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EXHIBIT 4.2
FIFTH AMENDED AND RESTATED
ERP OPERATING LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
AS OF
AUGUST 1, 1998
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TABLE OF CONTENT
1. PARTNERSHIP...........................................................1
1.1 CONTINUATION OF PARTNERSHIP; PARTNERSHIP INTERESTS.................1
1.2 NAME...............................................................2
2. DEFINITIONS...........................................................2
3. CAPITAL...............................................................8
3.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS..............................8
3.2 ISSUANCE AND CONVERSION OF UNITS...................................8
3.3 ADDITIONAL FUNDS..................................................12
3.4 CAPITAL ACCOUNTS..................................................13
3.5 INTEREST ON AND RETURN OF CAPITAL.................................13
3.6 NEGATIVE CAPITAL ACCOUNTS.........................................14
3.7 LIMIT ON CONTRIBUTIONS AND OBLIGATIONS OF PARTNERS................15
3.8 REDEMPTION AND REPURCHASE OF UNITS................................15
4. PRINCIPAL OFFICE.....................................................15
5. PURPOSES AND POWERS OF PARTNERSHIP...................................15
6. TERM.................................................................16
7. ALLOCATIONS..........................................................16
7.1 ALLOCATION OF PROFITS.............................................16
7.2 LOSSES............................................................16
7.3 SPECIAL ALLOCATIONS...............................................17
7.4 CURATIVE ALLOCATIONS..............................................19
7.5 TAX ALLOCATIONS: CODE SECTION 704(c)..............................19
8. CASH AVAILABLE FOR DISTRIBUTION......................................19
8.1 OPERATING CASH FLOW...............................................20
8.2 CAPITAL CASH FLOW.................................................20
8.3 CONSENT TO DISTRIBUTIONS..........................................21
8.4 RIGHT TO LIMIT DISTRIBUTIONS......................................21
9. MANAGEMENT OF PARTNERSHIP............................................21
9.1 GENERAL PARTNER...................................................21
9.2 LIMITATIONS ON POWERS AND AUTHORITIES OF PARTNERS.................22
9.3 LIMITED PARTNERS..................................................22
9.4 LIABILITY OF GENERAL PARTNER......................................23
9.5 INDEMNITY.........................................................23
9.6 OTHER ACTIVITIES OF PARTNERS AND AGREEMENTS WITH RELATED PARTIES..23
9.7 OTHER MATTERS CONCERNING THE GENERAL PARTNER......................23
9.8 PARTNER EXCULPATION...............................................24
9.9 GENERAL PARTNER EXPENSES AND LIABILITIES..........................25
10. BANKING..............................................................25
11. ACCOUNTING...........................................................25
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11.1 FISCAL YEAR....................................................25
11.2 BOOKS OF ACCOUNT...............................................25
11.3 METHOD OF ACCOUNTING...........................................25
11.4 SECTION 754 ELECTION...........................................25
11.5 TAX MATTERS PARTNER............................................26
11.6 ADMINISTRATIVE ADJUSTMENTS.....................................26
12. TRANSFERS OF PARTNERSHIP INTERESTS...................................26
13. ADMISSION OF NEW PARTNERS............................................28
14. TERMINATION, LIQUIDATION AND DISSOLUTION OF PARTNERSHIP..............28
14.1 TERMINATION EVENTS.............................................28
14.2 METHOD OF LIQUIDATION..........................................28
14.3 DATE OF TERMINATION............................................29
14.4 RECONSTITUTION UPON BANKRUPTCY.................................29
14.5 DEATH, LEGAL INCOMPETENCY, ETC. OF A LIMITED PARTNER...........30
15. POWER OF ATTORNEY....................................................30
16. AMENDMENT OF AGREEMENT...............................................30
17. MISCELLANEOUS........................................................31
17.1 NOTICES........................................................31
17.2 MODIFICATIONS..................................................32
17.3 SUCCESSORS AND ASSIGNS.........................................32
17.4 DUPLICATE ORIGINALS............................................32
17.5 CONSTRUCTION...................................................32
17.6 GOVERNING LAW..................................................32
17.7 OTHER INSTRUMENTS..............................................32
17.8 GENERAL PARTNER WITH INTEREST AS LIMITED PARTNER...............32
17.9 LEGAL CONSTRUCTION.............................................32
17.10 GENDER.........................................................33
17.11 PRIOR AGREEMENTS SUPERSEDED....................................33
17.12 NO THIRD PARTY BENEFICIARY.....................................33
17.13 PURCHASE FOR INVESTMENT........................................33
17.14 WAIVER.........................................................33
17.15 TIME OF ESSENCE................................................33
17.16 COUNTERPARTS...................................................33
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FIFTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
FOR
ERP OPERATING LIMITED PARTNERSHIP
THIS FIFTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this
"Agreement") has been executed and delivered as of the first day of August,
1998, by Equity Residential Properties Trust (the "General Partner" or the
"Company"), a Maryland real estate investment trust, pursuant to Section 16
hereof, for itself and on behalf of those partnerships identified on Schedule A
to this Agreement (each a "▇▇▇▇ Partner" and collectively, the "▇▇▇▇ Partners");
those entities identified on Schedule B to this Agreement (each a "Starwood
Partner" and collectively, the "Starwood Partners") ; and to the extent not
included in Schedule A or B those persons and entities identified in Schedule C
(the "Additional Partners") (the General Partner, the ▇▇▇▇ Partners, the
Starwood Partners and the Additional Partners, being each a "Partner" and
collectively, the "Partners"). The ▇▇▇▇ Partners, the Starwood Partners and the
Additional Partners are each a "Limited Partner" and are, as of the date of this
Agreement, the "Limited Partners".
RECITALS
A. The Partners are parties to that certain Fourth Amended and
Restated Agreement of Limited Partnership of ERP Operating Limited Partnership
dated as of September 30, 1995 (the "Prior Partnership Agreement") and, in
accordance therewith, have been doing business as an Illinois limited
partnership (the "Partnership") under the name "ERP Operating Limited
Partnership."
B. Pursuant to the powers granted to the General Partner under
Section 16 hereof, the General Partner deems it to be in the best interest of
the Partnership to amend and restate the Prior Partnership Agreement and is
desirous of continuing the Partnership in accordance with the Illinois Revised
Uniform Limited Partnership Act and this Agreement.
THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the General Partner, for itself
and on behalf of the Partners, agrees as follows:
1. Partnership.
1.1 Continuation of Partnership; Partnership Interests.
The General Partner and the Limited Partners do hereby continue the
Partnership as an Illinois limited partnership according to all of the
terms and provisions of this Agreement and otherwise in accordance with
the Act. The General Partner is the sole general partner and the
Limited Partners are the sole limited partners of the Partnership. All
Partnership profits, losses, and distributive shares of tax items
accruing prior to the date of this Agreement shall be allocated in
accordance with, and the respective rights and obligations of the
Partners with respect to the period prior to the date of this Agreement
shall be governed by, the Prior Partnership Agreement. No Partner has
any interest in any Partnership property but the interests of all
Partners in the Partnership are, for all purposes, personal property.
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1.2 Name. The Partnership name shall be "ERP Operating
Limited Partnership", but the General Partner may from time to time
change the name of the Partnership or may adopt such trade or
fictitious names as it may determine.
2. Definitions.
2.1 As used in this Agreement, the following terms shall
have the meanings set forth respectively after each:
"Act" shall mean the Illinois Revised Uniform Limited
Partnership Act, as amended from time to time, and any successor statute.
"Adjusted Capital Account Deficit" shall mean, at any time,
the then balance in the Capital Account of a Partner, after giving effect to the
following adjustments:
(i) credit to such Capital Account any amounts
that such Partner is obligated to restore pursuant to this Agreement or
otherwise or is deemed to be obligated to restore as described in the
penultimate sentences of Regulations Section 1.704-2(g)(1) and
Regulations Section 1.704-2(i)(5), or any successor provisions; and
(ii) debit to such Capital Account the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Aggregate Restoration Amount" shall mean with respect to the
Obligated Partners, as a group, the aggregate balances of the
Restoration Amounts, if any, of the Obligated Partners, as determined
on the date in question.
"Agreement" shall mean this Fifth Amended and Restated
Agreement of Limited Partnership, as it may be amended from time to time.
"Assignee" shall mean a Person to whom one or more OP Units
have been transferred in a manner permitted under this Agreement, but who has
not become a substituted Limited Partner, and who has the rights set forth in
Section 12(B)(ii).
"Bankruptcy" of a Partner shall mean (a) the filing by a
Partner of a voluntary petit ion seeking liquidation, reorganization,
arrangement or readjustment, in any form, of its debts under Title 11 of the
United States Code (or corresponding provisions of future laws) or any other
Federal or state insolvency law, or a Partner's filing an answer consenting to
or acquiescing in any such petition, (b) the making by a Partner of any
assignment for the benefit of its creditors or the admission by a Partner in
writing of its inability to pay its debts as they mature, or (c) the expiration
of sixty (60) days after the filing of an involuntary petition under Title 11 of
the United States Code (or corresponding provisions of future laws), seeking an
application for the appointment of a receiver for the assets of a Partner, or an
involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other Federal or state insolvency law,
provided that the same shall not have been vacated, set aside or stayed within
such 60-day period.
"Capital Account" shall mean the capital account maintained by
the Partnership for each Partner as described in Section 3.4 below.
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"Capital Cash Flow" shall have the meaning provided in Section
8.2 below.
"Capital Contribution" shall mean, when used in respect of a
Partner, the initial capital contribution of such Partner as set forth in
Schedule C below and any other amounts of money or the fair market value of
other property contributed by such Partner to the capital of the Partnership
pursuant to the terms of this Agreement, including the Capital Contribution made
by any predecessor holder of the Partnership Interest of such Partner.
"Code" shall mean the Internal Revenue Code of 1986, as the
same may be amended from time to time, and any successor statute.
"Common Share" shall mean a common share of beneficial
interest (or other comparable common equity interest) of the Company.
"Company" means Equity Residential Properties Trust, a
Maryland real estate investment trust and the General Partner of the
Partnership, and any successor thereto (including Equity Residential Properties
Trust as constituted as of the date of this Agreement).
"Contributing Partner" shall have the meaning provided in
clause (vi) of Section 3.2(B) below.
"Depreciation" shall mean for any fiscal year or portion
thereof, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for such period for
Federal income tax purposes, except that if the Gross Asset Value of an asset
differs from its adjusted basis for Federal income tax purposes at the beginning
of such period, Depreciation shall be an amount that bears the same relationship
to such beginning Gross Asset Value as the depreciation, amortization or cost
recovery deduction in such period for Federal income tax purposes bears to the
beginning adjusted tax basis; provided, however, that if the adjusted basis for
Federal income tax purposes of an asset at the beginning of such period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the General Partner.
"Determination Date" shall have the meaning provided in
Section 3.2 below.
"FPAA" shall have the meaning provided in Section 11.6 below.
"General Partner" means Equity Residential Properties Trust, a
Maryland real estate investment trust sometimes also referred to in this
Agreement as the "Company," and any successor thereto (including Equity
Residential Properties Trust as constituted as of the date of this Agreement).
"Gross Asset Value" means, with respect to any Partnership
asset, the asset's adjusted basis for Federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any
asset contributed by a Partner to the Partnership shall be the gross
fair market value of such asset, as determined by the General Partner;
(ii) The Gross Asset Value of all
Partnership assets shall be adjusted to equal their respective gross
fair market values, as determined by the General Partner, as of the
following times: (a) the acquisition of an additional
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interest in the Partnership by any new or existing Partner in exchange
for more than a de minimis Capital Contribution; (b) the distribution
by the Partnership to a Partner of more than a de minimis amount of
Partnership property as consideration for an interest in the
Partnership; and (c) the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, however,
that adjustments pursuant to clauses (a) and (b) above shall be made
only if the General Partner reasonably determines that such adjustments
are necessary or appropriate to reflect the relative economic interests
of the Partners in the Partnership;
(iii) The Gross Asset Value of any
Partnership asset distributed to any Partner shall be adjusted to equal
the gross fair market value of such asset on the date of distribution
as determined by the General Partner; and
(iv) The Gross Asset Value of Partnership
assets shall be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code Section 734(b) or
Code Section 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m) and paragraph (vi) of the
definition of Profits and Losses and Section 7.3(G) below; provided,
however, that Gross Asset Value shall not be adjusted pursuant to this
paragraph (iv) to the extent the General Partner determines that an
adjustment pursuant to paragraph (ii) above is necessary or appropriate
in connection with a transaction that would otherwise result in an
adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraphs (i), (ii) or (iv) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"IRS" shall have the meaning provided in Section 11.6 below.
"Limited Partner" shall mean any Person (i) whose name is set
forth as a Limited Partner on Schedule C attached hereto or who has become a
Limited Partner pursuant to the terms and conditions of this Agreement, and (ii)
who holds a Partnership Interest. "Limited Partners" means all such persons.
"Market Price" shall have the meaning set forth in Section
3.2(C) below.
"Nonrecourse Debt" shall mean a liability as defined in
Regulations Section 1.704-2(b)(3).
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(c).
"Obligated Partners" shall mean that or those Limited
Partner(s) listed as Obligated Partner(s) on Schedule D attached hereto and made
a part hereof, as such Schedule may be amended from time to time by the General
Partner, whether by express amendment to this Partnership Agreement or by
execution of a written instrument by and between any additional Obligated
Partner(s) being directly affected thereby and the General Partner, acting on
behalf of the Partnership and without the prior consent of the Limited Partners
(whether or not Obligated Partners other than the Obligated Partner(s) being
directly affected thereby). Any successor,
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Assignee, or transferee of the entire Partnership Interest of an Obligated
Partner shall be considered an Obligated Partner; provided, however, that if an
Obligated Partner makes a distribution of all or any portion of its OP Units in
accordance with Section 12(B)(i)(z) hereof, the General Partner shall, upon
receipt of written notice from such Obligated Partner and such distributee(s) of
OP Units, amend Schedule D to add any such distributee(s) as an additional
Obligated Partner in the manner set forth in such notice.
"Operating Cash Flow" shall have the meaning provided in
Section 8.1 below.
"OP Units" are units of Partnership Interest more particularly
described in Section 3.2 below.
"OP Unit Value" shall mean, as of any given time, the number
of OP Units into which a Preference Unit is convertible (whether or not the
conversion can then be effected), or the value of the Preference Unit expressed
in OP Units if the Preference Unit is not convertible into OP Units, as provided
for in the applicable Preference Unit Term Sheet or Other Securities Term Sheet.
"Other Securities" shall have the meaning set forth in clause
(iv) of Section 3.2(B) below.
"Other Securities Term Sheet" shall have the meaning provided
in clause (f) of Section 3.2(B) below.
"Partner Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set
forth in Regulations Section 1.704-2(i).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i).
"Partners" shall mean, collectively, the General Partner and
the Limited Partners, or any additional or successor Partners of the Partnership
admitted to the Partnership in accordance with the terms of this agreement.
Reference to a Partner shall be to any one of the Partners.
"Partnership Interest" shall mean the ownership interest of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which such Partner may be entitled as
provided in this Agreement, and to the extent not inconsistent with this
Agreement, under the Act, together with the obligations of such Partner to
comply with all of the terms and provisions of this Agreement and of the Act.
"Partnership Minimum Gain" has the meaning set forth in
Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
"Percentage Interest" shall mean, as to each Partner, the
quotient (expressed as a percentage) arrived at by dividing (i) the sum of the
OP Unit Value of any Preference Units held by that Partner and the number of OP
Units held by that Partner, by (ii) the sum of the OP Unit Value of all
Preference Units issued
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and outstanding at the time and the total number of OP Units issued and
outstanding at the time. The respective Percentage Interests of the Partners
shall be as set forth in Schedule C attached to this Agreement, as such may be
revised by the General Partner to add Partners from time to time as provided in
Section 3.1.
"Person" means any individual, partnership, corporation, trust
or other entity.
"Pledge" shall have the meaning provided in Section 12(B)(i)
below.
"Preference Units" are units of Partnership Interest more
particularly described in Section 3.2 below.
"Preference Unit Term Sheet" shall have the meaning provided
in clause (e) Section 3.2(B) below.
"Prior Partnership Agreement" has the meaning set forth in
Recital A above.
"Profits" and "Losses" shall mean for each fiscal year or
portion thereof, an amount equal to the Partnership's items of taxable income or
loss for such year or period, determined in accordance with Section 703(a) of
the Code with the following adjustments:
(i) any income which is exempt from
Federal income tax and not otherwise taken into account in computing
Net Profits or Net Losses shall be added to taxable income or loss;
(ii) any expenditures of the Partnership
described in Code Section 705(a)(2)(B) or treated as Section
705(a)(2)(B) expenditures under Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
Profits or Losses, will be subtracted from taxable income or loss;
(iii) in the event that the Gross Asset
Value of any Partnership asset is adjusted pursuant to the definition
of Gross Asset Value contained in this Section 2, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits and Losses;
(iv) gain or loss resulting from any
disposition of Partnership assets with respect to which gain or loss is
recognized for Federal income tax purposes shall be computed by
reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs
from its Gross Asset Value;
(v) in lieu of the depreciation,
amortization and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into
account Depreciation for such fiscal year or other period;
(vi) to the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in complete
liquidation of a Partner's Partnership Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
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decreases the basis of the asset) from the disposition of the asset and
shall be taken into account for purposes of computing Profits or
Losses; and
(vii) any items specially allocated pursuant
to Section 7.3 or Section 7.4 below shall not be considered in
determining Profits or Losses.
"Recapitalization" shall have the meaning provided in Section
3.2(C) below.
"Record Date" shall have the meaning provided in Section
9.1(x) below.
"Recourse Debt" shall mean the amount of indebtedness owed by
the Partnership other than Nonrecourse Debt and Partner Nonrecourse Debt.
"Regulations" shall mean the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Restoration Amount" shall mean with respect to any Obligated
Partner, the amount set forth opposite the name of such Obligated Partner on
Schedule D attached hereto and made a part hereof, as such Schedule may be
modified from time to time by an amendment to the Partnership Agreement or by
execution of a written instrument by and between such Obligated Partner, and/or
any additional Obligated Partner(s) being directly affected thereby and the
General Partner, acting on behalf of the Partnership and without the prior
written consent of the Limited Partners (whether or not Obligated Partners other
than the Obligated Partner(s) being directly affected thereby). If an Obligated
Partner makes a distribution of all or any portion of its OP Units in accordance
with Section 12(B)(i)(z) hereof, and the General Partner receives a written
notice from such Obligated Partner and any distributee of OP Units to amend
Schedule D to add such distributee as an additional Obligated Partner, the
Restoration Amount of such additional Obligated Partner shall be increased by an
amount equal to that amount set forth in such notice, and the Restoration Amount
of the Obligated Partner making such distribution shall be reduced by such
amount.
"TMP" shall have the meaning provided in Section 11.5 below.
"Third Party Loan" shall have the meaning provided in Section
9.7(E) below.
"Units" has the meaning set forth in Section 3.2(A) below.
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3. Capital.
3.1 Capital Contributions of the Partners. At the time of
the execution of this Agreement, the Partners shall make or shall have made or
be deemed to have made the Capital Contributions as set forth in Schedule C. The
Partners shall own OP Units in the amounts set forth in Schedule C and shall
have a Percentage Interest in the Partnership as set forth in Schedule C, which
Percentage Interest shall be adjusted in Schedule C from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
Capital Contributions, the issuance of additional OP Units or similar events
having an effect on a Partner's Percentage Interest. To the extent the
Partnership is acquiring any property by the merger of any other Person into the
Partnership, Persons who receive Partnership Interests in exchange for their
interests in the Person merging into the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement and as set forth in Schedule C.
3.2 Issuance and Conversion of Units.
A. The interest of a Partner in the Partnership
is referred to as being evidenced by one or more "Units". Units may be
either "OP Units" or "Preference Units":
(i) An "OP Unit" is a unit of Partnership Interest that,
as more particularly provided for below in Section
3.2(B), may be converted into either cash or one (1)
Common Share.
(ii) A "Preference Unit" is a unit of Partnership Interest
having such rights, preferences and other privileges,
variations and designations as may be determined by
the General Partner in its sole and absolute
discretion (but not in violation of the provisions of
Section 3.2(B) or the terms of any other Preference
Unit(s)). There may be more than one series or class
of Preference Units having differing terms and
conditions, but all Preference Units within a given
series or class shall have the same rights,
preferences and other privileges, variations and
designations. A Preference Unit shall be convertible
into one or more OP Units or be capable of being
valued in OP Units. With respect to each series or
class of Preference Units, the General Partner may
also, in its discretion, determine and fix, among
other terms and conditions, any of the following: (a)
the series to which such Preference Units shall
belong, (b) the distribution rate therefore, (c) the
price at and the terms and conditions on which such
Preference Units may be redeemed, (d) the amount
payable in respect of such Preference Units in the
event of involuntary or voluntary liquidation, (e) the
terms and conditions on which such Preference Units
may be converted, if such Preference Units are issued
with the privilege of conversion, and (f) the number
of such Preference Units to be issued as a part of
such series. Once determined and fixed as herein
provided, however, the terms and conditions of a
particular series or class of Preference Units may not
be changed without the written consent of the holders
of at least 67% of the Preference Units within the
class or series (or such greater percentage as may be
provided for in the applicable Preference Unit Term
Sheet or Other Securities Term Sheet, as the case may
be).
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The aggregate total of all Units outstanding as of the date of this Agreement,
including the making of the capital contributions referred to in Section 3.1
above, is 110,638,794. As of the date of this Agreement, each Partner is deemed
to hold Units as shown on Schedule C.
B. From time to time hereafter, subject to and
in accordance with the provisions of this Section 3.2(B), the General Partner
shall cause the Partnership to issue additional Units as follows:
(i) OP Units to the Company upon the issuance by the Company of
additional Common Shares (other than in exchange for OP Units)
and the contribution of the net proceeds thereof as a Capital
Contribution to the Partnership as provided for in Section
3.3(B) below it being understood, however, that the Company
may issue Common Shares in connection with share option plans,
dividend reinvestment plans, restricted share plans or other
benefit or compensation plans (for example, shares issued in
lieu of fees or compensation) without receiving any proceeds
and that the issuance of such Common Shares shall nonetheless
entitle the Company to additional OP Units pursuant to this
clause (i);
(ii) OP Units to Partners (including itself) that hold Preference
Units that are convertible into OP Units, upon the exercise of
such conversion in accordance with the terms and conditions of
the Preference Unit Term Sheet or Other Securities Term Sheet
(each hereinafter defined) applicable thereto;
(iii) OP Units to Partners holding OP Units (including itself) if
and to the extent of each such Partner's participation in any
reinvestment program contemplated by Section 3.3(C) below;
(iv) Preference Units to the Company upon the issuance by the
Company of securities other than Common Shares (whether debt
or equity securities; ("Other Securities") and the
contribution of the net proceeds thereof as a Capital
Contribution to the Partnership as provided for in Section
3.3(B) below; and
(v) in all other cases, OP Units and/or Preference Units, as
determined by the General Partner, in its discretion, to
existing or newly-admitted Partners (including itself), in
exchange for the contribution by a Partner (the "Contributing
Partner") of additional Capital Contributions to the
Partnership.
Issuance of OP Units as aforesaid shall be in accordance with the following:
(a) the number of OP Units issued to the Company under clause (i)
of this Section 3.2(B) shall be equal to the number of Common
Shares issued;
(b) the number of OP Units issued to a Partner under clause (ii)
of this Section 3.2(B) shall be as provided for in the
Preference Unit Term Sheet or the Other Securities Term Sheet
(each hereinafter defined) pursuant to which the Preference
Units being converted exist;
(c) the number of OP Units issued to a Limited Partner under
clause (iii) of this Section 3.2(B) shall be as provided for
in the applicable reinvestment program; and
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(d) the number of OP Units issued to a Contributing Partner under
clause (v) of this Section 3.2(B) shall be equal to the
quotient (rounded to the nearest whole number) arrived at by
dividing (x) the initial Gross Asset Value of the property
contributed as additional Capital Contributions (net of any
debt to which such property is subject or assumed, and any
cash paid to the Contributing Partner, by the Partnership in
connection with such contribution) by (y) the contractual
price per OP Unit agreed to by the General Partner and the
Contributing Partner.
Issuance of Preference Units as aforesaid shall be in accordance with the
following:
(e) Preference Units issued pursuant to clause (v) of this
Section 3.2(B) shall have the terms and conditions specified
in an agreement (a "Preference Unit Term Sheet") executed by
and between the Partnership (at the direction and in the
discretion of the General Partner) and the Contributing
Partner and such Preference Unit Term Sheet shall thereupon be
a part of this Agreement. The number of Preference Units
issued to a Contributing Partner under clause (v) of this
Section 3.2(B) shall be equal to the quotient (rounded to the
nearest whole number) arrived at by dividing (x) the initial
Gross Asset Value of the property contributed as additional
capital contributions (net of any debt to which such property
is subject or assumed by the Partnership in connection with
such contribution) by (y) an amount provided for in the
Preference Unit Term Sheet; and
(f) Preference Units issued pursuant to clause (iv) of this
Section 3.2(B) shall have economic terms substantially
identical to those of the applicable Other Securities and such
other terms and conditions, all of which are specified in an
agreement (an "Other Securities Term Sheet") executed between
the Partnership and the Company and such Other Securities Term
Sheet shall thereupon be a part of this Agreement.
Units may also be issued to some or all of the Partners holding Preference Units
if and to the extent of such Partner's participation in any reinvestment program
contemplated by Section 3.3(C) below. Upon the issuance of additional OP Units
and/or Preference Units in accordance with the provisions of this Section
3.2(B), each recipient of such Units shall either execute this Agreement or a
joinder to this Agreement (which joinder, as to Preference Units, may be a part
of the applicable Preference Unit Term Sheet or Other Securities Term Sheet) and
the Percentage Interests of all of the Partners shall thereupon be appropriately
adjusted by the General Partner. Notwithstanding anything to the contrary
contained herein, in no event shall any additional Preference Units or OP Units
be issued (pursuant to this Section 3.2(B) or otherwise) to the extent that the
effect of such issuance would be to reduce the General Partner's Percentage
Interest to fifty percent (50%) or less.
C. Subject to the further provisions of this
Section 3.2(C), the Company hereby grants to each Limited Partner holding OP
Units the right to request an exchange of any or all of its OP Units for Common
Shares, with one OP Unit being exchangeable for one Common Share. Such right may
be exercised by a Limited Partner at any time and from time to time upon not
less than ten (10) days prior written notice to the Company. Upon receipt of
such a request, the Company may, in its discretion, in lieu of issuing Common
Shares, cause the Partnership to pay to such Limited Partner cash in an amount
equal to the product arrived at by multiplying (i) the number of OP Units
requested to be exchanged by such Limited Partner multiplied by (ii) the Market
Price, with such payment to be made within ten (10) days after the Company's
receipt of the Limited Partner's exercise notice as aforesaid; provided,
however, that
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in calculating Market Price for this Section 3.2(C) only, the "Determination
Date" shall mean the trading date immediately preceding the date on which the
Company receives notice from the holder of OP Units stating such holder's
intention to exercise its right to request an exchange of its OP Units for
Common Shares. As used in this Section 3.2(C), "Market Price" means either (a)
the last reported sale price per share of the Common Shares at the close of
trading on the Determination Date as reported in the Wall Street Journal
(Midwest Edition) or such other reportable stock price reporting service as may
be selected by the General Partner, or (b) in the event that the Common Shares
were not traded on such Determination Date, then the last reported sale price as
aforesaid on the most recent day that the Common Shares were traded. If the
Company does not elect to make a cash payment, it shall be obligated to issue
Common Shares as provided above. The Company shall at all times reserve and keep
available out of its authorized but unissued Common Shares, solely for the
purpose of effecting the exchange of OP Units for Common Shares, such number of
Common Shares as shall from time to time be sufficient to effect the conversion
of all outstanding OP Units not owned by the Company, and any Preference Units
not owned by the Company that are convertible into OP Units (whether or not the
conversion can then be effected). No Limited Partner shall, by virtue of being
the holder of one or more OP Units and/or Preference Units, be deemed to be a
shareholder of or have any other interest in the Company. In the event of any
change in the outstanding Common Shares by reason of any share dividend, split,
recapitalization, merger, consolidation, combination, exchange of shares or
other similar corporate change (a "Recapitalization"), the number of OP Units
held by each Partner (or into which Preference Units are or may be convertible,
if applicable) shall be proportionately adjusted so that one OP Unit remains
exchangeable for one Common Share without dilution. The Assignee of any Limited
Partner may exercise the rights of such Limited Partner pursuant to this Section
3.2(C), and such Limited Partner shall be deemed to have assigned such rights to
such Assignee and shall be bound by the exercise of such rights by such Limited
Partner's Assignee. In connection with any exercise of such rights by such
Assignee on behalf of such Limited Partner, if the Company elects to make a cash
payment as provided herein, the cash payment shall be paid by the Partnership
directly to such Assignee and not to such Limited Partner. If the Company adopts
a shareholder rights plan or such other plan or arrangement pursuant to which
the holders of Common Shares are entitled to receive rights or other securities
upon the occurrence of specified events, then the General Partner shall in good
faith make an equitable adjustment to the exchange ratio of Common Shares for OP
Units, as the General Partner shall determine in its sole discretion, to protect
the value of the OP Units if any rights or other securities issued under such
plan or arrangement become exercisable and expire prior to a Determination Date.
In the event the Company issues any Common Shares in exchange for OP Units
pursuant to this Section 3.2(C), the General Partner shall record the transfer
on the books of the Partnership so that the Company is thereupon the owner and
holder of such OP Units. Notwithstanding the foregoing provisions of this
Section 3.2(C), a Limited Partner shall not have the right to exchange OP Units
for Common Shares if (i) in the opinion of counsel for the Company, the Company
would, as a result thereof, no longer qualify (or it would be likely that the
Company no longer would qualify) as a real estate investment trust under the
Code; or (ii) such exchange would, in the opinion of counsel for the Company,
constitute or be likely to constitute a violation of applicable securities laws.
In either such event, to the extent the consequences described in (i) or (ii)
could be eliminated by reasonable action of the Company without any material
detriment to the Company and at the expense of such Limited Partner(s)
requesting such exchange, the Company shall take all such reasonable action to
effect the exchange of OP Units for Common Shares by such Limited Partner(s) as
herein provided.
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3.3 Additional Funds.
A. No Partner shall be assessed or, except as
otherwise provided in this Agreement, required to contribute additional funds or
other property to the Partnership. Any additional funds or other property
required by the Partnership, as determined by the General Partner in its sole
discretion, may, at the option of the General Partner and without an obligation
to do so (except as provided for in Section 3.3(B) below), be contributed by the
General Partner or any other Partner (provided such other Partner is willing to
do so and the General consents thereto, each in its sole and absolute
discretion) as additional Capital Contributions. If and as the General Partner
or any other Partner makes additional Capital Contributions to the Partnership,
each such Partner shall receive additional OP Units and/or Preference Units as
provided for in Section 3.2(B) above. The General Partner shall also have the
right (but not the obligation) to raise any additional funds required for the
Partnership in accordance with the provisions of Section 9.7(E) below and/or by
causing the Partnership to borrow the necessary funds from third parties on such
terms and conditions as the General Partner shall deem appropriate in its sole
discretion. If the General Partner elects to cause the Partnership to borrow the
additional funds, or if the Partnership issues a guaranty, indemnity or similar
undertaking in connection with indebtedness of the Company as aforesaid, in any
such case one or more of the Partnership's assets may be encumbered to secure
the loan or undertaking. Except as provided for in Section 3.3(C) below, no
Limited Partner shall have the right to make additional Capital Contributions to
the Partnership without the prior written consent of the General Partner.
B. Except for (i) the capitalization of any
wholly owned entity of the General Partner which is the general partner of a
partnership having the Partnership as a limited partner, (ii) the net proceeds
generated by the issuance of Other Securities that evidence debt (and are not
equity securities) that are loaned by the Company to the Partnership, and (iii)
where, in the good faith opinion of the Company, the net proceeds generated by
the issuance of Other Securities (whether for debt or equity) are retained by
the Company for a valid business reason consistent with the purposes of the
Partnership and such retention does not materially adversely affect the Limited
Partners, the net proceeds of any and all funds raised by or through the Company
through the issuance of Common Shares or Other Securities shall be contributed
to the Partnership as additional Capital Contributions, and in such event the
Company shall be issued additional Units pursuant to Section 3.2(B) above.
C. If the General Partner creates and
administers a reinvestment program in substantial conformance with a dividend
reinvestment program which may be available from time to time to holders of the
Common Shares, each Limited Partner holding OP Units shall have the right to
reinvest any or all cash distributions payable to it from time to time pursuant
to this Agreement by having some or all (as the Limited Partner elects) of such
distributions contributed to the Partnership as additional Capital
Contributions, and in such event the Partnership shall issue to each such
Limited Partner additional OP Units pursuant to clause (iv) of Section 3.2(B)
above, or the General Partner may elect to cause distributions with respect to
which a Limited Partner has elected reinvestment to be contributed to the
Company in exchange for the issuance of Common Shares. At the option of the
General Partner, such a program may also be made available with respect to
Preference Units.
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3.4 Capital Accounts. A separate capital account
("Capital Account") shall be maintained for each Partner.
A. To each Partner's Capital Account there shall
be credited such Partner's Capital Contributions, such Partner's distributive
share of Profits and any items in the nature of income or gain which are
specially allocated pursuant to Section 7.3, Section 7.4 or Section 14.2(C)
hereof, and the amount of any Partnership liabilities assumed by such Partner or
which are secured by any Partnership property distributed to such Partner.
B. To each Partner's Capital Account there shall
be debited the amount of cash and the Gross Asset Value of any Partnership
property distributed to such Partner pursuant to any provision of this
Agreement, such Partner's distributive share of Losses and any items in the
nature of expenses or losses which are specially allocated pursuant to Section
7.3 or Section 7.4 hereof, and the amount of any liabilities of such Partner
assumed by the Partnership or which are secured by any property contributed by
such Partner to the Partnership.
C. In the event all or a portion of a
Partnership Interest is transferred in accordance with the terms of this
Agreement (including a transfer of OP Units in exchange for Common Shares,
pursuant to Section 3.2(C)), the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred Partnership
Interest.
D. In determining the amount of any liability
for purposes of Sections 3.4(A) and 3.4(B) above, there shall be taken into
account Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
E. This Section 3.4 and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Regulations Section 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities which are secured by contributed or
distributed property or which are assumed by the Partnership, or the Partners)
are computed in order to comply with such Regulations, the General Partner may
make such modification, provided that it is not likely to have a material effect
on the amounts distributed to any Partner pursuant to Section 14 below upon the
dissolution of the Partnership. The General Partner also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Partners and the amount of Partnership capital reflected
on the Partnership's balance sheet, as computed for book purposes, in accordance
with Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate
modifications in the event unanticipated events (for example, the acquisition by
the Partnership of oil or gas properties) might otherwise cause this Agreement
not to comply with Regulations Section 1.704-1(b).
3.5 Interest on and Return of Capital.
A. No Partner shall be entitled to any interest
on its Capital Account or on its contributions to the capital of the
Partnership.
B. Except as expressly provided for in this
Agreement, no Partner shall have the right to demand or to receive the return of
all or any part of his capital contributions to the Partnership and there shall
be no priority of one Partner over the other as to the return of capital
contributions or withdrawals or distributions of profits and losses. No Partner
shall have the right
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to demand or receive property other than cash in return for the contributions of
such Partner to the Partnership.
3.6 Negative Capital Accounts.
A. Except as provided in the next sentence and
Section 3.6(B), no Partner shall be liable to the Partnership or to any other
Partner for any deficit or negative balance which may exist in such Partner's
Capital Account. If any Obligated Partner has a deficit balance in its Capital
Account (after giving effect to all contributions, distributions, allocations
and adjustments to Capital Accounts for all periods), each such Obligated
Partner shall contribute to the capital of the Partnership an amount equal to
its respective deficit balance; such obligation to be satisfied by the end of
the fiscal year of liquidation (or, if later, within ninety (90) days following
the liquidation and dissolution of the Partnership.) Such contributions shall be
used to make payments to creditors of the Partnership and such Obligated
Partners (i) shall not be subrogated to the rights of any such creditor against
the General Partner, the Partnership, another Partner or any person related
thereto, and (ii) hereby waive any right to reimbursement, contribution or
similar right to which such Obligated Partners might otherwise be entitled as a
result of the performance of its obligations under this Agreement.
B. Except as otherwise agreed in writing by the
General Partner and an Obligated Partner, prior to the time of admission of such
Obligated Partner to the Partnership, notwithstanding any other provision of
this Agreement, an Obligated Partner shall cease to be an Obligated Partner for
purposes of this Section 3.6 upon an exchange by such Obligated Partner of all
remaining OP Units for Common Shares (pursuant to Section 3.2(C) or otherwise)
12 months after the date of such exchange by such Obligated Partner unless at
the time of, or during the 12 month period following, such exchange, there has
been:
(i) An entry of a decree or order for relief in respect of the
Partnership by a court having jurisdiction over a substantial
part of the Partnership's assets, or the appointment of a
receiver, liquidator, Assignee, custodian, trustee,
sequestrator (or other similar official) of the Partnership or
of any substantial part of its property, or ordering the
winding up or liquidation of the Partnership's affairs, in an
involuntary case under the federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law; or
(ii) The commencement against the Partnership of an involuntary
case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law; or
(iii) The commencement by the Partnership of a voluntary case under
the federal bankruptcy laws, as now or hereafter constituted,
or any other applicable federal or state bankruptcy,
insolvency or other similar law, or the consent by it to the
entry of an order for relief in an involuntary case under any
such law or the consent by it to the appointment of or taking
possession by a receiver, liquidator, Assignee, custodian,
trustee, sequestrator (or other similar official) of the
Partnership or of any substantial part of its property, or the
making by it of a general assignment for the benefit of
creditors, or the failure of Partnership generally to pay its
debts as such debts become due or the taking of any action in
furtherance of any of the foregoing;
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provided that, after the passage of such 12 months, the
Obligated Partner shall cease to be an Obligated Partner, at the first time, if
any, that all of the conditions set forth in (i) through (iii) above are no
longer in existence.
This Section 3.6(B) shall not be amended without the consent
of two-thirds in number of the Obligated Partners, provided, however, that no
such amendment shall adversely affect an Obligated Partner without the written
consent of such Obligated Partner.
3.7 Limit on Contributions and Obligations of Partners.
Neither the Limited Partner nor the General Partner shall be required to make
any additional advances or contributions to or on behalf of the Partnership or
to endorse any obligations of the Partnership.
3.8 Redemption and Repurchase of Units. Notwithstanding
any other provision of this Agreement which may be contrary to this Section 3.8,
in the event of the proposed repurchase or redemption for cash by the Company of
(i) Common Shares or, (ii) Other Securities with respect to which the Company
had previously been issued Preference Units pursuant to Section 3.2(B)(iv) of
this Agreement, then, in such event, the Partnership shall provide cash to the
Company concurrently with such repurchase or redemption for such purpose equal
to the proposed repurchase or redemption price, and one OP Unit owned by the
General Partner (or, in the case of redemption or repurchase by the Company of
Other Securities contemplated by clause (ii) above, one Preference Unit owned by
the General Partner which had been issued with respect to such Other Securities)
shall be cancelled with respect to each Common Share (or share of Other
Securities) so repurchased or redeemed.
4. Principal Office. The principal office of the
Partnership shall be located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the General Partner may designate
after giving written notice of such designation to the other Partners.
5. Purposes and Powers of Partnership.
A. The purposes of the Partnership shall be to
acquire, purchase, own, operate, manage, develop, redevelop, invest in, finance,
refinance, sell, lease and otherwise deal with multifamily residential
properties and assets related thereto, and interests therein, whether directly
or indirectly, alone or in association with others, and to conduct any other
business that may be lawfully conducted by a limited partnership pursuant to the
Act. The purposes of the Partnership include, but are not limited to:
(i) acquiring, developing, operating, leasing and
managing multifamily residential properties and conducting any other
lawful business relating thereto;
(ii) financing, mortgaging, exchanging, selling,
encumbering or otherwise disposing of all or any part of a multifamily
residential property or any interest therein;
(iii) constructing, reconstructing, altering,
modifying and subtracting from or adding to a multifamily residential
property or any part thereof;
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(iv) organizing and holding partnership interests
in partnerships owning or otherwise having an interest in, whether
directly or indirectly, one or more multifamily residential properties;
and
(v) in general, the making of any investments or
expenditures, the borrowing and lending of money and the taking of any
and all actions which are incidental or related to any of the purposes
recited above.
It is agreed that each of the foregoing is an ordinary part of the Partnership's
business and affairs. Property may be acquired subject to, or by assuming, the
liens, encumbrances, and other title exceptions which affect such property. The
Partnership may also be a partner, general or limited, in partnerships, general
or limited, and joint ventures created to accomplish all or any of the
foregoing.
B. The Partnership purposes may be accomplished
by taking any action which is not prohibited under the Act and which is related
to the acquisition, ownership, development, improvement, operation, management,
financing, leasing, exchanging, selling or otherwise encumbering or disposing of
all or any portion of the assets of the Partnership, or any interest therein.
6. Term. The term of the Partnership shall continue unti
the Partnership is terminated upon the occurrence of an event described in
Section 14.1 below.
7. Allocations.
7.1 Allocation of Profits. After giving effect
to the allocations set forth in Sections 7.3 and 7.4, Profits for any fiscal
year shall be allocated to the Partners in the following order of priority:
A. First, to the General Partner to the extent
that the cumulative Losses allocated to the General Partner pursuant to Section
7.2(D) exceed the cumulative Profits allocated to the General Partner pursuant
to this Section 7.1(A);
B. Second, to each Partner to the extent of and
in proportion to the amount by which the cumulative Losses allocated to such
Partner pursuant to Section 7.2(C) exceed the cumulative Profits allocated to
such Partner pursuant to this Section 7.1(B);
C. Third, to the General Partner to the extent
that the cumulative Losses allocated to the GeneralPartner pursuant to Section
7.2(B) exceed the cumulative Profits allocated to the General Partner pursuant
to this Section 7.1(C);
D. Fourth, to each Partner to the extent of and
in proportion to the amount by which the cumulative Losses allocated to such
Partner pursuant to Section 7.2(A) exceed the cumulative Profits allocated to
such Partner pursuant to this Section 7.1(D); and
E. Thereafter, to the Partners in accordance with
their respective Percentage Interests.
7.2 Losses. After giving effect to the
allocations set forth in Sections 7.3 and 7.4, Losses for each fiscal year
shall be allocated to the Partners in the following order of priority:
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A. First, to the Partners, in proportion to their
respective Percentage Interests; provided that Losses allocated pursuant to this
Section 7.2(A) shall not exceed the maximum amount of Losses that can be
allocated without causing any Partner to have an Adjusted Capital Account
Deficit (excluding for this purpose any increase to such Adjusted Capital
Account Deficit for a Partner's actual obligation to fund a deficit Capital
Account balance, including the obligation of an Obligated Partner to fund a
deficit Capital Account balance pursuant to Section 3.6 hereof);
B. Second, to the General Partner, until the
General Partner's Adjusted Capital Account Deficit (excluding for this purpose
any increase to such Adjusted Capital Account Deficit for the obligation of any
General Partner to actually fund a deficit Capital Account balance) equals the
excess of (i) the amount of Recourse Liabilities over (ii) the Aggregate
Restoration Amount;
C. Third, to the Obligated Partners, in proportion
to their respective Restoration Amounts, until such time as the Obligated
Partners have been allocated in aggregate amount of Losses pursuant to this
Section 7.2(C) equal to the Aggregate Restoration Amount; and
D. Thereafter, to the General Partner.
This Section 7.2 together with Section 7.1 shall
control notwithstanding any reallocation or adjustment of taxable income, loss
or other items by the IRS or any other taxing authority; provided, however, that
neither the Partnership nor the General Partner (nor any of their respective
affiliates) is required to indemnify any Obligated Partner (or its affiliates)
for the loss of any tax benefit resulting from any reallocation or adjustment of
taxable income, loss or other items by the IRS or other taxing authority. The
provisions of Section 7.1 and this Section 7.2 shall not be amended in a manner
which adversely affects an Obligated Partner (without consent of such Obligated
Partner), provided that the General Partner may amend Schedule D to add
additional Obligated Partners.
7.3 Special Allocations. The following special
allocations shall be made in the following order:
A. Minimum Gain Chargeback. Except as
otherwise provided in Regulations Section 1.704-2(f), notwithstanding any other
provision of this Section 7, if there is a net decrease in Partnership Minimum
Gain during any fiscal year, each Partner shall be specially allocated items of
Partnership income and gain for such fiscal year (and, if necessary, subsequent
fiscal years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). The items to be so allocated shall be determined in accordance with
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 7.3(A) is
intended to comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Regulations and shall be interpreted consistently therewith.
B. Partner Minimum Gain Chargeback.
Except as otherwise provided in Regulations Section 1.704-2(i)(4),
notwithstanding any other provision of this Section 7, if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to a Partner
Nonrecourse Debt during any Partnership fiscal year, each Partner who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated
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items of Partnership income and gain for such fiscal year (and, if necessary,
subsequent fiscal years) in an amount equal to such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). The items to be so allocated shall be determined in accordance
with Regulations Sections 1.704-2(i)(4) and 1.704-2(i)(2). This Section 7.3(B)
is intended to comply with the minimum gain chargeback requirement in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
C. Qualified Income Offset. In the event
any Partner unexpectedly receives any adjustments, allocations, or distributions
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), Section
1.704-1(b)(2)(ii)(d)(5), or Section 1.704-1(b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specially allocated to each such Partner in
an amount and manner sufficient to eliminate, to the extent required by the
Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as
possible, provided that an allocation pursuant to this Section 7.3(C) shall be
made only if and to the extent that such Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for this Section 7 have
been tentatively made, as if this Section 7.3(C) were not in the Agreement.
▇. ▇▇▇▇▇ Income Allocation. In the
event any Partner has a deficit Capital Account at the end of any Partnership
fiscal year which is in excess of the sum of (i) the amount such Partner is
obligated to restore pursuant to any provision of this Agreement, and (ii) the
amount such Partner is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Partner shall be specifically allocated items of Partnership income
and gain in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 7.3(D) shall be made only if and to the
extent that such Partner would have a deficit Capital Account in excess of such
sum after all other allocations provided for in this Section 7 have been made as
if Section 7.3(C) hereof and this Section 7.3(D) were not in the Agreement.
E. Preferential Gross Income
Allocations. If and to the extent Partners receive distributions from the
Partnership (other than (i) distributions pursuant to Section 14.2(C) in final
liquidation of the Partnership), each such Partner shall be allocated an
equal amount of Partnership gross income prior to any allocations of Profit and
Loss pursuant to Sections 7.1 and 7.2 above. For purposes of this Section
7.3(E), any payment with respect to a Preference Unit that, under the applicable
Preference Unit Term Sheet or Other Securities Term Sheet, as the case may be,
constitutes a payment in redemption of such Preference Unit shall not be
considered a distribution except to the extent such payment is specifically
attributable to accrued and unpaid preferred distributions with respect to such
Preference Unit provided for in such Term Sheet.
F. Nonrecourse Deductions. Nonrecourse
Deductions for any fiscal year shall be allocated among the Partners in
accordance with their respective Percentage Interests.
G. Partner Nonrecourse Deductions.
Any Partner Nonrecourse Deductions for any fiscal year shall be specially
allocated to the Partner who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable, in accordance with Regulations Section 1.704-2(i)(1).
H. Section 754 Adjustments. To the
extent an adjustment to the adjusted tax basis of any Partnership asset pursuant
to Code Section 734(b) or Code Section
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743(b) is required, pursuant to Regulations Section 1.704- 1(b)(2)(iv)(m)(2) or
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Partner in
complete liquidation of his interest in the Partnership, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specifically allocated to
the Partners in accordance with their respective Percentage Interests in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or the Partner
to whom such distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
7.4 Curative Allocations. The allocations set forth in
Sections 7.3(A), 7.3(B), 7.3(C), 7.3(D), 7.3(F), 7.3(G) and 7.3(H) above (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Regulations under Sections 704(b) and 514(c)(9)(E) of the Code. It is the
intent of the Partners that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Partnership income, gain, loss, or deduction
pursuant to this Section 7.4. Therefore, notwithstanding any other provision of
this Section 7 (other than the Regulatory Allocations), the General Partner
shall make such offsetting special allocations of Partnership income, gain,
loss, or deduction in whatever manner it determines appropriate so that, after
such offsetting allocations are made, each Partner's Capital Account balance is,
to the extent possible, equal to the Capital Account balance such Partner would
have had if the Regulatory Allocations were not part of the Agreement and all
Partnership items were allocated pursuant to Sections 7.1 and 7.2(A) (subject,
however, to Section 7.3(E) above), and so that, to the greatest extent possible,
such allocations comply with the Regulations under Code Section 514(c)(9)(E). In
exercising its discretion under this Section 7.4, the General Partner shall take
into account future Regulatory Allocations under Sections 7.3(A) and 7.3(B)
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 7.3(F) and 7.3(G).
7.5 Tax Allocations: Code Section 704(c).
A. Income, gain, loss, and deduction with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership for
Federal income tax purposes and its initial Gross Asset Value in accordance with
any permissible manner or manners under Code Section 704(c) and the Regulations
thereunder.
B. In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to the definition of "Gross Asset Value"
contained in Section 2 above, subsequent allocations of income, gain, loss, and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for Federal income tax purposes and its Gross
Asset Value in the same manner or manners permitted under Code Section 704(c)
and the Regulations thereunder.
C. Any elections or other decisions relating to
such allocations shall be made by the General Partner in any permissible manner
under the Code or the Regulations that the General Partner may elect in its sole
discretion. Allocations pursuant to this Section 7.5 are solely for purposes of
Federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Partner's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provision in this
Agreement.
8. Cash Available For Distribution.
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8.1 Operating Cash Flow. As used in this
Agreement, "Operating Cash Flow" shall mean and be defined as all cash receipts
of the Partnership from whatever source (but excluding Capital Cash Flow and
excluding the proceeds of any additional Capital Contributions to the
Partnership pursuant to Section 3.3 above) during the period in question in
excess of all items of Partnership expense (other than non-cash expenses such as
depreciation) and other cash needs of the Partnership, including, without
limitation, amounts paid by the Partnership as principal on debts and advances,
during such period, capital expenditures and any reserves (as determined by the
General Partner) established or increased during such period. In the discretion
of the General Partner, reserves may include cash held for future acquisitions.
Operating Cash Flow shall be distributed to or for the benefit of the Partners
of record as of the applicable Record Date not less frequently than annually,
and shall be distributed: first to those Partners holding Preference Units to
the extent of the respective priorities (if any) established by the applicable
Preference Unit Term Sheets and Other Securities Term Sheets; and then the
balance prorata among the Partners holding OP Units and the Partners holding
Preference Units which, based on the provisions of the applicable Preference
Unit Term Sheets and Other Securities Term Sheets, entitle such Partners to
participate in such distributions on a pari passu basis with the holders of OP
Units (the "Residual Operating Cash Flow Preference Units"), to each Partner
based on the quotient (expressed as a percentage) arrived at by dividing (i) the
sum of the OP Unit Value of any Residual Operating Cash Flow Preference Units
held by that Partner and the number of OP Units held by that Partner by (ii) the
sum of the OP Unit Value of all Residual Operating Cash Flow Preference Units
issued and outstanding at the time and the total number of OP Units issued and
outstanding at the time. Notwithstanding the foregoing, any incoming Limited
Partners who were admitted during the applicable quarter (but excluding any
incoming Partners who received Units from an existing Limited Partner) and who
held Units as of an applicable Record Date, but held such Units for less than
the entire period with respect to which an Operating Cash Flow distribution is
to be paid, shall be entitled to receive a pro-rated portion of such Operating
Cash Flow distribution otherwise payable to such Partner based on the number of
days such Units were outstanding during the applicable period, or any other
method of pro-ration deemed equitable by the General Partner, and in such event,
if the General Partner, in its sole discretion, deems it necessary, the amount
of the distribution payable to all other Partners shall be adjusted accordingly.
8.2 Capital Cash Flow. As used in this
Agreement, "Capital Cash Flow" shall mean and be defined as collectively (a)
gross proceeds realized in connection with the sale of any assets of the
Partnership, (b) gross financing or refinancing proceeds, (c) gross condemnation
proceeds (excluding condemnation proceeds applied to restoration of remaining
property) and (d) gross insurance proceeds (excluding rental insurance proceeds
or insurance proceeds applied to restoration of property), less (a) closing
costs, (b) the cost to discharge any Partnership financing encumbering or
otherwise associated with the asset(s) in question, (c) the establishment of
reserves (as determined by the General Partner, and which may include cash held
for future acquisitions), and (d) other expenses of the Partnership then due and
owing. Subject to Section 14.2 below, if applicable, Capital Cash Flow shall be
distributed to or for the benefit of the Partners of record as of the applicable
Record Date not less frequently than annually and shall be distributed: first to
the Partners holding Preference Units to the extent of the respective priorities
(if any) established by the applicable Preference Unit Term Sheets and Other
Securities Term Sheets; and then the balance prorata among those Partners
holding OP Units and those Partners holding Preference Units which, based on the
provisions of the applicable Preference Unit Term Sheets and Other Securities
Term Sheets, entitle such Partners to participate in such distributions on a
pari passu basis with the holders of OP Units (the "Capital Cash Flow Preference
Units"), to each Partner based on the quotient (expressed as a
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percentage) arrived at by dividing (i) the sum of the OP Unit Value of any
Capital Cash Flow Preference Units held by that Partner and the number of OP
Units held by that Partner by (ii) the sum of the OP Unit Value of all Capital
Cash Flow Preference Units issued and outstanding at the time and the total
number of OP Units issued and outstanding at the time. Notwithstanding the
foregoing, the General Partner reserves the right to pro-rate distributions of
Capital Cash Flow to incoming Limited Partners who were admitted during the
applicable quarter (but excluding any incoming Partners who received Units from
an existing Limited Partner) and who held Units as of the applicable Record Date
but held such Units for less than the entire period with respect to which the
Capital Cash Flow distribution is to be paid, based on the number of days such
Units were outstanding during the applicable period, or any other method of
pro-ration deemed equitable by the General Partner and, in such event, the
amount of the distribution payable to all other Partners shall be adjusted
accordingly.
8.3 Consent to Distributions. Each of the
Partners hereby consents to the distributions provided for in this Agreement.
8.4 Right to Limit Distributions. The right of
any Partner to receive distributions of any nature pursuant to the terms of this
Agreement shall be subject to the terms of any agreement between such Partner
and the Partnership limiting, restricting or providing rights of set-off with
respect to such distributions.
9. Management of Partnership.
9.1 General Partner. The General Partner shall
be the sole manager of the Partnership business, and shall have the right and
power to make all decisions and take any and every action with respect to the
property, the business and affairs of the Partnership and shall have all the
rights, power and authority generally conferred by law, or necessary, advisable
or consistent with accomplishing the purposes of the Partnership. All such
decisions or actions made or taken by the General Partner hereunder shall be
binding upon all of the Partners and the Partnership. The powers of the General
Partner to manage the Partnership business shall include, without limitation,
the power and authority to, directly or indirectly:
(i) operate any business normal or customary for
the owner of or investor in multifamily residential property;
(ii) perform any and all acts necessary or
appropriate to the operation of the Partnership assets, including, but
not limited to, applications for rezoning, objections to rezoning of
other property and the establishment of bank accounts in the name of
the Partnership;
(iii) procure and maintain with responsible
companies such insurance as may be available in such amounts and
covering such risks as are deemed appropriate by the General Partner;
(iv) take and hold all real, personal and mixed
property of the Partnership in the name of the Partnership or in the
name of a nominee;
(v) execute and deliver leases on behalf of and in
the name of the Partnership;
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(vi) borrow money (whether on a secured or
unsecured basis), finance and refinance the assets of the Partnership
or any part thereof or interest therein, and in connection therewith,
issue notes, bonds, securities and other undertakings and evidences of
indebtedness and documents related thereto (including, without
limitation, guaranty, indemnities and similar undertakings to support
loans obtained or debt securities issued by the Company where the net
proceeds thereof are either loaned to the Partnership or contributed to
the Partnership as a Capital Contribution);
(vii) coordinate all accounting and clerical
functions of the Partnership and employ such accountants, lawyers,
property managers, leasing agents and other management or service
personnel as may from time to time be required to carry on the business
of the Partnership;
(viii) acquire any assets, and encumber, sell, ground
lease or otherwise dispose of any or all of the assets of the
Partnership (including by way of merger, consolidation or other
combination with any other Person), or any part thereof or interest
therein; and
(ix) organize one or more partnerships which are
controlled, directly or indirectly, by the Partnership (including,
without limitation, Equity Residential Properties Management Limited
Partnership) and make any capital contributions required pursuant to
the partnership agreements of any such partnerships.
(x) establish the date (the "Record Date") for the
purpose of making any proper determination with respect to which
Partners are entitled to receive distributions, consent to any matter
for which the consent of Partners is permitted or required under any
provision hereof, or otherwise be allocated rights hereunder.
9.2 Limitations on Powers and Authorities of Partners.
Notwithstanding the powers of the General Partner set forth in Section 9.1
above, no Partner shall have the right or power to do any of the following:
(a) do any act in contravention of this Agreement,
or any amendment hereto;
(b) do any act which would make it impossible to
carry on the ordinary business of the Partnership, except to the extent
that such act is specifically permitted by the terms hereof (it being
understood and agreed that, except as hereafter provided in this
Section 9.2, a sale of any or all of the assets of the Partnership, for
example, would be an ordinary part of the Partnership's business and
affairs and is specifically permitted hereby); or
(c) confess a judgment against the Partnership.
9.3 Limited Partners. The Limited Partners shall have no
right or authority to act for or to bind the Partnership and no Limited Partner
shall participate in the conduct or control of the Partnership's affairs or
business.
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9.4 Liability of General Partner. The General Partner
shall not be liable or accountable, in damages or otherwise, to the Partnership
or to any other Partner for any error of judgment or for any mistakes of fact or
law or for anything which it may do or refrain from doing hereafter in
connection with the business and affairs of the Partnership except (i) in the
case of fraud, willful misconduct (such as an intentional breach of fiduciary
duty or an intentional breach of this Agreement) or gross negligence, and (ii)
for other breaches of this Agreement, but the liability of the General Partner
under this clause (ii) shall be limited to its interest in the Partnership as
more particularly provided for in Section 9.8 below. The General Partner shall
not have any personal liability for the return of any Limited Partner's capital.
9.5 Indemnity. The Partnership shall indemnify and shall
hold the General Partner (and the officers and trustees thereof) harmless from
any loss or damage, including without limitation reasonable legal fees and court
costs, incurred by it by reason of anything it may do or refrain from doing
hereafter for and on behalf of the Partnership or in connection with its
business or affairs; provided, however, that (i) the Partnership shall not be
required to indemnify the General Partner (or any officer or trustee thereof)
for any loss or damage which it might incur as a result of its fraud, willful
misconduct or gross negligence in the performance of its duties hereunder and
(ii) this indemnification shall not relieve the General Partner of its
proportionate part of the obligations of the Partnership as a Partner. In
addition, the General Partner shall be entitled to reimbursement from the
Partnership for any amounts paid by it in satisfaction of indemnification
obligations owed by the General Partner to present or former trustees or
officers of the General Partner or its predecessors, or other Persons
indemnified by the General Partner, as provided for in or pursuant to the
Declaration of Trust and By-Laws of the General Partner or otherwise. The right
of indemnification set forth in this Section 9.5 shall be in addition to any
rights to which the person or entity seeking indemnification may otherwise be
entitled and shall inure to the benefit of the successors and assigns of any
such person or entity. No Partner shall be personally liable with respect to any
claim for indemnification pursuant to this Section 9.5, but such claim shall be
satisfied solely out of assets of the Partnership.
9.6 Other Activities of Partners and Agreements with
Related Parties. The General Partner shall devote its full-time efforts in
furtherance of the Partnership business, it being expressly understood that,
except for (i) the Company's ownership interest in a partnership or a limited
liability company of which the Partnership is a partner or a member,
respectively; (ii) the Company's ownership of any qualified REIT subsidiary
(within the meaning of the Code) or any other entity which is a partner of a
partnership or a member of a limited liability company having the Partnership as
a partner or member, respectively; (iii) the Company's ownership of any entity
that owns no more than a one percent (1%) interest in any partnership, limited
liability company or other entity; (iv) borrowing (including the issuance of
debt securities) where the net proceeds thereof are loaned or contributed to the
Partnership; (v) any activity which the Board of Trustees of the General
Partner, in its sole discretion, has determined will have a material benefit to
the General Partner and will not have a material adverse effect on the
Partnership; and (vi) activities incidental to the Company's status and
existence as a real estate investment trust, the General Partner shall conduct
all of its activities with respect to the multifamily residential property
business exclusively through the Partnership and shall not conduct or engage in
any way in any other business.
9.7 Other Matters Concerning the General Partner.
A. The General Partner shall be protected in
relying, acting or refraining from acting on any resolution, certificate,
statement, instrument, opinion, report, notice,
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request, consent, order, bond, debenture, or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may exercise any of the
powers granted or perform any of the duties imposed by this Agreement either
directly or through agents. The General Partner may consult with counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants selected by it, each of whom may serve as consultants for the
Partnership. An opinion by any consultant on a matter which the General Partner
believes to be within its professional or expert competence shall be full and
complete protection as to any action taken or omitted by the General Partner
based on the opinion and taken or omitted in good faith. The General Partner
shall not be responsible for the misconduct, negligence, acts or omissions of
any consultant or contractor of the Partnership or of the General Partner, and
shall assume no obligations other than to use due care in the selection of all
consultants and contractors.
C. No mortgagee, grantee, creditor or any other
person dealing with the Partnership shall be required to investigate the
authority of the General Partner or secure the approval of or confirmation by
any Limited Partner of any act of the General Partner in connection with the
conduct of the Partnership business.
D. The General Partner may retain such persons
or entities as it shall determine (including the General Partner or any entity
in which the General Partner shall have an interest or with which it is
affiliated) to provide services to or on behalf of the Partnership. The General
Partner shall be entitled to reimbursement from the Partnership for its
out-of-pocket expenses (including, without limitation, amounts paid or payable
to the General Partner or any entity in which the General Partner shall have an
interest or with which it is affiliated) incurred in connection with
Partnership business. Such expenses shall be deemed to include those expenses
required in connection with the administration of the Partnership such as the
maintenance of Partnership books and records, management of the Partnership
property and assets and preparation of information respecting the Partnership
needed by the Partners in the preparation of their individual tax returns.
E. The General Partner may loan to the
Partnership the net proceeds of loans obtained or debt securities issued by the
Company so long as the terms of such loan to the Partnership are substantially
equivalent to the corresponding loan obtained or debt securities issued by the
Company.
9.8 Partner Exculpation. Except for fraud, willful m
misconduct and gross negligence, no Partner shall have any personal liability
whatever, whether to the Partnership or to the other Partner, for the debts or
liabilities of the Partnership or its obligations hereunder, and the full
recourse of the other Partner shall be limited to the interest of that Partner
in the Partnership. To the fullest extent permitted by law, no officer, trustee
or shareholder of the General Partner shall be liable to the Partnership for
money damages except for (i) active and deliberate dishonesty established by a
final judgment or (ii) actual receipt of an improper benefit or profit in money,
property or services. Without limitation of the foregoing, and except for fraud,
willful misconduct and gross negligence, no property or assets of any Partner,
other than its interest in the Partnership, shall be subject to levy, execution
or other enforcement procedures for the satisfaction of any judgment (or other
judicial process) in favor of any other Partner(s) and arising out of, or in
connection with, this Agreement. This Agreement is executed by the officers or
general partners of each Partner solely as officers or partners of the same and
not in their own individual capacities. No advisor, trustee, officer, partner,
employee, beneficiary, shareholder,
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participant or agent of any Partner (or of any partner of a Partner) shall be
personally liable in any matter or to any extent under or in connection with
this Agreement, and the Partnership, each Partner and their respective
successors and assigns shall look solely to the interest of the other Partner in
the Partnership for the payment of any claim or for any performance hereunder.
9.9 General Partner Expenses and Liabilities. All costs
and expenses incurred by the Company in connection with its activities as the
General Partner hereunder, all costs and expenses incurred by the Company in
connection with its continued corporate existence, qualification as a real
estate investment trust under the Code and otherwise, and all other liabilities
incurred or suffered by the General Partner in connection with the pursuit of
its business and affairs as contemplated hereunder and in connection herewith,
shall be paid (or reimbursed to the Company, if paid by the Company) by the
Partnership unless and to the extent that any such costs were paid by the
Company in connection with the issuance of additional shares of beneficial
interest of the Company as contemplated by Section 3.3(B) above. Notwithstanding
anything to the contrary contained herein, this Section 9.9 shall apply only to
the extent that such costs, expenses or liabilities exceed any cash distributed
to the General Partner by any wholly-owned subsidiary of the General Partner.
10. Banking. The funds of the Partnership shall be kept in
accounts designated by the General Partner and all withdrawals therefrom shall
be made on such signature or signatures as shall be designated by the General
Partner.
11. Accounting.
11.1 Fiscal Year. The fiscal year and taxable year of the
Partnership (the "fiscal year") shall end on the last day of December of each
year, unless another fiscal year end is selected by the General Partner.
11.2 Books of Account. The Partnership books of account
shall be maintained at the principal office designated in Section 4 above or at
such other locations and by such person or persons as may be designated by the
General Partner. The Partnership shall pay the expense of maintaining its books
of account. Each Partner shall have, during reasonable business hours and upon
reasonable prior notice, access to the books of the Partnership and in addition,
at its expense, shall have the right to copy such books. The General Partner, at
the expense of the Partnership, shall cause to be prepared and distributed to
the Partners annual financial data sufficient to reflect the status and
operations of the Partnership and its assets and to enable each Partner to file
its federal income tax return.
11.3 Method of Accounting. The Partnership books of account
shall be maintained and kept, and its income, gains, losses and deductions shall
be accounted for, in accordance with sound principles of accounting consistently
applied, or such other method of accounting as may be adopted hereafter by the
General Partner. All elections and options available to the Partnership for
Federal or state income tax purposes shall be taken or rejected by the
Partnership in the sole discretion of the General Partner.
11.4 Section 754 Election. In case of a distribution of
property made in the manner provided in Section 734 of the Code (or any similar
provision enacted in lieu thereof), or in the case of a transfer of any interest
in the Partnership permitted by this Agreement made in the manner provided in
Section 743 of the Code (or any similar provision enacted in lieu thereof), the
General Partner, on behalf of the Partnership, will file an election under
Section 754 of the Code
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(or any similar provision enacted in lieu thereof) in accordance with the
procedures set forth in the applicable Regulations.
11.5 Tax Matters Partner. The General Partner is hereby
designated the Tax Matters Partner (hereinafter referred to as the "TMP") of the
Partnership and shall have all the rights and obligations of the TMP under the
Code.
11.6 Administrative Adjustments. If the TMP receives
notice of a Final Partnership Administrative Adjustment (the "FPAA") or if a
request for an administrative adjustment made by the TMP is not allowed by the
United States Internal Revenue Service (the "IRS") and the IRS does not notify
the TMP of the beginning of an administrative proceeding with respect to the
Partnership's taxable year to which such request relates (or if the IRS so
notifies the TMP but fails to mail a timely notice of an FPAA), the TMP may,
but shall not be obligated to, petition a Court for readjustment of partnership
items. In the case of notice of an FPAA, if the TMP determines that the United
States District Court or Claims Court is the most appropriate forum for such a
petition, the TMP shall notify each person who was a Partner at any time during
the Partnership's taxable year to which the IRS notice relates of the
approximate amount by which its tax liability would be increased (based on such
assumptions as the TMP may in good faith make) if the treatment of partnership
items on his return was made consistent with the treatment of partnership items
on the Partnership's return, as adjusted by the FPAA. Unless each such person
deposits with the TMP, for deposit with IRS, the approximate amount of his
increased tax liability, together with a written agreement to make additional
deposits if required to satisfy the jurisdictional requirements of the Court,
within thirty days after the TMP's notice to such person, the TMP shall not
file a petition in such Court. Instead, the TMP may, but shall not be obligated
to, file a petition in the United States Tax Court.
12. Transfers of Partnership Interests.
A. General Partner. In no event may the General
Partner at any time assign, sell, transfer, pledge, hypothecate or otherwise
dispose of all or any portion of its Partnership Interest, except by operation
of law.
B. Limited Partner.
(i) No Limited Partner or substituted
Limited Partner shall, without the prior written consent of the General Partner
(which consent may be given or withheld in the sole discretion of the General
Partner), sell, assign, distribute or otherwise transfer (a "Transfer") all or
any part of his interest in the Partnership, except (w) by operation of law,
testamentary disposition, gift (outright or in trust) or by sale, in each case
to or for the benefit of his parent(s), spouse or descendants, (x) pledges or
other collateral transfers effected by a Limited Partner to secure the repayment
of a bona fide loan or other obligation (a "Pledge") and the subsequent
foreclosure or satisfaction thereof by transfer of such OP Units, (y) the
exchange of OP Units for shares of beneficial interest of the Company, pursuant
to Section 3.2(C) above, and (z) the distribution of OP Units or Preference
Units by a Limited Partner to any of its direct or indirect constituent partners
or owners. Notwithstanding the foregoing, each such transfer shall be subject to
compliance with restrictions on transferability contained in any other
applicable agreement executed by the transferor and compliance with applicable
securities laws; the General Partner reserves the right to require an opinion of
counsel regarding such matters in form and substance reasonably acceptable to
the General Partner as a condition to any such Transfer. Neither the conversion
of a Preference Unit into one or more OP Units nor the conversion of OP Unit
into a Common Share constitutes a Transfer. A Limited Partner shall notify the
General
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Partner of any Transfer of beneficial interest or other interest which
occurs without a transfer of record ownership, as well as any pledge or other
collateral transfer. No part of the interest of a Limited Partner shall be
subject to the claims of any creditor, any spouse for alimony or support, or to
legal process, and may not be voluntarily or involuntarily alienated or
encumbered except as may be specifically provided for in this Agreement. A
Limited Partner shall not be permitted to retire or withdraw from the
Partnership except as expressly permitted by this Agreement.
(ii) An Assignee, legatee, distributee or
other transferee (whether by conveyance, operation of law or
otherwise)(including any pledgee upon realization of its rights as a secured
creditor) (a "Transferee") of all or any portion of a Limited Partner's interest
in the Partnership shall be entitled to receive Profits, Losses and
distributions hereunder attributable to such interest acquired by reason of such
Transfer, from and after the effective date of the Transfer of such interest,
and Assignees shall have the ability to exercise the rights granted to Limited
Partners under Section 3.2(C), but shall not have any consent rights with
respect to any matter presented to Limited Partners for approval; provided,
however, anything in this Agreement to the contrary notwithstanding, (a) no
Transfer by a Limited Partner shall be effective until such Transfer has been
consented to by the General Partner except as provided in Section 12(B)(i); (b)
without the prior written consent of the General Partner, no Transferee shall be
considered a substituted Limited Partner except as provided in Section
12(B)(i)(w) and (z) and, in any event, until such Transferee shall have agreed
to be bound by the terms of this Agreement and shall have executed a counterpart
hereof; (c) the Partnership and the General Partner shall be entitled to treat
the transferor of such interest as the absolute owner thereof in all respects,
and shall incur no liability for the allocation of Profits and Losses or
distributions which are made to such transferor until such time as the written
instrument of Transfer has been received by the General Partner and the
"effective date" of the Transfer has passed, (d) the General Partner shall have
the right to require any such transferor to exchange the OP Units to which such
interest relates for Common Shares, pursuant to Section 3.2(C) above, excluding
Pledges of OP Units but including any transfer of the pledged OP Units, whether
to the secured party or otherwise, pursuant to such party's exercise of its
remedies under the Pledge or the related loan or obligation, and (e) an Assignee
shall not be bound by any amendments, modifications or changes to this Agreement
that would adversely affect its rights under Section 3.2(C) or this Section
12(B)(ii) without its consent. The "effective date" of any Transfer shall be the
last day of the month set forth on the written instrument of Transfer or such
other date consented to in writing by the General Partner as the "effective
date".
(iii) Notwithstanding anything to the
contrary contained in this Section 12(B), (a) in the event a Limited Partner
distributes in dissolution and liquidation all or any portion of its interest in
the Partnership, the partners, shareholders or members (as the case may be) in
such Limited Partner receiving such interest shall become substituted Limited
Partners, and shall (upon agreeing to be bound by the terms of this Agreement
and executing a counterpart hereof and/or any Preference Unit Terms Sheet or
Other Securities Term Sheet) succeed to the rights, interests and obligations of
such Limited Partner in the Partnership, in proportion to their respective
interests in such Limited Partner, and (b) no Transfer shall be effective to the
extent that such Transfer would, in the opinion of the General Partner (y) by
treating the interest in the Partnership so transferred as if it had been
exchanged for Common Shares in accordance with Section 3.2(C) above, violate the
limitations on ownership of Common Shares contained in Article VII of the
Declaration of Trust of the Company, or (z) violate any State or Federal
securities laws.
C. Admission Adjustments. The General Partner shall, when
necessary, cause this Agreement to be amended from time to time to reflect the
addition or withdrawal of
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Partners, and the issuance, conversion and redemption of any Preference Units
and/or OP Units (including the corresponding adjustments to Percentage
Interests).
D. Limitation. Notwithstanding any other provision of
this Agreement to the contrary, no sale, exchange, assignment, or other transfer
or issuance of a Partnership Interest by or to any Partner shall be effective,
if the effect of such transaction would be to cause the General Partner's
Percentage Interest to decrease to a level of fifty percent (50%) or less.
13. Admission of New Partners. The General Partner shall
admit to the Partnership as Limited Partners those persons and entities who are
not already Partners and who receive OP Units and/or Preference Units in
accordance with the provisions of this Agreement.
14. Termination, Liquidation and Dissolution of
Partnership.
14.1 Termination Events. The Partnership shall be
dissolved and its affairs wound up in the manner hereinafter provided upon the
earliest to occur of the following events:
(a) December 31, 2080; or
(b) the agreement of those Partners
holding at least ninety percent
(90%) of the Percentage Interests of
all of the Partners, determining
that the Partnership should be
dissolved; or
(c) subject to Section 14.4 below, the
entry of a final judgment, order or
decree of a court of competent
jurisdiction adjudicating as
bankrupt either the Partnership or
the General Partner, and the
expiration without appeal of the
period, if any, allowed by
applicable law to appeal therefrom.
14.2 Method of Liquidation. Upon the happening of
any of the events specified in Section 14.1 above, the General Partner (or if
there be no General Partner, a liquidating trustee selected by those Limited
Partners holding in the aggregate more than fifty percent 50% of the Percentage
Interests held by all Limited Partners) shall immediately commence to wind up
the Partnership's affairs and shall liquidate the assets of the Partnership as
promptly as possible, unless the General Partner, or the liquidating trustee,
shall determine that an immediate sale of Partnership assets would cause undue
loss to the Partnership, in which event the liquidation may be deferred for a
reasonable time. The Partners shall continue to share Operating Cash Flow,
Capital Cash Flow, Profits and Losses during the period of liquidation in the
same proportions as before dissolution (subject to Section 14.2(C) below). The
proceeds from liquidation of the Partnership, including repayment of any debts
of Partners to the Partnership, shall be applied in the order of priority as
follows:
A. Debts of the Partnership, including repayment
of principal and interest on loans and advances made by the General Partner
pursuant to Sections 3.3 and/or 9.7 above; then
B. To the establishment of any reserves deemed
necessary or appropriate by the General Partner, or by the person(s) winding up
the affairs of the Partnership in
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the event there is no remaining General Partner of the Partnership, for any
contingent or unforeseen liabilities or obligations of the Partnership. Such
reserves established hereunder shall be held for the purpose of paying any such
contingent or unforeseen liabilities or obligations and, at the expiration of
such period as the General Partner, or such person(s) deems advisable, the
balance of such reserves shall be distributed in the manner provided hereinafter
in this Section 14.2 as though such reserves had been distributed
contemporaneously with the other funds distributed hereunder; then
C. To the Partners in accordance with their
respective Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods. In connection therewith, the
Company, as the holder of Preference Units, shall be allocated gross income to
the extent necessary to cause its Capital Account balance to equal the amount
established in the applicable Other Securities Term Sheet upon any voluntary or
involuntary dissolution, liquidation or winding up of the Partnership; provided,
that no such gross income allocation shall be made to the Company to the extent
that such allocation would result in any additional Loss (or item thereof) being
allocated to any Obligated Partner.
14.3 Date of Termination. The Partnership shall be
terminated when all notes received in connection with such disposition have been
paid and all of the cash or property available for application and distribution
under Section 14.2 above (including reserves) shall have been applied and
distributed in accordance therewith.
14.4 Reconstitution Upon Bankruptcy.
A. Notwithstanding any dissolution of the
Partnership under clause (c) of Section 14.1 above, if the Partnership is
reconstituted as set forth in this Section 14.4, then the business of the
Partnership shall be continued with the Partnership's property and the
Partnership's assets shall not be liquidated.
B. If the Partnership is dissolved by reason of
the bankruptcy of the General Partner, a successor general partner may be
admitted within 90 days after the dissolution, effective as of the date of
dissolution, as the General Partner hereunder, with the written consent of those
Limited Partners holding more than 50% of the aggregate Percentage Interests of
all Limited Partners. Upon the admission of such successor general partner,
without any further consent or approval of any other Partner, the Partnership
shall be reconstituted as a successor limited partnership.
C. If the Partnership is dissolved by reason of
the bankruptcy of the Partnership in a proceeding for the reorganization (and
not the liquidation) of the Partnership, then, with the consent of the Company
and those Limited Partners holding at least fifty percent (50%) of the
Percentage Interests held by all Limited Partners, the Partnership may be
reconstituted within 90 days after dissolution, effective as of the date of
dissolution, whereupon the Partnership shall be reconstituted as a successor
limited partnership.
D. The successor limited partnership
reconstituted in accordance with the foregoing provisions of this Section 14.4
shall continue the business of the Partnership with the Partnership's property.
The Percentage Interests of the Partners in the successor limited partnership
shall be in proportion to their respective Percentage Interests in the dissolved
Partnership. Such successor limited partnership shall be governed by the terms
and provisions of this Agreement and references in this Agreement to the
Partnership or to the Partners or their
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rights and obligations shall be understood to comprehend such successor limited
partnership and the Partners thereof and their rights and obligations.
14.5 Death, Legal Incompetency, Etc. of a Limited Partner.
The death, legal incompetency, insolvency, dissolution or bankruptcy of a
Limited Partner shall not dissolve or terminate the Partnership. Upon the death
or incapacity of an individual Limited Partner, such individual Limited
Partner's interest in the Partnership shall be transferred either by will, the
laws of intestacy or otherwise to the legal representative or successor of such
individual Limited Partner.
15. Power of Attorney. Each Limited Partner hereby
irrevocably constitutes and appoints the Chairman of the Board of the General
Partner (or the Co-Chairmen acting together if there be more than one), with
full power of substitution, its true and lawful attorney, for him and in his
name, place and stead and for his use and benefit, to sign, swear to,
acknowledge, file and record:
(i) this Agreement, and subject to Section 16
below, amendments to this Agreement;
(ii) any certificates, instruments and documents
(including assumed and fictitious name certificates) as may be required
by, or may be appropriate under, the laws of the State of Illinois or
any other State or jurisdiction in which the Partnership is doing or
intends to do business, in order to discharge the purposes of the
Partnership or otherwise in connection with the use of the name or
names used by the Partnership;
(iii) any other instrument which may be required to
be filed or recorded by the Partnership on behalf of the Partners under
the laws of any State or by any governmental agency in order for the
Partnership to conduct its business;
(iv) any documents which may be required to effect
the continuation of the Partnership, the admission of a substitute or
additional Partner, or the dissolution and termination of the
Partnership, provided such continuation, admission or dissolution and
termination is not in violation of any provision of this Agreement; and
(v) any documents which may be required or
desirable to have the General Partner appointed, and act as, the "Tax
Matters Partner" as described in the Code.
The foregoing grant of authority is a special power of attorney coupled with an
interest, is irrevocable and shall survive the death or incapacity of any
individual Limited Partner, and shall survive the delivery of any assignment by
a Limited Partner of the whole or any portion of his interest in the
Partnership.
16. Amendment of Agreement.
A. Each Limited Partner, by his execution of or
joinder in this Agreement, hereby irrevocably appoints the Chairman of the Board
of the General Partner (or the Co-Chairmen acting together if there be more than
one) with power of substitution, as his true and
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lawful attorney coupled with an interest, in his name, place and ▇▇▇▇▇ to amend
this Agreement in any respect other than:
(i) to enlarge the obligation of any Partner to
make contributions to the capital of the Partnership, as provided for
in Section 3 above; or
(ii) except as otherwise provided for in this
Agreement or as required by law, to modify the allocation of Profits or
Losses or distributions among the Partners as provided for in Section 7
and 8 above, respectively; or
(iii) to amend Sections 1, 3.2, 9.2, or 12; or
(iv) to amend this Section 16.
B. With respect to amendments regarding Sections
16(A)(ii) or 16(A)(iii), this Agreement may be amended with the written consent
of the Company, the ▇▇▇▇ Partners, and the Starwood Partners or their respective
successors in interest, as applicable, so long as they shall remain Partners and
those Limited Partners holding not less than 67% of the aggregate of Percentage
Interests held by all Limited Partners.
Notwithstanding the foregoing, the terms and conditions of a particular
series of Preference Units may not be changed without the written consent of the
holders of at least 67% of the Preference Units within the class or series (or
such greater percentage as may be provided for in the applicable Preference Unit
Term Sheet or Other Securities Term Sheet, as the case may be).
C. With respect to amendments regarding Sections
16(A)(i) or (iv), this Agreement may be amended only with the written consent of
all Partners.
In the event this Agreement shall be amended pursuant
to this Section 16, the General Partner shall cause this Agreement to be amended
to reflect the amendment.
17. Miscellaneous.
17.1 Notices. Any notice, election or other communication
provided for or required by this Agreement shall be in writing and shall be
deemed to have been given when delivered by hand or by telecopy or other
facsimile transmission, the first business day after sent by overnight courier
(such as Federal Express), or on the second business day after deposit in the
United States Mail, certified or registered, return receipt requested, postage
prepaid, properly addressed to the Partner to whom such notice is intended to be
given at the address for the Partner set forth on the signature pages of this
Agreement, or at such other address as such person may have previously furnished
in writing to the Partnership and each Partner with copies to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.
Two ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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17.2 Modifications. Except as otherwise provided in this
Agreement, no change or modification of this Agreement, nor any waiver of any
term or condition in the future, shall be valid or binding upon the Partners
unless such change or modification shall be in writing and signed by all of the
Partners or, in the case of a waiver of any term or condition, such waiver shall
be in writing and signed by all Partners who were intended, as determined in the
reasonable judgment of the General Partner, to be the primary beneficiaries of
the waived term or condition.
17.3 Successors and Assigns. Any person acquiring or
claiming an interest in the Partnership, in any manner whatsoever, shall be
subject to and bound by all of the terms, conditions and obligations of this
Agreement to which his predecessor-in-interest was subject or bound, without
regard to whether such a person has executed a counterpart hereof or any other
document contemplated hereby. No person, including the legal representative,
heir or legatee of a deceased Partner, shall have any rights or obligations
greater than those set forth in this Agreement, and no person shall acquire an
interest in the Partnership or become a Partner thereof except as expressly
permitted by and pursuant to the terms of this Agreement. Subject to the
foregoing, and the provisions of Section 12 above, this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
successors, assigns, heirs, legal representatives, executors and administrators.
Notwithstanding the foregoing, the special voting and consent privileges granted
to the ▇▇▇▇ Partners and the Starwood Partners contained in Section 3.2(B)(e)
and Article 16 shall be limited to the ▇▇▇▇ Partners and the Starwood Partners
for such time as they remain Partners and any Person acquiring Units as a result
of the exercise of remedies by a pledgee of Units held by such Partner and shall
not be transferred to each Partners' respective successor-in-interest.
17.4 Duplicate Originals. For the convenience of the
Partners, any number of counterparts hereof may be executed, and each such
counterpart shall be deemed to be an original instrument, and all of which taken
together shall constitute one agreement.
17.5 Construction. The titles of the Sections and
subsections herein have been inserted as a matter of convenience of reference
only and shall not control or affect the meaning or construction of any of the
terms or provisions herein.
17.6 Governing Law. This Agreement shall be governed by the
laws of the State of Illinois. Except to the extent the Act is inconsistent with
the provisions of this Agreement, the provisions of such Act shall apply to the
Partnership.
17.7 Other Instruments. The parties hereto covenant and
agree that they will execute such other and further instruments and documents
as, in the opinion of the General Partner, are or may become necessary or
desirable to effectuate and carry out the Partnership as provided for by this
Agreement.
17.8 General Partner with Interest as Limited Partner. If
the General Partner ever has an interest as a Limited Partner in the
Partnership, the General Partner shall, with respect to such interest, enjoy all
of the rights and be subject to all of the obligations and duties of a Limited
Partner.
17.9 Legal Construction. In case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
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17.10 Gender. Whenever the context shall so require, all
words herein in any gender shall be deemed to include the masculine, feminine or
neuter gender, all singular words shall include the plural, and all plural words
shall include the singular.
17.11 Prior Agreements Superseded. Except for joinders, term
sheets and/or addendums that have been made or will be made and are deemed to be
incorporated by reference herein and made a part hereof, this Agreement
supersedes any prior understandings or written or oral agreements amongst the
Partners, or any of them, respecting the within subject matter and contains the
entire understanding amongst the Partners with respect thereto.
17.12 No Third Party Beneficiary. The terms and provisions
of this Agreement are for the exclusive use and benefit of General Partner and
the Limited Partners and shall not inure to the benefit of any other person or
entity.
17.13 Purchase for Investment. Each Partner represents,
warrants and agrees that it has acquired and continues to hold its interest in
the Partnership for its own account for investment only and not for the purpose
of, or with a view toward, the resale or distribution of all or any part
thereof, nor with a view toward selling or otherwise distributing such interest
or any part thereof at any particular time or under any predetermined
circumstances. Each Partner further represents and warrants that it is a
sophisticated investor, able and accustomed to handling sophisticated financial
matters for itself, particularly real estate investments, and that it has a
sufficiently high net worth that it does not anticipate a need for the funds it
has invested in the Partnership in what it understands to be a highly
speculative and illiquid investment.
17.14 Waiver. No consent or waiver, express or implied, by
any Partner to or of any breach or default by any other Partner in the
performance by such other Partner of its obligations hereunder shall be deemed
or construed to be a consent to or waiver of any other breach or default in the
performance by such other Partner of the same or any other obligations of such
Partner hereunder. Failure on the part of any Partner to complain of any act or
failure to act on the part of any other Partner or to declare any other Partner
in default, irrespective of how long such failure continues, shall not
constitute a waiver by such Partner of its rights hereunder.
17.15 Time of Essence. Time is hereby expressly made of the
essence with respect to the performance by the parties of their respective
obligations under this Agreement.
17.16 Counterparts. This Agreement may be executed in one or
more counterparts, which when taken together, shall constitute but one original.
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IN WITNESS WHEREOF, the General Partner (on behalf of itself and as
attorney-in-fact for the Limited Partners pursuant to Section 16 hereof) has
executed this Amendment as of the date first written above.
GENERAL PARTNER:
EQUITY RESIDENTIAL PROPERTIES TRUST, a
Maryland real estate investment trust
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
--------------------------------------------,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇
Title: Chief Executive Officer and President
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