\nWILSON DELAYED CLOSING DATE…………………………………………………………………………..64
\nWILSON GROUP…………………………………………………………………………………………9
\nWILSON PASSIVE INVESTMENT OPPORTUNITIES………………………………………………………………..11
\nWILSON PERCENTAGE INTEREST…………………………………………………………………………….9
\nWILSON PRINCIPALS…………………………………………………………………………………….9
\nWILSON REPRESENTATIVES……………………………………………………………………………….52
\nWINDING UP PERIOD……………………………………………………………………………………72
\nWORKING CAPITAL LINE…………………………………………………………………………………33
\n<\/c><\/s><\/table>\n viii<\/p>\n
7<\/p>\n
AMENDED AND RESTATED OPERATING AGREEMENT NO. 1 OF Wilson\/Equity
\n Office, LLC<\/p>\n
THIS AMENDED AND RESTATED OPERATING AGREEMENT NO. 1 (the “AGREEMENT”) of
\nWILSON\/EQUITY OFFICE, LLC, a Delaware limited liability company (the “COMPANY”)
\nis executed as of August 1, 2000 and amends and restates in its entirety that
\ncertain Operating Agreement of Wilson\/Equity Office, LLC (the “PRECEDING
\nAGREEMENT”), dated as of August 1, 2000 by and among WILSON INVESTORS –
\nCALIFORNIA, LLC, a Delaware limited liability company (“WILSON”), as manager (in
\nsuch capacity, the “MANAGER” as such term is more specifically defined below)
\nand member, and EOP Investor, L.L.C., a Delaware limited liability company
\n(“EOP”), formerly known as EOPMC Investor, L.L.C., as a member. EOP Operating
\nLimited Partnership, a Delaware limited partnership (“EOPOP”) and Equity Office
\nProperties Trust, a Maryland real estate investment trust (“EOPT”) are joining
\ninto this Agreement only for limited purposes set forth in SECTIONS 3.1.3,
\n3.1.4, 3.3 (first paragraph only), 3.4, 3.7, 3.8, 4.1 (first paragraph only),
\n4.1.2.2, 5.5.3, 7.14 and 7.15. The Wilson Principals (defined below) are joining
\ninto this Agreement only for limited purposes set forth in SECTIONS 3.1.3,
\n3.1.5, 3.6, 3.7, 7.8, and 7.12. EOP OP and each of the Wilson Principals shall
\nenter into a guarantee of their obligations hereunder in the form of Exhibit K.<\/p>\n
RECITALS<\/p>\n
A. Immediately prior to the Formation Date, Cornerstone Properties Inc., a
\nNevada corporation, Cornerstone Properties Limited Partnership, a Delaware
\nlimited partnership, and their Affiliates (collectively, “CORNERSTONE”) owned,
\nor had the right to acquire, all or substantial interests in the following
\nproperties located in Northern California with respect to which Cornerstone had
\nbegun or expected to begin development activities: the project commonly known as
\nthe Ferry Building, which is more particularly described on Exhibit A-1 to this
\nAgreement (the “FERRY BUILDING”), the series of related projects commonly known
\nas First & Howard, which is more particularly described on Exhibit A-2 to this
\nAgreement (“FIRST & HOWARD”); the project commonly known as Larkspur Landing
\nwhich is more particularly described on Exhibit A-3 to this Agreement (“LARKSPUR
\nLANDING”); the project commonly known as Concar, which is more particularly
\ndescribed on Exhibit A-4 to this Agreement (“CONCAR”); and the project which is
\njust at its earliest stages commonly known as Fair Isaac, which is more
\nparticularly described on Exhibit A-5 to this Agreement (“FAIR ISAAC”) and
\ntogether with the Ferry Building, Larkspur Landing First & Howard, and Concar
\nthe “EXISTING PROJECTS”).<\/p>\n
B. On the Formation Date, Cornerstone Properties Inc. was merged into EOPT, and
\nCornerstone Properties Limited Partnership was merged into EOP OP (collectively
\nthe “MERGER”). EOPT, EOP OP and their Affiliates are referred to in this
\nAgreement collectively as the “EOP GROUP” (each of which entities may be
\nreferred to herein as a “member” of the EOP Group). As a result of the Merger,
\ncertain of the entities comprising the EOP Group succeeded to substantially all
\nof the assets (including the Existing Projects) and operations of Cornerstone.
\nEOP OP and EOPT do not wish to directly invest in or own properties at the stage
\nof development of the Existing Projects and do not wish to engage in substantial
\ndevelopment management operations in Northern California. EOP is one of the
\nentities comprising the EOP Group.<\/p>\n
C. The principals of Wilson include former employees, officers and shareholders
\nof Cornerstone with substantial experience in the investment in and development
\nof major office and mixed-use projects in Northern California.<\/p>\n
D. The Company will be managed on a day-to-day basis by the Manager, provided
\nthat specified major decisions will require the approval of the Company’s board
\nof representatives (the “BOARD” as such term is more specifically defined
\nbelow).<\/p>\n
E. Wilson and EOP intend to form a series of separate limited liability
\ncompanies or limited partnerships (each a “PROJECT ENTITY” in which the Company
\nowns an interest), to acquire, own and hold for long term capital appreciation
\ntitle to or interests in the Owners of each of the Existing Projects, and
\npossibly other office projects in Northern California expected to contain more
\nthan 75,000 rentable square feet of office space or mixed use projects in
\nNorthern California expected to contain more than 100,000 rentable square feet
\nof office space (the “NEW PROJECTS” and, together with the Existing Projects,
\nthe “PROJECTS” as such term is more specifically defined below). The parties
\nexpect that the EOP Group and the Wilson Group will offer certain potential New
\nProjects to the Company on the terms and conditions set forth herein. Manager
\nmay also seek out potential investments for the Company on Manager’s own
\ninitiative. Manager, on behalf of the Company, will investigate, structure and<\/p>\n
1
\n 8<\/p>\n
recommend those potential New Projects (regardless of where originated) it
\nbelieves to be worthy of further consideration to the Company’s Board and the
\nBoard will determine which New Projects to pursue from time to time. The Company
\nwill be the manager or general partner of each Project Entity and the Company,
\nAffiliates of EOP or Affiliates of Wilson, or a combination of the foregoing,
\nmay have equity interests in Project Entities in accordance with the procedures
\nset out in this Agreement.<\/p>\n
F. EOP and Wilson are forming the Company:<\/p>\n
(i) to acquire, own, operate and hold for long term capital
\nappreciation interests in each of the Project Entities; and<\/p>\n
(ii) to provide development management services and, in
\nlimited circumstances, certain property management services to certain Owners,
\nto Affiliates of the Members, and to third parties, including third parties for
\nwhom Cornerstone previously was providing property and development management
\nservices.<\/p>\n
G. The EOP Group plans to consider investing equity in the Existing Projects and
\nwill have the opportunity to make equity investments and provide other financing
\nfor Existing Projects and New Projects in accordance with the procedures
\nprovided in this Agreement; provided, that if the EOP Group does elect to invest
\nequity in such Existing Projects, the parties have agreed on certain terms of
\nthe EOP Group’s investment in such Existing Projects.<\/p>\n
H. EOP and Wilson will have certain purchase and sale rights with respect to
\ninterests in and interests held by the Company, and as to Projects in which EOP
\nprovides certain equity financing, the EOP Group will also have certain
\ncomparable rights.<\/p>\n
NOW THEREFORE, incorporating the foregoing Recitals and in consideration of the
\nmutual agreements and covenants contained herein, the parties hereby agree as
\nfollows:<\/p>\n
1. DEFINITIONS.<\/p>\n
1.1 Definitions. In addition to the terms defined in the Recitals and elsewhere
\nin this Agreement, the following words, when capitalized, have the meanings set
\nforth below, unless the context otherwise requires. Terms defined in this
\nAgreement when preceded by the word “Project” shall have the same meanings with
\nrespect to EOP Project Entities and the interests of the Company and the EOP
\nInvestor therein as they have in this Agreement with respect to the Company and
\nthe interests of EOP and Wilson herein (with adjustments in cross-referenced
\nsection numbers and the like to correspond to the appropriate section numbers
\nand the like in the constituent documents of the EOP Project Entity).<\/p>\n
1.1.1 ADJUSTED BALANCE: For EOP, its Adjusted Capital from time to time minus
\n$1,244,000 and for Wilson, its Adjusted Capital from time to time plus
\n$1,244,000.<\/p>\n
1.1.2 ADJUSTED CAPITAL: For each Member, such Member’s Initial Cash Contribution
\nand Additional Contributions (excluding Default Capital until and unless
\nconverted to Adjusted Capital or redeemed pursuant to SECTION 5.3.2) reduced by
\ndistributions of capital made to such Member pursuant to SECTION 5.7.2.4 and, in
\nthe case of Project Adjusted Capital, contributions pursuant to SECTION 3.7.<\/p>\n
1.1.3 ADJUSTED DEFAULT CAPITAL: For each Member, the Member’s Default Capital
\nreduced by distributions of capital made to the Member pursuant to SECTIONS
\n5.7.1.2 and 5.7.2.2, and reduced to the extent a Member’s Default Capital is
\nconverted to Adjusted Capital pursuant to SECTION 5.3.2 (Redemption of
\nContribution Default).<\/p>\n
2
\n 9<\/p>\n
1.1.4 ADJUSTED PERMANENT CAPITAL AMOUNT: An amount equal to $6,986,000 for EOP
\nand $7,014,000 for Wilson, less in the case of EOP 49.9%, and in the case of
\nWilson 50.1%, of the total capital invested by the Company in any Project Entity
\nwhich is not returned or has not been returned, or deemed returned to the
\nCompany as described in SECTION 11.4, upon sale or other transfer of the
\napplicable Project and liquidation of such Project Entity or upon the sale or
\nother transfer of the Company Interest in such Project Entity, and as the same
\nmay be adjusted by written agreement of the Members entered into in their
\nrespective sole and absolute discretion.<\/p>\n
1.1.5 AFFILIATE: Any person or entity that directly, or indirectly through one
\nor more intermediaries, controls or is controlled by, or under common control
\nwith, another person or entity, or in which the person or entity owns more than
\n50% of the capital, profits or voting interests, which term may be used as an
\nadjective, noun or verb in any variation or tense.<\/p>\n
1.1.6 AGREEMENT: This Agreement, including the Exhibits and Schedules to this
\nAgreement, as amended from time to time.<\/p>\n
1.1.7 CAPITAL PROCEEDS: The net cash or other amounts received by the Company
\ndirectly or from a Project Entity from a Capital Transaction, including proceeds
\nfrom the Capital Transactions from any Project Entity (including through a
\nProject Entity from an Owner).<\/p>\n
1.1.8 CAPITAL TRANSACTION: A sale or other disposition, financing or refinancing
\nof a capital asset owned directly or indirectly by the Company, including (i)
\nProjects or interests in real property owned by the Company, any Project Entity
\nor any Owner and (ii) interests in any Project Entity or Owner. A Capital
\nTransaction would include the receipt of a condemnation award, damages awarded
\nin litigation attributable to damage to or a diminution in the value of the
\nProject’s real property that are not applicable to or paid as attorneys’ fees
\nand costs of the litigation, or insurance proceeds in each case related to a
\ncapital asset owned directly or indirectly by Company to the extent receipts
\nfrom the awards or proceeds are not used to repair or restore such capital
\nasset.<\/p>\n
1.1.9 CODE: The Internal Revenue Code of 1986, as amended from time to time.<\/p>\n
1.1.10 CONTRIBUTION PERCENTAGE: For Wilson, shall be equal to 50.1% and for EOP
\nshall be equal to $49.9%.<\/p>\n
1.1.11 DEFAULT CAPITAL: Capital contributed pursuant to SECTION 5.3.1
\n(Contribution by Other Members) that the contributing Member has elected to
\ntreat as such.<\/p>\n
1.1.12 DEFAULT PREFERRED RETURN: A variable rate per annum equal to the highest
\n“prime rate” as published from time to time by the Wall Street Journal (or a
\ncomparable publication if it is no longer being published) plus 8%, compounded
\nannually, but in no event greater than is permitted by applicable law.<\/p>\n
3
\n 10<\/p>\n
1.1.13 DILUTION AMOUNT: is defined in Section 5.3.2 (Redemption of Contribution
\nDefault).<\/p>\n
1.1.14 DISTRIBUTABLE CAPITAL PROCEEDS: The excess of (a) (i) the Capital
\nProceeds from a Capital Transaction, and (ii) any decrease in the reserves of
\nthe Company or a Project Entity or Owner, to the extent such reserves were
\nfunded with proceeds from a Capital Transaction; over (b) the sum of (i) amounts
\npaid or payable by the Company to satisfy any debt required to be repaid in
\nconnection with any Capital Transaction giving rise to the Distributable Capital
\nProceeds or to satisfy liabilities and expenses attributable to the Capital
\nTransaction, (ii) any other costs or expenditures attributable to the Capital
\nTransaction or which are then due and payable by the Company or the applicable
\nProject Entity, (iii) such reserves as the Board determines are appropriate for
\nthe Company and its future needs in connection; (iv) repayment of all principal
\nof and interest on the Company Required Funds Loans (provided that the amount
\npaid with respect to Company Required Funds Loans does not exceed the aggregate
\namount in clause (a) that is derived from sources other than the Promotional
\nInterest, unless the Capital Proceeds are from the disposition of the Last
\nProject) and all interest on the Working Capital Line to the extent then due and
\npayable; (v) the entire outstanding balance under the Working Capital Line if
\nthe Capital Proceeds are from the Last Project; and (vi) amounts needed to pay
\nany unpaid expenses in the development budget for the applicable Project.<\/p>\n
1.1.15 DISTRIBUTABLE CASH FLOW: The total Net Operating Cash Flow of the
\nCompany, after (i) payment of all expenses and obligations of the Company due
\nand payable to Members and Affiliates of Members not already accounted for in
\nthe Net Operating Cash Flow calculation, (ii) the payment of current and
\nreasonably anticipated operating obligations of the Company, and (iii) the
\ncreation of such reserves as the Board determines are appropriate for the
\nCompany and its future needs.<\/p>\n
1.1.16 EOP ADDITIONAL NOTICE PERSON: Initially, shall mean Laura Hassan but may
\nbe changed at any time by EOP by giving notice to Wilson.<\/p>\n
1.1.17 EOP INVESTOR: The EOP Group member which provides the Specified Equity
\nfor an EOP Project and holds the Direct EOP Interest in the EOP Project Entity,
\nas provided in SECTION 3.3.<\/p>\n
1.1.18 EOP PERCENTAGE INTEREST: A percentage from time to time equal to (i) the
\naggregate Adjusted Balance and Dilution Credits, if any, of EOP, divided by (ii)
\nthe aggregate Adjusted Balances and Dilution Credits, if any, of EOP and Wilson.
\nThe initial EOP Percentage Interest is 49.9%.<\/p>\n
1.1.19 EXISTING PROJECT CONTRIBUTION AMOUNT: with respect to any Existing
\nProject, shall mean that amount for such Project set forth on Exhibit B.<\/p>\n
1.1.20 FORMATION DATE: June 20, 2000.<\/p>\n
1.1.21 HAZARDOUS MATERIALS: Any substance: (i) that now or in the future is
\nregulated or governed by, requires investigation or remediation under, or is
\ndefined as a hazardous waste, hazardous substance, pollutant or contaminant
\nunder any governmental<\/p>\n
4
\n 11<\/p>\n
statute, code, ordinance, regulation, rule or order, and any amendment thereto,
\nincluding the Comprehensive Environmental Response Compensation and Liability
\nAct, 42 U.S.C. ss.9601 et seq., and the Resource Conservation and Recovery Act,
\n42 U.S.C. ss.6901 et seq., or (ii) that is toxic, explosive, corrosive,
\nflammable, radioactive, carcinogenic, dangerous or otherwise hazardous,
\nincluding gasoline, diesel fuel, petroleum hydrocarbons, polychlorinated
\nbiphenyls (PCBs), asbestos, radon and urea formaldehyde foam insulation.<\/p>\n
1.1.22 LAST PROJECT: any Approved Project, the disposition of which would leave
\nthe Company without any (i) Approved Projects under development, or (ii)
\ncompleted Approved Projects in which the Company continues to have its original
\nownership interest.<\/p>\n
1.1.23 LIQUIDATING TRANSACTION: The sale or other disposition of the last
\nProject in which the Company holds a direct or indirect interest or of all of
\nthe Company’s interest therein, including a sale or disposition of all of the
\ninterest of the Company in the last Project Entity in which the Company holds an
\ninterest.<\/p>\n
1.1.24 LIQUIDATION PROCEEDS: The net cash or other assets received by the
\nCompany from a Liquidating Transaction after payment of the costs the Company
\nincurs with respect to the Liquidating Transaction, plus any reserves held (and
\nno longer needed) by the Company with respect to the Projects that are the
\nsubject of such Liquidating Transaction.<\/p>\n
1.1.25 MAJOR DECISIONS: Those decisions listed in SECTION 8.3 (Major Decisions)
\nas requiring the approval of the Board.<\/p>\n
1.1.26 MANAGER: Wilson and any successors as the manager of the Company as
\napproved by the Board, but only in their role as manager and not as a Member
\nhereunder.<\/p>\n
1.1.27 MEMBERS: The members of the Company as they shall exist from time to
\ntime, including, initially Wilson and EOP, and later, any Member that may
\nhereafter be admitted to the Company in accordance with the terms and conditions
\nhereof and any permitted transferee of all or a portion of a Member’s Membership
\nInterest that is admitted as a substitute Member in accordance with SECTION 10
\n(Transfer of a Member’s Interest).<\/p>\n
1.1.28 MEMBERSHIP INTEREST: As to any Member at any given time, the Member’s
\ninterest in the Company, including the Member’s Adjusted Capital, Adjusted
\nBalance, Adjusted Default Capital and Capital Account, Company Required Funds
\nLoans, rights to distributions, Profits and Losses and any other rights and
\ninterests of the Member in the Company.<\/p>\n
1.1.29 MONEY MARKET RATE: means the rate of interest paid on the Merrill Lynch
\nReady Assets Trust as reported in the Wall Street Journal, or if the Wall Street
\nJournal ceases to report such rate, a comparable rate of interest.<\/p>\n
1.1.30 NET OPERATING CASH FLOW: For the applicable period, means the excess
\n(calculated on a “cash” basis in accordance with customary accounting practices
\nfor real estate entities consistently applied) of:<\/p>\n
5
\n 12<\/p>\n
1.1.30.1 the gross cash revenues and monies received by the Company for the
\nperiod from any source (including interest income, proceeds of rentaland
\nbusiness interruption insurance and the amount, if any, by which a previously
\nestablished reserve is reduced, if the amount was established from operating
\nrevenues and the Board determines it will not be needed, and net proceeds from
\nsales of personal and intangible property in the ordinary course of business),
\nbut not including cash revenues and monies received as (1) capital contributions
\nto the Company, (2) loans or similar advances to the Company (including from
\nMembers), (3) any Distributable Capital Proceeds, (4) security deposits or
\nprepaid rents from tenants, unless and until applied against tenant obligations
\nunder leases and (5) Liquidation Proceeds; over<\/p>\n
1.1.30.2 to the extent not excluded pursuant to SECTION 1.1.30.1 above, the sum
\nof all cash expenditures made by the Company, for or during the period for
\nanything other than expenses related to Distributable Capital Proceeds or
\nLiquidation Proceeds, including those relating to the operation, use,
\nmaintenance or repair of, or in connection with, a capital asset of the Company
\nand all installments and payments of principal, interest and other sums, if any,
\npaid during the applicable period in connection with any loans secured by a
\ncapital asset of the Company or other indebtedness of the Company, plus all
\nreserves funded or established by the Company, but not including (1) those
\ncosts, expenses and capital expenditures paid from previously established
\nreserves, (2) the costs and expenses incurred in connection with a Capital
\nTransaction and paid from the gross proceeds from such Capital Transaction, (3)
\ndistributions to Members, or (4) repayment or return of security deposits.<\/p>\n
1.1.31 OWNER: The entity owning all the tangible property or quasi-property
\ninterests comprising an Approved Project. The Owner may be a Project Entity if
\nthere are no investors in the Project other than an EOP Investor and the
\nCompany.<\/p>\n
1.1.32 PERCENTAGE INTEREST(S): The EOP Percentage Interest and\/or the Wilson
\nPercentage Interest, as the same may change from time to time.<\/p>\n
1.1.33 PROFITS OR LOSSES: If the Company’s taxable federal income or taxable
\nloss for a taxable year, as adjusted in the manner provided in subparagraphs (i)
\nthrough (iv) below, is a positive amount, that amount shall be the Company’s
\n“PROFIT” for the taxable year; and if negative, that amount shall be the
\nCompany’s “LOSS” for the taxable year. For each taxable year, the Company’s
\ntaxable income or taxable loss for such taxable year, as determined under
\nSection 703(a) of the Code and Treasury Regulations Section 1.703-1 (for this
\npurpose, all items of income, gain, loss or deduction required to be stated
\nseparately pursuant to Section 703(a)(1) of the Code shall be included in
\ntaxable income or taxable loss), but with the following adjustments:<\/p>\n
1.1.33.1 Any tax-exempt income, as described in Section 705(a)(1)(B) of the
\nCode, realized by the Company during the taxable year shall be taken into
\naccount in computing such taxable income or taxable loss as if it were taxable
\nincome.<\/p>\n
1.1.33.2 Any expenditures of the Company described in Section 705(a)(2)(B) of
\nthe Code for the taxable year, including any items treated under Treasury
\nRegulations Sec. 1.704-1(b)(2)(iv)(i) as items described in Section 705(a)(2)(B)
\nof<\/p>\n
6
\n 13<\/p>\n
the Code, shall be taken into account in computing the taxable income or taxable
\nloss as if they were deductible items.<\/p>\n
1.1.33.3 Any items of income, gain, loss or deduction that are required to be
\nallocated specially to the Members pursuant to SECTION 5.8.3 (Regulatory
\nAllocations) shall not be taken into account in computing such taxable income or
\nloss<\/p>\n
1.1.33.4 In lieu of the depreciation, amortization and other cost recovery
\ndeductions taken into account in computing taxable income or loss, the Company
\nshall compute these deductions based on the book value of Company property, in
\naccordance with Treasury Regulations Sec. 1.704-1(b)(2)(iv)(g)(3).<\/p>\n
1.1.33.5 Profit and Loss from the sale of any Company property shall be computed
\naccording to the book value of the Company property.<\/p>\n
The book value of Company property shall be, as of any particular date, the
\nvalue at which any asset of the Company is properly reflected on the books of
\nthe Company as of that date in accordance with the provisions of Treasury
\nRegulations Sec. 1.704-1(b). 1.1.34 PROJECT CAPITAL INVESTMENT: With respect to
\na Project, the aggregate equity investment by the Company in such Project.<\/p>\n
1.1.35 PROJECT COMMENCEMENT: The commencement of substantial construction on a
\nProject beyond the demolition, environmental remediation and site grading stages
\nof construction.<\/p>\n
1.1.36 PROJECT COMPLETION: (a) the substantial completion of core and shell
\nimprovements on a Project, substantially and in all material respects in
\naccordance with the Approved Project Items with respect thereto, together with
\n(b) the issuance of a temporary or permanent “certificate of occupancy” for the
\nbuilding core and shell, if and to the extent that such a certificate of
\noccupancy can be obtained prior to the completion of tenant improvements.<\/p>\n
1.1.37 PROJECT INVESTMENT: With respect to a Project, the aggregate investment
\n(whether as equity or debt) by the Company in such Project.<\/p>\n
1.1.38 PROJECT STABILIZATION: The date after the following requirements have
\nbeen met: (a) Project Completion has occurred, (b) leases have been signed for
\nthe occupancy of not less than the greater of (i) 95% of the Market Average
\nOccupancy, or (ii) 85% of the rentable space in the Project, (c) all of the
\nevents which are conditions precedent to the commencement of the leases referred
\nto in clause (b) of this subsection have occurred other than the passage of
\ntime, and (d) all tenants under such leases have accepted all tenant
\nimprovements for which the landlord or Owner is responsible as being completed
\nand have commenced paying rent. Manager shall notify the Board approximately 120
\ndays prior to the date Manager believes will be the date Project Stabilization
\nwill occur and again when it believes that a Project has reached Project
\nStabilization. After Project Commencement, Manager shall report monthly to the
\nBoard regarding the progress toward Project Stabilization of each Project. As
\nused in this subsection, “Market Average<\/p>\n
7
\n 14<\/p>\n
Occupancy” means the most recently published data from reliable industry sources
\non the prevailing occupancy in the relevant market area in which the Project is
\nlocated.<\/p>\n
1.1.39 PROJECTED YIELD: With respect to a Project, (i) the projected net
\noperating income in excess of operating expenses for the one-year period
\nfollowing Project Stabilization, divided by (ii) all projected costs associated
\nwith the Project prior to Project Stabilization.<\/p>\n
1.1.40 PROMOTIONAL INTEREST: With respect to an EOP Project, the aggregate cash
\ndistributions the Company has received or would be entitled to receive from the
\nEOP Project Entity under SECTIONS 0 and 0, or, with respect to Company Projects,
\nthe aggregate cash the Company has received or is entitled to receive as
\ndistributions from the corresponding Project Entity (the “PROJECT RETURN”) to
\nthe extent it exceeds the Project Return to which the Company would be entitled
\nif the Project Return were based solely on the Company’s pro-rata percentage of
\nthe equity contributed to the Project Entity.<\/p>\n
1.1.41 PRO-RATA: With respect to the Members, in proportion to their Percentage
\nInterests at the time or times in question.<\/p>\n
1.1.42 SUBSIDIARY(IES): Individually and collectively, Wilson\/Equity Office,
\nInc., Wilson\/Equity Office, L.P., the Project Entities and any Owners of EOP
\nProjects or Company Projects and all other entities that are (or may be from
\ntime to time) owned or controlled directly or indirectly by the Company or in
\nwhich the Company has an interest, including the Project Entities and the
\nOwners.<\/p>\n
1.1.43 WILSON GROUP: Wilson, the Wilson Principals, and their respective
\nAffiliates, each or any of which may be referred to herein as a “member” of the
\nWilson Group.<\/p>\n
1.1.44 WILSON PERCENTAGE INTEREST: A percentage from time to time equal to (i)
\nthe aggregate Adjusted Balance and Dilution Credits, if any, of Wilson, divided
\nby (ii) the aggregate Adjusted Balances and Dilution Credits, if any, of EOP and
\nWilson. The initial Wilson Percentage Interest is 50.1%.<\/p>\n
1.1.45 WILSON PRINCIPALS: William Wilson III, and, so long as they are employed
\nby the Company or any Subsidiary, any of Thomas P. Sullivan, Jacqueline U.
\nMoore, Richard Springwater, A. Robert Paratte, H. Lee Van Boven, Terry Reagan
\nand Scott Stephens and any person who has comparable direct or indirect economic
\nrights with respect to Wilson or the Company.<\/p>\n
2. ORGANIZATIONAL MATTERS.<\/p>\n
2.1 Formation. The parties to this Agreement have formed the Company as a
\nlimited liability company pursuant to the provisions of the Delaware Limited
\nLiability Company Act (as amended from time to time, the “LLC ACT”). Unless
\notherwise expressly provided in this Agreement, the rights and liabilities of
\nthe Manager and the Members will be as provided in the LLC Act. To the extent
\nthe provisions of this Agreement conflict with any provisions of the LLC Act,
\nthe provisions of this Agreement will control, to the extent permitted by law,<\/p>\n
8
\n 15<\/p>\n
and the conflicting provisions of the LLC Act will be deemed waived to the
\nmaximum extent permitted by law.<\/p>\n
2.2 Name and Place of Business. The Company will transact business under the
\nname of “WILSON\/EQUITY OFFICE, LLC” or such other name as the Manager may
\nhereafter select with the approval of the Board upon delivery of no less than
\nthirty (30) days prior written notice thereof to the Members. The principal
\nplace of business of the Company shall be at 199 First Street, Suite 200, San
\nFrancisco, California 94105, or at such other place as the Board may hereafter
\ndetermine upon delivery of no less than thirty (30) days prior written notice to
\nthe Members.<\/p>\n
2.3 Purpose of the Company. The principal business and purpose of the Company is
\nto (i) to acquire, own, operate and hold for long term capital appreciation
\ninterests in each of the Project Entities, (ii) to acquire, own, operate and
\nhold for long term capital appreciation office real estate assets and interests
\nin new and existing Projects in Northern California, and (iii) to provide
\ndevelopment and property management services to certain Owners and certain other
\nowners of real property. The Company may engage in all activities that are
\nnecessary and appropriate to the conduct of such business, but shall not engage
\nin any other business or activity without the unanimous consent of all Members.<\/p>\n
2.4 Certificate of Formation. Manager has prepared, executed and filed in the
\noffice of the Delaware Secretary of State the “Certificate of Formation” of the
\nCompany in accordance with the LLC Act (the “CERTIFICATE”) and shall prepare,
\nexecute and file such amendments thereto as may be approved by the Members from
\ntime to time, and shall cause a certified copy of the Certificate to be filed or
\nrecorded in any county or location in which such filing or recording is required
\nby law or is deemed appropriate by the Manager.<\/p>\n
2.5 Other Certificates. The Members shall execute and Manager shall file and
\ncause to be published or recorded from time to time such other statements,
\ncertificates and other documents as may be required by law or as the Manager
\ndeems appropriate in any state or county in which the Company transacts
\nbusiness.<\/p>\n
2.6 Agent for Service of Process. The name and address of the registered agent
\nof the Company for service of process on the Company in the State of Delaware is
\nCorporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
\nWILSON\/EQUITY OFFICE, LLC, 199 First Street, Suite 200, San Francisco,
\nCalifornia 94105, Attn: General Counsel is hereby designated as the agent of the
\nCompany upon whom process issued by authority of or under any law of the State
\nof California may be served. The Manager may change the designation of the agent
\nfor service of process and make any necessary filing with the Secretary of State
\nof the State of California.<\/p>\n
2.7 Term. The Company will commence on the Formation Date, and, subject to the
\nprovisions of SECTION 12 (Dissolution and Winding Up), will continue until
\nDecember 31, 2075, unless sooner terminated pursuant to the provisions of this
\nAgreement.<\/p>\n
9
\n 16<\/p>\n
2.8 Costs of Formation. The Company will reimburse each of the Members for its
\nreasonable attorneys’ fees and costs incurred in connection with the formation
\nof the Company, including the preparation of this Agreement.<\/p>\n
3. PROJECT INVESTMENT AND OWNERSHIP.<\/p>\n
3.1 Company Right of First Offer for New Project Opportunities in
\n Northern California.<\/p>\n
3.1.1 Qualifying Projects. Unless the Board otherwise agrees, the Company is to
\ninvest directly or indirectly only in real estate development projects
\n(“PROJECTS”) in Northern California suitable for long term investment that are
\nexpected to contain more than 75,000 rentable square feet of office space in
\noffice projects or more than 100,000 rentable square feet of office space in
\nmixed-use office\/retail\/residential development projects (“QUALIFYING
\nPROJECTS”). Qualifying Projects shall not include existing, already constructed
\noffice buildings not acquired with an intent to demolish and redevelop the
\nproperty.<\/p>\n
3.1.2 Company as Vehicle for Qualifying Projects. Company investments may take
\nthe form of interests in a Project Entity that directly owns a Project, or that
\nis a co-investor or joint venturer with one or more outside property owners,
\ninvestors or developers in a Project.<\/p>\n
3.1.3 Presentation of Opportunities. The EOP Group and the Wilson Group will
\noffer to the Company all investment opportunities relating to Qualifying
\nProjects (the “OPPORTUNITIES”) including Opportunities EOP may have involving
\nunrelated third parties in Northern California. For the purposes of this SECTION
\n3.1 (Company Right of First Offer for New Project Opportunities in Northern
\nCalifornia), notwithstanding the ownership structure in which a mixed-use
\nOpportunity is held, all portions of the mixed-use Opportunity will be treated
\nas a unified project and will not be “divided” up so that the Company (or the
\nretail or residential developer) participates only in the office (or retail or
\nresidential) portions. The Wilson Principals and their Affiliates may
\nparticipate in mixed-use Opportunities through their investments in or through
\nWilson\/Meany, LLC, provided that if any mixed-use Opportunity involves joint
\nownership of the retail component by any member of the Wilson Group and
\nWilson\/Meany, LLC (or another retail developer), Wilson will disclose such fact
\n(and the economic interest of any member of the Wilson Group therein and all
\nrelated information reasonably requested by EOP) to EOP at the time of the
\nOpportunity is presented to the Board pursuant to SECTION 3.2 (Opportunity
\nApproval Process). The EOP Group will not enter into another development joint
\nventure a significant business activity of which is an ongoing development
\nbusiness for multiple projects in Northern California that solicits prospective
\nProjects not already controlled by a third party developer who brings an
\ninvestment opportunity to the EOP Group, nor will the EOP Group use the name of
\nEOP, EOP OP or EOPT or any variation thereof containing the word “Equity” or
\n“EOP” in the name of any development investment joint venture in Northern
\nCalifornia while the Company remains in business and is not in the Winding Up
\nPeriod; provided, however that EOP may identify any particular development
\nproperty or properties as projects of “Equity Office.”<\/p>\n
10
\n 17<\/p>\n
3.1.4 EOP Excluded Opportunities. The obligation of the EOP Group to offer
\nOpportunities to the Company will not apply to investments where the Opportunity
\nis controlled by another party who is to be the developer. However, irrespective
\nof whether the Opportunity arises pursuant to a development joint venture, a
\nsignificant business activity of which is not a development business for
\nmultiple projects in Northern California, or under investments permitted by the
\npreceding sentence of this SECTION 3.1.4, the EOP Group will not invest in such
\nOpportunities unless Wilson is offered the right to invest (directly or
\nindirectly) up to 20% of the equity that the EOP Group invests in such
\nOpportunities on the same terms as the EOP Group, unless the developer
\ncontrolling the Opportunity will not permit the EOP Group to participate if any
\nmember of the Wilson Group were to hold such a direct or indirect interest.<\/p>\n
3.1.5 Wilson Passive Investment Opportunities. The obligation of the Wilson
\nPrincipals to offer, and to cause their Affiliates to offer, Opportunities to
\nthe Company will not apply to investments in Opportunities with respect to which
\nall of the following are true (“WILSON PASSIVE INVESTMENT OPPORTUNITIES”) :<\/p>\n
3.1.5.1 No member of the Wilson Group controls or manages the Project,
\nOpportunity or owner of the Opportunity, nor is any Wilson Principal an officer,
\ndirector, manager or managing member of any entity that does the foregoing;<\/p>\n
3.1.5.2 William Wilson or other Wilson Principals or Affiliates do not own,
\ncollectively, more than the greater of (A) 20% or (B) $2 million (but not in any
\nevent to exceed 30%), of the contributed capital in the Opportunity or in the
\nowner of the Opportunity (except that William Wilson may invest, on a passive
\nbasis, up to a total of $5 million (in the aggregate with respect to all Wilson
\nPassive Investment Opportunities) in projects controlled and managed by (or for
\nwhich the managing general partner or managing member receives a significant
\npromotional interest and is controlled and managed by) his children without
\nregard to these percentage limitations;<\/p>\n
3.1.5.3 William Wilson or other Wilson Principals or Affiliates do not own and
\nare not directly or indirectly entitled to percentages of the cash flow, income,
\nprofits or proceeds of the Opportunity or owner of the Opportunity greater than
\nthe percentages set forth in SECTION 3.1.5.2, above or corresponding to the
\ncapital interests permitted under SECTION 3.1.5.2 above;<\/p>\n
3.1.5.4 None of William Wilson or the other Wilson Principals or their
\nAffiliates are actively involved in the management, leasing, entitlement
\nprocess, supervision of design or construction, raising of equity or otherwise
\nactively involved in the development of the Opportunity; and<\/p>\n
3.1.5.5 The involvement of Wilson Principals and their Affiliates is consistent
\nwith their duties as employees of the Company.<\/p>\n
The obligation of each Wilson Principal to offer Opportunities to the
\nCompany will continue so long as such Wilson Principal is an officer or employee
\nof the Company and the Company remains in business and is not in the Winding Up
\nPeriod, provided that in all events<\/p>\n
11
\n 18<\/p>\n
William Wilson’s personal obligation to offer Opportunities to the Company will
\nremain in effect through the third anniversary of the Formation Date, even if he
\nis no longer an officer or employee of the Company, unless the Winding Up Period
\nhas already commenced within such 3-year period.<\/p>\n
3.2 Opportunity Approval Process.<\/p>\n
3.2.1 Review of Opportunities. Manager will review and propose to the Board
\npotential investments in Qualifying Projects in Northern California which it
\nbelieves are in the Company’s interest to pursue. Manager may cause the Company
\nto expend up to $50,000 in out-of-pocket costs to unrelated parties or such
\ngreater sum as the Board may direct from time to time on any potential
\nQualifying Project before the related Opportunity is brought to the Board for an
\ninvestment decision; provided, however that the Board has approved a budget line
\nitem for such expenditures and the Company’s aggregate annual expenditures for
\nsuch costs do not exceed the amount of such line item. The Company shall
\nevaluate any Opportunity brought to the Company by the EOP Group in the same
\nmanner as if the Company staff or Wilson had first developed the Opportunity.<\/p>\n
3.2.2 Board Approval. Notwithstanding that the Manager shall generally make the
\nMembers aware of the general progress of the Company in pursuing an Opportunity,
\nbecause the decision of the Company to invest in a Qualifying Project would be a
\nMajor Decision requiring the approval of the Board as described in SECTION 8.3
\n(Major Decisions), the Members have agreed to a formal process culminating in a
\nBoard presentation in connection with the decision to invest in a particular
\nProject. The Representatives may approve or disapprove any Opportunity for
\ninvestment in the sole and absolute discretion of each Representative. Any
\nOpportunity so approved for investment by the Board is referred to as an
\n“APPROVED PROJECT.” Concurrent with the Board making a Project an Approved
\nProject, the Board shall decide (i) upon a maximum capital investment (the
\n“MAXIMUM PROJECT INVESTMENT”) in that Project, and (ii) if it wants the
\nopportunity to revisit this decision prior to beginning construction (the “TWO
\nSTAGE PROCESS”). If the Board elects the Two Stage Process, then (a) the initial
\ndecision shall specify the maximum pre-construction capital investment (the
\n“MAXIMUM PRE-CONSTRUCTION CAPITAL INVESTMENT”) in the Project, and (b) prior to
\nconstruction the Devco Board will decide upon a revised Maximum Project
\nInvestment in that Project and decide whether to commence construction. The
\nFirst & Howard, Concar, the Ferry Building, and Fair Isaac Project shall be Two
\nStage Process Projects. The Maximum Pre-Construction Capital Investment for the
\nFerry Building and Concar shall be set forth in resolutions of the Board, but
\nshall be deemed to be zero until so agreed. The second stage approval to
\ncommence construction shall be deemed to have been granted for Building 2 at
\nFirst and Howard and Phase I (Buildings A and B) of Fair Isaac and the Maximum
\nProject Investments for such Projects shall be set forth in resolutions of the
\nBoard, but shall be deemed to be zero until so approved.<\/p>\n
3.2.3 Board Presentation and Wilson Recommendation. At the time a potential
\nOpportunity is brought to the Board for an investment decision, the proposal
\nwill be accompanied by a written report prepared by Manager and containing the
\nrecommendation of Manager to proceed to make an investment in the Opportunity,
\ntogether with the following<\/p>\n
12
\n 19<\/p>\n
information to the extent then available and any other items Manager chooses to
\npresent for the Board’s approval at that time:<\/p>\n
3.2.3.1 identification and physical description of the location and site, and a
\ndescription of the known existing conditions and proposed improvements;<\/p>\n
3.2.3.2 a preliminary development pro forma consisting of a proposed development
\nbudget, projected investment returns and valuations and project schedule;<\/p>\n
3.2.3.3 a proposed ownership and capitalization structure, including the
\ncontemplated equity investments, if any, beyond the Company’s proposed
\ninvestment;<\/p>\n
3.2.3.4 a proposed target range for entitlements;<\/p>\n
3.2.3.5 conceptual drawings;<\/p>\n
3.2.3.6 the proposed project architect and general contractor (if known);<\/p>\n
3.2.3.7 description of any fees payable to Wilson and\/or any Wilson Principal or
\nAffiliates (which Wilson shall cause to be limited to market rates for actual
\nservices being performed or property being sold (as distinct from promotional or
\nfinder’s fees));<\/p>\n
3.2.3.8 a brief written statement of the project concept which will describe the
\ntarget market segment and corresponding intended quality level of the
\nimprovements and any specific prospective tenants for the proposed development;<\/p>\n
3.2.3.9 a proposed Maximum Pre-Construction Capital Investment; and<\/p>\n
3.2.3.10 a proposed Maximum Project Investment.<\/p>\n
All the items described above in this SECTION 3.2.3 are referred to as
\n“PROJECT APPROVAL ITEMS.” Manager’s presentation to the Board will also include
\na description of the Project market, terms of purchase for the real property,
\nnames of all sellers of the real property, a description of any material adverse
\nconditions of the property known to Manager, a statement of projected net
\noperating income, a description of the entitlements’ projected timing and scope,
\nand description of pursuit costs to date, together with other information called
\nfor in Exhibit C, in the form of Exhibit C. Exhibit C may be changed from time
\nto time by the Board. Manager shall not be required to present to the Board any
\nOpportunities that Wilson does not intend to instruct its Representatives to
\napprove as described in SECTION 3.2.2. The Company shall not commence
\nconstruction on any Approved Project prior to such Project becoming either an
\nEOP Project or a Company Project. The Company shall not commence construction on
\nany Approved Project for which the Board has chosen the Two Stage Process prior
\nthe Board expressly determining the revised Maximum Project Investment and
\nexpressly electing to commence construction.<\/p>\n
13
\n 20<\/p>\n
3.3 EOP Projects. EOP will have the opportunity to provide, in its sole and
\nabsolute discretion, certain equity for Approved Projects on the following
\nterms; it being agreed that EOP may elect in writing at any time by notice to
\nWilson and the Company to have its rights under SECTION 3.4 be exercised not by
\nEOP but instead by any member of the EOP Group (EOP or such other member of the
\nEOP Group that is wholly owned (directly or indirectly) by EOP OP or EOPT, if
\nany, designated by EOP to exercise such rights herein called, an “EOP
\nINVESTOR”), and following any such election all references herein to EOP in its
\ncapacity as an investor in and partner or member of the Project Entity will be
\ndeemed references to EOP Investor. Whether the rights are exercised by EOP or
\nanother EOP Investor, both will be bound by the elections made by EOP or the EOP
\nInvestor with respect to these rights and EOP OP will be obligated to fund or to
\ncause the EOP Investor to fund all amounts that the EOP Investor is obligated to
\nfund to the applicable Project Entity as required pursuant to SECTION 3.4.2.<\/p>\n
3.4 Presentation to EOP. It is contemplated that at the time the Board first
\napproves an investment in an Opportunity, and that Opportunity therefore becomes
\nan Approved Project, it may not be known at that time whether and to what extent
\nadditional equity capital (in excess of what the Company will invest) will be
\nneeded for the Approved Project. However, at such time as the Manager reasonably
\ndeems appropriate and before any equity capital other than Company equity is
\nsolicited for investment in the Project Entity for the Approved Project, the
\nManager will submit the investment Opportunity to EOP (the “EOP INVESTMENT
\nDETERMINATION”), providing EOP with (i) the amount of equity (the “SPECIFIED
\nEQUITY”) requested of EOP (which shall be Manager’s best estimate of 60% (or
\nsuch greater percentage as the Board may determine (in the sole and absolute
\ndiscretion of each Board Member) for any Project) (in either event, the
\n“SPECIFIED EQUITY PERCENTAGE”), of the total equity required for the Project),
\n(ii) the then-current approved budget and pro forma for the Project and (iii)
\nthe related Project Approval Items, for EOP to determine whether EOP desires to
\nprovide the Specified Equity for the Approved Project. EOP will deliver notice
\nof its determination whether to provide such equity in writing within 30 days
\nafter the foregoing have been submitted to EOP, and EOP will be deemed to have
\nelected not to make the requested equity investment in the Project Entity unless
\nit elects in writing to commit to this investment within this period.<\/p>\n
3.4.1 EOP Approval of EOP Project and Related Project Approval Items. If EOP
\nelects to provide all of the Specified Equity, that Project will be an “EOP
\nPROJECT” and the Company will provide the amount of equity (the “COMPANY SHARE
\nOF EQUITY”) equal to (i) the total estimated as required by Manager, multiplied
\nby (ii) 100% minus the Specified Equity Percentage (the “COMPANY SHARE OF EQUITY
\nPERCENTAGE”). For each EOP Project, EOP will have been deemed to have consented
\nto the related Project Approval Items, as modified from time to time in
\naccordance with this SECTION 3.4.1; it being agreed that notwithstanding any
\nelection by EOP to designate EOP Investor to exercise its rights under SECTION
\n3.4, EOP (and not EOP Investor) will have the exclusive right to exercise the
\nrights of EOP under this SECTION 3.4.1, and EOP and EOP Investor will be bound
\nby the acts or failures to act of EOP with respect to these rights under this
\nSECTION 3.4.1.<\/p>\n
With respect to each EOP Project, EOP will have the right to approve material
\nchanges to any Project Approval Items in accordance with this SECTION 3.4.1 and
\nSECTION 8.4 (Member Decisions and Approvals; Conflicts of<\/p>\n
14
\n 21<\/p>\n
Interest) and to approve other EOP Approval Matters, such approval not to be
\nunreasonably withheld, conditioned or delayed, and EOP may not disapprove such
\nitems if such disapproval conflicts with previously approved Project Approval
\nItems or other previously approved EOP Approval Matters. The Company shall not
\ncommence construction on any EOP Project, unless and until the Board has
\napproved a detailed project budget for such Project, which approval shall be
\nsubject to the requirements of the immediately following sentence.
\nNotwithstanding anything to the contrary herein (including the foregoing
\nprovisions requiring that EOP may not unreasonably withhold, condition or delay
\nits consent to material changes to Project Approval Items), it shall be
\nreasonable for EOP to withhold its consent (and EOP may withhold such consent in
\nits sole and absolute discretion) to any (i) increases in the aggregate amount
\nof the originally approved development budget of greater than 2.00% or (ii)
\nchanges to other Project Approval Items (as such Project Approval Items may have
\nbeen approved by the Board in its sole and absolute discretion) which, when
\ntaken as a whole, result in (a) a Project of materially different size or
\nmaterially different quality, (b) Projected Yield being less, by 50 basis points
\n(0.50%) or more, than that projected in the then-approved development budget if
\nthe Projected Yield after such changes is more than 11.00%, (c) Projected Yield
\nbeing less, by 25 basis points (0.25%) or more, than that projected in the
\nthen-approved development budget if the Projected Yield after such changes is
\nless than or equal to 11.00%, or (d) the Projected Yield being less than 10.50%.
\nWith respect to each EOP Project, Wilson shall not unreasonably delay, withhold
\nor condition its consent to any matter for which its consent is solicited by EOP
\nto the extent the matter is one which EOP could not unreasonably delay, withhold
\nor condition its consent if Wilson asked for EOP’s approval thereto.<\/p>\n
EOP will from time to time designate to Wilson in writing at least up to three
\nofficers, employees or agents of EOP or its Affiliates (each an “EOP APPROVAL
\nPERSON”) who will have the right to participate in and authority to grant
\napprovals on behalf of EOP with respect to EOP Projects in accordance with this
\nSECTION 3.4.1, each with designated authority to grant or deny certain
\ncategories of approvals specified by EOP. Each EOP Approval Person will have the
\nauthority on behalf of EOP to give binding approvals with respect to such area
\nof authority. At least one EOP Approval Person, who may be one of the EOP
\nRepresentatives (the “GENERAL EOP APPROVAL PERSONS”), will have authority on
\nbehalf of EOP to give binding approvals in writing with respect to any approvals
\nrelating to an EOP Project or Project Approval Item, including Major Decisions
\nwith respect to such Projects.<\/p>\n
This approval process will be generally as follows:<\/p>\n
3.4.1.1 With respect to an EOP Project or a Company Project, Wilson and EOP will
\nhave the right to approve any changes to Project Approval Items which are
\nmaterial or which, when aggregated with other changes to Project Approval Items
\nnot previously approved, are material; provided, however, that consent to such
\nmaterial changes shall (i) not be unreasonably delayed, conditioned or withheld
\nto the extent provided in SECTION 3.4.1, and (ii) not be required if such
\nmaterial change follows necessarily from previously approved Project Approval
\nItems or EOP Approval Matters (other than matters where approval was required
\nunder this clause (ii)). Changes in Project Approval Items deemed to be material
\nshall include the selection or change of the principal architect or general
\ncontractor for the Project or modifications which materially affect the overall
\nquality or efficiency of the Project or the Project exterior or lobbies or the
\nProject building systems. Matters described in this SECTION 3.4.1.1 are referred
\nto as “MAJOR CHANGES.”<\/p>\n
3.4.1.2 Major Decisions and Major Changes on which EOP has approval rights are
\nreferred to as “EOP APPROVAL MATTERS.” The Manager may not take or cause the
\nCompany to take actions on any EOP Approval Matters unless EOP has given its
\napproval for such actions in one of the ways expressly set forth in this SECTION
\n3.4.1. All matters which do not constitute EOP Approval Matters may be managed
\nand decided upon for the Company by the Manager and the Company staff under the
\nManager’s direction acting reasonably and in good faith, provided EOP has been
\nable to participate in relevant team meetings as provided in SECTION 3.4.1.4.<\/p>\n
15
\n 22<\/p>\n
3.4.1.3 EOP Approval Matters which are decided at the Board level, during
\nconferences or at meetings (whether face-to-face or telephonic) in which an EOP
\nRepresentative and a Wilson Representative were present, or through other
\ncommunications between Wilson and an EOP Representative or EOP Approval Person,
\nwill be deemed binding on EOP and Wilson for all purposes provided such
\napprovals are expressly identified and described in written minutes of such
\nmeetings which are circulated to EOP by email to the EOP Approval Person or EOP
\nRepresentative that took part in the telephone conference or meeting, with copy
\nof the email to be sent by telecopy to that same EOP Representative or EOP
\nApproved Person, the EOP Additional Notice Person and to one other EOP Approval
\nPerson, and expressly identified therein in capital, bold or italic letters, as
\nEOP’s consent to EOP Approval Matters, unless EOP objects to such minutes
\npursuant to SECTION 3.4.1.5.<\/p>\n
3.4.1.4 The appropriate EOP Approval Persons may participate in Company team
\nmeetings relating to the EOP Project which are to be scheduled generally on a
\nmonthly basis, and decisions made at these meetings, including those related to
\nEOP Approval Matters, will be deemed to have been made and approved by EOP and
\nWilson so long as at least one EOP Approval Person with the relevant authority
\nand one Wilson Representative concurred in the decision, and further provided
\nthat such approvals are expressly identified and described in written minutes of
\nsuch meetings which are circulated to EOP by email to the EOP Approval Person or
\nEOP Representative that participated in the telephone conference or meeting,
\nwith copy of the email to be sent by telecopy to that same EOP Approval Person
\nor EOP Representative, the EOP Additional Notice Person and to one other EOP
\nApproval Person, and prominently expressly identified therein in capital, bold
\nor italic letters, as EOP’s consent to EOP Approval Matters unless EOP objects
\nto such minutes pursuant to SECTION 3.4.1.5.<\/p>\n
3.4.1.5 Minutes of the Board meetings will, and, at Manager’s option, minutes of
\nother conferences or meetings referred to in SECTIONS 3.4.1.3 and 3.4.1.4
\n(whether or not an EOP Approval Person or Representative attends) may, be
\nproduced by Manager or a person designated by Manager and any matters requiring
\nthe approval of the Members expressly identified and described in such minutes
\nwill be deemed approved by Wilson and EOP if, within the applicable Deemed
\nApproval Period after delivery of minutes meeting the requirements specified
\nabove, such Member or its Representative does not object to such minutes in
\nwriting, explaining the matters objected to and correcting such minutes. The
\n“DEEMED APPROVAL PERIOD” shall be 10 business days if the matter is a Major
\nDecision and 5 business days if the matter is a Major Change.<\/p>\n
3.4.1.6 To the extent not made at the Board level or otherwise approved as
\nprovided above, when Manager or the Company staff propose to make decisions that
\nconstitute EOP Approval Matters, Manager or the Company staff shall notify EOP
\nof the proposed decision by written notice to an authorized EOP Approval Person
\nexpressly identifying therein in capital, bold or italic letters, the proposed
\nchange as potentially being an EOP Approval Matter with respect to the Project
\nApproval Items and these changes will be deemed to be consented to by EOP if not
\nobjected to by EOP or an authorized EOP Approval Person in writing or by email
\nwithin the applicable Deemed Approval Period in a notice specifying the proposal
\nobjected to and the reasons therefore.<\/p>\n
16
\n 23<\/p>\n
3.4.1.7 Notwithstanding any of the provisions in this SECTION 3.4.1 regarding
\nthe process for confirming minutes of meetings or when any decision is binding
\non EOP or Wilson, whether involving an EOP Approval Matter or any other
\ndecision, any decision shall be deemed binding on EOP and Wilson whenever any
\nEOP Approval Person with the relevant authority as specified herein and any
\nWilson Representative, has signed or initialed (which may be by facsimile) any
\nwriting that states the decision made, and expressly identifies such decision in
\ncapital letters or italics as an EOP Approval Matter.<\/p>\n
3.4.1.8 Webcor Builders, Inc. (“WEBCOR”) and the Commercial Interior Contractors
\ndivision of WCP Services, Inc. (“CIC”) will be deemed preapproved as
\ncontractors, provided, however, that Webcor may be disapproved at any time
\nthereafter by any Member for cause.<\/p>\n
3.4.1.9 Unless already submitted to the Board, items to which a party objects
\nunder the foregoing procedures which are not resolved through further discussion
\nwill be submitted to the Board for decision promptly following the request of
\neither party pursuant to SECTION 13.1 (Disagreements).<\/p>\n
3.4.2 EOP Project Owner Structure and EOP Capital. All EOP Projects (or the
\ninterest of the Company and the EOP Investor therein) will be held through a
\nProject Entity in which the Company is the manager or general partner, as the
\ncase may be, and the Company and the EOP Investor are the members or limited
\npartners (an “EOP PROJECT ENTITY”). The EOP Investor will provide the Specified
\nEquity and the Company will provide the Company Share of Equity. If Wilson has
\nconditioned its obligation to provide capital to the Company relating to the
\napplicable EOP Project pursuant to SECTION 5.2.1, the date on which the
\nSpecified Equity and Company Share of Equity shall be due shall be the date
\nWilson becomes obligated to provide such capital to the Company, but may, in
\neach party’s respective sole and absolute discretion, be funded prior to such
\ndate. All such equity for an EOP Project will be funded pari passu by the EOP
\nInvestor and the Company on a ratable basis. Notwithstanding the above and
\nnotwithstanding anything to the contrary contained herein, (a) the EOP Investor
\nshall not have to fund the Specified Equity in response to any Project Capital
\nCall which the Company does not fund, provided such failure of the Company to
\nfund is not due to EOP’s failure to provide its required capital to the Company;
\nand (b) the Company shall not have to fund the Company Share of Equity (nor
\nshall Wilson or EOP have to contribute to the Company their allocable shares of
\nthe Company Share of Equity) in response to any Project Capital Call which the
\nEOP Investor does not fund. Any equity, in addition to the Specified Equity and
\nthe Company Share of Equity, that turns out to be required for the EOP Project
\nshall be handled as described in SECTION 5.2. The interests of the EOP Investor
\nand the Company in the EOP Project Entity are referred to herein as the “DIRECT
\nEOP INTEREST” and the “COMPANY INTEREST,” respectively. Each EOP Project Entity
\nAgreement will contain the analogous provisions and remedies for the failure of
\na member to make required contributions of Project Equity as are contained in
\nSECTION 5.3 (Failure to Make Contributions), except as otherwise expressly
\nprovided herein. Such agreements shall provide that the Project Distributable
\nCash Flow and Project Distributable Capital Proceeds from an EOP Project (which
\nshall be determined after paying interest and principal on Project Required
\nFunds Loans) shall be distributed as set forth below.<\/p>\n
17
\n 24<\/p>\n
3.4.2.1 Project Distributable Cash Flow. Each EOP Project Entity will distribute
\nProject Distributable Cash Flow to the Company and the EOP Investor, within
\nthirty (30) days following the end of each calendar quarter, in the following
\norder and priority; provided, however, that prior to Project Stabilization,
\nProject Distributable Cash Flow will be distributed if and only if the EOP
\nProject Entity has funded and maintains reserves at levels reasonably specified
\nby EOP:<\/p>\n
3.4.2.1.1 First, to the Company and the EOP Investor (ratably and pari passu,
\nwith neither having priority over the other) in proportion to each entity’s
\naccrued and unpaid Project Default Preferred Return, until the accrued and
\nunpaid Project Default Preferred Return for each of such entities is reduced to
\nzero;<\/p>\n
3.4.2.1.2 Second, to the Company and the EOP Investor (ratably and pari passu,
\nwith neither having priority over the other) in proportion to each entity’s
\nProject Adjusted Default Capital, until the Project Adjusted Default Capital of
\neach of such entities is reduced to zero; and<\/p>\n
3.4.2.1.3 Third, to the Company and the EOP Investor (ratably and pari passu,
\nwith neither having priority over the other) in proportion to their Project
\nPercentage Interests at the end of the calendar quarter for which the
\ndistribution is being made.<\/p>\n
3.4.2.2 Project Distributable Capital Proceeds. Each EOP Project Entity will
\ndistribute Project Distributable Capital Proceeds to the Company and the EOP
\nInvestor, within sixty (60) days after receipt of the same, in the following
\norder and priority:<\/p>\n
3.4.2.2.1 First, to the Company and the EOP Investor (ratably and pari passu,
\nwith neither having priority over the other) in proportion to each entity’s
\naccrued and unpaid Project Default Preferred Return, until the accrued and
\nunpaid Project Default Preferred Return for each of such entities is reduced to
\nzero;<\/p>\n
3.4.2.2.2 Second, to the Company and the EOP Investor (ratably and pari passu,
\nwith neither having priority over the other) in proportion to each entity’s
\nProject Adjusted Default Capital, until the Project Adjusted Default Capital for
\neach of such entities is reduced to zero;<\/p>\n
3.4.2.2.3 Third, to the Company and the EOP Investor (ratably and pari passu,
\nwith neither having priority over the other) in proportion to their Project
\nAdjusted Capital, until the Project Adjusted Capital of each entity has been
\nreduced to zero;<\/p>\n
3.4.2.2.4 Fourth, to the Company and the EOP Investor (ratably and pari passu,
\nwith neither having priority over the other) in proportion to the amount (the
\n“FIRST LEVEL RETURN AMOUNT”) for each necessary to give each such member of the
\nProject Entity a cumulative internal rate of return of 20% per annum (compounded
\nannually) on its capital contributions to the Project Entity (excluding Default
\nCapital) from time to time (for purposes of determining such internal rate of
\nreturn, the Project Entity shall take into account the distributions paid to
\nsuch members of the Project Entity pursuant to Sections 3.4.2.1.3, 3.4.2.2.3,
\n3.4.2.2.4 3.3.3.2.5 (but excluding 3.3.3.2.5.3) and 3.4.2.2.6 (but excluding<\/p>\n
18
\n 25<\/p>\n
3.3.3.2.6.3) (collectively, the “Relevant Distributions”) [[NOTE – THE FOLLOWING
\nINSERT RE SECTION 5.7.4 RELATES ONLY TO PROJECT ENTITY AGREEMENTS FOR CONCAR,
\nTHE FERRY BUILDING, AND BUILDING NOS. 2 AND 3 OF FIRST & HOWARD] but the Project
\nEntity shall disregard those distributions made to Company pursuant to Section
\n5.7.4 and shall instead treat such distributions pursuant to Section 5.7.4 as
\nhaving been made to the EOP Investor]) until each has received from the Relevant
\nDistributions an additional amount equal to its First Level Return Amount.<\/p>\n
3.4.2.2.5 Fifth, (i) until the EOP Investor has received from the Relevant
\nDistributions an amount equal to a cumulative internal rate of return of 25% per
\nannum (compounded annually) on its capital contributions to the Project Entity
\n(excluding Default Capital) from time to time (for purposes of determining such
\ninternal rate of return, the Project Entity shall take into account the Relevant
\nDistributions paid to EOP Investor [[NOTE – THE FOLLOWING INSERT RE SECTION
\n5.7.4 RELATES ONLY TO PROJECT ENTITY AGREEMENTS FOR CONCAR, THE FERRY BUILDING,
\nAND BUILDING NOS. 2 AND 3 OF FIRST & HOWARD] but the Project Entity shall
\ndisregard those distributions made to Company pursuant to Section 5.7.4 and
\nshall instead treat such distributions pursuant to Section 5.7.4 as having been
\nmade to the EOP Investor]), and then (ii) to the EOP Investor and the Company
\n(ratably, with neither having priority over the other) in the following
\nproportions:<\/p>\n
3.4.2.2.5.1 to the EOP Investor an amount equal to (A) its
\nProject Percentage Interest minus 20%, times (B) the amount to be distributed;<\/p>\n
3.4.2.2.5.2 to the Company an amount equal to (A) its Project
\nPercentage Interest times (B) the amount to be distributed; and<\/p>\n
3.4.2.2.5.3 20% to the Company as its Promotional Interest,
\nand<\/p>\n
3.4.2.2.6 Sixth, the balance to the Company and the EOP
\nInvestor (ratably, with neither having priority over the other) in the following
\nproportions:<\/p>\n
3.4.2.2.6.1 to the EOP Investor an amount equal to (A) its
\nProject Percentage Interest minus 30%, times (B) the amount to be distributed;<\/p>\n
3.4.2.2.6.2 to the Company an amount equal to (A) its Project
\nPercentage Interest times (B) the amount to be distributed; and<\/p>\n
3.4.2.2.6.3 30% to the Company as its Promotional Interest.<\/p>\n
If, for any EOP Project, the Specified Equity is more or less than 60% of the
\ntotal equity for such project (as may occur only if agreed by EOP and Wilson,
\neach in its sole and absolute discretion), the percentages in SECTIONS
\n3.4.2.1.3, 3.4.2.2.4, 3.3.3.2.5 and 3.4.2.2.6 may be adjusted by the agreement
\nof Wilson and EOP (each acting in its sole and absolute discretion).<\/p>\n
3.4.3 EOP Project Owner Constituent Documents. The operating agreement,
\nagreement of limited partnership, or other constituent agreements (each, an “EOP
\nPROJECT ENTITY AGREEMENT”) of each EOP Project Entity will reflect the matters
\nset forth in Exhibit D. The EOP Project Entity Agreements shall provide that the
\nCompany’s interest in the EOP Project Entity shall be held in the form of an “A
\nUNIT,” a “B UNIT” and a “C UNIT” representing membership or partnership
\ninterests in the EOP Project Entity. The A Unit shall entitle the Company to the
\nDistributions that would be payable to EOP with respect to the Company Interest
\npursuant to SECTIONS 5.7.1 and 5.7.2 if (a) there were no Default Capital or
\nDefault Capital Return, (b) the Permanent Capital Amount for EOP and Wilson were
\nzero, and (c) the Adjusted Balance of EOP and Wilson were equal to their
\nPro-Rata shares of the<\/p>\n
19
\n 26<\/p>\n
applicable Project Capital Investment. The B Unit shall entitle the Company to
\nthe distributions that would be payable to Wilson with respect to the Company
\nInterest pursuant to SECTIONS 5.7.1 and 5.7.2 (except for distributions with
\nrespect to any Promotional Interest) if (a) there were no Default Capital or
\nDefault Capital Return, (b) the Permanent Capital Amount for EOP and Wilson were
\nzero, and (c) the Adjusted Balance of EOP and Wilson were equal to their
\nPro-Rata shares of the applicable Project Capital Investment. The C Unit shall
\nentitle to Company to the Promotional Interest in the applicable Project. The
\nEOP Project Entity Agreements shall provide for adjustments in entitlements of
\nthe A Unit and the B Unit as required to reflect changes in the Adjusted Capital
\nof EOP and Wilson in the Company and changes in the EOP Percentage Interest and
\nthe Wilson Percentage Interest that may occur from time to time. The EOP Project
\nEntity Agreements shall provide (the “PROJECT REFINANCE PROVISION”) that in the
\nevent financing for the Project is obtained from a member of the EOP Group, then
\nprior to maturity, EOP Investor would have the right to cause the borrower to
\nrefinance the Loan, subject to the approval (not to be unreasonably withheld) of
\nWilson and any members or partners of Owner (other than the Project Entity)
\nwhich have the right to consent under the Owner’s operating or partnership
\nagreement. The EOP Project Entity Agreements shall further provide that (except
\nfor the First & Howard Project) the Project Entity shall not, from and after
\nFebruary 9, 2001, enter into partnership, operating agreements or other
\nagreements involving third party investors in such Projects unless such
\nagreements contain a provision (the “OWNER REFINANCE PROVISION”) allow the
\nProject Entity to cause the Owner to refinance such a loan as provided in the
\npreceding sentence. The foregoing sentence shall not preclude any member of the
\nEOP Group from requiring, as a condition to making a loan to the applicable
\nProject Entity or the applicable Owner, that any Project Entity’s operating
\nagreement contain the Project Refinance Provision and that the Owner’s operating
\nagreement or partnership agreement contain the Owner Refinance Provision.<\/p>\n
3.4.4 EOP Project Debt Financing. Manager will target EOP Projects to have a
\ndebt to equity ratio of 3.0 to 1.0 unless the Board determines that higher
\nleverage is appropriate. The Company will offer EOP (by itself, or, if desired
\nby EOP, through any of its Affiliates) the opportunity to provide construction
\nand permanent financing for EOP Projects, as well as mezzanine financing if the
\nEOP Project is to have mezzanine financing (collectively, “PROJECT FINANCING”).
\nManager shall, upon consultation with (and, at EOP’s sole discretion, with the
\nactive involvement of) EOP obtain Project Financing proposals for EOP Projects
\nbut in connection therewith shall not bind the Company in any way without the
\nexpress approval of the Board. EOP may also procure and present to Manager
\nProject Financing proposals for EOP Projects. The Board shall have final
\nauthority to select and the Board will select the most favorable Project
\nFinancing proposal. Once such a proposal is approved, Manager will have full
\nauthority to negotiate and close the Project Financing, provided that Manager
\nconsults with and involves EOP in such negotiations (including those with
\nrespect to Project Financing documents), and further provided that such
\nnegotiations and closing are on terms consistent with the any terms and
\nconditions approved or imposed by the Board. If EOP or such an Affiliate submits
\na proposal for Project Financing, the Company must accept such proposal if its
\nterms, taken as a whole, are at least as favorable to the Company as the best of
\nthe other proposals, in Manager’s reasonable judgment.<\/p>\n
20
\n 27<\/p>\n
3.5 Company Projects. If in connection with an EOP Investment Determination, EOP
\nhas not elected to provide all of the Specified Equity for an Approved Project,
\nthe Company may invest in the proposed Approved Project and obtain all or any
\nportion of the equity (or mezzanine debt, if applicable in accordance with and
\nsubject to the terms of SECTION 3.4.4) from sources other than EOP, provided
\nthat if the terms offered to the other equity investors or (if applicable)
\nmezzanine debt sources (such investors and sources, collectively “INVESTORS”),
\ntaken as a whole, are more favorable than those offered to EOP at the time of
\nthe EOP Investment Determination, the opportunity to invest all of the Specified
\nEquity (or such portion thereof a third party has agreed to provide) for that
\nApproved Project will again be offered to EOP on those more favorable terms
\npursuant to the same procedures applicable to the original EOP Investment
\nDetermination pursuant to SECTION 3.4 (Presentation to EOP). For Approved
\nProjects in which EOP made an EOP Investment Determination not to invest (the
\n“COMPANY PROJECTS”), the Company shall establish and structure the Project
\nEntity so that the Company shall be the manager or general partner of the
\nProject Entity for the Project and the Company and the other Investors will be
\nthe members or limited partners of the Project Entity for the Company Project.
\nThe Company shall not commence construction on any Company Project, unless and
\nuntil the Board has approved a detailed project budget for such Project, which
\napproval will not be unreasonably withheld by any Member so long as (a) the
\ntotal aggregate budgeted Project cost does not exceed 102% of (i) the budget
\napproved by the Board under SECTION 3.2.3.2, or (ii) any then-existing updated
\nbudget approved by the Board in its sole and absolute discretion, or (b) (x)
\nProjected Yield is no more than 50 basis points (0.50%) less than that projected
\nin the then-approved development budget, if the Projected Yield in such budget
\n(after application of the proposed change in budgeted Project cost) is more than
\n11.00%, or (y) Projected Yield for the Project (after application of the
\nproposed change in budgeted Project cost) is no more than 25 basis points
\n(0.25%) less than that projected in the then-approved development budget if the
\nProjected Yield in such budget is less than or equal to 11.00%, but greater than
\nor equal to 10.50%.<\/p>\n
3.6 Non-Company Projects. Only if the Board rejects an Opportunity (including
\nthe Existing Projects) and the Wilson Representatives have voted in favor of the
\nCompany pursuing such Opportunity, may any of the Wilson Group, pursue the
\nOpportunity on its own behalf (but without any equity contribution from the
\nCompany), with or without outside equity sources secured by them (each such
\nOpportunity so pursued by any of the Wilson Group, a “NON-COMPANY PROJECT”),
\nprovided that the Company will not be required to and will not provide any
\nguarantees or credit enhancement in connection with any Non-Company Project or
\nundertake any liability or obligation of any kind or nature, contingent or
\notherwise, other than its obligation to provide services to the owner thereof,
\nand provided further that, without the approval of EOP, none of the Wilson Group
\nwill undertake new Non-Company Projects where the Non-Company Project would
\nmaterially impair the ability of the Company to pursue or execute existing and
\nreasonably contemplated EOP Projects or Company Projects; it being agreed that
\nNon-Company Projects underway from time to time which are not reasonably
\nexpected to occupy substantial portions of the time of the staff of the Company
\nand which will not materially impair the ability of the Company to pursue or
\nexecute existing or reasonably contemplated EOP Projects or Company Projects
\nwill be permitted. Except with the consent of EOP, which may be given or denied
\nin its sole and absolute discretion, Wilson will not undertake any Non-Company
\nProjects which would be<\/p>\n
21
\n 28<\/p>\n
owned in whole or in part by a public real estate company that owns primarily
\noffice properties. The Company will have no ownership interest in any
\nNon-Company Project but will provide development management and, if requested by
\nthe owner, leasing and property management services to the owner for the
\nCompany’s standard fees as established from time to time pursuant to SECTION 4
\n(Third Party Development Management) and approved by the Board. The decision of
\nthe Company to enter into a development management agreement with the Owner of
\nthe Non-Company Project as described below shall constitute a Major Decision. So
\nlong as decisions with respect to the Non-Company Projects are addressed by the
\nterms of a development management agreement or are not expressly specified as a
\nBoard decision pursuant to another section of this Agreement, such decisions
\nshall not constitute Major Decisions. At Wilson’s election, a Non-Company
\nProject may be undertaken by an Affiliate of Wilson or the Wilson Group rather
\nthan Wilson and Wilson may establish a new entity to act as such as Affiliate.
\nMembers of the Wilson Group may act as the manager or general partner of the
\nOwner for the Non-Company Projects; however, within a reasonable time after the
\nformation of the Owner for the Non-Company Project (but before any agreements
\nare undertaken or executed between the Company and the Project Entity), Wilson
\nmust disclose the terms of the proposed Wilson compensation (and other matters
\nrelating to the Wilson management for the Non-Company Project) to the Company
\nand EOP. Any development management agreement between the Company and the Owner
\nor any Affiliate thereof, shall be on the form attached as Exhibit E. The Wilson
\nGroup shall cause the role of all members of the Wilson Group in any Non-Company
\nProject to be consistent with, and not unreasonably interfere with, their time
\nand effort commitments and responsibilities to the Company as contemplated in
\nthis Agreement.<\/p>\n
3.7 Existing Projects.<\/p>\n
3.7.1 Pending Approval. The Board shall make the decision whether or not to
\napprove Concar, First & Howard, Ferry Building and Fair Isaac as Approved
\nProjects and EOP shall determine whether such Projects (except First & Howard
\nbuildings 1 and 4) will be EOP Projects by a date to be mutually and reasonable
\nagreed by EOP and Wilson, and the Board and EOP will make the same
\ndeterminations with respect to Larkspur Landing by a date to be mutually and
\nreasonably agreed by EOP and Wilson (each such date, with respect to such
\nProjects, the “DECISION DATE”). Prior to such decision, the Company shall manage
\nthe development of such Projects as if they were EOP Projects owned by an EOP
\nProject Entity.<\/p>\n
3.7.2 If Not Approved. If any of such Projects do not ultimately become Approved
\nProjects, the EOP Group and the Wilson Group shall, within 10 days following the
\napplicable Decision Date, transfer to the Company any interests they may have in
\nsuch Projects (other than the rights of KFRITZ Investors, LLC under its option
\nagreement with respect to First & Howard) in accordance with SECTION 3.7. If any
\nof such Projects do not ultimately become Approved Projects, the Company shall
\nthereafter dispose of such Projects in the manner described in SECTION 11.10 for
\nCompany Projects, provided that EOP shall be deemed the Marketing Member and
\nWilson the Non-Marketing Member pursuant to such provision. The Company shall
\npay EOP OP the respective amount for each such Project, if any, specified on
\nExhibit B to the extent of the sale proceeds; provided, however that EOP’s
\nconsent (which may be granted or withheld in its sole and absolute discretion)
\nshall be<\/p>\n
22
\n 29<\/p>\n
required for any disposition of such Projects which do not result in sufficient
\nsale proceeds to pay EOP OP the respective amount for such Project specified on
\nExhibit B.<\/p>\n
3.7.3 If Approved. If any of the Existing Projects becomes an Approved Project
\npursuant to approval by the Board, then all related Project documentation and
\nmaterials delivered to EOP at least five business days prior to such approval or
\nas part of the materials submitted to the EOPT Board of Trustees will be deemed
\nto have been approved by Wilson and EOP, and to the extent covering the items
\ndescribed in SECTIONS 3.2.3.1-3.2.3.7, will constitute Project Approval Items
\ndeemed to have been approved by EOP and Wilson. In such event, the Company and
\nEOP agree to cause the formation of the Project Entities for each of the
\nExisting Projects that becomes an Approved Project within a reasonable time
\nafter such approval. Once the Project Entity and Owner for each such Existing
\nProject that is so approved are formed, (i) the Wilson Group and Company will
\nuse reasonable efforts to cause all of the rights and interests in such Existing
\nProject then held or controlled by the Wilson Group to be transferred to the
\nOwner formed to hold such Project, and (ii) the EOP Group and the Company will
\nuse reasonable efforts to cause all of the rights and interests in such Existing
\nProject then held or controlled by the EOP Group to be transferred to the Owner
\nformed to hold such Project, each within a reasonable time after request by the
\nCompany but not later than the time of the commencement of demolition or other
\nphysical construction work on the Project. If any such transfer (or, if
\napplicable, any transfer described in SECTION 3.7.1) is not reasonably
\npracticable, then the Members shall reasonably cooperate to structure an
\narrangement substantially similar (including similar economic benefits to the
\nMembers and any EOP Investor including those described in SECTION 5.7.4, but
\nexcluding the specific circumstances of each such person (e.g. the taxes that
\nsuch person might incur); provided, that to the extent it imposes no costs on
\nthe Members or any EOP Investor or any Affiliate thereof, such structure shall
\ntake account of the specific circumstances of the Members, the Wilson Principals
\nand any EOP Investor) to that which would have been achieved by such a transfer.<\/p>\n
3.7.3.1 If Approved as EOP Projects. If any such Existing Project is approved as
\nan EOP Project, at the time such Project is transferred to the Project Entity or
\nOwner, the EOP Investor with respect such Project shall be deemed to have made a
\ncontribution to the Project Entity in the applicable Existing Project
\nContribution Amount. Concurrent with such contribution the Company shall be
\nobligated to contribute to the Project Entity an amount in cash to the Project
\nEntity equal to the Company Share of Equity Percentage multiplied by the
\napplicable Existing Project Contribution Amount. Notwithstanding anything to the
\ncontrary contained herein, the Project Entity shall distribute such contribution
\nby the Company to the EOP Investor as a return of capital. If the Owner and
\nProject Entity are not the same, the Project Entity shall be deemed to have made
\na contribution to the Owner in the amount of the applicable Existing Project
\nContribution Amount. Concurrent with such contribution, any parties other than
\nthe Company that have an interest in the Owner shall contribute to the Owner an
\namount in cash equal to their percentage interests in the Owner multiplied by
\nthe Existing Project Contribution Amount. The Owner shall distribute such
\ncontributions by such parties to any Project Entity as a return of capital,
\nwhich shall (if such proceeds are Project Distributable Capital Proceeds) in
\nturn distribute such contributions to the Company, which in turn shall (if such
\nproceeds are Distributable Capital Proceeds) distribute such Contributions to
\nthe Members.<\/p>\n
23
\n 30<\/p>\n
3.7.3.2 If Approved as Company Projects. If any such Existing Project is
\napproved as a Company Project, at the time such Project is transferred to the
\nOwner, the Owner shall pay EOP the applicable Existing Project Contribution
\nAmount. Concurrent with such transfer, the Company shall be obligated to
\ncontribute to the Owner (through the Project Entity, if applicable) an amount in
\ncash equal to the Company’s Project Percentage Interest in the Owner multiplied
\nby the applicable Existing Project Contribution Amount. If the Owner and Project
\nEntity are not the same the Project Entity shall be deemed to have made a
\ncontribution to the Owner in such amount. Concurrent with such contribution, any
\nparties other than the Company or Project Entity that have an interest in the
\nOwner shall contribute to the Owner an amount in cash equal to their percentage
\ninterests in the Owner multiplied by the Existing Project Contribution Amount.<\/p>\n
3.7.4 Manager to Take Actions. To the extent that this SECTION 3.7 refers to
\nactions being taken by persons or entities that are not parties to this
\nAgreement or who are not bound by the provisions of this SECTION 3.7, the
\nManager shall cause such persons and entities to take actions in accordance with
\nthe provisions of this SECTION 3.7.<\/p>\n
3.8 Contribution of Projects. Existing Projects that become Approved Projects
\nthat are owned by a member of the EOP Group will be contributed (each, a
\n“CONTRIBUTION”) by such Owner to an Owner accordance with this SECTION 3.8 and
\nSECTION 3.7. Although a Project may be deeded directly to an Owner from a party
\nother than EOP, for purposes of this Agreement and the constituent Project
\nEntity documents such Projects will be treated as having been contributed to the
\nOwner by EOP (referred to herein as the “CONTRIBUTOR”).<\/p>\n
3.8.1 Project Contribution Closing. The closing of a Contribution will take
\nplace on the date mutually and reasonably agreed by Manager and the Contributor
\nfrom time to time (the “CONTRIBUTION CLOSING”). All Contributions and transfers
\nof Existing Projects pursuant to this SECTION 3.7 shall be as-is, where-is and
\nwith all faults and without recourse, representation or warranty by the
\nContributor. On the Contribution Closing, the Contributor shall cause the
\nappropriate Project or Contributor(s) interests therein to be conveyed and
\ncontributed to Owner by recording and delivering duly executed and acknowledged
\nquitclaim deeds therefor to the Owner together with such other instruments of
\ntransfer or assignment as may be reasonably requested by the Manager and
\napproved by the Contributor; provided, however, that if the Contributor is
\nprevented from directly transferring the Project or its interests therein to
\nOwner, solely by reason of restrictions contained in its current ownership
\ndocuments, the Members shall cooperate in attempting to create an ownership,
\nlease or management structure that will as nearly as possible provide the Owner
\nwith the same rights, obligations, risks, benefits and control as it would have
\nhad if it had received a quitclaim deed for the Project and the Members shall
\nthereafter diligently pursue whatever reasonable steps are available to
\neventually transfer all of Contributor’s right, title and interest in the
\nProject to Owner. Upon the Contribution Closing, the Contributor shall also
\ncontribute or cause to be quitclaimed to the Owner all of the Owner’s right,
\ntitle and interest, if any, in and to any and all (i) assignable permits,
\nvariances, licenses and approvals of any kind from governmental or
\nnon-governmental persons or entities in connection with the design, construction
\nor leasing of the existing or proposed improvements on that Project and copies
\nof all plans, specifications, reports, applications, surveys and similar
\ndocuments and materials relating to the Project or the related improvements, in
\nthe possession or under the<\/p>\n
24
\n 31<\/p>\n
control of the Contributor or of any of its Affiliates, (ii) existing
\nimprovements, machinery, equipment, furnishings and other tangible personal
\nproperty located on or used exclusively in the maintenance or operation of the
\nProject; (iii) easements, rights of way, privileges, licenses, appurtenances and
\nother rights and benefits belonging to the Project; (iv) transferable or
\nassignable permits, consents, authorizations, variances, waivers, licenses,
\ncertificates and approvals related to the Project; and (v) architectural,
\nmechanical, engineering and other plans, specifications and drawings, all
\nsurveys and soil, environmental, engineering and other reports or studies in
\nContributor’s or any of its Affiliates’ possession or control, and all
\ntransferable or assignable warranties, representations, guarantees and other
\nrights relating to the ownership, development, use and operation of the
\nProjects.<\/p>\n
3.8.2 Closing Costs; Prorations. The Owner will be responsible for any transfer
\ntaxes, escrow fees, recording costs, title insurance premiums, survey and other
\ncosts incurred in connection with the conveyance of a Project from the
\nContributor or its Affiliate to an Owner (excluding brokerage fees or
\ncommissions, as and to the extent set forth in SECTION 3.8.3 (Broker Fees)). All
\nrevenues and expenses of a Project shall be prorated between the current owner
\nand the new appropriate Owner as of the date the deed is recorded.<\/p>\n
3.8.3 Broker Fees. EOP, Wilson and Company acknowledge that no brokers will be
\ninvolved in any Project Contribution and agree that if any broker claims a
\ncommission or finder’s fee in a Project Contribution transaction, the Member
\nthrough whom (or through whose Affiliate) such broker makes a claim will be
\nresponsible for said commission or fee and shall indemnify the other Members and
\ntheir Affiliates against all costs and expenses (including reasonable attorneys’
\nfees) incurred in defending against the same. None of the payments made by a
\nMember pursuant to its responsibility under the preceding sentence will be
\ntreated as a capital contribution or credited to either Member’s Adjusted
\nCapital or Capital Account. Notwithstanding the foregoing the provisions of the
\ntwo preceding sentences shall not apply if the amount of such commission or
\nfinder’s fee and persons to whom such commission or finder’s fee would be
\npayable is approved by the Board when it approved the applicable Project
\nContribution. This provision will survive termination of this Agreement and
\ndissolution of the Company.<\/p>\n
4. DEVELOPMENT MANAGEMENT.<\/p>\n
4.1 Development Management. The Company will provide all customary development
\nand construction management services for each Approved Project and Non-Company
\nProject (pursuant to a Development Agreement in the form attached hereto as
\nExhibit E). EOP shall assign or cause to be assigned to the Company or a
\ndesignee approved by the Board, and the Company or such designee will assume,
\nfuture responsibility for the third party development management contracts for
\n250 Embarcadero, San Francisco, 850 Cherry, San Bruno for the GAP, Rincon
\nRestaurants and Island Park, and the Company or such designee will be entitled
\nto all fees on a prorated basis accruing from the Formation Date and thereafter
\nwith respect to these contracts. The Company may also provide development
\nconsulting services for third-parties different from full-scope development
\nmanagement services, for such fees as Manager deems appropriate provided such
\nthird parties have no<\/p>\n
25
\n 32<\/p>\n
relation to any member of the Wilson Group and are at market rates of
\ncompensation for the services the Company will provide.<\/p>\n
4.1.1 Development Fees for New EOP Projects. Development fees for new EOP
\nProjects will be allocated and payable across the development period as set
\nforth in this SECTION 4.1.1. Twenty-Five percent (25%) of the projected total
\nfee will be payable in equal monthly installments during the expected
\npreconstruction period, beginning when the Board approves a Project. If any of
\nthis portion of the fee remains unpaid on the date of Project Commencement, the
\nunpaid portion will be paid on such date. However, not more than ten percent
\n(10%) of the projected total fee will be payable prior to receipt of
\nentitlements consistent with the then Project Approval Items and any other
\nrequired entitlements (not to include receipt of a building permit or other
\npermits to commence demolition and construction). Sixty-Five percent (65%) of
\nthe total projected fee will be paid in equal monthly installments from Project
\nCommencement through projected Project Stabilization, and ten percent (10%) of
\nthe total fee will be paid at Project Stabilization. If prior to Project
\nStabilization, the Company Interest in an EOP Project is transferred to the EOP
\nGroup or if any Project or the Company Interest therein is sold or otherwise
\ndisposed of in a manner approved by the Board or otherwise allowed pursuant to
\nthis Agreement, the Company shall be entitled to receive from the Owner, in lieu
\nof any further payments of development fees to the Company, a payment equal to
\nany excess of (i) 3% of actual project costs (excluding land, but including both
\n“hard” and “soft” costs) incurred through the date of transfer, disposition or
\nsale, over (ii) the total fees paid to the Company to the date of the sale or
\ndisposition with respect to such Project.<\/p>\n
4.1.2 Development Services and Fees for Parkside and Seaport Plaza.<\/p>\n
4.1.2.1 The Company will provide development services for the Projects
\n(previously owned by Cornerstone and to be owned by the EOP Group following the
\nMerger) commonly known as the Parkside Project and more particularly described
\nin Exhibit A-5 (“PARKSIDE”) and as the Seaport Plaza Project and more
\nparticularly described in Exhibit A-6 (“SEAPORT PLAZA”) which will not be
\nApproved Projects. For Seaport, the monthly fee payable by the Owner to the
\nCompany shall be $45,844 and will be payable, on the first day of each month,
\nfor the period commencing on the Formation Date and ending December 31, 2000.
\nFor Parkside, the monthly fee payable, on the first day of each month, by the
\nOwner to the Company shall be $106,100 and it will be payable for the period
\ncommencing on the Formation Date and ending December 31, 2001.<\/p>\n
4.1.2.2 EOP OP shall cause the applicable members of the EOP Group to enter into
\nagreements consistent with SECTION 4.1.2.1.<\/p>\n
4.1.3 Development Fees for Existing Projects. Development Fees payable to the
\nCompany in respect of Existing Projects will be as follows if such Projects
\nbecome Approved Projects:<\/p>\n
4.1.3.1 First & Howard. As to First & Howard, development fees payable to the
\nCompany by the Owner will be 3% of total costs excluding land or option payments
\nand excluding direct third-party costs paid (without duplication) by
\nCornerstone,<\/p>\n
26
\n 33<\/p>\n
WWA Investors, LLC or KFRITZ Investors, LLC or the EOP Group prior to the
\nFormation Date. These costs will be allocated as appropriate to each building
\nwithin the Project, and the fee for each building will be 3% of the costs
\nremaining for that building. These fees will be payable as described above for
\nNew Projects.<\/p>\n
4.1.3.2 Concar, Ferry, Larkspur and Fair Isaac. As to the Existing Projects
\nother than First & Howard, development fees payable to the Company by the Owner
\nwill be 3% of total project costs (excluding land) and will be payable as
\ndescribed in SECTION 4.1.1 for new EOP Projects. The preconstruction period will
\nrun from the Formation Date until the expected commencement of construction.<\/p>\n
4.2 Property Management.<\/p>\n
4.2.1 EOP Projects. An Affiliate of EOP designated by EOP will provide property
\nmanagement services payable by the Owners, at market fees for comparable
\nservices, for all Existing Projects and EOP Projects (subject to the rights of
\ncertain third party partners thereof to be co-managers in portions of First & Howard), and, subject to any approval rights of any Investors, for the Company
\nProjects and Non-Company Projects.<\/p>\n
4.2.2 Third-Party Projects. The Company may provide property management and
\nleasing services for unaffiliated third-parties on such terms as the Manager
\ndeems reasonably appropriate.<\/p>\n
4.3 Leasing. Unless otherwise approved by the Board, the Company, in cooperation
\nwith an Affiliate of EOP, will be responsible for leasing all EOP Projects and
\nother Projects for which the Company provides development management services,
\nexcept for the Company Projects and Non-Company Projects where the Owner selects
\nanother leasing agent. Each EOP Project will be identified as being developed by
\nthe Company and as a Project of EOPT on leasing signs and all other marketing
\nmaterials. Whenever the Company provides leasing services, other than leasing
\nservices (unrelated to EOP Projects) for third parties, pursuant to this
\nAgreement, the Company (or a wholly-owned subsidiary) will receive from the
\nOwner 100% of a market leasing commission for all transactions where a
\ncommission is not paid to an outside broker and 50% of a market commission where
\na commission is paid to an outside broker or the EOP Group. For EOP Projects,
\n20% of the leasing commissions otherwise payable to the Company by the Owner
\nwill instead be paid to the EOP Group or its nominee; provided that if the EOP
\nGroup brings a tenant to the Company for any EOP Project or Company Project, and
\nsuch tenant is not represented by an outside broker or tenant representative,
\nthe EOP Group will additionally receive 50% of a market leasing commission. If a
\nprospective tenant is an existing tenant of the EOP Group or of related entities
\nin which any of the parties constituting the EOP Group has an equity or other
\nparticipating interest (other than any interest in connection with any Project
\nin which the Company or any member of the Wilson Group then has a direct or
\nindirect interest), then the EOP Group’s leasing personnel shall be entitled to
\nparticipate in the lease negotiations, but Manager, on behalf of the Company,
\nwill make the final decision on the lease and lease terms, which decision shall
\nnot be subject to Board approval so long as it is consistent with the Leasing
\nGuidelines (as defined below). If a prospective tenant is an existing tenant of
\nany member of the Wilson Group or of related entities in which any member of the
\nWilson<\/p>\n
27
\n 34<\/p>\n
Group has an equity or other participating interest (including, Wilson\/Meany or
\nNon-Company Projects and in which the EOP Group does not have an interest)
\n(other than any interest in connection with any Project in which the Company or
\nthe EOP Group then has a direct or indirect interest), then Wilson’s leasing
\npersonnel shall be entitled to participate in the lease negotiations, but EOP
\nwill make the final decision on behalf of the Company on the lease and lease
\nterms, which decision shall not be subject to Board approval so long as it is
\nconsistent with the Leasing Guidelines.<\/p>\n
5. FINANCIAL MATTERS.<\/p>\n
5.1 Initial Cash Contributions. To obtain additional capital from the Members
\nthe Company may request (a “CAPITAL CALL”, which term also refers to capital
\ncalls made by the Board pursuant to SECTION 5.2.1) in writing that within ten
\n(10) business days following such written request, the Members shall make
\ncapital contributions (each an “INITIAL CASH CONTRIBUTION”) to the Company in
\nproportion to their Contribution Percentages (except for the first $2,483,033
\ncontributed pursuant to this SECTION 5.1, which shall be contributed by EOP), of
\ncash to the capital of the Company. If EOP Lender is obligated to fund amounts
\npursuant to the Wilson Loan documents and defaults on such obligations, Wilson’s
\nobligation to contribute such amounts to the Company pursuant to this SECTION
\n5.1 shall not arise until EOP Lender has cured such default and funded such
\namounts. If (i) Wilson has timely and properly requested (or is deemed to have
\nautomatically requested as described in the Wilson Note) an Advance (as defined
\nin the Wilson Note) to meet a Capital Call, and (ii) EOP Lender is not in
\ndefault of its obligations to fund such Advance, but EOP Lender is not obligated
\nto fund such Advance, and (iii) no “Event of Default” has occurred under the
\nWilson Note, Wilson’s and EOP’s obligation to fund the Capital Call to which
\nsuch Advance relates shall not arise until the earlier of (a) EOP Lender’s
\nfunding of such Advance, or (b) an “Event of Default” has occurred under the
\nWilson Note. Wilson shall satisfy its obligation to contribute $8,911,137.20 to
\nthe Company by entering into and performing its obligations under that certain
\nContribution Agreement relating to the First & Howard Project dated as of
\nDecember 21, 2000. The total maximum capital contributions that the Members may
\nbe required to make under this SECTION 5.1 shall not exceed the following:<\/p>\n
EOP: $36,124,199.60<\/p>\n
Wilson: $33,776,000.00<\/p>\n
Each Member’s Initial Cash Contribution shall, when made, be credited to the
\ncontributing Member’s Capital Account and Adjusted Capital.<\/p>\n
A Capital Call pursuant to this SECTION 5.1 may only be made by the Board or the
\nManager as follows:<\/p>\n
5.1.1 Until the aggregate amount EOP has paid toward its Initial Cash
\nContribution is at least $13,244,000 the Manager may make a Capital Call at any
\ntime it believes it is in the best interest of the Company; provided that the
\namount of capital being requested of EOP pursuant thereto does not exceed
\n$13,244,000 when added to the aggregate amount EOP has paid toward its Initial
\nCash Contribution.<\/p>\n
5.1.2 The Board (with each Representative acting in its sole and absolute
\ndiscretion) may elect to make a Capital Call at any time, for any purpose.<\/p>\n
28
\n 35<\/p>\n
5.1.3 For a Project for which the Board has not elected the Two Stage Process,
\nas and when funds are necessary or desirable in connection with the development
\nof such Project, Wilson and EOP shall each cause their Representatives to cause
\nthe Board to make Capital Calls sufficient to fund the Company’s share of any
\nsuch funds, up to the Company’s share of the approved Maximum Project
\nInvestment.<\/p>\n
5.1.4 For a Project for which the Devco Board has elected the Two Stage Process,
\nbut not yet decided on a revised Maximum Project Investment, as and when funds
\nare necessary or desirable in connection with the development of such Project,
\nWilson and EOP shall each cause their Representatives to cause the Board to make
\nCapital Calls sufficient to fund the Company’s share of any such funds, up to
\nthe Company’s share of the Maximum Pre-Construction Capital Investment.<\/p>\n
5.1.5 For a Project for which the Devco Board has elected the Two Stage Process,
\nand has decided on a revised Maximum Project Investment, as and when funds are
\nnecessary or desirable in connection with the development of such Project,
\nWilson and EOP shall each cause their Representatives to cause the Board to make
\nCapital Calls sufficient to fund the Company’s share of any such funds, up to
\nthe Company’s share of the Maximum Project Investment as so revised.<\/p>\n
On or about the date of this Agreement, the Company shall borrow from the
\nWorking Capital Line (to the extent not previously borrowed from EOP) such funds
\nas are or were previously required for the prudent operation of the Company and
\nupon such borrowing, to the extent of available excess funds, any capital
\nheretofore contributed to the Company shall be returned to the Members. Any
\nprior borrowings by the Company from EOP shall be deemed to have been borrowed
\nfrom the Working Capital Line. Unless the Members otherwise agree, the Company
\nwill make no distribution of Distributable Capital Proceeds to any Member which
\nwould reduce that Member’s Adjusted Balance to an amount less than the Member’s
\nAdjusted Permanent Capital Amount from time to time. It is the intent of the
\nMembers to retain capital in the amount of Adjusted Permanent Capital Amount in
\nthe Company and to invest and reinvest as much as the Board may deem appropriate
\nof this amount in Approved Projects; provided, that, after the occurrence of any
\nDissolution Event described in SECTION 12.1 (Dissolution) and the making of any
\nequity investments which the Company is at that time required to make, the
\nAdjusted Permanent Capital Amount for each Member will be reduced to $0. The
\nAdjusted Permanent Capital Amount is a number used solely to determine the
\namount of Adjusted Capital that can be returned to the Members from time to time
\nand will not be relevant for any tax or financial accounting purpose.<\/p>\n
5.2 Additional Contributions and Loans.<\/p>\n
5.2.1 Additional Capital Calls. After all Initial Cash Contributions have been
\nmade by the Members, the Board (with each of the Representatives acting in its
\nsole and absolute discretion) may resolve to have the Company make a Capital
\nCall upon its Members to contribute additional capital to the Company at any
\ntime specified by the Board and with respect to any Projects (or with respect to
\nno particular Projects) specified by the Board; provided that, Wilson may, in
\nits sole discretion, in accordance with the following sentence, condition its
\nobligation to make its share of such contribution on the receipt by the Company
\n(on Wilson’s behalf) and\/or Wilson of Distributable Capital Proceeds from a
\nProject, in which event the effective date of the Capital Call for both Members
\nwill be the date of such receipt. Wilson shall inform the Board whether Wilson
\nwill so condition its obligation at the time the Project is brought to the Board
\nunder SECTION 3.2.3 (Board Presentation and Wilson Recommendation) and such
\ncondition shall be included as part of the Board’s resolution approving that
\nProject. With respect to any Capital Call, Wilson and EOP shall each provide<\/p>\n
29
\n 36<\/p>\n
its Contribution Percentage of any funds required thereby. Capital Calls may be
\nmade for the operation, maintenance, development, or acquisition of Approved
\nProjects or providing working capital or other funds for the Company. Except to
\nthe extent otherwise provided under SECTION 5.3 (Failure to Make Contributions),
\nall such amounts contributed by Wilson and EOP pursuant to this SECTION 5.2.1
\nshall be deemed “ADDITIONAL CONTRIBUTIONS,” and shall be credited to the
\ncontributing Member’s Capital Account and Adjusted Capital.<\/p>\n
No third party, including any creditor of the Company shall have any right to
\nrequire Manager or the Board to make any Capital Call hereunder or to enforce
\nthe obligations of the Members to contribute initial or additional capital.<\/p>\n
5.2.2 Loans of Required Funds.<\/p>\n
5.2.2.1 Project Required Funds. If (i) any Member (the “PROJECT LENDING MEMBER”)
\nreasonably determines at any time that additional funds (the “PROJECT REQUIRED
\nFUNDS”) should be expended for the prudent operation, maintenance, completion or
\nacquisition (if the acquisition has been approved by the Board) of development
\nof Approved Projects (the “PROJECT REQUIRED EXPENDITURES”), (ii) the applicable
\nProject Entity lacks such funds and is unable, within 20 business days after the
\nProject Lending Member’s request therefor, to borrow the same from a third
\nparty, without credit-enhancement or guaranties (except for customary
\nnon-recourse carve-outs, environmental indemnities and completion guaranties
\n(each from the Company and the Members only)), on terms that are more favorable
\nthan the terms of the Project Required Funds Loans described below, and (iii)
\nthe other Member’s Representatives have not consented to a proposed Board
\nresolution authorizing a capital call for the applicable Project Entity to
\ntimely obtain such funds within 10 business days after the Project Lending
\nMember’s written request therefor, then upon the expiration of such 20 business
\nday period, Manager shall cause the applicable Project Entity to borrow the
\nProject Required Funds from the Project Lending Member on the terms set forth in
\nthis SECTION 5.2.2.1 and shall cause the applicable Project Entity to expend
\nsuch funds on the Project Required Expenditures. The fact that the Board
\ndisapproves a loan satisfying the terms of subclause (ii) will not be deemed to
\nrender the Company “unable” to borrow such funds if the Representatives of the
\nProject Lending Member have voted against such loan. The Project Lending
\nMember’s loan of the Project Required Funds (the “PROJECT REQUIRED FUNDS LOAN”)
\nshall be a loan to the Project Entity at the lesser of a variable interest rate
\nequal to 30-day LIBOR plus 6.00% or the highest rate permitted by applicable
\nlaw. Notwithstanding anything to the contrary herein and in all circumstances,
\nthe Project Required Funds Loans shall be paid by the Project Entity out of
\navailable funds before any distributions are made to its members or partners,
\nincluding the Company. Each of the Project Required Funds Loans shall be
\nevidenced by a promissory note in the form of Exhibit J.<\/p>\n
5.2.2.2 Company Required Funds. If (i) any Member (the “COMPANY LENDING MEMBER”)
\nreasonably determines at any time that additional funds (the “COMPANY REQUIRED
\nFUNDS”) should be expended for the prudent operation of the Company (the
\n“COMPANY REQUIRED EXPENDITURES”) , (ii) the Company lacks such funds and is
\nunable, within 20 business days after the Company Lending Member’s request
\ntherefor, to borrow the same from a third party, without credit-enhancement or
\nguaranties (except for customary<\/p>\n
30
\n 37<\/p>\n
non-recourse carve-outs and environmental indemnities from the Company and the
\nMembers only), on terms that are more favorable than the terms of the Company
\nRequired Funds Loans described below, and (iii) the other Member’s
\nRepresentatives have not consented to a proposed Board resolution authorizing a
\nCapital Call for the Company to timely obtain such funds within 10 business days
\nafter the Company Lending Member’s written request therefor, then upon the
\nexpiration of such 20 business day period, Manager shall cause the Company to
\nborrow the Company Required Funds from the Company Lending Member on the terms
\nset forth in this SECTION 5.2.2.2 and shall cause the Company to expend such
\nfunds on the Company Required Expenditures. The fact that the Board disapproves
\na loan satisfying the terms of subclause (ii) will not be deemed to render the
\nCompany “unable” to borrow such funds if the Representatives of the Company
\nLending Member have voted against such loan. The Company Lending Member’s loan
\nof the Company Required Funds (the “COMPANY REQUIRED FUNDS LOAN”) shall be a
\nloan to the Company at a variable interest rate equal to the lesser of 30-day
\nLIBOR plus 6.00% or the maximum rate permitted by applicable law, and,
\nnotwithstanding anything to the contrary herein and in all circumstances, shall
\nbe paid by the Company before any distributions are made to the Members, and
\nshall be evidenced by a promissory note containing terms generally required by
\nsophisticated commercial lenders.<\/p>\n
5.2.2.3 Repayment of Required Funds Loans. Manager shall cause the Company to
\nrepay Company Required Funds Loans prior to making any distribution to the
\nMembers of (i) any Distributable Cash Flow or (ii) any Capital Proceeds in
\nexcess of the amount of such Capital Proceeds which are a Promotional Interest.
\nManager shall cause the Company to repay Company Required Funds Loans from the
\nCapital Proceeds of the Last Project prior to making any distribution to the
\nMembers of any Distributable Capital Proceeds from such Project.<\/p>\n
5.3 Failure to Make Contributions. In the event that any Member does not make
\nthe full amount of any required Initial Cash Contribution or Additional
\nContribution pursuant to SECTIONS 5.1 (Initial Contribution) or 5.2 (Additional
\nContributions), the other Member will have the following rights and remedies
\nwith respect to the Member that has not contributed its full share (as
\napplicable, the “NON-CONTRIBUTING MEMBER”):<\/p>\n
5.3.1 Contribution by Other Member. The Member which has made its entire Initial
\nCash Contribution and Additional Contributions (each a “CONTRIBUTING MEMBER”)
\nmay, but shall not be required to, contribute in cash all of the amount which
\nthe Non-Contributing Member failed to contribute (such amount, the “SHORTFALL
\nAMOUNT”). Any such contribution of the entire Shortfall Amount (a “SHORTFALL
\nCONTRIBUTION”), together with the amount (the “CONTRIBUTION AMOUNT”) theretofore
\ncontributed by such Contributing Member for which corresponding contributions
\nwere not made by the Non-Contributing Member, shall be treated as Default
\nCapital. Default Capital shall have the distribution priority set forth in
\nSECTION 5.7 (Distributions) and shall earn the Default Preferred Return until
\n(i) repaid by the Company, (ii) converted into Adjusted Capital pursuant to
\nSECTION 5.3.2, or (iii) redeemed pursuant to a Shortfall Redemption (as defined
\nbelow) pursuant to SECTION 5.3.2. To the extent a Contributing Member makes its
\nfull share of the Initial Cash Contribution or Additional Contribution but does
\nnot contribute the entire Shortfall Amount, such contribution shall not be
\ntreated as Default Capital, but the<\/p>\n
31
\n 38<\/p>\n
Percentage Interests of each Member shall automatically be adjusted, at the time
\nof such Contribution, as provided in the definitions of Percentage Interests.<\/p>\n
5.3.2 Redemption of Contribution Default. Each Non-Contributing Member will have
\na period of six (6) months (the “REDEMPTION PERIOD”) from the later of the date
\non which capital to be contributed pursuant to a Capital Call was due and
\npayable (the “CALL DATE”) or the date the Contributing Member makes a Shortfall
\nContribution, to make its capital contribution by paying (a “SHORTFALL
\nREDEMPTION”) an amount to the Contributing Member equal to the amount of
\nShortfall Contribution plus a return thereon at a rate equal to the Default
\nPreferred Return. Upon any Shortfall Redemption the Contribution Amount shall be
\ntreated as Initial Cash Contribution or Additional Contribution, as applicable,
\nfor the Contributing Member and the Shortfall Contribution shall be treated as
\nInitial Cash Contributions or Additional Contributions, as applicable, for the
\nNon-Contributing Member, in each case, as of the date the Shortfall Amount was
\ncontributed by the Contributing Member and no further Default Preferred Return
\nwill accrue thereon. If a Non-Contributing Member fails to make a Shortfall
\nRedemption within the Redemption Period, the contributions of the Contributing
\nMember will continue to be treated as Default Capital, unless within ninety (90)
\ndays after the end of the Redemption Period the Contributing Member elects in
\nwriting to convert the Default Capital. Upon such conversion, (i) the Adjusted
\nCapital of the Contributing Member shall be increased by the Shortfall
\nContribution and the Contribution Amount, (ii) the Contributing Member shall
\nreceive a “DILUTION CREDIT” in an amount equal to the Shortfall Contribution by
\nthe Contributing Member, and (iii) the Percentage Interests of each Member shall
\nbe adjusted as provided in the definitions of Percentage Interests. In the event
\na Contributing Member elects to convert such Default Capital into Adjusted
\nCapital, it will not be entitled to any Default Preferred Return it otherwise
\nwould have been entitled to receive with regard to such Default Capital after
\nthe date the Contributing Member elects to make such conversion. An example of
\nhow the provisions of this SECTION 5.3 operate is attached on Exhibit L.<\/p>\n
5.3.3 Redemption Failures by Wilson for EOP Projects. If Wilson fails to make,
\nwithin the Redemption Period, an Additional Contribution or a Shortfall
\nRedemption that relates to an EOP Project, such failure will not constitute a
\ndefault by Wilson (provided that Wilson shall be deemed to be in default if
\nWilson fails to make an Additional Contribution in the event that (i) the amount
\nof such required Additional Contribution plus all prior Advances under the
\nWilson Loan made through the Call Date is less than or equal to the Maximum Loan
\nAmount (as defined in the Wilson Note) and (ii) Wilson did not request (and was
\nnot deemed to have requested) an Advance for the full amount of such required
\ncontribution); however, if the EOP Project for which the Capital Call was made
\nis not performing substantially in accordance with the approved budget, leaseup
\nproforma and leaseup schedule for that Project (as such budget, proforma or
\nschedule may have been amended from time to time by the Board) at the end of
\ntwelve (12) months after the Call Date, at the end of such twelve (12) month
\nperiod EOP will, with respect to that EOP Project, have the right to elect to
\nmake all Major Decisions and all other material decisions with respect to that
\nProject (other than decisions involving a conflict of interest) and Manager
\nshall implement such Major Decisions and other material decisions in good faith;
\nprovided that in making such decisions with regard to major leases, financing
\nand sale of the Project, EOP shall first consult with, but shall not be required
\nto obtain the consent of, Wilson.<\/p>\n
32
\n 39<\/p>\n
5.3.4 Redemption Failures by EOP for EOP Projects. If EOP fails to make, within
\nthe Redemption Period, an Additional Contribution or a Shortfall Redemption that
\nrelates to an EOP Project, such failure will not constitute a default by EOP,
\nbut if the Project for which the Capital Call was made is not performing
\nsubstantially in accordance with the approved budget, leaseup proforma and
\nleaseup schedule for that Project (as such budget, proforma or schedule may have
\nbeen amended from time to time by the Board) at the end of the twelve (12)
\nmonths after Call Date, at the end of such twelve (12) month period Wilson will,
\nwith respect to that Project, have the right to elect to make all decisions,
\nincluding Major Decisions with respect to that Project after consultation with,
\nbut without the consent of, EOP with regard to major leases, financing and sale
\nof the Project (other than decisions involving a conflict of interest) and
\nManager shall implement such Major Decisions in good faith; provided that in
\nmaking such decisions with regard to major leases, financing and sale of the
\nProject, Wilson shall first consult with, but shall not be required to obtain
\nthe consent of, EOP.<\/p>\n
5.3.5 Failure to Make Contributions for Projects. In the event a Member fails to
\nmake the full amount of any required Initial Cash Contribution or Additional
\nContribution and the full Shortfall Amount is not contributed by the other
\nMember and if, as a result of such failure to make such Initial Cash
\nContribution or Additional Contribution, the Company is unable to make a
\nrequired capital contribution to a Project Entity, the economic consequences of
\nthe Company’s failure to make such required capital contribution to the EOP
\nProject Entity shall be borne by the Member who fails to so contribute, and this
\nAgreement shall be interpreted to so provide.<\/p>\n
5.3.6 Exclusive Remedies. The Members expressly agree that the sole rights and
\nremedies for the Company or any Member on account of the failure of any other
\nMember to make Initial Cash Contribution or Additional Contributions or
\nShortfall Redemptions shall be as set forth in this SECTION 5.3, provided that
\nthe Manager, on behalf of the Company, may bring an action against EOP OP to
\nenforce EOP OP’s obligation to make capital contributions with respect to an EOP
\nDirect Interest if the EOP Investor fails to do so, as provided in and subject
\nto the terms and conditions of this SECTION 5 and SECTION 3.3 and SECTION 3.4.2
\nand the terms of the applicable EOP Project Entity Agreement. Notwithstanding
\nthe foregoing sentence, if (i) the contribution required of Wilson pursuant to a
\nCapital Call plus all prior Advances under the Wilson Loan made through the Call
\nDate is less than or equal to the Maximum Loan Amount (as defined in the Wilson
\nNote), and (ii) Wilson did not request (and was not deemed to have requested) an
\nAdvance for the full amount of such Capital Call, then the Members shall have
\nall rights at law and in equity with respect to a breach of SECTIONS 5.1.3,
\n5.1.4, 5.1.5 or a Member’s failure to timely contribute capital in response to a
\nCapital Call pursuant to such Sections, and the non-defaulting member shall have
\nall rights and remedies available at law or in equity and may bring an action of
\nbehalf of the Company to enforce any rights the Company may have with respect
\nthereto.<\/p>\n
5.4 EOP Working Capital Loan. To the extent necessary to fund the operations of
\nthe Company, at the request of Wilson from time to time EOP will make a
\nrevolving working capital line of credit of up to $1,000,000 available to the
\nCompany, at a floating daily interest rate (“LOAN RATE”) of the greater of (i)
\nnine percent (9%) per annum or (ii) three (3)<\/p>\n
33
\n 40<\/p>\n
percentage points above 30 day LIBOR from time to time (but not to exceed the
\nmaximum rate permitted by applicable law) and otherwise pursuant to terms in a
\nloan agreement and note containing terms generally required by sophisticated
\ncommercial lenders. Outstanding amounts under the working capital line will be
\nrepaid from the Net Operating Cash Flow of the Company after repaying all
\namounts due under Company Required Funds Loans, if any, and after creating a
\nreasonable working capital reserve and provision for tax distributions, as
\nreasonably determined by the Manager, and may be re-borrowed from time to time
\non the same basis as originally drawn (the “WORKING CAPITAL LINE”). No more than
\n$1,000,000 may be outstanding under the Working Capital Line at any time. All
\namounts outstanding under the Working Capital Line will be due and payable on
\ndemand by EOP upon the earlier to occur of (i) 180 days after the occurrence of
\nany Dissolution Event described in SECTION 12 (Dissolution), (ii) the completion
\nof the Winding Up Period, or (iii) any disposition of the Last Project. Manager
\nshall cause the Company to repay the entire Working Capital Line prior to making
\nany distribution to the Members of any Capital Proceeds from the Last Project.
\nEOP shall have no obligation to fund any amounts under the Working Capital Line
\nfollowing the occurrence of a Dissolution Event or if the Company is in the
\nWinding Up Period. “LIBOR” means the London Interbank Offered Rate as reported
\nfrom time to time in the Wall Street Journal, regardless of what rates or
\nalternative quotations might be used or available to (or to any lender to) the
\nCompany, or any Member or any of their respective Lenders. Drawings under the
\nWorking Capital Line will be funded to the Company’s designated account within
\nthree business days after request upon receipt of Manager’s telephonic request
\ntherefor (provided written confirmation is received by EOP on the following day)
\nif such receipt is made by 1:00 p.m., San Francisco time, on that business day,
\nor on the following business day, if the request is made later.<\/p>\n
5.5 Guarantees.<\/p>\n
5.5.1 Recourse Liabilities. Upon the Board’s approval of any loans to be
\nobtained by the Company, a Project Entity or an Owner for an EOP Project or a
\nCompany Project in accordance with SECTION 8.3.9 of this Agreement, or if such
\nagreement was part of the terms on which the Board approved a Project as an
\nApproved Project, each Member (or at such Member’s election, in its sole
\ndiscretion, an Affiliate of comparable or greater financial strength, each a
\n“MEMBER GUARANTOR”) shall provide guarantees of any environmental liabilities,
\ncustomary non-recourse “carve outs” and completion guaranties as may be required
\nby the applicable lender. All other forms of guarantees of the obligations of
\nthe Company, a Project Entity or an Owner may be given or denied by each Member
\nin its sole and absolute discretion. Furthermore, at the request of Manager, any
\nof the EOP Group entities may, in its sole and absolute discretion, provide
\ncredit enhancement involving direct or indirect recourse liability, in
\nconnection with any loan approved by the Board. If, at the request of Manager,
\nsuch EOP Group entity agrees to provide such credit enhancement, the Manager
\nwill cause the Company to pay such EOP Group entity a credit enhancement fee
\nfrom the Project Entity or Owner of 1% per year of the amount of credit
\nenhanced, payable (and fully earned) in advance each year. The assumption by any
\nmember of the EOP Group of liability for customary non-recourse carve-outs,
\nenvironmental indemnities and completion guaranties will not be considered a
\ncredit enhancement. The assumption of such liability by any member of the EOP
\nGroup, other than EOP, shall be at its sole and absolute discretion.<\/p>\n
34
\n 41<\/p>\n
5.5.2 Reimbursement. If demand is made on any Member or Affiliate of such Member
\n(including a Member Guarantor) for payment under any guaranties (the “SHARED
\nGUARANTIES”) or any such party pays any amounts under any Shared Guaranties, or
\nif any obligations for liabilities under Shared Guaranties are satisfied from
\nany such party’s assets, such Member who pays or whose Member Guarantor or other
\nAffiliate pays (a “PAYING MEMBER GUARANTOR”) shall notify the other Members of
\nsuch demand, payment or satisfaction and request that each such other Member pay
\nits Pro-Rata share of the demand made on the Paying Member Guarantor or the
\npayment or satisfaction made by the Paying Member Guarantor. The Paying Member
\nGuarantor may include in its request for payment all amounts paid or expended in
\nconnection with the Shared Guaranties, including all amounts paid or incurred by
\nthe Paying Member Guarantor in administering or defending against the guarantee
\nor other agreement. Each request for payment by the Paying Member Guarantor
\nshall be treated for all purposes as a Capital Call. All amounts so paid by the
\nPaying Member Guarantor (net of payments to it by the Company pursuant to this
\nSECTION 5.5.2) to the Company by a Member or its Member Guarantor, shall be
\ndeemed an Additional Contribution made by such Member. Each Member that directly
\nor through its Member Guarantor(s) pays its Pro-Rata share of the total amount
\ndue under the Shared Guaranty and the Paying Member Guarantor’s administration
\nand defense costs shall be deemed a Contributing Member. Any Member who fails to
\nmake its required contribution shall be deemed a Non-Contributing Member and the
\namount not contributed shall be the Shortfall Amount and the Paying Member
\nGuarantor shall be deemed to have made the Shortfall Contribution. Contributing
\nMembers shall have all of the rights, options and remedies set forth in SECTION
\n5.2.2.2 (Failure to Make Contributions) with respect to such Shortfall Amount
\nand with respect to their contribution. All amounts paid by or on behalf of
\nContributing Members shall be credited to their Adjusted Capital and their
\nCapital Accounts, and all such amounts shall be promptly distributed by the
\nCompany to the Paying Member Guarantor upon receipt, to the extent the Paying
\nMember Guarantor has previously made payment or satisfaction to the applicable
\ncreditor or claimant in excess of its Member’s Pro-Rata share of the amount
\npayable to such creditor or claimant.<\/p>\n
5.5.3 Reimbursement by EOP OP. In the event an EOP Investor and the Company
\nprovide, collectively, a guarantee of any environmental liabilities, customary
\nnon-recourse “carve outs” and completion with respect to an EOP Project, all the
\nEOP Investors (jointly and severally) and the Company shall enter into an
\nagreement whereby the EOP Investors jointly and severally shall reimburse the
\nCompany and the Company shall reimburse the EOP Investor for any
\ndisproportionate share of amounts paid pursuant to such guarantee if such
\npayments were not necessitated by Manager’s gross negligence, willful misconduct
\nor breach. EOP OP shall guarantee the obligations of the EOP Investors to the
\nCompany under any such agreement up to a maximum aggregate liability of
\n$5,000,000 for all such agreements.<\/p>\n
5.6 Capital Accounts. A capital account (“CAPITAL ACCOUNT”) shall be maintained
\nfor each Member. Capital Accounts shall be maintained in accordance with
\nTreasury Regulations Sec. 1.704-1(b)(2)(iv). For purposes of computing Capital
\nAccount balances in connection with allocations of Profits and Losses under
\nSECTION 5.8 (Allocations of Profits and Losses), a Member’s Capital Account
\nbalance shall be deemed to include its share (determined in accordance with
\nRegulations Sections 1.704-2(g) and 1.704-2(i)(5), as<\/p>\n
35
\n 42<\/p>\n
applicable) of “partnership minimum gain” (as defined in Treasury Regulations
\n(“REGULATIONS”) Sec. 1.704-2(d)), and “minimum gain attributable to partner
\nnon-recourse debt” (as defined in Treasury Regulations Sec. 1.704-2(i)).<\/p>\n
If the Board shall determine at any time that it is prudent to modify
\nthe manner in which the Capital Accounts, or any related debits or credits, are
\ncomputed in order to comply with the applicable Regulations, then to the extent
\nthat such amendment or other modification does not materially adversely affect
\nthe economic interests of any Member (including causing any Member to recognize
\nincome or gain substantially earlier that it otherwise would or causing any
\nMember not to recognize losses later than it otherwise would), the Board may
\namend this Agreement accordingly.<\/p>\n
The Board may elect to increase or decrease the Members’ Capital Accounts in
\nconnection with certain events, as specified in Treasury Regulations Sec.
\n1.704-1(b)(2)(iv)(f)(5), to reflect a revaluation of Company property on the
\nCompany’s books. Any such revaluation shall be based on the agreement of the
\nMembers as to the value of the Company’s property or, if they cannot agree, then
\non an independent appraisal of the value of the Company’s property. If the Board
\nelects to undertake such a revaluation, the adjustments to Capital Accounts
\nshall be made in accordance with Treasury Regulations Sec. 1.704-1(b)(2)(iv)(f).<\/p>\n
Any loans made by the Members to the Company shall be accounted for in separate
\nloan accounts, and payments of principal and interest on such loans shall not
\naffect or be reflected in the Members’ Capital Accounts or Adjusted Capital.<\/p>\n
5.7 Distributions.<\/p>\n
5.7.1 Distributable Cash Flow. The Company will distribute any Distributable
\nCash Flow quarterly, within thirty (30) days following the end of each calendar
\nquarter, in the following order and priority:<\/p>\n
5.7.1.1 First, to the Members in proportion to each Member’s accrued and unpaid
\nDefault Preferred Return, until the accrued and unpaid Default Preferred Return
\nfor each of the Members is reduced to zero;<\/p>\n
5.7.1.2 Second, to the Members in proportion to each Member’s Adjusted Default
\nCapital, until the Adjusted Default Capital for each of the Members is reduced
\nto zero;<\/p>\n
5.7.1.3 Third, to the Members, Pro-Rata, except that any Distributable Cash Flow
\nthat consists of distributions received by the Company with respect to a
\nPromotional Interest in Project Distributable Cash Flow received from a Company
\nProject will be distributed seventy-five percent (75%) to Wilson and twenty-five
\npercent (25%) to EOP.<\/p>\n
5.7.2 Distributable Capital Proceeds. The Company will distribute (or retain as
\nprovided in this SECTION 5.7.2) Distributable Capital Proceeds (other than
\nLiquidation Proceeds), within sixty (60) days following the receipt of such
\nCapital Proceeds, in the following order and priority:<\/p>\n
36
\n 43<\/p>\n
5.7.2.1 First, to the Members in proportion to each Member’s accrued and unpaid
\nDefault Preferred Return, until the accrued unpaid Default Preferred Return for
\neach of the Members is reduced to zero;<\/p>\n
5.7.2.2 Second, to the Members in proportion to each Member’s Adjusted Default
\nCapital, until the Adjusted Default Capital for each of the Members is reduced
\nto zero;<\/p>\n
5.7.2.3 Third, the Company shall retain an amount equal to the amount, if any,
\nby which the amount of aggregate Project Investments (at such time) of the
\nCompany in ongoing Projects (other than the Project to which the specific
\nDistributable Capital Proceeds being distributed relate) is less than the
\naggregate Adjusted Permanent Capital Amount for EOP and Wilson; and<\/p>\n
5.7.2.4 Fourth, to the Members in proportion to the amounts, if any, by which
\neach Member’s Adjusted Balance exceeds its Adjusted Permanent Capital Amount at
\nthe time of the distribution, until each Member’s Adjusted Balance is equal to
\nits Adjusted Permanent Capital Amount; and<\/p>\n
5.7.2.5 Fifth, the balance, minus any Promotional Interest that has been earned
\non the Project to which such Distributable Capital Proceeds relate, to the
\nMembers Pro-Rata; and<\/p>\n
5.7.2.6 Sixth any Promotional Interest that has been earned with respect to the
\nProject to which such Distributable Capital Proceeds relate will be distributed
\n(i) to Wilson if such Project is an EOP Project or (ii) seventy-five percent
\n(75%) to Wilson and twenty-five percent (25%) to EOP if such Project is a
\nCompany Project.<\/p>\n
5.7.3 Distributions In Kind. Notwithstanding the provisions of SECTION 5.7.2,
\nany amounts received by the Company from or with respect to the sale (and not
\ndistribution) to an EOP Group Member of any B Unit or C Unit by the Company
\npursuant to Section 11, including any income, distributions and returns on such
\ninterests pursuant to SECTION 11.4.3 shall be distributed to Wilson, less any
\namount which would not have been paid to Wilson if the distribution had been
\ntreated as the Capital Proceeds from a Capital Transaction and the Distributable
\nCapital Proceeds distributed through the application of Section 5.7.2.<\/p>\n
5.7.4 Specified Project Allocations.<\/p>\n
5.7.4.1 Definitions.<\/p>\n
5.7.4.1.1 “BASE AMOUNT”: $1,903,800 as adjusted pursuant to Section 5.7.4.4.<\/p>\n
5.7.4.1.2 “CONCAR BASE AMOUNT”: $304,608 as adjusted pursuant to Section
\n5.7.4.4.<\/p>\n
5.7.4.1.3 “CONCAR RETURN”: the amount that would need to be paid as a return on
\nthe Concar Base Amount so that, based on the periods from the Formation<\/p>\n
37
\n 44<\/p>\n
Date until the Concar Base Amount and Concar Return (including any portion
\nthereof) are paid to Wilson pursuant to this SECTION 5.7.3, the Concar Base
\nAmount would have received an internal rate of return (per annum) equal to the
\nEOP IRR for the Concar Project, taking account of all payments in respect of the
\nConcar Base Amount and the Concar Return (including the timing of such
\npayments).<\/p>\n
5.7.4.1.4 “EOP IRR”: the internal rate of return (as a percentage per annum
\nreturn) realized or deemed realized on the Direct EOP Interest (excluding
\nDefault Capital) in each Specified Project, if such Specified Project were to
\nhave been sold at the same actual or implied Project Price as was used to
\ndetermine the Company Proceeds and at the same time as (i) the Presumed Closing
\nDate in the case of a sale or distribution of Project Entity Units to EOP, or
\n(ii) the actual date of sale otherwise, and the proceeds from such actual or
\ndeemed sale and all other funds and assets (including the mutually agreed net
\nvalue of reserves in excess of then currently incurred third party liabilities
\nand if not so agreed then as reasonably determined by the Company’s independent
\naccountants) of the applicable Project, Project Entity and Owner, if any, after
\ndeducting therefrom all debts (including any Project Required Funds Loans and
\nunpaid interest thereon), liabilities and expenses (including the assumed 1.5%
\nsale expenses for deemed Sales) of the Project, Project Entity and Owner, were
\ndistributed as Project Distributable Capital Proceeds according to SECTION
\n3.4.2.2 (disregarding the effect of this SECTION 5.7.4); provided that any
\ndistributions to the Direct EOP Interest on account of Project Default Capital
\nand Project Default Preferred Return shall be ignored for purposes of
\ncalculating the EOP IRR. If any of the Specified Projects becomes a Company
\nProject rather than an EOP Project, the EOP IRR for such Project will be based
\non the internal rate of return of EOP’s Percentage Interest in Project Adjusted
\nCapital invested by the Company in such Project. Such internal rate of return to
\nbe based on those Distributable Capital Proceeds with respect to such Project
\npaid or deemed paid to EOP pursuant to SECTION 5.7.2, disregarding the effect of
\nthis SECTION 5.7.4, and (i) assuming the Adjusted Permanent Capital Amounts for
\nEOP and Wilson were each zero; (ii) assuming that the Adjusted Balance for each
\nof EOP and Wilson is equal to such Members Pro-Rata share of the applicable
\nProject Capital Investment; (iii) ignoring any distributions on account of
\nDefault Capital and Default Preferred Return; and (iv) ignoring repayments and
\nreturns on any Company Required Funds Loans made by EOP. If any Specified
\nProject does not become an Approved Project, the Base Amount will not change but
\nthe portion of the Base Amount allocated to such Specified Project under this
\nSECTION 5.7.4.1 shall be re-apportioned among the remaining Specified Project
\nBase Amounts, in proportion to such remaining Specified Project Base Amounts,
\nand each of such Specified Project Base Amounts will increase accordingly.<\/p>\n
5.7.4.1.5 “FERRY BASE AMOUNT”: $342,684 as adjusted pursuant to Section 5.7.4.4.<\/p>\n
5.7.4.1.6 “FERRY RETURN”: the amount that would need to be paid as a return on
\nthe Ferry Base Amount so that, based on the periods from the Formation Date
\nuntil the Ferry Base Amount and Ferry Return (including any portion thereof) are
\npaid to Wilson pursuant to this SECTION 5.7.3, the Ferry Base Amount would have
\nreceived an internal rate of return (per annum) equal to the EOP IRR for the
\nFerry Project, taking account<\/p>\n
38
\n 45<\/p>\n
of all payments in respect of the Ferry Base Amount and the Ferry Return
\n(including the timing of such payments).<\/p>\n
5.7.4.1.7 “FIRST\/HOWARD BUILDING 2 BASE AMOUNT”: $894,786 as adjusted pursuant
\nto Section 5.7.4.4.<\/p>\n
5.7.4.1.8 “FIRST\/HOWARD BUILDING 2 RETURN”: the amount that would need to be
\npaid as a return on the First\/Howard Building 2 Base Amount so that, based on
\nthe periods from the Formation Date until the First\/Howard Building 2 Base
\nAmount and First\/Howard Building 2 Return (including any portion thereof) are
\npaid to Wilson pursuant to this SECTION 5.7.4, the First\/Howard Building 2 Base
\nAmount would have received an internal rate of return (per annum) equal to the
\nEOP IRR for the first building of the First & Howard Project, taking account of
\nall payments in respect of the First\/Howard Building 2 Base Amount and the
\nFirst\/Howard Building 2 Return (including the timing of such payments).<\/p>\n
5.7.4.1.9 “FIRST\/HOWARD BUILDING 3 BASE AMOUNT”: $361,722 as adjusted pursuant
\nto Section 5.7.4.4.<\/p>\n
5.7.4.1.10 “FIRST\/HOWARD BUILDING 3 RETURN”: the amount that would need to be
\npaid as a return on the First\/Howard Building 3 Base Amount so that, based on
\nthe periods from the Formation Date until the First\/Howard Building 3 Base
\nAmount and First\/Howard Building 3 Return (including any portion thereof) are
\npaid to Wilson pursuant to this SECTION 5.7.3, the First\/Howard Building 3 Base
\nAmount would have received an internal rate of return (per annum) equal to the
\nEOP IRR for the second building of the First & Howard Project, taking account of
\nall payments in respect of the First\/Howard Building 3 Base Amount and the
\nFirst\/Howard Building 3 Return (including the timing of such payments).<\/p>\n
5.7.4.1.11 “RETURNS”: the sum of the Concar Return, Ferry Return, First\/Howard
\nBuilding 2 Return and First\/Howard Building 3 Return collectively, or
\nindividually the “RETURN.”<\/p>\n
5.7.4.1.12 “SPECIFIED PROJECTS”: collectively, Ferry Building, Concar, and
\nBuildings 2 and 3 of the First and Howard Projects.<\/p>\n
5.7.4.1.13 “SPECIFIED PROJECT ALLOCATION AMOUNT”: the sum of the Base Amount and
\nReturns.<\/p>\n
5.7.4.2 Return of Base Amount. Specified Project Funds as described in this
\nSection are to be specially allocated and distributed to Wilson as provided
\nherein, notwithstanding the provisions of SECTION 3.4.2.2 and SECTION 5.7.2.
\nSpecified Project Funds used to pay the Base Amount are not to exceed
\n$2,144,200.<\/p>\n
The “SPECIFIED PROJECT FUNDS” are the first amounts that the EOP Investor and
\nEOP (through its interests in the Company) would otherwise have been entitled to
\nreceive pursuant to SECTION 3.4.2.2 and SECTION 5.7.2 from the disposition of
\neach Specified Project or Project Entity owning the Specified Projects after the
\nEOP Investor had received the return of Project Default Capital, Project Default
\nPreferred Return and return of invested capital under<\/p>\n
39
\n 46<\/p>\n
SECTIONS 3.4.2.2.1, 3.4.2.2.2 and 3.4.2.2.3, and EOP had similarly received the
\nreturn of Default Capital, return on Default Capital and return of invested
\ncapital under SECTIONS 5.7.2.1, 5.7.2.2 and 5.7.2.4. For this purpose it is to
\nbe assumed that (i) the provisions for the retention of the Company’s permanent
\ncapital are ignored so that the Adjusted Permanent Capital Amounts for EOP and
\nWilson were zero; (ii) the Adjusted Balance for each of EOP and Wilson is equal
\nto their respective Member’s Pro-Rata share of the applicable Project Investment
\n(i.e. 49.9\/50.1 unless subsequently changed); (iii) the effect of distributions
\nreallocated under this SECTION 5.7.4 is to be ignored, so that EOP is treated as
\nhaving received the distributions that this Section specially allocates to
\nWilson; and (iv) any Company Required Funds Loans advanced by EOP are ignored.
\nFor this purpose it is also assumed that in the case of any distribution of the
\nA Unit to EOP or acquisition of the B and C Unit by EOP, the Specified Project
\nFunds are calculated and paid as if the Project had been sold at the Project
\nPrice and the Project Proceeds were distributed according to SECTION 3.4.2.2
\n(disregarding the effect of this SECTION 5.7.4 and ignoring distributions with
\nrespect to Project Default Capital and Project Default Return).<\/p>\n
Until Wilson has received the Base Amount under this SECTION 5.7.4.2 from one or
\nmore of the Specified Projects on a cumulative basis, (i) the Specified Project
\nFunds that would have been paid to the EOP Investor shall instead be paid to the
\nCompany and the Company shall pay such amounts to Wilson, and (ii) the Specified
\nProject Funds that would have been paid to EOP shall instead be paid to Wilson.
\nWilson shall be entitled to payments of the entire Base Amount from the first
\nSpecified Project Funds received or deemed received by EOP and EOP Investor with
\nrespect to Specified Projects, even though such payments may exceed the portion
\nof the Base Amount allocated to that Specified Project under SECTION 5.7.4.1
\n(such allocations of Base Amount being for the purpose of determining the Return
\npayable for each Specified Project only). Each payment to Wilson under this
\nSECTION 5.7.4.2 shall be deemed to reduce the Concar Base Amount, Ferry Base
\nAmount, First\/Howard Building 2 Base Amount and First\/Howard Building 3 Base
\nAmount in proportion to their respective Base Amounts. The Specified Funds
\nremaining after payment to Wilson of the Base Amount under this SECTION 5.7.4.2
\nare called “RETURN FUNDS.” An example of the functioning of this Section is set
\nforth on Exhibit M.<\/p>\n
5.7.4.3 Payment of Returns. Return Funds from each Specified Project shall be
\ndistributed or paid by the Company to Wilson to pay pro rata any unpaid Returns
\nfor Specified Projects for which the EOP IRR can then be determined, until
\nWilson has received from Return Funds on a cumulative basis the aggregate amount
\nof those Returns for which the applicable EOP IRR has been determined.
\nAccordingly, any Return Funds from the first Specified Project to produce
\nSpecified Project Funds may be used only to pay the Return for that Specified
\nProject, with the balance of the Return Funds paid to EOP or the EOP Investor,
\nas applicable. For example, any Return Funds from the second Specified Project
\nto produce Specified Project Funds may be used only to pay unpaid Returns for
\nthe first two Specified Projects, with the balance of the Return Funds paid to
\nEOP or the EOP Investor, as applicable. In all circumstances where amounts
\npayable or distributable to Wilson under this SECTION 5.7.3 are based on deemed
\nrather than actual payments EOP or EOP Investor would in fact receive from
\nCompany or a Project Entity (were it not for this SECTION 5.7.4) with respect to
\na Specified Project, the Company will pay such amounts to Wilson on the date
\nwhen the Company Interest Value is determined.<\/p>\n
5.7.4.4 Reduction of Specified Project Allocation Amount. Wilson shall provide
\nin its operating agreement (on terms that will be disclosed to EOP and not
\nthereafter modified without EOP’s consent) that if a Wilson Principal
\nvoluntarily terminates his or her employment (other than through death or
\ndisability or for “GOOD REASON” as such term is defined in Exhibit H) with, or
\nis terminated for “CAUSE” (as such term is defined in Exhibit H) by, the Company
\nor its Affiliates or Wilson or its Affiliates, he or she will not be entitled to
\nreceive his or her allocated portion of the Specified Project Allocation Amount
\nexcept to the extent that the Specified Project Allocation Amount was paid prior
\nto such termination or arises from Specified Projects either that reached
\nProject Stabilization or whose C Unit was sold at or before such termination.
\nThe Specified Project Special Allocation Amount shall be reduced (and the
\ndifferent Base Amounts reduced ratably) by<\/p>\n
40
\n 47<\/p>\n
any such allocated portion to which any Wilson Principal ceases to be entitled
\npursuant to the preceding sentence. No Wilson Principal shall be a third party
\nbeneficiary of this Section 5.7.4.<\/p>\n
5.8 Allocations of Profits and Losses.<\/p>\n
5.8.1 Allocation of Profits and Losses for Capital Account Purposes. In general,
\nallocations to the Members under this Agreement shall be made in compliance with
\nthe requirements of Section 704(b) and the Treasury Regulations promulgated
\nthereunder in a manner that reflects the distribution provisions set forth in
\nSECTION 5.7. Specifically, all items of Company income, gain, loss, and
\ndeduction as determined for book purposes shall be allocated among the Members
\nand credited or debited to their respective Capital Accounts in accordance with
\nTreasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure to the maximum
\nextent possible (i) that such allocations satisfy the economic effect
\nequivalence test of Treasury Regulations Section 1.704-1(b)(2)(ii)(l) and (ii)
\nthat all allocations of items that cannot have economic effect (including
\ncredits and nonrecourse deductions) are allocated to the Members in accordance
\nwith the Members’ interests in the Company, which, unless otherwise required by
\nCode Section 704(b) and the Treasury Regulations promulgated thereunder, shall
\nbe in proportion to their Percentage Interests.<\/p>\n
In implementing the foregoing, Profits shall be allocated to the Members, (i)
\nfirst in proportion to and up to the amount of Losses previously allocated to
\nthe Members, (ii) then in proportion to and up to the amount of any cash
\ndistributions received by the Members pursuant to SECTIONS 5.7.1.1, 5.7.2.1,
\n5.7.1.3, 5.7.2.5 and 5.7.2.6, and then in proportion to and up to the amount of
\nthe next distributions that would be made to the Members pursuant to SECTIONS
\n5.7.1.1, 5.7.2.1, 5.7.1.3, 5.7.2.5 and 5.7.2.6 if there were sufficient
\nDistributable Cash Flow and\/or Distributable Capital Proceeds to make such
\ndistributions. Notwithstanding the foregoing:<\/p>\n
5.8.1.1 In the event of a sale of the B Unit or the C Unit (or both) of a
\nProject Entity pursuant to SECTION 11.5.2.1, all gain recognized by the Company
\nwith respect thereto shall be allocated solely to Wilson. In the event of a
\ndistribution of the A Unit to EOP, EOP’s Capital Account will be allocated an
\namount equal to the gain that would have been recognized by the Company if the A
\nUnit were sold for the A Unit Value, less the amount, if any, which would
\notherwise have been allocated to EOP with respect to distributions pursuant to
\nSections 5.7.1.1, 5.7.2.1, and 5.7.1.3.<\/p>\n
5.8.1.2 Notwithstanding SECTION 5.8.1.1 or SECTION 5.7, each time there is a
\ndistribution to Wilson of Distributable Capital Proceeds pursuant to SECTION
\n5.7.2.4, to the extent of current capital gain income there shall be allocated
\nto Wilson an amount of Profit not to exceed an aggregate amount of $1,244,000
\nconsisting of long-term capital gain (“CAPITAL GAIN PROFITS”) that would
\notherwise be allocated to EOP equal to 12.4152% of the amount of such
\ndistributions made to Wilson pursuant to SECTION 5.7.2.4 (or such higher
\npercentage as Wilson in its sole and absolute discretion may elect at any time
\nby notice to the Company). Such allocations shall be made only from Capital Gain
\nProfits realized from the Capital Transaction giving rise to such distributions
\nand if there are insufficient Capital Gain Profits from such Capital Transaction
\nthat would otherwise be allocated to EOP, from the next Capital Gain Profits to
\nbe allocated to EOP pursuant to this SECTION 5.8.1.<\/p>\n
41
\n 48<\/p>\n
5.8.2 Allocation of Profits and Losses for Tax Purposes. For Federal tax
\npurposes, except insofar as adjustments pursuant to Section 704(c) principles
\nmay be permitted or required by Treasury Regulation Section 1.704-1(b)(2)(iv) by
\nreason of property being contributed to the Company, as required by Treasury
\nRegulations Section 1.704-1(b)(2)(iv)(d), property being distributed by the
\nCompany as required by Section 1.704-1(b)(2)(iv)(c), property being revalued by
\nthe Company (a “book-up”) as permitted by Treasury Regulations Section
\n1.704-1(b)(2)(iv)(f) or a Company interest being transferred, and subject to and
\nconsistent with Sections 734 and 743 of the Code, each item of income, gain,
\nloss and deduction of the Company shall be allocated among the Members in the
\nsame manner as its correlative item of “book” income, gain, loss or deduction
\nhas been allocated pursuant to SECTION 5.8.1.<\/p>\n
5.8.3 Regulatory Allocations.<\/p>\n
5.8.3.1 Minimum Gain Chargeback. In any taxable year of the Company in which the
\nCompany has partnership minimum gain (as determined under Treasury Regulations
\nSection 1.704-2) or minimum gain attributable to partner nonrecourse debt (as
\ndetermined under Treasury Regulations Section 1.704-2), the provisions of such
\nTreasury Regulations regarding allocation and chargebacks of Company minimum
\ngain and minimum gain attributable to partner nonrecourse debt shall apply.<\/p>\n
5.8.3.2 Member Nonrecourse Debt. All deductions, losses, and Section
\n705(a)(2)(B) expenditures of the Company, as the case may be (all computed for
\n“book” purposes), that are treated under Section 1.704-2 of the Treasury
\nRegulations as deductions, losses, and expenditures attributable to “partner
\nnonrecourse debt” of the Company shall be allocated to the Member(s) bearing the
\nrisk of loss with respect to such liabilities in accordance with such Treasury
\nRegulations.<\/p>\n
5.8.3.3 Qualified Income Offset. Any Member who unexpectedly receives an
\nadjustment, allocation, or distribution described in subparagraph (4), (5) or
\n(6) of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations, which
\nadjustment, allocation or distribution creates or increases a negative Capital
\nAccount balance, shall be allocated items of book income (including gross book
\nincome) and book gain in an amount and manner sufficient to eliminate or to
\nreduce, as quickly as possible, the negative Adjusted Capital Account Balance so
\ncreated or increased. The Members intend that the provision set forth in this
\nSection shall constitute a “qualified income offset” as described in Section
\n1.704-1(b)(2)(ii)(d) of the Treasury Regulations and that this Section shall be
\nimplemented and interpreted as therein provided. As applicable, allocations made
\nunder this Section will be made pursuant to the “traditional method without
\ncurative allocations” as provided in Treasury Regulations Section 1.704-3(c).<\/p>\n
5.8.3.4 Allocation of Certain Tax Items. If any property of the Company is
\nreflected in the Capital Accounts of the Members and on the books of the Company
\nat a book value that differs from the adjusted tax basis of such property, then
\nthe tax items with respect to such property shall, in accordance with the
\nrequirements of Treasury Regulations Section 1.704-1(b)(4)(i), be shared among
\nthe Members in a manner that takes account of the variation between the adjusted
\ntax basis of the applicable property<\/p>\n
42
\n 49<\/p>\n
and its book value in the same manner as variations between the adjusted tax
\nbasis and fair market value of property contributed to the Company are taken
\ninto account in determining the Members’ shares of tax items under Code Section
\n704(c). All allocations made under this Section will be made pursuant to the
\n“traditional method without any curative allocations” as provided in Treasury
\nRegulations Section 1.704-3(b).<\/p>\n
5.8.3.5 Company Non-Recourse Liabilities. Pursuant to Treasury Regulations
\nSection 1.752-3, the Members’ interest in Company profits for purposes of
\ndetermining the Members’ shares of excess nonrecourse liabilities shall be their
\nPercentage Interests. Nonrecourse liabilities of the Company shall be allocated
\nto each Member as set forth in Treasury Regulations Section 1.752-3(a)(1)
\nthrough (3).<\/p>\n
5.8.3.6 Curative Allocations. The Members intend that the allocation of Profits,
\nLosses and other book items of income, gain, loss, deduction and credit pursuant
\nto this Agreement result in Capital Account balances that are consistent with
\nthe economic sharing provisions reflected in SECTION 5.7 (Distributions) as
\nadjusted herein after the occurrence of any Dissolution Event described in
\nSECTION 12.1 (Dissolution). Notwithstanding any other provisions contained
\nherein, allocations of income, gain, loss and deductions shall be applied and
\namended by the Company (subject to the approval of the Board) as necessary to
\nproduce such result; provided, however, that no such amended allocation shall be
\nmade if it causes the Company allocations to fail to have “substantial economic
\neffect” within the meaning of Section 704(b) of the Code.<\/p>\n
5.8.3.7 Other Limitations. Notwithstanding SECTION 5.8.1, Losses shall not be
\nallocated to a Member to the extent that such allocation would cause or increase
\na deficit Capital Account balance for the Member at the end of any year of the
\nCompany.<\/p>\n
5.8.4 Timing of Allocations. All allocations of Profits and Losses for any
\nfiscal year of the Company shall be made after charging the Members’ Capital
\nAccounts, as appropriate, for all distributions made or to be made with respect
\nto such fiscal year.<\/p>\n
5.9 Loan to Wilson. EOP shall cause a member of the EOP Group to make advances
\nto Wilson (“ADVANCES”) as contemplated by, and subject to the terms and
\nconditions set forth in those certain Loan Documents attached hereto as Exhibit
\nN. EOP consents to Wilson entering into the loan transaction described in that
\ncertain note (the “WILSON NOTE”) dated as of June 20, 2000 made by Wilson in
\nfavor of Equity Office Properties Management Corp., a Delaware corporation (“EOP
\nLENDER”) in the stated principal amount of $25,000,000 and in the related Loan
\nDocuments (as defined in the Wilson Note and referred to herein as the “WILSON
\nLOAN”), which documents do not violate this Agreement. EOP consents to Wilson’s
\nreceipt of Advances under the Wilson Loan from time to time.<\/p>\n
6. ACCOUNTING, BANKING, REPORTS<\/p>\n
6.1 Fiscal Year; Accounting Method. Unless otherwise determined by the Board,
\nthe fiscal year of the Company shall be the calendar year and the books of the
\nCompany shall be kept in accordance with the accrual method of accounting.<\/p>\n
43
\n 50<\/p>\n
6.2 Accountants. The Company shall engage as its accountants the firm which
\naudits EOPT unless otherwise determined by the Board. All audited statements and
\ntax returns to be provided by the Company pursuant to SECTION 6.4 (Reports and
\nFinancial Statements) or elsewhere in this Agreement shall be prepared by the
\naccounting firm selected pursuant to this SECTION 6.2.<\/p>\n
6.3 Books and Records. The Manager shall cause to be kept full and accurate
\nrecords of the Company’s affairs. The Company’s books and records, this
\nAgreement and the Articles and all amendments thereto, and all other records
\nrequired to be maintained by the Company pursuant to the LLC Act shall be
\nmaintained by the Manager at the principal office of the Company. The Members,
\ntheir internal staff and their counsel and accountants shall have the right at
\nany time during normal business hours to inspect and audit all such books and
\nrecords, to make copies thereof and to take extracts therefrom. In addition,
\ntheir authorized representatives shall have the same rights upon executing and
\ndelivering a confidentiality and non-disclosure agreement with respect thereto
\nin a form satisfactory to Manager. The Manager shall ensure that all deeds,
\nleases, contracts, title matters, surveys and other documentation, records and
\nfinancial information relating to the ownership, maintenance, development and
\nsale of a Property are maintained in safekeeping and organized and accessible to
\nthe Members. The Manager shall promptly deliver to the Members, upon request,
\nand at the expense of the Company, a copy of the information required to be
\nmaintained by the LLC Act and this Agreement.<\/p>\n
6.4 Reports and Financial Statements. Manager shall use reasonable efforts to
\ncause the following to be prepared and\/or distributed to all Members:<\/p>\n
6.4.1 Within ten (10) working days following receipt thereof from an Owner
\n(unless Manager or a member of the Wilson Group is the manager or general
\npartner of Owner, in which case 10 days after preparation) (A) reports and
\ncalculations describing a Project’s progress toward Project Stabilization, and
\n(B) periodic financial statements for an EOP Project or a Company Project.<\/p>\n
6.4.2 Within thirty (30) days following the end of each fiscal quarter
\ncompleted, financial statements for the Company in sufficient detail to give a
\nreasonable picture of the status and operations of the Company and the Capital
\nAccounts and Unreturned Capital of the Members, provided that annual statements
\nwill be audited at the Company’s expense.<\/p>\n
6.4.3 Within ninety (90) days after the end of each fiscal year, the Company’s
\nfederal and state income information tax returns for each fiscal year, to be
\nprepared and completed, at the Company’s expense, together with the information
\nwith respect to the Company necessary for the Members to prepare their federal
\nand state income tax returns within this period; provided that such Company tax
\nreturns shall not be filed until approved by the Board, provided that the
\nRepresentatives shall act reasonably in connection therewith.<\/p>\n
6.4.4 Closing financial statements for the Company after the liquidation and
\nwinding up of the Company, to be prepared and audited at the Company’s expense
\nand delivered to the Members within ninety (90) days after the liquidation and
\nwinding up is completed.<\/p>\n
44
\n 51<\/p>\n
6.4.5 Upon request, such additional information regarding the business and
\naffairs of the Company as a Member may reasonably request which is reasonably
\navailable to or may be reasonably obtained or prepared by the Manager.<\/p>\n
6.5 Banking. All funds of the Company shall be deposited in such accounts and at
\nsuch banks or financial institutions as the Manager may determine. Manager shall
\ngive notice to the Members promptly after establishing any such account. There
\nshall be no commingling of the monies and funds of the Company with monies and
\nfunds of any other person or entity, and monies and funds of the Company shall
\nbe used only for Company purposes. All withdrawals from bank accounts of the
\nCompany shall be made upon the signature of such person or persons as the
\nManager shall designate.<\/p>\n
7. MANAGEMENT AND OPERATION OF THE COMPANY<\/p>\n
7.1 Authority and Duties of Manager. Subject to other provisions of this
\nAgreement, including the power reserved in the Board to make the Major Decisions
\ndescribed in SECTION 8.3 (Major Decisions), the Manager will have exclusive
\npower and authority to direct and manage the business and operations of the
\nCompany, and will have all rights, powers and authority generally conferred by
\nlaw or necessary, advisable or appropriate for accomplishing the purpose of the
\nCompany. Manager shall carry out its obligations with respect to the management
\nof the Company using its good faith best efforts. Manager will be responsible
\nfor a breach of these management obligations only to the extent (i) not covered
\nby Company insurance, and (ii) resulting from either (a) its gross negligence or
\nwillful misconduct or (b) the gross negligence, willful misconduct or breach of
\nany of the Wilson Principals of any of the obligations which they have
\nspecifically undertaken in this Agreement. By way of illustration, and not by
\nway of limitation, subject to other provisions of this Agreement, including the
\npower reserved in the Board to make the Major Decisions described in SECTION 8.3
\n(Major Decisions), the Manager will have the authority, on behalf of the
\nCompany, as follows:<\/p>\n
7.1.1 To engage employees on behalf of the Company and its Subsidiaries and to
\ndirect the activities of such employees and appoint such officers of the Company
\nand its Subsidiaries as are contemplated in SECTION 7.6 (Officers and Employees)
\nand to pay such compensation for the services of such persons, including base
\ncompensation, bonuses and other forms of incentive and performance based
\ncompensation as, in the reasonable judgment of the Manager, is appropriate;
\nprovided that notwithstanding anything to the contrary contained herein, Manager
\nshall have no power or authority to cause the Company or its Subsidiaries to pay
\naggregate salaries, bonuses and other forms of incentive and performance based
\ncompensation (excluding benefits) to the Wilson Principals which exceed in the
\naggregate the amount described in SECTION 8.3.26 or amounts otherwise approved
\nby the Board. Subject to the foregoing restrictions on compensation and bonuses
\nfor the Wilson Principals, Manager may engage Company’s Subsidiaries to perform
\nsome or all of the work of the Company, such as activities requiring licensing
\nthat the Company does not have or cannot obtain, such as brokerage and property
\nmanagement activities.<\/p>\n
7.1.2 To seek out Opportunities on behalf of the Company, and to investigate and
\nreview all Opportunities (regardless of where originated) and to make
\nrecommendations<\/p>\n
45
\n 52<\/p>\n
to the Board with respect to those Opportunities that Manager decides are
\nappropriate or desirable for the Company to pursue;<\/p>\n
7.1.3 To review, propose to and make recommendations to the Board regarding
\nQualifying Projects;<\/p>\n
7.1.4 To make decisions relating to all Opportunities, Projects, and other
\nassets of the Company, other than EOP Approval Matters, Major Decisions and any
\ndecisions specified herein to be decided by the Board or otherwise in accordance
\nwith the procedures in SECTION 3.4.1; provided that notwithstanding anything to
\nthe contrary contained herein, Manager may not act or make decisions in
\ncontravention of terms of this Agreement or otherwise contrary to a direction of
\nthe Board.<\/p>\n
7.1.5 To review and make final recommendations to the Board regarding financing
\nfor any Project;<\/p>\n
7.1.6 To make expenditures of up to $50,000 in the aggregate per Opportunity (or
\nsuch higher sums as may from time to time be approved by the Board or authorized
\nin Company operating budgets approved by the Board) to investigate and pursue
\npotential Qualifying Projects;<\/p>\n
7.1.7 To request draws and make repayments under the Working Capital Line and to
\nmake repayments of Company Required Funds Loans;<\/p>\n
7.1.8 To cause the Company, on behalf of Owners, to enter into agreements for
\nproperty management, leasing, and development management services and for
\nconstruction of the improvements on a Project and any tenant and interior
\nimprovements;<\/p>\n
7.1.9 To obtain any policies of insurance that are permitted or required to be
\ncarried by the Company;<\/p>\n
7.1.10 To open and maintain accounts and deposits in the name of the Company in
\nbanks or other financial institutions;<\/p>\n
7.1.11 To cause the payment of all obligations and expenses of the Company
\nincurred in connection with the Company’s business;<\/p>\n
7.1.12 To make all Company decisions and elections for accounting and income tax
\npurposes, including selection of the accounting method or methods to be used by
\nthe Company, the selection of depreciation methods and useful lives for Company
\nassets and the making of any elections for income tax purposes under any section
\nof the Code, including Section 754 of the Code (except to the extent reserved to
\nthe Board elsewhere herein); provided, however, that (i) the Company shall make
\na Section 754 election if requested by EOP or Wilson, (ii) the Company shall use
\nthe “traditional method” without curative allocations under Section 704(c) with
\nrespect to all property owned directly or indirectly by the Company unless both
\nMembers (in their respective sole and absolute discretion) shall consent to
\nanother method, and (iii) the Company shall not make any election for federal
\nincome tax purposes that reasonably could be expected to have an effect on any
\nmember of<\/p>\n
46
\n 53<\/p>\n
the EOP Group or the Wilson Group that is adverse as compared to the effect that
\nwould result under other available alternatives unless EOP or Wilson (in their
\nrespective sole and absolute discretion), as the case may be, shall have
\nconsented thereto;<\/p>\n
7.1.13 To employ the same accountants as EOPT unless otherwise specified by the
\nBoard. To employ attorneys, insurance brokers, consultants and such other
\npersons as the Manager deems reasonable and appropriate for any Company purpose,
\nand to pay such compensation for the services of such persons as, in the
\njudgment of the Manager, is reasonable and appropriate; and to allocate the
\ncosts for any of such services paid to third parties (as well as reasonable
\namounts for in-house legal counsel employed by the Company or any Subsidiary at
\ncost, including administrative and overhead costs) to any of the Project
\nEntities or Owners as is reasonable and appropriate;<\/p>\n
7.1.14 To borrow money on behalf of the Company, and if required, to secure such
\nborrowings with Company assets, and to prepay, refinance, increase, modify,
\nconsolidate or extend, in whole or in part, any such indebtedness;<\/p>\n
7.1.15 To designate an agent for service of process for the Company;<\/p>\n
7.1.16 To prosecute, defend and settle any and all claims and litigation the
\nCompany may assert or bring or that may be asserted or brought against the
\nCompany, unless Manager or any member of the Wilson Group is a party to such
\nclaim or litigation adverse to the Company or the involvement of Manager or the
\nany member of the Wilson Group otherwise creates a conflict of interest for
\nManager or any of its Principals; and<\/p>\n
7.1.17 To make, execute, acknowledge and\/or deliver on behalf of the Company any
\nand all documents, instruments and agreements and do all things that are
\nnecessary or appropriate in the judgment of the Manager to carry out the
\nbusiness of the Company and the foregoing powers.<\/p>\n
All of the foregoing shall be on such terms and conditions and in such amounts
\nas the Manager deems in its good faith business judgment to be in the best
\ninterests of the Company.<\/p>\n
7.2 Execution of Contracts. Any agreement, instrument or other document executed
\nby Manager on behalf of the Company will be binding on the Company as to third
\nparties dealing with the Company, and the Manager may authorize any member,
\nmanager, general partner or other authorized representative of the Manager or
\nany officer or employee of the Company, acting alone, or with another authorized
\nsignatory, to execute any agreement, instrument or other document on behalf of
\nthe Manager, and such execution will be deemed binding upon the Company without
\nthe need for further inquiry by the party relying upon such execution and
\nauthorization.<\/p>\n
7.3 Tax Matters Partner. Subject to SECTION 8.3, Manager will act as the “TAX
\nMATTERS PARTNER,” as required by Sections 6221 et seq. of the Code. The Tax
\nMatters Partner will not be liable or responsible to the Company or to any
\nMember or former Member for any acts or failures to act, or for loss or
\nliability arising out of acts or failures to act, provided its actions or
\ninactions were in good faith and within the scope of its authority, except for
\nacts or failures to act that amount to gross negligence, willful misconduct,
\nbreach of fiduciary duty, or a breach of this Agreement. The Tax Matters Partner
\nwill be entitled to<\/p>\n
47
\n 54<\/p>\n
indemnification from the Company for actions taken or omitted in its capacity as
\nTax Matters Partner, as provided in SECTION 8.5 (Indemnification), subject to
\nany exceptions to rights of indemnification set forth therein. The Manager shall
\narrange for and cause to be taken such actions as may be necessary to cause EOP
\nand any other Member who so requests to become a “notice partner” within the
\nmeaning of Section 6223 of the Code. The Manager shall arrange for and cause to
\nbe delivered to each other Member notice of all significant matters that may
\ncome to its attention in its capacity as Tax Matters Partner by giving notice
\nthereof promptly after becoming aware thereof and, within such time, shall
\nforward to each other Member copies of all significant written communications
\nthat it may receive in such capacity. The Manager shall not take any action
\ncontemplated by Sections 6222 through 6231 of the Code, without the prior
\nwritten consent of the Members, which consent shall not be unreasonably withheld
\nor delayed. This provision is not intended to authorize the Manager to take any
\naction which is left to the determination of an individual Member under Sections
\n6222 through 6231 of the Code. Notwithstanding anything to the contrary herein,
\nthe Manager may not finally settle or otherwise dispose of any audit or
\nadministrative or judicial proceedings relating to tax items of the Company
\nwithout the prior written approval of the Members, and the Members and their
\nrepresentatives shall have the right to participate in any audit or
\nadministrative of judicial proceeding involving tax matters and the Company and
\nto attend all meetings with governmental authorities in connection therewith
\n(and the Manager shall cause its representatives in such proceedings to
\ncoordinate with the Members and their representatives to facilitate such
\nparticipation in an effective manner, including circulating for revisions and
\ncomment, with a reasonable period allowed therefor, any written submissions
\nproposed to be made in connection therewith).<\/p>\n
7.4 Compensation and Reimbursement of the Manager. Neither the Manager nor the
\nMembers will be entitled to any compensation for managing the internal affairs
\nof the Company and performing their respective duties hereunder. The Company
\nshall reimburse Manager for reasonable and necessary third party expenses paid
\nby Manager, if any, to the extent funds are available for such reimbursement
\npursuant to a budget for the Company which has been approved by the Board (or
\nwhich otherwise applies pursuant to SECTION 8.3.10); provided that the Company
\nshall not reimburse Manager for any expenses related to employees, contractors
\nor consultants of any member of the Wilson Group other than reasonable
\nincidental expenses incurred in connection with the business of the Company or
\nits Subsidiaries.<\/p>\n
7.5 Insurance. The Manager shall procure and maintain in effect, or cause to be
\nprocured and maintained in effect, at the expense of the Company, such insurance
\nand in such amounts as the Manager may from time to time deem prudent, in its
\ndiscretion, for the protection of the Members and the assets of the Company,
\ntaking into account the nature of the Company and its business activity.<\/p>\n
7.6 Officers and Employees. The Company and its subsidiaries will have such
\nemployees and officers as the Manager determines are necessary or desirable to
\ncarry out the business of the Company. All such officers will be appointed or
\nterminated by Manager, and may include a Chairman, President, Chief Financial
\nOfficer, Secretary, Assistant Secretary and such Executive, Senior and other
\nVice Presidents and other officers as Manager from time to time determines to be
\nnecessary or desirable to further the purposes of the Company.<\/p>\n
48
\n 55<\/p>\n
The Chairman of Wilson (who initially shall be William Wilson) and the President
\nof Wilson (who initially shall be Thomas Sullivan) will automatically and at all
\ntimes be the Chairman and President, respectively, of the Company. All employees
\nof the Company, including the officers of the Company, will perform their duties
\nunder the exclusive supervision and direction of the Manager. The officers and
\nemployees of the Company will have such powers and duties of supervision and
\nmanagement of the Company’s business as the Manager may from time to time
\ndesignate.<\/p>\n
7.7 Liability of Manager and Members. To the fullest extent permitted by law the
\nparties to this Agreement intend and agree that neither the Manager nor any
\nMember nor any Subsidiary, nor any of their respective members, managers,
\ndirectors, officers, employees, shareholders, partners or legal counsel (but not
\nincluding outside legal counsel) shall be liable or responsible to the Company
\nor the Members for any acts or failures to act, or any loss, liability, damage,
\nsettlement costs or other expense incurred by reason of acts or failures to act
\n(in each case to the extent related to the business of the Company), of any such
\nperson or entity if such person or entity in good faith (including with a good
\nfaith belief that their actions were authorized by the Company) acted in a
\nmanner reasonably believed to be in, or not opposed to, the best interests of
\nthe Company or its Subsidiaries except, with respect to the Manager, Members,
\nthe Wilson Principals or EOP OP or their Affiliates, to the extent such loss,
\nliability, damage, settlement cost or other expense resulted from the gross
\nnegligence or willful misconduct of such person or entity or breach of this
\nAgreement. The termination of any action, suit or proceeding by judgment, order
\nor settlement shall not, of itself, create a presumption that a person or entity
\ndid not act in good faith and in a manner reasonably believed to be in, or not
\nopposed to, the best interests of the Company. It is understood that the
\nemployees of the Company and its Subsidiaries will work under the management and
\ndirection of Manager, and the fact that any such employee may also be an
\nemployee, officer, principal or member directly or indirectly in Manager shall
\nnot in and of itself cause such employees of the Company or its Subsidiaries to
\nhave any liability or responsibility to the Company or its Subsidiaries for acts
\nor failures to act with respect to Manager and its Affiliates if such persons in
\ngood faith (including with a good faith belief that their actions were
\nauthorized by the Company) acted in a manner reasonably believed to be in, or
\nnot opposed to, the best interests of the Company or its Subsidiaries. It is
\nunderstood that Manager, the Wilson Group and the EOP Group are and shall
\ncontinue to be engaged in other real estate and real estate related activities,
\nincluding activities which may compete with the Company, without any obligation
\nto offer any interest in such activities to the Company or to any Member, except
\nas expressly set forth herein, including what is set forth in SECTION 3.1. None
\nof the decisions made, business opportunities (including leases) or any other
\nsteps or activities taken by Manager, a Member or any of such parties’
\nAffiliates with respect to such other projects shall be deemed a breach of any
\nduty (including any fiduciary duty) owed to Company or its other Members or
\nAffiliates by Manager or such Member except to the extent such loss, liability,
\ndamage, settlement cost or other expense resulted from the gross negligence or
\nwillful misconduct of such person or entity or breach of this Agreement.<\/p>\n
7.8 Time Devoted to Company. The Manager will devote such time to the affairs of
\nthe Company as is reasonably necessary for the conduct of the Company’s business
\nand the responsibilities assumed by the Manager hereunder; provided, however,
\nthat Manager and<\/p>\n
49
\n 56<\/p>\n
the Wilson Principals, excluding H. Lee Van Boven, will be obligated to devote
\nall of its or their business time to the affairs of the Company (unless a lesser
\ncommitment of time is approved by the Board) and, subject to the restrictions
\nimposed on the Wilson Group under SECTION 3.6 or elsewhere in this Agreement.<\/p>\n
7.9 Duties of Manager. Manager (in its capacity as manager as opposed to its
\ncapacity as a Member) shall manage the affairs of the Company in the best
\ninterest of the Members of the Company. Manager (in its capacity as manager as
\nopposed to its capacity as a Member) shall use commercially reasonable efforts
\nto perform all those tasks for which it has authority pursuant to SECTION 7. In
\naddition, Manager shall notify the Members promptly of any service of process on
\nit relating to any litigation or threatened litigation. Manager shall fully and
\ncontemporaneously disclose to EOP any transaction (and the terms thereof) into
\nwhich it causes the Company to enter if any of the other parties to such
\ntransaction are members of the Wilson Group. Upon request by any Member, Manager
\nshall provide such Member with any reports and information concerning the
\nCompany, any Opportunities or any other Projects as such Member may reasonably
\nrequest. Upon request by any Member, Manager shall provide such Member with
\nnotice promptly after the occurrence of any event as such Member may reasonably
\nspecify together with such details concerning such event as such Member may
\nreasonably specify or later request. Manager shall use commercially reasonable
\nefforts to allow CIC to bid on tenant improvement work relating to the Projects.<\/p>\n
7.10 Withdrawal of Manager. The Manager may not voluntarily withdraw or retire
\nfrom the Company or take any step to dissolve itself or allow dissolution,
\nunless approved by all of the Members.<\/p>\n
7.11 Severance Return. Neither the Company nor any of its Subsidiaries shall
\nretain, employ or hire as a consultant, contractor, agent or employee, any
\nperson receiving severance related payments in connection with the Merger,
\nexcept H. Lee Van Boven, unless any such person returns all of such payments to
\nthe EOP Group upon such retention, hiring or employment and Manager shall cause
\nany member of the Wilson Group not a party hereto do the same. In the event any
\nsuch person does not promptly return all of such payments to the EOP Group,
\nManager shall pay to EOP an amount equal to such unreturned payments.<\/p>\n
7.12 Wilson Principals. Manager shall cause any person who becomes a Wilson
\nPrincipal to agree, in a writing delivered to EOP no later than 30 days after
\nsuch person becoming a Wilson Principal, to be bound by SECTIONS 3.1.3, 3.1.5,
\n3.6, 3.7, 7.8, and 7.12 effective as of the date of such person becoming a
\nWilson Principal.<\/p>\n
7.13 Successors to Wilson Principals. Manager shall cause any person who is a
\nsuccessor to any Wilson Principals, or who occupies a position with the Company
\nor any Subsidiaries comparable to that of any of the then-current or former
\nWilson Principals, to agree, in a writing delivered to EOP no later than 30 days
\nafter such person succeeding such Wilson Principal or occupying such Wilson
\nPrincipal’s position, to be bound by SECTIONS 3.1.3, 3.1.5, 3.6, 3.7, 7.8, and
\n7.12 effective as of the date of such succession or occupation of such Wilson
\nPrincipal’s position.<\/p>\n
50
\n 57<\/p>\n
7.14 Continuing Employees. Upon the Formation Date, EOP OP will pay with respect
\nto employees transferring from Cornerstone or EOP to the Company or one of its
\nAffiliates, (a) to the Company an aggregate sum equal to the number of hours of
\naccrued vacation time being carried over by each such transferring employee,
\n(but not to exceed the hours of carried over accrued vacation time identified on
\nExhibit I) multiplied by such employee’s hourly salary rate, (b) to any such
\nemployee the number of accrued vacation hours (but not to exceed the accrued
\nvacation hours specified on Exhibit I) at such rate that such employee elects
\nnot to carry over, and (c) as and when any such employee (but, for the Wilson
\nPrincipals, only during the two years following the Formation Date and only up
\nto a maximum of ten days per Wilson Principal) uses sick leave carried over to
\nthe Company from Cornerstone, a sum equal to such hours of carried-over sick
\nleave so taken (but not to exceed the hours of sick leave for such employee
\nidentified on Exhibit I) multiplied by such employee’s hourly rate.
\nNotwithstanding anything to the contrary herein, EOP shall not be responsible
\nfor any accrued vacation hours (whether under clause (a), clause (b) or
\notherwise) with respect to any person to the extent such vacation hours exceed
\nthose specified on Exhibit I with respect to such person. In addition, unless
\nthe total amounts in such employees’ existing 401(k) plans (including the
\nunvested employer contributions) can be carried over to the Company’s new 401(k)
\nplans, EOP OP will pay the Company the aggregate amount of unvested employer
\ncontributions lost by such employees from their existing 401(k) plans, which the
\nCompany will contribute to the new 401(k) plans of such employees. Prior to the
\ndate the Company or its Affiliate pays bonuses to its employees for the year
\n2000, EOP will pay the Company (or its Affiliate) a sum equal to $477,690, which
\nrepresents 171\/366 of the aggregate target bonuses established by Cornerstone
\nfor such transferring employees for the year 2000. EOP will not be responsible
\nfor reimbursing the Company for any extra level of benefits to which
\ntransferring employees may be entitled in the future due to the fact that the
\nCompany will give such employees credit for time employed by William Wilson & Associates and Cornerstone, or any Affiliate thereof acquired by or merged into
\nEOP or any Affiliate thereof in determining the level of such benefits.<\/p>\n
7.15 Employment Indemnities. For claims brought within a period of three years
\nafter the Formation Date, except as provided in the immediately preceding
\nsentence, to the fullest extent permitted by law EOP OP expressly agrees to
\nindemnify Company and its Affiliates from and against any and all claims, debts,
\nliabilities or causes of action of any kind, known or unknown (collectively
\n“CORNERSTONE EMPLOYMENT CLAIMS”) that any transferring employee or other third
\nparty may now have or in the future may have against the Company, its Affiliates
\nor any of their agents, employees, partners, affiliated or related entities or
\npartnerships, insurers or representatives, or their predecessors, successors or
\nassigns, to the extent such Cornerstone Employment Claims are caused by or arise
\nfrom such parties’ employment or retention as an independent contractor by
\nWilliam Wilson & Associates or Cornerstone, or any Affiliate thereof acquired by
\nor merged into EOP or any Affiliate thereof prior to the Formation Date,
\nincluding but not limited to any claims arising from or related to any oral or
\nwritten contract or agreement, express or implied (including, without
\nlimitation, any alleged right to receive severance-related payments on the
\ntransfer of such employees from Cornerstone or the EOP Group to Company); any
\nalleged breach of any covenant of good faith and fair dealing, express or
\nimplied; any alleged restrictions on the right to terminate such party’s
\nemployment; any alleged violation of any duty to pay wages or<\/p>\n
51
\n 58<\/p>\n
compensation of any sort; and any alleged violation of any federal, state, or
\nlocal statue or ordinance including, but not limited to, wage and hour law,
\nworker’s compensation law, Title VII of the Civil Rights Act of 1964, the
\nAmericans with Disabilities Act, the Age Discrimination in Employment Act, the
\nFamily and Medical Leave Act, the California Fair Employment and Housing Act,
\nand any substantively similar or related provisions under federal, state or
\nlocal law related to their employment by Cornerstone or William Wilson & Associates or any Affiliate thereof acquired by or merged into EOP or any
\nAffiliate thereof. The Company shall indemnify EOP and hold EOP OP harmless from
\nand against, any claims (including reasonable attorneys’ fees and costs) by such
\nemployees for accrued vacation pay or sick leave that EOP OP pays to the Company
\nunder subclauses (a) or (c) above, or accrued vacation pay paid directly to such
\nemployees pursuant to subclause (b) above. Notwithstanding the above, EOP OP
\nshall have no liability or responsibility under this Agreement for any claims,
\ndebts, liabilities or causes of action caused by, or arising from, any act or
\nomission, by any person, occurring after the Formation Date.<\/p>\n
8. COMPANY BOARD OF REPRESENTATIVES; CERTAIN MEMBER APPROVALS.<\/p>\n
8.1 Board of Representatives.<\/p>\n
8.1.1 Statement of Purpose; Supplemental Policies. The purpose of this SECTION 8
\nis to set forth the manner in which EOP will exercise those approval rights
\nreserved to it through the “Board” described below. The parties have agreed to
\ngive various approvals through a Board of Representatives that is contemplated
\nto meet regularly, and through committees of the Board and Company development
\nteams in which Member representatives with appropriate authority will
\nparticipate.<\/p>\n
8.1.2 Powers of Board; Representatives. The Company will have a Board of
\nRepresentatives (the “BOARD”) which will have the authority to approve Major
\nDecisions as contemplated in SECTION 8.3 (Major Decisions). Notwithstanding
\nanything to the contrary herein, no action may be taken by the Manager with
\nrespect to any matter which is a Major Decision, or any other matter requiring
\napproval of or action by the Board, unless a Representative Majority has voted
\nto give such authority to Manager (or been deemed to have approved such action
\npursuant to SECTION 3.4.1 or any other procedure for deemed approvals adopted by
\nthe Board). The Board will be composed of four members (each, a
\n“REPRESENTATIVE”), two of whom will be designated by EOP and who will reasonably
\nacceptable to Wilson (the “EOP REPRESENTATIVES”) and two of whom will be
\ndesignated by Wilson and who will be reasonably acceptable to EOP (the “WILSON
\nREPRESENTATIVES”). William Wilson will be the Chairman of the Board and the
\nCompany and Thomas Sullivan will be the President of the Company, and each are
\nhereby deemed to be preapproved by EOP as acceptable Wilson Representatives.
\nDavid Naus and Peter Adams each are hereby deemed to be preapproved by Wilson as
\nacceptable EOP Representatives.<\/p>\n
8.1.3 Term. Except as otherwise provided by this Agreement, Representatives will
\nhold office until their successors are elected and qualified or until their
\nearlier resignation or removal. Any Representative may resign by delivering his
\nor her written resignation to the Board. Such resignation shall be effective
\nupon receipt unless it is specified to be effective at some other time or upon
\nthe happening of some other event.<\/p>\n
52
\n 59<\/p>\n
8.1.4 Removal. Any person may be removed as a Representative at any time by
\nwritten notice from the Member designating that Representative and under no
\nother circumstances. Any Representative may be removed from any Committee at any
\ntime by written notice from the Member designating that Representative and under
\nno other circumstances.<\/p>\n
8.1.5 Vacancies. If a person ceases to serve as a Representative during his or
\nher term of office, the Member designating that Representative, and only such
\nMember, will promptly fill the resulting vacancy with a person designated by
\nsuch Member and reasonably acceptable to the other Member. If a Representative
\nceases to serve on a Committee at any time, the Member designating that
\nRepresentative, and only such Member, will promptly fill the resulting vacancy
\nwith a Representative designated by such Member.<\/p>\n
8.1.6 Limitation of Liability of Representatives. No Representative will be
\nobligated personally for any debt, obligation or liability of the Company or of
\nany Member, whether arising in contract, tort or otherwise, solely by reason of
\nbeing or acting as Representative of the Company. To the fullest extent
\npermitted by law the parties to this Agreement intend and agree (i) that no
\nRepresentative shall be liable or responsible to the Company or the Members for
\nany acts or failures to act, or any loss, liability, damage, settlement costs or
\nother expense incurred by reason of acts or failures to act, of any such person
\nif such person in good faith acted in a manner reasonably believed to be in, or
\nnot opposed to, the best interests of the Member appointing such Representative,
\nand (ii) no Representative will be personally liable to the Company or to its
\nMembers for acting in good faith reliance upon the provisions of this Agreement
\nor for any breach of any fiduciary duty or other duty to the Company that does
\nnot involve a knowing violation of law. In determining whether to approve or
\ndisapprove a Major Decision, a Representative may consider, give weight to and
\nreflect the economic and other interests of the Member (and its Affiliates
\n(which may include the Representative in his or her personal capacity)) that
\nappointed that Representative, and by doing so will not be deemed to have
\nbreached any fiduciary duty to the Company or the Members or to have engaged in
\nmisconduct or obtained any improper personal benefit.<\/p>\n
8.2 Meetings of Board, Committees and Teams.<\/p>\n
8.2.1 Meetings. Regular meetings of the Board may be held without notice (if all
\nfour members of the Board attend such meetings, otherwise upon five business
\ndays’ notice) at such time, date and place as the Board may from time to time
\ndetermine. It is contemplated that initially, the Board will meet monthly.
\nSpecial meetings of the Board may be called, orally or in writing, by the
\nChairman or President of the Company, designating the time, date and place of
\nthe meeting. Representatives may participate in meetings of the Board by means
\nof conference telephone, Internet or similar communications systems by means of
\nwhich all Representatives participating in the meeting can hear each other, and
\nparticipation in such a meeting will constitute presence in person at the
\nmeeting. Manager will arrange for such telephonic, Internet or similar access
\nfor any Member who so requests.<\/p>\n
8.2.2 Notice of Meetings. Notice of the time, date and place of all special
\nmeetings of the Board will be given to each Representative by the Manager,
\nSecretary or<\/p>\n
53
\n 60<\/p>\n
Assistant Secretary of the Company. Notice will be given to each Representative
\nin person or by fax (with a copy delivered the next day by reputable overnight
\ncourier) to his or her business address at least three business days in advance
\nof the meeting. Notice need not be given to any Representative if a written
\nwaiver of notice is executed by him before or after the meeting, or if
\ncommunication with such Representative is unlawful. A notice or waiver of notice
\nof a meeting of the Board need not specify the purposes of the meeting.
\nAttendance at the meeting will be deemed to be a waiver of the requirement of
\nnotice, unless the Representative states in writing that the sole purpose of
\nattendance is to object to the failure to receive proper notice.<\/p>\n
8.2.3 Quorum. At any meeting of the Board, the presence or participation of at
\nleast one EOP Representative and one Wilson Representative will constitute a
\nquorum. Less than a quorum may adjourn any meeting from time to time and the
\nmeeting may be held as adjourned without further notice if a quorum is present.<\/p>\n
8.2.4 Action at Meeting. At any meeting of the Board at which a quorum is
\npresent, a majority of Representatives present may take any action on behalf of
\nthe Board, so long as one EOP Representative and one Wilson Representative (a
\n“REPRESENTATIVE MAJORITY”) join, approve or consent to that action, unless a
\nlarger number is required by law.<\/p>\n
8.2.5 Action by Consent. Any action required or permitted to be taken at any
\nmeeting of the Board may be taken without a meeting if a written consent thereto
\nis signed by at least a Representative Majority, and filed with the records of
\nthe meetings of the Board of Representatives. Such consent shall be treated as a
\nvote of the Board for all purposes.<\/p>\n
8.2.6 Committees and Teams. From time to time, the Board may establish
\ncommittees through which the powers and authority of the Board may be exercised
\n(each, a “COMMITTEE”) and may from time to time change the composition and size
\nof such Committees, provided that an EOP Representative and a Wilson
\nRepresentative will be entitled to serve on each such Committee, and that any
\naction of the Committee will require the consent of at least one EOP
\nRepresentative and one Wilson Representative. Manager may also create from time
\nto time management teams for specific purposes, but no Committee or management
\nteam has authority to make Major Decisions or, in the case of management teams,
\nother decisions reserved to the Board.<\/p>\n
8.2.7 Impasses and Disagreements. Impasses and disputes at the Committee and
\nteam level will be referred to the Board. Certain impasses and disputes at the
\nBoard level will be resolved pursuant to SECTION 13.1 (Disagreements).<\/p>\n
8.3 Major Decisions. Notwithstanding any other provision of this Agreement to
\nthe contrary, the Manager shall not have the authority to undertake the
\nfollowing actions or any action which would have the effect of causing any of
\nthe following (each, a “MAJOR DECISION”) except with the approval of the Board,
\nor with the written approval of both Wilson and EOP (or their deemed approval as
\nprovided in SECTION 3.4.1 or any other procedure for deemed approvals adopted by
\nthe Board), any of which approvals may be granted or withheld in such person or
\nentity’s sole and absolute discretion, except as otherwise expressly provided in
\nthis SECTION 8.3:<\/p>\n
54
\n 61<\/p>\n
8.3.1 Amending this Agreement, or the Certificate;<\/p>\n
8.3.2 Causing the Company to engage in any business other than as set forth in
\nSECTION 2.3 (Purpose);<\/p>\n
8.3.3 Doing any act in contravention of this Agreement or which would make it
\nimpossible to carry on the ordinary business of the Company;<\/p>\n
8.3.4 Making loans of the Company’s funds or assets to any person or entity or
\nguaranteeing the obligations of any person or entity (other than with respect to
\nenvironmental indemnities, customary non-recourse carve outs and completion
\nguaranties given by the Company as provided in SECTIONS 5.5 and 8.3.9);<\/p>\n
8.3.5 Dissolving (other than upon the occurrence of a Dissolution Event) or
\nmerging the Company;<\/p>\n
8.3.6 Admitting or appointing another Manager (except as specified under SECTION
\n13.2);<\/p>\n
8.3.7 Expending or committing Company funds or property paid to third parties
\n(including in-house legal fees allocated to a new Opportunity) in excess of
\n$50,000 for investigatory and seed costs for any single new Opportunity, other
\nthan as provided for in a budget approved by the Board;<\/p>\n
8.3.8 Expending or committing Company funds or property for any purpose except
\nas expressly provided herein or approved in the budget approved by the Board;<\/p>\n
8.3.9 Deciding major business terms of financing for the EOP Projects or Company
\nProjects such as loan amount, interest rate, points, term, recourse and
\nguaranties (other than customary non-recourse carve outs, environmental
\nindemnities and completion guaranties provided by the Members pursuant to
\nSECTION 5.5); provided that (i) the Members must act reasonably, (ii) once these
\nmajor terms have been approved, Manager will have full authority on behalf of
\nthe Company to negotiate, document and complete financing consistent with these
\napproved terms and the other provisions of this Agreement; and (iii) no Member
\nshall be obligated to provide any guaranty (other than customary non-recourse
\ncarve outs, environmental indemnities and completion guaranties provided
\npursuant to SECTION 5.5) except in circumstances and upon terms acceptable to it
\nin its sole and absolute discretion; and (iv) no Member Guarantor shall be
\nobligated to provide any guaranty (including any guaranty regarding customary
\nnon-recourse carve outs and environmental indemnities).<\/p>\n
8.3.10 Approving of annual Company operating budgets and approving Project
\nbudgets for EOP Projects and Company Projects, provided that the Representatives
\nshall act reasonably with respect to such Project Budgets for EOP Projects if
\nand to the extent required in SECTION 3.4.1; provided, that (i) until a new
\nCompany operating budget is approved by the Board, the prior year’s operating
\nbudget shall apply, with a 5% annual increase over the last operating budget
\napproved by the Board; and (ii) during the Winding Up Period, the
\nRepresentatives shall reasonably adjust the items in an unapproved budget under
\nwhich the Company may be operating pursuant to clause (i) to provide for
\nreductions<\/p>\n
55
\n 62<\/p>\n
in line items or additions to line items related to the fact that the Company is
\nwinding up its operations.<\/p>\n
8.3.11 Making expenditures that in the aggregate would cause the annual Company
\noperating budget to be exceeded by greater than 10%;<\/p>\n
8.3.12 Approving initial leasing guidelines and changes thereto (the “LEASING
\nGUIDELINES”) with respect to any EOP or Company Project; provided that the
\nRepresentatives shall act reasonably with respect to changes to leasing
\nguidelines. A Member asserting that another Member’s Representative Acted
\nunreasonably with respect to a change in the Leasing Guidelines shall have the
\nburden of proof to show the unreasonableness of the alleged conduct. The parties
\nagree it is not and will not be deemed unreasonable for any Representative to
\nrefuse to approve a change in the Leasing Guidelines where the refusal was
\nconsistent with a different plan disclosed to the other Representatives
\n(including a plan embodied in the then-existing Leasing Guidelines) to lease
\nspace in the applicable Project that, if followed and successful, would be
\nreasonably likely to produce at least as great an Estimated Project Value as
\nwould have occurred if the requested changes in the Leasing Guidelines were
\napproved. It is the intention of the foregoing sentence that if, measured by the
\nEstimated Project Value, both the changes proposed by the Representatives
\nrequesting the changes in the Leasing Guidelines and the plan proposed by the
\nRepresentatives who are refusing to accept such changes are reasonable, then it
\nshall not be unreasonable for the non-consenting Representatives to refuse to
\nconsent to the changes in the Leasing Guidelines. “ESTIMATED PROJECT VALUE”
\nshall mean the discounted present value of the Project determined by adding the
\ndiscounted present value of the projected net operating income over the then
\nnext five years to the discounted present value of the Project at the end of
\nsuch five-year period. In determining the Estimated Project Value, the discount
\nrate shall be 11%.<\/p>\n
8.3.13 Entering into any lease at any Project the terms of which are
\ninconsistent with the Leasing Guidelines;<\/p>\n
8.3.14 Entering into any major lease at any Project (as such “major lease” was
\ndefined by the Board when the Project became an Approved Project or at any time
\nthereafter); provided that if no such definition was made by the Board, the
\nBoard must approve all leases for such Project until the Board defines which
\nleases will be deemed to be major leases for such Project; further provided that
\nonce the business terms for any such major lease have been approved, Manager
\nwill have full authority on behalf of the Company to negotiate, document and
\ncomplete leases consistent with these approved terms; and further provided that
\nthe Representatives shall act reasonably with respect to approving major leases
\nthat are within the then-existing Leasing Guidelines.<\/p>\n
8.3.15 Except as expressly allowed elsewhere in this Agreement, selling or
\notherwise disposing of EOP Projects or Company Projects or of other significant
\nCompany assets, to the extent the Company has control over such sale or
\ndisposition;<\/p>\n
8.3.16 Creating recourse liability for any Member other than as required by
\nSECTION 5.5;<\/p>\n
56
\n 63<\/p>\n
8.3.17 Admitting another Member;<\/p>\n
8.3.18 Entering into contracts\/agreements with Affiliates of a Member, other
\nthan as expressly authorized herein;<\/p>\n
8.3.19 Borrowing money (other than under the Working Capital Line or Company
\nRequired Funds Loans), provided that the Representatives shall act reasonably
\nwith respect to borrowing (a) to pay off a Required Funds Loan, and (b) up to an
\naggregate of $2,000,000 (inclusive of Company Required Funds Loans) from time to
\ntime above and in addition to the $1,000,000 Working Capital Line, which shall
\nbe used for funding the operations of the Company but not the Projects;<\/p>\n
8.3.20 Making elections for income tax purposes (it being agreed that the
\nCompany will elect the traditional method without curative allocations under
\n704(c) to allocate to the contributing Member gain equal to the difference
\nbetween the deemed value and book value of property contributed by such Member);<\/p>\n
8.3.21 Establishing working capital or other reserves, provided that the Members
\nshall act reasonably;<\/p>\n
8.3.22 Institution or settlement of litigation involving the Company, any EOP
\nProject or any Company Project or Owner involving more than $100,000;<\/p>\n
8.3.23 Granting significant rights to third parties with respect to EOP Projects
\nor Company Projects, including purchase options, rights of first refusal to
\npurchase, easements or other material rights or encumbrances (other than leases
\nto the extent not a Major Decision under SECTIONS 8.3.13 or 8.3.14) or
\nmembership interests;<\/p>\n
8.3.24 Making material changes in EOP Project or Company Project budgets;<\/p>\n
8.3.25 Deciding to engage a third-party manager or leasing agent for EOP
\nProjects or Company Projects, except as required by the Owner operating
\nagreements;<\/p>\n
8.3.26 Setting aggregate salaries, bonuses and other forms of compensation (but
\nexcluding customary benefits) of the Wilson Principals as employees and
\nconsultants of the Company or any Subsidiary; provided, however, that (i) the
\nBoard will be deemed to have approved such aggregate amount if set out as a
\nseparate line item in the annual Company operating budget approved by the Board
\nor under which the Company is operating in the absence of such approval pursuant
\nto SECTION 8.3.10; (ii) no Representative may withhold its consent to such
\naggregate amount set out in an annual Company operating budget proposed by
\nManager if such aggregate amount does not exceed a sum equal to (a) one hundred
\nfive percent (105%) of the approved aggregate cash salaries and bonuses of the
\nWilson Principals for the preceding year (such amount or amounts to be
\nannualized for any partial year) for those Wilson Principals who were Wilson
\nPrincipals for all or part of the preceding year, plus (b) a reasonable cash
\ncompensation for those Wilson Principals who were not Wilson Principals during
\nthe preceding year; (iii) so long as the Winding Up Period has not commenced, if
\na new annual Company operating budget is not approved by the Board in any year,
\nsuch aggregate cash compensation for such year shall increase by 5% over the
\nprevious<\/p>\n
57
\n 64<\/p>\n
year’s annual amount until the Board approves a new compensation amount but
\nshall be reduced by amounts attributable to employees who are no longer
\nreasonably necessary; and (iv) for the calendar year 2000, the approved amount
\nfor the aggregate cash salaries and bonuses for the Wilson Principals shall be
\n$2,950,000, prorated for the portion of the year following the Formation Date,
\nplus $477,690; and<\/p>\n
8.3.27 Except as provided in SECTION 5.1 (Initial Cash Contributions),
\ninitiating any Capital Call or Project Entity capital call.<\/p>\n
8.4 Member Decisions and Approvals; Conflicts of Interest. Whenever a Member’s
\nconsent or approval is required or contemplated under this Agreement, whether
\ndirectly or through that Member’s appointed Representatives or EOP Approval
\nPersons, unless otherwise expressly provided, that Member or its Representatives
\nor the EOP Approval Persons may grant or withhold such consent or approval in
\ntheir sole and absolute discretion, unless this Agreement expressly provides
\notherwise. Decisions where there is a direct conflict between the interests of
\nthe EOP Group, and that of the Company as a whole, such as the price and terms
\non which the Company’s interest (or the B and\/or Promotional Interests) in an
\nEOP Project will be offered to EOP or a decision to accept Project financing
\noffered by EOP on a Project or the enforcement or termination of agreements in
\nwhich EOP is an adverse party, will be made in good faith by Wilson on behalf of
\nthe Company and otherwise in accordance with the terms of this Agreement.
\nDecisions where there is a direct conflict between the Company and any member of
\nthe Wilson Group, such as entering into, enforcement or termination of
\nagreements with any member of the Wilson Group or such member’s Affiliates, will
\nbe made in good faith by EOP on behalf of the Company and otherwise in
\naccordance with the terms of this Agreement.<\/p>\n
8.5 Indemnification.<\/p>\n
8.5.1 Indemnification of Representatives and Officers. Subject to SECTION 8.5.7,
\nthe Company shall indemnify to the fullest extent permitted by the LLC Act (as
\nthe same exists or may hereafter be amended, but, in the case of any such
\namendment, only to the extent that such amendment permits the Company to provide
\nbroader indemnification rights than said law permitted the Company to provide
\nprior to such amendment) any person who was or is a party, or is threatened to
\nbe made a party, to any threatened, pending or completed action, suit or
\nproceeding, whether civil, criminal, administrative or investigative (other than
\nan action or suit initiated by or in the right of the Company) by reason of the
\nfact that (a) he is or was a member, manager, Representative, employee,
\nexecutive or officer of the Company, one of its Members, its Manager, or its
\nSubsidiaries, or is or was serving at the request of the Company or its
\nSubsidiaries as a director, partner, manager, member, employee or officer of
\nanother corporation, partnership, limited liability company, joint venture,
\ntrust or other enterprise and (b) the matter arises in connection with such role
\nor in connection with the business of the Company or a Subsidiary, against
\nexpenses (including attorneys’ fees), judgments, fines and amounts paid in
\nsettlement actually and reasonably incurred by him in connection with such suit,
\naction or proceeding if he acted in good faith (including with a good faith
\nbelief that their actions were authorized by or within the scope of his
\nemployment with the Company or its Subsidiaries) and in a manner he reasonably
\nbelieved to be in or not opposed to the best interests of the Company or its
\nSubsidiaries, and,<\/p>\n
58
\n 65<\/p>\n
with respect to any criminal action or proceeding, had no reasonable cause to
\nbelieve his conduct was unlawful (provided, however, that with respect to any
\nthreatened actions that do not eventually become an actual action, suit or
\nproceeding, the Company’s indemnification shall include only the reasonable
\nlegal fees and costs incurred to respond to such threatened actions). The
\ntermination of any action, suit or proceeding by judgment, order, settlement,
\nconviction, or upon a plea of nolo contendere or its equivalent, shall not, of
\nitself, create a presumption that the person (i) did not act in good faith and
\nin a manner which he reasonably believed to be in or not opposed to the best
\ninterests of the Company or its Subsidiaries, or (ii) with respect to any
\ncriminal action or proceeding, had reasonable cause to believe that his conduct
\nwas unlawful. Without limitation of the foregoing, to the extent that a person
\nentitled to indemnity under this SECTION 8.5, has been successful on the merits
\nor otherwise in defense of any action, suit, or proceeding and the requirements
\nof clauses (a) and (b) of this SECTION 8.5.1 have been met, he shall also be
\nindemnified against expenses (including attorneys’ fees) actually and reasonably
\nincurred by him in connection therewith. Notwithstanding the foregoing, the
\nCompany shall indemnify any such person seeking indemnification in connection
\nwith an action, suit or proceeding initiated by such person only if the
\ninitiation and continued prosecution of such action, suit or proceeding was
\nauthorized by the Board.<\/p>\n
8.5.2 Advance Payments. Expenses incurred in defending a civil or criminal
\naction, suit or proceeding may be paid by the Company in advance of the final
\ndisposition of such action, suit or proceeding and then only as authorized by
\nthe Board in the specific case (including by one or more Representatives who may
\nbe parties to such action, suit or proceeding), upon receipt of an undertaking
\nby or on behalf of the Representative, officer, employee or agent to repay such
\namount unless it is ultimately determined that he is entitled to be indemnified
\nby the Company as authorized in this SECTION 8.5.<\/p>\n
8.5.3 Non-Exclusive Nature of Indemnification. The indemnification provided
\nherein will not be deemed exclusive of any other rights to which any person,
\nwhether or not entitled to be indemnified hereunder, may be entitled under any
\nstatute, by-law, agreement, vote of Members or Representatives or otherwise,
\nboth as to action in his official capacity and as to action in another capacity
\nwhile holding such office or position as an employee, Representative, officer or
\nagent, and will continue with respect to matters pertaining to times when such
\nperson held office or position as an employee, Representative, officer or agent
\nas to a person who has ceased to be a Representative, officer, employee or agent
\nand will inure to the benefit of the heirs, executors and administrators of such
\na person. Each person who is or becomes a Representative or officer as aforesaid
\nwill be deemed to have served or to have continued to serve in such capacity in
\nreliance upon the indemnity provided for in this SECTION 8.5.<\/p>\n
8.5.4 Insurance. The Company shall purchase and maintain insurance (with
\nstandard waiver of subrogation clauses if available) on behalf of any person who
\nis or was a Representative, officer, employee or agent of the Company, or is or
\nwas serving at the request of the Company or a Subsidiary as a director,
\nofficer, employee or agent of another corporation, partnership, joint venture,
\ntrust or other enterprise against any liability asserted against him and
\nincurred by him in any such capacity, or arising out of his status as such,
\nwhether or not the Company would have the power to indemnify him against such
\nliability<\/p>\n
59<\/p>\n
66
\n under the provisions of the LLC Act (as presently in effect or hereafter
\n amended) or this Agreement.<\/p>\n
8.5.5 No Duplicate Payments. The Company’s indemnification under this SECTION
\n 8.5 of any person who is or was a Representative, officer, employee or agent
\n of the Company, or is or was serving at the request of the Company as a
\n director, officer, employee or agent of another corporation, partnership,
\n joint venture, trust or other enterprise, will be reduced by any amounts
\n such person receives as indemnification (i) under any policy of insurance
\n purchased and maintained on his behalf by the Company, (ii) from such other
\n corporation, partnership, joint venture, trust or other enterprise, or (iii)
\n under any other applicable indemnification provision.<\/p>\n
8.5.6 Third Party Beneficiaries. Any person entitled to be indemnified
\n pursuant to this SECTION 8.5 shall be a third party beneficiary of SECTION
\n 8.5 of this Agreement.<\/p>\n
8.5.7 Limitation. Notwithstanding anything to the contrary herein, except to
\n the extent covered by applicable collectible insurance proceeds payable to
\n the Company, the Company shall not be obligated to indemnify or defend (i)
\n any party to this Agreement (other than the Wilson Principals) with respect
\n to a claim made by another party to this Agreement alleging a breach of this
\n Agreement by the party requesting indemnification, (ii) Manager with respect
\n to any claim for gross negligence, willful misconduct or breach of this
\n Agreement (provided that the Company shall defend the Manager from claims of
\n third parties not related to EOP or the Wilson Principals alleging gross
\n negligence, willful misconduct or breach of this Agreement by Manager, if
\n Manager undertakes in customary form to reimburse the Company for the costs
\n of such defense in the event it is finally determined by a court of
\n competent jurisdiction that Manager’s gross negligence, willful misconduct
\n or breach of this Agreement was responsible in whole or in part for the
\n third party’s loss), or (iii) any of the Wilson Principals with respect to a
\n claim that such Wilson Principal breached an obligation imposed on him or
\n her to which he or she is bound under SECTIONS 3.1.3, 3.1.5, 3.6, 3.7, 7.8,
\n and 7.12.<\/p>\n
9. MEMBERS<\/p>\n
9.1 Liability of Members. Except as otherwise provided in this Agreement,
\n the Members will not be bound by, or be personally liable for, any expenses,
\n liabilities or obligations of the Company; provided, however, that the
\n capital of the Members invested herein will be subject to the risk of the
\n business of the Company and the claims of its creditors as provided by law.
\n Nothing contained herein, however, will be construed as limiting any
\n Members’ (i) obligations to contribute capital to the Company pursuant to
\n SECTION 5.2 (Additional Contributions) and to reinvest Distributable Capital
\n Proceeds up to the amount of each Member’s Adjusted Permanent Capital
\n pursuant to SECTION 0, or (ii) liability to other Members on account of the
\n liable member’s breach of this Agreement.<\/p>\n
9.2 Matters on Which the Members are Entitled to Vote. Except as otherwise
\n provided by this Agreement, the Members will only have the right directly or
\n through their Representatives to vote upon the matters described in SECTION
\n 8.3 (Major Decisions).<\/p>\n
60
\n 67<\/p>\n
9.3 Members’ Rights and Powers. The Members will have only the rights
\n expressly stated in this Agreement to affect the Company’s structure and its
\n affairs. The Members will have no right, power, or authority to act for or
\n on behalf of the Company or to bind the Company and, except for the exercise
\n of the voting and approval and other rights expressly granted to the Members
\n under the terms of this Agreement, will not interfere or take part in the
\n conduct or control of the Company business. The Members may advance or loan
\n money to the Company or transact other business with the Company, subject to
\n any express limitations contained in this Agreement. The rights and
\n liabilities of any Member transacting business with the Company will be as
\n provided in the provisions of the LLC Act.<\/p>\n
9.4 Restrictions on Members. The Members will not have the right or power
\n to (i) withdraw or reduce their contribution to the capital of the Company
\n except as a result of distributions provided for in this Agreement, or (ii)
\n bring an action for partition against the Company.<\/p>\n
9.5 Indebtedness Instruments. Except upon approval of the Board, no Member
\n will acquire or guarantee any instrument evidencing indebtedness owed to a
\n third party and\/or collateral security therefor given to a third party to
\n which the Company is a party or which purports to constitute a lien upon or
\n the grant of a security interest in any Company property, or any
\n indebtedness instrument of the Company or an entity in which the Company
\n holds a direct or indirect interest, unless such acquisition or guarantee is
\n expressly authorized by this Agreement. Notwithstanding the foregoing any
\n member of the EOP Group may acquire any debt that has been guaranteed (in
\n whole or in part) by any member of the EOP Group and any member of the
\n Wilson Group may acquire and debt that has been guaranteed (in whole or in
\n part) by any member of the Wilson Group.<\/p>\n
9.6 Non-Parties. EOP shall cause each of those members of the EOP Group
\n that are not parties hereto to comply with its obligations as a constituent
\n of the EOP Group set forth herein. Wilson shall cause each of those members
\n of the Wilson Group that are not parties hereto to comply with its
\n obligations as a constituent of the Wilson Group set forth herein.<\/p>\n
10. TRANSFER OF A MEMBER’S INTEREST.<\/p>\n
10.1 Definition. The term “TRANSFER” (which may be used as an adjective,
\n noun or verb in any variation or tense) includes any sale, assignment,
\n encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by
\n bequest, devise or descent, or other transfer, including transfers to
\n receivers, levying creditors, trustees or receivers in bankruptcy
\n proceedings or general assignees for the benefit of creditors, whether
\n voluntary or by operation of law, directly or indirectly, of any part or all
\n of a Member’s Membership Interest in the Company or of any right, title or
\n interest in any Member, provided that a transfer includes the indirect
\n Transfer of ownership interests in a Member only if one or a series of
\n transactions result in a majority of the capital or voting interests of the
\n Member no longer being controlled, directly or indirectly, by any entity of
\n the EOP Group in the case of EOP or by some or all of the individuals
\n identified by name (including William Wilson) in the definition of Wilson
\n Principals in the case of Wilson. Notwithstanding the foregoing, a Transfer
\n also includes any direct or indirect sale, assignment, encumbrance,
\n hypothecation, pledge, conveyance in trust, gift, transfer by bequest,
\n devise or descent, or other transfer, <\/p>\n
61
\n 68<\/p>\n
including transfers to receivers, levying creditors, trustees or receivers
\n in bankruptcy proceedings or general assignees for the benefit of creditors,
\n whether voluntary or by operation of law, directly or indirectly (other than
\n at their death), which reduces the personal interest of either of William
\n Wilson or Thomas Sullivan in the Company, any Member or any entity
\n comprising any Member to less than 50% of such interest as of the Formation
\n Date.<\/p>\n
10.2 Transfers. No Transfer will be permitted nor may any Member withdraw
\n from the Company without the prior written consent of the Board, which
\n consent may be granted or withheld in its sole discretion, except that the
\n following Transfers do not require the consent of the Board, Manager or any
\n other Member:<\/p>\n
10.2.1 A Member may Transfer all or any portion of its Membership Interest to
\n the Manager, subject to the provisions of 10.4 (Conditions to Transfer), or
\n to any other Member, and EOP may make a Transfer to any entity included in
\n the EOP Group or in connection with any merger of EOP OP or EOPT, all of the
\n foregoing being subject to the provisions of SECTION 10.4 (Conditions to
\n Transfer); and<\/p>\n
10.2.2 To the extent the Company is required by law to allow such assignment
\n or pledge, a Member may assign or pledge its rights to receive distributions
\n under this Agreement, but no pledgee or assignee of such rights shall have
\n any interest in, or be entitled to any rights of a Member in this Company
\n unless such pledgee or assignee is admitted as a substituted Member under
\n SECTION 10.3 (Substituted Member).<\/p>\n
10.2.3 Any of the Wilson Principals may Transfer all or any portion of their
\n direct or indirect interests in Wilson by (i) conveyance, grant, gift or
\n otherwise to any trust, family limited partnership or other entity whose
\n primary beneficiaries or owners are related by blood or marriage to the
\n Transferor or whose primary purpose is charitable or (ii) by bequest,
\n descent, devise or the laws of intestate succession; provided, however, that
\n with respect to the Transfers described in the foregoing clauses (i) and
\n (ii), (a) William Wilson and Tom Sullivan, so long as they are alive, shall
\n each personally retain ownership of at least 50% of their respective
\n interests they held in Wilson as of the Formation Date, and (b) a majority
\n of the capital or voting interests of Wilson are controlled, directly or
\n indirectly, at all times by some or all of the individuals identified by
\n name (including William Wilson) in the definition of Wilson Principals.<\/p>\n
10.3 Substituted Members. No Transfer of a Member’s Membership Interest will
\n cause the transferee to become a substituted Member of the Company unless
\n its interest was acquired pursuant to a Transfer permitted under this
\n Agreement and notice thereof has been given to Manager. Until the admission
\n of a transferee as a Member, a transferor of a Membership Interest will not
\n be released from its obligations under this Agreement. Even after the
\n admission of a transferee as a Member, the transferor shall not be released
\n from any obligations arising or accruing prior to such transfer.<\/p>\n
10.4 Conditions to Transfer. No Transfer of an interest of a Member will be
\n completed and no transferee will become a substituted Member unless and
\n until (i) the transferring Member and the proposed transferee comply with
\n the requirements, if any, of the securities laws of the United States and
\n all applicable states and any other laws that are applicable to <\/p>\n
62
\n 69<\/p>\n
the proposed Transfer, (ii) if requested by the Board, the transferring
\n Member provides the Manager with a legal opinion in a form and from counsel
\n reasonably acceptable to the Manager that the foregoing conditions have been
\n satisfied, (iii) the transferring Member agrees to reimburse the Company for
\n any costs reasonably incurred by the Company in connection with such
\n Transfer, (iv) in the case of a Transfer where the transferee is to be a
\n substituted Member, the transferee executes an instrument, in form
\n reasonably satisfactory to the Manager, in which the transferee adopts and
\n agrees to be bound by all the terms and provisions of this Agreement, and
\n (v) a written instrument of transfer has been received by the Manager. Until
\n all of the foregoing conditions have been satisfied, the Company and the
\n Manager may continue to treat the transferor of any such interest as its
\n absolute owner and will incur no liability for any allocation or
\n distribution made in good faith to the transferor.<\/p>\n
10.5 Allocation of Benefits. Upon the Transfer of all or any part of the
\n Membership Interest of a Member as herein provided, the Profits and Losses
\n attributable to the Membership Interest so transferred will be allocated
\n between the transferor and transferee as of the date and in the manner set
\n forth on the written assignment. Distributions will be made to the holder of
\n record of the interest on the date of distribution.<\/p>\n
11. PUT\/CALL PROVISIONS.<\/p>\n
11.1 EOP Project Puts and Calls. Subject to the terms and conditions herein,
\n EOP will have the right to acquire all of the Company Interest in each EOP
\n Project Entity at an all cash price determined as set forth herein. EOP
\n shall have the right (the “CALL RIGHT”) and Wilson shall have the right (the
\n “PUT RIGHT”) to commence the process of determining such price as set forth
\n herein. Notwithstanding anything to the contrary herein, EOP may assign its
\n rights under this SECTION 11, with respect to any or all Projects, to any
\n member of the EOP Group without limitation or restriction.<\/p>\n
11.2 Notice of Puts and Calls. EOP may (or may cause any entity comprising
\n part of the EOP Group to) exercise its Call with respect to the Company
\n Interest in the applicable Project Entity. EOP may exercise its Call Right
\n with respect to any such Company Interest in the applicable Project Entity
\n by delivering notice (the “CALL NOTICE”) to Wilson not earlier than the
\n first to occur of (i) Project Stabilization for the applicable EOP Project,
\n or (ii) 40 months following Project Commencement for the applicable EOP
\n Project. Wilson may exercise its Put Right with respect to any such Company
\n Interest in the applicable Project Entity by delivering notice (the “PUT
\n NOTICE”) to EOP not earlier than the first to occur of (i) Project
\n Stabilization for the applicable EOP Project, or (ii) prior to Project
\n Stabilization (but not earlier than 120 days before Wilson reasonably
\n anticipates that Project Stabilization will occur) for the applicable EOP
\n Project, if sufficient signed leases are in place to allow Project
\n Stabilization to occur once those leases have commenced, provided, however
\n that it shall be a condition to EOP’s obligation to close on its acquisition
\n of the Company Interest that Project Stabilization has been achieved.
\n Concurrently with the Put Notice, or not later than 30 days after receipt of
\n the Call Notice, Wilson will deliver to EOP a notice (the “PRICING NOTICE”)
\n specifying an amount (the “PROJECT PRICE”) which Wilson believes, reasonably
\n and in good faith, to be the Fair Market Value for the applicable EOP
\n Project as a whole as if the entire underlying real property, ground lease
\n or other such interest actually owned by the Owner were being sold on the
\n terms and conditions, including <\/p>\n
63
\n 70<\/p>\n
prorations, (collectively, the “SALE TERMS”) set forth in the form of
\n purchase agreement attached hereto as Exhibit F. At any time within the 60
\n days (the “RESPONSE PERIOD”) after delivery of the Pricing Notice, EOP may
\n elect, in EOP’s sole and absolute discretion, to buy the applicable Company
\n Interest by delivering notice (the “EXERCISE NOTICE”) thereof to Wilson.
\n Failure to deliver the Exercise Notice within the Response Period will be
\n deemed to be a binding decision by EOP not to purchase such Company Interest
\n at a price based on the Project Price. For Existing Projects other than Fair
\n Isaac (and only for such Existing Projects), at Wilson’s sole and absolute
\n discretion such Sale Terms may specify (such specification, a “B UNIT
\n EXCLUSION NOTICE”) that all or any part of the B Unit (the “EXCLUDED B
\n UNIT”) in the applicable Project Entity is to be excluded from the Company
\n Interest being sold. In such event, if EOP purchases the remaining Company
\n Interest, then when such remaining Interest is transferred to EOP, the
\n Company will assign its rights in the Excluded B Unit to Wilson and Wilson
\n shall become a member of the applicable EOP Project Entity, and all
\n references in this SECTION 11 (Put\/Call Provisions) to purchasing or
\n otherwise transferring the B Unit will not apply (other than as provided in
\n SECTION 11.11 (Sale of Excluded B Units)).<\/p>\n
11.3 Closing.<\/p>\n
11.3.1 Terms. If EOP delivers its Exercise Notice, EOP shall purchase the
\n applicable Company Interest from the Company and the Company shall sell such
\n Company Interest to EOP on the Sale Terms and the other terms and conditions
\n set forth herein (collectively, the “SALE”).<\/p>\n
11.3.2 Date. Except as otherwise provided herein, the closing of the Sale (the
\n “CLOSING”) will occur 30 days after the date of the Exercise Notice (the
\n “PRESUMED CLOSING DATE”), unless either EOP or Wilson specifies a later date
\n pursuant to this SECTION 11.3.2. In the Exercise Notice, EOP may identify
\n (such identification the “EOP CLOSING DELAY NOTICE”) a later proposed date
\n for the Closing, which date (the “EOP DELAYED CLOSING DATE”) may be any
\n business day after the Promote Calculation Date but on or prior to the date
\n 180 days after the date of the Exercise Notice. If Wilson desires the
\n Closing to occur later than the Presumed Closing Date or EOP Delayed Closing
\n Date, as applicable, at its option it may defer the Closing to any date on
\n or before the first business day following the first anniversary of Project
\n Completion for the applicable EOP Project (the “WILSON DELAYED CLOSING
\n DATE”) by so notifying (the “WILSON CLOSING DELAY NOTICE”) EOP in writing no
\n later than 10 business days after receipt of the Exercise Notice. The date
\n of the Closing (the “CLOSING DATE”) will be: (i) the Wilson Delayed Closing
\n Date if Wilson has timely sent the Wilson Delayed Closing Notice; (ii) the
\n EOP Delayed Closing Date if EOP has timely sent the EOP Closing Delay Notice
\n and Wilson has not timely sent a Wilson Closing Delay Notices; and (iii) the
\n Presumed Closing date if EOP has not timely sent the EOP Closing Delay
\n Notice and Wilson has not timely sent the Wilson Closing Delay Notice.<\/p>\n
11.4 Sale Price.<\/p>\n
11.4.1 Definitions.<\/p>\n
64
\n 71<\/p>\n
11.4.1.1 “PROJECT PROCEEDS”: The total Project Distributable Capital Proceeds
\n the applicable EOP Project Entity would have available for distribution by
\n the applicable entity on the Promote Calculation Date from a deemed sale of
\n the applicable EOP Project (as a whole as if the entire underlying real
\n property, ground lease or other such interest actually owned by the Owner
\n were being sold) on the Promote Calculation Date for the Project Price in
\n accordance with the Sale Terms (including prorations described therein), and
\n from all other funds and assets (including the mutually agreed net value of
\n reserves in excess of then currently existing third party liabilities being
\n reserved against, and if not so agreed than as reasonably determined by the
\n Company’s independent accountants) of the Project, Project Entity and Owner,
\n after deducting all debts (including any Project Required Funds Loans and
\n unpaid interest thereon), liabilities and expenses (including an assumed
\n 1.5% of the Project Price for all closing costs and expenses associated with
\n the Sale including commissions, but not including prorations) of the
\n Project, Project Entity and Owner if the Project Entity and Owner were
\n liquidated and the proceeds distributed in accordance with the Project
\n Entity’s organization documents.<\/p>\n
11.4.1.2 “COMPANY PROCEEDS”: The total Project Proceeds from the applicable EOP
\n Project Entity that would be distributable to the Company in the event of
\n the deemed sale and liquidation of the Project Entity and Owner under
\n SECTION 3.4.2.2 (Project Distributable Capital Proceeds) and the provisions
\n of the Project Entity’s organizational documents.<\/p>\n
11.4.1.3 “A UNIT VALUE”: The total Company Proceeds from the applicable EOP
\n Project Entity that would be distributable to EOP if such Company Proceeds
\n were distributed by the Company to EOP pursuant to SECTION 5.7.2 and the
\n aggregate Adjusted Permanent Capital Amount for EOP and Wilson were zero and
\n the Adjusted Balance of each of Wilson and EOP were equal to its Pro-Rata
\n share of the Project Capital Investment.<\/p>\n
11.4.1.4 “B UNIT VALUE”: The total Company Proceeds from the applicable EOP
\n Project Entity that would be distributable to Wilson if such Company
\n Proceeds were distributed by the Company to Wilson pursuant to SECTION
\n 5.7.2, and the aggregate Adjusted Permanent Capital Amount for EOP and
\n Wilson were zero and the Adjusted Balance of each of Wilson and EOP were
\n equal to its Pro-Rata share of the Project Capital Investment, but not
\n including distributions to which Wilson is entitled under SECTION 5.7.2.6.<\/p>\n
11.4.1.5 “C UNIT VALUE”: The total Company Proceeds that would be distributable
\n to Wilson pursuant to Section 5.7.2.6 if all such Company Proceeds were
\n distributed by the Company.<\/p>\n
11.4.1.6 “PROMOTE CALCULATION DATE” shall be the date which is the 30th day
\n after the later of (x) Project Stabilization or (y) the last day of the
\n Response Period (even if the Exercise Notice were delivered before such
\n day).<\/p>\n
11.4.1.7 “PROMOTE DISTRIBUTION” shall mean the amount of those distributions
\n payable pursuant to Section 5.7.2.6.<\/p>\n
65
\n 72<\/p>\n
11.4.2 Price for Company Interest. The price for the entire Company Interest,
\n if transferred pursuant to a Put or a Call will be equal to the amount of
\n the Company Proceeds.<\/p>\n
11.4.3 Adjustments for Closing Delays.<\/p>\n
11.4.3.1 Adjustment to Amount of Promote Distribution. If EOP has delivered an
\n EOP Closing Delay Notice, the Promote Distribution will be increased at the
\n rate of 20% per annum commencing on the Promote Calculation Date and ending
\n on the EOP Delayed Closing Date (or later date to the extent caused by EOP’s
\n breach of its obligations, if applicable, to close) or such earlier date as
\n the entire Promote Distribution is paid. Unless Wilson has delivered a
\n Wilson Closing Delay Notice, at any time prior to the Closing Date, EOP
\n shall have the authority (in its absolute and sole discretion) to pay a
\n portion the portion of the purchase price equal to the Promote Distribution
\n at any time prior to the Closing Date and to cause the Company to pay the
\n Promote Distribution to Wilson concurrently. If Wilson has delivered a
\n Wilson Closing Delay Notice, the Promote Distribution will be increased at
\n the Money Market Rate commencing on the date which would have been the
\n Closing Date, but for the Wilson Closing Delay Notice. If EOP has not
\n delivered an EOP Closing Delay Price and Wilson has not delivered a Wilson
\n Closing Delay Notice, there will be no increase in the Promote Distribution
\n under SECTION 11.4.3.1. The purchase price for the Company Interest shall be
\n increased by any increase in the Promote Distribution Pursuant to this
\n SECTION 11.4.3.1.<\/p>\n
11.4.3.2 Adjustment in Wilson A and B Unit Distributions. If Wilson has
\n delivered a Wilson Closing Delay Notice, then between the date which would
\n have been the Closing Date but for the Wilson Closing Delay Notice and the
\n Wilson Delayed Closing Date, notwithstanding anything to the contrary herein
\n (including SECTION 5.7), the Company shall pay to EOP all distributions made
\n by the Project Entity with respect to the A Unit and the B Unit which derive
\n from income accrued by the Project Entity during this period (and allocate
\n this income appropriately to EOP) and EOP shall pay to Wilson a return on
\n the B Unit Value at the Money Market Rate, with appropriate credits or
\n deductions based on reasonable prorations on account of distributions on the
\n A Unit and B Unit that have been made prior to all distributions made by the
\n Project Entity with respect to the A Unit and B Unit being paid to EOP
\n (e.g., if all rents for a month were distributed by the Project Entity on
\n the first day of the month and EOP only became entitled to such
\n distributions on the second day of the month, it would be appropriate for
\n Wilson to have its Pro-Rata Share of such rent payments deducted from its
\n return at the Money Market Rate).<\/p>\n
11.5 Mode of Payment of Put\/Call Price.<\/p>\n
11.5.1 OP Unit Exchange. At Wilson’s request delivered concurrently with the
\n Pricing Notice, EOP, Wilson and the Company shall cooperate (and EOP shall
\n cause EOP OP to cooperate) to structure the Sale as a contribution of
\n Company Interests in the Project Entity in exchange for UPREIT operating
\n partnership units of EOP OP (“OP UNITS”) pursuant to the terms of the form
\n Contribution Agreement attached hereto as Exhibit G. Such OP Units shall be
\n valued at the greater of the then market price of EOPT shares (based on a
\n trailing 10 trading-day weighted (by trading volume) average closing price
\n calculated as of the date five trading days prior to closing) or the net
\n asset value per share (“NAV”) of <\/p>\n
66
\n 73<\/p>\n
EOPT stock, as reasonably determined by the Board of Trustees of EOPT as of
\n the date of the Pricing Notice (and which NAV the Wilson Group agrees to
\n keep strictly confidential). Any transfers of OP Units by Wilson and its
\n successors or assigns as holders of the OP Units will be subject to
\n reasonable transfer restrictions imposed by EOPT, compliance with applicable
\n state and federal securities laws, availability of the private placement
\n exemption under Section 4(2) of 1933 Act, and the requirement that any
\n recipient of OP Units that would otherwise receive a de minimis number of OP
\n Units, shall receive cash instead of OP Units at EOP’s election.<\/p>\n
11.5.2 Company Unit Distribution.<\/p>\n
11.5.2.1 Operation of A Unit Distribution. At EOP’s request, delivered
\n concurrently with the Exercise Notice, EOP, the Wilson Group and the Company
\n shall cooperate to structure the Sale as a purchase of the B Unit and C Unit
\n from the Company, the distribution of certain proceeds from the sale of the
\n B Unit and C Unit to Wilson and the distribution of the A Unit from the
\n Company to EOP or a member of the EOP Group designated by EOP. In such a
\n transaction, (a) EOP will be obligated to simultaneously recontribute to the
\n Company in cash the amount, if any, by which the A Unit Value exceeds the
\n cash that EOP would have received in accordance with SECTION 5.7.2 had the
\n Sale been an all cash transaction; and (b) Wilson will be obligated to
\n simultaneously recontribute to the Company in cash the amount, if any, by
\n which the B Unit Value and the C Unit Value exceed the cash that Wilson
\n would have received in accordance with SECTION 5.7.2 had the Sale been an
\n all cash transaction. In such a transaction there shall be made such
\n adjustments to the Members’ Default Capital, accrued Default Preferred
\n Return, Adjusted Capital and Capital Accounts as would have been made if
\n Company Proceeds were Capital Proceeds, the Distributable Capital Proceeds
\n of which were distributed (with applicable Company retentions) pursuant to
\n SECTION 5.7.2.<\/p>\n
11.5.2.2 Operation of B Unit Distribution. In any transaction where Wilson
\n delivers a B Unit Exclusion Notice, EOP, the Wilson Group and the Company
\n shall cooperate to structure the Sale to involve the distribution of the
\n Excluded B Unit to Wilson. In such a transaction (a) the Company will
\n distribute the Excluded B Unit to Wilson and Wilson will be obligated to
\n simultaneously recontribute to the Company in cash the amount, if any, by
\n which the B Unit Value exceeds the cash that Wilson would have received with
\n respect to the B Unit in accordance with SECTION 5.7.2 had the Sale been an
\n all cash transaction; provided that if the Excluded B Unit is not the entire
\n B Unit, then this recontributed amount shall be adjusted to reflect this
\n fact. In such a transaction there shall be made such adjustments to the
\n Members’ Default Capital, accrued Default Preferred Return, Adjusted Capital
\n and Capital Accounts as would have been made if Company Proceeds were
\n Capital Proceeds, the Distributable Capital Proceeds of which were
\n distributed (with applicable Company retentions) pursuant to SECTION 5.7.2.<\/p>\n
11.6 Right to Market EOP Project. If the Put Right or the Call Right has
\n been exercised and EOP has failed to timely deliver an Exercise Notice,
\n Wilson will have the right, subject to the provisions of SECTION 11.7 (the
\n “RIGHT OF FIRST OFFER”), to cause the Company or the Owner (as applicable)
\n to market the applicable EOP Project (or at Wilson’s election, all but not
\n less than all of the related Project Entity’s interests therein) for sale
\n and <\/p>\n
67
\n 74<\/p>\n
to sell the EOP Project (or all such interests) to a third party, provided
\n that a contract of sale is entered into within 180 days after the end of the
\n Response Period and the closing of any such sale occurs within the later of
\n (i) 45 days after the end of such 180-day period, or (ii) the first business
\n day that is one year after Project Completion. Provided they comply with the
\n terms of this Agreement, all sales by the Company under this SECTION 11.5.2
\n will be under the exclusive direction and control of Wilson and without the
\n need for further consent or approval by the Board, EOP or the EOP Group.<\/p>\n
11.7 Right of First Offer. The Company shall not sell (or allow to be sold)
\n any EOP Project (or any of the related Project Entity’s interests therein)
\n to a third party for a price (the “THIRD PARTY PRICE”) that is less than the
\n Project Price (or with respect to the related Project Entity’s interests in
\n such Project, that portion of the Project Price that would be attributable
\n to the such interests) or on any other material terms more favorable to the
\n purchaser, taken as a whole, than the Sale Terms (disregarding the right of
\n Wilson to receive OP Units) unless Wilson first delivers a new Pricing
\n Notice specifying the Third Party Price as the Project Price and amending
\n the Sale Terms to provide the same terms as for the proposed third party
\n sale (the “MORE FAVORABLE TERMS”). EOP shall then have all rights set forth
\n in this SECTION 11 with respect to such New Pricing Notice, including the
\n right to deliver an Exercise Notice within the new Response Period, but the
\n length of the Response Period shall be 30 days; provided, however, that if
\n the Company has entered into an otherwise binding contract to sell an EOP
\n Project at the Third Party Price on the More Favorable Terms with a binding
\n closing date (the “THIRD PARTY CLOSING DATE”) then if EOP delivers an
\n Exercise Notice, the Closing of EOP’s purchase shall be a date specified by
\n EOP in its discretion, but no later than the later of (i) the date 30 days
\n after the expiration of the Response Period, or (ii) the Third Party Closing
\n Date, provided that, if (a) the More Favorable Terms provided for a closing
\n date after the first business day that is one year after Project Completion,
\n and (b) any Third Party Closing Date is on or after the first business day
\n that is one year after Project Completion, then at Wilson’s sole election,
\n the closing shall not occur until the first business day that is one year
\n after Project Completion. If EOP does not deliver such an Exercise Notice,
\n Wilson will be entitled to complete the third party sale of the Project for
\n an all cash price at the price and on the terms specified in the New Pricing
\n Notice delivered under this SECTION 11.7 within the time specified in
\n SECTION 11.6.<\/p>\n
11.8 Calculation of Promote Distribution in Connection With Third Party
\n Sales or Exercise of Right of First Offer.<\/p>\n
11.8.1 First ROFO. If EOP fails to timely deliver its Exercise Notice or
\n otherwise declines the offer to purchase pursuant to SECTION 11.7, and the
\n Company thereafter sells (or causes to be sold) the related EOP Project (or
\n the related Project Entity’s interests therein) to a third party as
\n permitted by the Right of First Offer, the Promotional Interest will be
\n calculated as though the Project Price were the actual sale price (after
\n appropriate adjustment if interests in the Project rather than the Project
\n were sold), and will equal the greater of (x) the Promotional Interest
\n calculated as of the Promote Calculation Date or (y) the Promotional
\n Interest calculated as of the date of such sale.<\/p>\n
11.8.2 Subsequent ROFO. If EOP fails to timely deliver its Exercise Notice or
\n otherwise declines the Put or Call and the Company does not sell (or cause
\n to be sold) the <\/p>\n
68
\n 75<\/p>\n
related EOP Project to a third party on terms permitted by the Right of
\n First Offer, but the Company subsequently sells to a third-party based on a
\n subsequent reoffer to EOP pursuant to SECTION 11.7 (Right of First Offer)
\n under a subsequent Right of First Offer, the Promotional Interest will be
\n calculated as though the Project Price were the actual sale price (after
\n appropriate adjustment if interests in the Project rather than the Project
\n were sold) and will equal the greater of (A) the Promotional Interest
\n calculated as of the later of (i) the 30th day after the most recent
\n Exercise Notice declining to purchase the EOP Project (or applicable
\n interests) was delivered or (ii) the last day on which the most recent
\n Exercise Notice could have been delivered; or (B) the Promotional Interest
\n calculated as of the date of such sale.<\/p>\n
11.8.3 No Adjustments Applicable. The provisions of SECTION 11.4.3 shall not
\n apply to any calculations pursuant to this SECTION 11.8.<\/p>\n
11.9 Second Phase and Partial Interest Projects. Without limitation of
\n Wilson’s or EOP’s rights under SECTIONS 11.1 through 11.7, inclusive, if (a)
\n EOP exercises its Call Right, or Wilson exercises its Put Right with respect
\n to an EOP Project (“SECOND PHASE PROJECTS”) that is (i) a subsequent phase
\n of another EOP Project in which EOP or its designee has already purchased a
\n portion of the Company Interest or (ii) a Project otherwise already
\n substantially owned and controlled by the EOP Group, or (b) EOP exercises
\n its Call Right, or Wilson exercises its Put Right, with respect to an EOP
\n Project that is not owned 100% by the Company, members of the Wilson Group
\n and the EOP Group (“PARTIAL-INTEREST PROJECTS”), or (c) a Project for which
\n a Put Right or a Call Right was exercised remains unsold more than 460 days
\n after the delivery of the Pricing Notice (an “UNSOLD PROJECT”), then EOP may
\n elect for Second Phase Projects and Unsold Projects, and Wilson may elect
\n for Partial-Interest Projects, in lieu of the Right of First Offer described
\n above, to have the Fair Market Value (as defined below) of the applicable
\n EOP Project as a whole determined under the procedures set forth under
\n SECTIONS 13.1.5 and 13.1.6. The party electing to proceed under such
\n Sections must send notice of such election to the other party within 30 days
\n after the Put or Call Notice is delivered, and the procedures under such
\n Sections shall be initiated within 10 business days thereafter.<\/p>\n
11.9.1 EOP Purchase. After the Fair Market Value for a Second Phase Project,
\n an Unsold Project or Partial-Interest Project is determined in accordance
\n with the procedures set forth in this SECTION 11.9, EOP may, in its sole and
\n absolute discretion, within 60 days thereafter elect to purchase the Company
\n Interest by sending an Exercise Notice on the same terms and conditions and
\n using the same procedure as if EOP had received a Pricing Notice with the
\n Project Price being specified as the Fair Market Value, except as otherwise
\n set forth in this Section. If EOP sends the Exercise Notice, the Project
\n Proceeds will be calculated as though the Project Price were the Fair Market
\n Value, and the Presumed Closing Date will be 30 days after the Exercise
\n Notice. The Closing Date shall be subject to adjustment on the same terms as
\n set forth in SECTION 11.3.2. The Promote Calculation Date shall be 30 days
\n after (a) the Put Notice or Call Notice for Second Phase and Partial
\n Interest Projects, or (b) a party elects to proceed under this SECTION 11.9
\n for Unsold Projects. If the arbitrator chooses the value Wilson presented in
\n the arbitration rather than the value EOP presented in the arbitration as
\n the Fair Market Value, the Promote Distribution will be increased at the
\n rate of 20% per annum commencing on the Promote Calculation Date and ending
\n on the date EOP <\/p>\n
69
\n 76<\/p>\n
sends the Exercise Notice. The purchase price for the Company Interest shall
\n be increased by any increase in the Promote Distribution Pursuant to this
\n SECTION 11.4.3.1.<\/p>\n
11.9.2 Third-Party Sale. If EOP does not send an Exercise Notice within 60
\n days after determination of the Fair Market Value, Wilson, on behalf of the
\n Company and the EOP Investor in such Project, will have the exclusive right
\n to market and sell the Project (or, at Wilson’s election, all but not less
\n than all of the related Project Entity’s interests therein), and the
\n negotiation, terms and closing will be under the exclusive direction and
\n control of Wilson and without the need for further consent or approval by
\n the Board or the EOP Group, provided that the price at which the sale of the
\n EOP Project is consummated is at least equal to 95% of the Fair Market Value
\n with respect to Partial-Interest Projects (whether or not they are also
\n Second Phase and\/or Unsold Projects) or 97.5% of the Fair Market Value for
\n Second-Phase or Unsold Projects (or, in the case of a sale of all of the
\n Project Entity’s interests therein, the portion of such values attributable
\n to such interests), and the other material terms, taken as a whole, are
\n materially no more favorable to the buyer than the Sale Terms (disregarding
\n the right to receive OP Units). If the Project is sold to a third-party, the
\n Promotional Interest will equal the greater of (a) the Promotional Interest
\n where the Project Price is calculated on the Promote Calculation Date
\n described above in this SECTION 11.9 as though the Project Price were the
\n Fair Market Value, or (b) the Promotional Interest where the Promote
\n Calculation Date is the actual date of sale to the third party as though the
\n actual sale price were the Project Price. In addition, if the arbitrator
\n chooses the value Wilson presented in the arbitration rather than the value
\n EOP presented in the arbitration as the Fair Market Value and the
\n Promotional Interest is not calculated pursuant to clause (b) above, then
\n the Promote Distribution will be increased at the rate of 20% per annum
\n commencing on the Promote Calculation Date and ending at the end of EOP’s
\n 60-day response period.<\/p>\n
11.10 Company Projects: Except for the Put Right and Call Right, the decision
\n to sell or dispose of a Company Project will be a Major Decision requiring
\n approval of Wilson and EOP or the Board; provided, that at any time after
\n one year following Project Stabilization of a Company Project (and subject
\n to any restrictions imposed by any third-party equity investor in the
\n Project) if the Members have not agreed on a sale or disposition of such
\n Project (or all of the interests of the Company, the EOP Group and the
\n Wilson Group in the Company Project (the “COMPANY GROUP”)), either EOP or
\n Wilson will have the right, during the Marketing Period (as defined below),
\n to market and sell the Company Project or the interests of the Company Group
\n in the Company Project (alternatively, the “MARKETED PROJECT”) on behalf of
\n the Company, provided that the Member marketing (the “MARKETING MEMBER”) and
\n selling the Marketed Project shall first comply with the following
\n provisions of this SECTION 11.10. The Marketing Member must first give
\n notice (the “ROFO NOTICE”) to the other Member (the “NON-MARKETING MEMBER”)
\n of its intention to market the Marketed Project and offer (the “OFFER”) to
\n sell the Marketed Project for a cash price (the “OFFER PRICE”) on specified
\n terms (the “OFFER TERMS”). The Non-Marketing Member may accept such Offer
\n within 30 days after receipt by giving notice (the “ACCEPTANCE NOTICE”)
\n thereof to the Marketing Member, in which case the Company shall sell, and
\n the Non-Marketing Member shall buy, the Marketed Project at the Offer Price
\n and on the Offer Terms. If the Non-Marketing Member does not timely deliver
\n an Acceptance Notice, for the 225 days (the “MARKETING PERIOD”) following
\n the last day the Non-Marketing Member had to timely deliver an Acceptance
\n Notice, the Marketing Member may cause the Company to <\/p>\n
70
\n 77<\/p>\n
market and consummate the sale of the Marketed Project at a price no less
\n than the Offer Price and on other material terms no more less favorable to
\n the Company, taken as a whole, than the Offer Terms.<\/p>\n
11.11 Sale of Excluded B Units. At any time after the five-year anniversary
\n of the Project Stabilization if Wilson owns any Excluded B Units, EOP may,
\n by written notice (the “EXCLUDED B UNIT CALL NOTICE”) to Wilson, elect to
\n purchase or Wilson may, by written notice EOP (the “EXCLUDED B UNIT PUT
\n NOTICE”) elect to sell, all or any Excluded B Unit(s) at a price (the
\n “EXCLUDED B UNIT EXERCISE PRICE”) equal to the B Unit Value calculated as if
\n the Project Price were the Fair Market Value of the applicable Project as a
\n whole determined under the procedures set forth under SECTIONS 13.1.5 and
\n 13.1.6 which shall be initiated within five business days after delivery of
\n the Excluded B Unit Call or Put Notice. Within 60 days after determination
\n of the Fair Market Value, EOP, in its sole and absolute discretion, (and
\n through any the EOP Group entity) may elect to purchase such Excluded B
\n Units by giving written notice (the “EXCLUDED B UNIT EXERCISE NOTICE”) to
\n Wilson. If EOP timely delivers an Excluded B Unit Exercise Notice, Wilson
\n shall sell to EOP and EOP shall purchase from Wilson the Excluded B Unit
\n that was the subject of the Excluded B Unit Exercise Notice at the Excluded
\n B Unit Exercise Price and all the Sale Terms on the date 10 business days
\n after EOP delivers the Excluded B Unit Exercise Notice. If EOP does not
\n timely deliver an Excluded B Unit Exercise Notice or notifies Wilson that it
\n will not exercise its right to purchase the Excluded B Unit Wilson will have
\n the right to cause the applicable Project Entity or Owner (as applicable) to
\n market the applicable EOP Project (or at Wilson’s election, all but not less
\n than all of the related Project Entity’s interests therein) for sale and to
\n sell the EOP Project (or all such interests) to a third party, provided that
\n the sale closes within 225 days after (and a binding contract has been
\n entered into with 180 days after) EOP sends a notice declining to purchase
\n the Excluded B Unit. Wilson shall not sell (or allow to be sold) the EOP
\n Project for a price (the “EXCLUDED B UNIT THIRD PARTY PRICE”) that is less
\n than 100% of the Fair Market Value or on any other material terms, taken as
\n a whole, that are more favorable to the buyer than the Sale Terms
\n (disregarding the right of Wilson to receive OP Units), unless Wilson first
\n delivers a new offer to EOP specifying the Excluded B Unit Third Party Price
\n as the Project Price and amending the Sale Terms to provide the same terms
\n as for the proposed third party sale (the “MORE FAVORABLE THIRD PARTY
\n TERMS”). EOP shall then have the 30 days to send an Excluded B Unit Exercise
\n Notice at the Excluded B Unit Third Party Price and\/or More Favorable Third
\n Party Terms. If EOP does not deliver the Excluded B Unit Exercise Notice,
\n Wilson will be entitled to complete the third-party sale of the Project (or
\n all such interests) for an all cash price on the terms and conditions set
\n forth in this Section.<\/p>\n
11.12 Control of Projects Pending Sale. Notwithstanding anything herein
\n (including in SECTION 4.3) to the contrary, if EOP has delivered an Exercise
\n Notice or an Excluded B Unit Exercise Notice with respect to any Project, so
\n long as the EOP Group member who is the prospective purchaser of the Project
\n has not defaulted in its obligation to close, when so obligated to close,
\n EOP shall have the exclusive right to conduct, manage, control and make all
\n decisions (including all leasing negotiations and decisions with respect to
\n such Project including whether or not to enter into a lease and the terms of
\n any such lease, but excluding the right to cause Wilson to have new recourse
\n liability (other than customary non-recourse<\/p>\n
71
\n 78<\/p>\n
carve-outs and environmental indemnities) with respect to such Project) on
\n behalf of the Company with respect to such Project without Board approval<\/p>\n
12. DISSOLUTION AND WINDING UP.<\/p>\n
12.1 Dissolution. Causing a dissolution of the Company before the expiration
\n of the agreed term set forth in this Agreement, except as otherwise
\n expressly provided in this Agreement, will be a breach of this Agreement.
\n The Members agree that there is no adequate remedy at law for such breach
\n and consequently the agreement of each Member not to cause a dissolution
\n shall be specifically enforceable.<\/p>\n
This Company shall begin the Winding Up Period upon the first to occur of the
\nfollowing events (each, a “DISSOLUTION EVENT”):<\/p>\n
12.1.1 The expiration of the Company’s agreed term;<\/p>\n
12.1.2 The effective date of a written decision by all of the Members to
\n dissolve the Company;<\/p>\n
12.1.3 The sale or other voluntary disposition of all or substantially all of
\n the assets of the Company and the receipt of all of the consideration
\n therefor;<\/p>\n
12.1.4 Unless the Board otherwise determines, the tenth (10th) anniversary of
\n the Formation Date;<\/p>\n
12.1.5 At the election of Wilson in writing after it is true that neither
\n Samuel Zell nor Timothy Callahan are either Chairman or CEO of EOPT, but
\n prior to the date 60 days after EOP delivers a truthful notice to Wilson
\n that the foregoing has occurred;<\/p>\n
12.1.6 At the election of EOP in writing after the death, permanent disability
\n or resignation (other than Premature Resignation, defined below) of William
\n Wilson from Wilson, but prior to the date 60 days after Wilson delivers a
\n truthful notice thereof to EOP that the foregoing has occurred;<\/p>\n
12.1.7 At the election of either Member upon at least 180 days prior written
\n notice to the other Member, effective at any time after the three-year
\n anniversary of the Formation Date; and<\/p>\n
12.1.8 At the election in writing of the non-breaching party, provided that
\n (i) a final determination (“DEFAULT DETERMINATION”) in accordance with the
\n procedures of this Agreement for resolving Disagreements under SECTION 13.1
\n (Disagreements) has been made to the effect that such Member has committed
\n an uncured material breach of this Agreement (other than a failure to make
\n Additional Contributions, for which SECTION 5.2.2.2 (Failure to Make
\n Contributions) shall provide the exclusive remedy), and (ii) such material
\n breach remains uncured after more than 20 working days after the Default
\n Determination and notice thereof specifying the nature and extent of the
\n material breach (in the case of a failure to pay money) or after more than
\n 60 working days after the Default Determination and notice thereof from the
\n other Member specifying the nature and extent of the material breach (in the
\n case of any other breach).<\/p>\n
72
\n 79<\/p>\n
12.2 Winding Up.<\/p>\n
12.2.1 Winding Up. Upon the occurrence of a Dissolution Event and until the
\n Company finally liquidates, dissolves and files a certificate of
\n cancellation (the “WINDING UP PERIOD”): (i) except if the Dissolution Event
\n is a Default Determination in which event the defaulting party remains so
\n obligated, neither the EOP Group nor the Wilson Group will have any further
\n obligation to offer Qualifying Projects to the Company; (ii) subject to
\n Wilson’s purchase right described in SECTION 12.2.2 (Wilson Right to
\n Purchase Following Dissolution Event), the Company will not undertake New
\n Projects and EOP may elect to cause the Company to continue or discontinue
\n Projects which have been commenced but where the Company has not made any
\n commitments to third parties to complete the Project and the Company will
\n not suffer a net loss (not including lost profits) in excess of $500,000 if
\n the Project were disposed of rather than pursued (“DISCONTINUED PROJECTS”)
\n and to liquidate any land, options or other rights to Discontinued Projects,
\n or any interests therein; (iii) the Company will complete all then existing
\n pending Projects other than Discontinued Projects; (iv) EOP Projects will be
\n completed and offered to EOP or sold pursuant to the procedures outlined in
\n SECTION 11 (Put\/Call Provisions); (v) third party development contracts with
\n non-affiliated owners and Owners of Non-Company Projects will be completed
\n (or at EOP’s election and with the consent of Wilson (which consent shall
\n not be required if EOP’s Representatives voted not to make such Project an
\n Approved Project or not to accept or undertake the Development Contract),
\n assigned to one or more members of the Wilson Group); (vi) the Company will
\n attempt to complete Company Projects and upon completion the Company will
\n exercise any buy-sell rights or rights to sell the property contained in the
\n organizational documents of the Owner. Capital invested by the Company in
\n Projects will be distributed as Liquidating Distributions as Projects are
\n liquidated, and upon liquidation of the last project and other assets of the
\n Company, the Company will be liquidated.<\/p>\n
12.2.2 Wilson Right to Purchase Following Dissolution Event. If a Dissolution
\n Event occurs (except a Default Determination where Wilson is the defaulting
\n party), Wilson will have a right of first offer to purchase any land,
\n options or other rights to Projects that EOP has elected will not be
\n continued by the Company in accordance with SECTION 12.2.1 at a price which
\n EOP designates, in good faith, to be the Fair Market Value thereof and on
\n the same basis and terms as if Wilson had all the rights of EOP and EOP had
\n all rights of Wilson under the Right of First Offer (including Wilson’s
\n right to be re-offered such Project if not sold or a contract of sale has
\n not been entered into within 180 days after Wilson declines and thereafter
\n sold within 45 days at a price and on other material terms, taken as a
\n whole, no less favorable to the purchaser, but not (unless EOP elects in its
\n sole and absolute discretion) EOP’s obligation to structure the transaction
\n to involve OP Units), Wilson will be permitted to use the Company personnel
\n to develop those projects and new projects (the “OUTSIDE PROJECTS”)
\n independently of the Company provided the Wilson Principals and other
\n personnel of the Company and its Subsidiaries continue to commit sufficient
\n time and resources to the EOP Projects, Company Projects and any other work
\n and projects that are to be completed by the Company and further provided
\n that the compensation paid by the Company or its Subsidiaries to such
\n personnel shall be reduced by the portion of their time spent on Outside
\n Projects.<\/p>\n
73
\n 80<\/p>\n
12.2.3 Premature Resignation. Upon the occurrence of a Premature Resignation
\n (as defined below) of William Wilson, or the occurrence of a Dissolution
\n Event resulting from an uncured Wilson breach, in addition to any other
\n rights and remedies EOP has hereunder, Wilson will have no right of first
\n offer to purchase pursuant to SECTION 12.2.2, and in addition to any rights
\n and remedies secured to EOP hereunder, EOP will have the exclusive right to
\n make all decisions (other than decisions involving a conflict of interest;
\n provided that EOP’s right to purchase such Project shall not for any purpose
\n of this Agreement be deemed to be such a conflict), including all Major
\n Decisions with respect to (a) the completion, disposition and any other
\n matter related to EOP Projects and Company Projects, and (b) the disposition
\n of the other Company assets. A “PREMATURE RESIGNATION” will be deemed to
\n have occurred, subject to the provisions of SECTION 13.1.1 (Disagreements)
\n and a final determination thereunder and Wilson’s failure to effect a cure
\n within 30 days following notice of such final determination, if Wilson
\n resigns from Wilson or resigns as Chairman of the Company or otherwise
\n ceases to have a significant involvement in the business without the prior
\n consent of EOP (other than as a result of death or a permanent disability)
\n at any time before the third anniversary of the Formation Date. In addition,
\n upon a Premature Resignation, at the option of EOP, William Wilson and\/or
\n Thomas Sullivan may be replaced as an officer(s) of the Company by a person
\n selected by EOP, but neither Wilson, William Wilson nor Thomas Sullivan will
\n lose their continuing economic entitlements in the Company, the Projects and
\n Owners except to the extent provided herein or in the organizational
\n documents of the Owners.<\/p>\n
12.2.4 EOP Material Breach. Upon the occurrence of a Dissolution Event
\n resulting from an uncured EOP breach, Wilson will have the exclusive right
\n to make all Major Decisions with respect to (a) the completion, disposition
\n and any other matter related to EOP Projects and Company Projects, and (b)
\n the disposition of other the Company assets, other than decisions involving
\n a conflict of interest.<\/p>\n
12.3 Liquidation. During the Winding Up Period, Distributable Cash Flow and
\n Distributable Capital Proceeds shall continue to be distributed to the
\n Members as provided in SECTION 5.7 (Distributions) and Profits, Losses and
\n credits shall continue to be allocated between the Members as provided in
\n SECTION 5.8 (Allocations). Following a Dissolution Event and completion of
\n the matters described in SECTION 12.2.1 (Winding Up), the Company shall
\n dissolve and upon the occurrence of a Liquidating Transaction, a
\n “LIQUIDATOR,” who will be the Manager if not in default of its obligations
\n hereunder, or if the Manager is in default, a Member or third party selected
\n by EOP, will immediately complete the winding up of the Company’s affairs in
\n an orderly and businesslike manner.<\/p>\n
Following the Liquidating Transaction, Liquidation Proceeds and proceeds from
\nthe liquidation of the Company’s other assets, if any, will be applied in the
\nfollowing order of priority: 12.3.1 To the Company’s creditors, including
\npayment of amounts outstanding under with respect to the Working Capital Line
\nand<\/p>\n
Company Required Funds Loans, pro-rata and pari passu and the expenses of
\n liquidation, in the order of priority provided by law;<\/p>\n
12.3.2 To interest first and then principal on other debts owing to the
\n Members, and to other advances made by Members to or for the benefit of the
\n Company and to pay any <\/p>\n
74
\n 81<\/p>\n
outstanding leasing commissions and fees owed to leasing agents and property
\n managers, including to any Affiliates of any Members pro-rata and pari
\n passu;<\/p>\n
12.3.3 To set up any reserves that are reasonably determined by the Liquidator
\n to be necessary for any contingent liabilities of the Company, which
\n reserves shall be held by the Company or paid over to a bank as escrow
\n holder and shall be disbursed under the direction of the Liquidator in
\n payment of such contingent liabilities. As such contingent liabilities have
\n been paid or adequately provided for in the reasonable judgment of the
\n Liquidator, the balance of such reserves shall be distributed pursuant to
\n SECTION 12.3.4 below; and<\/p>\n
12.3.4 To the Members pursuant to the provisions of SECTION 5.7.2
\n (Distributable Capital Proceeds) and SECTION 5.7.4, and any Profits, Losses
\n and credits associated with the Liquidation Transaction and winding up of
\n the Company will be shared by the Members as provided in SECTION 5.8.1.<\/p>\n
12.4 Capital Account Deficit. A Member will be liable to the Company for all
\n or a portion of any deficit in its Capital Account only if it so elects (and
\n the other Members recognize such election) to be liable for such deficit or
\n portion thereof. Such election may be for any amount elected by the Member
\n and may be amended or withdrawn at any time. The election, and any amendment
\n thereof, will be made by written notice to the Manager stating that the
\n Member elects to be liable, and specifying the limitations, if any, on the
\n maximum amount or duration of such liability. A withdrawal of any such
\n election, or an amendment reducing the Member’s maximum liability, will not
\n be effective to avoid responsibility for any loss incurred prior to such
\n amendment or withdrawal. Any Member who has elected to be liable for all or
\n a portion of his Capital Account deficit shall contribute capital to the
\n Company under this provision at the time and in the form required by
\n Treasury Regulation Sec. 1.704-1(b)(2)(ii); if such regulation provides for
\n more than one date or mode of contribution, the contributing Member(s) may
\n select any time or mode of contribution so permitted. No third party,
\n including any creditor of the Company, shall have the right to enforce the
\n foregoing contribution obligations. In accordance with the foregoing: to the
\n extent, if any, that Wilson has a deficit capital account balance because it
\n has received distributions of not more than $1,244,000 under SECTION 5.7.2
\n that are in excess of capital gains Profits allocated to Wilson under
\n SECTION 5.8.1.2, Wilson shall have the obligation to restore this deficit
\n capital account balance by paying the amount of this deficit (not to exceed
\n $1,244,000) to the Company at the time of liquidation.<\/p>\n
13. MISCELLANEOUS PROVISIONS<\/p>\n
13.1 Disagreements.<\/p>\n
13.1.1 Mutual Agreement. This SECTION 13.1 shall cover resolution of disputes
\n concerning Arbitrable Decisions. An “ARBITRABLE DECISION” hereunder shall be
\n defined as any issue where the parties hereto are unable to reach resolution
\n at the Board level on any dispute arising hereunder where the parties are
\n required to act reasonably, but not including disputes regarding decisions
\n which may be made in the sole discretion of any party hereto or of any
\n Representative. Notwithstanding anything to the contrary herein, the
\n following shall <\/p>\n
75
\n 82<\/p>\n
not be Arbitrable Decisions: decisions to approve or not approve a Project
\n pursuant to SECTION 3.2.2, EOP’s decision whether or not to provide the
\n Specified Equity for a Project pursuant to SECTION 3.3, and either Member’s
\n exercise of its options and elections under SECTION 11. Notwithstanding
\n anything to the contrary herein, the following shall be Arbitrable
\n Decisions: the Board’s failure to agree on Major Decisions described in
\n SECTIONS 8.3.9, 8.3.10 (with respect to only those decisions for which the
\n Members are required to act reasonably), 8.3.11 (with respect to
\n expenditures that exceed the Company operating budget that, when aggregated
\n with other expenditures, exceed such budget by less than 50%), 8.3.19 (with
\n respect to only those decisions for which the Members are required to act
\n reasonably) and 8.3.21. Any party may at any time initiate the first step in
\n the resolution process set forth in this SECTION 13.1 (Disagreements) by
\n written notice (the “DISAGREEMENT NOTICE”) to the other parties. The
\n Disagreement Notice will set forth in brief form the nature of the dispute
\n and the initiating party’s understanding of the positions or proposals of
\n each party to the dispute and will call for a meeting (which may be
\n telephonic at the option of any Member) to occur at a date, time and place
\n designated in the notice, which date will be no earlier than two (2)
\n business days and no later than five (5) business days after the date of
\n delivery of the Disagreement Notice; provided, however, that any party
\n receiving a Disagreement Notice may, by written notice to all other parties
\n delivered at least one business day before the meeting date scheduled in the
\n Disagreement Notice, re-schedule the meeting date to a date no later than
\n five (5) business days after the meeting date set forth in the Disagreement
\n Notice, provided such party has first confirmed with all parties that its
\n proposed new meeting date is acceptable to all parties. The party sending
\n the Disagreement Notice and the addressee(s) shall together be termed the
\n “DISAGREEING PARTIES.” At the designated date, time and place, the
\n Disagreeing Parties shall each send a representative, who will have
\n authority to resolve the dispute and will be instructed to use good faith,
\n diligent efforts to resolve the dispute at that meeting. If a Disagreeing
\n Party does not send a representative, the Disagreeing Parties will be deemed
\n unable to resolve the dispute at the meeting.<\/p>\n
13.1.2 Dispute Brief. If the Disagreeing Parties are unable to resolve the
\n dispute by mutual agreement at the meeting required in the preceding
\n paragraph, each Disputant shall, within 10 business days following the date
\n of the meeting, deliver to all parties a thorough description and analysis
\n of the dispute and its position or proposal to resolve the dispute, together
\n with all materials that may be useful or necessary to support its
\n statements, positions or proposals (the “DISPUTE BRIEF”).<\/p>\n
13.1.3 Decision. All parties to this Agreement shall at all times designate an
\n individual (the “DECISION MAKER”) with full authority to resolve all
\n Arbitrable Decisions. In general, the Decision Maker shall be someone with
\n appropriate stature, position and authority and shall not be the person
\n involved in the day-to-day decision making for the Company or applicable
\n Project. Wilson hereby appoints William Wilson as its Decision Maker, and
\n EOP hereby appoints Tim Callahan as its Decision Maker. Any party may change
\n the designation of its Decision Maker at any time by written notice to all
\n parties. If the Disagreeing Parties are unable to resolve the dispute by
\n mutual agreement at the meeting required in SECTION 13.1.1, the Decision
\n Makers shall meet in person at the principal office of EOPT or by telephone
\n conference at 11:00 a.m. Central Standard Time on the sixth (6th) business
\n day following the date of the meeting held pursuant to SECTION 13.1.1 and
\n shall use good faith, <\/p>\n
76
\n 83<\/p>\n
diligent efforts to resolve the dispute at that meeting. The Decision Makers
\n may agree, in writing, prior to the stated meeting date and time, to hold
\n the meeting at another time, date or place; provided, however, that only one
\n such postponement will be permitted under any circumstances and that the
\n meeting must occur within eight (8) business days of the meeting held
\n pursuant to SECTION 13.1.1 above. If any Decision Maker does not attend a
\n meeting when required hereunder, the party who attended may, at its
\n election, proceed immediately to mediation or arbitration as provided
\n herein.<\/p>\n
13.1.4 Mediation. Except as otherwise provided in this Agreement, if the
\n parties have not resolved a Disagreement within ten (10) days after the
\n Mutual Delivery of the Dispute Briefs, the Disagreeing Parties will submit
\n the Disagreement to mediation by a mediator at the principal offices of the
\n Company. If the mediator is not selected by agreement of the Disagreeing
\n Parties within seven (7) business days after the Decision Makers meet, the
\n mediator will be chosen by JAMS\/ENDISPUTE. The mediator chosen by the
\n JAMS\/ENDISPUTE must be a lawyer or a judge or retired judge who has
\n conducted at least three commercial mediations in the preceding three (3)
\n year period, and who has practiced law in the area of real estate
\n development or public or private investments or heard at least three cases
\n involving substantial issues in these areas. The mediation shall be
\n conducted under such procedures as may be agreed to by the parties, or
\n failing such agreement, under the JAMS\/ENDISPUTE Mediation Rules. If a party
\n does not participate in the mediation, the other party may proceed
\n immediately to arbitration.<\/p>\n
13.1.5 Arbitration. If the Decision Makers are unable to resolve the
\n Disagreement by mutual agreement at their meeting, or as otherwise provided
\n herein, either Member may submit the Disagreement to arbitration to be
\n resolved by a single arbitrator. Unless, the parties agree otherwise, the
\n mediator shall act as the arbitrator. If the parties choose not to use the
\n mediator as the arbitrator, the Decision Makers shall try to agree on an
\n arbitrator selected from the a list of available JAMS\/ENDISPUTE commercial
\n arbitrators at their meeting. If the parties are unable to select an
\n arbitrator from this list one will be appointed on their behalf by
\n JAMS\/ENDISPUTE. In establishing whether an arbitrator is available to serve,
\n the parties will advise him or her of the names of all Disagreeing Parties
\n and other involved parties and the names of all of their Affiliates and the
\n names of all of their constituent partners, members, managers, board
\n members, principal shareholders (each holding more than a 10% interest) and
\n principal officers, and confirm that there is no conflict of interest. A
\n diligent effort will be made to select an arbitrator within the three (3)
\n business days immediately following the date of the meeting, and if no
\n arbitrator is confirmed by that third (3rd) business day, either Disputant
\n may request that an arbitrator be designated by JAMS\/ENDISPUTE. Within one
\n week of the selection of an arbitrator, each Disputant will deliver its
\n Dispute Brief, which may be modified, unless otherwise agreed by all
\n Disagreeing Parties, only to reflect changes in its proposal contained in
\n the original Dispute Brief arising as a result of the preceding negotiations
\n of the parties and which modification will be contained on a single (8 1\/2″
\n x 11″) piece of paper, within two (2) business days of the arbitrator’s
\n selection. The arbitrator may, at his or her discretion, meet separately
\n with the Disagreeing Parties or not at all or conduct a hearing attended by
\n all Disagreeing Parties. However, the arbitrator will allow the parties to
\n take a maximum of four depositions apiece and request the production of
\n documents from one another in disputes involving claims for $1,000,000 or
\n higher and the arbitrator will hold a hearing for claims in that amount or<\/p>\n
77
\n 84<\/p>\n
larger. The arbitrator will render his or her decision within two weeks of
\n receiving the Dispute Briefs or the termination of the hearing, whichever is
\n longer. The award or decision of the arbitrator shall be final and
\n enforceable in any court of competent jurisdiction; provided, however, that
\n the award may be vacated or corrected for any of the reasons permitted under
\n and pursuant to California Code of Civil Procedure Section 1286.2 or 1286.6.
\n The arbitrator shall have no authority to modify any of the terms of this
\n Agreement. The fees and expenses of the arbitrator shall be paid by the
\n Disputant who is not the prevailing party, as defined in SECTION 13.11
\n below. Unless otherwise provided in this agreement, the JAMS\/ENDISPUTE
\n Comprehensive Arbitration Rules and Procedures will apply.<\/p>\n
13.1.6 Fair Market Value. “FAIR MARKET VALUE” means the gross cash purchase
\n price at which a purchaser, being under no compulsion to do so, would be
\n willing to purchase a Project. If the parties are unable to determine the
\n Fair Market Value of a Project by mutual agreement, the parties shall use
\n the dispute resolution procedures set forth in this SECTION 13.1
\n (Disagreements), provided, that if the parties invoke the arbitration
\n procedures of SECTION 13.1.5 (Arbitration) (A) the arbitrator will be a
\n licensed real estate broker who has not been involved in more than two
\n transactions or business deals within the past five years, and who is not
\n currently involved in a transaction or business deal, with the Wilson Group
\n or the EOP Group and who is active in the leasing or purchase and sale of
\n properties such as the Project, as applicable under the circumstances, in
\n question in the general vicinity of and of a quality comparable to such
\n Project, and (B) the arbitrator will be required to choose the Fair Market
\n Value proposed by one of the Disagreeing Parties which is closest to the
\n arbitrator’s personal determination of Fair Market Value and will have no
\n authority to substitute his or her own estimation of the Fair Market Value.
\n This broker\/arbitrator will be chosen by mutual agreement of the parties,
\n and if they cannot agree upon the broker\/arbitrator within ten working days
\n after the request for the arbitration, then the broker\/arbitrator shall be a
\n person meeting the requisite requirements chosen by the JAMS\/ENDISPUTE.<\/p>\n
13.2 Default and Remedies. Except as otherwise set forth herein, upon any
\n Event of Default by a party hereto, the other parties shall have all rights
\n at law and in equity. If an Event of Default occurs with respect to Manager,
\n EOP may at any time upon written notice designate a replacement entity that
\n shall become the Manager; provided that such Manager shall have no liability
\n for any acts or omissions of the predecessor Manager(s). Notwithstanding
\n anything to the contrary herein, no party hereto shall be liable under any
\n circumstances for incidental or consequential damages. An “EVENT OF DEFAULT”
\n shall mean a breach of this Agreement (i) found to involve willful and
\n intentional misconduct or fraud, (ii) which is material and which the
\n breaching party is not diligently and promptly proceeding to cure after such
\n breach has been determined to have occurred pursuant to SECTION 13.1.5,
\n (iii) which is material and has not been cured within 30 days after such
\n breach has been determined to have occurred pursuant to SECTION 13.1.5; or
\n (iv) after a party has been determined pursuant to SECTION 13.1.5 (including
\n any settlement of a Dispute alleging such breach for which any of the
\n procedures set forth in SECTION 13.1.5 were used, if such party would not be
\n considered to be the prevailing party in the settlement of such Dispute) to
\n have breached this Agreement more than three times. In the event that there
\n is any Disagreement with respect to whether such a cure has been effected,
\n the Disagreement may be immediately submitted to an arbitrator pursuant to
\n SECTION 13.1.5 or the matter may <\/p>\n
78
\n 85<\/p>\n
proceed to resolution in a court of competent jurisdiction as determined by
\n the party alleging the failure to effect the cure.<\/p>\n
13.3 Execution by Power of Attorney. Any Member may execute this Agreement
\n or the Articles or any statement, certificate or document referred to in
\n SECTION 2.4 (Certificate of Formation) by an attorney-in-fact duly
\n authorized pursuant to a power of attorney.<\/p>\n
13.4 Applicable Law. This Agreement and the rights of the parties hereunder
\n shall be construed in accordance with, and governed by, the laws of the
\n State of Delaware, excluding its conflicts of laws principles, to the extent
\n of matters related to the LLC Act and otherwise shall be governed and
\n construed in accordance with the laws of the State of California, excluding
\n its conflicts of laws principles.<\/p>\n
13.5 Entire Agreement. This document represents the final, entire and
\n complete agreement between the parties with respect to the subject matter
\n hereof and supersedes all other prior or contemporaneous agreements,
\n communications or representations, whether oral or written, express or
\n implied, including any term sheets or other memoranda of discussion points.
\n The parties acknowledge and agree that they may not and are not relying on
\n any representation, promise, inducement, or other statement, whether oral or
\n written and by whomever made, that is not contained expressly in this
\n Agreement. This Agreement may only be modified by a written instrument
\n signed by representatives authorized to bind the respective parties. Oral
\n modifications are unenforceable.<\/p>\n
13.6 Successors. This Agreement shall be binding upon and inure to the
\n benefit of the parties hereto and their respective heirs, legal
\n representatives, successors and assigns; subject, however, to the provisions
\n of SECTION 10 (Transfers of a Member’s Interest).<\/p>\n
13.7 Notices. All notices, requests, demands, consents and other
\n communications (collectively, “NOTICES”) permitted or required to be given
\n under this agreement shall be in writing and shall be personally delivered,
\n sent by reputable express delivery service which guarantees next business
\n day delivery, or by telecopy, to the applicable addresses and telecopy
\n numbers set forth below, or to such other address as the party to receive
\n such communication has designated by notice to the other party. All such
\n Notices shall be deemed given and effective (i) if personally delivered,
\n upon receipt or refusal to accept delivery, (ii) if by such express delivery
\n service, on the next business day following deposit thereof with such
\n express delivery service, and (iii) if by telecopy, upon mechanical
\n confirmation of successful transmission thereof generated by the sending
\n telecopy machine; provided copy was sent for next business day delivery by
\n such an express delivery service. The inability to deliver because of a
\n changed address of which no notice was given, or rejection or other refusal
\n to accept any notice, shall be deemed to be the receipt of the notice by the
\n intended recipient as of the date of such inability to deliver or rejection
\n or refusal to accept. Any notice to be given by any party hereto may be
\n given by the counsel for such party.<\/p>\n
If to Wilson or any
\n of the Wilson
\n Principals: Wilson Investors – California, LLC
\n 199 First Street, Suite 200
\n San Francisco, CA 94105
\n Attn: Messrs. William Wilson III
\n and Thomas Sullivan<\/p>\n
79
\n 86<\/p>\n
with copies to: Farella Braun & Martel LLP
\n Suite 3000
\n 235 Montgomery Street
\n San Francisco, CA 94104
\n Attn: Jeffrey P. Newman<\/p>\n
If to EOP, EOP OP
\n or EOPT: EOP Investor, L.L.C.
\n c\/o Equity Office Properties Trust
\n 1200 17th Street
\n Suite 1130 Denver, CO 80202
\n Attn: _________________<\/p>\n
with copies to: EOP Investor, L.L.C.
\n c\/o Equity Office Properties Trust
\n Two North Riverside Plaza
\n 19th Floor
\n Chicago, IL 60606
\n Attn: _________________<\/p>\n
EOP Investor, L.L.C.
\n c\/o Equity Office Properties Trust
\n Two North Riverside Plaza
\n 19th Floor
\n Chicago, IL 60606
\n Attn: Vice President –
\n Development Investments<\/p>\n
EOP Investor, L.L.C.
\n c\/o Equity Office Properties Trust
\n Two North Riverside Plaza
\n 19th Floor
\n Chicago, IL 60606
\n Attn: General Counsel<\/p>\n
If to EOP Additional
\n Notice Person: EOP Investor, L.L.C.
\n c\/o Equity Office Properties Trust
\n Two North Riverside Plaza
\n 19th Floor
\n Chicago, IL 60606
\n Attn: Jeffrey S. Arnold<\/p>\n
If to Manager: Wilson Investors – California, LLC
\n 199 First Street, Suite 200
\n San Francisco, CA 94105
\n Attn: Messrs. William Wilson III
\n and Thomas Sullivan<\/p>\n
with copies to: Farella Braun & Martel LLP
\n Suite 3000
\n 235 Montgomery Street
\n San Francisco, CA 94104
\n Attn: Jeffrey P. Newman<\/p>\n
80
\n 87<\/p>\n
Any Member may, by written Notice given to the Manager and the other Members in
\naccordance with the provisions of this Section 13.6, designate one other person
\nor entity to receive copies of any Notices to such Member.<\/p>\n
13.8 Covenant of Further Assurances. The Members hereby agree to execute and
\n deliver all such documents and perform all such acts as may be necessary or
\n reasonably required to carry out the purposes and provisions of this
\n Agreement.<\/p>\n
13.9 Unenforceability of Certain Provisions. If any term, covenant or
\n condition of this Agreement or its application to any person or
\n circumstances shall be held to be illegal, invalid or unenforceable, the
\n remainder of this Agreement or the application of such term or provisions to
\n other persons or circumstances shall not be affected, and each term hereof
\n shall be legal, valid and enforceable to the fullest extent permitted by
\n law, unless an essential purpose of this Agreement would be defeated by the
\n loss of the illegal, unenforceable, or invalid provision. In the event of
\n such partial invalidity, the parties shall seek in good faith to agree on
\n replacing any such legally invalid provisions with valid provisions which,
\n in effect, will, from an economic viewpoint, most nearly and fairly approach
\n the effect of the invalid provision and the intent of the parties in
\n entering into this Agreement.<\/p>\n
13.10 Headings. The headings, captions and titles contained herein are
\n inserted solely for convenience and shall not be used in construing or
\n interpreting this Agreement.<\/p>\n
13.11 Statutes. Any reference herein to any statute, law, ordinance, code or
\n regulation or any section or provision thereof, shall be deemed to include
\n any future amendments thereto and any similar provisions of law that may
\n hereafter replace or be substituted for such provision, whether or not
\n designated by the same title or number.<\/p>\n
13.12 Attorneys’ Fees. In the event of any dispute between the parties,
\n whether based on contract, tort or other cause of action or involving
\n bankruptcy or similar proceedings, in any way related to this Agreement, the
\n non-prevailing party shall pay to the prevailing party all reasonable
\n attorneys’ fees and costs and expenses of any type, without restriction by
\n statute, court rule or otherwise, incurred by the prevailing party in
\n connection with any action or proceeding (including arbitration proceedings,
\n any appeal and the enforcement of any judgment or award), whether or not the
\n dispute is litigated or prosecuted to final judgment. The “prevailing party”
\n shall be determined based upon an assessment of which party’s major
\n arguments or positions taken in the action or proceeding could fairly be
\n said to have prevailed (whether by compromise, settlement, abandonment by
\n the other party of its claim or defense, final decision, after any appeals,
\n or otherwise) over the other party’s major arguments or positions on major
\n disputed issues.<\/p>\n
13.13 Cross-References. All cross-references in this Agreement, unless
\n specifically directed to another agreement or document, refer to provisions
\n within this Agreement.<\/p>\n
13.14 Investment Representation. Each Member, by executing this Agreement or
\n another instrument by which it is admitted to the Company, warrants that it
\n is acquiring its limited liability company interest solely for its own
\n account for investment and not with a view to or in connection with the sale
\n or distribution of any part thereof, and acknowledges that its Membership
\n Interest in the Company is not registered under the Securities Act of <\/p>\n
81
\n 88<\/p>\n
1933, as amended (the “SECURITIES ACT”) and that the transfer or sale of its
\n Company Interest may be restricted by the Securities Act and other
\n applicable federal and state Securities laws.<\/p>\n
13.15 Interpretation. All parties have been represented by counsel in the
\n preparation and negotiation of this Agreement, and this Agreement shall be
\n construed according to the fair meaning of its language. The rule of
\n construction to the effect that ambiguities are to be resolved against the
\n drafting party shall not be employed in interpreting this Agreement. Unless
\n the context clearly requires otherwise, (i) the plural and singular numbers
\n shall each be deemed to include the other; (ii) the masculine, feminine, and
\n neuter genders shall each be deemed to include the others; (iii) “shall,”
\n “will,” or “agrees” are mandatory, and “may” is permissive; (iv) “or” is not
\n exclusive; (v) “includes” and “including” are not limiting (e.g. “including”
\n means “including without limitation”; and (vi) “days” means calendar days
\n unless specifically provided otherwise.<\/p>\n
13.16 Amendments. Except as permitted in SECTION 5.6 (Capital Accounts), any
\n amendment to or modification of this Agreement must be approved and executed
\n by all Members.<\/p>\n
13.17 Counterparts. This Agreement may be signed in any number of
\n counterparts with the same effect as if the signatures to each counterpart
\n were upon a single instrument, and is intended to be binding when all
\n parties have delivered their signatures to the other parties. Signatures may
\n be delivered by facsimile transmission. All counterparts shall be deemed an
\n original of this Agreement.<\/p>\n
13.18 No Waiver. No consent or waiver by either party to or of any breach or
\n non-performance of any representation, condition, covenant or warranty shall
\n be enforceable unless in a writing signed by the party entitled to enforce
\n performance, and such signed consent or waiver shall not be construed as a
\n consent to or waiver of any other breach or non-performance of the same or
\n any other representation, condition, covenant, or warranty.<\/p>\n
13.19 Third Party Beneficiaries. This Agreement has been made solely for the
\n benefit of the parties hereto and their respective successors and permitted
\n assigns, and, except as otherwise expressly provided herein, nothing in this
\n Agreement is intended to, or shall, confer upon any other person any
\n benefits, rights or remedies under or by reason of this Agreement.<\/p>\n
13.20 Right to Cause the Company to Bring Actions. If any member of the EOP
\n Group that has joined in this Agreement, breaches its obligations hereunder
\n to the Company, Wilson shall have the right, in its own name and on behalf
\n of the Company, to bring an action against such member to require it to
\n honor such obligations and to recover any damages incurred, which lawsuit if
\n filed by the Company shall be brought and controlled by Wilson on behalf of
\n the Company, in Wilson’s sole and absolute discretion. If any member of the
\n Wilson Group that has joined in this Agreement, breaches its obligations
\n hereunder to the Company EOP shall have the right, in its own name and on
\n behalf of the Company, to bring an action against such member to require it
\n to honor such obligations and to recover any damages incurred, which lawsuit
\n if filed by the Company shall be brought and controlled by EOP on behalf of
\n the Company, in EOP’s sole and absolute discretion.<\/p>\n
82
\n 89<\/p>\n
13.21 Exhibits. All Recitals and Exhibits referred to in this Agreement are
\n incorporated herein by reference and shall be deemed part of this Agreement.<\/p>\n
13.22 Authority. Each of the individuals executing this Agreement on behalf
\n of EOP or Wilson individually represents and warrants that he or she has
\n been authorized to do so and has the power to bind the party for whom he or
\n she is signing.<\/p>\n
13.23 Time. Time is of the essence of this Agreement. In the computation of
\n any period of time provided for in this Agreement or by law, any date
\n falling on a Saturday, Sunday or legal holiday shall be deemed to refer to
\n the next day which is not a Saturday, Sunday, or legal holiday.<\/p>\n
13.24 Waiver Of Fiduciary Claims. Each of EOP and Wilson acknowledges and
\n agrees that to the extent a member (an “AFFILIATED LENDER”) of the EOP Group
\n or the Wilson Group makes loans pursuant to Sections 5.2.2 or 5.4 or
\n provides financing to a Project Entity or Owner, such loans are made in such
\n Affiliated Lender’s role as a third party lender. Any note evidencing any
\n such loan, together with the Affiliated Lender’s right to exercise its
\n remedies as a lender in the event of any default, is completely separate
\n from such Affiliated Lender’s indirect interest, through equity, as an
\n indirect owner of constituent membership interests in the Company, or any of
\n its Subsidiaries. Each of EOP and Wilson further acknowledges that the
\n Affiliated Lender would not have made the loan to borrower without the
\n waiver set forth below. Therefore, each of EOP, Wilson and the Company, for
\n themselves and on behalf of all of their constituent members, hereby waives
\n any right that it or any of such constituent members would otherwise have
\n hereunder, under the formation and organizational documents of the Company,
\n or otherwise under any legal theory based upon statutory or common law, to
\n bring any claim against such Affiliated Lender or any affiliate thereof,
\n asserting that such Affiliated Lender’s advancing funds or such Affiliated
\n Lender’s exercise of its rights or remedies as a lender, constitutes a
\n breach by such Affiliated Lender or any member of the Company, of any
\n fiduciary duty to the Company or to the direct or indirect constituent
\n members thereof. Each of EOP, Wilson and the Company acknowledges that it
\n was advised by competent legal counsel in reviewing this provision and that
\n it has elected to waive its rights and the rights of its constituent members
\n as provided above in consideration of for any loan described above by any
\n Affiliated Lender.<\/p>\n
83
\n 90<\/p>\n
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
\nday and year first above written.<\/p>\n
WILSON:<\/p>\n
WILSON INVESTORS – CALIFORNIA, LLC, a Delaware
\n limited liability company<\/p>\n
By: \/s\/ TOM SULLIVAN
\n —————————
\n Name: TOM SULLIVAN
\n ————————-
\n Title: MANAGER
\n ————————<\/p>\n
EOP:<\/p>\n
EOP INVESTOR, L.L.C., a Delaware limited
\n liability company<\/p>\n
By: EOP Operating Limited Partnership, a
\n Delaware limited partnership<\/p>\n
By: Equity Office Properties Trust, a
\n Maryland real estate investment trust,
\n its sole general partner<\/p>\n
By: \/s\/ STANLEY M. STEVENS
\n ——————————
\n Name: STANLEY M. STEVENS
\n ——————————
\n Title: EXECUTIVE VICE PRESIDENT
\n ——————————<\/p>\n
MANAGER:<\/p>\n
WILSON INVESTORS – CALIFORNIA, LLC, a
\n Delaware limited liability company<\/p>\n
By: \/s\/ TOM SULLIVAN
\n —————————
\n Name: TOM SULLIVAN
\n ————————-
\n Title: MANAGER
\n ————————<\/p>\n
S-1
\n 91<\/p>\n
The following persons are entering into this
\n Agreement for the limited purposes set forth
\n in the first paragraph of this Agreement:<\/p>\n
WILSON PRINCIPALS:
\n \/s\/ WILLIAM WILSON III
\n —————————
\n William Wilson III<\/p>\n
\/s\/ THOMAS P. SULLIVAN
\n —————————
\n Thomas P. Sullivan<\/p>\n
\/s\/ JACQUELINE U. MOORE
\n —————————
\n Jacqueline U. Moore<\/p>\n
\/s\/ RICHARD SPRINGWATER
\n —————————
\n Richard Springwater<\/p>\n
\/s\/ A. ROBERT PARATTE
\n —————————
\n A. Robert Paratte<\/p>\n
\/s\/ H. LEE VAN BOVEN
\n —————————
\n H. Lee Van Boven<\/p>\n
\/s\/ TERRY REAGAN
\n —————————
\n Terry Reagan<\/p>\n
\/s\/ SCOTT STEPHENS
\n —————————
\n Scott Stephens<\/p>\n
S-2<\/p>\n
92<\/p>\n
The following persons are entering into this
\n Agreement for the limited purposes set forth
\n in the first paragraph of this Agreement:<\/p>\n
EOP OP:<\/p>\n
EOP OPERATING LIMITED PARTNERSHIP, a Delaware
\n limited partnership<\/p>\n
By: Equity Office Properties Trust, a Maryland
\n real estate investment trust, its sole
\n general partner<\/p>\n
By: \/s\/ STANLEY M. STEVENS
\n —————————–
\n Name: Stanley M. Stevens
\n —————————
\n Title: Executive Vice President
\n ————————–<\/p>\n
EOPT:<\/p>\n
EQUITY OFFICE PROPERTIES TRUST, a Maryland
\n real estate investment trust<\/p>\n
By: \/s\/ STANLEY M. STEVENS
\n —————————–
\n Name: Stanley M. Stevens
\n —————————
\n Title: Executive Vice President
\n ————————–<\/p>\n
S-3<\/p>\n
93<\/p>\n
\n
\n1. DEFINITIONS………………………………………………………………………………….1
\n 1.1 Definitions………………………………………………………………………….1<\/p>\n2. ORGANIZATIONAL MATTERS………………………………………………………………………..7
\n 2.1 Formation……………………………………………………………………………7
\n 2.2 Name and Place of Business…………………………………………………………….7
\n 2.3 Purpose of the Company………………………………………………………………..7
\n 2.4 Certificate of Formation………………………………………………………………7
\n 2.5 Other Certificates……………………………………………………………………8
\n 2.6 Agent for Service of Process…………………………………………………………..8
\n 2.7 Term………………………………………………………………………………..8
\n 2.8 Costs of Formation……………………………………………………………………8<\/p>\n
3. PROJECT INVESTMENT AND OWNERSHIP……………………………………………………………….8
\n 3.1 Company Right of First Offer for New Project Opportunities in
\n Northern California…………………………………………………………………..8
\n 3.2 Opportunity Approval Process………………………………………………………….10
\n 3.3 EOP Projects………………………………………………………………………..12
\n 3.4 Presentation to EOP………………………………………………………………….12
\n 3.5 Company Projects…………………………………………………………………….19
\n 3.6 Non-Company Projects…………………………………………………………………20
\n 3.7 Existing Projects……………………………………………………………………21
\n 3.8 Contribution of Projects……………………………………………………………..22<\/p>\n
4. DEVELOPMENT MANAGEMENT……………………………………………………………………….24
\n 4.1 Development Management……………………………………………………………….24
\n 4.2 Property Management………………………………………………………………….25
\n 4.3 Leasing…………………………………………………………………………….25<\/p>\n
5. FINANCIAL MATTERS……………………………………………………………………………26
\n 5.1 Initial Cash Contributions……………………………………………………………26
\n 5.2 Additional Contributions and Loans…………………………………………………….28
\n 5.3 Failure to Make Contributions…………………………………………………………30
\n 5.4 EOP Working Capital Loan……………………………………………………………..32
\n 5.5 Guarantees………………………………………………………………………….32
\n 5.6 Capital Accounts…………………………………………………………………….34
\n 5.7 Distributions……………………………………………………………………….34
\n 5.8 Allocations of Profits and Losses……………………………………………………..39
\n 5.9 Loan to Wilson………………………………………………………………………42<\/p>\n
6. ACCOUNTING, BANKING, REPORTS………………………………………………………………….42
\n 6.1 Fiscal Year; Accounting Method………………………………………………………..42
\n 6.2 Accountants…………………………………………………………………………42
\n 6.3 Books and Records……………………………………………………………………42
\n 6.4 Reports and Financial Statements………………………………………………………42
\n 6.5 Banking…………………………………………………………………………….42
\n<\/c><\/c><\/c><\/s><\/table>\n
94<\/p>\n
\n
\n7. MANAGEMENT AND OPERATION OF THE COMPANY………………………………………………………..43
\n 7.1 Authority and Duties of Manager……………………………………………………….43
\n 7.2 Execution of Contracts……………………………………………………………….46
\n 7.3 Tax Matters Partner………………………………………………………………….46
\n 7.4 Compensation and Reimbursement of the Manager…………………………………………..47
\n 7.5 Insurance…………………………………………………………………………..47
\n 7.6 Officers and Employees……………………………………………………………….47
\n 7.7 Liability of Manager and Members………………………………………………………47
\n 7.8 Time Devoted to Company………………………………………………………………48
\n 7.9 Duties of Manager……………………………………………………………………48
\n 7.10 Withdrawal of Manager………………………………………………………………..49
\n 7.11 Severance Return…………………………………………………………………….49
\n 7.12 Wilson Principals……………………………………………………………………49
\n 7.13 Successors to Wilson Principals……………………………………………………….49
\n 7.14 Continuing Employees…………………………………………………………………49
\n 7.15 Employment Indemnities……………………………………………………………….50<\/p>\n8. COMPANY BOARD OF REPRESENTATIVES; CERTAIN MEMBER APPROVALS……………………………………….50
\n 8.1 Board of Representatives……………………………………………………………..50
\n 8.2 Meetings of Board, Committees and Teams………………………………………………..52
\n 8.3 Major Decisions……………………………………………………………………..53
\n 8.4 Member Decisions and Approvals; Conflicts of Interest……………………………………56
\n 8.5 Indemnification……………………………………………………………………..56<\/p>\n
9. MEMBERS…………………………………………………………………………………….58
\n 9.1 Liability of Members…………………………………………………………………58
\n 9.2 Matters on Which the Members are Entitled to Vote……………………………………….59
\n 9.3 Members’ Rights and Powers……………………………………………………………59
\n 9.4 Restrictions on Members………………………………………………………………59
\n 9.5 Indebtedness Instruments……………………………………………………………..59
\n 9.6 Non-Parties…………………………………………………………………………59<\/p>\n
10. TRANSFER OF A MEMBER’S INTEREST……………………………………………………………….59
\n 10.1 Definition………………………………………………………………………….59
\n 10.2 Transfers…………………………………………………………………………..60
\n 10.3 Substituted Members………………………………………………………………….61
\n 10.4 Conditions to Transfer……………………………………………………………….61
\n 10.5 Allocation of Benefits……………………………………………………………….61<\/p>\n
11. PUT\/CALL PROVISIONS………………………………………………………………………….61
\n 11.1 EOP Project Puts and Calls……………………………………………………………61
\n 11.2 Notice of Puts and Calls……………………………………………………………..61
\n 11.3 Closing…………………………………………………………………………….62
\n 11.4 Sale Price………………………………………………………………………….63
\n 11.5 Mode of Payment of Put\/Call Price……………………………………………………..64
\n 11.6 Right to Market EOP Project…………………………………………………………..66
\n<\/c><\/c><\/c><\/s><\/table>\n
95<\/p>\n
\n
\n 11.7 Right of First Offer…………………………………………………………………66
\n 11.8 Calculation of Promote Distribution in Connection With Third
\n Party Sales or Exercise of Right of First Offer…………………………………………66
\n 11.9 Second Phase and Partial Interest Projects……………………………………………..67
\n 11.10 Company Projects…………………………………………………………………….68
\n 11.11 Sale of Excluded B Units……………………………………………………………..69
\n 11.12 Control of Projects Pending Sale………………………………………………………69<\/p>\n12. DISSOLUTION AND WINDING UP……………………………………………………………………70
\n 12.1 Dissolution…………………………………………………………………………70
\n 12.2 Winding Up………………………………………………………………………….71
\n 12.3 Liquidation…………………………………………………………………………72
\n 12.4 Capital Account Deficit………………………………………………………………73<\/p>\n
13. MISCELLANEOUS PROVISIONS……………………………………………………………………..73
\n 13.1 Disagreements……………………………………………………………………….73
\n 13.2 Default and Remedies…………………………………………………………………76
\n 13.3 Execution by Power of Attorney………………………………………………………..76
\n 13.4 Applicable Law………………………………………………………………………77
\n 13.5 Entire Agreement…………………………………………………………………….77
\n 13.6 Successors………………………………………………………………………….77
\n 13.7 Notices…………………………………………………………………………….77
\n 13.8 Covenant of Further Assurances………………………………………………………..79
\n 13.9 Unenforceability of Certain Provisions…………………………………………………79
\n 13.10 Headings……………………………………………………………………………79
\n 13.11 Statutes……………………………………………………………………………79
\n 13.12 Attorneys’ Fees……………………………………………………………………..79
\n 13.13 Cross-References…………………………………………………………………….79
\n 13.14 Investment Representation…………………………………………………………….80
\n 13.15 Interpretation………………………………………………………………………80
\n 13.16 Amendments………………………………………………………………………….80
\n 13.17 Counterparts………………………………………………………………………..80
\n 13.18 No Waiver…………………………………………………………………………..80
\n 13.19 Third Party Beneficiaries…………………………………………………………….80
\n 13.20 Right to Cause the Company to Bring Actions…………………………………………….80
\n 13.21 Exhibits……………………………………………………………………………81
\n 13.22 Authority…………………………………………………………………………..81
\n 13.23 Time……………………………………………………………………………….81
\n 13.24 Waiver Of Fiduciary Claims……………………………………………………………81
\n<\/c><\/c><\/c><\/s><\/table>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7468],"corporate_contracts_industries":[9489],"corporate_contracts_types":[9573,9576],"class_list":["post-41658","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-equity-office-properties-trust","corporate_contracts_industries-real__reits","corporate_contracts_types-formation","corporate_contracts_types-formation__llc"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/41658","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=41658"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=41658"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=41658"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=41658"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}