AMENDED AND RESTATED OPERATING AGREEMENT
NO. 1
OF
WILSON/EQUITY OFFICE, LLC
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INDEX OF DEFINED TERMS
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Page
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A UNIT...........................................................................................................20
A UNIT VALUE.....................................................................................................64
ACCEPTANCE NOTICE................................................................................................70
ADDITIONAL CONTRIBUTIONS.........................................................................................29
ADJUSTED BALANCE..................................................................................................3
ADJUSTED CAPITAL..................................................................................................3
ADJUSTED DEFAULT CAPITAL..........................................................................................3
ADJUSTED PERMANENT CAPITAL AMOUNT.................................................................................3
AFFILIATE.........................................................................................................3
AGREEMENT.........................................................................................................1
APPROVED PROJECT.................................................................................................12
ARBITRABLE DECISION..............................................................................................75
B UNIT...........................................................................................................20
B UNIT EXCLUSION NOTICE..........................................................................................63
B UNIT VALUE.....................................................................................................65
BASE AMOUNT......................................................................................................37
BOARD.........................................................................................................2, 52
C UNIT...........................................................................................................20
C UNIT VALUE.....................................................................................................65
CALL DATE........................................................................................................31
CALL NOTICE......................................................................................................63
CALL RIGHT.......................................................................................................62
CAPITAL ACCOUNT..................................................................................................35
CAPITAL CALL.....................................................................................................28
CAPITAL GAIN PROFITS.............................................................................................41
CAPITAL PROCEEDS..................................................................................................3
CAPITAL TRANSACTION...............................................................................................4
CAUSE............................................................................................................40
CERTIFICATE.......................................................................................................9
CIC..............................................................................................................17
CLOSING..........................................................................................................64
CLOSING DATE.....................................................................................................64
CODE..............................................................................................................4
COMMITTEE........................................................................................................54
COMPANY...........................................................................................................1
COMPANY GROUP....................................................................................................70
COMPANY INTEREST.................................................................................................18
COMPANY LENDING MEMBER...........................................................................................30
COMPANY PROCEEDS.................................................................................................64
COMPANY PROJECTS.................................................................................................21
COMPANY REQUIRED EXPENDITURES....................................................................................30
COMPANY REQUIRED FUNDS...........................................................................................30
COMPANY REQUIRED FUNDS LOAN......................................................................................31
COMPANY SHARE OF EQUITY..........................................................................................14
COMPANY SHARE OF EQUITY PERCENTAGE...............................................................................14
CONCAR............................................................................................................1
CONCAR BASE AMOUNT...............................................................................................37
CONCAR RETURN....................................................................................................37
CONTRIBUTING MEMBER..............................................................................................31
CONTRIBUTION.....................................................................................................24
CONTRIBUTION AMOUNT..............................................................................................31
</TABLE>
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<TABLE>
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CONTRIBUTION CLOSING.............................................................................................24
CONTRIBUTION PERCENTAGE...........................................................................................4
CONTRIBUTOR......................................................................................................24
CORNERSTONE.......................................................................................................1
CORNERSTONE EMPLOYMENT CLAIMS....................................................................................51
DECISION DATE....................................................................................................22
DECISION MAKER...................................................................................................75
DEEMED APPROVAL PERIOD...........................................................................................17
DEFAULT CAPITAL...................................................................................................4
DEFAULT DETERMINATION............................................................................................72
DEFAULT PREFERRED RETURN..........................................................................................4
DILUTION AMOUNT...................................................................................................4
DILUTION CREDIT..................................................................................................32
DIRECT EOP INTEREST..............................................................................................18
DISAGREEING PARTIES..............................................................................................75
DISAGREEMENT NOTICE..............................................................................................75
DISCONTINUED PROJECTS............................................................................................72
DISPUTE BRIEF....................................................................................................75
DISSOLUTION EVENT................................................................................................71
DISTRIBUTABLE CAPITAL PROCEEDS....................................................................................4
DISTRIBUTABLE CASH FLOW...........................................................................................5
EOP...............................................................................................................1
EOP ADDITIONAL NOTICE PERSON......................................................................................5
EOP APPROVAL MATTERS.............................................................................................16
EOP APPROVAL PERSON..............................................................................................15
EOP CLOSING DELAY NOTICE.........................................................................................64
EOP DELAYED CLOSING DATE.........................................................................................64
EOP GROUP.........................................................................................................1
EOP INVESTMENT DETERMINATION.....................................................................................14
EOP INVESTOR..................................................................................................5, 14
EOP IRR..........................................................................................................37
EOP OP............................................................................................................1
EOP PERCENTAGE INTEREST...........................................................................................5
EOP PROJECT......................................................................................................14
EOP PROJECT ENTITY...............................................................................................17
EOP PROJECT ENTITY AGREEMENT.....................................................................................20
EOP REPRESENTATIVES..............................................................................................52
EOPT..............................................................................................................1
ESTIMATED PROJECT VALUE..........................................................................................56
EVENT OF DEFAULT.................................................................................................77
EXCLUDED B UNIT..................................................................................................63
EXCLUDED B UNIT CALL NOTICE......................................................................................70
EXCLUDED B UNIT EXERCISE NOTICE..................................................................................70
EXCLUDED B UNIT EXERCISE PRICE...................................................................................70
EXCLUDED B UNIT PUT NOTICE.......................................................................................70
EXCLUDED B UNIT THIRD PARTY PRICE................................................................................70
EXERCISE NOTICE..................................................................................................63
EXISTING PROJECT CONTRIBUTION AMOUNT..............................................................................5
EXISTING PROJECTS.................................................................................................1
FAIR ISAAC........................................................................................................1
FAIR MARKET VALUE................................................................................................77
FERRY BASE AMOUNT................................................................................................38
FERRY BUILDING....................................................................................................1
FERRY RETURN.....................................................................................................38
FIRST & HOWARD....................................................................................................1
FIRST LEVEL RETURN AMOUNT........................................................................................19
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FIRST/HOWARD BUILDING 2 BASE AMOUNT..............................................................................38
FIRST/HOWARD BUILDING 2 RETURN...................................................................................38
FIRST/HOWARD BUILDING 3 BASE AMOUNT..............................................................................38
FIRST/HOWARD BUILDING 3 RETURN...................................................................................38
FORMATION DATE....................................................................................................1
GENERAL EOP APPROVAL PERSONS.....................................................................................15
GOOD REASON......................................................................................................40
HAZARDOUS MATERIALS...............................................................................................5
INITIAL CASH CONTRIBUTION........................................................................................28
INVESTORS........................................................................................................21
LARKSPUR LANDING..................................................................................................1
LAST PROJECT......................................................................................................5
LEASING GUIDELINES...............................................................................................55
LIBOR............................................................................................................33
LIQUIDATING TRANSACTION...........................................................................................5
LIQUIDATION PROCEEDS..............................................................................................5
LIQUIDATOR.......................................................................................................73
LLC ACT...........................................................................................................9
LOAN RATE........................................................................................................33
MAJOR CHANGES....................................................................................................16
MAJOR DECISION...................................................................................................54
MAJOR DECISIONS...................................................................................................6
MANAGER........................................................................................................1, 6
MARKETED PROJECT.................................................................................................70
MARKETING MEMBER.................................................................................................70
MARKETING PERIOD.................................................................................................70
MEMBER GUARANTOR.................................................................................................34
MEMBERS...........................................................................................................6
MEMBERSHIP INTEREST...............................................................................................6
MERGER............................................................................................................1
MONEY MARKET RATE.................................................................................................6
MORE FAVORABLE TERMS.............................................................................................67
MORE FAVORABLE THIRD PARTY TERMS.................................................................................70
NAV..............................................................................................................66
NET OPERATING CASH FLOW...........................................................................................6
NEW PROJECTS......................................................................................................2
NON-COMPANY PROJECT..............................................................................................21
NON-CONTRIBUTING MEMBER..........................................................................................31
NON-MARKETING MEMBER.............................................................................................70
NOTICES..........................................................................................................78
OFFER............................................................................................................70
OFFER PRICE......................................................................................................70
OFFER TERMS......................................................................................................70
OP UNITS.........................................................................................................66
OPPORTUNITIES....................................................................................................10
OUTSIDE PROJECTS.................................................................................................73
OWNER.............................................................................................................7
PARKSIDE.........................................................................................................26
PARTIAL-INTEREST PROJECTS........................................................................................68
PAYING MEMBER GUARANTOR..........................................................................................34
PERCENTAGE INTEREST(S)............................................................................................7
PREMATURE RESIGNATION............................................................................................73
PRESUMED CLOSING DATE............................................................................................64
PRICING NOTICE...................................................................................................63
PROFITS OR LOSSES.................................................................................................7
PROJECT APPROVAL ITEMS...........................................................................................13
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PROJECT CAPITAL INVESTMENT........................................................................................7
PROJECT COMMENCEMENT..............................................................................................8
PROJECT COMPLETION................................................................................................8
PROJECT ENTITY....................................................................................................2
PROJECT FINANCING................................................................................................20
PROJECT INVESTMENT................................................................................................8
PROJECT LENDING MEMBER...........................................................................................30
PROJECT PRICE....................................................................................................63
PROJECT PROCEEDS.................................................................................................64
PROJECT REQUIRED EXPENDITURES....................................................................................30
PROJECT REQUIRED FUNDS...........................................................................................30
PROJECT REQUIRED FUNDS LOAN......................................................................................30
PROJECT RETURN....................................................................................................8
PROJECT STABILIZATION.............................................................................................8
PROJECTED YIELD...................................................................................................8
PROJECTS......................................................................................................2, 10
PROMOTE CALCULATION DATE.........................................................................................65
PROMOTE DISTRIBUTION.............................................................................................65
PROMOTIONAL INTEREST..............................................................................................8
PRO-RATA..........................................................................................................8
PUT NOTICE.......................................................................................................63
PUT RIGHT........................................................................................................63
QUALIFYING PROJECTS..............................................................................................10
REDEMPTION PERIOD................................................................................................31
REGULATIONS......................................................................................................35
REPRESENTATIVE...................................................................................................52
REPRESENTATIVE MAJORITY..........................................................................................54
RESPONSE PERIOD..................................................................................................63
RETURN...........................................................................................................39
RETURN FUNDS.....................................................................................................40
RETURNS..........................................................................................................39
RIGHT OF FIRST OFFER.............................................................................................67
ROFO NOTICE......................................................................................................70
SALE.............................................................................................................63
SALE TERMS.......................................................................................................63
SEAPORT PLAZA....................................................................................................26
SECOND PHASE PROJECTS............................................................................................68
SECURITIES ACT...................................................................................................81
SHARED GUARANTIES................................................................................................34
SHORTFALL AMOUNT.................................................................................................31
SHORTFALL CONTRIBUTION...........................................................................................31
SHORTFALL REDEMPTION.............................................................................................31
SPECIFIED EQUITY.................................................................................................14
SPECIFIED EQUITY PERCENTAGE......................................................................................14
SPECIFIED PROJECT ALLOCATION AMOUNT..............................................................................39
SPECIFIED PROJECT FUNDS..........................................................................................39
SPECIFIED PROJECTS...............................................................................................39
SUBSIDIARY(IES)...................................................................................................8
TAX MATTERS PARTNER..............................................................................................47
THIRD PARTY CLOSING DATE.........................................................................................67
THIRD PARTY PRICE................................................................................................67
TRANSFER.........................................................................................................61
UNSOLD PROJECT...................................................................................................68
WEBCOR...........................................................................................................17
WILSON............................................................................................................1
WILSON CLOSING DELAY NOTICE......................................................................................64
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WILSON DELAYED CLOSING DATE......................................................................................64
WILSON GROUP......................................................................................................9
WILSON PASSIVE INVESTMENT OPPORTUNITIES..........................................................................11
WILSON PERCENTAGE INTEREST........................................................................................9
WILSON PRINCIPALS.................................................................................................9
WILSON REPRESENTATIVES...........................................................................................52
WINDING UP PERIOD................................................................................................72
WORKING CAPITAL LINE.............................................................................................33
</TABLE>
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AMENDED AND RESTATED OPERATING AGREEMENT NO. 1 OF Wilson/Equity
Office, LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT NO. 1 (the "AGREEMENT") of
WILSON/EQUITY OFFICE, LLC, a Delaware limited liability company (the "COMPANY")
is executed as of August 1, 2000 and amends and restates in its entirety that
certain Operating Agreement of Wilson/Equity Office, LLC (the "PRECEDING
AGREEMENT"), dated as of August 1, 2000 by and among WILSON INVESTORS -
CALIFORNIA, LLC, a Delaware limited liability company ("WILSON"), as manager (in
such capacity, the "MANAGER" as such term is more specifically defined below)
and member, and EOP Investor, L.L.C., a Delaware limited liability company
("EOP"), formerly known as EOPMC Investor, L.L.C., as a member. EOP Operating
Limited Partnership, a Delaware limited partnership ("EOPOP") and Equity Office
Properties Trust, a Maryland real estate investment trust ("EOPT") are joining
into this Agreement only for limited purposes set forth in SECTIONS 3.1.3,
3.1.4, 3.3 (first paragraph only), 3.4, 3.7, 3.8, 4.1 (first paragraph only),
4.1.2.2, 5.5.3, 7.14 and 7.15. The Wilson Principals (defined below) are joining
into this Agreement only for limited purposes set forth in SECTIONS 3.1.3,
3.1.5, 3.6, 3.7, 7.8, and 7.12. EOP OP and each of the Wilson Principals shall
enter into a guarantee of their obligations hereunder in the form of Exhibit K.
RECITALS
A. Immediately prior to the Formation Date, Cornerstone Properties Inc., a
Nevada corporation, Cornerstone Properties Limited Partnership, a Delaware
limited partnership, and their Affiliates (collectively, "CORNERSTONE") owned,
or had the right to acquire, all or substantial interests in the following
properties located in Northern California with respect to which Cornerstone had
begun or expected to begin development activities: the project commonly known as
the Ferry Building, which is more particularly described on Exhibit A-1 to this
Agreement (the "FERRY BUILDING"), the series of related projects commonly known
as First & Howard, which is more particularly described on Exhibit A-2 to this
Agreement ("FIRST & HOWARD"); the project commonly known as Larkspur Landing
which is more particularly described on Exhibit A-3 to this Agreement ("LARKSPUR
LANDING"); the project commonly known as Concar, which is more particularly
described on Exhibit A-4 to this Agreement ("CONCAR"); and the project which is
just at its earliest stages commonly known as Fair Isaac, which is more
particularly described on Exhibit A-5 to this Agreement ("FAIR ISAAC") and
together with the Ferry Building, Larkspur Landing First & Howard, and Concar
the "EXISTING PROJECTS").
B. On the Formation Date, Cornerstone Properties Inc. was merged into EOPT, and
Cornerstone Properties Limited Partnership was merged into EOP OP (collectively
the "MERGER"). EOPT, EOP OP and their Affiliates are referred to in this
Agreement collectively as the "EOP GROUP" (each of which entities may be
referred to herein as a "member" of the EOP Group). As a result of the Merger,
certain of the entities comprising the EOP Group succeeded to substantially all
of the assets (including the Existing Projects) and operations of Cornerstone.
EOP OP and EOPT do not wish to directly invest in or own properties at the stage
of development of the Existing Projects and do not wish to engage in substantial
development management operations in Northern California. EOP is one of the
entities comprising the EOP Group.
C. The principals of Wilson include former employees, officers and shareholders
of Cornerstone with substantial experience in the investment in and development
of major office and mixed-use projects in Northern California.
D. The Company will be managed on a day-to-day basis by the Manager, provided
that specified major decisions will require the approval of the Company's board
of representatives (the "BOARD" as such term is more specifically defined
below).
E. Wilson and EOP intend to form a series of separate limited liability
companies or limited partnerships (each a "PROJECT ENTITY" in which the Company
owns an interest), to acquire, own and hold for long term capital appreciation
title to or interests in the Owners of each of the Existing Projects, and
possibly other office projects in Northern California expected to contain more
than 75,000 rentable square feet of office space or mixed use projects in
Northern California expected to contain more than 100,000 rentable square feet
of office space (the "NEW PROJECTS" and, together with the Existing Projects,
the "PROJECTS" as such term is more specifically defined below). The parties
expect that the EOP Group and the Wilson Group will offer certain potential New
Projects to the Company on the terms and conditions set forth herein. Manager
may also seek out potential investments for the Company on Manager's own
initiative. Manager, on behalf of the Company, will investigate, structure and
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recommend those potential New Projects (regardless of where originated) it
believes to be worthy of further consideration to the Company's Board and the
Board will determine which New Projects to pursue from time to time. The Company
will be the manager or general partner of each Project Entity and the Company,
Affiliates of EOP or Affiliates of Wilson, or a combination of the foregoing,
may have equity interests in Project Entities in accordance with the procedures
set out in this Agreement.
F. EOP and Wilson are forming the Company:
(i) to acquire, own, operate and hold for long term capital
appreciation interests in each of the Project Entities; and
(ii) to provide development management services and, in
limited circumstances, certain property management services to certain Owners,
to Affiliates of the Members, and to third parties, including third parties for
whom Cornerstone previously was providing property and development management
services.
G. The EOP Group plans to consider investing equity in the Existing Projects and
will have the opportunity to make equity investments and provide other financing
for Existing Projects and New Projects in accordance with the procedures
provided in this Agreement; provided, that if the EOP Group does elect to invest
equity in such Existing Projects, the parties have agreed on certain terms of
the EOP Group's investment in such Existing Projects.
H. EOP and Wilson will have certain purchase and sale rights with respect to
interests in and interests held by the Company, and as to Projects in which EOP
provides certain equity financing, the EOP Group will also have certain
comparable rights.
NOW THEREFORE, incorporating the foregoing Recitals and in consideration of the
mutual agreements and covenants contained herein, the parties hereby agree as
follows:
1. DEFINITIONS.
1.1 Definitions. In addition to the terms defined in the Recitals and elsewhere
in this Agreement, the following words, when capitalized, have the meanings set
forth below, unless the context otherwise requires. Terms defined in this
Agreement when preceded by the word "Project" shall have the same meanings with
respect to EOP Project Entities and the interests of the Company and the EOP
Investor therein as they have in this Agreement with respect to the Company and
the interests of EOP and Wilson herein (with adjustments in cross-referenced
section numbers and the like to correspond to the appropriate section numbers
and the like in the constituent documents of the EOP Project Entity).
1.1.1 ADJUSTED BALANCE: For EOP, its Adjusted Capital from time to time minus
$1,244,000 and for Wilson, its Adjusted Capital from time to time plus
$1,244,000.
1.1.2 ADJUSTED CAPITAL: For each Member, such Member's Initial Cash Contribution
and Additional Contributions (excluding Default Capital until and unless
converted to Adjusted Capital or redeemed pursuant to SECTION 5.3.2) reduced by
distributions of capital made to such Member pursuant to SECTION 5.7.2.4 and, in
the case of Project Adjusted Capital, contributions pursuant to SECTION 3.7.
1.1.3 ADJUSTED DEFAULT CAPITAL: For each Member, the Member's Default Capital
reduced by distributions of capital made to the Member pursuant to SECTIONS
5.7.1.2 and 5.7.2.2, and reduced to the extent a Member's Default Capital is
converted to Adjusted Capital pursuant to SECTION 5.3.2 (Redemption of
Contribution Default).
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1.1.4 ADJUSTED PERMANENT CAPITAL AMOUNT: An amount equal to $6,986,000 for EOP
and $7,014,000 for Wilson, less in the case of EOP 49.9%, and in the case of
Wilson 50.1%, of the total capital invested by the Company in any Project Entity
which is not returned or has not been returned, or deemed returned to the
Company as described in SECTION 11.4, upon sale or other transfer of the
applicable Project and liquidation of such Project Entity or upon the sale or
other transfer of the Company Interest in such Project Entity, and as the same
may be adjusted by written agreement of the Members entered into in their
respective sole and absolute discretion.
1.1.5 AFFILIATE: Any person or entity that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or under common control
with, another person or entity, or in which the person or entity owns more than
50% of the capital, profits or voting interests, which term may be used as an
adjective, noun or verb in any variation or tense.
1.1.6 AGREEMENT: This Agreement, including the Exhibits and Schedules to this
Agreement, as amended from time to time.
1.1.7 CAPITAL PROCEEDS: The net cash or other amounts received by the Company
directly or from a Project Entity from a Capital Transaction, including proceeds
from the Capital Transactions from any Project Entity (including through a
Project Entity from an Owner).
1.1.8 CAPITAL TRANSACTION: A sale or other disposition, financing or refinancing
of a capital asset owned directly or indirectly by the Company, including (i)
Projects or interests in real property owned by the Company, any Project Entity
or any Owner and (ii) interests in any Project Entity or Owner. A Capital
Transaction would include the receipt of a condemnation award, damages awarded
in litigation attributable to damage to or a diminution in the value of the
Project's real property that are not applicable to or paid as attorneys' fees
and costs of the litigation, or insurance proceeds in each case related to a
capital asset owned directly or indirectly by Company to the extent receipts
from the awards or proceeds are not used to repair or restore such capital
asset.
1.1.9 CODE: The Internal Revenue Code of 1986, as amended from time to time.
1.1.10 CONTRIBUTION PERCENTAGE: For Wilson, shall be equal to 50.1% and for EOP
shall be equal to $49.9%.
1.1.11 DEFAULT CAPITAL: Capital contributed pursuant to SECTION 5.3.1
(Contribution by Other Members) that the contributing Member has elected to
treat as such.
1.1.12 DEFAULT PREFERRED RETURN: A variable rate per annum equal to the highest
"prime rate" as published from time to time by the Wall Street Journal (or a
comparable publication if it is no longer being published) plus 8%, compounded
annually, but in no event greater than is permitted by applicable law.
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1.1.13 DILUTION AMOUNT: is defined in Section 5.3.2 (Redemption of Contribution
Default).
1.1.14 DISTRIBUTABLE CAPITAL PROCEEDS: The excess of (a) (i) the Capital
Proceeds from a Capital Transaction, and (ii) any decrease in the reserves of
the Company or a Project Entity or Owner, to the extent such reserves were
funded with proceeds from a Capital Transaction; over (b) the sum of (i) amounts
paid or payable by the Company to satisfy any debt required to be repaid in
connection with any Capital Transaction giving rise to the Distributable Capital
Proceeds or to satisfy liabilities and expenses attributable to the Capital
Transaction, (ii) any other costs or expenditures attributable to the Capital
Transaction or which are then due and payable by the Company or the applicable
Project Entity, (iii) such reserves as the Board determines are appropriate for
the Company and its future needs in connection; (iv) repayment of all principal
of and interest on the Company Required Funds Loans (provided that the amount
paid with respect to Company Required Funds Loans does not exceed the aggregate
amount in clause (a) that is derived from sources other than the Promotional
Interest, unless the Capital Proceeds are from the disposition of the Last
Project) and all interest on the Working Capital Line to the extent then due and
payable; (v) the entire outstanding balance under the Working Capital Line if
the Capital Proceeds are from the Last Project; and (vi) amounts needed to pay
any unpaid expenses in the development budget for the applicable Project.
1.1.15 DISTRIBUTABLE CASH FLOW: The total Net Operating Cash Flow of the
Company, after (i) payment of all expenses and obligations of the Company due
and payable to Members and Affiliates of Members not already accounted for in
the Net Operating Cash Flow calculation, (ii) the payment of current and
reasonably anticipated operating obligations of the Company, and (iii) the
creation of such reserves as the Board determines are appropriate for the
Company and its future needs.
1.1.16 EOP ADDITIONAL NOTICE PERSON: Initially, shall mean Laura Hassan but may
be changed at any time by EOP by giving notice to Wilson.
1.1.17 EOP INVESTOR: The EOP Group member which provides the Specified Equity
for an EOP Project and holds the Direct EOP Interest in the EOP Project Entity,
as provided in SECTION 3.3.
1.1.18 EOP PERCENTAGE INTEREST: A percentage from time to time equal to (i) the
aggregate Adjusted Balance and Dilution Credits, if any, of EOP, divided by (ii)
the aggregate Adjusted Balances and Dilution Credits, if any, of EOP and Wilson.
The initial EOP Percentage Interest is 49.9%.
1.1.19 EXISTING PROJECT CONTRIBUTION AMOUNT: with respect to any Existing
Project, shall mean that amount for such Project set forth on Exhibit B.
1.1.20 FORMATION DATE: June 20, 2000.
1.1.21 HAZARDOUS MATERIALS: Any substance: (i) that now or in the future is
regulated or governed by, requires investigation or remediation under, or is
defined as a hazardous waste, hazardous substance, pollutant or contaminant
under any governmental
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<PAGE> 11
statute, code, ordinance, regulation, rule or order, and any amendment thereto,
including the Comprehensive Environmental Response Compensation and Liability
Act, 42 U.S.C. ss.9601 et seq., and the Resource Conservation and Recovery Act,
42 U.S.C. ss.6901 et seq., or (ii) that is toxic, explosive, corrosive,
flammable, radioactive, carcinogenic, dangerous or otherwise hazardous,
including gasoline, diesel fuel, petroleum hydrocarbons, polychlorinated
biphenyls (PCBs), asbestos, radon and urea formaldehyde foam insulation.
1.1.22 LAST PROJECT: any Approved Project, the disposition of which would leave
the Company without any (i) Approved Projects under development, or (ii)
completed Approved Projects in which the Company continues to have its original
ownership interest.
1.1.23 LIQUIDATING TRANSACTION: The sale or other disposition of the last
Project in which the Company holds a direct or indirect interest or of all of
the Company's interest therein, including a sale or disposition of all of the
interest of the Company in the last Project Entity in which the Company holds an
interest.
1.1.24 LIQUIDATION PROCEEDS: The net cash or other assets received by the
Company from a Liquidating Transaction after payment of the costs the Company
incurs with respect to the Liquidating Transaction, plus any reserves held (and
no longer needed) by the Company with respect to the Projects that are the
subject of such Liquidating Transaction.
1.1.25 MAJOR DECISIONS: Those decisions listed in SECTION 8.3 (Major Decisions)
as requiring the approval of the Board.
1.1.26 MANAGER: Wilson and any successors as the manager of the Company as
approved by the Board, but only in their role as manager and not as a Member
hereunder.
1.1.27 MEMBERS: The members of the Company as they shall exist from time to
time, including, initially Wilson and EOP, and later, any Member that may
hereafter be admitted to the Company in accordance with the terms and conditions
hereof and any permitted transferee of all or a portion of a Member's Membership
Interest that is admitted as a substitute Member in accordance with SECTION 10
(Transfer of a Member's Interest).
1.1.28 MEMBERSHIP INTEREST: As to any Member at any given time, the Member's
interest in the Company, including the Member's Adjusted Capital, Adjusted
Balance, Adjusted Default Capital and Capital Account, Company Required Funds
Loans, rights to distributions, Profits and Losses and any other rights and
interests of the Member in the Company.
1.1.29 MONEY MARKET RATE: means the rate of interest paid on the Merrill Lynch
Ready Assets Trust as reported in the Wall Street Journal, or if the Wall Street
Journal ceases to report such rate, a comparable rate of interest.
1.1.30 NET OPERATING CASH FLOW: For the applicable period, means the excess
(calculated on a "cash" basis in accordance with customary accounting practices
for real estate entities consistently applied) of:
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1.1.30.1 the gross cash revenues and monies received by the Company for the
period from any source (including interest income, proceeds of rentaland
business interruption insurance and the amount, if any, by which a previously
established reserve is reduced, if the amount was established from operating
revenues and the Board determines it will not be needed, and net proceeds from
sales of personal and intangible property in the ordinary course of business),
but not including cash revenues and monies received as (1) capital contributions
to the Company, (2) loans or similar advances to the Company (including from
Members), (3) any Distributable Capital Proceeds, (4) security deposits or
prepaid rents from tenants, unless and until applied against tenant obligations
under leases and (5) Liquidation Proceeds; over
1.1.30.2 to the extent not excluded pursuant to SECTION 1.1.30.1 above, the sum
of all cash expenditures made by the Company, for or during the period for
anything other than expenses related to Distributable Capital Proceeds or
Liquidation Proceeds, including those relating to the operation, use,
maintenance or repair of, or in connection with, a capital asset of the Company
and all installments and payments of principal, interest and other sums, if any,
paid during the applicable period in connection with any loans secured by a
capital asset of the Company or other indebtedness of the Company, plus all
reserves funded or established by the Company, but not including (1) those
costs, expenses and capital expenditures paid from previously established
reserves, (2) the costs and expenses incurred in connection with a Capital
Transaction and paid from the gross proceeds from such Capital Transaction, (3)
distributions to Members, or (4) repayment or return of security deposits.
1.1.31 OWNER: The entity owning all the tangible property or quasi-property
interests comprising an Approved Project. The Owner may be a Project Entity if
there are no investors in the Project other than an EOP Investor and the
Company.
1.1.32 PERCENTAGE INTEREST(S): The EOP Percentage Interest and/or the Wilson
Percentage Interest, as the same may change from time to time.
1.1.33 PROFITS OR LOSSES: If the Company's taxable federal income or taxable
loss for a taxable year, as adjusted in the manner provided in subparagraphs (i)
through (iv) below, is a positive amount, that amount shall be the Company's
"PROFIT" for the taxable year; and if negative, that amount shall be the
Company's "LOSS" for the taxable year. For each taxable year, the Company's
taxable income or taxable loss for such taxable year, as determined under
Section 703(a) of the Code and Treasury Regulations Section 1.703-1 (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or taxable loss), but with the following adjustments:
1.1.33.1 Any tax-exempt income, as described in Section 705(a)(1)(B) of the
Code, realized by the Company during the taxable year shall be taken into
account in computing such taxable income or taxable loss as if it were taxable
income.
1.1.33.2 Any expenditures of the Company described in Section 705(a)(2)(B) of
the Code for the taxable year, including any items treated under Treasury
Regulations Sec. 1.704-1(b)(2)(iv)(i) as items described in Section 705(a)(2)(B)
of
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the Code, shall be taken into account in computing the taxable income or taxable
loss as if they were deductible items.
1.1.33.3 Any items of income, gain, loss or deduction that are required to be
allocated specially to the Members pursuant to SECTION 5.8.3 (Regulatory
Allocations) shall not be taken into account in computing such taxable income or
loss
1.1.33.4 In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing taxable income or loss, the Company
shall compute these deductions based on the book value of Company property, in
accordance with Treasury Regulations Sec. 1.704-1(b)(2)(iv)(g)(3).
1.1.33.5 Profit and Loss from the sale of any Company property shall be computed
according to the book value of the Company property.
The book value of Company property shall be, as of any particular date, the
value at which any asset of the Company is properly reflected on the books of
the Company as of that date in accordance with the provisions of Treasury
Regulations Sec. 1.704-1(b). 1.1.34 PROJECT CAPITAL INVESTMENT: With respect to
a Project, the aggregate equity investment by the Company in such Project.
1.1.35 PROJECT COMMENCEMENT: The commencement of substantial construction on a
Project beyond the demolition, environmental remediation and site grading stages
of construction.
1.1.36 PROJECT COMPLETION: (a) the substantial completion of core and shell
improvements on a Project, substantially and in all material respects in
accordance with the Approved Project Items with respect thereto, together with
(b) the issuance of a temporary or permanent "certificate of occupancy" for the
building core and shell, if and to the extent that such a certificate of
occupancy can be obtained prior to the completion of tenant improvements.
1.1.37 PROJECT INVESTMENT: With respect to a Project, the aggregate investment
(whether as equity or debt) by the Company in such Project.
1.1.38 PROJECT STABILIZATION: The date after the following requirements have
been met: (a) Project Completion has occurred, (b) leases have been signed for
the occupancy of not less than the greater of (i) 95% of the Market Average
Occupancy, or (ii) 85% of the rentable space in the Project, (c) all of the
events which are conditions precedent to the commencement of the leases referred
to in clause (b) of this subsection have occurred other than the passage of
time, and (d) all tenants under such leases have accepted all tenant
improvements for which the landlord or Owner is responsible as being completed
and have commenced paying rent. Manager shall notify the Board approximately 120
days prior to the date Manager believes will be the date Project Stabilization
will occur and again when it believes that a Project has reached Project
Stabilization. After Project Commencement, Manager shall report monthly to the
Board regarding the progress toward Project Stabilization of each Project. As
used in this subsection, "Market Average
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Occupancy" means the most recently published data from reliable industry sources
on the prevailing occupancy in the relevant market area in which the Project is
located.
1.1.39 PROJECTED YIELD: With respect to a Project, (i) the projected net
operating income in excess of operating expenses for the one-year period
following Project Stabilization, divided by (ii) all projected costs associated
with the Project prior to Project Stabilization.
1.1.40 PROMOTIONAL INTEREST: With respect to an EOP Project, the aggregate cash
distributions the Company has received or would be entitled to receive from the
EOP Project Entity under SECTIONS 0 and 0, or, with respect to Company Projects,
the aggregate cash the Company has received or is entitled to receive as
distributions from the corresponding Project Entity (the "PROJECT RETURN") to
the extent it exceeds the Project Return to which the Company would be entitled
if the Project Return were based solely on the Company's pro-rata percentage of
the equity contributed to the Project Entity.
1.1.41 PRO-RATA: With respect to the Members, in proportion to their Percentage
Interests at the time or times in question.
1.1.42 SUBSIDIARY(IES): Individually and collectively, Wilson/Equity Office,
Inc., Wilson/Equity Office, L.P., the Project Entities and any Owners of EOP
Projects or Company Projects and all other entities that are (or may be from
time to time) owned or controlled directly or indirectly by the Company or in
which the Company has an interest, including the Project Entities and the
Owners.
1.1.43 WILSON GROUP: Wilson, the Wilson Principals, and their respective
Affiliates, each or any of which may be referred to herein as a "member" of the
Wilson Group.
1.1.44 WILSON PERCENTAGE INTEREST: A percentage from time to time equal to (i)
the aggregate Adjusted Balance and Dilution Credits, if any, of Wilson, divided
by (ii) the aggregate Adjusted Balances and Dilution Credits, if any, of EOP and
Wilson. The initial Wilson Percentage Interest is 50.1%.
1.1.45 WILSON PRINCIPALS: William Wilson III, and, so long as they are employed
by the Company or any Subsidiary, any of Thomas P. Sullivan, Jacqueline U.
Moore, Richard Springwater, A. Robert Paratte, H. Lee Van Boven, Terry Reagan
and Scott Stephens and any person who has comparable direct or indirect economic
rights with respect to Wilson or the Company.
2. ORGANIZATIONAL MATTERS.
2.1 Formation. The parties to this Agreement have formed the Company as a
limited liability company pursuant to the provisions of the Delaware Limited
Liability Company Act (as amended from time to time, the "LLC ACT"). Unless
otherwise expressly provided in this Agreement, the rights and liabilities of
the Manager and the Members will be as provided in the LLC Act. To the extent
the provisions of this Agreement conflict with any provisions of the LLC Act,
the provisions of this Agreement will control, to the extent permitted by law,
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and the conflicting provisions of the LLC Act will be deemed waived to the
maximum extent permitted by law.
2.2 Name and Place of Business. The Company will transact business under the
name of "WILSON/EQUITY OFFICE, LLC" or such other name as the Manager may
hereafter select with the approval of the Board upon delivery of no less than
thirty (30) days prior written notice thereof to the Members. The principal
place of business of the Company shall be at 199 First Street, Suite 200, San
Francisco, California 94105, or at such other place as the Board may hereafter
determine upon delivery of no less than thirty (30) days prior written notice to
the Members.
2.3 Purpose of the Company. The principal business and purpose of the Company is
to (i) to acquire, own, operate and hold for long term capital appreciation
interests in each of the Project Entities, (ii) to acquire, own, operate and
hold for long term capital appreciation office real estate assets and interests
in new and existing Projects in Northern California, and (iii) to provide
development and property management services to certain Owners and certain other
owners of real property. The Company may engage in all activities that are
necessary and appropriate to the conduct of such business, but shall not engage
in any other business or activity without the unanimous consent of all Members.
2.4 Certificate of Formation. Manager has prepared, executed and filed in the
office of the Delaware Secretary of State the "Certificate of Formation" of the
Company in accordance with the LLC Act (the "CERTIFICATE") and shall prepare,
execute and file such amendments thereto as may be approved by the Members from
time to time, and shall cause a certified copy of the Certificate to be filed or
recorded in any county or location in which such filing or recording is required
by law or is deemed appropriate by the Manager.
2.5 Other Certificates. The Members shall execute and Manager shall file and
cause to be published or recorded from time to time such other statements,
certificates and other documents as may be required by law or as the Manager
deems appropriate in any state or county in which the Company transacts
business.
2.6 Agent for Service of Process. The name and address of the registered agent
of the Company for service of process on the Company in the State of Delaware is
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
WILSON/EQUITY OFFICE, LLC, 199 First Street, Suite 200, San Francisco,
California 94105, Attn: General Counsel is hereby designated as the agent of the
Company upon whom process issued by authority of or under any law of the State
of California may be served. The Manager may change the designation of the agent
for service of process and make any necessary filing with the Secretary of State
of the State of California.
2.7 Term. The Company will commence on the Formation Date, and, subject to the
provisions of SECTION 12 (Dissolution and Winding Up), will continue until
December 31, 2075, unless sooner terminated pursuant to the provisions of this
Agreement.
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2.8 Costs of Formation. The Company will reimburse each of the Members for its
reasonable attorneys' fees and costs incurred in connection with the formation
of the Company, including the preparation of this Agreement.
3. PROJECT INVESTMENT AND OWNERSHIP.
3.1 Company Right of First Offer for New Project Opportunities in
Northern California.
3.1.1 Qualifying Projects. Unless the Board otherwise agrees, the Company is to
invest directly or indirectly only in real estate development projects
("PROJECTS") in Northern California suitable for long term investment that are
expected to contain more than 75,000 rentable square feet of office space in
office projects or more than 100,000 rentable square feet of office space in
mixed-use office/retail/residential development projects ("QUALIFYING
PROJECTS"). Qualifying Projects shall not include existing, already constructed
office buildings not acquired with an intent to demolish and redevelop the
property.
3.1.2 Company as Vehicle for Qualifying Projects. Company investments may take
the form of interests in a Project Entity that directly owns a Project, or that
is a co-investor or joint venturer with one or more outside property owners,
investors or developers in a Project.
3.1.3 Presentation of Opportunities. The EOP Group and the Wilson Group will
offer to the Company all investment opportunities relating to Qualifying
Projects (the "OPPORTUNITIES") including Opportunities EOP may have involving
unrelated third parties in Northern California. For the purposes of this SECTION
3.1 (Company Right of First Offer for New Project Opportunities in Northern
California), notwithstanding the ownership structure in which a mixed-use
Opportunity is held, all portions of the mixed-use Opportunity will be treated
as a unified project and will not be "divided" up so that the Company (or the
retail or residential developer) participates only in the office (or retail or
residential) portions. The Wilson Principals and their Affiliates may
participate in mixed-use Opportunities through their investments in or through
Wilson/Meany, LLC, provided that if any mixed-use Opportunity involves joint
ownership of the retail component by any member of the Wilson Group and
Wilson/Meany, LLC (or another retail developer), Wilson will disclose such fact
(and the economic interest of any member of the Wilson Group therein and all
related information reasonably requested by EOP) to EOP at the time of the
Opportunity is presented to the Board pursuant to SECTION 3.2 (Opportunity
Approval Process). The EOP Group will not enter into another development joint
venture a significant business activity of which is an ongoing development
business for multiple projects in Northern California that solicits prospective
Projects not already controlled by a third party developer who brings an
investment opportunity to the EOP Group, nor will the EOP Group use the name of
EOP, EOP OP or EOPT or any variation thereof containing the word "Equity" or
"EOP" in the name of any development investment joint venture in Northern
California while the Company remains in business and is not in the Winding Up
Period; provided, however that EOP may identify any particular development
property or properties as projects of "Equity Office."
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3.1.4 EOP Excluded Opportunities. The obligation of the EOP Group to offer
Opportunities to the Company will not apply to investments where the Opportunity
is controlled by another party who is to be the developer. However, irrespective
of whether the Opportunity arises pursuant to a development joint venture, a
significant business activity of which is not a development business for
multiple projects in Northern California, or under investments permitted by the
preceding sentence of this SECTION 3.1.4, the EOP Group will not invest in such
Opportunities unless Wilson is offered the right to invest (directly or
indirectly) up to 20% of the equity that the EOP Group invests in such
Opportunities on the same terms as the EOP Group, unless the developer
controlling the Opportunity will not permit the EOP Group to participate if any
member of the Wilson Group were to hold such a direct or indirect interest.
3.1.5 Wilson Passive Investment Opportunities. The obligation of the Wilson
Principals to offer, and to cause their Affiliates to offer, Opportunities to
the Company will not apply to investments in Opportunities with respect to which
all of the following are true ("WILSON PASSIVE INVESTMENT OPPORTUNITIES") :
3.1.5.1 No member of the Wilson Group controls or manages the Project,
Opportunity or owner of the Opportunity, nor is any Wilson Principal an officer,
director, manager or managing member of any entity that does the foregoing;
3.1.5.2 William Wilson or other Wilson Principals or Affiliates do not own,
collectively, more than the greater of (A) 20% or (B) $2 million (but not in any
event to exceed 30%), of the contributed capital in the Opportunity or in the
owner of the Opportunity (except that William Wilson may invest, on a passive
basis, up to a total of $5 million (in the aggregate with respect to all Wilson
Passive Investment Opportunities) in projects controlled and managed by (or for
which the managing general partner or managing member receives a significant
promotional interest and is controlled and managed by) his children without
regard to these percentage limitations;
3.1.5.3 William Wilson or other Wilson Principals or Affiliates do not own and
are not directly or indirectly entitled to percentages of the cash flow, income,
profits or proceeds of the Opportunity or owner of the Opportunity greater than
the percentages set forth in SECTION 3.1.5.2, above or corresponding to the
capital interests permitted under SECTION 3.1.5.2 above;
3.1.5.4 None of William Wilson or the other Wilson Principals or their
Affiliates are actively involved in the management, leasing, entitlement
process, supervision of design or construction, raising of equity or otherwise
actively involved in the development of the Opportunity; and
3.1.5.5 The involvement of Wilson Principals and their Affiliates is consistent
with their duties as employees of the Company.
The obligation of each Wilson Principal to offer Opportunities to the
Company will continue so long as such Wilson Principal is an officer or employee
of the Company and the Company remains in business and is not in the Winding Up
Period, provided that in all events
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William Wilson's personal obligation to offer Opportunities to the Company will
remain in effect through the third anniversary of the Formation Date, even if he
is no longer an officer or employee of the Company, unless the Winding Up Period
has already commenced within such 3-year period.
3.2 Opportunity Approval Process.
3.2.1 Review of Opportunities. Manager will review and propose to the Board
potential investments in Qualifying Projects in Northern California which it
believes are in the Company's interest to pursue. Manager may cause the Company
to expend up to $50,000 in out-of-pocket costs to unrelated parties or such
greater sum as the Board may direct from time to time on any potential
Qualifying Project before the related Opportunity is brought to the Board for an
investment decision; provided, however that the Board has approved a budget line
item for such expenditures and the Company's aggregate annual expenditures for
such costs do not exceed the amount of such line item. The Company shall
evaluate any Opportunity brought to the Company by the EOP Group in the same
manner as if the Company staff or Wilson had first developed the Opportunity.
3.2.2 Board Approval. Notwithstanding that the Manager shall generally make the
Members aware of the general progress of the Company in pursuing an Opportunity,
because the decision of the Company to invest in a Qualifying Project would be a
Major Decision requiring the approval of the Board as described in SECTION 8.3
(Major Decisions), the Members have agreed to a formal process culminating in a
Board presentation in connection with the decision to invest in a particular
Project. The Representatives may approve or disapprove any Opportunity for
investment in the sole and absolute discretion of each Representative. Any
Opportunity so approved for investment by the Board is referred to as an
"APPROVED PROJECT." Concurrent with the Board making a Project an Approved
Project, the Board shall decide (i) upon a maximum capital investment (the
"MAXIMUM PROJECT INVESTMENT") in that Project, and (ii) if it wants the
opportunity to revisit this decision prior to beginning construction (the "TWO
STAGE PROCESS"). If the Board elects the Two Stage Process, then (a) the initial
decision shall specify the maximum pre-construction capital investment (the
"MAXIMUM PRE-CONSTRUCTION CAPITAL INVESTMENT") in the Project, and (b) prior to
construction the Devco Board will decide upon a revised Maximum Project
Investment in that Project and decide whether to commence construction. The
First & Howard, Concar, the Ferry Building, and Fair Isaac Project shall be Two
Stage Process Projects. The Maximum Pre-Construction Capital Investment for the
Ferry Building and Concar shall be set forth in resolutions of the Board, but
shall be deemed to be zero until so agreed. The second stage approval to
commence construction shall be deemed to have been granted for Building 2 at
First and Howard and Phase I (Buildings A and B) of Fair Isaac and the Maximum
Project Investments for such Projects shall be set forth in resolutions of the
Board, but shall be deemed to be zero until so approved.
3.2.3 Board Presentation and Wilson Recommendation. At the time a potential
Opportunity is brought to the Board for an investment decision, the proposal
will be accompanied by a written report prepared by Manager and containing the
recommendation of Manager to proceed to make an investment in the Opportunity,
together with the following
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information to the extent then available and any other items Manager chooses to
present for the Board's approval at that time:
3.2.3.1 identification and physical description of the location and site, and a
description of the known existing conditions and proposed improvements;
3.2.3.2 a preliminary development pro forma consisting of a proposed development
budget, projected investment returns and valuations and project schedule;
3.2.3.3 a proposed ownership and capitalization structure, including the
contemplated equity investments, if any, beyond the Company's proposed
investment;
3.2.3.4 a proposed target range for entitlements;
3.2.3.5 conceptual drawings;
3.2.3.6 the proposed project architect and general contractor (if known);
3.2.3.7 description of any fees payable to Wilson and/or any Wilson Principal or
Affiliates (which Wilson shall cause to be limited to market rates for actual
services being performed or property being sold (as distinct from promotional or
finder's fees));
3.2.3.8 a brief written statement of the project concept which will describe the
target market segment and corresponding intended quality level of the
improvements and any specific prospective tenants for the proposed development;
3.2.3.9 a proposed Maximum Pre-Construction Capital Investment; and
3.2.3.10 a proposed Maximum Project Investment.
All the items described above in this SECTION 3.2.3 are referred to as
"PROJECT APPROVAL ITEMS." Manager's presentation to the Board will also include
a description of the Project market, terms of purchase for the real property,
names of all sellers of the real property, a description of any material adverse
conditions of the property known to Manager, a statement of projected net
operating income, a description of the entitlements' projected timing and scope,
and description of pursuit costs to date, together with other information called
for in Exhibit C, in the form of Exhibit C. Exhibit C may be changed from time
to time by the Board. Manager shall not be required to present to the Board any
Opportunities that Wilson does not intend to instruct its Representatives to
approve as described in SECTION 3.2.2. The Company shall not commence
construction on any Approved Project prior to such Project becoming either an
EOP Project or a Company Project. The Company shall not commence construction on
any Approved Project for which the Board has chosen the Two Stage Process prior
the Board expressly determining the revised Maximum Project Investment and
expressly electing to commence construction.
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3.3 EOP Projects. EOP will have the opportunity to provide, in its sole and
absolute discretion, certain equity for Approved Projects on the following
terms; it being agreed that EOP may elect in writing at any time by notice to
Wilson and the Company to have its rights under SECTION 3.4 be exercised not by
EOP but instead by any member of the EOP Group (EOP or such other member of the
EOP Group that is wholly owned (directly or indirectly) by EOP OP or EOPT, if
any, designated by EOP to exercise such rights herein called, an "EOP
INVESTOR"), and following any such election all references herein to EOP in its
capacity as an investor in and partner or member of the Project Entity will be
deemed references to EOP Investor. Whether the rights are exercised by EOP or
another EOP Investor, both will be bound by the elections made by EOP or the EOP
Investor with respect to these rights and EOP OP will be obligated to fund or to
cause the EOP Investor to fund all amounts that the EOP Investor is obligated to
fund to the applicable Project Entity as required pursuant to SECTION 3.4.2.
3.4 Presentation to EOP. It is contemplated that at the time the Board first
approves an investment in an Opportunity, and that Opportunity therefore becomes
an Approved Project, it may not be known at that time whether and to what extent
additional equity capital (in excess of what the Company will invest) will be
needed for the Approved Project. However, at such time as the Manager reasonably
deems appropriate and before any equity capital other than Company equity is
solicited for investment in the Project Entity for the Approved Project, the
Manager will submit the investment Opportunity to EOP (the "EOP INVESTMENT
DETERMINATION"), providing EOP with (i) the amount of equity (the "SPECIFIED
EQUITY") requested of EOP (which shall be Manager's best estimate of 60% (or
such greater percentage as the Board may determine (in the sole and absolute
discretion of each Board Member) for any Project) (in either event, the
"SPECIFIED EQUITY PERCENTAGE"), of the total equity required for the Project),
(ii) the then-current approved budget and pro forma for the Project and (iii)
the related Project Approval Items, for EOP to determine whether EOP desires to
provide the Specified Equity for the Approved Project. EOP will deliver notice
of its determination whether to provide such equity in writing within 30 days
after the foregoing have been submitted to EOP, and EOP will be deemed to have
elected not to make the requested equity investment in the Project Entity unless
it elects in writing to commit to this investment within this period.
3.4.1 EOP Approval of EOP Project and Related Project Approval Items. If EOP
elects to provide all of the Specified Equity, that Project will be an "EOP
PROJECT" and the Company will provide the amount of equity (the "COMPANY SHARE
OF EQUITY") equal to (i) the total estimated as required by Manager, multiplied
by (ii) 100% minus the Specified Equity Percentage (the "COMPANY SHARE OF EQUITY
PERCENTAGE"). For each EOP Project, EOP will have been deemed to have consented
to the related Project Approval Items, as modified from time to time in
accordance with this SECTION 3.4.1; it being agreed that notwithstanding any
election by EOP to designate EOP Investor to exercise its rights under SECTION
3.4, EOP (and not EOP Investor) will have the exclusive right to exercise the
rights of EOP under this SECTION 3.4.1, and EOP and EOP Investor will be bound
by the acts or failures to act of EOP with respect to these rights under this
SECTION 3.4.1.
With respect to each EOP Project, EOP will have the right to approve material
changes to any Project Approval Items in accordance with this SECTION 3.4.1 and
SECTION 8.4 (Member Decisions and Approvals; Conflicts of
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Interest) and to approve other EOP Approval Matters, such approval not to be
unreasonably withheld, conditioned or delayed, and EOP may not disapprove such
items if such disapproval conflicts with previously approved Project Approval
Items or other previously approved EOP Approval Matters. The Company shall not
commence construction on any EOP Project, unless and until the Board has
approved a detailed project budget for such Project, which approval shall be
subject to the requirements of the immediately following sentence.
Notwithstanding anything to the contrary herein (including the foregoing
provisions requiring that EOP may not unreasonably withhold, condition or delay
its consent to material changes to Project Approval Items), it shall be
reasonable for EOP to withhold its consent (and EOP may withhold such consent in
its sole and absolute discretion) to any (i) increases in the aggregate amount
of the originally approved development budget of greater than 2.00% or (ii)
changes to other Project Approval Items (as such Project Approval Items may have
been approved by the Board in its sole and absolute discretion) which, when
taken as a whole, result in (a) a Project of materially different size or
materially different quality, (b) Projected Yield being less, by 50 basis points
(0.50%) or more, than that projected in the then-approved development budget if
the Projected Yield after such changes is more than 11.00%, (c) Projected Yield
being less, by 25 basis points (0.25%) or more, than that projected in the
then-approved development budget if the Projected Yield after such changes is
less than or equal to 11.00%, or (d) the Projected Yield being less than 10.50%.
With respect to each EOP Project, Wilson shall not unreasonably delay, withhold
or condition its consent to any matter for which its consent is solicited by EOP
to the extent the matter is one which EOP could not unreasonably delay, withhold
or condition its consent if Wilson asked for EOP's approval thereto.
EOP will from time to time designate to Wilson in writing at least up to three
officers, employees or agents of EOP or its Affiliates (each an "EOP APPROVAL
PERSON") who will have the right to participate in and authority to grant
approvals on behalf of EOP with respect to EOP Projects in accordance with this
SECTION 3.4.1, each with designated authority to grant or deny certain
categories of approvals specified by EOP. Each EOP Approval Person will have the
authority on behalf of EOP to give binding approvals with respect to such area
of authority. At least one EOP Approval Person, who may be one of the EOP
Representatives (the "GENERAL EOP APPROVAL PERSONS"), will have authority on
behalf of EOP to give binding approvals in writing with respect to any approvals
relating to an EOP Project or Project Approval Item, including Major Decisions
with respect to such Projects.
This approval process will be generally as follows:
3.4.1.1 With respect to an EOP Project or a Company Project, Wilson and EOP will
have the right to approve any changes to Project Approval Items which are
material or which, when aggregated with other changes to Project Approval Items
not previously approved, are material; provided, however, that consent to such
material changes shall (i) not be unreasonably delayed, conditioned or withheld
to the extent provided in SECTION 3.4.1, and (ii) not be required if such
material change follows necessarily from previously approved Project Approval
Items or EOP Approval Matters (other than matters where approval was required
under this clause (ii)). Changes in Project Approval Items deemed to be material
shall include the selection or change of the principal architect or general
contractor for the Project or modifications which materially affect the overall
quality or efficiency of the Project or the Project exterior or lobbies or the
Project building systems. Matters described in this SECTION 3.4.1.1 are referred
to as "MAJOR CHANGES."
3.4.1.2 Major Decisions and Major Changes on which EOP has approval rights are
referred to as "EOP APPROVAL MATTERS." The Manager may not take or cause the
Company to take actions on any EOP Approval Matters unless EOP has given its
approval for such actions in one of the ways expressly set forth in this SECTION
3.4.1. All matters which do not constitute EOP Approval Matters may be managed
and decided upon for the Company by the Manager and the Company staff under the
Manager's direction acting reasonably and in good faith, provided EOP has been
able to participate in relevant team meetings as provided in SECTION 3.4.1.4.
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3.4.1.3 EOP Approval Matters which are decided at the Board level, during
conferences or at meetings (whether face-to-face or telephonic) in which an EOP
Representative and a Wilson Representative were present, or through other
communications between Wilson and an EOP Representative or EOP Approval Person,
will be deemed binding on EOP and Wilson for all purposes provided such
approvals are expressly identified and described in written minutes of such
meetings which are circulated to EOP by email to the EOP Approval Person or EOP
Representative that took part in the telephone conference or meeting, with copy
of the email to be sent by telecopy to that same EOP Representative or EOP
Approved Person, the EOP Additional Notice Person and to one other EOP Approval
Person, and expressly identified therein in capital, bold or italic letters, as
EOP's consent to EOP Approval Matters, unless EOP objects to such minutes
pursuant to SECTION 3.4.1.5.
3.4.1.4 The appropriate EOP Approval Persons may participate in Company team
meetings relating to the EOP Project which are to be scheduled generally on a
monthly basis, and decisions made at these meetings, including those related to
EOP Approval Matters, will be deemed to have been made and approved by EOP and
Wilson so long as at least one EOP Approval Person with the relevant authority
and one Wilson Representative concurred in the decision, and further provided
that such approvals are expressly identified and described in written minutes of
such meetings which are circulated to EOP by email to the EOP Approval Person or
EOP Representative that participated in the telephone conference or meeting,
with copy of the email to be sent by telecopy to that same EOP Approval Person
or EOP Representative, the EOP Additional Notice Person and to one other EOP
Approval Person, and prominently expressly identified therein in capital, bold
or italic letters, as EOP's consent to EOP Approval Matters unless EOP objects
to such minutes pursuant to SECTION 3.4.1.5.
3.4.1.5 Minutes of the Board meetings will, and, at Manager's option, minutes of
other conferences or meetings referred to in SECTIONS 3.4.1.3 and 3.4.1.4
(whether or not an EOP Approval Person or Representative attends) may, be
produced by Manager or a person designated by Manager and any matters requiring
the approval of the Members expressly identified and described in such minutes
will be deemed approved by Wilson and EOP if, within the applicable Deemed
Approval Period after delivery of minutes meeting the requirements specified
above, such Member or its Representative does not object to such minutes in
writing, explaining the matters objected to and correcting such minutes. The
"DEEMED APPROVAL PERIOD" shall be 10 business days if the matter is a Major
Decision and 5 business days if the matter is a Major Change.
3.4.1.6 To the extent not made at the Board level or otherwise approved as
provided above, when Manager or the Company staff propose to make decisions that
constitute EOP Approval Matters, Manager or the Company staff shall notify EOP
of the proposed decision by written notice to an authorized EOP Approval Person
expressly identifying therein in capital, bold or italic letters, the proposed
change as potentially being an EOP Approval Matter with respect to the Project
Approval Items and these changes will be deemed to be consented to by EOP if not
objected to by EOP or an authorized EOP Approval Person in writing or by email
within the applicable Deemed Approval Period in a notice specifying the proposal
objected to and the reasons therefore.
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3.4.1.7 Notwithstanding any of the provisions in this SECTION 3.4.1 regarding
the process for confirming minutes of meetings or when any decision is binding
on EOP or Wilson, whether involving an EOP Approval Matter or any other
decision, any decision shall be deemed binding on EOP and Wilson whenever any
EOP Approval Person with the relevant authority as specified herein and any
Wilson Representative, has signed or initialed (which may be by facsimile) any
writing that states the decision made, and expressly identifies such decision in
capital letters or italics as an EOP Approval Matter.
3.4.1.8 Webcor Builders, Inc. ("WEBCOR") and the Commercial Interior Contractors
division of WCP Services, Inc. ("CIC") will be deemed preapproved as
contractors, provided, however, that Webcor may be disapproved at any time
thereafter by any Member for cause.
3.4.1.9 Unless already submitted to the Board, items to which a party objects
under the foregoing procedures which are not resolved through further discussion
will be submitted to the Board for decision promptly following the request of
either party pursuant to SECTION 13.1 (Disagreements).
3.4.2 EOP Project Owner Structure and EOP Capital. All EOP Projects (or the
interest of the Company and the EOP Investor therein) will be held through a
Project Entity in which the Company is the manager or general partner, as the
case may be, and the Company and the EOP Investor are the members or limited
partners (an "EOP PROJECT ENTITY"). The EOP Investor will provide the Specified
Equity and the Company will provide the Company Share of Equity. If Wilson has
conditioned its obligation to provide capital to the Company relating to the
applicable EOP Project pursuant to SECTION 5.2.1, the date on which the
Specified Equity and Company Share of Equity shall be due shall be the date
Wilson becomes obligated to provide such capital to the Company, but may, in
each party's respective sole and absolute discretion, be funded prior to such
date. All such equity for an EOP Project will be funded pari passu by the EOP
Investor and the Company on a ratable basis. Notwithstanding the above and
notwithstanding anything to the contrary contained herein, (a) the EOP Investor
shall not have to fund the Specified Equity in response to any Project Capital
Call which the Company does not fund, provided such failure of the Company to
fund is not due to EOP's failure to provide its required capital to the Company;
and (b) the Company shall not have to fund the Company Share of Equity (nor
shall Wilson or EOP have to contribute to the Company their allocable shares of
the Company Share of Equity) in response to any Project Capital Call which the
EOP Investor does not fund. Any equity, in addition to the Specified Equity and
the Company Share of Equity, that turns out to be required for the EOP Project
shall be handled as described in SECTION 5.2. The interests of the EOP Investor
and the Company in the EOP Project Entity are referred to herein as the "DIRECT
EOP INTEREST" and the "COMPANY INTEREST," respectively. Each EOP Project Entity
Agreement will contain the analogous provisions and remedies for the failure of
a member to make required contributions of Project Equity as are contained in
SECTION 5.3 (Failure to Make Contributions), except as otherwise expressly
provided herein. Such agreements shall provide that the Project Distributable
Cash Flow and Project Distributable Capital Proceeds from an EOP Project (which
shall be determined after paying interest and principal on Project Required
Funds Loans) shall be distributed as set forth below.
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3.4.2.1 Project Distributable Cash Flow. Each EOP Project Entity will distribute
Project Distributable Cash Flow to the Company and the EOP Investor, within
thirty (30) days following the end of each calendar quarter, in the following
order and priority; provided, however, that prior to Project Stabilization,
Project Distributable Cash Flow will be distributed if and only if the EOP
Project Entity has funded and maintains reserves at levels reasonably specified
by EOP:
3.4.2.1.1 First, to the Company and the EOP Investor (ratably and pari passu,
with neither having priority over the other) in proportion to each entity's
accrued and unpaid Project Default Preferred Return, until the accrued and
unpaid Project Default Preferred Return for each of such entities is reduced to
zero;
3.4.2.1.2 Second, to the Company and the EOP Investor (ratably and pari passu,
with neither having priority over the other) in proportion to each entity's
Project Adjusted Default Capital, until the Project Adjusted Default Capital of
each of such entities is reduced to zero; and
3.4.2.1.3 Third, to the Company and the EOP Investor (ratably and pari passu,
with neither having priority over the other) in proportion to their Project
Percentage Interests at the end of the calendar quarter for which the
distribution is being made.
3.4.2.2 Project Distributable Capital Proceeds. Each EOP Project Entity will
distribute Project Distributable Capital Proceeds to the Company and the EOP
Investor, within sixty (60) days after receipt of the same, in the following
order and priority:
3.4.2.2.1 First, to the Company and the EOP Investor (ratably and pari passu,
with neither having priority over the other) in proportion to each entity's
accrued and unpaid Project Default Preferred Return, until the accrued and
unpaid Project Default Preferred Return for each of such entities is reduced to
zero;
3.4.2.2.2 Second, to the Company and the EOP Investor (ratably and pari passu,
with neither having priority over the other) in proportion to each entity's
Project Adjusted Default Capital, until the Project Adjusted Default Capital for
each of such entities is reduced to zero;
3.4.2.2.3 Third, to the Company and the EOP Investor (ratably and pari passu,
with neither having priority over the other) in proportion to their Project
Adjusted Capital, until the Project Adjusted Capital of each entity has been
reduced to zero;
3.4.2.2.4 Fourth, to the Company and the EOP Investor (ratably and pari passu,
with neither having priority over the other) in proportion to the amount (the
"FIRST LEVEL RETURN AMOUNT") for each necessary to give each such member of the
Project Entity a cumulative internal rate of return of 20% per annum (compounded
annually) on its capital contributions to the Project Entity (excluding Default
Capital) from time to time (for purposes of determining such internal rate of
return, the Project Entity shall take into account the distributions paid to
such members of the Project Entity pursuant to Sections 3.4.2.1.3, 3.4.2.2.3,
3.4.2.2.4 3.3.3.2.5 (but excluding 3.3.3.2.5.3) and 3.4.2.2.6 (but excluding
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3.3.3.2.6.3) (collectively, the "Relevant Distributions") [[NOTE - THE FOLLOWING
INSERT RE SECTION 5.7.4 RELATES ONLY TO PROJECT ENTITY AGREEMENTS FOR CONCAR,
THE FERRY BUILDING, AND BUILDING NOS. 2 AND 3 OF FIRST & HOWARD] but the Project
Entity shall disregard those distributions made to Company pursuant to Section
5.7.4 and shall instead treat such distributions pursuant to Section 5.7.4 as
having been made to the EOP Investor]) until each has received from the Relevant
Distributions an additional amount equal to its First Level Return Amount.
3.4.2.2.5 Fifth, (i) until the EOP Investor has received from the Relevant
Distributions an amount equal to a cumulative internal rate of return of 25% per
annum (compounded annually) on its capital contributions to the Project Entity
(excluding Default Capital) from time to time (for purposes of determining such
internal rate of return, the Project Entity shall take into account the Relevant
Distributions paid to EOP Investor [[NOTE - THE FOLLOWING INSERT RE SECTION
5.7.4 RELATES ONLY TO PROJECT ENTITY AGREEMENTS FOR CONCAR, THE FERRY BUILDING,
AND BUILDING NOS. 2 AND 3 OF FIRST & HOWARD] but the Project Entity shall
disregard those distributions made to Company pursuant to Section 5.7.4 and
shall instead treat such distributions pursuant to Section 5.7.4 as having been
made to the EOP Investor]), and then (ii) to the EOP Investor and the Company
(ratably, with neither having priority over the other) in the following
proportions:
3.4.2.2.5.1 to the EOP Investor an amount equal to (A) its
Project Percentage Interest minus 20%, times (B) the amount to be distributed;
3.4.2.2.5.2 to the Company an amount equal to (A) its Project
Percentage Interest times (B) the amount to be distributed; and
3.4.2.2.5.3 20% to the Company as its Promotional Interest,
and
3.4.2.2.6 Sixth, the balance to the Company and the EOP
Investor (ratably, with neither having priority over the other) in the following
proportions:
3.4.2.2.6.1 to the EOP Investor an amount equal to (A) its
Project Percentage Interest minus 30%, times (B) the amount to be distributed;
3.4.2.2.6.2 to the Company an amount equal to (A) its Project
Percentage Interest times (B) the amount to be distributed; and
3.4.2.2.6.3 30% to the Company as its Promotional Interest.
If, for any EOP Project, the Specified Equity is more or less than 60% of the
total equity for such project (as may occur only if agreed by EOP and Wilson,
each in its sole and absolute discretion), the percentages in SECTIONS
3.4.2.1.3, 3.4.2.2.4, 3.3.3.2.5 and 3.4.2.2.6 may be adjusted by the agreement
of Wilson and EOP (each acting in its sole and absolute discretion).
3.4.3 EOP Project Owner Constituent Documents. The operating agreement,
agreement of limited partnership, or other constituent agreements (each, an "EOP
PROJECT ENTITY AGREEMENT") of each EOP Project Entity will reflect the matters
set forth in Exhibit D. The EOP Project Entity Agreements shall provide that the
Company's interest in the EOP Project Entity shall be held in the form of an "A
UNIT," a "B UNIT" and a "C UNIT" representing membership or partnership
interests in the EOP Project Entity. The A Unit shall entitle the Company to the
Distributions that would be payable to EOP with respect to the Company Interest
pursuant to SECTIONS 5.7.1 and 5.7.2 if (a) there were no Default Capital or
Default Capital Return, (b) the Permanent Capital Amount for EOP and Wilson were
zero, and (c) the Adjusted Balance of EOP and Wilson were equal to their
Pro-Rata shares of the
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applicable Project Capital Investment. The B Unit shall entitle the Company to
the distributions that would be payable to Wilson with respect to the Company
Interest pursuant to SECTIONS 5.7.1 and 5.7.2 (except for distributions with
respect to any Promotional Interest) if (a) there were no Default Capital or
Default Capital Return, (b) the Permanent Capital Amount for EOP and Wilson were
zero, and (c) the Adjusted Balance of EOP and Wilson were equal to their
Pro-Rata shares of the applicable Project Capital Investment. The C Unit shall
entitle to Company to the Promotional Interest in the applicable Project. The
EOP Project Entity Agreements shall provide for adjustments in entitlements of
the A Unit and the B Unit as required to reflect changes in the Adjusted Capital
of EOP and Wilson in the Company and changes in the EOP Percentage Interest and
the Wilson Percentage Interest that may occur from time to time. The EOP Project
Entity Agreements shall provide (the "PROJECT REFINANCE PROVISION") that in the
event financing for the Project is obtained from a member of the EOP Group, then
prior to maturity, EOP Investor would have the right to cause the borrower to
refinance the Loan, subject to the approval (not to be unreasonably withheld) of
Wilson and any members or partners of Owner (other than the Project Entity)
which have the right to consent under the Owner's operating or partnership
agreement. The EOP Project Entity Agreements shall further provide that (except
for the First & Howard Project) the Project Entity shall not, from and after
February 9, 2001, enter into partnership, operating agreements or other
agreements involving third party investors in such Projects unless such
agreements contain a provision (the "OWNER REFINANCE PROVISION") allow the
Project Entity to cause the Owner to refinance such a loan as provided in the
preceding sentence. The foregoing sentence shall not preclude any member of the
EOP Group from requiring, as a condition to making a loan to the applicable
Project Entity or the applicable Owner, that any Project Entity's operating
agreement contain the Project Refinance Provision and that the Owner's operating
agreement or partnership agreement contain the Owner Refinance Provision.
3.4.4 EOP Project Debt Financing. Manager will target EOP Projects to have a
debt to equity ratio of 3.0 to 1.0 unless the Board determines that higher
leverage is appropriate. The Company will offer EOP (by itself, or, if desired
by EOP, through any of its Affiliates) the opportunity to provide construction
and permanent financing for EOP Projects, as well as mezzanine financing if the
EOP Project is to have mezzanine financing (collectively, "PROJECT FINANCING").
Manager shall, upon consultation with (and, at EOP's sole discretion, with the
active involvement of) EOP obtain Project Financing proposals for EOP Projects
but in connection therewith shall not bind the Company in any way without the
express approval of the Board. EOP may also procure and present to Manager
Project Financing proposals for EOP Projects. The Board shall have final
authority to select and the Board will select the most favorable Project
Financing proposal. Once such a proposal is approved, Manager will have full
authority to negotiate and close the Project Financing, provided that Manager
consults with and involves EOP in such negotiations (including those with
respect to Project Financing documents), and further provided that such
negotiations and closing are on terms consistent with the any terms and
conditions approved or imposed by the Board. If EOP or such an Affiliate submits
a proposal for Project Financing, the Company must accept such proposal if its
terms, taken as a whole, are at least as favorable to the Company as the best of
the other proposals, in Manager's reasonable judgment.
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3.5 Company Projects. If in connection with an EOP Investment Determination, EOP
has not elected to provide all of the Specified Equity for an Approved Project,
the Company may invest in the proposed Approved Project and obtain all or any
portion of the equity (or mezzanine debt, if applicable in accordance with and
subject to the terms of SECTION 3.4.4) from sources other than EOP, provided
that if the terms offered to the other equity investors or (if applicable)
mezzanine debt sources (such investors and sources, collectively "INVESTORS"),
taken as a whole, are more favorable than those offered to EOP at the time of
the EOP Investment Determination, the opportunity to invest all of the Specified
Equity (or such portion thereof a third party has agreed to provide) for that
Approved Project will again be offered to EOP on those more favorable terms
pursuant to the same procedures applicable to the original EOP Investment
Determination pursuant to SECTION 3.4 (Presentation to EOP). For Approved
Projects in which EOP made an EOP Investment Determination not to invest (the
"COMPANY PROJECTS"), the Company shall establish and structure the Project
Entity so that the Company shall be the manager or general partner of the
Project Entity for the Project and the Company and the other Investors will be
the members or limited partners of the Project Entity for the Company Project.
The Company shall not commence construction on any Company Project, unless and
until the Board has approved a detailed project budget for such Project, which
approval will not be unreasonably withheld by any Member so long as (a) the
total aggregate budgeted Project cost does not exceed 102% of (i) the budget
approved by the Board under SECTION 3.2.3.2, or (ii) any then-existing updated
budget approved by the Board in its sole and absolute discretion, or (b) (x)
Projected Yield is no more than 50 basis points (0.50%) less than that projected
in the then-approved development budget, if the Projected Yield in such budget
(after application of the proposed change in budgeted Project cost) is more than
11.00%, or (y) Projected Yield for the Project (after application of the
proposed change in budgeted Project cost) is no more than 25 basis points
(0.25%) less than that projected in the then-approved development budget if the
Projected Yield in such budget is less than or equal to 11.00%, but greater than
or equal to 10.50%.
3.6 Non-Company Projects. Only if the Board rejects an Opportunity (including
the Existing Projects) and the Wilson Representatives have voted in favor of the
Company pursuing such Opportunity, may any of the Wilson Group, pursue the
Opportunity on its own behalf (but without any equity contribution from the
Company), with or without outside equity sources secured by them (each such
Opportunity so pursued by any of the Wilson Group, a "NON-COMPANY PROJECT"),
provided that the Company will not be required to and will not provide any
guarantees or credit enhancement in connection with any Non-Company Project or
undertake any liability or obligation of any kind or nature, contingent or
otherwise, other than its obligation to provide services to the owner thereof,
and provided further that, without the approval of EOP, none of the Wilson Group
will undertake new Non-Company Projects where the Non-Company Project would
materially impair the ability of the Company to pursue or execute existing and
reasonably contemplated EOP Projects or Company Projects; it being agreed that
Non-Company Projects underway from time to time which are not reasonably
expected to occupy substantial portions of the time of the staff of the Company
and which will not materially impair the ability of the Company to pursue or
execute existing or reasonably contemplated EOP Projects or Company Projects
will be permitted. Except with the consent of EOP, which may be given or denied
in its sole and absolute discretion, Wilson will not undertake any Non-Company
Projects which would be
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owned in whole or in part by a public real estate company that owns primarily
office properties. The Company will have no ownership interest in any
Non-Company Project but will provide development management and, if requested by
the owner, leasing and property management services to the owner for the
Company's standard fees as established from time to time pursuant to SECTION 4
(Third Party Development Management) and approved by the Board. The decision of
the Company to enter into a development management agreement with the Owner of
the Non-Company Project as described below shall constitute a Major Decision. So
long as decisions with respect to the Non-Company Projects are addressed by the
terms of a development management agreement or are not expressly specified as a
Board decision pursuant to another section of this Agreement, such decisions
shall not constitute Major Decisions. At Wilson's election, a Non-Company
Project may be undertaken by an Affiliate of Wilson or the Wilson Group rather
than Wilson and Wilson may establish a new entity to act as such as Affiliate.
Members of the Wilson Group may act as the manager or general partner of the
Owner for the Non-Company Projects; however, within a reasonable time after the
formation of the Owner for the Non-Company Project (but before any agreements
are undertaken or executed between the Company and the Project Entity), Wilson
must disclose the terms of the proposed Wilson compensation (and other matters
relating to the Wilson management for the Non-Company Project) to the Company
and EOP. Any development management agreement between the Company and the Owner
or any Affiliate thereof, shall be on the form attached as Exhibit E. The Wilson
Group shall cause the role of all members of the Wilson Group in any Non-Company
Project to be consistent with, and not unreasonably interfere with, their time
and effort commitments and responsibilities to the Company as contemplated in
this Agreement.
3.7 Existing Projects.
3.7.1 Pending Approval. The Board shall make the decision whether or not to
approve Concar, First & Howard, Ferry Building and Fair Isaac as Approved
Projects and EOP shall determine whether such Projects (except First & Howard
buildings 1 and 4) will be EOP Projects by a date to be mutually and reasonable
agreed by EOP and Wilson, and the Board and EOP will make the same
determinations with respect to Larkspur Landing by a date to be mutually and
reasonably agreed by EOP and Wilson (each such date, with respect to such
Projects, the "DECISION DATE"). Prior to such decision, the Company shall manage
the development of such Projects as if they were EOP Projects owned by an EOP
Project Entity.
3.7.2 If Not Approved. If any of such Projects do not ultimately become Approved
Projects, the EOP Group and the Wilson Group shall, within 10 days following the
applicable Decision Date, transfer to the Company any interests they may have in
such Projects (other than the rights of KFRITZ Investors, LLC under its option
agreement with respect to First & Howard) in accordance with SECTION 3.7. If any
of such Projects do not ultimately become Approved Projects, the Company shall
thereafter dispose of such Projects in the manner described in SECTION 11.10 for
Company Projects, provided that EOP shall be deemed the Marketing Member and
Wilson the Non-Marketing Member pursuant to such provision. The Company shall
pay EOP OP the respective amount for each such Project, if any, specified on
Exhibit B to the extent of the sale proceeds; provided, however that EOP's
consent (which may be granted or withheld in its sole and absolute discretion)
shall be
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required for any disposition of such Projects which do not result in sufficient
sale proceeds to pay EOP OP the respective amount for such Project specified on
Exhibit B.
3.7.3 If Approved. If any of the Existing Projects becomes an Approved Project
pursuant to approval by the Board, then all related Project documentation and
materials delivered to EOP at least five business days prior to such approval or
as part of the materials submitted to the EOPT Board of Trustees will be deemed
to have been approved by Wilson and EOP, and to the extent covering the items
described in SECTIONS 3.2.3.1-3.2.3.7, will constitute Project Approval Items
deemed to have been approved by EOP and Wilson. In such event, the Company and
EOP agree to cause the formation of the Project Entities for each of the
Existing Projects that becomes an Approved Project within a reasonable time
after such approval. Once the Project Entity and Owner for each such Existing
Project that is so approved are formed, (i) the Wilson Group and Company will
use reasonable efforts to cause all of the rights and interests in such Existing
Project then held or controlled by the Wilson Group to be transferred to the
Owner formed to hold such Project, and (ii) the EOP Group and the Company will
use reasonable efforts to cause all of the rights and interests in such Existing
Project then held or controlled by the EOP Group to be transferred to the Owner
formed to hold such Project, each within a reasonable time after request by the
Company but not later than the time of the commencement of demolition or other
physical construction work on the Project. If any such transfer (or, if
applicable, any transfer described in SECTION 3.7.1) is not reasonably
practicable, then the Members shall reasonably cooperate to structure an
arrangement substantially similar (including similar economic benefits to the
Members and any EOP Investor including those described in SECTION 5.7.4, but
excluding the specific circumstances of each such person (e.g. the taxes that
such person might incur); provided, that to the extent it imposes no costs on
the Members or any EOP Investor or any Affiliate thereof, such structure shall
take account of the specific circumstances of the Members, the Wilson Principals
and any EOP Investor) to that which would have been achieved by such a transfer.
3.7.3.1 If Approved as EOP Projects. If any such Existing Project is approved as
an EOP Project, at the time such Project is transferred to the Project Entity or
Owner, the EOP Investor with respect such Project shall be deemed to have made a
contribution to the Project Entity in the applicable Existing Project
Contribution Amount. Concurrent with such contribution the Company shall be
obligated to contribute to the Project Entity an amount in cash to the Project
Entity equal to the Company Share of Equity Percentage multiplied by the
applicable Existing Project Contribution Amount. Notwithstanding anything to the
contrary contained herein, the Project Entity shall distribute such contribution
by the Company to the EOP Investor as a return of capital. If the Owner and
Project Entity are not the same, the Project Entity shall be deemed to have made
a contribution to the Owner in the amount of the applicable Existing Project
Contribution Amount. Concurrent with such contribution, any parties other than
the Company that have an interest in the Owner shall contribute to the Owner an
amount in cash equal to their percentage interests in the Owner multiplied by
the Existing Project Contribution Amount. The Owner shall distribute such
contributions by such parties to any Project Entity as a return of capital,
which shall (if such proceeds are Project Distributable Capital Proceeds) in
turn distribute such contributions to the Company, which in turn shall (if such
proceeds are Distributable Capital Proceeds) distribute such Contributions to
the Members.
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3.7.3.2 If Approved as Company Projects. If any such Existing Project is
approved as a Company Project, at the time such Project is transferred to the
Owner, the Owner shall pay EOP the applicable Existing Project Contribution
Amount. Concurrent with such transfer, the Company shall be obligated to
contribute to the Owner (through the Project Entity, if applicable) an amount in
cash equal to the Company's Project Percentage Interest in the Owner multiplied
by the applicable Existing Project Contribution Amount. If the Owner and Project
Entity are not the same the Project Entity shall be deemed to have made a
contribution to the Owner in such amount. Concurrent with such contribution, any
parties other than the Company or Project Entity that have an interest in the
Owner shall contribute to the Owner an amount in cash equal to their percentage
interests in the Owner multiplied by the Existing Project Contribution Amount.
3.7.4 Manager to Take Actions. To the extent that this SECTION 3.7 refers to
actions being taken by persons or entities that are not parties to this
Agreement or who are not bound by the provisions of this SECTION 3.7, the
Manager shall cause such persons and entities to take actions in accordance with
the provisions of this SECTION 3.7.
3.8 Contribution of Projects. Existing Projects that become Approved Projects
that are owned by a member of the EOP Group will be contributed (each, a
"CONTRIBUTION") by such Owner to an Owner accordance with this SECTION 3.8 and
SECTION 3.7. Although a Project may be deeded directly to an Owner from a party
other than EOP, for purposes of this Agreement and the constituent Project
Entity documents such Projects will be treated as having been contributed to the
Owner by EOP (referred to herein as the "CONTRIBUTOR").
3.8.1 Project Contribution Closing. The closing of a Contribution will take
place on the date mutually and reasonably agreed by Manager and the Contributor
from time to time (the "CONTRIBUTION CLOSING"). All Contributions and transfers
of Existing Projects pursuant to this SECTION 3.7 shall be as-is, where-is and
with all faults and without recourse, representation or warranty by the
Contributor. On the Contribution Closing, the Contributor shall cause the
appropriate Project or Contributor(s) interests therein to be conveyed and
contributed to Owner by recording and delivering duly executed and acknowledged
quitclaim deeds therefor to the Owner together with such other instruments of
transfer or assignment as may be reasonably requested by the Manager and
approved by the Contributor; provided, however, that if the Contributor is
prevented from directly transferring the Project or its interests therein to
Owner, solely by reason of restrictions contained in its current ownership
documents, the Members shall cooperate in attempting to create an ownership,
lease or management structure that will as nearly as possible provide the Owner
with the same rights, obligations, risks, benefits and control as it would have
had if it had received a quitclaim deed for the Project and the Members shall
thereafter diligently pursue whatever reasonable steps are available to
eventually transfer all of Contributor's right, title and interest in the
Project to Owner. Upon the Contribution Closing, the Contributor shall also
contribute or cause to be quitclaimed to the Owner all of the Owner's right,
title and interest, if any, in and to any and all (i) assignable permits,
variances, licenses and approvals of any kind from governmental or
non-governmental persons or entities in connection with the design, construction
or leasing of the existing or proposed improvements on that Project and copies
of all plans, specifications, reports, applications, surveys and similar
documents and materials relating to the Project or the related improvements, in
the possession or under the
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control of the Contributor or of any of its Affiliates, (ii) existing
improvements, machinery, equipment, furnishings and other tangible personal
property located on or used exclusively in the maintenance or operation of the
Project; (iii) easements, rights of way, privileges, licenses, appurtenances and
other rights and benefits belonging to the Project; (iv) transferable or
assignable permits, consents, authorizations, variances, waivers, licenses,
certificates and approvals related to the Project; and (v) architectural,
mechanical, engineering and other plans, specifications and drawings, all
surveys and soil, environmental, engineering and other reports or studies in
Contributor's or any of its Affiliates' possession or control, and all
transferable or assignable warranties, representations, guarantees and other
rights relating to the ownership, development, use and operation of the
Projects.
3.8.2 Closing Costs; Prorations. The Owner will be responsible for any transfer
taxes, escrow fees, recording costs, title insurance premiums, survey and other
costs incurred in connection with the conveyance of a Project from the
Contributor or its Affiliate to an Owner (excluding brokerage fees or
commissions, as and to the extent set forth in SECTION 3.8.3 (Broker Fees)). All
revenues and expenses of a Project shall be prorated between the current owner
and the new appropriate Owner as of the date the deed is recorded.
3.8.3 Broker Fees. EOP, Wilson and Company acknowledge that no brokers will be
involved in any Project Contribution and agree that if any broker claims a
commission or finder's fee in a Project Contribution transaction, the Member
through whom (or through whose Affiliate) such broker makes a claim will be
responsible for said commission or fee and shall indemnify the other Members and
their Affiliates against all costs and expenses (including reasonable attorneys'
fees) incurred in defending against the same. None of the payments made by a
Member pursuant to its responsibility under the preceding sentence will be
treated as a capital contribution or credited to either Member's Adjusted
Capital or Capital Account. Notwithstanding the foregoing the provisions of the
two preceding sentences shall not apply if the amount of such commission or
finder's fee and persons to whom such commission or finder's fee would be
payable is approved by the Board when it approved the applicable Project
Contribution. This provision will survive termination of this Agreement and
dissolution of the Company.
4. DEVELOPMENT MANAGEMENT.
4.1 Development Management. The Company will provide all customary development
and construction management services for each Approved Project and Non-Company
Project (pursuant to a Development Agreement in the form attached hereto as
Exhibit E). EOP shall assign or cause to be assigned to the Company or a
designee approved by the Board, and the Company or such designee will assume,
future responsibility for the third party development management contracts for
250 Embarcadero, San Francisco, 850 Cherry, San Bruno for the GAP, Rincon
Restaurants and Island Park, and the Company or such designee will be entitled
to all fees on a prorated basis accruing from the Formation Date and thereafter
with respect to these contracts. The Company may also provide development
consulting services for third-parties different from full-scope development
management services, for such fees as Manager deems appropriate provided such
third parties have no
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relation to any member of the Wilson Group and are at market rates of
compensation for the services the Company will provide.
4.1.1 Development Fees for New EOP Projects. Development fees for new EOP
Projects will be allocated and payable across the development period as set
forth in this SECTION 4.1.1. Twenty-Five percent (25%) of the projected total
fee will be payable in equal monthly installments during the expected
preconstruction period, beginning when the Board approves a Project. If any of
this portion of the fee remains unpaid on the date of Project Commencement, the
unpaid portion will be paid on such date. However, not more than ten percent
(10%) of the projected total fee will be payable prior to receipt of
entitlements consistent with the then Project Approval Items and any other
required entitlements (not to include receipt of a building permit or other
permits to commence demolition and construction). Sixty-Five percent (65%) of
the total projected fee will be paid in equal monthly installments from Project
Commencement through projected Project Stabilization, and ten percent (10%) of
the total fee will be paid at Project Stabilization. If prior to Project
Stabilization, the Company Interest in an EOP Project is transferred to the EOP
Group or if any Project or the Company Interest therein is sold or otherwise
disposed of in a manner approved by the Board or otherwise allowed pursuant to
this Agreement, the Company shall be entitled to receive from the Owner, in lieu
of any further payments of development fees to the Company, a payment equal to
any excess of (i) 3% of actual project costs (excluding land, but including both
"hard" and "soft" costs) incurred through the date of transfer, disposition or
sale, over (ii) the total fees paid to the Company to the date of the sale or
disposition with respect to such Project.
4.1.2 Development Services and Fees for Parkside and Seaport Plaza.
4.1.2.1 The Company will provide development services for the Projects
(previously owned by Cornerstone and to be owned by the EOP Group following the
Merger) commonly known as the Parkside Project and more particularly described
in Exhibit A-5 ("PARKSIDE") and as the Seaport Plaza Project and more
particularly described in Exhibit A-6 ("SEAPORT PLAZA") which will not be
Approved Projects. For Seaport, the monthly fee payable by the Owner to the
Company shall be $45,844 and will be payable, on the first day of each month,
for the period commencing on the Formation Date and ending December 31, 2000.
For Parkside, the monthly fee payable, on the first day of each month, by the
Owner to the Company shall be $106,100 and it will be payable for the period
commencing on the Formation Date and ending December 31, 2001.
4.1.2.2 EOP OP shall cause the applicable members of the EOP Group to enter into
agreements consistent with SECTION 4.1.2.1.
4.1.3 Development Fees for Existing Projects. Development Fees payable to the
Company in respect of Existing Projects will be as follows if such Projects
become Approved Projects:
4.1.3.1 First & Howard. As to First & Howard, development fees payable to the
Company by the Owner will be 3% of total costs excluding land or option payments
and excluding direct third-party costs paid (without duplication) by
Cornerstone,
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WWA Investors, LLC or KFRITZ Investors, LLC or the EOP Group prior to the
Formation Date. These costs will be allocated as appropriate to each building
within the Project, and the fee for each building will be 3% of the costs
remaining for that building. These fees will be payable as described above for
New Projects.
4.1.3.2 Concar, Ferry, Larkspur and Fair Isaac. As to the Existing Projects
other than First & Howard, development fees payable to the Company by the Owner
will be 3% of total project costs (excluding land) and will be payable as
described in SECTION 4.1.1 for new EOP Projects. The preconstruction period will
run from the Formation Date until the expected commencement of construction.
4.2 Property Management.
4.2.1 EOP Projects. An Affiliate of EOP designated by EOP will provide property
management services payable by the Owners, at market fees for comparable
services, for all Existing Projects and EOP Projects (subject to the rights of
certain 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
Projects and Non-Company Projects.
4.2.2 Third-Party Projects. The Company may provide property management and
leasing services for unaffiliated third-parties