits allocated pursuant to Sections 4.1(a) and 4.2(a)
hereof and shall instead be allocated among the Members in proportion to their
respective shares of such excess, determined pursuant to Sections 4.3(n) and
4.3(o) hereof. In the event more than one item of such property is disposed of
by the Company, the foregoing sentence shall apply to such items in the order in
which they are disposed of by the Company, so that Profits equal to the entire
amount of such excess with respect to the first such property disposed of shall
be allocated prior to any allocations with respect to the second such property
disposed of, and so forth.
(n) Basis Increases. In the event the adjusted tax basis of any
Code Section 38 property that has been placed in service by the Company is
increased pursuant to Code Section 50(c), such increase shall be specially
allocated among the Members (as an item in the
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nature of income or gain) in the same proportions as the investment tax credit
that is recaptured with respect to such property is shared among the Members.
(o) Basis Reductions. Any reduction in the adjusted tax basis (or
cost) of Company Code Section 38 property pursuant to Code Section 50(c) shall
be specially allocated among the Members (as an item in the nature of expenses
or losses) in the same proportions as the basis (or cost) of such property is
allocated pursuant to Section 1.46-3(f)(2)(i) of the Income Tax Regulations.
(p) Varying Interests, Tax Accounting Conventions. In the event
Members are admitted to the Company on different dates during any fiscal year,
the Profits, Losses or any other items allocated to the Members for each such
fiscal year shall be determined on a daily, monthly or other basis, as
determined by the Manager using any permissible method under Code Section 706
and the Income Tax Regulations thereunder.
(q) Excess Nonrecourse Liabilities. Solely for purposes of
determining a Member's proportionate share of the "excess nonrecourse
liabilities" of the Company within the meaning of Section 1.752-3(a)(3) of the
Income Tax Regulations, the Members' interests in Company profits shall be (with
the Members intending to satisfy the reasonable consistency requirement
contained in the Allocation Regulations) in proportion to their respective
Percentage Interests.
(r) Treatment of Certain Distributions. To the extent permitted
by Sections 1.704-2(h) and 1.704-2(i)(6) of the Allocation Regulations, the
Manager shall endeavor to treat distributions of Net Cash Receipts or Capital
Proceeds as having been made from the proceeds of a Nonrecourse Liability or a
Member Nonrecourse Debt only to the extent that such distributions would cause
or increase an Adjusted Capital Account Deficit for any Member.
(s) Effect. The Members are aware of the consequences of the
allocations made by this Article IV and hereby agree to be bound by the
provisions of this Article IV in reporting their shares of Company income and
loss for income tax purposes and otherwise.
4.4 DISTRIBUTIONS OF NET CASH RECEIPTS. Net Cash Receipts for each
fiscal year (or fractional portion thereof), if any, shall be distributed among
the Members within twenty (20) days after the close of each calendar quarter, or
more frequently in the Manager's sole discretion, in the following order of
priority:
(a) First, as interest to Members having outstanding Member
Loans, in proportion to the amount of interest owed to each Member, until the
Members shall have received amounts equal to the total amounts of accrued and
unpaid interest owed on such Member Loans;
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(b) Second, as principal to Members having outstanding Member
Loans, in proportion to the amount of principal owed to each Member, until the
Members shall have received amounts equal to the total principal balances owed
on such Member Loans; and
(c) Thereafter, the balance thereof to the Members in proportion
to their respective Percentage Interests.
4.5 DISTRIBUTIONS OF PROCEEDS FROM CAPITAL TRANSACTIONS WHEN COMPANY NOT
LIQUIDATED. If, as a result of a Capital Transaction that does not result in the
liquidation of the Company, the Company obtains Capital Proceeds, such Capital
Proceeds shall be distributed, after payment of such debts and liabilities of
the Company (excluding Member Loans), as may be determined by the Manager, in
the following order of priority:
(a) First, as interest to Members having outstanding Member
Loans, in proportion to the amount of interest owed to each Member, until the
Members shall have received amounts equal to the total amounts of accrued and
unpaid interest owed on such Member Loans;
(b) Second, as principal to Members having outstanding Member
Loans, in proportion to the amount of principal owed to each Member, until the
Members shall have received amounts equal to the total principal balances owed
on such Member Loans; and
(c) Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.6 DISTRIBUTIONS OF LIQUIDATION PROCEEDS UPON LIQUIDATION. Upon the liquidation
of the Company, the Manager shall attempt to liquidate the assets of the Company
and the proceeds of such liquidation shall be applied and distributed in the
following order of priority:
(a) First, to the payment of the debts and liabilities of the
Company (excluding Member Loans) and the expenses of liquidation;
(b) Second, to the setting up of reserves that the Manager
determines are reasonably necessary to pay all contingent, conditional or
unmatured claims and obligations that are known to the Company and all claims
and obligations that are known to the Company but with respect to which the
claimant or obligee is unknown. Such reserves may be paid over by the Manager to
any attorney at law or other party selected by the Manager, as escrow agent to
be held for disbursement in payment of any of the aforementioned liabilities or
obligations, or at the expiration of such period as shall be deemed advisable by
the Manager, for distribution in accordance with clauses (c) through (e) of this
Section 4.6;
(c) Third, as interest to Members having outstanding Member
Loans, in proportion to the amount of interest owed to each Member, until the
Members shall have received amounts equal to the total amounts of accrued and
unpaid interest owed on such Member Loans;
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(d) Fourth, as principal to Members having outstanding Member
Loans, in proportion to the amount of principal owed to each Member, until the
Members shall have received amounts equal to the total principal balances owed
on such Member Loans; and
(e) Thereafter, to the Members in accordance with their
respective positive Capital Account balances, determined after all allocations
pursuant to Sections 4.1 through 4.3 (including, without limitation, allocations
to reflect the gain or loss recognized upon the sale of the Property) and all
distributions pursuant to Sections 4.4 and 4.5 have been made, but before any
distributions pursuant to this Section 4.6(e) are made.
4.7 DISTRIBUTIONS IN KIND ON LIQUIDATION. Upon the liquidation of the
Company, to the extent the Company's assets are not sold or otherwise disposed
of, such assets (if any) may, at the unanimous direction of the Members, be
distributed in kind to the Members as follows: the value of such assets shall be
appraised (by an appraiser selected by the Members) to determine the Profits and
Losses that would have resulted if such assets had been sold; the Capital
Account of each Member shall be debited or credited with such Member's
respective share of the hypothetical gains or losses resulting from such assumed
sales in the same manner as such Capital Account would have been debited or
credited on the actual disposition of such assets; and such assets shall be
distributed in accordance with the Members' Capital Account balances as thus
adjusted, each Member taking an undivided interest in such assets subject to a
pro rata share of the Company's liabilities.
4.8 CERTAIN PROVISIONS OF THE ACT SUPERSEDED. The provisions of this
Agreement regarding allocations and distributions among the Members are intended
to and should, to the fullest extent permitted by law, supersede the provisions
of the Act regarding allocations and distributions.
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ARTICLE V
POWER, AUTHORITY, RIGHTS, DUTIES AND OBLIGATIONS OF THE
MANAGER
5.1 MANAGEMENT OF COMPANY.
(a) Authority of M/I Under Lease. The Members acknowledge that
M/I is the tenant under the Lease and that, pursuant to the provisions of the
Lease, M/I shall have the authority and obligations with respect to the
maintenance and operation of the Building and the other matters as set forth in
the Lease.
(b) Authority of Manager to Manage Company's Business. Except as
otherwise specifically limited herein, the Manager shall have the exclusive
right to manage the Company's business. Accordingly, except as otherwise
specifically limited in this Agreement or under applicable law, the Manager
shall: (i) manage the affairs and business of the Company; (ii) exercise the
authority and powers granted to the Company; and (iii) otherwise act in all
other matters on behalf of the Company. No contract, obligation or liability of
any kind or type may be entered into on behalf of the Company by any Member
other than the Manager. The Manager shall take all actions which shall be
necessary or appropriate to accomplish the Company's purposes in accordance with
the terms of this Agreement. The Manager is hereby designated and named a
"manager" of the Company, within the meaning of Section 18-101(10) of the Act.
5.2 CONSTRUCTION OF THE IMPROVEMENTS. The Manager shall use its best
efforts on behalf of the Company to cause the Improvements to be constructed
and completed in accordance with the terms of the Lease. For the purposes of
this Section 5.2, the use of the term "best efforts" by the Manager shall not
require the Manager to advance any of its funds on behalf of the Company where
it is not otherwise obligated to furnish such funds under the terms of this
Agreement. Such duties of the Manager shall be performed in accordance with
and shall include, but not be limited to, the following:
(a) Preliminary Budget. Attached hereto as Schedule E is a
preliminary budget (the "Preliminary Budget"), which has been approved by all of
the Members as providing the preliminary understanding of the viability of the
development of the Improvements.
(b) Design Architect. The Manager shall retain, on behalf of the
Company, the firm of Gensler and Associates (the "Design Architect") to be the
design architect for the Improvements. The Design Architect shall be retained
upon such terms and conditions and for such compensation as all of the Members
shall have approved in advance. The Members shall use their best efforts and due
diligence to cooperatively and collaboratively review, refine and ultimately
approve in writing such terms, conditions and compensation. M/I agrees to
retain, at the Company's cost as a Development Expense, the Design Architect to
be the design architect for the Tenant Improvements.
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(c) Project Architect. The Manager shall retain, on behalf of the
Company, the firm of NBBJ (the "Project Architect") to prepare the construction
drawings for the Improvements. The Project Architect shall be retained upon such
terms and conditions and for such compensation as all of the Members shall have
approved in advance. The Members shall use their best efforts and due diligence
to cooperatively and collaboratively review, refine and ultimately approve in
writing such terms, conditions and compensation. M/I agrees to retain, at the
Company's cost as a Development Expense, the Project Architect to prepare the
construction drawings for the Tenant Improvements.
(d) Construction Manager. The Manager shall retain, on behalf of
the Company, the joint venture Gillbane and Smoot (the "Construction Manager"),
to serve as the construction manager for the construction of the Improvements.
The Construction Manager shall be retained upon such terms and conditions and
for such compensation as all of the Members shall have approved in advance. The
Members shall use their best efforts and due diligence to cooperatively and
collaboratively review, refine and ultimately approve in writing such terms,
conditions and compensation. M/I agrees to retain, at the Company's cost as a
Development Expense, the Construction Manager to serve as the construction
manager for the construction of the Tenant Improvements.
(e) Plans. The Manager shall deliver or caused to be delivered to
the Members proposed plans and specifications for the Improvements and for the
Tenant Improvements. Such proposed plans and specifications shall (i) include,
without limitation, the siting, schematic design and specifications for facade
materials for the Building and the other Improvements and the Tenant
Improvements, (ii) to the satisfaction of Limited, be complementary in siting,
design and materials and consistent in quality and design to the building
proposed to be built by Limited (or an affiliate of Limited) and intended to be
located as shown on Schedule D attached hereto and made a part hereof and (iii)
in all respects provide for the construction of a first class office building.
The Members shall use their best efforts and due diligence to cooperatively and
collaboratively review, refine and ultimately approve in writing such proposed
plans and specifications. The proposed plans and specifications for the
Improvements and the Tenant Improvements approved by all of the Members shall be
referred to herein as the "Plans".
(f) Development Budget; Right of Manager to Pay Development
Expenses. Following the approval of the Plans by all of the Members, the Manager
shall prepare and deliver to each of the Members a proposed development budget.
Such proposed development budget shall be in substantially the same form as the
Preliminary Budget and shall require the approval of each of the Members. The
Members shall use their best efforts and due diligence to cooperatively and
collaboratively review, refine and ultimately approve in writing such proposed
development budget; provided, however, that such final approval shall not occur
unless and until all of the Members have reviewed and approved final contracts
for engineering services for the Improvements, final contracts for the services
to be provided to the Company by the Design Architect, the Project Architect and
the Construction Manager, and contracts with subcontractors accounting for not
less than ninety percent (90%) of the labor and materials necessary
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to construct the Improvements. The proposed development budget approved by all
of the Members shall be referred to herein as the "Development Budget". Upon
such approval of the Development Budget by the Members, the Manager shall have
the right, without further consent or approval by the Members, to incur or pay
the expenses set forth in such approved Development Budget. After approval of
the Development Budget by all of the Members, subject to the provisions of
Section 5.2(g) below, the Manager may at any time reallocate a portion of any
line-item therein to any other such line-item; provided, however, that, without
the written consent of all of the Members, (i) no such reallocation may result
in any increase in the Total Budgeted Development Expenses and (ii) no such
reallocation may result in the amount set forth in any particular line item
(including the "contingency") being increased or decreased by more than five
percent (5%).
(g) Changes to Plans. All proposed changes in or additions to the
Plans shall be submitted by the Manager to the Members for their approval. No
proposed changes to the Plans shall be adopted, accepted or implemented without
the prior approval of all of the Members. The Members shall use their best
efforts and due diligence to cooperatively and collaboratively review, refine
and ultimately approve in writing such proposed changes to the Plans.
(h) Retention of Agents. Upon obtaining prior approval of all of
the Members, the Manager may retain, on behalf of the Company, such Persons as
all of the Members shall deem advisable in connection with the construction of
the Improvements and the landscaping of the Property, including, without
limitation, attorneys, engineers and contractors, on such terms and for such
compensation as all of the Members shall determine; provided, however, that the
Manager shall not employ any affiliate of any Member except as described in
Section 5.10.
5.3 THE LEASE. The Manager shall, on behalf of the Company, enter into
the Lease of the Building with M/I. The Manager will not, without the prior
consent of Limited: (i) modify, amend, renew or grant any consent or waiver
under the Lease, (ii) grant rent concessions or discount rents (except as
specifically provided for in the Lease), (iii) accept a surrender of the Lease,
(iv) exercise any right or option granted to the landlord thereunder to cancel
all or any part of the term of the Lease or fail to take any reasonable action
that may terminate any option of the tenant thereunder to cancel the Lease or
(v) approve any assignment of the Lease or any subletting of all or any portion
of the premises demised under the Lease. The Manager shall: (a) on behalf of the
Company, perform, observe and discharge the obligations of the landlord under
the Lease and enforce or secure the performance, observance and discharge of the
obligations of the tenant to be performed, observed or discharged under the
Lease, (b) give prompt notice to Limited of each breach or alleged breach by the
landlord or the tenant under the Lease, together with a true and complete copy
of each notice of default or demand and each summons or other legal process and
each pleading prepared by or on behalf of the landlord and each pleading
received from the tenant with respect to any such breach and (c) on behalf of
the Company, appear in and defend any action or proceeding arising out of or in
connection with the Lease or the rents and other amounts payable thereunder.
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5.4 OPERATING AND CAPITAL IMPROVEMENT BUDGETS.
(a) Preparation and Submission of Proposed Operating and Capital
Budgets. Not later than sixty (60) days prior to the commencement of each fiscal
year of the Company, commencing November 1, 1996, the Manager shall prepare or
cause to be prepared and submit to the Members a proposed operating budget and a
proposed capital improvement budget with respect to the Property for such fiscal
year. The proposed operating budget shall set forth the projected income and
receipts from the Property for such fiscal year and the operating expenses to be
incurred during such year, such operating expenses to be set forth in reasonable
detail with each category of expense listed on a separate line. The proposed
capital improvement budget shall set forth in reasonable detail a description of
all capital improvements, repairs, replacements and alterations (i.e.,
improvements, repairs, replacements or additions, the cost of which may not be
deducted as an expense but must be capitalized and amortized over the life of
such improvements, repairs, replacements or alterations, but not including
therein any tenant improvement work) that the Manager proposes to make in and to
the Property during such fiscal year and the estimated cost of each.
(b) Approval of Operating Budgets by Members. Within twenty (20)
days after such submission of the proposed operating budget to the Members, each
Member shall send to the Manager a notice containing the approval of such
proposed operating budget or the disapproval of such proposed operating budget
and the specific detailed reasons for such disapproval. If within such twenty
(20) day period a Member does not send to the Manager any such notice approving
the proposed operating budget or disapproving the proposed operating budget and
setting forth the specific detailed reasons for such disapproval, then such
Member shall be deemed to have approved the proposed operating budget. If within
such twenty (20) day period a Member sends the Manager a notice disapproving the
proposed operating budget and setting forth the specific detailed reasons
therefor, the Manager shall use its reasonable efforts to revise the proposed
operating budget in order to address the reasons specified by such Member for
its disapproval of the proposed operating budget and shall then submit the
revised proposed operating budget to each Member for its approval. The Manager
and the Members shall repeat the process described in this Section 5.4(b) until
such proposed operating budget is approved or deemed approved by all of the
Members. The Manager shall be deemed to have approved any proposed operating
budget (or, as the case may be, any revised proposed operating budget) submitted
to the Member pursuant to this Section 5.4(b).
(c) Right of Manager to Pay Operating Expenses; Uncontrollable
Expenses. Upon such approval of an operating budget by all of the Members, the
Manager shall have the right, without further consent or approval by the
Members, to incur and pay the operating expenses set forth in such approved
budget, provided that in the case of any operating expense that is not an
Uncontrollable Expense, the Manager shall not have the right to incur or pay the
same if it exceeds by
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more than five percent (5%) the amount set forth on the appropriate line for the
category of expense involved in the approved operating budget or if an
expenditure will cause the aggregate amount of operating expenses that are not
Uncontrollable Expenses to exceed by more than five percent (5%) the aggregate
amount of such operating expenses provided for in the approved operating budget.
As used in this Section 5.4, the term "Uncontrollable Expenses" shall mean an
item of expense, the amount of which is not within the power of the Manager to
control and shall include, by way of illustration and without limitation, real
estate taxes, utility charges, and debt service under loans permitted hereunder
or otherwise approved by all of the Members. If at any time the Manager desires
to incur an operating expense that is not provided for in the approved operating
budget, the Manager shall not incur such expense without the prior approval of
all of the Members. If at any time it becomes evident to the Manager that the
cost of any operating expense that is not an Uncontrollable Expense will exceed
by more than five percent (5%) the amount set forth in respect thereof in the
approved operating budget, or the amount of all such expenses will exceed by
more than five percent (5%) the aggregate amount budgeted therefor in such
operating budget, the Manager shall not incur the operating expense in question
or, as applicable, any of such operating expenses without the approval of all of
the Members. Notwithstanding the foregoing, however, if in the reasonable
good-faith judgment of the Manager any operating expense not provided for in the
approved operating budget, the cost of which in any single instance does not
exceed $10,000, must at any time be undertaken immediately in order to protect
the Property or any portion thereof or to avoid accident or injury to Persons or
their property, the Manager shall be free to incur such operating expense
without regard to the approved operating budget and without first securing the
approval of the Members, but the Manager shall notify the Members promptly (and
in no event later than one (1) full day after the Manager first becomes aware of
the condition requiring the measures in question and of the need for such
measures) of any condition requiring any of the aforesaid measures.
(d) Approval of Capital Budgets by Members. Within twenty (20)
days after such submission of the proposed capital improvement budget to each
Member, each Member shall send to the Manager a notice containing the approval
of such capital improvement budget or the disapproval of such proposed capital
improvement budget and the specific detailed reasons for such disapproval. If,
within such twenty (20) day period a Member does not send to the Manager a
notice approving the proposed capital improvement budget or disapproving the
proposed capital improvement budget and setting forth the specific detailed
reasons for such disapproval, then such Member shall be deemed to have approved
the proposed capital budget. If within such twenty (20) day period a Member
sends the Manager a notice disapproving the proposed capital improvement budget
and setting forth the specific detailed reasons therefor, the Manager shall use
its reasonable efforts to revise the proposed capital improvement budget in
order to address the reasons specified by such Member for its disapproval of the
proposed capital improvement budget and shall then submit the revised proposed
capital improvement budget to each Member for its approval. The Manager and the
Members shall repeat the process described in this Section 5.4(d) until such
proposed capital budget is approved or deemed approved by all of the Members.
The Manager shall be deemed to have approved any proposed capital improvement
budget (or, as the case may be, any revised proposed capital improvement budget)
submitted to the Members pursuant to this Section 5.4(d).
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(e) Right of Manager to Pay Capital Expenses. Upon such approval
of a capital improvement budget by all of the Members, the Manager shall have
the right, without further consent or approval by the Members, to make the
capital improvements, repairs, replacements and alterations set forth in such
budget and to pay the cost thereof, and pay the capital improvement expenses set
forth in such approved budget, provided that the cost of any such capital
improvement, repair, replacement or alteration does not exceed by more than five
percent (5%) the amount thereof set forth for such item in the approved capital
improvement budget, and provided, further that the cost of all such capital
improvements, repairs, replacements and alterations does not exceed by more than
five percent (5%) the aggregate amount set forth in such capital improvement
budget. If at any time the Manager desires to make a capital improvement,
repair, replacement or alteration that is not provided for in the approved
capital budget, the Manager shall not proceed with such improvement, repair,
replacement or alteration without the prior approval of all of the Members. If
at any time it becomes evident to the Manager that the cost of any capital
improvement, repair, replacement or alteration provided for in the approved
capital improvement budget will exceed by more than five percent (5%) the amount
budgeted therefor in the approved capital improvement budget, or that the
aggregate amount of the cost of all capital improvements, repairs, replacements
and alterations provided for in such budget will exceed by more than five
percent (5%) the aggregate amount budgeted therefor in the approved capital
improvement budget, the Manager shall not proceed further with the making of
such improvement, repair, replacement or alteration or, as applicable, with any
of such capital improvements, repairs, replacements or alterations without the
approval of all of the Members. Notwithstanding the foregoing, however, if in
the reasonable good-faith judgment of the Manager any capital improvement,
repair, replacement or alteration, the cost of which in any single instance does
not exceed $10,000, must at any time be undertaken immediately in order to
protect the Property or any portion thereof or to avoid accident or injury to
Persons or their property, the Manager shall be free to make such capital
improvement, repair, replacement or alteration without regard to the approved
capital improvement budget and without first securing the approval of the
Members, but the Manager shall notify each Member promptly (and in no event
later than one (l) full day after the Manager first becomes aware of the
condition requiring the measures in question and of the need for such measures)
of any condition requiring any of the aforesaid measures.
(f) Failure to Agree on Operating Budget. In the event that the
Members are unable to agree on any operating budget for any fiscal year, or on
any item therein, (i) any items in such operating budget which have been so
approved shall become operative immediately and (ii) with respect to any other
item of such operating budget, the Manager shall be entitled to expend in
respect of such item, until such time as the dispute in question shall be
otherwise resolved, an amount (on an annual basis) equal to the amount for the
corresponding item in the operating budget for the then-current year.
5.5 CONSTRUCTION LOAN AND PERMANENT LOAN. Subject to the provisions
of Section 5.8 hereof:
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(a) The Manager shall use its best efforts to obtain a commitment
for and to close a Construction Loan. The Construction Loan shall be in such
amount and on such other terms and conditions as shall be approved by all of the
Members. The Members shall collaborate in good faith and in a timely manner to
approve such amount, terms and conditions.
(b) The Manager shall use its best efforts to obtain a commitment
for and to close a Permanent Loan. The Permanent Loan shall be in such amount
and on such other terms and conditions as shall be approved by all of the
Members. The Members shall collaborate in good faith and in a timely manner to
approve such amount, terms and conditions.
(c) The Manager, on behalf of the Company, shall execute the
Mortgages in respect of the Construction Loan and the Permanent Loan, when and
as required by the commitments for same. With respect to each of the
Construction Loan and the Permanent Loan and any other loan entered into by the
Company in accordance with the provisions hereof, following the closing of each
such loan, the Manager: (i) shall not, without the prior consent of all of the
Members, modify or amend any provision of the Mortgage in respect of such loan,
(ii) on behalf of the Company, shall perform, observe and discharge the
obligations of the Company under the Mortgage in respect of such a loan, (iii)
shall give to the Members prompt notice of each breach or alleged breach by the
Company or the lender under the Mortgage in respect of such loan, together with
a true and complete copy of each notice of default or demand and each summons or
other legal process and each pleading prepared by or on behalf of the Company
and each notice of default or demand and each summons or other legal process and
each pleading received from such lender and (iv) on behalf of the Company, shall
appear in and defend any action or proceeding arising out of or in connection
with the Mortgage in respect of such loan.
5.6 SPECIFIC RIGHTS AND POWERS OF MANAGER. In addition to the rights and
powers of the Manager provided for in Sections 5.1, 5.2, 5.3, 5.4 and 5.5, and
subject to the limitations provided in such Sections, and the approval rights of
the Members set forth in Section 5.8 hereof and except as otherwise specifically
limited in this Agreement or under applicable law, the Manager shall have all
specific rights and powers required for the management of the business of the
Company including, without limitation, the right to do the following:
(a) Operate, maintain, repair and improve the Property;
(b) Incur all reasonable expenditures and pay all obligations of
the Company;
(c) Execute any and all documents or instruments of any kind
which the Manager deems necessary or appropriate to achieve the purposes of the
Company, including, without limitation, contracts, agreements, leases,
subleases, easements, deeds, notes, Mortgages and other documents or instruments
of any kind or character or amendments of any such documents or instruments;
(d) Purchase or lease equipment for Company purposes;
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(e) Borrow money from individuals, banks and other lending
institutions for any Company purpose, and mortgage or pledge all or any portion
of the Property; to secure or provide for the repayment of such loans; obtain
replacements of any Mortgage or Mortgages in whole or in part, refinance,
recast, modify, extend or consolidate any Mortgage affecting all or any portion
of Property;
(f) Procure and maintain, at the expense of the Company and with
responsible companies, such insurance as may be available in such amounts and
covering such risks as are appropriate in the reasonable judgment of the
Manager;
(g) Employ and dismiss from employment any and all Company
employees, agents, independent contractors, attorneys and accountants; and
(h) Supervise the preparation and filing of all Company tax
returns.
5.7 AGREEMENTS; LAWS AND PERMITS. Without limiting the provisions of
Section 5.3 or Section 5.5 hereof and subject to the availability of required
funds to the Company, the Manager shall cause the Company to comply with all
agreements entered into by the Company or by which the Company is bound and all
Laws and Permits applicable to the Company.
5.8 APPROVAL OF MEMBERS. Notwithstanding any contrary provision of this
Article V, but subject to Section 6.4(b), the Manager shall not take any of the
following actions without first obtaining the consent of all of the Members in
accordance with the provisions of Section 6.4(a):
(a) sell, exchange, transfer, convey, assign, lease or otherwise
dispose of, or encumber the Property or any portion thereof (other than pursuant
to the Lease entered into in compliance with the provisions hereof);
(b) enter into any management, leasing or brokerage agreement for
the Property or any portion thereof, modify, amend or revise in any material
respect to extend, renew, cancel or terminate any such management, leasing or
brokerage agreement or change or suffer or permit to be changed the agent under
any such management, leasing or brokerage agreement;
(c) acquire any real property other than the Property, including,
without limitation, leases of real property, or any personal property other than
the personal or other personal property necessary or desirable for the operation
and maintenance of the Property;
(d) agree to a settlement of any proceeding brought for the
taking of all or any portion of the Property in condemnation or by eminent
domain or to a sale of all or any portion of the Property in lieu of such taking
in condemnation or by eminent domain;
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(e) borrow any money (including, without limitation, the
Construction Loan and the Permanent Loan) (excluding any Member Loan made by
virtue of the provisions of Section 3.6(b)(iv));
(f) place any Mortgage or deed of trust on the Property or any
portion thereof, or prepay, extend, refinance, modify or amend any Mortgage
covering the Property or any portion thereof;
(g) demolish the whole or any part of any Improvement or Tenant
Improvement; construct any addition to any Improvement or Tenant Improvement or
any new Improvements or Tenant Improvements; undertake any repair, restoration,
alteration, betterment, or rebuilding of any Improvement or Tenant Improvement
(including, without limitation after any casualty) other than in accordance with
Section 5.4 (regarding capital improvement budgets); reduce the amount of
rentable area in the Property; reduce the parking area or the number of parking
spaces or the landscaping on the Property; or alter the architectural appearance
of any of the Improvements or the Tenant Improvements;
(h) change the nature of the business of the Company or enter
into any business other than or in addition to that contemplated by this
Agreement;
(i) take advantage on behalf of the Company of any federal or
state bankruptcy or insolvency law or similar law for the relief of debtors;
(j) make any loan from the Company to a Member or any Affiliate
of a Member;
(k) cause the formation of any corporation, partnership, limited
liability company or other subsidiary entity owned or controlled by the Company;
(l) make investments, other than the temporary investment of
working capital as provided for in Section 10.5 in the ordinary course of
business;
(m) initiate in the name or on the account of the Company any
lawsuit or other judicial proceeding other than in connection with proceedings
concerning the Lease or the tenant thereunder;
(n) establish any reserves from Net Cash Receipts or Capital
Proceeds (it being understood that any reserve provided for in an approved
budget shall be deemed for this purpose to have been approved by the Members);
(o) commit or suffer any acts which would make it impossible to
carry out the operation of the business of the Company, change or reorganize the
Company into any other legal form or dissolve or voluntarily terminate the
Company;
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(p) admit to the Company a new additional or Substitute Member
except as otherwise specifically provided for in this Agreement;
(q) amend this Agreement or the Certificate of Formation (except
as provided in Section 11.1); or
(r) engage, transact or do business in any jurisdiction other
than the State of Ohio.
5.9 COMPENSATION OF THE MANAGER. The Manager shall not receive any
compensation for its services as Manager hereunder. Notwithstanding the
preceding sentence, however, the Company shall pay to the Manager, on an annual
basis, the amount of out-of-pocket costs and expenses incurred in the
performance of its duties hereunder, as set forth in the operating budgets in
effect from time to time under Section 5.4.
5.10 OTHER ACTIVITIES OF MEMBERS.
(a) The Manager shall devote to the Company such of its time and
render such services as may be required for the efficient conduct of the
business of the Company, to carry out the purpose of this Agreement, and to
maintain the Property as a first-class office building and to attempt to
maximize the profits resulting from the ownership thereof.
(b) Any Member, any Affiliates and any officer, director,
shareholder, member, manager, employee or agent of any Member or any Affiliates
may lend money to and transact other business with the Company and may engage in
or possess an interest in other business ventures of every nature and
description, independently or with others, including, but not limited to, those
competitive with the business of the Company. Neither the Company nor the other
Members shall have any rights in and to such independent ventures or the income
or profits derived therefrom nor shall any Member assert any claim with respect
thereto on the opportunities therefrom.
(c) The Members or their Affiliates may serve as asset manager
and/or mortgage broker for the Company and/or as management agent of the
Property. No compensation or fees shall be paid to the Members or their
Affiliates except as described in this Agreement. The Members or their
Affiliates may receive compensation for any goods or services rendered to the
Company provided the amount of such compensation is not more than the amount the
Company would be required to pay to unrelated Persons for comparable goods or
services. Any payment to be made to a Member or one of its Affiliates for such
goods or services shall be disclosed to the Members and approved by all of the
Members in advance of the service being rendered or the goods being provided.
Upon such disclosure and approval, no Member shall be entitled to any share of
such payment, except to the extent made or received in violation of this
Agreement.
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5.11 INDEMNIFICATION. The Company shall, to the fullest extent
permitted under the Act and other applicable law, indemnify any Person who is a
party, or is threatened to be made a party, to any threatened, pending or
completed civil, criminal, administrative or investigative action, suit or
proceeding because such Person is or was a Manager, Member, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
member, manager, director, trustee, partner, officer, employee or agent of
another limited liability company, corporation, partnership, joint venture,
trust or other enterprise, against costs, claims, damages, losses, judgments,
fines and expenses (including without limitation, reasonable attorneys' fees,
filing fees, court reporters' fees and transcript costs) actually and reasonably
incurred by such Person in connection with such action, suit or proceeding if
such Person's act or omission giving rise to any claim for indemnification under
this Section 5.11 was not occasioned by such Person's fraud, willful misconduct,
gross negligence or intent to cause injury to the Company or by such Person's
reckless disregard for the best interests of the Company, and in respect of any
criminal action or proceeding, such Person had no reasonable basis to believe
such Person's conduct was unlawful. Notwithstanding the foregoing, the Company
shall not indemnify a Member in respect of a dispute among the Members, or any
of them, arising out of this Agreement.
5.12 TAX MATTERS MEMBER. The "Tax Matters Member" (referred to as the
"tax matters partner" in Section 6231(a)(7) of the Code), shall be designated in
writing from time to time by the Manager and, initially, shall be Georgetown.
The Tax Matters Member shall represent the Company and the Members, at Company
expense, in any administrative or judicial proceeding with the Internal Revenue
Service, at the direction of all of the Members. Any other Member may, at its
own expense, participate in such proceeding to the extent permitted by the Code.
If an administrative proceeding results in the issuance of a "final partnership
administrative adjustment" ("FPAA"), as that term is used in Sections 6223 et
seq. of the Code, the Tax Matters Member, at the direction of all of the
Members, shall determine whether the Company shall seek judicial review of such
FPAA. If the Tax Matters Member determines that the Company shall not seek
judicial review, it shall promptly notify all the other Members of this
determination and each Member shall be entitled, at its own expense, to pursue
whatever rights it may have under the Code. Any amounts paid by the Tax Matters
Member on behalf of the Company in connection with any administrative or
judicial proceeding shall be considered a loan to the Company, and not a
contribution to capital. The Tax Matters Member shall not be liable to the
Company or the other Members for any action it takes or fails to take in
connection with any such judicial or administrative proceeding, including,
without limitation, the agreement to or failure to agree to a settlement or the
extension of, or failure to extend the relevant statutes of limitations, unless
such action or failure constitutes willful misconduct, fraud, gross negligence
or breach of a fiduciary duty to the Company or any of the other Members. The
Members shall use their best efforts and due diligence to cooperatively and
collaboratively advise and direct the Tax Matters Member in the performance of
its obligations under this Section 5.12.
5.13 PROPERTY MANAGEMENT AGENT. The Members, acting unanimously, shall
have the right, from time to time, to select a property management agent to
manage the Property. The terms of any property management agreement shall be
determined by the unanimous consent of the Members.
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5.14 CERTAIN PROVISIONS OF THE ACT SUPERSEDED. The provisions of this
Agreement regarding the management of the Company are intended to and shall, to
the fullest extent permitted by law, supersede the provisions of the Act
regarding the management of a limited liability company.
ARTICLE VI
RIGHTS, DUTIES AND OBLIGATIONS OF MEMBERS
6.1 RIGHTS OF MEMBERS OTHER THAN THE MANAGER TO PARTICIPATE IN THE
MANAGEMENT OR CONTROL OF THE BUSINESS. Except as specifically set forth in this
Agreement, the Members shall have the right and power to participate in the
management and control of the Company, its business and its affairs. However,
the Members other than the Manager shall have no right or power to control or
supervise, and no duty or responsibility for, the filing of any tax return or
the making of any tax payment for or on behalf of the Company or any of its
officers or employees; and shall have no duty or obligation to be responsible
for the execution of the Company's fiscal responsibilities.
6.2 LIMITED LIABILITY OF MEMBERS. Subject to the provisions of the Act,
the liability of a Member for the debts and obligations of the Company shall be
limited to the amount of its Capital Contribution, and no Member shall be
obligated to contribute money to the Company or to otherwise answer for an
obligation of the Company beyond its obligation to pay its Capital Contribution,
except to the extent required by law.
6.3 MEETINGS. Members holding one third (1/3rd) or more of the
Percentage Interests may by written notice to the Manager call a meeting of all
the Members. Upon receipt of a written request for such a meeting, the Manager
shall promptly, and in any event not later than five (5) days after receipt of
such request, fix a place and time for such meeting, and shall notify each
Member thereof in writing. Such notice shall state the purpose for which the
meeting is to be held. Such meeting shall be held at a place convenient to the
Members in Franklin County, Ohio. Such meeting shall be held not less than ten
(10) nor more than twenty (20) days after receipt of a request for a meeting.
6.4 CONSENT OF THE MEMBERS.
(a) General. Subject to Section 6.4(b), the unanimous written
consent of the Members shall be required with respect to the matters referred to
in Section 5.8. Such consent may be withheld by any Member, in its sole and
absolute discretion, for any reason or for no reason at all. In the event that
the Manager proposes to undertake on behalf of the Company any of such matters,
the Manager shall give notice to the Members of such proposal, setting forth the
material terms and conditions of such proposal and requesting a consent of each
Member thereto. Within fifteen (15) days following receipt of such notice, each
Member shall deliver a written response to the Manager either consenting to such
proposal or refusing to consent to such proposal. A Member shall be deemed to
have given its consent if (a) such consent is given in a vote (either in person
or by proxy) at a meeting
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of the Members called and held in accordance with the provisions of Section 6.3,
(b) such consent is delivered in writing to the Manager or (c) the Manager has
not received written notice from such Member expressly withholding such consent
within fifteen (15) days after a notice is sent to such Member seeking its
consent.
(b) Override During Tenant Default Period. Notwithstanding
anything to the contrary set forth in this Agreement, during a Tenant Default
Period, as defined below, all rights of M/I to consent to or approve of any
action except those identified in the next sentence shall be suspended, and the
provisions providing for such suspended consent or approval rights shall be
deemed to apply only to the Members other than M/I or the successor to M/I's
Percentage Interest. The following rights of M/I shall not be suspended during a
Tenant Default Period: (i) the right to consent to the admission of Substitute
Members pursuant to Section 7.5(b), (ii) the right to consent to the
continuation of the Company's business and reformation of the Company following
the Retirement of a Member pursuant to Section 7.8 and (iii) the right to
receive notice of any action requiring the consent or approval of all Members
hereunder. A "Tenant Default Period" shall mean any period or periods of time
commencing upon the occurrence of a Lease Default, as defined in the following
sentence, and ending upon the cure of such Lease Default. As used in the
foregoing sentence only, a "Lease Default" shall mean either: (A) M/I's failure
pursuant to the Lease to pay rent and/or real estate taxes and assessments on
the Property as the same become due and payable (after the expiration of all
notice and cure periods as provided in the Lease) (a "Monetary Default"); or (B)
as to any default other than a Monetary Default (a "Nonmonetary Default"),
agreement between the Company and M/I that a Nonmonetary Default has occurred
or, absent such agreement, then a final, unappealable determination by a court
of competent jurisdiction that a Nonmonetary Default has occurred; provided,
however, that notwithstanding the foregoing provisions to the contrary, M/I
shall have no right, from and after the occurrence of an alleged Nonmonetary
Default, to consent or approve any action whereby the Company, in its reasonable
discretion, expends funds or takes actions to preserve, repair or maintain the
Company's assets or their value (including, without limitation, payments for
taxes, assessments, insurance and utilities), to avoid the imposition of liens,
to preserve tax abatement status for the Property, to comply with lender
requirements, to comply with laws or to cure a default under the Lease by the
Company.
ARTICLE VII
TRANSFERS OF INTERESTS OR RETIREMENT; FIRST OFFER PROVISIONS; PURCHASE RIGHTS
UPON DEFAULT; CONTINUATION AFTER RETIREMENT OF MEMBERS
7.1 LIMITATIONS ON TRANSFERS AND RETIREMENT; CERTAIN PERMITTED
TRANSFERS.
(a) General Prohibition. Except as otherwise provided in this
Section 7.1 or in Section 7.2, a Member may not sell, pledge, assign or
otherwise transfer all or any portion of its Percentage Interest, without
obtaining the unanimous written consent of the other Members, which consent may
be withheld at their discretion for any reason or for no reason at all. Any
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attempt to do so in contravention of this Agreement shall be void. Other than in
connection with a transfer or assignment and the admission of a Substitute
Member in its place in accordance with this Article VII, a Member may not
voluntarily Retire as a Member of the Company without the unanimous written
consent of the other Members. Neither the death nor the dissolution of the
Member, nor the commencement of proceedings for the Bankruptcy, insolvency or
receivership of the Member, whether voluntary or involuntary, shall be deemed a
"voluntary" Retirement by such Member for purposes of this Section 7.1(a), and
the Company shall have no rights or claims for damages against such Member on
account thereof.
(b) Certain Permitted Transfers.
(i) To Certain Commonly Controlled Persons. Each Member
may assign or otherwise transfer all, but not less than all, of its Percentage
Interest to a Person directly or indirectly controlling, controlled by or under
common control with such Member without having to comply with Sections 7.1(a) or
7.2, provided that (A) the provisions of Section 7.4 are complied with in
respect of such assignment or transfer, (B) the admission of a Substitute Member
remains subject to the provisions of Section 7.5 and (C), in the case of
assignments or transfers by Georgetown and its successors only, either or both
of Marshall Rose or Edgar A. Lampert shall be a meaningful principal of or
participant in the assignee or transferee. For purposes of this Section
7.1(b)(i) only, "control" of a Person by a Person shall mean the ownership by
the controlling Person of at least fifty percent (50%) of the legal and
beneficial interests of the Person controlled. The assigning or transferring
Member shall provide the other Members with at least thirty (30) days written
notice of any such proposed assignment or transfer.
(ii) By Limited. On and after the Completion Date,
Limited may assign or otherwise transfer all, but not less than all, of its
Percentage Interest to a Person to whom Limited and/or its Affiliates are
concurrently transferring all or substantially all of the property identified on
Schedule D attached hereto, without having to comply with Sections 7.1(a) or
7.2, provided that (A) the provisions of Section 7.4 are complied with in
respect of such assignment or transfer, (B) the admission of a Substitute Member
remains subject to the provisions of Section 7.5, (C) the assignment or transfer
is made for fair market value, and (D) M/I and Georgetown each are provided the
opportunity to concurrently assign or transfer their respective Percentage
Interests on the same terms and conditions to the assignee or transferee or, at
the election of Limited, to Limited or its designee.
(iii) Between the Members. On and after the Completion
Date, each Member may assign or otherwise transfer all, but not less than all,
of its Percentage Interest to any other Member without having to comply with
Sections 7.1(a), 7.2 and 7.5, provided that the provisions of Section 7.4 are
complied with in respect of such assignment or transfer.
7.2 RIGHT OF FIRST OFFER.
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(a) General. During the period of time commencing on the date
which is the first day of the twenty-seventh month after the Completion Date,
and ending upon the termination of the Company (the "First Offer Period"), each
Member shall have the option to initiate the procedures provided for in this
Section 7.2 (the "First Offer Procedures"). The First Offer Procedures shall be
initiated upon the giving by a Member to all of the other Members of an
Initiating Notice during the First Offer Period. As used in this Section 7.2,
the term "Initiating Notice" shall mean a notice to the effect that the Member
giving such notice (the "Electing Member" as to such notice) desires to initiate
the First Offer Procedures and containing (i) a statement to the effect that the
Electing Member offers to sell such Member's Percentage Interests and such
Member's interest in any Member Loans made by such Member (such Member's "First
Offer Interest"), (ii) a statement of the value (as determined by the Electing
Member), in United States Dollars, of the assets of the Company upon which the
Electing Member agrees to permit to be based the calculation of the purchase
price of First Offer Interests to be purchased and sold in accordance with the
First Offer Procedures (the "Stated Valuation Price"), and (iii) the additional
terms of sale upon which the Electing Member offers to sell its First Offer
Interest.
(b) Options of Other Members. Upon the giving of an Initiating
Notice, the Members to whom such Initiating Notice was given (the "Other
Members") thereupon shall have an irrevocable option to purchase the interests
offered to be sold in the corresponding Initiating Notice, each on the terms and
subject to the conditions set forth in this Section 7.2 (the "Purchase Option").
Each Other Member may exercise the Purchase Option by giving to the Electing
Member, within thirty (30) days of the giving by the Electing Member of the
corresponding Initiating Notice, a notice to the effect that such Other Member
desires to exercise the Purchase Option (an "Option Election Notice"). If more
than one of the Other Members gives an Option Election Notice, then each such
Other Member shall be deemed to have elected to purchase the portion of the
First Offer Interest that bears the same proportion to the entire First Offer
Interest as the Percentage Interest of such Offeree Member bears to the
aggregate of the Percentage Interests of all the Offeree Members making such
election.
(c) Calculation of First Offer Price. The purchase price to be
paid for a First Offer Interest (the "First Offer Price" in respect of such
First Offer Interest) shall be calculated in accordance with this Section
7.2(c). The First Offer Price in respect of a Member's First Offer Interest
shall be that amount which would be distributed to such Member pursuant to
Section 4.6 assuming hypothetically that the assets of the Company were sold for
the Stated Valuation Price and the proceeds of such sale were applied and
distributed in accordance with said Section 4.6. Upon the giving of an
Initiating Notice, the Manager promptly shall engage, on behalf of and at the
expense of the Company, the Company's then-serving Accountants to determine the
First Offer Price of the Electing Member's First Offer Interest in accordance
with this Section 7.2, and to give notice of such determination to each Member.
Such determination shall take into account any then-pending but uneffected
conversions of Member Loans into Cash Needs Contributions, in accordance with
the provisions of Sections 3.6(b)(v), as if such conversions had been effected.
Such determination shall identify any Member Loan as to which no election to so
convert such Member Loan to a Cash Needs Contribution has then been made, and
shall assume that none of
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such Member Loans will be so converted. If for any reason notice of such
determination is not given to the Members within twenty-one (21) days of the
giving of the Initiating Notice, the Electing Member shall have the option to
engage, on behalf of and at the expense of the Company, any
nationally-recognized firm of independent public accountants for such purpose.
If the Electing Member so engages a nationally-recognized firm of independent
public accountants for such purpose, the Electing Member shall give to the other
Members notice to that effect. At the corresponding First Offer Closing (as
defined in Section 7.2(d)), the First Offer Price shall be adjusted to take into
account any conversions of Member Loans to Cash Needs Contributions effected
subsequent to, and not taken to account in, the determinations referred to in
this Section 7.2(c). The failure of the First Offer Price to be so determined
shall not affect the obligations of the Members set forth in this Section 7.2.
(d) Closing of First Offer Purchase and Sale. The closing of the
purchase and sale of a First Offer Interest upon the exercise of a Purchase
Option (a "First Offer Closing") shall be consummated in accordance with the
provisions of this Section 7.2(d). A First Offer Closing shall be consummated at
the business office of the Company at 10:00 a.m., Columbus, Ohio local time, on
the First Offer Closing Date. As used in this Agreement, the term "First Offer
Closing Date" in reference to a First Offer Closing shall mean the date
designated as such in a notice given by the Member (or jointly by the Members,
if more than one) required to purchase a First Offer Interest at such First
Offer Closing (each, a "Purchasing Member") to the Member required to sell the
First Offer Interest at such First Offer Closing (the "Selling Member");
provided that such date shall be a date which is no sooner than thirty (30) days
and no later than ninety (90) days after the date on which the corresponding
Option Election Notice is given. In the event that no such notice is given, the
First Offer Closing Date shall be the date which is the ninetieth (90th) day
after the date on which the corresponding Option Election Notice is given. At
the First Offer Closing, (i) each Purchasing Member shall pay to the Selling
Member its share of the First Offer Price in respect of the First Offer Interest
to be purchased and sold, calculated in accordance with Section 7.2(c) of this
Agreement, in United States Dollars and in the form of a good bank-certified or
cashier's check drawn on an institution reasonably satisfactory to the Selling
Member or, at the direction of the Selling Member, by wire transfer to an
account designated by the Selling Member, and (ii) the Selling Member shall
effectively transfer to the order of each Purchasing Member its share of the
Selling Member's First Offer Interest in accordance with the First Offer
Procedures, free and clear of all liens or encumbrances of any kind. At, and
subsequent to, the First Offer Closing, each Member and the Company shall
execute, deliver and acknowledge any and all documents, agreements, and
statements and certificates concerning factual matters, and shall take or
refrain from taking actions, as shall be reasonable, necessary or appropriate in
connection with the consummation of the First Offer Closing in accordance with
the provisions of this Section 7.2.
(e) Right to Transfer. In the event that the Electing Member does
not receive within the time limits set forth in Section 7.2(b) above any Option
Election Notice from any of the Other Members, then the Electing Member shall
thereupon be free to sell and assign the First Offer Interest to any Person at a
price not less than the First Offer Price and on terms not less
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favorable to the Electing Member than the terms described in the Option Election
Notice for a period of one hundred eighty (180) days following the earlier of
(i) the expiration of the thirty (30) day period during which the Other Members
may deliver an Option Election Notice and (ii) the receipt by the Electing
Member of any notice or notices from all of the Other Members rejecting such
offer contained in the Initiating Notice, provided that (A) the provisions of
Section 7.4 are complied with in respect of such assignment and (B) the
admission of a Substitute Member remains subject to the provisions of Section
7.5. Each Member and the Company shall execute, deliver and acknowledge any and
all documents, agreements, and statements and certificates concerning factual
matters, and shall take or refrain from taking actions, as shall be commercially
reasonable, necessary or appropriate in connection with the consummation of the
sale or assignment by the Electing Member of the First Offer Interest in
accordance with the provisions of this Section 7.2. If such sale and assignment
is not consummated within such one hundred eighty (180) day period, the Electing
Member shall not have the right to sell or assign the First Offer Interest
without once again complying with the provisions of this Section 7.2.
(f) Additional Provisions Governing First Offer Procedures. The
provisions of this Section 7.2(f) shall govern the First Offer Procedures
notwithstanding any contrary provision or effect of this Agreement.
(i) Effect of Conflict With Loan Agreement. The Company
shall provide to each Member a copy of each agreement entered into by the
Company in accordance with the provisions of this Agreement providing for a loan
to the Company by a lender other than a Member. If the implementation of the
First Offer Procedures would conflict with or cause a default under any such
agreement, a Member desiring to implement the First Offer Procedures shall have
obtained the consent or waiver of the lender under each such agreement to the
implementation of the First Offer Procedures prior to giving an Initiating
Notice.
(ii) Effect of Default by Lessee Under Lease. M/I shall
not give an Initiating Notice during a Tenant Default Period, and any such
notice given by M/I during a Tenant Default Period and purporting to be an
Initiating Notice shall be void and of no effect whatsoever.
(iii) Effect of Pending Cash Needs Contributions. The
First Offer Procedures shall be subject to the provisions of Section 3.6(b)(v).
Accordingly, in the event that the Selling Member has elected to convert a
Member Loan to a Cash Needs Contribution in accordance with Section 3.6(b)(v)
and such conversion remains uneffected during the period following the giving of
an Initiating Notice, the implementation of the First Offer Procedures shall
take into account the effect of Section 3.6(v)(5) as applied to such conversion.
In the event that any such conversion remains uneffected at the time of a First
Offer Closing scheduled in accordance with this Section 7.2, such First Offer
Closing shall be deferred until the business day following the date on which
such conversion has been effected.
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(iv) Effect of Pending Default Purchase Right. No Member
shall give an Initiating Notice during any period in which Limited or Georgetown
are entitled to exercise the Default Purchase Right pursuant to Section 7.3, any
such notice given by a Member during such period and purporting to be an
Initiating Notice shall be void and of no effect whatsoever, and the First Offer
Procedures shall be suspended during such period.
(v) Waiver, Modification and Amendment Permitted. Any of
the provisions of this Section 7.2 may be waived, modified or amended by a
written instrument executed by all of the Members.
7.3 PURCHASE RIGHTS UPON DEFAULT.
(a) Purchase Rights Upon Event of Default Under Lease. Upon the
occurrence of an Event of Default, as that term is defined in the Lease, which
is undisputed between the tenant under the Lease and the Company or which has
been determined to have occurred pursuant to a final, unappealable decision by a
court of competent jurisdiction, each of Limited and Georgetown shall have the
right (but not the obligation), at any time thereafter, to purchase and to
receive an assignment of the entire Percentage Interest of M/I for an aggregate
purchase price equal to the Appraised Value, as defined in Section 7.3(b), of
the Company, multiplied by the Percentage Interest of M/I (a "Default Purchase
Right"). If either Limited or Georgetown desires to elect to exercise its
Default Purchase Right, such electing Member shall notify the other Member in
writing of its decision, and such other Member shall within twenty (20) days
thereafter notify the electing Member of its decision whether or not to exercise
its Default Purchase Right. If both Limited and Georgetown elect to exercise
their respective Default Purchase Rights, each of Limited and Georgetown shall
be entitled to purchase the portion of the Percentage Interest of M/I that bears
the same proportion to the entire Percentage Interest of M/I as the Percentage
Interest of such Member bears to the aggregate of the Percentage Interests of
Limited and Georgetown, for a purchase price equal to a proportionate amount of
the Appraised Value of the Company, multiplied by the Percentage Interest of
M/I. Each electing Member shall give to M/I a notice that such Member has
elected to purchase the Percentage Interest of M/I.
(b) Determination of Appraised Value. The "Appraised Value" of
the Company shall be the value which M/I and the electing Member(s),
collectively, shall assign to the Company. If the Members do not agree on such a
value within twenty (20) days after the date of the giving of the notice (or the
later of the notices, if more than one is given) referred to in the final
sentence of Section 7.3(a) (the "Section 7.3(a) Notice Date"), the Appraised
Value shall be the amount which would be distributed to all of the Members
pursuant to Section 4.6 assuming hypothetically that the assets of the Company
were sold for their fair market value, as determined by an appraiser mutually
chosen by all of the Members. If the Members do not mutually agree on an
appraiser within forty (40) days after the Section 7.3(a) Notice Date, the
Appraised Value shall be the average of the two (2) closest amounts assigned as
the Appraised Value by three (3) appraisers, one of whom is appointed by M/I,
one of whom is appointed by the electing Member(s) and one of whom is chosen by
the other two appraisers. If the appraisers chosen by
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M/I and the electing Member(s) do not mutually agree on the third appraiser
within sixty (60) days after the Section 7.3(a) Notice Date, the Manager shall
promptly thereafter, and in any event within eighty (80) days after the Section
7.3(a) Notice Date, formally request that the Administrative Law Judge of the
Court of Common Pleas of Franklin County, Ohio select an appraiser for this
purpose. The appraiser authorized under this Section 7.3(b) to assign a value to
the Company shall have no more than forty-five (45) days from their final
selection or appointment to prepare and deliver such appraisals to the Members.
The costs of appraisal, if any, shall be borne fifty percent (50%) by M/I and
fifty percent (50%) by the electing Member(s).
(c) Closing of Purchase Option Under Section 7.3. The closing of
a purchase of the Percentage Interest of M/I pursuant to this Section 7.3 shall
be consummated at the business office of the Company at 10:00 a.m., Columbus,
Ohio local time on the date agreed upon by the Members (or, in the absence of
such agreement, the first business day which is at least twenty (20) days after
the date the Appraised Value is determined). At the closing, each electing
Member shall pay to M/I its share of (or, if applicable, the entire) purchase
price determined under Sections 7.3(a) and (b), and M/I shall effectively
transfer to the order of such electing Member(s) its Percentage Interest, free
and clear of all liens or encumbrances of any kind. At, and subsequent to,
closing, each Member and the Company shall execute, deliver and acknowledge any
and all documents, agreements, and statements and certificates, and shall take
or refrain from taking actions, as shall be commercially reasonable, necessary
or appropriate in connection with the consummation of the transfer(s)
contemplated by this Section 7.3.
7.4 ADDITIONAL RESTRICTIONS ON ASSIGNMENTS OR TRANSFERS.
Notwithstanding anything in this Article VII to the contrary, the following
additional restrictions apply to the Percentage Interests:
(a) No Member shall make any assignment or transfer of any
Percentage Interests if the assignment or transfer would, when considered with
all other assignments and transfers during the same applicable twelve-month
period, cause a termination of the Company for federal income tax purposes.
(b) No Member shall make any assignment or transfer of any
Percentage Interests to a minor or to an incompetent; except that an assignment
or transfer may be made to a trustee, custodian or guardian for the benefit of a
minor or an incompetent, if such assignment or transfer is effected in
accordance with applicable law. No Member shall make an assignment to a
tax-exempt entity under Section 168(h) of the Code.
(c) No Member shall make any assignment or transfer of any
Percentage Interests unless such Member gives a copy of this Agreement to the
assignee or transferee before such assignment or transfer is effected.
(d) The Manager may require, as a condition to the assignment or
transfer of any Percentage Interests, that the assigning or transferring Member
and/or the assignee or
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transferee (i) assume all costs incurred by the Company in connection therewith;
and (ii) furnish reasonable assurances to the Manager, including the provision
of any factual information and/or legal opinions satisfactory in all respects to
the Manager, that such assignment or transfer complies in all respects with
applicable federal and state securities laws.
7.5 REQUIREMENTS FOR SUBSTITUTION. Notwithstanding anything in this
Article VII to the contrary, upon the assignment or other transfer of any
Percentage Interests, no assignee shall have the right to become a Substitute
Member in place of its assignor unless the conditions of Sections 7.1 and 7.4
have been satisfied and:
(a) The assignor has evidenced in a written instrument of
assignment its intention that the assignee be admitted as a Substitute Member
pursuant to the provisions hereof;
(b) The unanimous written consent of the Members has been
obtained, which consent may be withheld by any Member, in its sole and absolute
discretion, for any reason or for no reason at all; provided that the consent
requirement of this Section 7.5(b) shall not apply to any assignee intending to
become a Substitute Member in connection with a transfer or assignment by
Limited or M/I described in Section 7.1(b)(i) or (ii) if Limited and M/I, in the
aggregate, do not own eighty percent (80%) or more of all interests in the
capital, income, gain, loss, deduction or credit of the Company;
(c) The assignee has adopted and agreed in writing to be bound by
all of the provisions hereof, as the same may have been amended;
(d) The assignee shall have paid all reasonable legal fees and a
reasonable handling fee to the Manager to cover administrative charges in
connection with such assignment and substitution; and
(e) All documents reasonably required by the Manager to effect
the substitution of the assignee as a Member shall have been executed.
When and if all of the provisions of this Section 7.5 have been complied with,
the assignee shall thereupon become a Member of the Company. It is understood
and agreed by and among the Members that an assignment or transfer between the
Members pursuant to Section 7.1(b)(iii) need not comply with this Section 7.5.
7.6 OBLIGATIONS AND RIGHTS OF TRANSFEREES. Whether or not a Person who
acquires an interest in the Company has accepted in writing the terms and
provisions of this Agreement and assumed in writing the obligations hereunder of
its predecessor in interest, such Person shall be deemed, by such acquisition of
such interest, to have agreed to be subject to and bound by all the obligations
of this Agreement with the same effect as any predecessor in interest of such
Person. A Person acquiring an interest in the Company shall have only such
rights and shall be subject to all the obligations as provided in this
Agreement, and, without limiting the foregoing, such Person shall not
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have the right to have the value of its interest ascertained or receive the
value of such interest or, in lieu thereof, profits attributable to any right in
the Company, except as set forth in this Agreement.
7.7 DISTRIBUTIONS AND ALLOCATIONS IN RESPECT OF TRANSFERRED PERCENTAGE
INTERESTS. If any Percentage Interest is sold, assigned or transferred during
any accounting period in compliance with the provisions of this Article VII,
Profits, Losses, each item thereof and all other items attributable to such
Percentage Interest for such period shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the period in accordance with Code Section 706(d), using any conventions
permitted by law and selected by the Manager. Unless otherwise determined by the
Manager, all distributions made on or before the date thirty (30) days following
the date on which the Company receives written notice of such transfer
(accompanied by the transfer documents) shall be made to the transferor, and all
distributions made thereafter shall be made to the transferee. Solely for
purposes of making such allocations and distributions, the Company shall
recognize such transfer not later than the end of the calendar month during
which it is given notice of such transfer, provided that if the Company does not
receive a notice stating the date such Percentage Interest or interest was
transferred and such other information as the Manager may reasonably require
within thirty (30) days after the end of the accounting period during which the
transfer occurs, then, at the Manager's option, all of such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, on the last day of the accounting period
during which the transfer occurs, was the owner of the Percentage Interest or
interest. Neither the Company nor the Manager shall incur any liability for
making allocations and distributions in accordance with the provisions of this
Section 7.7, whether or not the Manager or the Company has knowledge of any
transfer of ownership of any Percentage Interest.
7.8 CONTINUATION AFTER RETIREMENT OF MEMBER. The Company shall be
dissolved upon the Retirement of a Member; provided, however, that the Company
and its business shall be continued (and the Company reformed) after such
Retirement if the unanimous written consent of the remaining Members has been
obtained, which consent may be withheld by any Member, in its sole and absolute
discretion, for any reason or for no reason at all. In the event that the
Company's business has been validly continued as provided in the preceding
sentence, such business shall be continued in the form of a successor limited
liability company, which shall be deemed constituted and continued on the terms
and conditions set forth in this Agreement, except as may be modified by
agreement of the Members; and the assets of the Company shall not be liquidated.
The successor limited liability company shall be deemed to have acquired by
contribution the assets of the Company and the interest of each Member in the
Company, subject to the liabilities and obligations of the Company. Each Member
hereby agrees to execute and deliver all documents necessary to effectuate the
purposes of this Section.
7.9 RESTRICTIONS REASONABLE. Each Member acknowledges and agrees that
the restrictions on the transfer of Percentage Interests imposed by this
Agreement are imposed to accomplish legitimate purposes of the Company, and that
such restrictions are not more restrictive than necessary to accomplish those
purposes.
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7.10 CERTAIN PROVISIONS OF THE ACT SUPERSEDED. The provisions of this
Agreement regarding the Retirement of a Member and the transfer of Percentage
Interests are intended to and shall, to the fullest extent permitted by law,
supersede the provisions of the Act regarding the withdrawal of a member, in
respect of each Member.
ARTICLE VIII
REMOVAL OF MANAGER;
ADMISSION OF SUBSTITUTE MANAGER
8.1 REMOVAL OF MANAGER. Subject to Section 8.3, the Manager may be
removed as Manager upon the unanimous written direction of the Members other
than the Manager, for any reason or no reason at all.
8.2 ADMISSION OF SUBSTITUTE MANAGER. Subject to Section 8.3: (a) a
substitute Manager shall be chosen by the Members other than the removed Manager
upon the removal or Retirement of the Manager, and shall succeed to all the
rights, powers, authority, duties and obligations of such Manager as set forth
in this Agreement immediately upon its admission as a Manager in the Company;
(b) a Manager must also be a Member; and (c) a substitute Manager shall be
admitted as Manager and as a Member on such terms and conditions as shall be
determined with the unanimous written consent of the Members other than the
removed Manager, which consent may be withheld by any of such Members, in its
sole and absolute discretion, for any reason or for no reason at all.
8.3 MANAGER UPON PURCHASE OF CERTAIN PERCENTAGE INTERESTS.
(a) Limited. In the event that Limited acquires the Percentage
Interest of Georgetown or M/I pursuant to Section 7.1(b)(iii) or otherwise, the
Members agree that Limited shall thereupon become the Manager without any
further action and thereafter, notwithstanding Section 8.1, Limited may not be
removed as Manager pursuant to Section 8.1.
(b) M/I. In the event that M/I acquires the Percentage Interest
of Georgetown or Limited pursuant to Section 7.1(b)(iii) or otherwise, the
Members agree that M/I shall thereupon become the Manager without any further
action and thereafter, notwithstanding Section 8.1, M/I may not be removed as
Manager pursuant to Section 8.1.
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ARTICLE IX
PROCEDURE ON DISSOLUTION
9.1 LIQUIDATION. Upon the dissolution of the Company, unless the
Company is continued or reformed as provided in this Agreement, the Manager
shall proceed to liquidate the Company and to apply and distribute the proceeds
of liquidation as set forth in Sections 4.6 and 4.7.
9.2 OPERATIONS DURING LIQUIDATION. Upon the determination that the
Company is to be dissolved and liquidated, the business of the Company during
the period of liquidation shall be carried on by the Manager, or if there be no
Manager, by a designee of the Members, who shall possess all the powers of the
Manager to the extent necessary to wind up the business and affairs of the
Company.
9.3 TIME FOR LIQUIDATION. In the event the Company is "liquidated"
within the meaning of the Allocation Regulations, distributions shall be made
pursuant to Section 4.6 in compliance with the timing requirements of the
Allocation Regulations; provided, however, that if, in the opinion of counsel
satisfactory to the Manager, failure to comply with the Allocation Regulations
would not cause the allocations of Profits and Losses (or any item thereof) to
the respective Members to lack substantial economic effect within the meaning of
Section 704(b) of the Code, then distributions need not be made in compliance
with the timing requirements of the Allocation Regulations. With the approval of
the Manager, distributions pursuant to the preceding sentence may be distributed
to a trust established for the benefit of the Members for the purposes of
liquidating Company assets, collecting amounts owed to the Company, and paying
any contingent or unforeseen liabilities or obligations of the Company in
accordance with Section 4.6(b). The assets of any such trust shall be
distributed to the Members from time to time, in the reasonable discretion of
the trustee(s) thereof with the consent of the Manager in the same proportions
as the amount distributed to such trust by the Company would otherwise have been
distributed to the Members pursuant to this Agreement. The trustee(s) of such
trust (and any successors) may be designated by the Manager. Subject to
compliance with the foregoing, a reasonable amount of time shall be allowed for
the orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to enable the Manager to minimize the losses
which might otherwise be attendant upon such liquidation.
9.4 MANAGER NOT LIABLE FOR RETURN OF CAPITAL CONTRIBUTIONS. The Manager
shall not be personally liable for any distribution required pursuant to this
Agreement unless such failure to distribute is caused by the gross negligence,
fraud or willful misconduct of the Manager, and such distribution shall be made
solely from available Company assets, if any.
9.5 TERMINATION. Upon compliance with the foregoing distribution plan
(including payment over to an escrow agent or trustee, if deemed appropriate by
the Manager and if there be sufficient funds therefor), the Company shall cease
to be such, and the Manager shall execute, acknowledge and cause to be filed a
certificate of cancellation of the Company with the Secretary of State,
including the name of the Company and the effective date of its dissolution
subject to and in accordance with applicable law.
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ARTICLE X
BOOKS AND RECORDS; BANK ACCOUNTSACCOUNTS
10.1 MAINTENANCE OF BOOKS AND ACCOUNTING METHOD. The Manager shall keep
or cause to be kept the following: (i) a current list of the full names, in
alphabetical order, and last known business or residence addresses of all
Members; (ii) a copy of the Certificate of Formation, including any amendments
thereof and any written powers of attorney relating to the execution thereof;
(iii) a copy of this Agreement, including any amendments thereof and any written
powers of attorney relating to the execution thereof; (iv) copies of federal,
state and local income tax returns and reports of the Company for the three most
recent years; (v) copies of any financial statements of the Company for the
three most recent years; and the other information required to be made available
to the Members pursuant to the Act, including Section 18-305 thereof. Such books
and records shall be maintained at the principal place of business of the
Company and be available upon reasonable notice, at reasonable times, for
inspection and examination by the Members or their duly authorized agents or
representatives in accordance with and subject to the provisions of the Act.
Such books and records shall be consistent with the rules set forth in Section
3.4 of this Agreement. The books and records of the Company shall be kept in
accordance with generally accepted accounting principles and consistent with
federal tax accounting principles prescribed in the Code.
10.2 FISCAL YEAR. The fiscal year of the Company shall be the calendar
year.
10.3 REPORTS TO THE MEMBERS.
(a) During the period commencing on the formation of the Company
and terminating at the close of the Company's second fiscal year, not less often
than quarterly, the Manager shall cause to be prepared (at the Company's
expense) a statement of the financial affairs of the Company (including a
balance sheet, income statement and cash flow statement) and shall submit copies
of such statement to each Member. Thereafter, the Manager shall cause to be
prepared (at the Company's expense) and submitted to the Members such statements
on an annual basis; provided, however, that upon the reasonable request of a
Member, the Manager shall cause to be prepared such statements on a more
frequent basis. The annual financial statements shall be audited and certified
by the Accountants.
(b) The Manager shall cause to be prepared and distributed to
each Member (at the Company's expense), on or before February 28 of each year,
the Member's Schedule K-1 (Form 1065) and all other information reasonably
necessary for the preparation of such Member's federal, state and local tax
returns. No cause of action shall accrue to any Member under this Section 10.3
if the Manager shall have acted in good faith in attempting to meet its
obligations under this Section yet failed to deliver the required statements,
reports, returns or information within the specified period.
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(c) The Manager shall cause to be prepared and sent to each
Member quarterly status reports concerning the operations of the Property.
(d) The Accountants shall be selected from time to time upon the
unanimous consent of the Members.
10.4 INSPECTION BY MEMBERS. Each Member and its representatives shall
have the right, at the expense of the Member taking such action or on whose
behalf such action is being taken, to inspect and examine all books, records,
files and other documents of the Company at all reasonable times during normal
business hours at the offices of the Company. Each Member and its
representatives also shall have the right, in connection with an examination of
the Company to interview the employees of the Manager or the Company in respect
to Company activities, and to interview any other Person (including, without
limitation, the Manager), and the employees thereof, which acts for or has
custody or control of records or documents of the Company. In addition, the
Members shall have the right to obtain from the Manager from time to time upon
reasonable demand: (i) true and full information regarding the state of the
business and financial condition of the Company and any other information
regarding the affairs of the Company; (ii) the documents described in Section
10.1 hereof; and (iii) any other information regarding the affairs of the
Company as is just and reasonable.
10.5 BANKING. All funds of the Company shall be deposited in such bank
account or accounts as shall be established and designated by the Manager.
Withdrawals from any such bank account shall be made upon such signature or
signatures as the Manager may designate. All deposits and other funds not needed
in the operation of the business of the Company and not distributed to the
Members may be invested in deposits that are fully insured by the Federal
Deposit Insurance Corporation or in money market funds rated in the highest
rating category for such funds by a nationally-recognized rating service.
10.6 TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS. The Manager shall, at
the direction of all of the Members, make all tax elections on behalf of the
Company. In the event of a transfer of all or any part of the interest of any
Member for an amount in excess of the adjusted basis for such interest for
federal income tax purposes, the Manager may elect at the direction of all of
the Members, pursuant to Section 754 of the Code (or corresponding provisions of
succeeding law), to enable an adjustment to be made to the basis of the
Property. Any costs incurred by the Company in connection with such Section 754
election shall be borne by the Member seeking a transfer of its interest. Any
adjustments made pursuant to an election under Section 754 shall affect only the
successor in interest to the transferring Member. Each Member will furnish the
Company with all information necessary to give effect to such election.
10.7 COST SEGREGATION ANALYSIS. The Members hereby agree to cause the
Company to engage the services of an appropriate professional firm to prepare a
cost segregation analysis of the Improvements for the purpose of properly
segregating, for income tax depreciation purposes, those
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assets which are subject to depreciation over a shorter period than that
available for the Building, in order to maximize the income tax deductions
available to the Company.
ARTICLE XI
AMENDMENTS
11.1 UNANIMOUS CONSENT OF THE MEMBERS. The provisions of this Agreement
and the Certificate of Formation may be amended only upon the unanimous written
consent of the Members. The consent of any Member to such amendment shall be
deemed to have been given if (a) such consent is given in a vote (either in
person or by proxy) at a duly called meeting of the Members, (b) such consent is
delivered in writing to the Manager or (c) the Manager has not received a
written notice from such Member expressly withholding such consent within
fifteen (15) days after a notice is sent to such Member seeking its consent.
ARTICLE XII
GENERAL PROVISIONS
12.1 NO THIRD PARTY BENEFICIARIES. None of the provisions of this
Agreement shall be construed as existing for the benefit of any creditor of the
Company or as being enforceable by any party not a signatory hereto. There shall
be no third party beneficiaries of this Agreement.
12.2 NON-WAIVER. No provision of this Agreement shall be deemed to have
been waived unless such waiver is contained in a written notice given by the
party granting such waiver to the party claiming such waiver and no such waiver
shall be deemed to be a waiver of any other or further obligation or liability
of the party or parties in whose favor the waiver was given or a waiver by any
party not executing such waiver of any of its rights.
12.3 ADDITIONAL DOCUMENTS AND INSTRUMENTS. The parties shall execute
and deliver to each other such other and further documents and instruments as
may be necessary to carry out the purposes of this Agreement and which are
required by the Manager, or any federal, state or local governmental agency
having jurisdiction over the Property or the Company.
12.4 SEVERABILITY. If any provision or provisions of this Agreement (or
any part thereof) or the application thereof to any particular facts or
circumstances shall be illegal and unenforceable by reason of any statute or
rule of law, or shall be deemed null and void pursuant to Section 2.5 of this
Agreement, the remaining provisions (or parts thereof) of this Agreement or the
application of the particular provision or provisions (or parts thereof) to
other facts or circumstances shall not be affected thereby and shall remain in
full force and effect. It is the intention of the provisions of this Section to
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make clear that the agreement of the parties to this Agreement is that this
Agreement shall be enforced insofar as it may be enforced consistent with
applicable statutes and rules of law.
12.5 NOTICES AND CONSENTS. Except as otherwise specifically set forth
in this Agreement, all notices, demands, requests, consents or approvals given,
required or permitted to be given hereunder, shall be contained in writing and
shall be deemed sufficiently given if actually received or if hand delivered or
sent by recognized overnight delivery service or by certified mail, postage
prepaid and return receipt requested, addressed to the parties at the addresses
set forth below:
If to Georgetown:
The Georgetown Company
667 Madison Avenue
23rd Floor
New York, NY 10021
Attention: Controller
If to Limited:
Limited Oval Office I, Inc.
Three Limited Parkway
Columbus, Ohio 43230
Attention: Real Estate Legal Department
with a copy to:
John P. Wellner, Esq.
Vorys, Sater, Seymour and Pease
52 East Gay Street
P.O. Box 1008
Columbus, Ohio 43216-1008
If to M/I:
M/I Schottenstein Homes, Inc.
41 South High Street
Suite 2410
Columbus, Ohio 43215
Attention: General Counsel
With a copy to:
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Daniel J. Kayne, Esq.
Schottenstein, Zox & Dunn
41 South High Street
Suite 2600
Columbus, Ohio 43215
or to such other address as the recipient shall have previously notified the
sender of in writing, and shall be deemed received upon actual receipt (unless
sent by certified mail, in which event such notice shall be deemed to have been
received three (3) business days after the date of mailing).
12.6 ENTIRE AGREEMENT. This Agreement and each of the exhibits and/or
schedules annexed hereto, each of which is made a part hereof by this reference,
constitute the entire limited liability company agreement of the Company within
the meaning of the Act and contain the entire understanding and agreement
between the parties upon the subject matter of this Agreement and may only be
amended or changed in a writing as provided in Article XI. Any prior
understandings and agreements between the parties are merged herein, except only
as herein otherwise expressly stated.
12.7 PROVISIONS BINDING. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective heirs, executors,
administrators, successors and assigns and any additional or substitute Manager
or Member (except as may otherwise be specifically provided herein).
12.8 CAPTIONS. The table of contents and captions set forth herein are
for convenience and reference only and are not intended to modify, limit,
describe or affect in any way the contents, scope or intent of this Agreement.
12.9 DEFINITIONS. All terms used herein which are defined in this
Agreement shall have the meaning set forth in this Agreement, unless the context
clearly indicates otherwise.
12.10 COUNTERPARTS. This Agreement may be executed in several
counterparts and all so executed shall constitute one and the same agreement
binding on all parties hereto, notwithstanding that all parties have not signed
the same counterpart or that any such counterpart does not have attached copies
of all exhibits and/or schedules hereto as then in effect and copies of all
signature pages attached hereto that constitute part of this Agreement. The
Manager shall maintain at the business office of the Company a counterpart of
this Agreement as executed by all Members and to which shall be attached copies
of all exhibits and/or schedules hereto as then in effect, and all signature
pages, which counterpart shall be available for inspection by any Member.
12.11 WORD MEANINGS. The words such as "herein," "hereinafter,"
"hereof" and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
The singular shall include the plural, and the masculine gender shall include
the feminine and neuter, and vice versa, unless the context otherwise requires.
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12.12 APPLICABLE LAW. This Agreement and the rights of the parties
hereto shall be interpreted in accordance with the laws of the State of
Delaware.
12.13 CHOICE OF VENUE AND CONSENT TO JURISDICTION AND VENUE. It is
the intention of the parties that this Agreement shall be deemed to have been
entered into in Franklin County, Ohio. EACH PARTY HEREBY: (I) CONSENTS TO THE
SUBJECT MATTER AND PERSONAL JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF OHIO AND ANY OF THE COURTS OF FRANKLIN COUNTY, IN THE
STATE OF OHIO IN ANY ACTION, SUIT OR PROCEEDING ARISING UNDER THIS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, ACTIONS, SUITS AND PROCEEDINGS IN CONNECTION
WITH THE ENFORCEMENT OF ANY JUDGMENT), (II) AGREES THAT ANY SUCH ACTION, SUIT OR
PROCEEDING MAY BE BROUGHT IN ANY OF SUCH COURTS, (III) WAIVES ANY OBJECTION
BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO JURISDICTION OR VENUE OF ANY
ACTION INSTITUTED IN SUCH COURTS HEREUNDER, AND (IV) AGREES THAT SERVICE OF
PROCESS OR NOTICE IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE EFFECTIVE IF
GIVEN IN ACCORDANCE WITH SECTION 12.5.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the undersigned have duly executed this Limited
Liability Company Agreement of Northeast Office Venture, Limited Liability
Company.
THE GEORGETOWN COMPANY
By:
-------------------------------------
Printed Name: Edgar A. Lampert
Title: Authorized Representative
LIMITED OVAL OFFICE I, INC.
By:
------------------------------------
Printed Name: George R. Sappenfield
Title: Vice President - Real Estate
M/I SCHOTTENSTEIN HOMES, INC.
By:
------------------------------------
Print Name: Irving E. Schottenstein
Title: President
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SCHEDULE A
MEMBERS, CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
Member Percentage
and Address Interests
The Georgetown Company 33 1/3%
667 Madison Avenue
23rd Floor
New York, NY 10021
Limited Oval Office I, Inc. 33 1/3%
Three Limited Parkway
Columbus, Ohio 43230
M/I Schottenstein Homes, Inc. 33 1/3%
41 South High Street
Suite 2410
Columbus, Ohio 43215
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SCHEDULE B
LEGAL DESCRIPTION OF THE LAND
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SCHEDULE C
CERTIFICATE OF FORMATION
OF
NORTHEAST OFFICE VENTURE, LIMITED LIABILITY COMPANY
The undersigned, desiring to form a limited liability company under
Chapter 6, Sections 18-101 et seq. of the Delaware Code, hereby certifies as
follows:
1. The name of the limited liability company shall be Northeast
Office Venture, Limited Liability Company.
2. The address of the limited liability company's registered
office in the state of Delaware is Corporation Trust Center, 1209 Orange Street,
in the City of Wilmington, County of New Castle 19801. The name of its
registered agent at such address is The Corporation Trust Company.
3. The undersigned is an authorized person for purposes of the
execution and delivery of this Certificate of Formation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Formation of Northeast Office Venture, Limited Liability Company this ____
day of ________, 1995.
THE GEORGETOWN COMPANY, a
New York general partnership
By:
-----------------------------
Print name:
-----------------------
Title:
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-C-1-
64
SCHEDULE D
LOCATION OF CERTAIN REAL PROPERTY
IN PROXIMITY TO THE LAND
-D-1-
65
SCHEDULE ESCHEDULE E
PRELIMINARY BUDGET
-E-1-