EXHIBIT 10.1
EXECUTION COPY
LIMITED LIABILITY COMPANY AGREEMENT
OF
TRIPLE NET INVESTMENT COMPANY LLC
Dated as of April 22, 2004 and Effective as of June 4, 2004
LIMITED LIABILITY COMPANY AGREEMENT
OF
TRIPLE NET INVESTMENT COMPANY LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (as it may be amended,
modified, supplemented or restated from time to time, this "Agreement") of
TRIPLE NET INVESTMENT COMPANY LLC (the "Company"), made and entered into as of
the 22nd day of April, 2004, and effective as of June 4, 2004, by and among
Lexington Corporate Properties Trust, a Maryland statutory real estate
investment trust ("LXP"), and Utah State Retirement Investment Fund, a common
trust fund created pursuant to the statutes of the State of Utah (the "Fund").
LXP and the Fund are sometimes individually referred to herein as a "Member" and
collectively referred to herein as the "Members").
In consideration of the covenants and agreements set forth
herein, the Members hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For the purposes of this Agreement,
initially capitalized terms used herein shall have the following meanings:
"Acquiport Entities" shall mean individually or collectively, (a)
Lexington Acquiport Company, LLC and (b) Lexington Acquiport Company II, LLC.
"Acquiport Operating Agreements" shall mean individually or
collectively, (a) the Operating Agreement of Lexington Acquiport Company, LLC
dated as of July 14, 1999, as amended, and (b) the Operating Agreement of
Lexington Acquiport Company II, LLC dated as of December 5, 2001, as amended.
"Acquiport Property" shall mean a property or loan which is
required to be presented by LXP to the Acquiport Entities for consideration for
acquisition or investment pursuant to the Acquiport Operating Agreements.
"Acquisition Activities" is defined in Section 3.6(f) hereof.
"Acquisition Fee" is defined in Section 3.6(g) hereof.
"Acquisition Memorandum" shall mean a memorandum in the form
attached as Schedule 3 hereto with respect to any Proposed Qualified Property as
provided in Section 3.6(b) hereof.
"Acquisition Parameters" shall mean the guidelines and
requirements for any Proposed Qualified Property that are set forth on Schedule
2 hereto.
"Act" is defined in Section 2.1 hereof.
"Additional Capital Contribution" is defined in Section 5.1(b)
hereof.
"Adjusted Capital Account Deficit" shall mean the deficit
balance, if any, in a Member's Capital Account at the end of any fiscal year,
with the following adjustments: (i) credit to such Capital Account any amount
that such Member is obligated or deemed obligated to restore under Regulations
Section 1.704-1(b)(2)(ii)(c), as well as any additions thereto pursuant to the
next to last sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
after taking into account thereunder any changes during such year in Partnership
Minimum Gain and in the minimum gain attributable to any Partner Nonrecourse
Debt; and (ii) debit to such Capital Account the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of
Adjusted Capital Account Deficit is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner
consistent with such intent.
"Advisor" shall mean AEW Capital Management, L.P. or any
successor thereto designated by the Fund as provided in Section 12.1(c) hereof
that serves as the manager of the Fund.
"Affiliate" when used with respect to any particular Person,
shall mean (a) any Person or group of Persons acting in concert that directly or
indirectly through one or more intermediaries controls or is controlled by or is
under common control with such particular Person, (b) any Person that is an
officer, partner, member or trustee of, or serves in a similar capacity with
respect to, such particular Person or of which such particular Person is an
officer, partner, member or trustee or with respect to which such particular
Person serves in a similar capacity, (c) any Person that, directly or
indirectly, is the beneficial owner of 10% or more of any class of voting
securities of, or otherwise has an equivalent beneficial interest in, such
particular Person or of which such particular Person is directly or indirectly
the owner of 10% or more of any class of voting securities or in which such
particular Person has an equivalent beneficial interest or (d) any relative or
spouse of such particular Person. Notwithstanding the foregoing, neither LXP nor
the Fund shall be deemed to be an Affiliate of the other party. The definition
of "Affiliate" as used in this Agreement shall not be affected by the
Regulations under Code Section 752 describing certain "related" parties.
"Agreement" is defined in the Preamble hereto. This Agreement
shall be the "limited liability company agreement" for the Company within the
meaning of Section 18-101(7) of the Act.
"Amending Member" is defined in the Section 3.5(c) hereof.
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"Annual Budget" shall mean the annual budget for the Company and
each Qualified Property for any fiscal year, including without limitation a
reasonable description of the amount, source and character of each item of gross
income, expense and services to be rendered in the form attached hereto as
Exhibit A, approved by the Members as provided in Section 3.5 hereof.
"Annual Plan" is defined in Section 3.5(a) hereof.
"Appraisal" shall mean an appraisal performed by any third-party
appraiser set forth under "Approved Appraisers" on Schedule 2.5 hereto or any
other third-party appraiser selected by the Fund and reasonably acceptable to
the Manager.
"Approved Qualified Property" is defined in Section 3.6(d)
hereof.
"Asset Manager" shall mean Lexington Realty Advisors, Inc. or
another Affiliate of LXP.
"Bankruptcy" of the Company or a Member shall be deemed to have
occurred upon the happening of any of the following: (i) the filing of an
application by the Company or such Member for, or a consent to, the appointment
of a trustee, receiver or liquidator of its assets; (ii) the filing by the
Company or such Member of a voluntary petition or answer in bankruptcy or the
filing of a pleading in any court of record admitting in writing its inability
to pay its debts as such debts come due or seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation; (iii) the making by the Company or such Member of a
general assignment for the benefit of creditors; (iv) the filing by the Company
or such Member of an answer admitting the material allegations of, or its
consenting to or defaulting in answering, a bankruptcy or insolvency petition
filed against it in any bankruptcy or similar proceeding; or (v) the expiration
of sixty (60) days following the entry by any court of competent jurisdiction of
an order for relief in any bankruptcy or insolvency proceeding involving the
Company or such Member or of an order, judgment or decree adjudicating the
Company or such Member a bankrupt or insolvent or appointing a trustee, receiver
or liquidator of its assets.
"Bona Fide Offer" is defined in Section 3.7(b) hereof.
"Book Depreciation" shall mean all deductions attributable to the
depreciation, amortization or other cost recovery, including additions, of any
Qualified Property or other asset (whether tangible or intangible) acquired by
the Company that has a useful life in excess of one year, as such deductions are
computed for federal income tax purposes; provided, that with respect to any
Company asset the tax basis of which differs from the Book Value of such asset,
Book Depreciation for any period shall equal (x) the sum total of all deductions
taken during such period attributable to depreciation, amortization or other
cost recovery deduction for federal income tax purposes with respect to such
asset, multiplied by (y) the Book Value of such asset divided by the tax basis
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thereof; provided further, that if the depreciation, amortization or other cost
recovery deduction for federal income tax purposes with respect to any Company
asset for any period is zero ($0.00), Book Depreciation shall be determined by
the Tax Matters Member using any reasonable method selected by the Tax Matters
Member that is based on the Book Value of such asset.
"Book Value" shall mean, with respect to any Company asset at any
time, the adjusted basis of such asset for federal income tax purposes, except
that (i) the initial Book Value of any asset contributed by a Member to the
Company shall be the Fair Market Value of such asset, and (ii) the Book Value of
all Company assets shall be adjusted to equal their Fair Market Values, as
determined in good faith by the Manager, upon the occurrence of certain events
as described below. In either case, the Book Value of Company assets shall
thereafter be adjusted for Book Depreciation taken into account with respect to
such asset. Provided the Tax Matters Member makes an election to do so as
provided under Section 1.704-1(b)(2)(iv)(f) of the Regulations, the Book Value
of Company assets shall be adjusted to equal their Fair Market Value, as
determined in good faith by the Manager, as of the following times to which the
election relates: (1) the admission of a new Member to the Company or
acquisition by an existing Member of an additional interest in the Company,
provided that the consideration contributed to the Company upon such admission
or acquisition is more than a de minimis amount of money or property; (2) the
distribution by the Company to a Member of more than a de minimis amount of
money or other property; and (3) the termination of the Company for federal
income tax purposes pursuant to Code Section 708(b)(1)(B).
The Book Value of all Company assets shall also be increased (or
decreased) to the extent that adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b) have been taken into
account for purposes of determining Capital Accounts in accordance with
Regulation Section 1.704-1(b)(2)(iv)(m), unless such adjustments have already
been accounted for pursuant to the preceding paragraph. If the Book Value of an
asset has been determined or adjusted pursuant hereto, such value shall
thereafter be the basis for, and be adjusted by, the depreciation taken into
account with respect to, such asset for purposes of computing Profits and
Losses. Moreover, notwithstanding the foregoing, the Book Value of any Company
asset distributed to either Member shall be the gross Fair Market Value of such
asset on the date of distribution.
"Business Day" shall mean any day other than a Saturday, Sunday,
any day on which national banks in New York, New York are not open for business
and all other days on which the offices of the State of Utah or the Commonwealth
of Massachusetts are not open for business.
"Buy/Sell Property" is defined in Section 11.1(a) hereof.
"Capital Account" shall mean, with respect to either Member, the
separate "book" account which the Company shall establish and maintain for such
Member as
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provided in Section 6.1 hereof and in accordance with Section 704(b) of the Code
and Regulations Section 1.704-1(b)(2)(iv) and such other provisions of Section
1.704-1(b) of the Regulations as must be complied with in order for the Capital
Accounts to be determined in accordance with the provisions of said Regulations.
In furtherance of the foregoing, the Capital Accounts shall be maintained in
compliance with Section 1.704-1(b)(2)(iv) of the Regulations, and the provisions
hereof shall be interpreted and applied in a manner consistent therewith.
"Capital Call" is defined in Section 5.1(b) hereof.
"Capital Commitment" shall mean, with respect to each Member, the
amount set forth opposite its name on Schedule 1 hereto, as such Schedule may be
amended or modified from time to time upon the Members' unanimous consent. Any
payment of the Acquisition Fees or Financing Fees shall neither increase nor
decrease a Member's Capital Commitment.
"Capital Contribution" shall mean, at any particular time and
with respect to either Member, an amount equal to the sum of (x) the total
amount of cash and (y) the Fair Market Value of any property (determined as of
the date such property is contributed by such Member and net of any liabilities
secured by such property that the Company is considered to assume or take
subject to under Section 752 of the Code), that has in each case been
contributed to the Company by such Member pursuant to Section 5.1 hereof.
"Cash Purchase Price" is defined in Section 11.2(c) hereof.
"Cause" is defined in Section 8.3(a) hereof.
"Challenging Member" is defined in Section 11.1(d) hereof.
"Claim Amount" is defined in Section 5.1(e) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
or corresponding provisions of future laws.
"CPI" shall mean the Revised Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor, U.S. City Average, All Items, based on 1982-84 as 100. If
the CPI hereafter ceases to use the base of 1982-84 as 100, then the CPI with
the new base shall be used. If the Bureau of Labor Statistics ceases to publish
the CPI, then the successor or most nearly comparable index shall be used. In
the event that the U.S. Department of Labor, Bureau of Labor Statistics, changes
the publication frequency of the CPI so that it is not available when required
under the Agreement, then the CPI for the closest preceding month for which a
CPI is available shall be used in place of the CPI no longer available.
"Default Amount" is defined in Section 5.1(d) hereof.
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"Defaulting Member" is defined in Section 5.1(d) hereof.
"Defaulting Transferring Member" is defined in Section 5.1(e)
hereof.
"Distributable Cash" shall mean the amounts distributed pursuant
to Section 7.1(a)(i) hereof.
"Economic Interest" shall mean, with respect to any Percentage
Interest, (a) all income, profits, cash flow, proceeds of sales and/or
refinancing of the Qualified Properties, fees or payments of whatever nature and
all distributions to which either Member would be entitled, now or at any time
hereafter, of whatsoever description or character; (b) all of either Member's
present and future rights to and in its Capital Account, whether by way of
liquidating distributions or otherwise, and all of such Member's right to
receive or share in any surplus of the Company in the event of the dissolution
of the Company; and (c) all damages, awards, money and considerations of any
kind or character to which either Member would be entitled, now or at any time
hereafter, arising out of or derived from any proceeding by or against such
Member in any federal or state court, under any bankruptcy or insolvency law or
under any law relating to assignments for the benefit of creditors,
compositions, extensions or adjustments of indebtedness, or to any other relief
of debtors, or otherwise in connection with its interest in the Company.
"Economic Risk of Loss" shall have the meaning specified in
Regulations Section 1.752-2.
"Election Notice" is defined in Schedule 5 hereto.
"Environmental Assessment" shall mean with respect to any
Proposed Qualified Property, a phase one environmental site assessment performed
by any environmental consultant set forth under "Approved Environmental
Consultants" on Schedule 2.5 hereto, or any other qualified environmental
consultant selected by the Manager and reasonably acceptable to the Fund (each,
an "Environmental Consultant") in accordance with the then current ASTM Standard
Practice for Environmental Site Assessments, E1527 and, if required, any
additional Phase II sampling, investigation, monitoring or other activities
performed by an Environmental Consultant.
"Environmental Law" shall mean every federal, state, county or
other governmental law, statute, ordinance, rule, regulation, requirement, order
(including any consent order), or other binding obligation, injunction, writ or
decision relating to or addressing the environment or hazardous materials,
including, but not limited to, those federal statutes commonly referred to as
the Clean Air Act, Clean Water Act, Resource Conservation Recovery Act, Toxic
Substances Control Act, Comprehensive Environmental Response, Compensation and
Liability Act and the Endangered Species Act as well as all regulations
promulgated thereunder and all state laws and regulations
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equivalent thereto, as each such statute, regulation or state law or regulation
equivalent may be amended from time to time.
"Exclusivity Right" is defined in Section 3.9(a)(ii) hereof.
"Exercise Notice" is defined in Schedule 5 hereof.
"Extraordinary Call" is defined in Section 5.1(c) hereof.
"Extraordinary Capital Contribution" is defined in Section 5.1(c)
hereof.
"Extraordinary Funding" is defined in Section 5.1(c) hereof.
"Extraordinary Loan" is defined in Section 5.1(c) hereof.
"Fair Market Value" shall mean an amount (in cash) that a bona
fide, willing buyer under no compulsion to buy and a bona fide, willing and
unrelated seller under no compulsion to sell would pay and accept, respectively,
for the purchase and sale of a Qualified Property, taking into account any
liens, restrictions and agreements then in effect and binding upon the Qualified
Property or any successor owner thereof and any options, rights of first refusal
or offer or other rights or options that either burden the Qualified Property or
run to the benefit of the owner of the Qualified Property; provided, however,
that in determining the Fair Market Value of any Qualified Property, none of the
options, rights of first refusal or offer or other rights of the Members
hereunder shall be taken into consideration.
"Fee Disclosure" is defined in Section 3.11(h) hereof.
"FFO" shall mean net income or loss (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect funds from operations on the same basis.
"Financing Fee" is defined in Section 3.6(g) hereof.
"Fund" is defined in the Preamble hereto.
"Indemnified Party" is defined in Section 3.13(a) hereof.
"Initial Capital Contribution" shall mean, with respect to each
Member, an amount equal to the sum of (x) the amount of cash and (y) the Fair
Market Value of any property (determined as of the date such property is
contributed by such Member and net of any liabilities secured by such property
that the Company is considered to assume or
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take subject to under Section 752 of the Code), that has in each case been
contributed to the Company by such Member at such time as the Members have
agreed.
"Lion Partnership Agreement" shall mean the Limited Partnership
Agreement of Lexington/Lion Venture L.P. dated as of October 1, 2003.
"Lion Property" shall mean a property which is required to be
presented by LXP to the Lion Venture for consideration for acquisition or
investment pursuant to the Lion Partnership Agreement.
"Lion Venture" shall mean Lexington/Lion Venture L.P., a Delaware
limited partnership.
"Interest Price" is defined in Section 11.1(a) hereof.
"Liquidating Events" is defined in Section 9.1 hereof.
"Liquidation" shall mean (a) when used with respect to the
Company, the earlier of (i) the date upon which the Company is terminated under
Section 708(b)(1) of the Code and (ii) the date upon which the Company ceases to
be a going concern, and (b) when used with respect to either Member, the earlier
of (i) the date upon which there is a Liquidation of the Member and (ii) the
date upon which such Member's entire interest in the Company is terminated other
than by transfer, assignment or other disposition to a Person other than the
Company.
"Liquidator" shall mean the Manager, unless the Manager's
Bankruptcy, insolvency, removal, withdrawal or liquidation or default hereunder
shall have preceded the Liquidation of the Company, in which case the Liquidator
shall be any Person designated as such by the Fund.
"Losses" and "Profits" are defined in Section 6.2(b) hereof.
"LXP" is defined in the Preamble hereto.
"LXP Affiliated Party" shall mean LXP, the Asset Manager and/or
any of their respective Affiliates.
"LXP Board" shall mean the Board of Trustees of LXP.
"Major Decision" is defined in Section 3.4 hereof.
"Management Agreement" shall mean the agreement between the Asset
Manager and the Company which shall be substantially in the form attached hereto
as Exhibit B.
"Management Fee" is defined in Section 3.10(c) hereof.
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"Manager" shall mean the Person in whom the management of the
Company is vested pursuant to the terms of this Agreement. LXP shall be the
Manager until LXP (x) transfers its limited liability company membership
interest in the Company or withdraws as a Member from the Company, (y) transfers
or assigns its rights and obligations as the Manager or resigns as the Manager,
or (z) is removed as Manager, each as provided in Article VIII hereof.
"Material Modification" shall mean a modification relating to the
treatment of Capital Accounts, distributions and/or allocations hereunder which,
when considered on a cumulative basis with the effect of all other such
modifications previously made, is likely to adversely affect the amount
ultimately distributable or paid to either Member hereunder as determined by the
independent accountants of the Company.
"Member" is defined in the Preamble hereto.
"Net Cash Flow from Operations" shall mean the gross proceeds
from Company operations (excluding sales or other dispositions or refinancings
of Qualified Properties) less the sum of any portion thereof used to (x) pay
Operating Expenses, capital improvements, replacements or debt payments, any
management fees payable to the Manager or Asset Manager pursuant to Section
3.10(c) hereof, any credits reserved pursuant to Section 3.10(c) hereof,
indemnities and other extraordinary payments made pursuant to this Agreement or
to (y) establish reasonable reserves for Operating Expenses, capital
improvements, replacements, debt payments and contingencies as provided in the
Annual Plan, as such reserves are calculated, established and maintained by the
Manager pursuant to Section 3.11(d). "Net Cash Flow from Operations" shall not
be reduced by real estate depreciation or by cost amortization, cost recovery
deductions or similar allowances, but shall be increased by any reduction of
reserves previously described in an Annual Plan.
"Net Cash from Sales or Refinancings" shall mean the gross cash
proceeds from the sale or other disposition or refinancing of Qualified
Properties less (a) any closing, transaction and other costs incurred by the
Company in connection with such sale or other disposition or refinancing or
repayment or exercise, as the case may be; (b) the amount required to retire any
debt outstanding against such Qualified Properties; and (c) any amounts required
to fund any related reserves up to the levels required by the Annual Plan, as
calculated by the Manager. Net Cash from Sales or Refinancings shall be
increased by reductions of reserves originally funded from Net Cash from Sales
or Refinancings. "Net Cash from Sales or Refinancings" shall include all
principal and interest payments made with respect to any note or other
obligation received by the Company in connection with the sale or other
disposition of any Qualified Property.
"Net Rents" for any period shall mean the base rents, escalations
of base rents, percentage rents and other rents (but specifically excluding
reimbursements from tenants for Operating Expenses) actually received by the
Company from all of the tenants
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of the Qualified Properties during such period less any Operating Expenses for
the Qualified Properties not paid by the tenants thereof.
"Nonrecourse Liability" shall mean any Company liability (or
portion thereof) the Economic Risk of Loss of which is not borne by either
Member or any party related to either Member, as such related party is described
in the applicable Regulations under Code Section 752.
"Non-Investment Grade Tenant" shall mean a tenant of a property
that either (a) has a current credit rating by Standard & Poor's of B to BB+ or
a comparable credit rating by Moody's Investors Services, Inc., Duff & Phelps
Credit Rating Co., Fitch IBCA.
"Non-Sale Member" is defined in Section 3.7(b) hereof.
"Offer Notice" is defined in Section 11.1(a) hereof.
"Offer Price" is defined in Section 11.1(a) hereof.
"Offered Agreement" is defined in Section 11.1(a) hereof.
"Offering Member" is defined in Section 11.1(a) hereof.
"Operating Expenses" shall mean (x) all reasonable and customary
costs and expenses of Third Parties retained in connection with the ownership,
leasing, operation, repair and maintenance of the Qualified Properties and (y)
real estate taxes, insurance premiums, utility charges, rent collection and
lease enforcement costs, brokerage commissions to the extent applicable to the
period in question (but excluding any Acquisition Fees payable to the Manager or
the Asset Manager under Section 3.6(g) hereof), maintenance expenses, costs of
repairs and replacements (which, under generally accepted accounting principles
consistently applied, may be expensed during the period when made) and
management fees (but excluding any management fees or the Oversight Fee payable
to the Manager or Asset Manager pursuant to Section 3.10(c) hereof) in
connection with the ownership, leasing, operation, repair and maintenance of the
Qualified Properties. Operating Expenses shall not include general and
administrative costs and overhead of the Company and debt payments.
"O.P. Unit" shall mean a partnership interest in a partnership in
which LXP is a partner.
"Oversight Fee" is defined in Section 3.10(c) hereof.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4).
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"Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Regulations Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" is defined in Section 6.3(d)
hereof.
"Partnership Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) and (d) of the Regulations.
"Percentage Interest" shall mean the entire undivided ownership
interest in the Company of either Member at any particular time, (x) expressed
as a percentage rounded to the nearest one one-hundredth (0.01%), (y) determined
at such time by dividing the total Capital Contributions made by such Member by
the total Capital Contributions made in the Company by both Members and (z) as
may be adjusted from time to time in accordance with the terms hereof. The
Percentage Interest of each Member as of the date hereof shall be as described
on Schedule 1 hereto.
"Permitted Expenses" shall mean, for each annual period covered
by an Annual Plan, Operating Expenses, capital improvements, replacements and
debt payments as set forth therein plus, with respect to each budget line item
in the Annual Budget portion of such Annual Plan, the greater of (w) five
percent (5%) of each such budget line item or (x) Twenty Thousand Dollars
($20,000.00); provided, however, that Permitted Expenses shall not include any
Operating Expenses, capital improvements, replacements and debt payments which,
when added to all other obligations incurred or reserve amounts accrued in
excess of the applicable budget line items in such Annual Budget portion of the
Annual Plan, exceed (x) One Hundred Thousand Dollars ($100,000) in any fiscal
year for a particular Qualified Property or (y) an average (taking into account
all Qualified Properties then owned by the Company) of Fifty Thousand Dollars
($50,000) per Qualified Property. Permitted Expenses shall also mean (i) all
reasonable and customary costs and expenses of Third Parties retained in
connection with the Acquisition Activities as provided in Section 3.6(f) hereof,
(ii) any reasonable costs or expenses incurred in implementing a Major Decision
agreed to by the Members as provided in Section 3.4 hereof and not otherwise
already included in an Annual Plan, (iii) costs and expenses incurred by the
Members in connection with the formation of the Company, including legal fees,
and (iv) the management fees payable pursuant to Section 3.10(c) hereof.
"Person" shall mean any individual, trust (including a business
trust), unincorporated association, corporation, limited liability company,
joint stock company, general partnership, limited partnership, joint venture,
governmental authority or other entity.
"Physical Inspection Report" shall mean a report prepared by any
consultant set forth under "Approved Physical Inspection Consultants" on
Schedule 2.5 hereto, or any other qualified independent third party engineer,
architect or other real estate inspector selected by the Manager and reasonably
acceptable to the Fund concerning the physical condition of any Proposed
Qualified Property.
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"Plan Amendment" is defined in Section 3.5(c).
"Profits" and "Losses" are defined in Section 6.2(b) hereof.
"Proposed Plan" is defined in Section 3.5(a) hereof.
"Proposed Tendered Qualified Properties" is defined in Section
11.2(b) hereof.
"Proposed Qualified Property" is defined in Section 3.6(a)
hereof.
"Purchase and Sale Agreement" shall mean the agreement pursuant
to which a Member transfers an Approved Qualified Property to the Company
pursuant to Section 5.1 hereof and shall be in the form to be agreed to by the
Members, at which time it will be attached as Exhibit C to this Agreement.
"Qualified Property" or "Qualified Properties" shall mean the
interest of the Company in each parcel of real property acquired as provided in
Section 3.6 hereof, together with all buildings, structures and improvements
located thereon, fixtures contained therein, appurtenances thereto and all
personal property owned in connection therewith.
"Redemption Right" is defined in Section 11.2(a) hereof.
"Redemption Right Shares" is defined in Section 11.4 hereof.
"Regulations" shall mean the income tax regulations promulgated
under the Code, whether temporary, proposed or finalized, as such regulations
may be amended from time to time (including corresponding provisions of future
regulations).
"Regulatory Allocations" is defined in Section 6.3(f) hereof.
"Removal Amount" is defined in Section 8.3(b) hereof.
"Removal Notice" is defined in Section 8.3(a) hereof.
"Responding Member" is defined in Section 11.1(a) hereof.
"Responding Interest Price" is defined in Section 11.1(c) hereof.
"Response Notice" is defined in Section 11.1(a) hereof.
"Retained Qualified Properties" is defined in Section
11.2(b)(ii).
"Right of First Refusal" is defined in Section 3.7(b) hereof.
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"Rights Trigger Date" shall mean the date of June 1, 2007.
"Sale Member" is defined in Section 3.7(b) hereof.
"Sale Notice" is defined in Section 3.7(b) hereof.
"Section 704(c) Property" shall mean (x) each item of property to
which Section 704(c) of the Code or Section 1.704-3(a)(3) of the Regulations
applies that is contributed to the Company, and (y) any property owned by the
Company which is governed by the principles of Section 704(c) of the Code, as
contemplated by Section 1.704-1(b)(4)(i) and other analogous provisions of the
Regulations.
"Share Purchase Price" is defined in Schedule 5 hereof.
"Shares" shall mean the common shares of beneficial interest, par
value $.0001 per share, of LXP.
"SP Subsidiary" shall mean an entity selected by the Manager and
approved by the Fund which shall be wholly-owned (directly or indirectly) by the
Company, the purpose of which is limited to acquiring, financing, holding for
investment, preserving, managing, operating, improving, leasing, selling,
exchanging, transferring and otherwise using or disposing of a Qualified
Property or Qualified Properties.
"Tax Depreciation" shall mean with respect to any property owned
by the Company depreciation, accelerated cost recovery, or modified cost
recovery, and any other amortization or deduction allowed or allowable for
federal, state or local income tax purposes.
"Tax Matters Member" is defined in Section 6.5 hereof.
"Tendered Qualified Properties" shall mean all of the Company's
Qualified Properties owned by the Company at the time the Fund exercises the
Redemption Right pursuant to Section 11.2 hereof or, if the Fund or LXP, or
both, exercise their rights to exclude Qualified Properties under Section
11.2(b) hereof, the Qualified Properties remaining after the Fund has excluded
Qualified Properties pursuant to Clause (ii) of Section 11.2(b) hereof and after
LXP has excluded certain Qualified Properties pursuant to Clause (iii) of
Section 11.2(b) hereof.
"Third Parties" shall mean consultants, engineers, environmental
consultants, appraisers, accountants, attorneys, contractors and subcontractors,
brokers or managers, but excluding any LXP Affiliated Party.
"Transferring Member" is defined in Section 5.1(e) hereof.
13
"12% IRR" shall mean an annual interest rate of 12% which, when
applied to the Capital Contributions (including credited amounts under Section
3.10(c) hereof) made, and the Acquisition Fees and Financing Fees (if any) paid,
by each Member and the Distributable Cash distributed to each Member, renders
the net present value of such negative (i.e. Capital Contributions, Acquisition
Fees and Financing Fees) and positive (i.e. Distributable Cash) cash flows equal
to zero.
Capitalized terms used herein but not defined herein shall have
the meanings assigned to such terms in Schedule 5 hereto, unless the context
requires otherwise.
ARTICLE II
FORMATION, DURATION AND PURPOSES
Section 2.1 Formation. Pursuant to the Delaware Limited Liability
Company Act, codified in the Delaware Code Annotated, Title 6, Sections 18-101
to 18-1109, as the same may be amended from time to time (the "Act"), the
Members agree to form and hereby form the Company by entering into this
Agreement. The Members hereby acknowledge that a certificate of formation has
been executed by Dianne R. Smith, an authorized person (as such term is used in
Section 18-201 of the Act), and filed in the office of the Delaware Secretary of
State on April 22, 2004. The execution and filing of such certificate of
formation with the Delaware Secretary of State is hereby authorized, ratified
and approved by the Members. The rights, liabilities and obligations of either
Member with respect to the Company shall be determined in accordance with the
Act and this Agreement. To the extent anything contained in this Agreement
modifies, supplements or otherwise affects any such right, liability, or
obligation arising under the Act, this Agreement shall supercede the Act to the
extent not restricted thereby.
Section 2.2 Name; Registered Agent and Registered Office. The
name of the Company and the name under which the business of the Company shall
be conducted shall be "Triple Net Investment Company LLC". The registered agent
of the Company shall be National Registered Agents, Inc., and the registered
office of the Company shall be at National Registered Agents, Inc., 9 East
Lookerman Street, Suite 1B, in the City of Dover, County of Kent, Delaware
19901. The Manager may select another such registered agent or registered office
from time to time upon ten (10) Business Days prior written notice thereof to,
and the consent of, the Members.
Section 2.3 Principal Office. The principal place of business and
office of the Company shall be located at One Penn Plaza, Suite 4015, New York,
New York 10119-4015, or at such other place as the Manager may determine from
time to time. The business of the Company may also be conducted at such
additional place or places as the Manager may determine.
Section 2.4 Purposes and Business. The business of the Company is
to, directly or indirectly, acquire, finance, refinance, hold for investment,
preserve,
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manage, operate, improve, lease, sell, exchange, transfer and otherwise use or
dispose of the Qualified Properties as may be, directly or indirectly, acquired
by the Company from time to time pursuant to the terms hereof, which Qualified
Properties may be located anywhere in the United States and shall not be used
primarily for agricultural, horticultural, ranch, mining, recreational,
amusement or club purposes. In connection therewith and without limiting the
foregoing, the Company shall have the power to, directly or indirectly, dispose
of the Qualified Properties in accordance with the terms of this Agreement and
to engage in any and all activities related or incidental thereto, all for the
benefit of the Company.
Section 2.5 Term. The term of the Company shall commence on the
date of this Agreement and shall continue in full force and effect until ten
(10) years from the date hereof, unless sooner terminated pursuant to the terms
hereof. No Member may withdraw from the Company without the prior consent of the
other Members, other than as expressly provided in this Agreement.
Section 2.6 Other Qualifications. The Company shall file or
record such documents and take such other actions under the laws of any
jurisdiction in which the Company does business as are necessary or desirable to
permit the Company to do business in any such jurisdiction and to promote the
limitation of liability for the Members in any such jurisdiction.
Section 2.7 Limitation on the Rights of Members. Except as
otherwise specifically provided in this Agreement, (a) no Member shall have the
right to withdraw or retire from, or reduce its contribution to the capital of,
the Company; (b) no Member shall have the right to demand or receive property
other than cash in return for its Capital Contribution; and (c) no member shall
have priority over any other Member either as to the return of its Capital
Contribution or as to profits or distributions.
ARTICLE III
MANAGEMENT RIGHTS, DUTIES, AND POWERS
OF THE MANAGER; TRANSACTIONS INVOLVING MEMBERS
Section 3.1 Management.
(a) Management by the Manager. LXP shall be the Manager until LXP
(x) transfers its membership interest in the Company or withdraws as a
Member from the Company, (y) transfers or assigns its rights and
obligations as the Manager or resigns as the Manager, or (z) is removed
as the Manager, each as provided in Article VIII hereof. The Manager
shall manage the investments, business and day-to-day affairs of the
Company and shall be responsible for acquisitions and dispositions of
Qualified Properties, subject, however, to the provisions of Section 3.4
hereof with respect to Major Decisions, of Section 3.6 and Section 3.7
hereof with respect to the acquisition or sale of Qualified Properties
and any other provisions of this Agreement concerning the
15
investments, business and day-to-day affairs of the Company. The Manager
shall use reasonable efforts to manage the investments, business and
day-to-day affairs of the Company in accordance with the Annual Plan
approved in accordance with Section 3.5 hereof. Except as provided in
this Agreement, the Manager shall have all the rights and powers of a
manager as provided in the Act and as otherwise provided by law, and any
action taken by the Manager shall constitute the act of and serve to bind
the Company. The Manager may delegate certain of the tasks that are to be
performed in connection with the acquisition of properties, the
management of the Qualified Properties or the business and day-to-day
affairs of the Company. Any such delegation to third parties provided in
the previous sentence shall be supervised by the Manager and such
delegation shall not relieve the Manager of any of its obligations
hereunder. Any right of either of the Members to consent to any action
requiring its consent hereunder shall not be diminished or otherwise
affected by such delegation.
(b) Delegation to the Asset Manager. LXP in its capacity as
Manager shall have the right to retain the Asset Manager and delegate
(pursuant to Section 3.1(a) above) to the Asset Manager any of the
following duties and responsibilities: the management of the Qualified
Properties and the performance of the tasks necessary for the evaluation
of Proposed Qualified Properties and the acquisition of Approved
Qualified Properties as contemplated in Section 3.6 hereof. The Asset
Manager shall be qualified to do business in all jurisdictions in which
the Company does business or owns properties. If LXP in its capacity as
Manager elects to retain the Asset Manager, the Company and the Asset
Manager shall enter into a Management Agreement substantially in the form
attached hereto as Exhibit B and made a part hereof. The Manager may
replace the Asset Manager at any time and from time to time, provided
that as a condition to such replacement of the Asset Manager, (x) the
Fund and the Advisor shall have received written notice of such
replacement and (y) the replacement Asset Manager shall have entered into
an agreement substantially in the form attached hereto as Exhibit B. Any
other property management or operating agreement between the Company and
any Asset Manager shall be acceptable to the Members and shall by its
terms terminate without penalty at the election of the Fund upon five (5)
Business Days' written notice to such Asset Manager if LXP is removed as
Manager. The Asset Manager shall have no interest in or rights under this
Agreement, shall not be admitted as a substitute for LXP and shall not
have any of the rights of a Member under the Act or this Agreement. The
Asset Manager may be authorized to perform such tasks of the Manager
specified in Section 3.3 hereof that LXP in its capacity as Manager
reasonably deems necessary or appropriate in connection with the
management of the Qualified Properties, the evaluation of Proposed
Qualified Properties or the acquisition of Approved Qualified Properties,
but in all cases in accordance with the Annual Plan and the requirements
of Section 3.4, Section 3.6 and Section 3.7 hereof and any other
provisions of this Agreement concerning the investments, business and
affairs of
16
the Company. The Asset Manager shall not have the authority to execute or
deliver documents on behalf of the Company or to bind the Company, except
as expressly set forth in the Management Agreement between the Company
and the Asset Manager. Notwithstanding anything to the contrary contained
in Section 3.3 hereof, the Asset Manager shall not have any authority to
borrow or draw down funds or finance or refinance any part of any
purchase price or incur indebtedness secured by any Qualified Property or
any unsecured indebtedness. Any delegation to the Asset Manager provided
in this Section 3.1(b) shall be supervised by LXP in its capacity as
Manager and such delegation shall not relieve LXP of any of its
obligations hereunder as Manager.
(c) Right to Rely on Authority of the Manager. Any action taken
by LXP in its capacity as Manager, acting on behalf of the Company
pursuant to the authority conferred thereon in this Agreement, shall be
binding on the Company. In no event shall any Person dealing with LXP
with respect to the conduct of the affairs of the Company while LXP is
the Manager be obligated to ascertain whether the terms of this Agreement
have been complied with, or be obligated to inquire into the necessity or
expediency of any action of LXP.
(d) No Management by the Fund. The Fund shall have the authority
to approve the Annual Plan (and amendments thereof) and to approve Major
Decisions. The Fund shall also have the authority to consent to certain
acts of the Manager, the Asset Manager and the Company, in each case as
and to the extent provided in this Agreement. The Fund shall not
participate in the control of the business of the Company or transact any
business for the Company or have the power to sign documents for or
otherwise bind the Company and shall not perform and shall have no
authority to perform any act, thing or deed in the name of or on behalf
of the Manager, the Asset Manager or the Company (provided, however, that
Fund shall have the right to appoint a replacement Manager pursuant to
Section 8.3(a) and to exercise certain rights on behalf of the Company
pursuant to Section 3.1(e)). The Fund may give any consents, approvals or
other authorizations described in this Agreement without being deemed to
have participated in the control of the Company.
(e) Fund's Right to Enforce Company Rights Against LXP Affiliated
Parties. Notwithstanding anything herein to the contrary, if the Manager
has failed to enforce any of the Company's rights against any LXP
Affiliated Party that has defaulted on any obligation owed to the Company
under this Agreement or under any agreement between the Company and any
LXP Affiliated Party, the Fund shall be entitled to exercise, on behalf
of the Company and at the expense of the Company (either in the Company's
own capacity or as manager of the Company), the Company's rights and
obligations arising under such agreements all without the consent or
approval of the Manager; provided, that the Fund shall not have the right
to terminate such agreements or any rights of the LXP
17
Affiliated Party under such agreements without Cause without the consent
of the Manager.
Section 3.2 Meetings of the Members
(a) Meetings of the Members. The Members of the Company may hold
meetings, both regular and special, within or outside the State of
Delaware. Regular meetings of the Members shall be held at least annually
with written notice to the Members at such time and at such place as
shall from time to time be reasonably determined by the Manager subject
to consent by the Members. Regular or special meetings of the Members may
be called by either Member on not less than ten (10) Business Day's
written notice to the other Member. The Advisor may attend meetings of
the Members but shall not vote on behalf of the Fund.
(b) Acts of the Members. Both Members must be present at any
meeting of the Members, and all acts of the Members must be approved by
the unanimous vote of the Members. Each Member present at a meeting and
entitled to participate in such meeting shall be entitled to one vote
with respect to any action. If either Member shall not be present at any
meeting of the Members, the other Member present at such meeting shall
adjourn the meeting from time to time, without notice other than
announcement of the date and location of the adjourned meeting, until
both Members shall be present. Any action required or permitted to be
taken at any meeting of the Members may be taken without a meeting if
both Members consent thereto in writing, and the writing or writings are
filed with the minutes of such proceedings of the Members.
(c) Electronic Communication. Members may participate in meetings
of the Members by means of telephone conference or similar communications
equipment that allows all persons participating in the meeting to hear
each other, and such participation in a meeting shall constitute presence
in person at the meeting. If all the participants are participating by
telephone conference or similar communications equipment, the meeting
shall be deemed to be held at the principal place of business of the
Company.
(d) Authorized Representatives. Prior to the first annual meeting
of the Members and prior to the time the Fund casts a vote: (i) the Fund
shall deliver to LXP a list of individuals who are authorized to attend
meetings of the Members and cast votes on its behalf and shall update
such list to reflect any changes in authorized individuals; and (ii) LXP
shall deliver to the Fund an incumbency certificate naming all of LXP's
executive officers and shall replace such certificate whenever there is a
change in LXP's executive officers. LXP's executive officers are
authorized to attend meetings of the Members and to cast votes on behalf
of LXP.
18
(e) Informational Meetings. The Manager shall hold informational
meetings with the Fund and the Advisor to review and discuss the
Company's activities and business upon ten (10) Business Days' prior
written notice by the Fund. The Fund may, but shall not be obligated to,
attend informational meetings that are attended by the Advisor. Such
meetings shall be held at a mutually convenient time at the New York City
offices of LXP unless the Members otherwise agree. LXP, the Fund and the
Advisor may each designate any number of representatives to attend such
meetings.
Section 3.3 Authority of the Manager. Except as otherwise
provided in this Article III, the Manager is hereby authorized to do the
following, for and in the name and on behalf of the Company, as may be
necessary, convenient or incidental to the implementation of the Annual Plan or
to the accomplishment of the purposes of the Company (provided, that if any of
the following constitutes a Major Decision that is not specifically set forth in
the Annual Plan, the Manager shall first obtain the consent of the Fund pursuant
to Section 3.4 hereof):
(i) acquire by purchase, exchange or otherwise, any
Proposed Qualified Property consistent with the purposes of the Company,
but only in accordance with Section 3.6 hereof;
(ii) operate, manage and maintain each of the Qualified
Properties;
(iii) take such action as is necessary to form, create or
set up any SP Subsidiary that has been approved by the Members in
accordance with Section 3.6 hereof;
(iv) dissolve, terminate or wind-up any SP Subsidiary,
provided that any Qualified Property held by such SP Subsidiary has been
disposed of in accordance with Section 3.7 or Section 11.1 hereof or
transferred to the Company or any other SP Subsidiary;
(v) enter into, amend, extend or renew any lease of any
Qualified Property or any part thereof or interest therein approved by
the Members as part of the Annual Plan;
(vi) initiate legal proceedings or arbitration with
respect to any lease of any Qualified Property or part thereof or
interest therein; provided that the initiation of such legal proceedings
or arbitration shall have arisen (x) in connection with any matter of an
emergency nature, (y) for the collection of rent or (z) involving an
uninsured claim of less than $100,000;
(vii) dispose of any or all of the Qualified Properties by
sale, lease, exchange or otherwise, and grant an option for the sale,
lease, exchange or
19
otherwise of any or all the Qualified Properties, but only in accordance
with Section 3.7 hereof;
(viii) employ and dismiss from employment any and all
employees, agents, independent contractors and, subject to Section 4.9
hereof, attorneys and accountants for the Company;
(ix) pay all Permitted Expenses (and maintain in reserve
the amount of any credits pursuant to Section 3.10(c) hereof);
(x) execute and deliver any and all agreements, contracts,
documents, certifications and instruments necessary or convenient in
connection with the management, maintenance and ownership of the
Qualified Properties and in connection with any other matters with
respect to which the Manager has authority to act pursuant to the Annual
Plan or as set forth in this Section 3.3;
(xi) draw down funds as needed under any approved lines of
credit or other financing previously approved under Section 3.4 hereof;
(xii) finance or refinance a portion of the purchase price
of any Qualified Property and incur (and refinance) indebtedness secured
by any Qualified Property, or any portion thereof or any interest or
estate therein and incur any other secured or unsecured borrowings or
other indebtedness;
(xiii) implement those Major Decisions that are
specifically set forth in the Annual Plan or that have been approved by
the Fund pursuant to Section 3.4 below; and
(xiv) subject to any conditions expressly provided in this
Agreement, engage in any kind of activity and perform and carry out
contracts of any kind necessary or incidental to or in connection with
the accomplishment of the purposes of the Company as may be lawfully
carried out or performed by a limited liability company under the laws of
each state in which the Company is then formed or registered or qualified
to do business.
Section 3.4 Major Decisions. Notwithstanding anything to the
contrary contained in this Agreement, the Manager shall not take, on behalf of
the Company, and shall not permit the Company or the Asset Manager to take, any
action, make any decision, expend any sum or undertake or suffer any obligation
which comes within the scope of any Major Decision unless such Major Decision is
approved by the Fund in advance in writing (including any written approval
delivered at a meeting in accordance with Section 3.2 hereof) or is specifically
set forth in the Annual Plan. As used herein, "Major Decision" shall mean a
decision to take any of the following actions:
20
(i) the acquisition by purchase, exchange or otherwise of
any Qualified Property or other real property except in accordance with
Section 3.6 hereof;
(ii) the disposition by sale, lease, exchange or
otherwise, and the granting of an option for the sale, lease, exchange or
other disposition of any or all of the Qualified Properties except in
accordance with Section 3.7(b) and Section 11.1 hereof;
(iii) the financing or refinancing of, or the increasing
of any mortgage indebtedness encumbering, any Qualified Property, or any
portion thereof or any interest or estate therein, whether recourse or
non-recourse to the Company, or the incurrence of indebtedness secured by
any Qualified Property, or any portion thereof or any interest or estate
therein, or the incurrence of any other secured or unsecured borrowings
or other indebtedness by the Company, including determination of the
terms and conditions thereof, and any amendments to such terms and
conditions except as contemplated in an Annual Plan or in accordance with
Section 3.4 hereof;
(iv) the formation, creation or setting up of any SP
Subsidiary except in accordance with Section 3.6 hereof;
(v) the making of any loan;
(vi) the entering into of any transaction or agreement
with or for the benefit of, or the employment or engagement of, any LXP
Affiliated Party, except as expressly contemplated in Sections 3.1(b) and
3.10 hereof;
(vii) the causing or permitting of an encumbrance of any
Percentage Interest or any portion thereof;
(viii) making an Extraordinary Call to the Members to fund
an operating deficit of the Company, which Extraordinary Call shall be
made only in accordance with Section 5.1(c) hereof;
(ix) the construction, alteration, improvement, repair,
rehabilitation, razing, rebuilding or replacement of any building or
other improvements or the making of any capital improvements,
replacements, repairs, alterations or changes in, to or on any Qualified
Property, or any part thereof, except to the extent provided for in the
Annual Plan; provided that repairs of emergency nature may be undertaken
without prior approval of the Fund provided the Manager notifies the
Advisor in writing thereof within two (2) Business Days following the
commencement of such emergency repairs;
21
(x) the incurring of any cost or expense for any fiscal
year which, (x) when added to all other costs and expenses for such
fiscal year, exceeds the applicable budget line in the Annual Budget
portion of the Annual Plan by the greater of Twenty Thousand Dollars
($20,000) or five percent (5%) thereof or, (y) when added to all other
costs and expenses in excess of their applicable budget line items in the
Annual Budget portion of the Annual Plan, exceeds (i) One Hundred
Thousand Dollars ($100,000) in any fiscal year for any Qualified Property
or (ii) an average (taking into account all Qualified Properties then
owned by the Company) of Fifty Thousand Dollars ($50,000) per Qualified
Property; provided that, notwithstanding the foregoing, repairs of
emergency nature may be undertaken without prior approval of the Fund
provided the Manager notifies the Advisor in writing thereof within two
(2) Business Days following the commencement thereof;
(xi) the incurring of any expense other than a Permitted
Expense; provided that, notwithstanding the foregoing, repairs of an
emergency nature may be undertaken without prior approval of the Fund
provided the Manager notifies the Advisor in writing thereof within two
(2) Business Days following the commencement thereof;
(xii) the reinvestment for restoration purposes of (i)
insurance proceeds in excess of $500,000 received by the Company in
connection with the damage or destruction of any Qualified Property or
(ii) condemnation proceeds in excess of $500,000 received by the Company
in connection with the taking or settlement in lieu of a threatened
taking of all or any portion of any Qualified Property; provided that (x)
if the determination is made not to reinvest any such insurance or
condemnation proceeds, then so much thereof as may be necessary shall be
applied to the razing or other disposition of the remaining improvements
as may be required by law or by a reasonably prudent property manager and
the balance of such insurance or condemnation proceeds shall be
distributed in accordance with this Agreement and (y) any reinvestment of
insurance or condemnation proceeds that is contractually required under
any lease or the terms of any financing or refinancing of a Qualified
Property approved in each case by the Members shall not be a Major
Decision subject to this Section 3.4;
(xiii) the approval of the Annual Plan;
(xiv) the initiation of legal proceedings or arbitration
with respect to any lease of any Qualified Property or part thereof or
interest therein; provided that the initiation of such legal proceedings
or arbitration (x) in connection with any matter of an emergency nature,
or (y) for the collection of rent, shall not be a Major Decision subject
to this Section 3.4;
22
(xv) the commencement of any litigation by the Company or
the settlement of any litigation against the Company involving an
uninsured claim of $100,000 or more;
(xvi) the commencement of any case, proceeding or other
action seeking protection for the Company as debtor under any existing or
future law of any jurisdiction relating to Bankruptcy, insolvency,
reorganization or relief of debtors; any consent to the entry of an order
for relief in or institution of any case, proceeding or other action
brought by any third party against the Company as a debtor under any
existing or future law of any jurisdiction relating to Bankruptcy,
insolvency, reorganization or relief of debtors; the filing of an answer
in any involuntary case or proceeding described in the previous clause
admitting the material allegations of the petition therefor or otherwise
failing to contest any such involuntary case or proceeding; the seeking
of or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, custodian or any similar official for the Company
or for a substantial portion of its Qualified Properties; any assignment
for the benefit of the creditors of the Company; or the admission in
writing that the Company is unable to pay its debts as they mature or
that the Company is not paying its debts as they become due;
(xvii) with respect to any lease of any Qualified
Property, or part thereof or interest therein, the entering into,
amending, extending or renewing thereof, in each case not already
approved by the Members as part of the Annual Plan;
(xviii) the execution of any agreement, contract,
understanding or other arrangement to effectuate a Major Decision;
provided that the execution of a non-binding letter of intent in
accordance with Section 3.6(a) hereof shall not be a Major Decision
subject to this Section 3.4;
(xix) the extension of the statute of limitations for
assessing or computing any tax liability against the Company or the
amount of any Company tax item or to settle any dispute with respect to
any income, or any other material, tax;
(xx) the admission of a new Member to the Company;
(xxi) any material deviation from the insurance standards
set forth on Schedule 4.8 hereto;
(xxii) the taking of any of the foregoing actions through
a SP Subsidiary or any other subsidiary of the Company; and
(xxiii) any other action which requires the consent or
approval of the Fund under this Agreement.
23
Section 3.5 Preliminary and Annual Plans.
(a) Preparation and Approval of Plans. The Manager shall prepare
and deliver to the Fund and the Advisor for the Members' approval or
disapproval a proposed annual plan for the next fiscal year of the
Company (as further described below, a "Proposed Plan"). The Proposed
Plan shall cover the Company, each Qualified Property and shall include:
a proposed Annual Budget covering the Company, each Qualified Property
and a brief narrative description of the material portions thereof; a
plan of operations for each Qualified Property, including anticipated
repairs and improvements; estimated financing needs and estimated
financing costs; estimated cash flow projections; a description of
tenants then in occupancy in each Qualified Property; a schedule of
Qualified Properties, any leases which are expiring during such fiscal
year and the plans for the re-leasing of such Qualified Properties and
any lease restructures (such as subleasing or expansion by a tenant) of
which the Manager is aware; projected capital improvements and capital
repairs; a description of any Proposed Qualified Properties to the extent
identified, including the terms of acquisition, provided that nothing in
the Proposed Plan shall affect or limit the provisions of Section 3.6
hereof; a hold/sell analysis of each Qualified Property; and any other
information relative to the management of the Qualified Properties or the
Company reasonably requested by the Fund. The Manager shall prepare and
submit a Proposed Plan to the Fund and the Advisor on or before November
15th of the year prior to such fiscal year. The Fund shall provide the
Manager with any comments or requested changes the Fund may have to such
Proposed Plan within fifteen (15) days after its receipt thereof. The
Manager shall submit a revised Proposed Plan to the Fund and the Advisor
incorporating or otherwise addressing the Fund's requested changes no
later than December 15th of the year prior to the fiscal year covered by
such revised Proposed Plan; provided that if the Fund provides comments
on a Proposed Plan to the Manager on any date after December 1st, then
the Manager's deadline for submitting a revised Proposed Plan as
described in this sentence shall be extended one day for each day after
December 1st that the Fund shall have delayed providing comments to the
Manager. The Fund shall approve or disapprove such revised Proposed Plan
within the period ending on the later of (x) fifteen (15) days after its
receipt thereof or (y) December 31st of the year prior to the fiscal year
covered by such revised Proposed Plan. Any Proposed Plan approved by the
Members in accordance with this Section 3.5(a) shall become the annual
plan for the next fiscal year of the Company (any Proposed Plan approved
by the Members for any fiscal year of the Company, and as may be amended
from time to time by a Plan Amendment in accordance with Section 3.5(c)
hereof, an "Annual Plan"). A model of an Annual Plan is attached as
Schedule 3.5 and made a part hereof. The initial Annual Plan shall be
agreed upon by the Members within sixty (60) days of the date hereof.
24
(b) Dispute Concerning an Annual Budget. If, prior to the
commencement of any fiscal year, the Members have not reached an
agreement as to the amount to be allocated to any budget line item set
forth in the Annual Budget portion of the Proposed Plan for such fiscal
year, then (i) as to any such disputed budget line item, the Annual
Budget portion of the Annual Plan for the immediately preceding fiscal
year (exclusive of any non-recurring capital expenditures) shall be
controlling but only with respect to such disputed budget line item (in
each case adjusted to reflect the increases in the CPI for November of
such fiscal year over the CPI for November of such immediately preceding
fiscal year) and only until such time as the Members reach an agreement
on the amount to be allocated to such budget line item, and (ii) as to
any budget line item or items that are not in dispute, the Annual Budget
portion of the Proposed Plan shall control.
(c) Amendments to Annual Plans. If in either Members' judgment an
Annual Plan requires amendment, such Member (the "Amending Member") shall
deliver to the other Member (the "Non-Amending Member") (and, if the
Amending Member is LXP, to the Advisor) a written notice setting forth
the proposed amendment to the Annual Plan and the basis therefor. The
Non-Amending Member shall approve or disapprove such proposed amendment
within fifteen (15) Business Days after receipt thereof, and, upon
approval by the Non-Amending Member (any such amendment, a "Plan
Amendment"), the Annual Plan (including, without limitation any
amendments to the Annual Budget portion thereof) shall be amended by the
Plan Amendment as set forth in the written notice described in the
preceding sentence.
Section 3.6 Qualified Property Acquisitions.
(a) Generally; Approval by the Fund. The Manager shall originate
net-leased properties as candidates for acquisition, directly or
indirectly, by the Company (any such property, a "Proposed Qualified
Property") and shall consult regularly with the Advisor regarding each
Proposed Qualified Property. The Manager or Asset Manager may, with the
consent of the Advisor, enter into a good faith non-binding letter of
intent concerning the acquisition of a Proposed Qualified Property. After
entering into a good faith non-binding letter of intent with respect to a
Proposed Qualified Property and performing such underwriting and other
property analysis as the Manager deems appropriate with respect thereto,
the Manager or Asset Manager shall submit the Acquisition Memorandum
described in Section 3.6(b) hereof to the Advisor and the Fund; provided
however that the Manager shall not recommend to the Fund the acquisition
of any Proposed Qualified Property that does not satisfy or comply with
the Acquisition Parameters (although the Manager, at its election, may
submit such property to the Company for its consideration pursuant to
Section 3.6(c)). The Fund shall have fifteen (15) Business Days after its
receipt of the
25
documents described in the preceding sentence to approve or disapprove,
in its sole and absolute discretion, a Proposed Qualified Property. If
the Fund fails to respond to the Manager's recommendation within such
fifteen (15) Business Days, the Manager may send to the Fund and the
Advisor a second notice requesting a response within ten (10) Business
Days after actual receipt by the Fund and the Advisor. Any failure by the
Fund to approve a Proposed Qualified Property within such ten (10)
Business Day period shall be deemed to be a disapproval of such Proposed
Qualified Property.
(b) Acquisition Memorandum. For each Proposed Qualified Property,
the Manager or Asset Manager shall deliver to the Fund and the Advisor an
Acquisition Memorandum stating that such Proposed Qualified Property is a
net-leased facility and describing such Proposed Qualified Property in
reasonable detail, including without limitation: the size and location
thereof, the improvements thereon, the operating history and financial
status thereof and the material findings of all due diligence undertaken
to date with respect thereto, including the material findings to date of
any Appraisal, Environmental Assessment and/or Physical Inspection
Report; the structure of the contemplated transaction, including whether
an SP Subsidiary will take title to the Proposed Qualified Property, the
cost to the Company, including the purchase price, the amount and
material terms of any mortgage indebtedness to be assumed, incurred or
taken subject to; the anticipated hold time of the Proposed Qualified
Property; and the material provisions of the net lease or leases thereon
and copies of such leases (or in the case of proposed leases, drafts or
reasonably detailed abstracts of proposed leases), the identification of
each tenant thereon and financial information relating to each such
tenant and setting forth such other information as the Advisor may
reasonably request. The Acquisition Memorandum shall include a credit
analysis of any tenant net-leasing such property, including the credit
rating of any such tenant by Standard & Poor's, Moody's Investors
Services, Inc., Duff & Phelps Credit Rating Co. or Fitch IBCA, or, if a
credit rating of any such tenant is not available from the foregoing
credit-rating companies, a credit analysis thereof by or any other credit
rating entity agreed to by the Members.
(c) Proposed Qualified Properties Which Do Not Comply With
Acquisition Parameters. With respect to any Proposed Qualified Property
that does not comply in all respects with the Acquisition Parameters and
that the Manager elects to submit to the Fund for approval pursuant to
Section 3.6(a) hereof, the Manager or Asset Manager shall deliver to the
Fund and the Advisor a reasonably detailed description of the ways in
which such Proposed Qualified Property does not comply with the
Acquisition Parameters.
(d) Acquisition of Approved Qualified Properties. Upon receipt of
the written approval of the Fund as provided in Section 3.6(a) above of
the
26
acquisition by the Company of a Proposed Qualified Property (any Proposed
Qualified Property so approved, an "Approved Qualified Property"), the
Manager or Asset Manager shall take all commercially reasonable efforts
on behalf of the Company to negotiate and execute all documents necessary
to acquire the Approved Qualified Property pursuant to and in accordance
with the terms approved by the Members (including formation of an SP
Subsidiary, if applicable) and to complete due diligence that the Manager
deems reasonably necessary, including (to the extent not already
completed) obtaining an Appraisal, an Environmental Assessment and a
Physical Inspection Report. The Manager or Asset Manager shall keep the
Advisor reasonably informed of the progress of the Company's acquisition
of any Approved Qualified Property, including the material findings of
all due diligence and of any material matters that arise during the
course thereof. Upon completion of all due diligence undertaken as
specified above with respect to an Approved Qualified Property and as a
condition to completing the acquisition of the Approved Qualified
Property, the Manager or Asset Manager shall deliver the Advisor a
memorandum summarizing the estimated closing costs, the material findings
of the completed due diligence and any changes in the status of such
Approved Qualified Property since the date of the Acquisition Memorandum
described in Section 3.6(b) above and the Fund shall confirm its
continuing approval of the acquisition before the Manager commits (on a
nonrefundable basis) the Company's funds as provided below. The Manager
or Asset Manager will provide to the Fund or the Advisor copies of the
Appraisal, the Environmental Assessment, the Physical Inspection Report
and the survey after completion thereof. Notwithstanding such deliveries,
the Manager and Asset Manager shall remain solely responsible for such
due diligence and any liability arising in connection therewith, and
neither the Fund nor the Advisor shall be obligated to read or review
such memorandum, Environmental Assessment, Physical Inspection Report or
survey.
It is understood and agreed that (x) the Manager may deposit its
own funds, or cause the Company to deposit Company funds, as refundable
earnest money, and (y) the Company's funds shall be substituted (and
such funds reimbursed to the Manager) or committed, as the case may be,
on a nonrefundable basis only after due diligence is completed and the
Fund has confirmed its continuing approval of the acquisition. After the
Company has committed its funds on a nonrefundable basis in accordance
with the prior sentence, if the terms of the acquisition change in any
material respect from the terms described in the Acquisition Memorandum,
such change shall require the consent of the Fund.
Within five (5) Business Days after the closing of an Approved
Qualified Property, the Manager shall deliver to the Advisor (x) a
closing statement acknowledging the receipt of and setting forth the
application of the Members' Capital Contributions and any other funds of
the Company used to acquire such Approved Qualified Property or to pay
closing costs (including an estimate of
27
costs not finalized at closing, including legal fees and costs)
associated therewith and (y) copies of all certificates of insurance
delivered in connection with such closing as requested by the Fund or the
Advisor.
(e) Disapproved Qualified Properties. If the Fund (x) disapproves
(or is deemed to have disapproved as provided in Section 3.6(a) hereof)
any Proposed Qualified Property, (y) fails after the completion of due
diligence to confirm its continuing approval of the acquisition as
provided in Section 3.6(d) above, or (z) otherwise withdraws its approval
of an Approved Qualified Property as provided in Section 3.6(d) above,
the Manager shall not cause or permit the Company to acquire such
Proposed Qualified Property or Approved Qualified Property and LXP or its
designee shall have the right to acquire such Proposed Qualified Property
or Approved Qualified Property for its own account or with or in
connection with any other Person.
(f) Acquisition Costs. Except as provided in the following
sentence and in Section 3.6(g) hereof, LXP or the Asset Manager (as the
case may be) shall be liable for all costs and expenses arising in
connection with the identification or evaluation of, the bidding on and
the structuring and negotiation of and contracting for the acquisition or
attempted acquisition of, and the due diligence undertaken in connection
with, any Proposed Qualified Property or Approved Qualified Property
(such activities, the "Acquisition Activities"). The Company shall be
liable for all reasonable and customary costs and expenses of Third
Parties retained in connection with the Acquisition Activities; provided
that if for any reason other than pursuant to Section 3.7(b) or Section
11.1 hereof any LXP Affiliated Party (instead of the Company or an SP
Subsidiary) acquires title to any Proposed Qualified Property or Approved
Qualified Property, LXP shall pay all of the costs and expenses (and
reimburse the Company for any refundable or nonrefundable deposits funded
by the Company in connection with the acquisition of such property)
incurred or to be incurred in connection with the Acquisition Activities
relating to such Proposed Qualified Property or Approved Qualified
Property (it being understood that the proviso in this sentence applies
only in those circumstances in which any LXP Affiliated Party (rather
than the Company or an SP Subsidiary) acquires a Proposed Qualified
Property or an Approved Qualified Property and therefore LXP would not
pay such costs and expenses in the case of LXP's exercise of the Right of
First Refusal or a buy/sell under this Agreement).
(g) Acquisition Fee; Financing Fee. Upon the acquisition of any
Approved Qualified Property by the Company or by an SP Subsidiary
(including any Approved Qualified Property contributed or transferred in
whole or in part by LXP or any LXP Affiliated Party to the Company),
pursuant to this Section 3.6, the Fund shall pay the Manager or the Asset
Manager an acquisition fee
28
(the "Acquisition Fee") equal to the amount of the Fund's Percentage
Interest multiplied by the following sum:
(m) (1) the amount up to $10 million of the purchase price
of such acquired Approved Qualified Property multiplied by
(2) 0.90% plus
(n) (1) the amount from $10 million to $20 million of the
purchase price of such acquired Approved Qualified
Property multiplied by (2) 0.75% plus
(o) the amount over $20 million of the purchase price of
such acquired Approved Qualified Property multiplied by
(2) 0.65%.
For example, if the purchase price of such acquired
Approved Qualified Property were $25 million, the
Acquisition Fee payable by the Fund would equal 70% of
$197,500 (or $138,250).
In addition, if the Manager or the Asset Manager arranges financing for
the purchase of an Approved Qualified Property without the use of a
third-party broker then the Fund shall pay the Manager or the Asset
Manager a fee (the "Financing Fee") equal to the amount of the Fund's
Percentage Interest multiplied by the following sum:
(x) (1) the amount up to $10 million of the financing
arranged for such acquired Approved Qualified Property
multiplied by (2) 0.75% plus
(y) (1) the amount from $10 million to $20 million of the
financing arranged of such acquired Approved Qualified
Property multiplied by (2) 0.50% plus
(z) the amount over $20 million of the financing arranged
of such acquired Approved Qualified Property multiplied by
(2) 0.25%.
For example, if the amount financed for such Approved
Qualified Property were $25 million, the Financing Fee
payable by the Fund would equal 70% of $137,500 ($96,250);
provided that, notwithstanding the foregoing, in no event shall that
Financing Fee exceed the then current market rate that would be payable
to an independent mortgage banker or broker.
(h) Further Restrictions on Acquisitions. Under no circumstances
whatsoever shall the Company acquire any property (i) that the Fund would
be
29
prohibited by applicable law or public policy from acquiring if the Fund
were to make such acquisition directly in its own name or (ii) that would
give rise to nonqualifying income for purposes of the real estate
investment trust tests set forth in Section 856 of the Code or (iv) that
is or will be subject to any leases that would not be treated at "true
leases" for federal income tax purposes.
(i) Approved Qualified Properties. Notwithstanding anything to
the contrary, the Members hereby acknowledge and agree that each property
listed on Schedule 3.6(i) hereto shall be (i) deemed an Approved
Qualified Property hereunder, with respect to which (x) the Manager or
the Asset Manager has delivered the required information pursuant to
Section 3.6(d) hereof and (y) the Fund has confirmed its continuing
approval of the acquisition of such Approved Qualified Property pursuant
to Section 3.6(d) hereof, and (ii) transferred to the Company pursuant to
the Purchase and Sale Agreement.
Section 3.7 Sale of Qualified Properties; Right of First Refusal.
(a) Authority to Sell. The Manager shall have no authority to and
shall not initiate the sale of any Qualified Property without approval by
the Fund (except as provided in Section 3.7(b) and Section 11.1 hereof).
From and after the earlier of (i) the Rights Trigger Date and (ii) the
date on which the Company shall have invested all of the Members' Capital
Commitment, the Fund or LXP may each require the sale of any or all of
the Qualified Properties as provided in Section 3.7(b) below.
(b) Required Sales; the Right of First Refusal. The Fund or LXP
shall each have the right, at any time after the earlier of (i) the
Rights Trigger Date and (ii) the date on which the Company shall have
invested all of the Members' Capital Commitment, and from time to time
thereafter, to require the Company to sell any or all of the Qualified
Properties to a third party or parties, in each instance by written
notice (a "Sale Notice") to the other Member; provided, however, that a
Member's right to require a sale under this Section 3.7(b) is subject to
and limited by a Member's ability to exercise its Right of First Refusal
set forth below or its rights under Section 11.1. Upon receipt of any
Sale Notice, the Manager shall commence promptly to market and sell to
third parties on behalf of the Company such Qualified Property or
Qualified Properties specified in the Sale Notice. If the Company
receives a Bona Fide Offer, as defined below, the Manager shall inform
the Fund in writing of the terms and conditions thereof and the Member
that delivered the Sale Notice (the "Sale Member") shall respond in
writing as to whether it will accept or reject such Bona Fide Offer
within fifteen (15) days of receipt of such notification from the
Manager. If the Sale Member fails to respond in writing within the
above-referenced fifteen day period, the Sale Member shall be deemed to
have accepted such Bona Fide Offer. If the Sale Member has accepted or
has been deemed to have accepted such Bona
30
Fide Offer, the other Member (the "Non-Sale Member") or an Affiliate of
the Non-Sale Member shall have the absolute right to purchase such
Qualified Property or Qualified Properties upon the same terms and
conditions as set forth in such Bona Fide Offer for cash or its
equivalent (such right, the "Right of First Refusal"). The Non-Sale
Member shall, within fifteen (15) days after the Sale Member's decision
to accept such Bona Fide Offer, indicate in writing to the Sale Member
whether or not the Non-Sale Member has elected to exercise its Right of
First Refusal. Failure to send such notification within fifteen (15) days
shall constitute an election by the Non-Sale Member to waive its Right of
First Refusal with respect to such Qualified Property and the Company may
sell the Qualified Property to the third party making the Bona Fide
Offer, but only (x) upon substantially the same terms and conditions
contained in such Bona Fide Offer and (y) within one hundred fifty (150)
days after the Non-Sale Member waived its Right of First Refusal. If the
Non-Sale Member exercises its Right of First Refusal, the Sale Member
shall consent to the sale of the Qualified Property or Qualified
Properties to the Non-Sale Member, or its Affiliate, on substantially the
same terms and conditions contained in the Bona Fide Offer. A "Bona Fide
Offer" shall mean, with respect to the Qualified Property or Qualified
Properties described in the Sale Notice, an offer (in the form of a
non-binding letter of intent or other written offer) made in good faith
by a financially responsible, stable party that is not Affiliated with
either Member having adequate financial worth, not having a reputation in
the community for criminal, immoral or unconscionable behavior, and
having substantial experience in the ownership or operation of real
property. Each Member hereby (i) acknowledges that the Right of First
Refusal in this Section 3.7 (b) may inhibit the Sale Member's ability to
obtain market rate Bona Fide Offers, and (ii) agrees that, if an
independent real estate broker informs the Members that the Right of
First Refusal is inhibiting the Sale Member's ability to obtain market
rate Bona Fide Offers with respect to a property, the Members will
initially decide whether the Company shall offer to reimburse third
parties for all reasonable and documented out-of-pocket costs incurred in
making a Bona Fide Offer that is not accepted because the Non-Sale Member
acquired such property pursuant to the Right of First Refusal.
(c) Properties in Foreclosure. In the event a lender to the
Company or a SP Subsidiary has initiated or threatens to initiate a
foreclosure proceeding with respect to any Qualified Property securing
such lender's loan to the Company or such SP Subsidiary (it being
understood that any such loan shall be non-recourse to the Company, such
SP Subsidiary and the Members), and the Members disagree as to whether
such Qualified Property shall be transferred to the lender in
satisfaction of such loan, the Member not in favor of such transfer shall
have the right to purchase such Qualified Property from the Company for
One Dollar ($1.00) provided such Member assumes such loan in full and
such lender releases the Company therefrom. No adjustments to the Capital
Contributions, Capital
31
Commitments, or Capital Account shall be made on account of a transfer
made in accordance with this Section 3.7(c).
(d) Time of the Essence. The Members agree that time is of the
essence with respect to the rights and obligations described in this
Section 3.7.
Section 3.8 Limitation On Company Indebtedness.
(a) Maximum Debt. The total debt of the Company at any time shall
not exceed sixty percent (65%) of the Company's capitalization which,
when all Capital Commitments have been fully contributed, shall be
$92,857,143 of maximum debt. The total debt of any Qualified Property at
any one time shall not exceed seventy percent (70%) of the value of such
Qualified Property.
(b) Non-Recourse to the Members. Notwithstanding anything to the
contrary contained in this Agreement, the Company shall not incur debt
that is recourse to the Members, and the Members shall not be liable for
any debts or other obligations or liabilities incurred by the Company.
Section 3.9 Business Opportunity.
(a) LXP.
(i) General. Each LXP Affiliated Party may each engage in
or possess any interest in other business ventures of any kind,
independently or with others, including but not limited to the ownership,
operation and management of net-leased real property, except as provided
in this Section 3.9(a).
(ii) Exclusivity. Subject to Section 3.9(a)(iv) hereof,
LXP shall make available for purchase by the Company, and the Company
shall have the right to purchase pursuant to Section 3.6 hereof, all
properties which satisfy or comply with all of the "Required Parameters"
comprising the Acquisition Parameters (the "Exclusivity Right"); provided
that if (i) 75% of the Member's Capital Commitments have been drawn
(i.e., $11,250,000 for LXP and $26,250,000 for the Fund or (ii) the Fund
disapproves of three Proposed Qualified Properties within in any 12-month
period, in either case, LXP may enter into other joint ventures with the
goal of acquiring properties that meet the Acquisition Parameters.
(iii) Acquisition by LXP. Any LXP Affiliated Party may
acquire (x) the properties it is required to offer to the Company in
accordance with Section 3.9(a)(ii) hereof only (1) if the seller will
accept only O.P. Units in exchange therefor or (2) after the Fund or the
Advisor has disapproved such acquisitions as provided in Section 3.6
hereof and (y) properties that it is not required to offer to the Company
under Section 3.9(a)(ii) hereof.
32
(iv) Exceptions to Exclusivity Right. Notwithstanding
anything to the contrary contained in this Section 3.9(a): (x) the
Company shall have no right to purchase pursuant to Section 3.6 hereof or
this Section 3.9(a), any Acquiport Property or Lion Property (even if it
otherwise meets the Acquisition Parameters) unless the Acquiport Entities
or the Lion Venture, as the case may be, determine not to acquire such
property in accordance with the Acquiport Operating Agreements or the
Lion Partnership Agreement, as the case may be; (y) the Company's
Exclusivity Right shall terminate at such time as 75% of the Member's
Capital Contributions have been invested; and (z) LXP, at its option,
shall have the right, upon notice to the Fund, to terminate the
Exclusivity Right if, within any twelve (12) month period, the Fund does
not approve the Company's acquisition of any combination of three (3)
Proposed Qualified Properties within the Acquisition Parameters and/or
Approved Qualified Properties (except that for purposes of this Section
3.9(a)(iv)(z), "Proposed Qualified Property" and "Approved Qualified
Property" shall not include any such Proposed Qualified Property or
Approved Qualified Property, the purchase price of which, exclusive of
the cost of Acquisition Activities with respect thereto, is greater than
105% of the Appraisal delivered to the Fund pursuant to Sections 3.6(b)
and (d) hereof); provided that if LXP exercises such option, then the
Fund, at its option, shall have the right to terminate its obligation to
make Additional Capital Contributions upon notice to LXP, in which event
each Member shall be deemed to have satisfied its entire Capital
Commitment.
(b) The Fund. The Fund and any of its Affiliates may engage in or
possess any interest in other business ventures of any kind,
independently or with others, including but not limited to the ownership,
operation and management of net-leased real property.
(c) Duties and Conflicts. Subject to the Manager's obligation to
present net-leased properties to the Company pursuant to Section 3.6 and
Section 3.9(a) hereof, each Member recognizes that the other Member and
its Affiliates have or may have other business interests, activities and
investments, some of which may be in conflict or competition with the
business of the Company, and that such Persons are entitled to carry on
such other business interests, activities and investments. The Members
and their respective Affiliates may engage in or possess an interest in
any other business or venture of any kind, independently or with others,
on their own behalf or on behalf of other entities with which they are
affiliated or associated, and such Persons may engage in any activities,
whether or not competitive with the Company, without any obligation
(except as expressed in Sections 3.6 and 3.9(a)) to offer any interest in
such activities to the Company or to either Member. Neither the Company
nor either Member shall have any right, by virtue of this Agreement, in
such activities, or the income or profits derived therefrom, and the
pursuit of such activities, even if
33
competitive with the business of the Company, shall not be deemed
wrongful or improper.
Section 3.10 Payments to LXP or the Asset Manager.
(a) Manager Expenses. The Manager shall pay (i) the salaries of
all of its officers and regular employees and all employment expenses
related thereto, (ii) general overhead expenses, (iii) record-keeping
expenses, (iv) the costs of the office space and facilities which it
requires, (v) the costs of such office space and facilities as the
Company reasonably requires, (vi) all out of pocket costs and expenses
incurred in connection with the management of the Qualified Properties
and the Company (other than Operating Expenses) and (vii) costs and
expenses relating to Acquisition Activities as set forth in and limited
by Section 3.6(f).
(b) Company Expenses. The Company shall pay all Permitted
Expenses. The Manager is authorized, in the name and on behalf of the
Company, to reimburse itself for Permitted Expenses paid by the Manager
or to reimburse the Asset Manager for Permitted Expenses paid by the
Asset Manager; provided, that if for any reason any LXP Affiliated Party
(instead of the Company or an SP Subsidiary, which (for the purpose of
this sentence) shall not be deemed to be an LXP Affiliated Party)
acquires title to any Proposed Qualified Property or Approved Qualified
Property, LXP shall pay all of the costs and expenses incurred or to be
incurred in connection with the Acquisition Activities relating to such
Proposed Qualified Property or Approved Qualified Property (it being
understood that the proviso in this sentence applies only in those
circumstances in which an LXP Affiliated Party (rather than the Company
or an SP Subsidiary) acquires a Proposed Qualified Property or an
Approved Qualified Property and therefore LXP would not pay such costs
and expenses in the case of LXP's exercise of the Right of First Refusal
or a buy/sell under this Agreement).
(c) Management Fee; Oversight Fee. The Manager shall cause the
Company to pay to the Asset Manager pursuant to the Management Agreement
(or to the Manager in the event the Management Agreement is terminated)
an annual Management Fee ("Management Fee") equal to the Fund's aggregate
Percentage Interest multiplied by two and one-half percent (2.5%) of Net
Rents, payable monthly. Such fee shall be calculated monthly, based on
Net Rents received by the Company for such month, and adjusted as
provided herein. Within thirty (30) days of the Company's receipt of the
annual reports described in Section 4.3 hereof for a fiscal year, the
Asset Manager shall provide to the Advisor and the Fund a written
statement of reconciliation setting forth (a) the Net Rents for such
fiscal year and the Management Fee payable to the Asset Manager in
connection therewith, pursuant to this Agreement, (b) the Management Fee
already paid by the Company to the Asset Manager during such fiscal year,
and (c) either the amount owed to the Asset Manager by the Company
34
(which shall be the excess, if any, of the Management Fee payable to the
Asset Manager for such fiscal year pursuant to this Agreement over the
Management Fee actually paid by the Company to the Asset Manager for such
fiscal year) or the amount owed to the Company by the Asset Manager
(which shall be the excess, if any, of the Management Fee actually paid
by the Company to the Asset Manager for such fiscal year over the
Management Fee payable to the Asset Manager for such fiscal year pursuant
to this Agreement). The Asset Manager or the Company, as the case may be,
shall pay to the other the amount owed pursuant to clause (c) above
within five (5) Business Days of the receipt by the Advisor and the Fund
of the written statement of reconciliation described in this Section
3.10(c).
In addition, a credit in an amount equal to two and
one-half percent (2.5%) of Net Rents for the fiscal year (or applicable
portion thereof), less the Management Fee, as adjusted above (or the
applicable portion thereof), shall be reserved on the Company books
until a Capital Call is made by the Manager in accordance with Section
5.1(b) hereof, whereupon the amount of the credit shall be applied, in
whole or in part, to the extent necessary to fund LXP's pro rata share
of such Capital Call and will be treated for purposes of this Agreement
as if such amount were an actual Capital Contribution made by LXP which
(1) reduces the respective aggregate Capital Commitment of LXP and (2)
gives rise to an entitlement to allocations (but only out of subsequent
Profits), and related distributions, in amounts that reflect the amounts
that would have been allocated and distributed if such notional capital
contributions had constituted actual Capital Contributions, including a
return of such notional capital contributions to LXP pursuant to Section
7.1 hereof. For the avoidance of doubt, the amounts reserved pursuant to
this paragraph shall be set aside in a reserve account for the benefit
of LXP and shall be distributed to LXP to the extent of any amount
remaining in such reserve upon termination of the Company.
In those cases in which a tenant of any Qualified Property
requests that the Company provide property management services at such
tenant's expense, the Asset Manager shall be entitled to an oversight
fee for such property management services for the tenant of such
Qualified Property equal to one half of one percent (0.50%) of the Net
Rent from such Qualified Property ("Oversight Fee"), which Oversight Fee
shall be payable by the tenant of such Qualified Property, in accordance
with the terms as such tenant and the Asset Manager may agree.
Concurrently with the reconciliation statement required above, the Asset
Manager shall provide to the Advisor and the Fund a written statement
setting forth all Oversight Fees paid to the Asset Manager during such
fiscal year and the Net Rents relating to such Qualified Properties for
such fiscal year.
35
(d) Acquisition Fees; Financing Fees. The Fund shall pay the
Acquisition Fees and Financing Fees in accordance with the provisions of
Section 3.6(g).
Section 3.11 Other Duties and Obligations of the Manager.
(a) Company's Continued Existence. The Manager shall take all
reasonable actions which may be necessary or appropriate for the
continuation of the Company's valid existence as a limited liability
company under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business
in which it is engaged.
(b) Personal Liability. The Manager shall at all times use its
best efforts to Members shall not have any personal liability with
respect to any Company liability or obligation in excess of that portion
of their respective Capital Commitments actually called by the Manager
pursuant to Section 5.1(a) and Section 5.1(b) hereof.
(c) Company for Tax Purposes. The Manager shall take all actions
necessary to assure that the Company will be treated as a partnership for
federal and state income tax purposes and be governed by the applicable
provisions of Subchapter K of Chapter 1 of the Code.
(d) Reasonable Reserves. The Manager shall establish and maintain
out of Company funds reasonable reserves for working capital, capital
expenditures and to pay other costs and expenses incident to ownership of
the Qualified Properties and for such other Company purposes as the
Manager deems appropriate, all as provided for and in accordance with the
Annual Plan.
(e) Deviations from the Annual Budget. The Manager shall verbally
inform the Advisor as soon as practicable of any actual or potential
variance from any budget line item of the Annual Budget portion of the
Annual Plan for any fiscal year of the Company which (x) exceeds the
greater of Twenty Thousand Dollars ($20,000) or five percent (5%) of the
amount allocated to such budget line item or, (y) when added to all other
costs and expenses already exceeding their applicable budget line items
for such fiscal year, exceeds One Hundred Thousand Dollars ($100,000) for
a particular Qualified Property or an average (taking into account all
Qualified Properties then owned by the Company) of Fifty Thousand Dollars
($50,000) per Qualified Property.
(f) Time Devoted to the Company. The Manager and its officers and
key employees shall devote such time and attention to the Company
business as shall be necessary to supervise the Company's business and
affairs in accordance with the provisions of this Agreement.
36
(g) Fee Disclosure. Within 10 days after the date of this
Agreement, the Manager shall disclose in writing to the Fund (the "Fee
Disclosure") all fees, bonuses and other compensation paid by or on
behalf of the Manager to any placement agent, finder or other individual
or entity (other than the officers and employees of the Manager) in
connection with the purchase by the Fund of its interest in the Company.
The Manager may omit from the Fee Disclosure fees and expenses paid to
its counsel (Paul, Hastings, Janofsky & Walker LLP) in connection with
the organization of the Company, provided that such counsel has not also
represented the Fund in connection with the formation of the Company and
has not been involved in any form of solicitation relating to the
Company.
Notwithstanding anything to the contrary contained in this
Agreement or any subscription or other agreement relating hereto, the
Manager hereby agrees that the Fund or its Affiliates may disclose the
information contained in the Fee Disclosure to the public.
The Manager represents and warrants that all information
contained in the Fee Disclosure will be true, correct and complete. In
the event that the Fund does not receive the Fee Disclosure within the
time period provided above, or the Fund determines that the Fee
Disclosure contains a material inaccuracy or omission, the Fund shall
have the option, in its sole discretion and without liability to the
Manager or any third party, to cease making their respective Capital
Contributions to the Company (without being deemed to be Defaulting
Members under this Agreement) and to pursue all remedies that may be
available to them.
Section 3.12 Exculpation.
(a) LXP. No LXP Affiliated Party nor any officer, director,
trustee or employee of any LXP Affiliated Party shall be liable,
responsible or accountable in damages or otherwise to the Company or any
other Member for any act or omission on behalf of the Company, in good
faith and within the scope of the authority conferred on LXP as Manager
under this Agreement or otherwise under this Agreement or the Asset
Manager, as the case may be, or by law unless such act or failure to act
(i) is or results in a breach of any representation, warranty or covenant
of LXP contained in this Agreement, which breach had or has a material
adverse effect on the Company or the Fund and, if capable of cure, is not
cured within fifteen (15) days after notice thereof is delivered to LXP
by the Fund, (ii) was fraudulent or committed in bad faith or (iii)
constituted gross negligence or willful misconduct.
(b) Securities Exception. Notwithstanding the exculpation
contained in Section 3.12(a) above, each LXP Affiliated Party shall be
liable, responsible and accountable in damages or otherwise to the
Company and the Fund for any act or omission on behalf of the Company and
within the scope of authority conferred on LXP as Manager or the Asset
Manager (i) which act or omission was
37
negligent (including any negligent misrepresentation) and violated any
law, statute, regulation or rule relating to Shares or any other security
of LXP or (ii) to the extent the Company or the Fund is charged with
liability for, or suffers or incurs loss, liability, cost or expense
(including reasonable attorneys' fees) as a result of, such act or
omission and such act or omission was negligent and related to Shares or
such other security of LXP.
(c) The Fund. None of the Fund, the Advisor, any officer,
director or employee of the Fund or the Advisor, or any Affiliate of the
Fund or the Advisor shall be liable, responsible or accountable in
damages or otherwise to the Company or to any other Member for any act or
omission on behalf of the Company, in good faith and within the scope of
authority conferred on the Fund under this Agreement or by law unless
such act or failure to act (i) is or results in a breach of any
representation, warranty or covenant of the Fund contained in this
Agreement, which breach had or has a material adverse effect on the
Company or LXP and, if capable of cure, is not cured within fifteen (15)
days after notice thereof is delivered to the Fund by LXP, (ii) was
fraudulent or committed in bad faith or (iii) constituted gross
negligence or willful misconduct.
(d) Survival. The provisions of this Section 3.12 shall survive
any termination of the Company or this Agreement.
Section 3.13 Indemnification.
(a) By the Company. The Company shall indemnify, defend and hold
harmless any Person (an "Indemnified Party") who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of any act or omission or alleged act or
omission arising out of such Indemnified Party's activities as (i) a
Member or an officer, director, employee, Affiliate or agent of the
Member, (ii) the Manager, the Fund, the Advisor or the Asset Manager or
an officer, director, employee, Affiliate or agent of any of them on
behalf of the Company or in furtherance of the interest of the Company or
(iii) LXP or an LXP Affiliated Party that is obligated to enter into a
direct financial obligation (including, without limitation, a guarantee
or non-recourse carve out of liability) in connection with the financing
of any Qualified Property, against personal liability, claims, losses,
damages and expenses for which such Indemnified Party has not been
reimbursed by insurance proceeds or otherwise (including attorneys' fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by such Indemnified Party in connection with such action, suit
or proceeding and any appeal therefrom, unless such Indemnified Party (A)
acted fraudulently, in bad faith or with gross negligence or willful
misconduct or (B) by such act or failure to act breached any
representation, warranty or covenant contained in this Agreement, which
breach had or has a
38
material adverse effect on the Company or either Member and, if capable
of cure, is not cured within fifteen (15) days after notice thereof by
the aggrieved Member(s). Any indemnity by the Company under this
Agreement shall be provided out of, and to the extent of, Company
revenues and assets only, and no Member shall have any personal liability
on account thereof. The indemnification provided under this Section 3.13
shall (x) be in addition to, and shall not limit or diminish, the
coverage of the Members or any Affiliates under any insurance maintained
by the Company and (y) apply to any legal action, suit or proceeding
commenced by a Member or in the right of a Member or the Company. The
indemnification provided under this Section 3.13 shall be a contract
right and shall include the right to be reimbursed for reasonable
expenses incurred by any such Indemnified Party within thirty (30) days
after such expenses are incurred.
(b) By LXP. LXP shall indemnify and hold harmless the Fund and
the Advisor from and against any liabilities, claims, losses, damages and
expenses incurred by the Fund (including attorneys' fees, judgments,
fines and amounts paid in settlement) as a result of any act or omission
by any LXP Affiliated Party which (i) constitutes or results in a breach
of any representation, warranty or covenant of LXP contained in this
Agreement, which breach had or has a material adverse effect on the
Company, the Fund, or the Advisor and, if capable of cure, is not cured
within fifteen (15) days after notice thereof from the aggrieved Fund,
(ii) was performed or omitted fraudulently or in bad faith or (iii)
constituted gross negligence or willful misconduct.
Section 3.14 Fiduciary Responsibility. Subject to the provisions
set forth in Section 3.9 and Section 3.12(a) hereof, the Manager acknowledges
that it is under a common law fiduciary duty to conduct the affairs of the
Company in the best interests of the Company and the Members and consequently
must exercise good faith and integrity in handling Company affairs.
ARTICLE IV
BOOKS AND RECORDS; REPORTS TO MEMBERS
Section 4.1 Books. The Manager shall maintain or cause to be
maintained separate, full and accurate books and records of the Company, and
either Member or any authorized representative of either Member, including the
Advisor, shall have the right to inspect, examine and copy the same and to meet
with employees of the Manager responsible for preparing the same at reasonable
times during business hours and upon reasonable notice. All policies of the
Company with respect to the maintenance of such books and records shall be
subject to approval by all of the Members.
Section 4.2 Monthly and Quarterly Reports.
(a) Monthly Reports. The Manager shall prepare and distribute to
the Advisor within thirty (30) days after the last day of each month a
report with
39
respect to the Company and each Qualified Property, including without
limitation (i) an operating statement for the monthly period and
year-to-date showing variances from the Annual Budget portion of the
Annual Plan, (ii) a schedule of aged accounts receivable and accounts
payable, (iii) an occupancy and leasing status report, (iv) a rent roll
and (v) a bank statement reconciliation report.
(b) Quarterly Reports. The Manager shall, within forty (40) days
after the last day of each fiscal quarter,
(i) prepare and distribute to the Advisor a year-to-date
consolidated report with respect to the Company (with the last month of
each such report comprised of forecasted, rather than actual, results),
prepared in accordance with generally accepted accounting principles,
consistently applied, including (a) a balance sheet, (b) a profit and
loss statement, (c) a statement of changes in the Members' Capital
Accounts, (d) a cash flow and distribution statement, (e) a report
briefly describing each variance from the applicable budget line item in
the consolidated Annual Budget portion of the Annual Plan exceeding the
greater of Twenty Thousand Dollars ($20,000) and five percent (5%) of the
amount allocated to such budget line item, (f) a statement as to whether
the total of all actual variances from all budget line items in the
consolidated Annual Budget portion of the Annual Plan exceeds One Hundred
Thousand Dollars ($100,000) for any particular Qualified Property or an
average (taking into account all Qualified Properties then owned by the
Company) of Fifty Thousand Dollars ($50,000) per Qualified Property, (g)
calculations in sufficient detail to verify the accuracy of all fees and
other amounts paid or payable to the Asset Manager under the Management
Agreement and (h) such other reports as either Member may reasonably
request; and
(ii) prepare and distribute to the Advisor simultaneously
with each quarterly report a report with respect to each Qualified
Property, including an operating statement for the quarter and
year-to-date showing each variance from the budget line items in the
Annual Budget portion of the Annual Plan, and a narrative describing
material market changes (as determined in good faith by the Manager or
Asset Manager), and material changes in property operations, physical
condition, capital expenditures and leasing and occupancy.
Section 4.3 Annual Reports. The Manager shall prepare and
distribute to the Advisor within eighty (80) days after the end of each fiscal
year financial statements with respect to the Company, which include the items
set forth in clauses (i) and (ii) of Section 4.2(b) above with respect to such
fiscal year. The eighty (80) day period referred to in the immediately preceding
sentence shall be extended by one (1) day for each day after February 15th that
the Advisor fails to deliver to the Manager fair market value information
necessary for the preparation of such financial statements for the previous
fiscal year with respect to each Qualified Property as provided in Section 4.4
40
hereof. Such financial statements shall be prepared in accordance with
generally accepted accounting principles, consistently applied, and shall
be audited at the Company's expense by such nationally recognized firm of
independent certified public accountants selected by the Manager with the
consent of the Members as provided in Section 4.9 hereof. All reports
delivered pursuant to this Section 4.3 shall also include unaudited
calculations in sufficient detail to verify the accuracy of all fees and
other amounts paid or payable to the Asset Manager pursuant to the terms
of this Agreement and such other reports as either Member may reasonably
request.
Section 4.4 Appraisals; Additional Reports.
(a) Appraisals. In the Fund's sole discretion, the Advisor may
obtain an Appraisal of each Qualified Property, at the Fund's or
Advisor's expense, from time to time, but no more frequently than each
calendar quarter. The Manager and the Asset Manager shall fully cooperate
with the appraiser in connection with any such Appraisal, shall provide
such information to the appraiser as is reasonably requested by the
appraiser and shall cause its employees to be reasonably available to
meet with and answer questions of the appraiser so as to enable the
appraiser to compete its appraisals in a timely manner. None of the
Manager, the Asset Manager, the Fund nor the Advisor shall have any
liability with respect to any acts or actions taken by an appraiser,
including but not limited to Appraisals.
(b) Additional Reports. The Manager shall prepare and distribute
to the Members such additional financial, property, investment and other
reports regarding the Company, the Qualified Properties or any related
matter as either Member may reasonably request, including without
limitation information necessary to enable the Advisor to provide to the
Fund a valuation of their respective Percentage Interests. To the extent
either Member deems it appropriate or necessary, the Manager agrees to
reasonably cooperate in any audit or examination conducted by such Member
or its consultants of any of the information contained in any report
delivered pursuant to this Article IV.
Section 4.5 Accountants; Tax Returns.
(a) The Manager shall engage such nationally recognized firm of
independent certified public accountants approved by the Members as
provided in Section 4.9 hereof to review, or to sign as preparer, all
federal, state and local tax returns which the Company is required to
file.
(b) The Manager will furnish to each Member within one hundred
sixty (160) days after the end of each calendar year, or as soon
thereafter as is practicable, a Schedule K-1 or such other statement as
is required by the Internal Revenue Service which sets forth such
Member's share of the profits or losses and other relevant fiscal items
of the Company for such fiscal year.
41
(c) The Manager shall deliver to the Members copies of all
federal, state and local income tax returns and information returns, if
any, which the Company is required to file.
Section 4.6 Accounting and Fiscal Year. The Manager shall keep
the Company books and records on the accrual basis. The fiscal year of the
Company shall end on December 31.
Section 4.7 Company Funds.
(a) Generally. The funds of the Company shall be deposited into
such account or accounts as are designated by the Manager and reasonably
approved by the Fund. All withdrawals from or charges against such
accounts shall be made by the Manager or by those Persons designated from
time to time by the Manager.
(b) Restrictions on Deposits. Pending distribution or expenditure
in accordance with the terms of this Agreement, funds of the Company may
be invested, in the reasonable discretion of the Manager, in United
States government obligations, insured obligations which are rated not
lower than AA by Standard & Poor's or have a comparable rating from a
nationally recognized rating agency, collateralized bank time deposits,
repurchase agreements, money market funds, commercial paper which is
rated not lower than P-1, certificates of deposit which are rated not
lower than AA by Standard & Poor's or have a comparable rating from a
nationally recognized rating agency, banker's acceptances eligible for
purchase by the Federal Reserve and bonds and other evidences of
indebtedness and preferred stock which are rated not lower than AA by
Standard & Poor's or are of a comparable credit quality.
Section 4.8 Insurance. The Manager shall cause the Company or the
tenant or tenants of each Qualified Property (in accordance with the insurance
obligations under the applicable lease) to maintain insurance thereon of such
types and in such amounts that at a minimum are consistent with the standards
approved by the Members, a copy of which standards is attached hereto as
Schedule 4.8. The Fund may amend such standards from time to time upon written
notice to the Manager, and the Manager shall have sixty (60) days after receipt
of such written notice to cause the tenants of the Qualified Properties to
obtain, if necessary, insurance that conforms with such revised standards,
provided that such revised standards are reasonable and based on industry
standards. The Manager shall cause the Company to obtain, at the Company's
expense, such types and amounts of insurance that the tenant or tenants of any
Qualified Property have failed to maintain and that are included within the
insurance standards listed on Schedule 4.8 hereto, as may be revised from time
to time pursuant hereto.
Section 4.9 Attorneys and Accountants. The attorneys and
accountants for the Company shall be selected by the Manager and approved by the
42
Fund, provided that (a) the Manager may engage local counsel as necessary in
connection with the business of the Company without the approval of the Fund
provided such counsel's fees and the other terms and conditions of its
engagement are comparable to those of other law firms providing similar services
in such local area and the Fund has not previously notified the Manager that
such law firm is unacceptable and (b) the accounting firm shall be among the
four (4) largest accounting firms in the United States when chosen and shall
provide accounting services at market cost.
ARTICLE V
CONTRIBUTIONS
Section 5.1 Capital Contributions.
(a) Generally; Percentage Interests. Each Member shall make an
Initial Capital Contribution to the Company in an amount and at such time
as the Members have agreed. Except as provided in this Section 5.1, (i)
no Member shall be obligated to make any Additional Capital Contribution
or Extraordinary Funding to the Company and (ii) any Additional Capital
Contribution or Extraordinary Funding shall be made by the Members in
proportion to their respective Percentage Interests as determined at the
time of the Capital Call or Extraordinary Call. The Members shall have
the Percentage Interests in the Company set forth opposite each Member's
name on Schedule 1 hereto, as may be adjusted from time to time pursuant
to Section 5.1(d) hereof.
(b) Additional Capital Contributions. In the event the Company
requires capital to acquire an Approved Qualified Property, the Manager
shall be entitled to require an additional Capital Contribution (an
"Additional Capital Contribution") from the Members in an amount not in
excess of the amount necessary to acquire such Approved Qualified
Property plus all reasonable and customary costs and expenses incurred by
the Company for Third Parties retained in connection with the Acquisition
Activities; provided that (x) each Member shall be required to contribute
the amount determined by multiplying such Member's Percentage Interest by
such Additional Capital Contribution and (y) no Member shall be required
to contribute the amount described in clause (x) above if such amount,
when added to the total of all of such Member's prior Capital
Contributions, exceeds such Member's Capital Commitment. If the Manager
shall provide to the Members a written notice calling for an Additional
Capital Contribution (any such notice, a "Capital Call") setting forth
the total amount of such Additional Capital Contribution, the amount of
each Member's share of such Additional Capital Contribution as determined
pursuant to clause (x) above, and the due date on which the Manager is
requiring that such Additional Capital Contribution be contributed to the
Company, which due date shall be at least ten (10) Business Days after
the date on which the Members actually received the Capital Call and not
more than one (1) Business Day prior to the scheduled
43
closing of the acquisition of such Approved Qualified Property; each
Member shall contribute its share of such Additional Capital Contribution
in immediately available funds on or before such due date. If the
acquisition of an Approved Qualified Property fails to close and the
Manager determines there will not be a closing with fifteen (15) days of
the date of the originally scheduled closing, the Manager (x) shall
inform the Members of such failure and return each Member's share of the
Additional Capital Contribution made with respect thereto and (y) each
Member's Capital Contribution shall be restored to the level thereof
immediately prior to such Additional Capital Contribution. If, at any
time after the Members have each contributed their entire Capital
Commitment, the Members elect to contribute additional capital, the
Members shall contribute such additional capital in accordance with their
respective Percentage Interests. A Member may contribute to the Company
an Approved Qualified Property, or an equity interest therein, pursuant
to the Contribution Agreement.
(c) Extraordinary Fundings. In the event the Company requires
additional funds to cover any costs and expenses for which the Company
has insufficient funds, the Manager may make a written request therefor
(any such request, an "Extraordinary Call") setting forth the amount
requested and the due date therefor, which due date shall be at least ten
(10) Business Days after the date on which the Members actually received
the Extraordinary Call. The Fund shall have the right to approve or
disapprove any Extraordinary Call. If the Fund elects to approve an
Extraordinary Call, then each Member shall be required to fund an amount
equal to the amount determined by multiplying such Member's Percentage
Interest by the amount set forth in such approved Extraordinary Call
(each such Extraordinary Call required to be funded hereunder, an
"Extraordinary Funding"). If the Fund elects not to approve an
Extraordinary Call, then no Member shall have any obligation to fund such
disapproved Extraordinary Call, and the Manager shall cover such
shortfall in funds by Company borrowings. An Extraordinary Funding may be
made by agreement of the Members either as a loan by the Members to the
Company (any such loan, an "Extraordinary Loan") or a supplementary
capital contribution by the Members to the Company (any such
contribution, an "Extraordinary Capital Contribution"). Each Member shall
contribute its share of such Extraordinary Capital Contribution or
Extraordinary Loan, as the case may be, in immediately available funds on
or before the due date to which the Members agreed in the Extraordinary
Call. If the Members agree to make an Extraordinary Loan, (x) each Member
shall loan to the Company the amount of such Member's share as determined
above with interest equal to either a rate agreed to by the Members or,
if there is no such agreement, then the 10-year treasury rate plus two
percent (2%) per annum as of the date the Extraordinary Loan is made, (y)
the Annual Budget portion of the Annual Plan shall be amended to reflect
such loan, and (z) such loan (including interest accrued thereon) shall
be repaid from Net Cash Flow from Operations or Net Cash from Sales or
Refinancings. Any Net Cash
44
Flow from Operations or any Net Cash from Sales or Refinancings shall be
applied to each Member's unpaid Extraordinary Loan in proportion to each
Member's Percentage Interest.
(d) Failure to Fund an Additional Capital Contribution or
Extraordinary Funding. If either Member (a "Defaulting Member") fails to
make any Additional Capital Contribution or Extraordinary Funding which
it is required to make under this Section 5.1 by the due date therefor,
then any non-defaulting Member may, at its election, make an Additional
Capital Contribution or Extraordinary Funding to the Company in an amount
equal to the amount that the Defaulting Member failed to contribute
("Default Amount"). The Defaulting Member shall be liable for interest
equal to the 10-year treasury rate plus two percent (2%) per annum
accruing from the due date of such Additional Capital Contribution or
Extraordinary Funding, payable on the first Business Day of each month,
on such Default Amount to the Company, provided that the non-defaulting
Member makes an Additional Capital Contribution or Extraordinary Funding
equal to the Default Amount, or any portion thereof, in which case the
applicable amount of interest shall be paid to the non-defaulting Member.
If for ninety (90) days a Defaulting Member shall fail to make an
Additional Capital Contribution or Extraordinary Funding or to pay to the
Company or the non-defaulting Member (as applicable) any interest that
has accrued on such Default Amount, the Percentage Interest of the
Defaulting Member shall be adjusted, effective the day after the
conclusion of such ninety (90) day period, to equal: the Percentage
Interest of such Defaulting Member (prior to adjustment hereunder)
multiplied by a fraction, the numerator of which is the Defaulting
Member's total Capital Contribution, and the denominator of which is the
product of 120% multiplied by the sum of the Defaulting Member's total
Capital Contribution, plus the amount of the Default Amount and any
accrued and unpaid interest on the Default Amount during such ninety (90)
day period. The adjustment of the Defaulting Member's Percentage Interest
hereunder may also be expressed by the following formula:
a = b x c
---------------
(c+d+e) x 120%
Where a = new Percentage Interest of Defaulting Member after
adjustment hereunder
b = old Percentage Interest of Defaulting Member prior
to adjustment hereunder
c = Defaulting Member's total Capital Contribution
d = amount of Default Amount
45
e = accrued interest on Default Amount during ninety
(90) day period
The adjustment of the Percentage Interest of the Defaulting Member
hereunder shall constitute satisfaction of the Default Amount including
interest thereon and shall cure the Defaulting Member's default
hereunder and the Default Amount, excluding accrued interest, shall
constitute a Capital Contribution made by the non-defaulting Member and
shall be credited to the Capital Account of the non-defaulting Member.
In addition, the Percentage Interest of the non-defaulting Member shall
be increased by the amount by which the Percentage Interest of the
Defaulting Member is decreased. Notwithstanding the foregoing, the
provisions of this Section 5.1(d) shall not be applied against the Fund,
as the Defaulting Member, during the occurrence and continuance of any
material default by LXP, in its capacity as Manager, of its obligations
under this Agreement, or by the Asset Manager, of its obligations under
the Management Agreement, and the Fund shall not be obligated to make an
Additional Capital Contribution or Extraordinary Funding to the Company
pursuant hereto unless and until any such material default by LXP, in
its capacity as Manager, or the Asset Manager, has been cured to the
reasonable satisfaction of the Fund. In addition, if LXP fails to make
an Additional Capital Contribution or Extraordinary Funding for a period
exceeding ninety (90) days, LXP shall lose its right to be the Manager
and the Fund shall have the right in its sole and absolute discretion to
replace LXP as Manager in accordance with the provisions of Section 8.3
hereof.
(e) Failure to Satisfy Claims Under a Purchase and Sale
Agreement. If a Member, or an Affiliate of a Member, has transferred an
Approved Qualified Property pursuant to a Purchase and Sale Agreement (a
"Transferring Member") and the Company has a claim under such Purchase
and Sale Agreement against such Transferring Member which has either been
(w) acknowledged and agreed to by such Transferring Member or (x)
adjudicated in favor of the Company (after all appeals have been taken)
(the acknowledged or adjudicated amount of such claim being the "Claim
Amount"), such Transferring Member shall either, as applicable, (y)
satisfy such Claim Amount at its expense or (z) contribute the Claim
Amount to the Company (for which it shall not receive any additional
credit to its Capital Account as a Capital Contribution). If for ninety
(90) days such Transferring Member (a "Defaulting Transferring Member")
shall fail to satisfy such Claim Amount or contribute such Claim Amount
to the Company, the Percentage Interest of the Defaulting Transferring
Member shall be adjusted, effective the day after the conclusion of such
ninety (90) day period, to equal: the Percentage Interest of such
Defaulting Transferring Member (prior to adjustment hereunder) multiplied
by a fraction, the numerator of which is the Defaulting Transferring
Member's total Capital Contribution, and the
46
denominator of which is the product of 120% multiplied by the sum of the
Defaulting Transferring Member's total Capital Contribution, plus the
amount of the Claim Amount. The adjustment of the Defaulting Transferring
Member's Percentage Interest hereunder may also be expressed by the
following formula:
a = b x c
-------------
(c+d) x 120%
Where a = new Percentage Interest of Defaulting Transferring
Member after adjustment hereunder
b = old Percentage Interest of Defaulting
Transferring Member prior to adjustment hereunder
c = Defaulting Transferring Member's total Capital
Contribution
d = amount of Claim Amount
The adjustment of the Percentage Interest of the Defaulting Transferring
Member hereunder shall constitute satisfaction of the Claim Amount and
shall cure the Defaulting Transferring Member's default hereunder and
the Claim Amount shall constitute a Capital Contribution made by the
non-defaulting Member and shall be credited to the Capital Account of
the non-defaulting Member. In addition, the Percentage Interest of the
non-defaulting Member shall be increased by the amount by which the
Percentage Interest of the Defaulting Member is decreased.
Section 5.2 Return of Capital Contribution. Except as otherwise
expressly provided in this Agreement, (a) the Capital Contribution of a Member
will be returned to that Member only in the manner and to the extent provided in
Article VII and Article IX hereof and (b) no Member shall have any right to
demand or receive the return of its Capital Contribution. In the event the
Company is required or compelled to return any Capital Contribution, no Member
shall have the right to receive property other than cash. No Member shall be
entitled to interest on its Capital Contribution or Capital Account
notwithstanding any disproportion therein as between the Members.
Section 5.3 Liability of the Members. No Member shall have any
personal liability to the Company, to either Member, to the creditors of the
Company or to any other Person for any debt, liability or obligation of the
Company. No Member shall be required to contribute funds or capital to the
Company in excess of its Capital Commitment although the Members may at their
option contribute funds in excess of their respective Capital Commitments
pursuant to Section 5.1(c) and Section 5.1(d) hereof.
47
Section 5.4 No Third Party Beneficiaries. The foregoing
provisions of this Article V are not intended to be for the benefit of any
creditor of the Company or any other Person, and no creditor of the Company or
any other Person may rely on the commitment of either Member to make any Capital
Contribution. Additional Capital Contributions and Extraordinary Fundings are
not payable unless and until the conditions set forth in Section 5.1 hereof have
been satisfied, and no creditor of the Company or any other Person shall have,
or be given, any right to cause a Capital Call or Extraordinary Call to be given
by the Manager.
ARTICLE VI
MAINTENANCE OF CAPITAL ACCOUNTS;
ALLOCATION OF PROFITS AND LOSSES
FOR BOOK AND TAX PURPOSES
Section 6.1 Capital Accounts.
(a) Generally: Credits to Capital Accounts. A Capital Account
shall be established and maintained for each Member. Initially, the
Capital Account of each Member shall be credited with each Member's
respective Initial Capital Contribution. Thereafter, each Member's
Capital Account shall be credited with any Additional Capital
Contributions or Extraordinary Capital Contributions made or contributed
by such Member and such Member's allocable share of Profits, any
individual items of income and gain allocated to such Member pursuant to
the provisions of this Article VI, and the amount of additional cash, or
the Fair Market Value of any Company asset (net of any liabilities
assumed by the Company and liabilities to which the asset is subject),
contributed to the Company by such Member or deemed contributed to the
Company by such Member in accordance with Regulations Section
1.704-1(b)(2)(iv)(c).
(b) Debits to Capital Account. The Capital Account of each Member
shall be debited with the Member's allocable share of Losses, any
individual items of expenses and loss allocated to such Member pursuant
to the provisions of this Article VI, the amount of any cash distributed
to such Member and the Fair Market Value of any Company asset (net of any
liabilities assumed by the Member and liabilities to which the asset is
subject) distributed to such Member or deemed distributed to such Member
in accordance with Regulations Section 1.704-1(b)(2)(iv)(c).
(c) Capital Account of Transferee. In the event that any
Percentage Interest of a Member is transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred
Percentage Interest in such Member.
(d) Adjustments of Book Value. In the event that the Book Value
of any Company asset is adjusted as described in the definition of "Book
Value", the
48
Capital Accounts of both Members shall be adjusted in accordance with
Regulation Section 1.704-1(b)(2)(iv)(f) or Regulation Section
1.704-1(b)(2)(iv)(m), as applicable, to reflect such adjustment.
(e) Compliance with Regulations. The foregoing provisions and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulation Section 1.704-1(b) and
shall be interpreted and applied in a manner consistent with such
Regulation. In the event that the Manager shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto, are computed in order to comply with such Regulation,
the Manager may make such modification; provided, however, that if such
modification constitutes a Material Modification, it shall become
effective only upon the consent of either Member to whom such
modification would constitute a Material Modification.
Section 6.2 Profits and Losses.
(a) Allocation. Except as otherwise provided in Section 6.3
hereof, for each fiscal year of the Company, Profits and Losses shall be
allocated as set forth below.
(i) Profits (calculated without regard to the Management
Fee) shall be allocated:
(A) first, to the Members in an amount sufficient
to reverse the cumulative amount of any Losses allocated to the
Members in the current and all prior fiscal years pursuant to
Section 6.2(a)(ii)(C) hereof, in proportion to the allocation of
such Losses to such Members;
(B) second, to the Members pro rata in accordance
with their respective Percentage Interests until the Members have
received a cumulative amount allocated pursuant to this Section
6.2(a)(i)(B) for the current and all prior fiscal years equal to
the sum of (1) an aggregate amount sufficient to provide such
Members with their 12% IRR (not including amounts representing a
return of Capital Contributions with respect to any Qualified
Property) and (2) the aggregate amount of Losses allocated to
such Members pursuant to Section 6.2(a)(ii)(B) hereof; and
(C) the balance, if any, (x) 85% to the Members pro
rata in proportion to their Percentage Interests and (y) 15% to
LXP.
(ii) Losses (calculated without regard to the Management
Fee) shall be allocated:
49
(A) first, to the Members in an amount sufficient
to reverse the cumulative amount of any Profits allocated to the
Members in the current and all prior fiscal years pursuant to
Section 6.2(a)(i)(C) hereof, in proportion to the allocation of
such Profits to such Members;
(B) second, to the Members in an amount sufficient
to reverse the cumulative amount of any Profits allocated to the
Members in the current and all prior fiscal years pursuant to
Section 6.2(a)(i)(B) hereof, in proportion to the allocation of
such Profits to such Members; and
(C) the balance, if any, to the Members pro rata in
accordance with their Percentage Interests.
(iii) Any deduction with respect to the Management Fee
payable pursuant to Section 3.10(c) hereof shall be specially allocated
to the Fund.
(b) Adjustments to "Profits" and "Losses". When used in this
Agreement, "Profits" and "Losses" shall mean, for each fiscal year or
other period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required
to be stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss), and otherwise in accordance with the
methods of accounting followed by the Company for federal income tax
purposes, with the following adjustments:
(i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses shall be added to such taxable income or loss;
(ii) any items that are specially allocated pursuant to
this Agreement shall not be taken into account in computing Profits or
Losses;
(iii) any expenditure of the Company described in Section
705(a)(2)(B) of the Code (or treated as such under Regulation Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing
Profits or Losses pursuant to this Definition shall be deducted from such
taxable income or loss;
(iv) any depreciation, amortization and/or cost recovery
deductions with respect to any asset shall be deemed to be equal to the
Book Depreciation available with respect to such asset;
50
(v) the computation of all items of income, gain, loss and
deduction shall be made without regard to any basis adjustment under
Section 743 of the Code;
(vi) in the event the Book Value of any Company asset is
adjusted pursuant to the definition of Book Value, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
and
(vii) gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Book Value of
the property disposed of, notwithstanding that the adjusted tax basis of
such property differs from its Book Value.
(c) Changes in Percentage Interests. If either Member's
Percentage Interest changes during any taxable year of the Company in
accordance with Section 5.1(d) and Section 5.1(e) hereof, then for that
taxable year the Company will effect a deemed closing of the books as of
the date of such change, and the Profits and Losses of the Company (and
all items of income, gain, loss, deduction or credit for federal income
tax purposes) for the period in such year ending on and including such
date (the "pre-change period") shall be allocated among the Members in
proportion to their respective Percentage Interest (as may be required by
Section 6.2 hereof) as of the first day of such pre-change period, and
each Member's share of Profits and Losses (and all items of income, gain,
loss, deduction or credit for federal income tax purposes) for the period
following such date of change (the "post-change period") shall be
allocated among the Members in proportion to their respective Percentage
Interest (as may be required by Section 6.2 hereof) as of the first date
of such post-change period.
Section 6.3 Regulatory Allocations.
(a) Minimum Gain Chargeback. If there is a net decrease in
Partnership Minimum Gain during any fiscal year, each Member shall be
specially allocated items of Company income and gain for such fiscal year
(and, if necessary, subsequent fiscal years) in an amount equal to such
Member's share of the net decrease in Partnership Minimum Gain, as
determined under Regulations Section 1.704-2(g). Allocations pursuant to
the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3(a)
is intended to comply with the "minimum gain chargeback" requirements of
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
51
(b) Chargeback Attributable to Partner Nonrecourse Debt. If there
is a net decrease in Partner Nonrecourse Debt Minimum Gain during any
fiscal year attributable to a Partner Nonrecourse Debt, each Member with
a share of Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt at the beginning of such year shall be specially
allocated items of income and gain for such fiscal year (and, if
necessary, for subsequent fiscal years) in an amount equal to such
Member's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4) and (5). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance
with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section
6.3(b) is intended to comply with the "minimum gain chargeback"
requirements of Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(c) Qualified Income Offset. If either Member unexpectedly
receives any adjustment, allocation or distribution described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which results in
or increases an Adjusted Capital Account Deficit for the Member, such
Member shall be allocated items of income and book gain in an amount and
manner sufficient to eliminate such Adjusted Capital Account Deficit or
increase therein as quickly as possible; provided, that an allocation
pursuant to this Section 6.3(c) shall be made if and only to the extent
that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided in this Article VI have been tentatively made
as if this Section 6.3(c) were not in the Agreement. This Section 6.3(c)
is intended to constitute a "qualified income offset" as provided by
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
(d) Partner Nonrecourse Deductions. Items of Company loss,
deduction or Section 705(a)(2)(B) expenditures that are attributable to a
Partner Nonrecourse Debt ("Partner Nonrecourse Deductions") shall be
allocated among the Members who bear the Economic Risk of Loss for such
Partner Nonrecourse Debt in the ratio in which they share Economic Risk
of Loss for such Partner Nonrecourse Debt. This provision is to be
interpreted in a manner consistent with the requirements of Regulations
Section 1.704-2(b)(4) and (i)(1).
(e) Limitation on Allocation of Net Loss. To the extent any
allocation of Losses or other items of loss or deduction would cause or
increase an Adjusted Capital Account Deficit as to either Member, such
allocation shall be reallocated among the other Members in accordance
with their respective Percentage Interests, subject to the limitations
hereof.
52
(f) Curative Allocation. The allocations set forth in this
Section 6.3 (the "Regulatory Allocations") are intended to comply with
certain requirements of the applicable Regulations promulgated under Code
Section 704(b). Notwithstanding any other provision of this Article VI,
the Regulatory Allocations shall be taken into account in allocating
other operating Profits, Losses and other items of income, gain, loss and
deduction to the Members for Capital Account purposes so that, to the
extent possible, the net amount of such allocations of Profits, Losses
and other items shall be equal to the amount that would have been
allocated to each Member if the Regulatory Allocations had not occurred.
Section 6.4 Allocation of Tax Items for Tax Purposes.
(a) Generally. Subject to Sections 1.704-1(b)(4)(i) and
1.704-1(b)(2)(iv)(m) of the Regulations and Section 6.4(b), Section
6.4(c) and Section 6.4(e) hereof, allocations of income, gain, loss,
deduction and credit for federal, state and local tax purposes shall be
allocated to the Members in the same manner and amounts as the book items
corresponding to such tax items are allocated for Capital Account
purposes.
(b) Recapture Income. Notwithstanding Section 6.4(a) hereof, if
there is a gain on any sale, exchange or other disposition of Company
property and all or a portion of such gain is characterized as ordinary
income by virtue of the recapture rules of Code Section 1245 or 1250, or
under the corresponding recapture rules of state or local income tax law,
as the case may be, then, to the extent possible, such recapture income
for United States and state and local tax purposes shall be allocated to
the Members in the ratio that they were allocated Tax Depreciation
previously taken and allowed with respect to the Company property being
sold or otherwise disposed of.
(c) Section 754 Adjustments. Notwithstanding Section 6.4(a)
hereof, any increase or decrease in the amount of any items of income,
gain, loss, deduction or credit for tax purposes attributable to an
adjustment to the basis of Company assets made pursuant to a valid
election or deemed election under Sections 732(d), 734, 743, and 754 of
the Code, and any increase or decrease in the amount of any item of
credit or tax preference attributable to any such adjustment, shall be
allocated to those Members entitled thereto under such law. Such items
shall be excluded in determining the Capital Accounts of the Members,
except as otherwise provided by Section 1.704-1(b)(2)(iv)(m) of the
Regulations.
(d) Nonrecourse Deductions. Any "Nonrecourse Deductions" as
defined in Treasury Regulations Section 1.704-2(c) for any fiscal year or
other period shall be specially allocated as items of loss in the manner
provided in Treasury Regulations Section 1.704-2(j)(1)(ii).
53
(e) Sharing of Excess Nonrecourse Liabilities. For purposes of
determination of the Members' shares of the excess Nonrecourse
Liabilities of the Company for purposes of Section 1.752-3(a)(3) of the
Regulations, the Members' interests in profits as determined pursuant to
Section 1.752-3(a)(3) of the Regulations shall be in accordance with
their Percentage Interests as adjusted from time to time.
(f) Section 704(c). Notwithstanding Section 6.4 hereof, if the
Company owns or acquires Section 704(c) Property, or if the Tax Matters
Member makes an election referred to in the definition of "Book Value"
herein, then, solely for tax purposes and not for Capital Account
purposes, Tax Depreciation, and any gain or loss, attributable to such
Section 704(c) Property shall be allocated between or among the Members
in a manner that takes into account the variation between such Book Value
and such adjusted tax basis, in accordance with the principles of Code
Section 704(c) and the Regulations promulgated thereunder and such method
set forth in Regulations Section 1.704-3(b). Any elections or other
decisions relating to such allocations (including under Section 1.704-3
of the Regulations, whether to use the traditional method, the
traditional method with curative allocations or the remedial method)
shall be made by the Tax Matters Member (as defined below) in any manner
that reasonably reflects the purpose and intention of this Agreement.
Section 6.5 Tax Matters Member. LXP is hereby designated as the
"tax matters partner" for the Company as such term is defined in Section
6231(a)(7) of the Code (the "Tax Matters Member"), and all federal, state and
local tax audits and litigation shall be conducted under the direction of LXP.
All expenses incurred with respect to any tax matter which does or may affect
the Company, including but not limited to expenses incurred by LXP acting in its
capacity as Tax Matters Member in connection with Company level administrative
or judicial tax proceedings, shall be paid out of Company assets, whether or not
included in an Annual Plan. If the Fund is permitted under the Code to
participate in Company level administrative or judicial tax proceedings and the
Fund chooses, in its sole discretion, to so participate, the Company shall be
responsible for all expenses incurred by the Fund in connection with such
participation, whether or not included in an Annual Plan. Without the consent of
the Fund, the Tax Matters Member shall have no right to extend the statute of
limitations for assessing or computing any tax liability against the Company or
the amount of any Company tax item or to settle any dispute with respect to any
income, or any other material, tax. The Tax Matters Member shall, promptly upon
receipt thereof, forward to each Member a copy of any correspondence relating to
the Company received from the Internal Revenue Service or any other tax
authority which relates to matters that are of material importance to the
Company and/or the Members. The Tax Matters Member shall promptly advise each
Member in writing of the substance of any material conversation held with any
representative of the Internal Revenue Service which relates to an audit or
administrative proceeding relating to a tax return of the Company.
54
Section 6.6 Adjustments.
(a) Generally. Except as otherwise provided in this Agreement,
all items of Company income, gain, loss and deduction and any other
allocations not otherwise provided for shall be divided among the Members
in the same proportions as they share Profits and Losses, as the case may
be, for the year.
(b) Upon Transfer or Change in Percentage Interest. Except as
otherwise provided in Section 6.2(c) hereof, if any Percentage Interest
is transferred in any fiscal year in accordance with this Agreement, or
if a Member's Percentage Interest changes during any fiscal year, all
Profits and Losses attributable to such Percentage Interest for such
fiscal year shall be divided and allocated in accordance with an interim
closing of the books as of the date of a transfer or change.
(c) Amendments to this Article VI. The Manager is specifically
authorized, with the consent of the Fund and upon the advice of the
accountants or legal counsel for the Company, to amend this Article VI to
comply with any Regulations with respect to the distributions and
allocations of the Company and any such amendment shall become effective;
provided, however, that if such amendment constitutes a Material
Modification for either Member, then such amendment shall become
effective only upon the express written consent of such Member.
ARTICLE VII
DISTRIBUTIONS
Section 7.1 Cash Available for Distributions.
(a) Generally.
(i) The Manager shall cause the Company to distribute (A)
all Net Cash Flow from Operations not less frequently than monthly; and
(B) except upon Liquidation, Net Cash from Sales or Refinancings at such
times as the Members may determine as soon as practicable after the
receipt of such Net Cash from Sales or Refinancings, as follows: (x)
first, to the Members pro rata in accordance with their Percentage
Interest, until such time as the Members have each received cumulative
distributions in an amount sufficient to achieve a 12% IRR and (y)
thereafter, (1) 85% to the Members pro rata in accordance with their
Percentage Interests and (2) 15% to LXP.
(ii) Distributable Cash shall not be used to acquire
Qualified Properties or make capital improvements on Qualified Properties
unless consented to in writing in advance by the Members.
55
(iii) Notwithstanding anything to the contrary herein, any
amounts credited to the reserve, held for the benefit of LXP, pursuant to
Section 3.10(c) hereof (and not otherwise applied to LXP's share of any
Capital Call pursuant to such section) shall be distributed to LXP upon
termination of the Company.
(b) Withholdings. The Manager is authorized to withhold from
distributions or allocations to either Member (or, in the event there are
insufficient funds, require such Member to contribute to the Company) and
to pay over to any federal, state or local government any amounts
required to be withheld pursuant to the Code or any provisions of any
other federal, state or local law with respect to any payment,
distribution or allocation to the Company or such Member and shall
allocate any such amounts to such Member with respect to which such
amount was withheld. All amounts so withheld (including such amounts
contributed by the Member) shall be treated as amounts distributed to
such Member, and will reduce the amount otherwise distributable to such
Member, pursuant to this Article VII for all purposes under this
Agreement.
(c) Restrictions on Distributions. Notwithstanding anything to
the contrary contained in this Section 7.1, the Company shall not make a
distribution to the extent that, at the time of such distribution and
after giving effect to such distribution, all liabilities of the Company
(other than liabilities to the Members on account of their Capital
Contributions or liabilities for which the recourse of creditors is
limited to specific property of the Company) shall exceed the Fair Market
Value of the Company assets, except that the Fair Market Value of
Qualified Property that is subject to a liability for which the recourse
of the creditors is limited shall be included in the Company assets only
to the extent that the Fair Market Value of such Qualified Property
exceeds that liability.
(d) Clawback. Upon the tenth anniversary of the date hereof and
upon the dissolution of the Company pursuant to Section 9.1 hereof, if
and to the extent either Member has not received an amount of
distributions (during the life of the Company and in liquidation) at
least sufficient to achieve a 12% IRR calculated on an aggregate basis,
then LXP shall promptly restore capital to the Company for payment to
each such Member in such amounts until each such Member has received such
aggregate amount of distributions, provided however, that LXP shall not
be obligated to contribute pursuant to this Section 7.1(d) an amount
greater than the total amount of distributions previously made to LXP
pursuant to Section 7.1(a)(i)(y)(2) hereof (net of taxes on income
attributable to such distributions).
ARTICLE VIII
TRANSFER; REMOVAL OF MANAGER
Section 8.1 Prohibition on Transfers and Withdrawals by Members.
The Members shall be prohibited from transferring or assigning their
56
respective interests (or any part of such interests) in the Company and
any attempted transfer shall be void ab initio. Except as provided in
Section 11.1 and Section 11.2 hereof, the Members shall be prohibited
from withdrawing from the Company. If either Member withdraws from the
Company, it shall be and remain liable for all obligations and
liabilities incurred by it as a Member, and shall be liable to the
Company and the other Members for all indemnifications set forth herein
and for any liabilities, losses, claims, damages, costs and expenses
(including reasonable attorneys' fees) incurred by the Company as a
result of any withdrawal in breach of this Agreement.
Section 8.2 Prohibition on Transfers by and Resignation of
Manager.
(a) LXP may not transfer or assign its rights and obligations (or
any portion thereof) as the Manager and may not resign as Manager, except
with the prior written consent of all the Members, which consent may be
given or withheld in their sole discretion. If LXP resigns as Manager
without consent by the Fund, LXP shall be and remain liable for all
obligations and liabilities incurred by it as Manager, and shall be
liable to the Company and the Fund for all indemnifications set forth
herein and for any liabilities, losses, claims, damages, costs and
expenses (including reasonable attorneys' fees) incurred by the Company
as a result of any resignation in breach of this Agreement. If the
Members approve a transfer or assignment by LXP of its rights and
obligations as Manager, any transferee or assignee thereof shall execute
a counterpart to this Agreement agreeing to be bound by all the
provisions of this Agreement as if originally a party to this Agreement.
(b) Any assignment, transfer or other disposition (voluntary,
involuntary or by operation of law) of any membership interest in LXP to
a Person other than a directly or indirectly wholly-owned Affiliate of
LXP shall require the prior written consent of the Fund.
Section 8.3 Removal of the Manager.
(a) Generally. In the event of (i) a default by the Manager of
any of its obligations hereunder, or a default by the Asset Manager of
any of its obligations under the Management Agreement, which default
materially and adversely affects the Company or the Fund and which, if
capable of cure, remains uncured for thirty (30) days after written
notice thereof, (ii) gross negligence, willful misconduct or fraud in the
performance by the Manager of its obligations hereunder or by the Asset
Manager of its obligations under the Management Agreement, (iii) the
commission of a felony or misdemeanor involving embezzlement, theft or
acts of moral turpitude by the Manager or the Asset Manager, (iv) failure
by the Manager to make an Additional Capital Contribution or
Extraordinary Funding for a period exceeding ninety (90) days or (v)
failure by LXP to pay a Claim Amount for a period exceeding ninety (90)
days (any of the
57
foregoing, "Cause"), the Fund shall have the right in its sole and
absolute discretion to remove the Manager (and, except in the case of a
failure to make an Additional Capital Contribution or Extraordinary
Funding, to remove LXP as a Member if LXP or any LXP Affiliated Party is
the Manager) by written notice to the Manager (the "Removal Notice") and
to appoint a new Manager. The Removal Notice shall specifically set forth
the act or failure to act of the Manager or the Asset Manager upon which
the Cause is based. Such removal of the Manager shall be effective ten
(10) Business Days after receipt of the Removal Notice by the Manager
(unless such removal is enjoined as provided below). If LXP is the
Manager, LXP shall have the right, in its discretion, to sue the Fund to
enjoin such removal. In order to enable LXP to seek prompt injunctive
relief in the event of a removal pursuant hereto, the parties agree to
seek expedited resolution of any lawsuit brought with respect to such
removal, and the Fund acknowledges that, for purposes hereof only, in the
event the Fund violated Section 8.3 hereof by wrongfully removing LXP,
the injury to LXP would be irreparable and one for which there is no
adequate remedy at law. In the event that the Fund elects to remove the
Manager (or LXP), any agreements between the Company and the Manager (or
any LXP Affiliated Party) shall be terminated without cost or penalty as
of the effective date of the Manager's removal.
(b) Removal Amount Due LXP. Upon removal of LXP as a Member as
provided in Section 8.3(a) above, LXP shall be entitled to be paid an
amount (the "Removal Amount") equal to the difference between (i) the
amount LXP would receive if the Company were dissolved, the Qualified
Properties sold for their Fair Market Values (determined pursuant to
Section 8.3(c) hereof) and the assets of the Company were distributed in
liquidation in accordance with Section 9.2 hereof, minus (ii) any
liabilities, claims, losses, damages, costs or expenses incurred by the
Company or the Fund as a result of the Cause which led to LXP's removal
hereunder. The Company shall cause the Removal Amounts payable to LXP to
be paid out of proceeds from liquidation or sales of Qualified Properties
and other assets resulting from a liquidation performed in accordance
with the standards described in the first two sentences of Section
9.2(ii) hereof in cash no later than two (2) years after effectiveness of
the removal; provided, that the Company may, but shall not be obligated
to, pay such Removal Amounts without liquidating some or all of the
Qualified Properties and other assets not later than two (2) years after
the effectiveness of the removal. Interest on the Removal Amounts payable
to LXP shall accrue at a rate equal to the 10-year treasury rate plus two
percent (2%) per annum following the effectiveness of the removal, as
provided in Section 8.3(a) hereof, and shall be payable in arrears out of
proceeds from liquidation of Qualified Properties and other assets. The
proceeds from the liquidation or sale of a Qualified Property shall be
distributed to the Members pro rata in accordance with Section 9.2
hereof. If, due to market conditions or the adverse effect of liquidation
on the Fair Market Value of the Qualified Properties, liquidation cannot
be completed within two (2) years, the
58
date for paying the Removal Amounts payable to LXP in full shall be
extended for the length of time needed to accomplish liquidation in
accordance with Section 9.2.
(c) Determination of Fair Market Value. For purposes of
calculating the Removal Amounts described above in Section 8.3(b), the
Fair Market Value of each Qualified Property shall be (i) the net amount
obtained by liquidating such Qualified Property in accordance with
Section 9.2 and applying the proceeds of sale to the payment of the debts
and obligations of the Company secured by or relating to such Qualified
Property (including a pro rata portion of the Company's debts and
obligations that are not secured by or do not relate to any particular
Qualified Property) and to the expenses of liquidating such Qualified
Property and to the setting up to any reserves in accordance with Section
9.2(iv)(B) hereof (but only with respect to such Qualified Property), or
(ii) if the Company elects not to liquidate each such Qualified Property,
determined by agreement between the Members, or if agreement cannot be
reached within thirty (30) days after determination that the Qualified
Property will not be liquidated, by an independent, reputable and
qualified real estate appraiser with at least ten (10) years experience
selected by the Members. If the Members cannot agree on an appraiser,
then each shall select an independent, qualified and reputable real
estate appraiser with at least ten (10) years experience to determine the
Fair Market Values of the Qualified Properties. If the appraisers agree
on the Fair Market Values, then the Fair Market Values of the Qualified
Properties shall be as determined by the appraisers. If the appraisers do
not agree, then each appraiser shall set forth its determination of the
Fair Market Value of each Qualified Property and, with respect to each
Qualified Property, if the higher amount set forth in either appraisal is
not more than 10% of the lower amount, then the Fair Market Value of such
Qualified Property shall be the average of the amount set forth in the
two appraisals. If the higher amount exceeds the lower amount of the
appraisal of any Qualified Property by more than 10%, then the two
appraisers shall designate a third appraiser to determine the Fair Market
Value of such Qualified Property. If the two appraisers cannot agree upon
the designation of the third appraiser, then the third appraiser shall be
appointed by the American Arbitration Association in the City of New
York. The third appraiser shall conduct such investigations as it shall
deem appropriate and within 30 days after its date of designation shall
choose, with respect to each Qualified Property as to which a Fair Market
Value has not been determined pursuant to the second preceding sentence,
the appraisal of the Fund's appraiser or the appraisal of LXP's appraiser
and no other amount as the Fair Market Value of each Qualified Property.
The decision of the third appraiser shall be in writing and shall be
binding on the Members. If LXP and the Fund agree on an appraiser, then
the Company shall pay the fees and expenses of such appraiser. If LXP and
the Fund each select an appraiser, then LXP and the Fund shall each pay
the fees and expenses of the appraiser selected by it, and the Company
shall pay the fees and
59
expenses of any third appraiser designated by such appraisers or by the
American Arbitration Association.
(d) Removal not Wrongful. In addition to the foregoing, after
removal of LXP as a Member and, if LXP sues to enjoin the removal, a
final determination by a court of competent jurisdiction that such
removal was not wrongful, the Fund shall have the right to cause the
dissolution and liquidation of the Company in accordance with Article IX
hereof.
ARTICLE IX
TERMINATION
Section 9.1 Dissolution. The Company shall dissolve and commence
winding up and liquidating upon the first to occur of any of the following
(collectively, the "Liquidating Events"):
(i) the reduction to cash or cash equivalents (other than
purchase money notes obtained by the Company from the sale of Qualified
Property) of the last remaining Qualified Property;
(ii) the agreement in writing by the Members to dissolve
the Company;
(iii) the termination of the term of the Company pursuant
to Section 2.5 hereof;
(iv) the entry of a decree of judicial dissolution of the
Company pursuant to Section 17-802 of the Act;
(v) the election of the Fund to dissolve the Company
pursuant to Section 8.3(d) hereof;
(vi) all of the Qualified Properties have been sold to
LXP, or its designees, or to the Fund, or its designees, pursuant to the
exercise of the Buy/Sell as provided in Section 11.1 hereof;
(vii) the Bankruptcy, insolvency, dissolution or
withdrawal from the Company of LXP or the Fund, provided that the
bankruptcy of LXP shall not constitute a Liquidating Event if the Company
is continued pursuant to this Section 9.1; or
(viii) the election of either Member to dissolve the
Company after the breach by the Fund (in the case of LXP) or LXP (in the
case of the Fund) of any representation, warranty or covenant contained
in this Agreement, which breach had or has a material adverse effect on
the Company or such Member, and,
60
if capable of cure, is not cured within fifteen (15) days after notice
thereof from such Member.
The Members hereby agree that, notwithstanding any provision of the Act, the
Company shall not dissolve prior to the occurrence of a Liquidating Event. Upon
the occurrence of the events described in Section 9.1(v) or Section 9.1(vii)
above (relating to the status of LXP), the Company shall not be dissolved or
required to be wound up if within ninety (90) days after such event the Fund
elects, in its sole and absolute discretion, to continue the business of the
Company and to appoint, effective as of the date of such event, a successor
Manager.
Section 9.2 Termination. In all cases of dissolution of the
Company, the business of the Company shall be wound up and the Company
terminated as promptly as practicable thereafter, and each of the following
shall be accomplished:
(i) The Liquidator shall cause to be prepared a statement
setting forth the assets and liabilities of the Company as of the date of
dissolution, a copy of which statement shall be furnished to both of the
Members;
(ii) The Qualified Properties and assets of the Company
shall be liquidated by the Liquidator as promptly as possible, but in an
orderly and businesslike and commercially reasonable manner, consistent
with maximizing the price to be received. The Liquidator in its
reasonable discretion and with the consent of the Fund shall determine
whether to sell any Qualified Property at a public or private sale, for
what price and on what terms. The Liquidator may, in the exercise of its
good faith business judgment and if commercially reasonable and if
acceptable to the Fund, determine not to sell a portion of the Qualified
Properties and assets of the Company, in which event such Qualified
Properties and assets shall be distributed in kind pursuant to clause
(iv) below;
(iii) Any Profit or Loss realized by the Company upon the
sale or other disposition of its property pursuant to Section 9.2(ii)
above shall be allocated to the Members as required by Article VI hereof;
and
(iv) The proceeds of sale and all other assets of the
Company shall be applied and distributed as follows and in the following
order of priority; (provided, that if LXP has been removed as Members and
have received payment in full of the Removal Amounts pursuant to Section
8.3 hereof, then LXP shall not be paid any portion of such proceeds of
sale and other assets of the Company):
(A) To the payment of the debts and liabilities of
the Company and the expenses of liquidation;
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(B) To the setting up of any reserves which the
Liquidator shall reasonably determine to be necessary for
contingent, unliquidated or unforeseen liabilities or obligations
of the Company or the Members arising out of or in connection
with the Company. Such reserves may, in the discretion of the
Liquidator, be paid over to a national bank or national title
company selected by it and authorized to conduct business as an
escrowee to be held by such bank or title company as escrowee for
the purposes of disbursing such reserves to satisfy the
liabilities and obligations described above, and at the
expiration of such period as the Liquidator may reasonably deem
advisable, distribute any remaining balance in the manner set
forth below; and
(C) The balance, if any, to the Members in
accordance with Section 7.1 hereof.
No payment or distribution in any of the foregoing categories shall be
made until all payments in each prior category shall have been made in
full. If the payments due to be made in any of the foregoing categories
exceed the remaining assets available for such purpose, such payment
shall be made to the Persons entitled to receive the same pro rata in
accordance with the respective amount due them.
Payments described in clause (iv) above must be made in cash. The
Members shall continue to share profits, losses and other tax items
during the period of liquidation in the same proportions as before
dissolution.
Section 9.3 Certificate of Cancellation. Upon completion of the
distribution of the Company's assets as provided in this Article IX and the
completion of the winding-up of the affairs of the Company, the Company shall be
terminated, and the Liquidator shall cause the filing of a certificate of
cancellation of the certificate of formation in the office of the Secretary of
State of the State of Delaware in accordance with the Act and shall take all
such other actions as may be necessary to terminate the Company in accordance
with the Act and shall take such other actions as may be necessary to terminate
the Company's registration in any other jurisdictions where the Company is
registered or qualified to do business.
Section 9.4 Acts in Furtherance of Liquidation. Each Member or
former Member, upon the request of the Liquidator, shall promptly execute,
acknowledge and deliver all documents and other instruments as the Liquidator
shall reasonably request to effectuate the proper dissolution and termination of
the Company, including the winding up of the business of the Company.
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ARTICLE X
REPRESENTATIONS OF THE MEMBERS
Section 10.1 Representations of the Fund. The Fund hereby
represents and warrants to LXP and the Company as follows:
(i) This Agreement constitutes the valid and binding
agreement of the Fund, enforceable against the Fund in accordance with
its terms, subject as to enforcement of bankruptcy, insolvency and other
similar laws affecting the rights of creditors and to general principles
of equity;
(ii) The Fund has all requisite power and authority to
enter into this Agreement, to carry out the provisions and conditions
hereof and to perform all acts necessary or appropriate to consummate all
of the transactions contemplated hereby and no further action by the Fund
is necessary to authorize the execution or delivery of this Agreement;
(iii) This Agreement has been duly and validly executed
and delivered by the Fund and the execution, delivery and performance
hereof by the Fund does not and will not (i) require the approval of any
other Person, or (ii) contravene or result in any breach of or constitute
any default under, or result in the creation of any lien upon the Fund's
assets under, any indenture, mortgage, loan agreement, lease or other
agreement or instrument to which the Fund is a party or by which the Fund
or any of its properties is bound;
(iv) To the Fund's knowledge, there has been no material
adverse change in the economic condition of the Fund since the last
public report thereof;
(v) No finder's, broker's or similar fee or commission has
been paid or shall be paid by the Fund to any individual or organization
in connection with the formation of the Company except for fees payable
to the Advisor;
(vi) There is no action, suit or proceeding pending or, to
its knowledge, threatened against the Fund that questions the validity or
enforceability of this Agreement or, if determined adversely to it, would
materially adversely affect the ability of the Fund to perform its
obligations hereunder;
(vii) The Fund is not the subject of any bankruptcy,
insolvency or reorganization proceeding;
(viii) To the Fund's knowledge, the Fund has not received
from any governmental agency any notice of violation of any law, statute
or regulation which would have a material adverse effect on the Company;
and
63
(ix) To the Fund's knowledge, the Fund is not in default
in the performance or observation of any obligation under any agreement
or instrument to which it is a party or by which it or any of its
properties is bound, which default would individually or in the aggregate
with other defaults materially adversely affect the business or financial
condition of the Company.
Section 10.2 Representations of LXP. LXP represents and warrants
to the Fund and the Company as follows:
(i) This Agreement constitutes the valid and binding
agreement of LXP enforceable against LXP in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency and other similar
laws affecting the rights of creditors and to general principles of
equity;
(ii) LXP has been duly formed and is validly existing as a
real estate investment trust in good standing under the laws of the State
of Maryland, with all requisite power and authority to enter into this
Agreement, to carry out the provisions and conditions hereof and to
perform all acts necessary or appropriate to consummate all of the
transactions contemplated hereby. Except as set out on Schedule 10.2(ii)
attached hereto, LXP is duly qualified as a foreign corporation in each
jurisdiction in which the ownership of its assets or the conduct of its
business requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the business or
financial condition of the Company or LXP;
(iii) This Agreement has been duly and validly executed
and delivered by LXP and the execution, delivery and performance hereof
by LXP does not and will not (x) require the approval of any other Person
or (y) contravene or result in any breach of or constitute any default
under, or result in the creation of any lien upon LXP's assets under, any
indenture, mortgage, loan agreement, lease or other agreement or
instrument to which LXP or any LXP Affiliated Party is a party or by
which LXP or any of its properties is bound;
(iv) To LXP's knowledge, LXP is not in default in the
performance or observation of any obligation under any agreement or
instrument to which it is a party or by which it or any of its properties
is bound, which default would individually or in the aggregate with other
defaults materially adversely affect the business or financial condition
of LXP;
(v) The formation of the Company did not and the
consummation of the transactions contemplated herein does not and will
not result in any violation of the organizational documents of LXP;
64
(vi) No finder's, broker's or similar fee or commission
has been paid or shall be paid to any individual or organization in
connection with the formation of the Company except for fees, if any,
payable to the Advisor;
(vii) There is no action, suit or proceeding pending or,
to its knowledge, threatened against LXP that questions the validity or
enforceability of this Agreement or, if determined adversely to it, would
materially adversely affect the ability of LXP to perform its obligations
hereunder;
(viii) Except as set forth in Schedule 10.2(ix) attached
hereto and made a part hereof, there has been no material adverse change
in the circumstances or condition, financial or otherwise, of LXP since
the date of the last filing by LXP with the United States Securities and
Exchange Commission;
(ix) LXP is not the subject of any bankruptcy, insolvency
or reorganization proceeding;
(x) LXP is a "real estate investment trust" (a "REIT")
within the meaning of Section 856 of the Code (and any Regulations
promulgated thereunder);
(xi) To LXP's knowledge, LXP has not received from any
governmental agency any notice of violation of any law, statute or
regulation which would have a material adverse effect on the financial
condition of LXP or of the Company;
(xii) The informational materials that have been publicly
disseminated to the shareholders of LXP are true, complete and correct in
all material respects as of the date of such informational materials,
provided that with respect to any forecasts or financial projections
contained in such publicly-disseminated informational materials, LXP
represents and warrants only that such forecasts and financial
projections represent LXP's best estimates of future performance;
(xiii) Financial statements for LXP previously delivered
to the Advisor or the Fund present fairly the financial position of LXP
as of the date of such financial statements; and
(xiv) All information contained in the Fee Disclosure will
be true, correct and complete, as of the date of such disclosure.
65
ARTICLE XI
SPECIAL MEMBER RIGHTS AND OBLIGATIONS
Section 11.1 Buy/Sell.
(a) Generally. After the Rights Trigger Date, either Member, and,
as provided in Section 11.1(e) and Section 11.1(f) below, the Member
specified therein (the "Offering Member") may provide the other Member
(the "Responding Member") with notice (the "Offer Notice") of a price
(the "Offer Price") that the Offering Member, or its designee(s), is
willing to pay to purchase the Percentage Interests of the other Member,
such Offer Notice to include, as an attachment thereto, a bona fide
proposed purchase and sale agreement on terms reasonably customary for
the sale of limited liability interests in a limited liability company
that owns primarily real property (the "Offered Agreement"). Upon receipt
of the Offer Notice, the Responding Member shall have thirty (30) days to
provide to the Offering Member a notice (the "Response Notice")
specifying the Responding Member's election to purchase the Percentage
Interests of the other Member or sell its Percentage Interest to the
Offering Member (such Percentage Interest of the respective Member, the
"Buy/Sell Property"), or its designee(s), for cash in an amount equal to
the amount of cash the Offering Member would receive under Section 9.2
hereof if the Company assets were sold for cash at the Offer Price and
the Company liquidated and dissolved (the "Interest Price"). In
determining the amount of the Interest Price, it will be assumed that no
reserves will be required under Section 9.2 hereof. Any Offer Notice made
in connection with a dispute between the Members concerning more than
fifty percent (50%) of the Qualified Properties or concerning the
governance or management of the Company shall supersede and render of no
further effect any Offer Notice to which no Response Notice has been
provided to the Offering Member.
(b) Responding Member's Election to Purchase. If the Responding
Member timely delivers a Response Notice that specifies the Responding
Member's election to purchase the Buy/Sell Property from the Offering
Member as described in Section 11.1(a) above, then the Responding Member
shall (x) post a deposit equal to five percent (5%) of the Interest Price
within five (5) business days after delivery of such Response Notice, and
(y) have up to ninety (90) days to close the purchase of the Buy/Sell
Property on substantially the same terms and conditions as contained in
the Offered Agreement.
(c) Responding Member's Election not to Purchase. If the
Responding Member delivers a timely Response Notice that specifies the
Responding Member's election not to purchase the Buy/Sell Property, as
described in Section 11.1(a) above, or if the Responding Member fails to
deliver a timely Response Notice, then the Offering Member must (x) post
a deposit equal to five percent (5%) of the Interest Price, and (y)
purchase the Buy/Sell Property
66
from the Responding Member within the ninety (90) day period beginning on
the earlier of (A) the date of delivery of the Response Notice, or (B)
the expiration of the thirty (30) day period during which the Responding
Member is required to deliver a Response Notice, for cash in an amount
equal to the amount the Responding Member would receive under Section 9.2
hereof if the Company assets were sold at the Offer Price and the Company
were liquidated and dissolved (the "Responding Interest Price"). In
determining the amount of the Responding Interest Price, it will be
assumed that no reserves will be required pursuant to Section 9.2 hereof.
(d) Challenge to Buy/Sell. If either Member (the "Challenging
Member") initiates a legal action with respect to any exercise of the
other Member's rights under this Section 11.1 and such legal action is
not resolved in the Challenging Member's favor by a court of competent
jurisdiction, the Challenging Member shall pay all attorneys' fees and
court costs arising in connection with the Challenging Member's legal
action.
(e) Buy/Sell Upon Default or Dispute. Prior to the Rights Trigger
Date, either Member may exercise as the Offering Member its buy/sell
right as provided in Section 11.1(a) above in the event of a material
default of this Agreement by either of the other Member, or a material
dispute between the Members.
(f) Buy/Sell Upon Change of Control in LXP. In the event there is
any change in the control or management of LXP without the consent of the
Fund while LXP is the Manager, the Fund may exercise the buy-sell
provided in this Section 11.1. For the purposes hereof, (x) a change in
control shall be deemed to occur upon any Person (and its Affiliates)
becoming the beneficial owner, directly or indirectly, of thirty-three
percent (33%) or more of the outstanding Shares on a fully diluted basis
(including any outstanding interests in Leperq Corporate Income Fund,
L.P., Leperq Corporate Income Fund II, L.P. and Net 3 Acquisition L.P.
and any other entity, that can be converted into Shares) and (y) a change
in management shall be deemed to occur either upon the resignation or
removal of both E. Robert Roskind and T. Wilson Eglin from the management
of LXP or the replacement of a majority of the members of the Board of
Trustees of LXP over a one-year period.
(g) Buy/Sell Upon Capital Commitment Not Drawn by Second
Anniversary. In the event the initial Capital Commitment is not fully
drawn down by June 4, 2006, the Fund may exercise the buy-sell provided
in this Section 11.1.
(h) Due Diligence and Other Costs. Each Member shall bear its own
costs, such as due diligence expenses and consultants' and attorneys'
fees, incurred in connection with its exercise of, or response to,
buy/sell rights.
67
(i) Failure to Purchase. If the Member that becomes the "Buyer"
defaults on its obligation to purchase the Buy/Sell Property, (x) the
Buyer shall not be entitled to the return of its deposit, and (x) the
other Member shall have the option to purchase the Buy/Sell Property at a
ten percent (10%) discount on the Interest Price.
Section 11.2 Convertibility.
(a) Grant of Redemption Rights. The Fund will have the right (the
"Redemption Right") to require LXP, or its designee(s), to acquire all or
a portion of their Percentage Interests in the Company for either, at
LXP's sole option, (i) a number of Shares equal to the Share Purchase
Price or (ii) a cash amount equal to the Cash Purchase Price, both in
accordance with the Redemption Rights Schedule attached hereto as
Schedule 5 and made a part hereof. Any Shares issued pursuant to this
Section 11.2 will not be registered under any federal or state securities
laws but shall be subject to the terms of the registration rights
agreement attached hereto as Schedule 7 and made a part hereof to be
entered into by LXP and the Fund at the time of issuance of such Shares.
Notwithstanding anything in this Agreement to the contrary, in the event
the shareholders of LXP are required by law, regulation or otherwise to
approve the issuance of Shares to the Fund and do not approve the
issuance of Shares to the Fund as provided in this Agreement, which
failure to approve prevents the Fund from being able to receive the Share
Purchase Price upon exercise of the Redemption Right, LXP shall satisfy
the Fund's Redemption Right by paying the Cash Purchase Price to the Fund
pursuant to Section 11.2(c) below.
(b) Conditions to Exercise of Redemption Right. The Redemption
Right shall be subject to the following conditions:
(i) The Fund may exercise the Redemption Right at any time
on and after the Rights Trigger Date;
(ii) The Fund may exercise the Redemption Right only if
all of the Qualified Properties have a remaining lease maturity of at
least an average of five (5) years. If all of the Qualified Properties do
not have a remaining lease maturity of at least an average of five (5)
years, then the Fund shall have the right to exclude Qualified Properties
(the "Retained Qualified Properties") that the Fund shall designate from
the calculation of lease maturity so as to make the remaining Qualified
Properties (the "Proposed Tendered Qualified Properties") satisfy the
minimum lease maturity standard; and
(iii) (x) LXP may exclude any Proposed Tendered Qualified
Property that has (A) experienced a material adverse change in its
financial condition or (B) has a remaining lease maturity of less than
five (5) years.
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(y) In addition, LXP may exclude any Proposed Tendered
Qualified Property leased in whole or in part to any Non-Investment
Grade Tenant that has experienced a material adverse change in its
financial condition (including a downgrading of its credit rating since
such Proposed Tendered Qualified Property was acquired by the Company)
(it being understood that, notwithstanding the Acquisition Parameters,
if the Company has acquired a Proposed Tendered Qualified Property
leased in whole or in part to any tenant that has an investment grade
credit rating that has experienced a downgrade of its credit rating
since such Proposed Tendered Qualified Property was acquired by the
Company, such property may also be excluded).
(z) The Proposed Tendered Qualified Properties
excluded by LXP as provided in this Section 11.2(b)(iii) shall be added
to and become a part of the Retained Qualified Properties, and the
Redemption Right shall apply only to the remaining Proposed Tendered
Qualified Properties (the remaining Proposed Tendered Qualified
Properties are collectively referred to as the "Tendered Qualified
Properties").
(c) Cash Purchase Price. LXP shall have a right in its sole and
absolute discretion to satisfy the Fund' Redemption Right by paying the
Cash Purchase Price to the Fund. The Cash Purchase Price (the "Cash
Purchase Price") shall be a cash price equal to the Fund's aggregate
Percentage Interest multiplied by the Fair Market Values of all of the
Tendered Qualified Properties.
(d) The Fund's Retained Qualified Properties. If the Fund elects
to exclude the Retained Qualified Properties in accordance with Section
11.2(b) above, the Fund shall identify the Retained Qualified Properties
in its Exercise Notice, and the Retained Qualified Properties shall be
dealt with as set forth in Paragraph 13 of Schedule 5.
(e) LXP's Retained Qualified Properties. If LXP elects to exclude
any of the Retained Qualified Properties in accordance with Section
11.2(b) above, LXP shall identify the Retained Qualified Properties in
its Election Notice, and the Retained Qualified Properties shall be dealt
with as set forth in Paragraph 13 of Schedule 5.
Section 11.3 Remuneration To Members. No Member is entitled to
remuneration for acting on behalf of the Company. Except as otherwise authorized
in this Agreement, including but not limited to Sections 3.6 and 3.10, no Member
is entitled to remuneration for acting in the Company business.
Section 11.4 Equality of Shares. LXP covenants that: (x) the
Shares issuable upon the Fund's exercise of the Redemption Right (the
"Redemption Right Shares") shall have rights, privileges, powers and immunities
identical to the Shares then outstanding, including without limitation full
voting rights and any rights (whether or not
69
then exercisable) to purchase or subscribe for other securities; (y) LXP shall
not issue securities of any class entitled to vote in the election of trustees
of LXP unless fair consideration is transferred to LXP in exchange therefor and
the proportionate voting power of such class does not exceed the proportion of
the total capital of LXP represented by such consideration; and (z) LXP shall
not amend its organic documents, adopt or amend any plan, or issue or suffer to
remain outstanding any securities, the terms or effect of which is (or upon the
occurrence of any event would become) inconsistent with the foregoing clauses
(x) and (y) or would subject the Redemption Right Shares to any disability or
deny the Redemption Right Shares any benefit not shared equally with all other
Shares then outstanding. If LXP shall breach the covenants contained in this
Section 11.4, then the Fund shall have all remedies hereunder or under
applicable law, including, without limitation, if the Fund exercises the
Redemption Right as provided Section 11.2 hereof, the Fund shall have the option
of requiring LXP either (x) to pay the Cash Purchase Price or (y) to pay the
Share Purchase Price plus, in either case, damages in an amount equal to the
total of (i) one hundred and ten percent (110%) of the difference, if any,
between the value that the Shares received by the Fund would have had had such
dilution not occurred and the value of such Shares as diluted and (ii) any other
damages suffered by the Fund as the result of such breach.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Notices.
(a) Generally. All notices, demands, approvals, consents or
requests provided for or permitted to be given pursuant to this Agreement
must be in writing.
(b) Manner of Notice. All notices, demands, approvals, consents
and requests to be sent to the Company or either Member pursuant to the
terms hereof shall be deemed to have been properly given or served, if
personally delivered, sent by recognized messenger or next day courier
service, or sent by United States mail, telex or facsimile transmission
to the addresses or facsimile numbers listed below, and will be deemed
received, unless earlier received: (a) if sent by express, certified or
registered mail, return receipt requested, when actually received or
delivery refused; (b) if sent by messenger or courier, when actually
received; (c) if sent by telex or facsimile transmission, on the date
sent, so long as a confirming notice is sent by messenger or courier or
by express, certified, registered, or first-class mail; (d) if delivered
by hand, on the date of delivery; and (e) if sent by first-class mail,
seven days after it was mailed. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice
was given shall be deemed to be receipt of the notice, demand or request
sent.
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If to the Company: Triple Net Investment Company LLC
c/o Lexington Corporate Properties Trust
One Penn Plaza
Suite 4015
New York, New York 10119-4015
Attention: Chief Executive Officer
Telephone No.: (212) 692-7200
Fax No. (212) 594-6600
with a copy to: Utah State Retirement Investment Fund
540 East 200 South, Fourth Floor
Salt Lake City, UT 84012
Attention: Devon W. Olsen
Telephone No.: (801) 366-7377
Fax No.: (801) 328-7377
and: AEW Capital Management, L.P.
World Trade Center East
Two Seaport Lane
Boston, MA 02210
Attention: Chris Kazantis
Telephone No.: (617) 261-9360
Fax No.: (617) 261-9555
If to LXP: c/o Lexington Corporate Properties Trust
One Penn Plaza
Suite 4015
New York, New York 10119-4015
Attention: Chief Executive Officer
Telephone No.: (212) 692-7200
Fax No.: (212) 594-6600
with a copy to: Paul, Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York 10022
Attention: Mark Schonberger, Esq.
Telephone No.: (212) 318-6859
Fax No.: (212) 230-7747
If to the Fund: Utah State Retirement Investment Fund
540 East 200 South, Fourth Floor
Salt Lake City, UT 84012
Attention: Devon W. Olsen
Telephone No.: (801) 366-7377
Fax No.: (801) 328-7377
71
with a copy to: Ray Quinney & Nebeker P.C.
36 South State Street
Suite 1400
Salt Lake City, Utah 84111
Attention: Ira B. Rubinfeld
Telephone No.: (801) 323-3354
Fax No.: (801) 532-7543
and: AEW Capital Management, L.P.
World Trade Center East
Two Seaport Lane
Boston, MA 02210
Attention: Chris Kazantis
Telephone No.: (617) 261-9360
Fax No.: (617) 261-9555
(c) Right to Change Addresses. A Member shall have the right from
time to time and at any time during the term of this Agreement to change
its notice address or addresses by giving to the other Member at least
ten (10) Business Days' prior written notice thereof in the manner
provided by this Section 12.1. The Fund shall have the right from time to
time and at any time during the term of this Agreement to designate a
successor to AEW Capital Management as Advisor by giving to the other
Member at least ten (10) Business Days' prior written notice thereof in
the manner provided by this Section 12.1.
(d) Notices to Paul, Hastings, Janofsky & Walker LLP. Copies of
the following notices shall be provided to Paul, Hastings, Janofsky and
Walker LLP at the address listed in Section 12.1(b) above: notices made
in connection with Section 11.1 and Section 11.2 hereof, notices of
default and any notice made in connection with the exercise by a Member
of any right hereunder not in the ordinary course of the Company's
business.
Section 12.2 Governing Laws. This Agreement and the obligations
of the Members hereunder shall be interpreted, construed and enforced in
accordance with the laws of the State of Delaware without regard to its choice
of law provisions. Except as otherwise provided herein, the rights and
obligations of the Members and the administration and termination of the Company
shall be governed by the Act.
Section 12.3 Entire Agreement. This Agreement (including the
exhibits and schedules hereto) contains the entire agreement between the
parties, supercedes any prior agreements or understandings between them and may
not be modified or amended in any manner other than pursuant to Section 12.12
hereof.
72
Section 12.4 Waiver. No consent or waiver, express or implied, by
either Member to or of any breach or default by any other Member in the
performance by the other Member of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other Member of the same or any other obligations of such
other Member hereunder. Failure on the part of either Member to complain of any
act or failure to act of any of the other Members or to declare any of the other
Members in default, irrespective of how long such failure continues, shall not
constitute a waiver by such Member of its rights hereunder. No custom, practice
or course of dealings arising among the Members in the administration hereof
shall be construed as a waiver or diminution of the right of either Member to
insist upon the strict performance by any other Member of the terms, covenants,
agreements and conditions herein contained.
Section 12.5 Validity. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
Section 12.6 Terminology; Captions. All personal pronouns used in
this Agreement, whether used in the masculine, feminine, or neuter gender, shall
include all other genders; the singular shall include the plural, and vice versa
and shall refer solely to the parties signatory hereto except where otherwise
specifically provided. Titles of Articles, Sections, Subsections, Schedules and
Exhibits are for convenience only, and neither limit nor amplify the provisions
of the Agreement itself, and all references herein to Articles, Sections,
Subsections, Schedules and Exhibits shall refer to the corresponding Articles,
Sections, Subsections, Schedules and Exhibits of this Agreement unless specific
reference is made to such Articles, Sections, Subsections, Schedules and
Exhibits of another document or instrument. Any use of the word "including"
herein shall, unless the context otherwise requires, be deemed to mean
"including without limitation".
Section 12.7 Remedies Not Exclusive. Except as otherwise provided
herein, the rights and remedies of the Company and of the Members hereunder
shall not be mutually exclusive, i.e., the exercise of one or more of the
provisions hereof shall not preclude the exercise of any other provisions
hereof. Each of the Members confirms that damages at law may be an inadequate
remedy for a breach or threatened breach of this Agreement and agrees that in
the event of a breach or threatened breach of any provision hereof, the
respective rights and obligations hereunder shall be enforceable by specific
performance, injunction or other equitable remedy but nothing herein contained
is intended to, nor shall it, limit or affect any rights or rights at law or by
statute or otherwise of any party aggrieved as against the other for breach or
threatened breach of any provision hereof, it being the intention by this
section to make clear the agreement of the Members that the respective rights
and obligations of the Members hereunder shall be enforceable in equity as well
as at law or otherwise.
73
Section 12.8 Action by the Members. No approval, consent,
designation or other action by a Member shall be binding upon such Member unless
the same is in writing and executed on behalf of such Member by a duly
authorized representative of such Member.
Section 12.9 Further Assurances. Each of the Members shall
hereafter execute and deliver such further instruments and do such further acts
and things as may be required or useful to carry out the intent and purpose of
this Agreement and as are not inconsistent with the terms hereof.
Section 12.10 Liability of the Members. Each Member's exposure to
liabilities hereunder is limited to its interest in the Company. No Member shall
be personally liable for the expenses, liabilities, debts, or obligations of the
Company.
Section 12.11 Binding Effect. Except as otherwise provided in
this Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Members and their respective
successors, transferees, and assigns.
Section 12.12 Amendments. Except as otherwise provided in this
Agreement, this Agreement may not be amended without the written consent of all
the Members.
Section 12.13 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original, but all such counterparts together shall constitute but one and the
same instrument; signature and acknowledgment pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature and acknowledgement pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and delivery to each of the
Members of a fully executed original counterpart of this Agreement.
Section 12.14 Waiver of Partition. Each of the Members hereby
irrevocably waives any and all rights (if any) that it may have to maintain any
action for partition of any of the Qualified Properties to be acquired.
Section 12.15 No Third Party Beneficiaries. Supplementing Section
5.4 hereof, nothing in this Agreement, expressed or implied, is intended to
confer any rights or remedies upon any Person, other than the Members and,
subject to the restrictions on assignment contained herein, their respective
successors and assigns.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
74
IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first set forth above.
LXP
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LEXINGTON CORPORATE PROPERTIES TRUST
By: /s/ Patrick Carroll
-------------------------------------
Name: Patrick Carroll
Title: Executive Vice President
THE FUND
--------
UTAH STATE RETIREMENT INVESTMENT FUND
By: /s/ Devon W. Olson
-------------------------------------
Name: Devon W. Olson
Title: Director of Real Estate
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS........................................................1
Section 1.1 Definitions................................................1
ARTICLE II FORMATION, DURATION AND PURPOSES..................................14
Section 2.1 Formation.................................................14
Section 2.2 Name; Registered Agent and Registered Office..............14
Section 2.3 Principal Office..........................................14
Section 2.4 Purposes and Business.....................................14
Section 2.5 Term......................................................15
Section 2.6 Other Qualifications......................................15
Section 2.7 Limitation on the Rights of Members.......................15
ARTICLE III MANAGEMENT RIGHTS, DUTIES, AND POWERS OF
THE MANAGER; TRANSACTIONS INVOLVING MEMBERS.......................15
Section 3.1 Management................................................15
Section 3.2 Meetings of the Members...................................18
Section 3.3 Authority of the Manager..................................19
Section 3.4 Major Decisions...........................................20
Section 3.5 Preliminary and Annual Plans..............................24
Section 3.6 Qualified Property Acquisitions...........................25
Section 3.7 Sale of Qualified Properties; Right of First Refusal......30
Section 3.8 Limitation On Company Indebtedness........................32
Section 3.9 Business Opportunity......................................32
Section 3.10 Payments to LXP or the Asset Manager......................34
Section 3.11 Other Duties and Obligations of the Manager...............36
Section 3.12 Exculpation...............................................37
Section 3.13 Indemnification...........................................38
Section 3.14 Fiduciary Responsibility..................................39
ARTICLE IV BOOKS AND RECORDS; REPORTS TO MEMBERS.............................39
Section 4.1 Books.....................................................39
Section 4.2 Monthly and Quarterly Reports.............................39
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Section 4.3 Annual Reports............................................40
Section 4.4 Appraisals; Additional Reports............................41
Section 4.5 Accountants; Tax Returns..................................41
Section 4.6 Accounting and Fiscal Year................................42
Section 4.7 Company Funds.............................................42
Section 4.8 Insurance.................................................42
Section 4.9 Attorneys and Accountants.................................42
ARTICLE V CONTRIBUTIONS.....................................................43
Section 5.1 Capital Contributions.....................................43
Section 5.2 Return of Capital Contribution............................47
Section 5.3 Liability of the Members..................................47
Section 5.4 No Third Party Beneficiaries..............................48
ARTICLE VI MAINTENANCE OF CAPITAL ACCOUNTS;
ALLOCATION OF PROFITS AND LOSSES FOR BOOK
AND TAX PURPOSES..................................................48
Section 6.1 Capital Accounts..........................................48
Section 6.2 Profits and Losses........................................49
Section 6.3 Regulatory Allocations....................................51
Section 6.4 Allocation of Tax Items for Tax Purposes..................53
Section 6.5 Tax Matters Member........................................54
Section 6.6 Adjustments...............................................55
ARTICLE VII DISTRIBUTIONS.....................................................55
Section 7.1 Cash Available for Distributions..........................55
ARTICLE VIII TRANSFER; REMOVAL OF MANAGER......................................56
Section 8.1 Prohibition on Transfers and Withdrawals by Members.......56
Section 8.2 Prohibition on Transfers by and Resignation of Manager....57
Section 8.3 Removal of the Manager....................................57
ARTICLE IX TERMINATION.......................................................60
Section 9.1 Dissolution...............................................60
Section 9.2 Termination...............................................61
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Section 9.3 Certificate of Cancellation...............................62
Section 9.4 Acts in Furtherance of Liquidation........................62
ARTICLE X REPRESENTATIONS OF THE MEMBERS....................................63
Section 10.1 Representations of the Fund...............................63
Section 10.2 Representations of LXP....................................64
ARTICLE XI SPECIAL MEMBER RIGHTS AND OBLIGATIONS.............................66
Section 11.1 Buy/Sell..................................................66
Section 11.2 Convertibility............................................68
Section 11.3 Remuneration To Members...................................69
Section 11.4 Equality of Shares........................................69
ARTICLE XII GENERAL PROVISIONS................................................70
Section 12.1 Notices...................................................70
Section 12.2 Governing Laws............................................72
Section 12.3 Entire Agreement..........................................72
Section 12.4 Waiver....................................................73
Section 12.5 Validity..................................................73
Section 12.6 Terminology; Captions.....................................73
Section 12.7 Remedies Not Exclusive....................................73
Section 12.8 Action by the Members.....................................74
Section 12.9 Further Assurances........................................74
Section 12.10 Liability of the Members..................................74
Section 12.11 Binding Effect............................................74
Section 12.12 Amendments................................................74
Section 12.13 Counterparts..............................................74
Section 12.14 Waiver of Partition.......................................74
Section 12.15 No Third Party Beneficiaries..............................74
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Schedules and Exhibits
Schedule 1: Names and Capital Commitments of Members
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Schedule 2: Acquisition Parameters
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Schedule 2.5: Approved Environmental Consultants, Architectural
- ------------ Engineers and Appraisers
Schedule 3: Form of Acquisition Memorandum
- ----------
Schedule 3.5: Model of an Annual Plan
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Schedule 4.8: Insurance Standards
- ------------
Schedule 5: Redemption Rights
- ----------
Schedule 7: Registration Rights Agreement
- ----------
Schedule 10.2(ii): LXP Non-qualified Jurisdictions
- -----------------
Schedule 10.2(ix): Exceptions to No Material Adverse Change
- -----------------
Exhibit A: Form of Annual Budget
- ---------
Exhibit B: Form of Agreement between Company and Asset Manager
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Exhibit C: Form of Purchase and Sale Agreement
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