FORM OF AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
OF
BERKSHIRE INCOME REALTY-OP, L.P.
(a Delaware limited partnership)
Dated as of _______, 2003
TABLE OF CONTENTS
ARTICLE 1 DEFINED TERMS.........................................................................................2
ARTICLE 2 ORGANIZATIONAL MATTERS...............................................................................19
Section 2.1. Formation; Continuation...............................................................19
Section 2.2. Name..................................................................................19
Section 2.3. Registered Office and Agent; Principal Office.........................................19
Section 2.4. Power of Attorney.....................................................................19
Section 2.5. Term..................................................................................21
ARTICLE 3 PURPOSE .............................................................................................21
Section 3.1. Purpose and Business..................................................................21
Section 3.2. Powers................................................................................21
Section 3.3. Representations and Warranties by the Parties.........................................22
ARTICLE 4 CAPITAL CONTRIBUTIONS................................................................................23
Section 4.1. Capital Contributions of the Partners.................................................23
Section 4.2. Additional Capital Contributions and Loans Generally..................................24
Section 4.3. Loans by Third Parties................................................................24
Section 4.4. Additional Funding and Capital Contributions..........................................24
Section 4.5. No Third Party Beneficiary............................................................26
Section 4.6. No Interest on Capital................................................................26
Section 4.7. Repurchase of REIT Stock..............................................................27
ARTICLE 5 DISTRIBUTIONS........................................................................................27
Section 5.1. Requirements and Characterization of Distributions....................................27
Section 5.2. Distributions in Kind.................................................................29
Section 5.3. Distributions Upon Liquidation........................................................29
Section 5.4. Restricted Distributions..............................................................29
ARTICLE 6 ALLOCATIONS..........................................................................................29
Section 6.1. Allocations in General................................................................29
Section 6.2. Additional Allocation Provisions......................................................29
Section 6.3. Tax Allocations.......................................................................32
ARTICLE 7 MANAGEMENT AND OPERATION OF BUSINESS; AMENDMENTS.....................................................32
Section 7.1. Management............................................................................32
Section 7.2. Certificate of Limited Partnership....................................................36
Section 7.3. Certain Restrictions on General Partner's Authority...................................36
Section 7.4. Amendments............................................................................38
Section 7.5. Mergers, Etc..........................................................................40
Section 7.6. Reimbursement of the General Partner; Reimbursement of Limited Partners...............41
Section 7.7. Outside Activities of the General Partner and the Special Limited
Partner...............................................................................42
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Section 7.8. Contracts with Affiliates.............................................................42
Section 7.9. Indemnification.......................................................................43
Section 7.10. Liability of the General Partner......................................................45
Section 7.11. Other Matters Concerning the General Partner..........................................46
Section 7.12. Title to Partnership Assets...........................................................47
Section 7.13. Reliance by Third Parties.............................................................47
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS...........................................................47
Section 8.1. Limitation of Liability...............................................................47
Section 8.2. Management of Business................................................................48
Section 8.3. Outside Activities of Limited Partners................................................48
Section 8.4. Return of Capital.....................................................................48
Section 8.5. Rights of Limited Partners Relating to the Partnership................................49
Section 8.6. Exchange Rights.......................................................................49
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS...............................................................52
Section 9.1. Records and Accounting................................................................52
Section 9.2. Reports...............................................................................52
ARTICLE 10 TAX MATTERS.........................................................................................53
Section 10.1. Preparation of Tax Returns; Tax Accounting............................................53
Section 10.2. Tax Elections.........................................................................53
Section 10.3. Tax Matters Partner...................................................................53
Section 10.4. Withholding...........................................................................54
ARTICLE 11 TRANSFERS AND WITHDRAWALS; REMOVAL OF GENERAL PARTNER...............................................54
Section 11.1. Transfer..............................................................................54
Section 11.2. Transfer of General Partner's Interest................................................54
Section 11.3. Special Limited Partner's Rights to Transfer..........................................55
Section 11.4. Other Limited Partners' Rights to Transfer............................................56
Section 11.5. Substituted Limited Partners..........................................................58
Section 11.6. Assignees.............................................................................58
Section 11.7. General Provisions....................................................................59
ARTICLE 12 ADMISSION OF PARTNERS...............................................................................60
Section 12.1. Admission of Successor General Partner................................................60
Section 12.2. Admission of Successor Special Limited Partner........................................61
Section 12.3. Admission of Additional Limited Partners..............................................61
Section 12.4. Amendment of Agreement and Certificate of Limited Partnership.........................62
Section 12.5. Limit on Number of Partners...........................................................62
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION............................................................62
Section 13.1. Dissolution...........................................................................62
Section 13.2. Winding Up............................................................................63
Section 13.3. Notice of Dissolution.................................................................65
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Section 13.4. Termination of Partnership and Cancellation of Certificate of Limited Partnership.....65
Section 13.5. Reasonable Time for Winding-Up........................................................65
Section 13.6. Waiver of Partition...................................................................65
ARTICLE 14 MEETINGS 65
Section 14.1. Meetings of the Common Limited Partners...............................................65
Section 14.2. Meetings of Preferred Limited Partners................................................66
ARTICLE 15 GENERAL PROVISIONS..................................................................................66
Section 15.1. Addresses and Notice..................................................................66
Section 15.2. Titles and Captions...................................................................67
Section 15.3. Pronouns and Plurals..................................................................67
Section 15.4. Further Action........................................................................67
Section 15.5. Binding Effect........................................................................67
Section 15.6. Waiver................................................................................67
Section 15.7. Counterparts..........................................................................67
Section 15.8. Applicable Law........................................................................67
Section 15.9. Entire Agreement......................................................................68
Section 15.10. Invalidity of Provisions..............................................................68
EXHIBITS:
Exhibit A - Partners, Contributions and Partnership Interests
Exhibit B - Notice of Exercise of Exchange Right
Exhibit C - Designation of Series A Preferred Limited Partner Units
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BERKSHIRE INCOME REALTY-OP, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of ____________, 2003, is entered into by and among BIR GP, L.L.C., a
Delaware
limited liability company, as general partner (the "GENERAL PARTNER"), Berkshire
Income Realty, Inc., a Maryland corporation and the parent of the General
Partner (the "SPECIAL LIMITED PARTNER"), KRF Company, L.L.C., a
Delaware limited
liability company ("KRF"), and the other Persons whose names are set forth on
Exhibit A hereto, as other Limited Partners, together with any other Persons who
become Partners in the Partnership as provided herein. Capitalized terms used
herein and not otherwise defined have the respective meanings given them in
Article 1.
W I T N E S S E T H:
WHEREAS, on July 22, 2002, the General Partner and the Special
Limited Partner formed a
Delaware limited partnership under the name "Berkshire
Income Realty-OP, L.P." (the "PARTNERSHIP") and entered into an Agreement of
Limited Partnership dated as of July 22, 2002 (the "PRIOR AGREEMENT");
WHEREAS, the Special Limited Partner intends to qualify as a
REIT;
WHEREAS, in exchange for the contribution of assets to the
Partnership by the General Partner, the Special Limited Partner and KRF, the
Partnership will issue Partnership Units to each such Person as provided herein;
WHEREAS, in furtherance of the Partnership's business, the
Partnership may acquire additional Apartment Communities or other assets from
time to time, including in exchange for Partnership Units; and
WHEREAS, the parties hereto desire to continue the Partnership as a
limited partnership under the
Delaware Revised Uniform Limited Partnership Act
in accordance with the provisions of this Agreement, which supersedes, amends
and restates the Prior Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, covenant and agree as follows:
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ARTICLE 1
DEFINED TERMS
The following definitions shall for all purposes, unless otherwise
expressly provided, apply to the terms used in this Agreement.
"ACT" means the
Delaware Revised Uniform Limited Partnership Act, as
it may be amended from time to time, and any successor to such statute.
"ACTIONS" has the meaning set forth in Section 7.9(a) hereof.
"ADDITIONAL FUNDS" has the meaning set forth in Section 4.4(a)
hereof.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as either a Preferred Limited Partner or Common Limited Partner
pursuant to Sections 4.4(b) and 12.3 hereof and who is shown as such on the
books and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for
each Partner as of the end of each Partnership Year (i) increased by any amounts
that 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)
and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership Year.
"ADJUSTMENT DATE" means the date of a Capital Contribution pursuant
to Section 4.4 hereof.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time,
including pursuant to a Designation Instrument.
"APARTMENT COMMUNITY" means any multi-family residential apartment
building or building complex, including all facilities ancillary thereto and the
land underlying the same.
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"ASSIGNEE" means a Person to whom one or more Limited Partner
Interests 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 11.6 hereof.
"AVAILABLE CASH" means, with respect to any period for which such
calculation is being made,
(i) the sum, without duplication, of:
(a) the Partnership's Net Income or Net Loss (as the case may
be) for such period (determined without taking into account clause (g) of
such definition),
(b) Depreciation and all other noncash charges or accruals and
any amount that was not paid by the Partnership during such period to the
extent deducted in determining Net Income or Net Loss for such period,
(c) the excess, if any, of the net cash proceeds from the
sale, exchange, disposition, or refinancing of Partnership property for
such period over the gain (or loss, as the case may be) recognized from
such sale, exchange, disposition, or refinancing during such period
(excluding Terminating Capital Transactions),
(d) all other cash received (including amounts previously
accrued as Net Income and amounts of deferred income), including any
amounts borrowed by the Partnership for such period, that were not
included in determining Net Income or Net Loss for such period, and
(e) all amounts described in clause (ii)(f) below to the
extent that the General Partner determines that such amounts are no longer
needed for the purpose for which they were reserved;
(ii) less the sum, without duplication, of:
(a) all principal debt payments made during such period
by the Partnership,
(b) capital expenditures made by the Partnership during
such period,
(c) investments in any entity (including loans made
thereto) to the extent that such investments are not otherwise
described in clause (ii)(b),
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period (including amounts paid
in respect of expenses previously accrued),
(e) any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period, and
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(f) the amount of any working capital accounts and other cash
or cash equivalents that the General Partner determines to be necessary or
appropriate in its sole discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made, or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"BENEFICIAL OWNERSHIP" means, with respect to any Person, ownership
of shares of any class or series of stock of the Special Limited Partner, shares
of beneficial interest of ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government
Income Trust II, or Partnership Units in the Partnership, as applicable, equal
to the sum of (i) the number of such shares or units directly owned by such
Person and (ii) the number of such shares or units indirectly owned by such
Person, taking into account the constructive ownership rules of Code Section
544, as modified by Code Section 856(h)(1)(B). The terms "Beneficial Owner,"
"Beneficially Owns," "Beneficially Own" and "Beneficially Owned" shall have the
correlative meanings.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day
on which commercial banks in New York, New York or Boston, Massachusetts are
authorized or required by law to close.
"CAPITAL ACCOUNT" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(a) To each Partner's Capital Account, there shall be added
such Partner's Capital Contributions, such Partner's distributive share of
Net Income and any items in the nature of income or gain that are
specially allocated pursuant to Section 6.2 hereof, and the amount of any
Partnership liabilities assumed by such Partner or that are secured by any
property distributed to such Partner.
(b) From each Partner's Capital Account, there shall be
subtracted the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this Agreement,
such Partner's distributive share of Net Losses and any items in the
nature of deduction or loss that are specially allocated pursuant to
Section 6.2 hereof, and the amount of any liabilities of such Partner
assumed by the Partnership or that are secured by any property contributed
by such Partner to the Partnership.
(c) In the event any interest in the Partnership is
transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it is
attributable to the transferred interest.
(d) The provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a
manner consistent with such Regulations. If the General Partner shall
determine that it is prudent to modify the manner in which the
4
Capital Accounts are maintained in order to comply with such Regulations,
the General Partner may make such modification.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
cash equivalents or the Gross Asset Value of any Contributed Property that such
Partner contributes to the Partnership pursuant to Sections 4.1, 4.2 or 4.4
hereof or is deemed to contribute pursuant to Sections 4.4(d) hereof.
"CASH AMOUNT" means an amount of cash equal to the Common Value of
the REIT Common Shares Amount or the Preferred Value of the Preferred Shares
Amount, as applicable.
"CERTIFICATE" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Secretary of State of the State of
Delaware, as amended from time to time in accordance with the terms hereof and
the Act.
"CERTIFICATE OF INCORPORATION" means the Charter of the Special
Limited Partner filed in the office of the State Department of Assessments and
Taxation of the State of Maryland on July 19, 2002, as amended or restated from
time to time, including any Articles Supplementary.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific Section or Sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"COMMON CONVERSION FACTOR" means 1.0; PROVIDED, that in the event
that the Special Limited Partner (i) declares or pays a dividend on its
outstanding Class A REIT Common Shares or Class B REIT Common Shares in Class A
REIT Common Shares or Class B REIT Common Shares, as the case may be, or makes a
distribution to all holders of its outstanding Class A REIT Common Shares or
Class B REIT Common Shares in Class A REIT Common Shares or Class B REIT Common
Shares, as the case may be, (ii) subdivides its outstanding Class A REIT Common
Shares or Class B REIT Common Shares or (iii) combines its outstanding Class A
REIT Common Shares or Class B REIT Common Shares into a smaller number of Class
A REIT Common Shares or Class B REIT Common Shares, as the case may be, the
Common Conversion Factor with respect to Class A REIT Common Shares or Class B
REIT Common Shares, as the case may be, shall be adjusted by multiplying the
Common Conversion Factor by a fraction, the numerator of which shall be the
number of Class A REIT Common Shares or Class B REIT Common Shares issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination (assuming for such purposes that such dividend, distribution,
subdivision or combination has occurred as of such time), and the denominator of
which shall be the actual number of Class A REIT Common Shares or Class B REIT
Common Shares (determined without the above assumption) issued and outstanding
on the record date for such dividend, distribution, subdivision or combination.
Any adjustment to the Common Conversion Factor shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
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"COMMON LIMITED PARTNER" means any Person named as a Common Limited
Partner in Exhibit A attached hereto, as such Exhibit may be amended from time
to time, or any Substituted Limited Partner or Additional Limited Partner, in
such Person's capacity as a Common Limited Partner in the Partnership. For
avoidance of doubt, the term Common Limited Partner shall include the Special
Limited Partner so long as it owns Common Limited Partner Units.
"COMMON LIMITED PARTNER INTEREST" means a Partnership Interest of a
Common Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Common Limited Partners. A Common Limited Partner
Interest may be expressed as a number of Partnership Units (each a "COMMON
LIMITED PARTNER UNIT"). For the avoidance of doubt, in determining the
Partnership Interests of all Common Limited Partners, with respect to the
Special Limited Partner, only its Common Limited Partner Interests shall be
included in the calculation. For purposes of this Agreement, Common Limited
Partner Interests shall be designated as "Class A Common Limited Partner
Interests," "Class B Common Limited Partner Interests," or such other class or
series as the General Partner may designate pursuant to Section 4.4(d).
"COMMON VALUE" means on any date with respect to a REIT Common
Share, the market price on such date or, if such date is not a trading day, then
the market price on the immediately preceding day that is a trading day;
PROVIDED, that for purposes of determining the Cash Amount with respect to
Tendered Units of an Exchanging Partner, the term "COMMON VALUE" shall mean the
average of the daily market prices for ten consecutive trading days immediately
preceding the date of receipt by the Special Limited Partner of a Notice of
Exercise of Exchange Right. The market price for any such trading day shall be:
(i) if the REIT Common Shares are listed or admitted to trading on any
securities exchange or the NASDAQ National Market System, the closing price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices on such day, in either case as
reported in the principal consolidated transaction reporting system, (ii) if the
REIT Common Shares are not listed or admitted to trading on any securities
exchange or the NASDAQ National Market System, the last reported sale price on
such day or, if no sale takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a reliable quotation source
designated by the Special Limited Partner, or (iii) if the REIT Common Shares
are not listed or admitted to trading on any securities exchange or the NASDAQ
National Market System and no such last reported sale price or closing bid and
asked prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable quotation source designated by the
Special Limited Partner, or if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so reported, on the
most recent day (not more than ten days prior to the date in question) for which
prices have been so reported; PROVIDED, that if there are no bid and asked
prices reported during the ten days prior to the date in question, the Common
Value of the REIT Common Shares shall be determined by the Special Limited
Partner acting in good faith on the basis of such information as it considers,
in its reasonable judgment, appropriate. In the event the REIT Common Shares
Amount includes common rights (as defined in the definition of REIT Common
Shares Amount) that a holder of REIT Common Shares would be entitled to receive,
then the Common Value of such common
6
rights shall be determined by the Special Limited Partner acting in good faith
on the basis of such information as it considers, in its reasonable judgment,
appropriate.
"CONSENT" means the consent to or approval of a proposed action by a
Partner given in accordance with Section 14.1 or Section 14.2 hereof.
"CONSENT OF THE COMMON LIMITED PARTNERS" means the Consent of a
Majority-In-Interest of the Common Limited Partners, which Consent shall be
obtained prior to the taking of any action for which it is required by this
Agreement.
"CONTRIBUTED PROPERTIES" means each Property or other asset, but
excluding cash and cash equivalents, contributed or deemed contributed to the
Partnership.
"DEBT" means, as to any Person, as of any date of determination, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; and (iii) all indebtedness for
borrowed money or for the deferred purchase price of property or services
secured by any lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property, even though such Person
has not assumed or become liable for the payment thereof.
"DEPRECIATION" means, for each Partnership Year, an amount equal to
the federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, 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 year, Depreciation shall be in an amount
that bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such
year bears to such beginning adjusted tax basis; PROVIDED, HOWEVER, that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the General
Partner.
"DESIGNATION INSTRUMENT" means with respect to a class or series of
Common Limited Partner Interests or Preferred Limited Partner Interests, an
instrument executed by the General Partner at the time of issuance of such class
or series, setting forth the designations, powers, preferences and relative,
participating, optional and other special rights, powers and privileges of such
class or series as established by the General Partner pursuant to Section 4.4(d)
of this Agreement. The General Partner shall identify each such Designation
Instrument as the next consecutively lettered Exhibit to this Agreement (the
first such Designation Instrument to be Exhibit C hereto) and shall deliver a
conformed copy thereof to each Limited Partner; PROVIDED, that the failure to
deliver a conformed copy to a Limited Partner shall not in any way invalidate
the issuance of such class or series or give any Limited Partner any rights
under this Agreement other than the right to obtain a conformed copy of such
Designation Instrument.
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"EFFECTIVE DATE" means the date of closing of the Initial Public
Offering of the Series A Preferred Shares.
"EXCHANGE RIGHT" has the meaning set forth in Section 8.6 hereof.
"EXCHANGING PARTNER" has the meaning set forth in Section 8.6
hereof.
"GENERAL PARTNER" means BIR GP, L.L.C. or its successor as
general partner of the Partnership, in its capacity as general partner of the
Partnership.
"GENERAL PARTNER INTEREST" means the Partnership Interest held by
the General Partner that is the general partner interest hereunder. A General
Partner Interest may be expressed as a number of Partnership Units (each a
"GENERAL PARTNER UNIT").
"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) 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 agreed by the General Partner and the contributing Partner.
(b) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined
by the General Partner using such reasonable method of valuation as it may
adopt, as of the following times:
(i) the acquisition of an additional interest in the
Partnership by a new or existing Partner in exchange for more than a DE
MINIMIS Capital Contribution unless the General Partner determines that
such adjustment is not necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership;
(ii) the distribution by the Partnership to a Partner of
more than a DE MINIMIS amount of Partnership property (other than cash) as
consideration for all or part of an interest in the Partnership, unless
the General Partner determines that such adjustment is not necessary or
appropriate to reflect the relative economic interests of the Partners in
the Partnership; and
(iii) the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
(c) The Gross Asset Value of any Partnership asset distributed
to a Partner shall be the gross fair market value of such asset as of the
date of distribution as determined by the General Partner.
(d) The Gross Asset Values 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); PROVIDED, HOWEVER, that Gross Asset Values shall not
be
8
adjusted pursuant to this subparagraph (d) to the extent that an
adjustment pursuant to subparagraph (b) is made in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (d).
(e) If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subparagraph (a), (b) or (d), such
Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of computing Net
Income and Net Loss.
"INCAPACITY" or "INCAPACITATED" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his estate;
(ii) as to any corporation that is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership or limited liability company that is a
Partner, the dissolution and commencement of winding up of the partnership or
limited liability company; (iv) as to any estate that is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust that is a Partner, the termination
of the trust (but not the substitution of a new trustee); or (vi) as to any
Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner, (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors, (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above, (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties, (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within 120
days after the commencement thereof, (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within 90 days of such appointment, or (h) an appointment
referred to in clause (g) is not vacated within 90 days after the expiration of
any such stay.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of (A) its status as general partner or limited partner, or the parent of
the general partner or a limited partner, of the Partnership, (B) such Person's
status as a director, officer, employee, member or manager of the Partnership or
the general partner or a limited partner, or the parent of the general partner
or a limited partner, of the Partnership or (C) his or its liability, pursuant
to a loan guaranty or otherwise, for any indebtedness of the Partnership or an
Affiliate of the Partnership (including, without limitation, any indebtedness
that the Partnership or any Affiliate of the Partnership has assumed or taken
assets subject to), whether or not such indebtedness is recourse to the assets
of the Partnership or such Affiliate, and (ii) other Persons (including
Affiliates of the General Partner, any Limited Partner or the Partnership) as
the General Partner may
9
designate from time to time (whether before or after the event giving rise to
potential liability), in its sole discretion.
"INITIAL PUBLIC OFFERING" means the offering of Series A Preferred
Shares pursuant to the Form S-11 Registration Statement (No. 333-98571) filed by
the Special Limited Partner with the Securities and Exchange Commission.
"JUNIOR PARTNERSHIP INTERESTS" means the General Partner Interest
and the Common Limited Partner Interests.
"JUNIOR PERCENTAGE INTEREST" means, as to the General Partner and
each Common Limited Partner, its interest in the Partnership as determined by
dividing, as applicable, the number of General Partner Units or Common Limited
Partner Units owned by such Partner by the aggregate number of General Partner
Units and Common Limited Partner Units then outstanding and as specified in
Exhibit A attached hereto, as such Exhibit may be amended from time to time.
"KRF" means KRF Company, L.L.C., a
Delaware limited liability
company.
"KRF CONTRIBUTION AGREEMENT" means that certain Contribution and
Sale Agreement among the Partnership, KRF, KRF GP, Inc., a Massachusetts
corporation, and [OP SUB, LLC], a
Delaware limited liability company, dated as
of _____________, 2002.
"KRF GIT LIMIT" means, during such time as the Partnership owns any
shares of beneficial interest of either of ▇▇▇▇▇ Government Income Trust or
▇▇▇▇▇ Government Income Trust II, the percentage obtained at any time with
respect to each of ▇▇▇▇▇ Government Income Trust and ▇▇▇▇▇ Government Income
Trust II by (a) multiplying (i) the percentage of shares of such trust
Beneficially Owned by the Partnership by (ii) the greatest result obtained under
any of the following clauses:
(A) the total distributions made by the Partnership pursuant to
Article 5 during a Partnership Year or other applicable period to KRF, divided
by the total distributions made by the Partnership pursuant to Article 5 during
a Partnership Year or other applicable period to all Partners;
(B) allocations of Net Income and items thereof specially allocated
by the Partnership pursuant to Article 6 for a Partnership Year or other
applicable period to KRF, divided by Net Income and items thereof specially
allocated by the Partnership pursuant to Article 6 for a Partnership Year or
other applicable period to all Partners; and
(C) after taking into account any distributions made pursuant to
Article 5, the amount that would be distributed by the Partnership pursuant to
Section 13.2(a)(4) and Section 13.2(a)(5) to KRF if the Partnership were to be
liquidated at such time, divided by the total distributions that would be made
by the Partnership pursuant to Section 13.2(a)(4) and Section 13.2(a)(5) to all
Partners if the Partnership were to be liquidated at such time; and
10
(b) adding to the percentage obtained in clause (a) above the
percentage obtained by multiplying (i) the percentage of shares of such trust
Beneficially Owned by the Partnership by (ii) the greatest result obtained under
any of the following clauses:
(A) the total distributions made by the Partnership pursuant to
Article 5 during a Partnership Year or other applicable period to the Special
Limited Partner and the General Partner, divided by the total distributions made
by the Partnership pursuant to Article 5 during a Partnership Year or other
applicable period to all Partners;
(B) allocations of Net Income and items thereof specially allocated
by the Partnership pursuant to Article 6 for a Partnership Year or other
applicable period to the Special Limited Partner and the General Partner,
divided by Net Income and items thereof specially allocated by the Partnership
pursuant to Article 6 for a Partnership Year or other applicable period to all
Partners; and
(C) after taking into account any distributions made pursuant to
Article 5, the amount that would be distributed by the Partnership pursuant to
Section 13.2(a)(4) and Section 13.2(a)(5) to the Special Limited Partner and the
General Partner if the Partnership were to be liquidated at such time, divided
by the total distributions that would be made by the Partnership pursuant to
Section 13.2(a)(4) and Section 13.2(a)(5) to all Partners if the Partnership
were to be liquidated at such time;
by (iii) the result obtained by dividing:
(A) the Common Value of the REIT Common Shares Beneficially Owned by
the KRF Individuals plus the Preferred Value of the Series A Preferred Shares
and any Other Preferred Shares Beneficially Owned by the KRF Individuals, by
(B) the Common Value of the outstanding REIT Common Shares plus the
Preferred Value of the outstanding Series A Preferred Shares and any Other
Preferred Shares.
"KRF INDIVIDUAL" means each individual (as such term is defined
pursuant to Code Section 542(a)(2)) who Beneficially Owns any Partnership Units,
REIT Common Shares, Series A Preferred Shares or Other Preferred Shares actually
owned by KRF.
"KRF PERSONS" means KRF, the KRF Individuals and the KRF Related
Parties.
"KRF RELATED PARTY" means each Person (other than KRF and each KRF
Individual) whose Beneficial Ownership of Partnership Units, REIT Common Shares,
Series A Preferred Shares or Other Preferred Shares causes the number of
Partnership Units, REIT Common Shares, Series A Preferred Shares or Other
Preferred Shares, as applicable, Beneficially Owned by any KRF Individual to
increase.
"LIMITED PARTNER" means a Common Limited Partner or a Preferred
Limited Partner, and "LIMITED PARTNERS" means the Common Limited Partners and
the Preferred Limited Partners.
11
"LIMITED PARTNER INTEREST" means a Common Limited Partner Interest
or a Preferred Limited Partner Interest, and "LIMITED PARTNER INTERESTS" means
the Common Limited Partner Interests and the Preferred Limited Partner
Interests. A Limited Partner Interest may be expressed as a number of
Partnership Units (each a "LIMITED PARTNER UNIT").
"LIQUIDATING EVENTS" has the meaning set forth in Section 13.1
hereof.
"LIQUIDATION PREFERENCE AMOUNT" means with respect to any Preferred
Limited Partner Interest, the amount payable with respect to such Preferred
Limited Partner Interest (as established by the General Partner at the time of
issuance thereof and set forth in the Designation Instrument with respect to
such Preferred Limited Partner Interest made a part of this Agreement as set
forth in Section 4.4(d) hereof) upon the voluntary or involuntary dissolution,
liquidation, winding-up or termination of the Partnership, or upon the stated
maturity of such Preferred Limited Partner Interest or upon the earlier
redemption of such Preferred Limited Partner Interests, as the case may be,
other than in any such case any accrued and unpaid distributions payable at such
time.
"LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
"MAJORITY-IN-INTEREST OF THE COMMON LIMITED PARTNERS" means those
Common Limited Partners holding in the aggregate more than fifty percent (50%)
of the Percentage Interests of the Common Limited Partners, as a class. For the
avoidance of doubt, in determining the Majority-In-Interest of the Common
Limited Partners, with respect to the Special Limited Partner, only its Common
Limited Partner Interests shall be included in the calculation.
"NET INCOME" and "NET LOSS" means, for each Partnership Year of the
Partnership or other applicable period, an amount equal to the Partnership's
taxable income or loss for such period, determined in accordance with Code
Section 703(a) (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Income
(or Net Loss) pursuant to this definition of Net Income or Net Loss shall
be added to (or subtracted from) such taxable income (or loss);
(b) Any expenditure of the Partnership described in Code
Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) not otherwise taken
into account in computing Net Income (or Net Loss) pursuant to this
definition of Net Income (or Net Loss), shall be subtracted from (or added
to) such taxable income (or loss);
(c) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to subparagraph (b) or subparagraph (c) of the
definition of Gross Asset Value, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset for
purposes of computing Net Income or Net Loss;
12
(d) Gain or loss resulting from any disposition of Partnership
property 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;
(e) In lieu of the depreciation, amortization and other cost
recovery deductions that would otherwise be taken into account in
computing such taxable income or loss, there shall be taken into account
Depreciation for such Partnership Year or other period;
(f) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) is required pursuant
to Regulation 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
liquidation of a Partner's interest in the Partnership, 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 decreases the
basis of the asset) from the disposition of the asset and shall be taken
into account for purposes of computing Net Income or Net Loss; and
(g) Notwithstanding any other provision of this definition of
Net Income or Net Loss, any item that is specially allocated pursuant to
Section 6.2 hereof shall not be taken into account in computing Net Income
or Net Loss. The amounts of the items of Partnership income, gain, loss or
deduction available to be specially allocated pursuant to Section 6.2
hereof shall be determined by applying rules analogous to those set forth
in this definition of Net Income or Net Loss.
"NEW PARTNERSHIP SECURITIES" has the meaning set forth in Section
4.4(c) hereof.
"NEW REIT SECURITIES" has the meaning set forth in Section 4.4(c)
hereof.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year or other applicable period shall be determined in accordance
with the rules of Regulations Section 1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"NOTICE OF EXERCISE OF EXCHANGE RIGHT" means the Notice of Exercise
of Exchange Right substantially in the form of Exhibit B to this Agreement.
"OTHER PREFERRED SHARES" has the meaning set forth in Section 4.4(c)
hereof.
"OWNERSHIP LIMIT" means the applicable restriction on ownership of
shares of any class or series of stock of the Special Limited Partner imposed
under the Certificate of Incorporation.
13
"PARTNER" means a General Partner or a Limited Partner, and
"PARTNERS" means the General Partner and the Limited Partners.
"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"PARTNERSHIP" means the limited partnership formed under the Act and
pursuant to the Prior Agreement, and any successor thereto.
"PARTNERSHIP INTEREST" means an ownership interest in the
Partnership and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement together with
all obligations of such Person to comply with the terms and provisions of this
Agreement. A Partnership Interest may be expressed as a number of Partnership
Units.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Available Cash under Section 5.1 hereof,
which record date in the case of distributions to the Special Limited Partner
with respect to its Partnership Interests shall be the same as the record date
established by the Special Limited Partner for a distribution to its
stockholders of some or all of its portion of such distribution.
"PARTNERSHIP UNIT" means a share of the Partnership Interests of all
Partners issued pursuant to Article 4 hereof. The ownership of Partnership Units
may be evidenced by certificates in such form as the General Partner may adopt
from time to time on behalf of the Partnership. Partnership Units shall be
either General Partner Units or Limited Partner Units and, without limitation on
the authority of the General Partner set forth in Article 4 hereof, the General
Partner may designate, in accordance with the provisions of this Agreement,
Limited Partner Units, when issued, as Common Limited Partner Units or Preferred
Limited Partner Units and may designate one of more series of Common Limited
Partner Units or Preferred Limited Partner Units.
14
"PARTNERSHIP YEAR" means the taxable year of the Partnership for
federal income tax purposes, which shall be the calendar year unless otherwise
required by the Code.
"PERCENTAGE INTEREST" means, as to each Partner as the context may
require, (i) with respect to any class or series of Partnership Units held by
such Partner, its interest in such class or series of Partnership Units as
determined by dividing the Partnership Units of such class or series owned by
such Partner by the total number of Partnership Units of such class or series
then outstanding as specified in Exhibit A attached hereto, as such Exhibit may
be amended from time to time, or (ii) its interest in the Junior Partnership
Interests determined as set forth in the definition of Junior Percentage
Interest.
"PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
"PREFERRED CONVERSION FACTOR" means 1.0; PROVIDED, that in the event
that the Special Limited Partner (i) declares or pays a dividend on its
outstanding Series A Preferred Shares or Other Preferred Shares in Series A
Preferred Shares or Other Preferred Shares, as the case may be, or makes a
distribution to all holders of its outstanding Series A Preferred Shares or
Other Preferred Shares in Series A Preferred Shares or Other Preferred Shares,
as the case may be, (ii) subdivides its outstanding Series A Preferred Shares or
Other Preferred Shares or (iii) combines its outstanding Series A Preferred
Shares or Other Preferred Shares into a smaller number of Series A Preferred
Shares or Other Preferred Shares, as the case may be, the Preferred Conversion
Factor with respect to Series A Preferred Shares or Other Preferred Shares, as
the case may be, shall be adjusted by multiplying the Preferred Conversion
Factor by a fraction, the numerator of which shall be the number of Series A
Preferred Shares or Other Preferred Shares issued and outstanding on the record
date for such dividend, distribution, subdivision or combination (assuming for
such purposes that such dividend, distribution, subdivision or combination has
occurred as of such time), and the denominator of which shall be the actual
number of Series A Preferred Shares or Other Preferred Shares (determined
without the above assumption) issued and outstanding on the record date for such
dividend, distribution, subdivision or combination. Any adjustment to the
Preferred Conversion Factor shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
"PREFERRED LIMITED PARTNER" means any Person named as a Preferred
Limited Partner in Exhibit A attached hereto, as such Exhibit may be amended
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Preferred Limited Partner in the
Partnership.
"PREFERRED LIMITED PARTNER INTEREST" means a Partnership Interest
issued from time to time pursuant to Section 4.4(d) of this Agreement that is
designated by the General Partner at the time of its issuance as a Preferred
Limited Partner Interest. In accordance with Section 4.4(d) hereof, Preferred
Limited Partner Interests may be issued in series with each such series having
such designations, powers, preferences and relative, participating, optional or
other special rights, powers and privileges, including voting and conversion
rights and rights, powers and privileges senior to the General Partner Interest
and the Common Limited Partner Interests as shall be determined by the General
Partner at the time of issuance subject to the requirements of
15
Section 4.4 hereof and set forth in a Designation Instrument. A Preferred
Limited Partner Interest of a series may be expressed as a number of Partnership
Units (each a "PREFERRED LIMITED PARTNER UNIT").
"PREFERRED SHARES AMOUNT" shall mean a number of Series A Preferred
Shares or Other Preferred Shares equal to the product of the number of Limited
Partner Units tendered by an Exchanging Partner pursuant to Section 8.6 hereof,
multiplied by the applicable Preferred Conversion Factor; PROVIDED, that in the
event the Special Limited Partner issues to all holders of Series A Preferred
Shares or Other Preferred Shares as of a certain record date rights, options,
warrants or convertible or exchangeable securities giving the holder the right
to subscribe for or purchase Series A Preferred Shares or Other Preferred
Shares, as the case may be, or any other securities or property (collectively,
the "PREFERRED RIGHTS") that have been declared (i) prior to, on or after the
date of a Notice of Exercise of Exchange Right, with a record date within the
period starting on the date of the Notice of Exercise of Exchange Right and
ending on the day preceding the Specified Exchange Date, then the Preferred
Shares Amount shall also include such preferred rights that a holder of that
number of such series of preferred shares would be entitled to receive and (ii)
prior to, on or after a Notice of Exercise of Exchange Right, with a record date
within the period starting on the date of the Notice of Exercise of Exchange
Right and ending on the day preceding the Specified Exchange Date, then the
General Partner shall adjust the Cash Amount in good faith to reflect the
increased value of such series of preferred shares.
"PREFERRED VALUE" means on any date with respect to a Series A
Preferred Share or Other Preferred Share, the market price on such date or, if
such date is not a trading day, then the market price on the immediately
preceding day that is a trading day; PROVIDED, that for purposes of determining
the Cash Amount with respect to Tendered Units of an Exchanging Partner, the
term "PREFERRED VALUE" shall mean the average of the daily market prices for ten
consecutive trading days immediately preceding the date of receipt by the
Special Limited Partner of a Notice of Exercise of Exchange Right. The market
price for any such trading day shall be: (i) if the Series A Preferred Shares or
Other Preferred Shares are listed or admitted to trading on any securities
exchange or the NASDAQ National Market System, the closing price, regular way,
on such day, or if no such sale takes place on such day, the average of the
closing bid and asked prices on such day, in either case as reported in the
principal consolidated transaction reporting system, (ii) if the Series A
Preferred Shares or Other Preferred Shares are not listed or admitted to trading
on any securities exchange or the NASDAQ National Market System, the last
reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the Special Limited Partner, or (iii) if
the Series A Preferred Shares or Other Preferred Shares are not listed or
admitted to trading on any securities exchange or the NASDAQ National Market
System and no such last reported sale price or closing bid and asked prices are
available, the average of the reported high bid and low asked prices on such
day, as reported by a reliable quotation source designated by the Special
Limited Partner, or if there shall be no bid and asked prices on such day,
average of the high bid and low asked prices, as so reported on the most recent
day (not more than ten days prior to the date in question) for which prices have
been so reported; PROVIDED, that if there are no bid and asked prices reported
during the ten days prior to the date in question, the Preferred Value of the
Series A Preferred Shares or Other Preferred Shares shall be determined by the
Special Limited Partner acting in good faith on the basis of such information
16
as it considers, in its reasonable judgment, appropriate. In the event the
Preferred Shares Amount includes preferred rights (as defined in the definition
of Preferred Shares Amount) that a holder of Series A Preferred Shares or Other
Preferred Shares would be entitled to receive, then the Preferred Value of such
preferred rights shall be determined by the Special Limited Partner acting in
good faith on the basis of such information as it considers, in its reasonable
judgment, appropriate.
"PRIOR AGREEMENT" has the meaning set forth in the recitals to this
Agreement, which Prior Agreement is amended and restated in its entirety by this
Agreement.
"PROPERTY" shall mean any property or assets of the Partnership,
including, without limitation, any Apartment Community in which the Partnership
or any Property Partnership, directly or indirectly, acquires ownership of a fee
or leasehold interest.
"PROPERTY PARTNERSHIP" shall mean and include any partnership,
limited liability company, joint venture or other similar arrangement in which
the Partnership is or becomes a direct or indirect partner or other equity
participant and that is formed for the purpose of acquiring, developing or
owning a Property.
"QUALIFIED TRANSFEREE" means an "Accredited Investor" as defined in
Rule 501 promulgated under the Securities Act.
"REGULATIONS" means the applicable federal income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"REGULATORY ALLOCATIONS" has the meaning set forth in Section
6.2(a)(8) hereof.
"REIT" means a real estate investment trust within the meaning of
the Code.
"REIT COMMON SHARE" shall mean a share of a class of stock of the
Special Limited Partner that is not entitled to priority over any other class of
stock of the Special Limited Partner in the payment of dividends or with respect
to rights upon the liquidation, dissolution or winding up of the Company, and
that belongs to a class designated as "REIT Common Shares" by the Special
Limited Partner for purposes of this Agreement. For purposes of this Agreement,
shares of the Class A Common Stock, par value $.01 per share, of the Special
Limited Partner shall be designated "Class A REIT Common Shares" and shares of
the Class B Common Stock, par value $.01 per share, of the Special Limited
Partner shall be designated "Class B REIT Common Shares."
"REIT COMMON SHARES AMOUNT" shall mean a number of REIT Common
Shares of the applicable class equal to the product of the number of Limited
Partner Units tendered by an Exchanging Partner pursuant to Section 8.6 hereof,
multiplied by the Common Conversion Factor; PROVIDED, that in the event the
Special Limited Partner issues to all holders of such class of REIT Common
Shares as of a certain record date rights, options, warrants or convertible or
exchangeable securities giving the holder the right to subscribe for or purchase
REIT Common Shares or any other securities or property (collectively, the
"COMMON RIGHTS") that have been
17
declared (i) prior to, on or after the date of a Notice of Exercise of Exchange
Right, with a record date within the period starting on the date of the Notice
of Exercise of Exchange Right and ending on the day preceding the Specified
Exchange Date then the REIT Common Shares Amount shall also include such rights
that a holder of that number of shares of such class would be entitled to
receive and (ii) prior to, on or after a Notice of Exercise of Exchange Right,
with a record date within the period starting on the date of the Notice of
Exercise of Exchange Right and ending on the day preceding the Specified
Exchange Date then the General Partner shall adjust the Cash Amount in good
faith to reflect the increased value of such class of REIT Common Shares.
"REIT SHARES AMOUNT" means the REIT Common Shares Amount or the
Preferred Shares Amount, as applicable.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"SERIES A PREFERRED SHARE" shall mean a share of __% Cumulative
Redeemable Series A Preferred Stock of the Special Limited Partner.
"SPECIAL LIMITED PARTNER" means Berkshire Income Realty, Inc., a
Maryland corporation, or its successor.
"SPECIFIED EXCHANGE DATE" means, subject to Section 8.6(c) and
8.6(d)(4) hereof and compliance with the requirements of Section 8.6(e) hereof,
the tenth Business Day after receipt by the Special Limited Partner of a Notice
of Exercise of Exchange Right.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities or (ii) the outstanding equity interests is owned,
directly or indirectly, by such Person.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as
either a Preferred Limited Partner or Common Limited Partner to the Partnership
pursuant to Section 11.5 hereof.
"TAX ITEM" means, with respect to each Partnership Year or other
applicable period, each item of income, gain, loss, credit and deduction of the
Partnership for purposes of the Code and the Regulations.
"TENDERED UNITS" has the meaning set forth in Section 8.6(a) hereof.
"TERMINATING CAPITAL TRANSACTION" means any sale or other
disposition of all or substantially all of the assets of the Partnership or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership.
"TRANSACTION" has the meaning set forth in Section 11.3(b) hereof.
18
"TRANSFER" means any sale, assignment, bequest, conveyance, devise,
gift, encumbrance, hypothecation, mortgage, exchange, transfer or other
disposition or act of alienation, whether voluntary or involuntary, or by
operation of law.
"TWELVE-MONTH PERIOD" means the twelve-month period ending on the
day before the first anniversary of the Effective Date or on a subsequent
anniversary thereof.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1. FORMATION; CONTINUATION.
The Partnership is a limited partnership formed and continued
pursuant to the provisions of the Act and upon the terms and conditions set
forth in the Prior Agreement. The Partners hereby continue the Partnership
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement, which amends and restates the Prior Agreement in its
entirety as of the date hereof. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
Section 2.2. NAME.
The name of the Partnership is Berkshire Income Realty-OP, L.P. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner.
Section 2.3. REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE.
The address of the registered office of the Partnership in the State
of
Delaware is located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent for service of process
on the Partnership in the State of Delaware at such registered office is the
Corporation Trust Company. The principal office of the Partnership is located at
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such other place
as the General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
Section 2.4. POWER OF ATTORNEY.
(a) Each Limited Partner and each Assignee hereby constitutes
and appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
19
(1) execute, swear to, seal, acknowledge, deliver, file
and record in the appropriate public offices (a) all certificates,
documents and other instruments (including, without limitation, this
Agreement and the Certificate and all amendments or restatements
thereof) that the General Partner or the Liquidator deems
appropriate or necessary to form, qualify or continue the existence
or qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability to
the extent provided by applicable law) in the State of Delaware and
in all other jurisdictions in which the Partnership may conduct
business or own property; (b) all instruments that the General
Partner or the Liquidator deems appropriate or necessary to reflect
any amendment, change, modification or restatement of this Agreement
in accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the Liquidator
deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation; (d) all conveyances and other instruments or documents
that the General Partner or the Liquidator deems appropriate or
necessary to reflect the distribution or exchange of assets of the
Partnership pursuant to the terms of this Agreement; (e) all
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described
in, Article 4, 11, 12 or 13 hereof or the Capital Contribution of
any Partner; (f) all documents that the General Partner deems
appropriate or necessary to effect a merger or other business
combination permitted under this Agreement; and (g) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of
Partnership Interests; and
(2) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole discretion of the
General Partner or the Liquidator, to make, evidence, give, confirm
or ratify any vote, consent, approval, agreement or other action
that is made or given by the Partners hereunder or is consistent
with the terms of this Agreement or appropriate or necessary, in the
sole discretion of the General Partner or the Liquidator, to
effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or the Liquidator to amend this Agreement except in accordance with Article 7
hereof or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
or the Liquidator to act as contemplated by this Agreement in any filing or
other action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee or the
Transfer of all or any portion of a Limited Partner's or Assignee's Partnership
Units and shall extend to a Limited Partner's or Assignee's heirs, successors,
assigns and
20
personal representatives. Each Limited Partner or Assignee hereby agrees to be
bound by any representation made by the General Partner or the Liquidator,
acting in good faith pursuant to such power of attorney, and each Limited
Partner or Assignee hereby waives any and all defenses that may be available to
contest, negate or disaffirm the action of the General Partner or the
Liquidator, taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within 15 days after receipt of the General Partner's or the
Liquidator's request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case may be,
deems necessary to effectuate this Agreement and the purposes of the
Partnership.
Section 2.5. TERM.
The term of the Partnership commenced on July 22, 2002, the date the
original Certificate was filed in the office of the Secretary of State of
Delaware in accordance with the Act, and shall continue until December 31, 2052,
unless the Partnership is dissolved sooner pursuant to the provisions of Article
13 hereof or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1. PURPOSE AND BUSINESS.
The purpose and nature of the Partnership is to conduct any business
that may be lawfully conducted by a limited partnership organized pursuant to
the Act except as otherwise provided herein, including, without limitation, to
engage in the following activities: (i) to conduct the business of the
ownership, leasing and operation of Apartment Communities (including, without
limitation, the construction, management, improvement and maintenance, and the
acquisition, purchase, sale, transfer, encumbrance, conveyance, exchange and
other disposition, of Apartment Communities), (ii) to enter into any
partnership, joint venture or other similar arrangement to engage in any
business permitted by clause (i), (iii) to own interests in ▇▇▇▇▇ Government
Income Trust, ▇▇▇▇▇ Government Income Trust II, ▇▇▇▇▇ Insured Mortgage Limited
Partnership, ▇▇▇▇▇ Insured Plus Limited Partnership, ▇▇▇▇▇ Insured Plus II
Limited Partnership and ▇▇▇▇▇ Insured Plus III Limited Partnership, and (iv) to
do anything necessary or incidental to the foregoing.
Section 3.2. POWERS.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership
interests in other entities, to enter into, perform and carry out contracts of
any kind, to borrow money, to issue evidences of indebtedness and to secure such
indebtedness by mortgage, trust deed, pledge, security interest or other lien or
encumbrance on any Property; PROVIDED, that, notwithstanding any other provision
of this Agreement, the Partnership shall not take, or refrain from taking, any
action that, in the judgment of the General Partner, in its sole discretion,
(i) (A)
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could cause any of the Special Limited Partner, ▇▇▇▇▇ Government Income Trust or
▇▇▇▇▇ Government Income Trust II to violate the "closely held" restrictions of
Section 856(h) of the Code, (B) could otherwise adversely affect the ability of
the Special Limited Partner to qualify as a REIT or (C) could subject the
Special Limited Partner to any taxes under Section 857 or Section 4981 of the
Code, unless in the case of clause (i)(A) or (i)(B) the Special Limited Partner,
▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government Income Trust II, as
applicable, has ceased to qualify as a REIT, or (ii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Special Limited Partner or its securities or the Partnership, unless such action
(or inaction) described in clause (i)(C) or (ii) above shall have been
specifically consented to by the Special Limited Partner in writing. In
connection with the foregoing, and without limiting the Special Limited
Partner's right in its sole and absolute discretion in accordance with its
Certificate of Incorporation to cease qualifying as a REIT, the Partners
acknowledge that the status of each of the Special Limited Partner, ▇▇▇▇▇
Government Income Trust and ▇▇▇▇▇ Government Income Trust II as a REIT and the
avoidance of income and excise taxes on the Special Limited Partner inures to
the benefit of all the Partners and not solely to the Special Limited Partner.
Notwithstanding the foregoing, the Partners agree that the Special Limited
Partner may terminate its status as a REIT under the Code at any time to the
full extent permitted under its Certificate of Incorporation. The General
Partner on behalf of the Partnership also shall be empowered to do any and all
acts and things necessary or prudent to ensure that the Partnership will not be
classified as a "publicly traded partnership" for purposes of Section 7704 of
the Code or as a "taxable mortgage pool" for purpose of Section 7701(i) of the
Code.
Section 3.3. REPRESENTATIONS AND WARRANTIES BY THE PARTIES.
(a) Each Person that is an individual, as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner, as the
case may be, shall represent and warrant to each other Partner that (i) the
consummation of the transactions contemplated by this Agreement to be performed
by such Partner will not result in a breach or violation of, or a default under,
any material agreement by which such Partner or any of such Partner's property
is or are bound, or any statute, regulation, order or other law to which such
Partner is subject, and (ii) unless otherwise agreed to by the General Partner
under such conditions as are satisfactory to it, such Partner is neither a
"foreign person" within the meaning of Code Section 1445(f) nor a "foreign
partner" within the meaning of Code Section 1446(e).
(b) Each Person that is not an individual represents and
warrants to each other Partner as a condition to becoming a Limited Partner that
(i) all transactions contemplated by this Agreement to be performed by it have
been duly authorized by all necessary action, including without limitation, that
of its general partner(s), committee(s), trustee(s), beneficiaries, directors
and/or shareholder(s), as the case may be, as required, (ii) the consummation of
such transactions shall not result in a breach or violation of, or a default
under, its partnership agreement, operating agreement, trust agreement, charter
or by-laws, as the case may be, any material agreement by which such Partner or
any of such Partner's properties is bound, or any statute, regulation, order or
other law to which such Partner is subject, and (iii) unless otherwise agreed to
by the General Partner under such conditions as are satisfactory
22
to it, such Partner is neither a "foreign person" within the meaning of Code
Section 1445(f) nor a "foreign partner" within the meaning of Code Section
1446(e).
(c) 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 except as permitted
under Article 11 hereof. 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.
(d) The representations and warranties contained in Sections
3.3(a), 3.3(b) and 3.3(c) hereof shall survive the execution and delivery of
this Agreement by each Partner (and a Person's being admitted as a Substituted
Limited Partner or an Additional Limited Partner pursuant to Sections 11.5, 12.2
or 12.3 hereof) and the dissolution, liquidation and termination of the
Partnership.
(e) Each Partner hereby acknowledges that no representations
as to potential profit, cash flows, funds from operations or yield, if any, in
respect of the Partnership or the Special Limited Partner have been made by any
Partner or any employee or representative or Affiliate of any Partner, and that
projections and any other information, including, without limitation, financial
and descriptive information and documentation, that may have been in any manner
submitted to such Partner shall not constitute any representation or warranty of
any kind or nature, express or implied.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1. CAPITAL CONTRIBUTIONS OF THE PARTNERS.
At the time of the execution of this Agreement, the Capital
Contributions of the Partners are as set forth in Exhibit A to this Agreement.
To the extent the Partnership acquires in the future any property by the merger
of any 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 an amendment to
Exhibit A. Each Partner shall own Partnership Units in the amount set forth for
such Partner in Exhibit A, as the same may be amended from time to time, and
shall have a Percentage Interest in the Junior Partnership Interests or in a
series of Preferred Limited Partner Interests as set forth for such Partner in
Exhibit A, which Percentage Interest shall be adjusted in Exhibit A from time to
time by the General Partner to the extent necessary to reflect accurately sales,
exchanges or other Transfers, redemptions, Capital Contributions, the issuance
of additional Partnership Units, or similar events having an effect on a
Partner's Percentage Interest.
23
Section 4.2. ADDITIONAL CAPITAL CONTRIBUTIONS AND LOANS
GENERALLY.
Except as otherwise required by law, the Partners shall have no
obligation to make any additional Capital Contributions or loans to the
Partnership.
Section 4.3. LOANS BY THIRD PARTIES.
Subject to Section 4.4 hereof, the Partnership (and any Person in
which the Partnership owns a direct or indirect interest) may incur Debt, or
enter into other similar credit, guarantee, financing or refinancing
arrangements for any purpose (including, without limitation, in connection with
any further acquisition of Properties) from any Person upon such terms as the
General Partner or such Person in which the Partnership owns an interest, as
applicable, determines appropriate.
Section 4.4. ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS.
(a) GENERAL. The General Partner may, at any time and from
time to time, determine that the Partnership requires additional funds
("ADDITIONAL FUNDS") for the acquisition of additional Properties or for such
other purposes as the General Partner may determine. Additional Funds may be
raised by the Partnership, at the election of the General Partner, in any manner
provided in, and in accordance with, the terms of this Section 4.4. No Person
shall have any preemptive, preferential, participation or similar right or
rights to subscribe for or acquire any Partnership Interest.
(b) ADDITIONAL LIMITED PARTNERS. The General Partner on behalf
of the Partnership may raise all or any portion of the Additional Funds by
accepting additional Capital Contributions from any Partners or any third party
and either (A) in the case of Partners, increasing such Partner's Partnership
Interest, or (B) in the case of a third party, admitting such third party as an
Additional Limited Partner. Subject to the terms of this Section 4.4 and to the
definition of Gross Asset Value, the General Partner shall determine in good
faith the amount, terms and conditions of such additional Capital Contributions.
(c) ISSUANCE OF SHARES BY THE SPECIAL LIMITED PARTNER. The
Special Limited Partner shall not issue (i) any additional Class A REIT Common
Shares, Class B REIT Common Shares, Series A Preferred Shares or other shares of
preferred stock of the Special Limited Partner ("OTHER PREFERRED SHARES") (other
than Class A REIT Common Shares, Class B REIT Common Shares, Series A Preferred
Shares or Other Preferred Shares issued pursuant to Section 8.6 hereof or
pursuant to a dividend or distribution (including any stock split) of Class A
REIT Common Shares to all of the holders of Class A REIT Common Shares or of
Class B REIT Common Shares to all of the holders of Class B REIT Common Shares
or of Series A Preferred Shares to all holders of Series A Preferred Shares or
of Other Preferred Shares to all holders of such Other Preferred Shares), (ii)
any rights, options, warrants or convertible or exchangeable securities giving
the holder the right to subscribe for or purchase Class A REIT Common Shares,
Class B REIT Common Shares, Series A Preferred Shares or Other Preferred Shares
or (iii) any Debt that provides any of the rights described in clause (ii)
(collectively, "NEW REIT SECURITIES") unless (A) the General Partner shall cause
the Partnership to issue to the General Partner additional General Partner Units
or to the Special Limited Partner additional Common
24
Limited Partner Interests, Preferred Limited Partner Interests or rights,
options, warrants or convertible or exchangeable securities of the Partnership,
as applicable (collectively, "NEW PARTNERSHIP SECURITIES"), having designations,
preferences and other rights such that the economic interests associated with
such New Partnership Securities are substantially the same as those of such New
REIT Securities, and (B) the Special Limited Partner or the General Partner
shall make a Capital Contribution of the net proceeds from the issuance of, or
the exercise of the rights contained in, such New REIT Securities, as the case
may be.
(d) ISSUANCES OF LIMITED PARTNER INTERESTS. The General
Partner is hereby authorized, without the consent of the Limited Partners, other
than as provided in a Designation Instrument, to cause the Partnership from time
to time to issue to the Partners (including the General Partner) or other
Persons Common Limited Partner Interests and Preferred Limited Partner
Interests. Common Limited Partner Interests and Preferred Limited Partner
Interests may be issued in one or more class or series, with such designations,
powers, preferences and relative, participating, optional or other special
rights, powers and privileges, including voting and conversion rights and
rights, powers and privileges senior to the General Partner Interest and the
Common Limited Partner Interests as shall be determined by the General Partner
in its sole and absolute discretion, subject to the Act and as set forth in a
Designation Instrument, including, without limitation, (i) the allocations of
Tax Items to each such class or series, (ii) the rights of each such class or
series to share in Partnership distributions of Available Cash and (iii) the
rights of each such class or series upon dissolution, liquidation, winding-up or
termination of the Partnership, including, without limitation, the Liquidation
Preference Amount with respect to such class or series. Notwithstanding the
foregoing, no Common Limited Partner Interests or Preferred Limited Partner
Interests shall be issued to the Special Limited Partner unless (A) the Common
Limited Partner Interests or Preferred Limited Partner Interests are issued in
connection with an issuance of common stock or preferred stock, as the case may
be, of the Special Limited Partner which shares have designations, preferences
and other rights such that the economic interests attributable to such shares
are substantially similar to the designations, preferences and other rights of
the Common Limited Partner Interests or Preferred Limited Partner Interests, as
the case may be, issued to the Special Limited Partner and (B) the Special
Limited Partner shall make a Capital Contribution to the Partnership in
accordance with Section 4.4(c) hereof in an amount equal to the net proceeds
raised in connection with the issuance of such shares of common stock or
preferred stock, as the case may be, of the Special Limited Partner. Unless
otherwise specified in the Designation Instrument, with respect to any class or
series of Common Limited Partner Interests or Preferred Limited Partner
Interests issued to the Special Limited Partner in consideration of the proceeds
received by the Special Limited Partner from a concurrent offering of common
stock or preferred stock, as the case may be, of the Special Limited Partner,
the Special Limited Partner shall be deemed to have made (notwithstanding the
actual amount of the contribution) a Capital Contribution to the Partnership in
the amount of the gross proceeds of such issuance of common stock or preferred
stock and the Partnership shall be deemed to have simultaneously reimbursed the
Special Limited Partner pursuant to Section 7.6(b) of this Agreement for the
amount of the underwriting discounts and commissions and other issuance costs
incurred by the Special Limited Partner in connection with such issuance. Upon
issuance of any additional class or series of Common Limited Partner Interests
or Preferred Limited Partner Interests, the Designation Instrument applicable to
such
25
class or series shall constitute an amendment to this Agreement and shall become
a part hereof whether or not actually attached to this Agreement.
(e) PERCENTAGE INTEREST ADJUSTMENTS.
(1) Upon the acceptance of additional cash Capital
Contributions pursuant to this Section 4.4, the Percentage Interests
of the Partners holding Partnership Interests of the class or series
being issued shall be adjusted based upon the number of Partnership
Units of such class or series issued in connection with such Capital
Contribution.
(2) Upon the acceptance of additional Capital
Contributions pursuant to this Section 4.4 in the form of
Contributed Property, the amount of the Capital Contribution shall
be equal to the Gross Asset Value of the Property contributed as of
the Adjustment Date, net of any liabilities assumed by the
Partnership in connection with such assets or liabilities to which
such Contributed Property is subject, and the Percentage Interests
of the Partners holding Partnership Interests of the class or series
being issued shall be adjusted based upon the number of Partnership
Units of such class or series issued in connection with such Capital
Contribution.
(3) Upon the acceptance of additional Capital
Contributions pursuant to this Section 4.4 in the form of cash and
Contributed Property, the amount of the Capital Contribution shall
be equal to the sum of (A) the amount of cash contributed on the
Adjustment Date and (B) the Gross Asset Value of the Property
contributed as of the Adjustment Date, net of any liabilities
assumed by the Partnership in connection with such assets or
liabilities to which the Contributed Property is subject, and the
Percentage Interests of the Partners holding Partnership Interests
of the class or series being issued shall be adjusted based on the
number of Partnership Units of such class or series issued in
connection with such Capital Contribution.
Section 4.5. NO THIRD PARTY BENEFICIARY.
No creditor or other third party having dealings with the
Partnership shall have the right to enforce the right or obligation of any
Partner to make Capital Contributions or loans or to pursue any other right or
remedy hereunder or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may be
enforced solely by, the parties hereto and their respective successors and
assigns. None of the rights or obligations of the Partners herein set forth to
make Capital Contributions or loans to the Partnership shall be deemed an asset
of the Partnership for any purpose by any creditor or other third party, nor may
such rights or obligations be sold, transferred or assigned by the Partnership
or pledged or encumbered by the Partnership to secure any debt or other
obligation of the Partnership or of any of the Partners.
Section 4.6. NO INTEREST ON CAPITAL.
26
No Partner shall be entitled to interest on its Capital Contribution
or its Capital Account.
Section 4.7. REPURCHASE OF REIT STOCK.
In the event that the Special Limited Partner shall elect to
purchase from its shareholders Class A REIT Common Shares, Class B REIT Common
Shares, Series A Preferred Shares or Other Preferred Shares for the purpose of
delivering such shares to satisfy an obligation under any dividend reinvestment
program adopted by the Special Limited Partner, any redemption of the Series A
Preferred Shares in accordance with their terms or any other obligation or
arrangement undertaken by the Special Limited Partner in the future, the
purchase price paid by the Special Limited Partner for such shares and any other
expenses incurred by the Special Limited Partner in connection with such
purchase shall be considered as a redemption by and expenses of the Partnership
and shall be paid or reimbursed to the General Partner or the Special Limited
Partner, as applicable, subject to the condition that: (i) if such Class A REIT
Common Shares, Class B REIT Common Shares, Series A Preferred Shares or Other
Preferred Shares subsequently are to be sold by the Special Limited Partner, the
Special Limited Partner shall pay to the Partnership, directly or through the
General Partner, any net proceeds received by the Special Limited Partner from
the sale of such shares; PROVIDED, that an exchange pursuant to Section 8.6
shall not be considered a sale for such purposes; and (ii) if the purchase is a
redemption of the Series A Preferred Shares in accordance with their terms or
such Class A REIT Common Shares, Class B REIT Common Shares, Series A Preferred
Shares or Other Preferred Shares are not re-transferred by the Special Limited
Partner within 30 days after the purchase thereof, the General Partner shall
cause the Partnership to cancel a number of the applicable class or series of
Common Limited Partner Units or Preferred Limited Partner Units held by the
Special Limited Partner (or, if applicable, General Partner Units held by the
General Partner) equal to the product of (x) the number of shares of such Class
A REIT Common Shares, Class B REIT Common Shares, Series A Preferred Shares or
Other Preferred Shares and (y) a fraction, the numerator of which is one and the
denominator of which is the Common Conversion Factor or Preferred Conversion
Factor, as applicable, in effect on the date of such cancellation.
ARTICLE 5
DISTRIBUTIONS
Section 5.1. REQUIREMENTS AND CHARACTERIZATION OF
DISTRIBUTIONS.
The General Partner shall cause the Partnership to distribute
quarterly all, or such portion as the General Partner may in its discretion
determine, Available Cash generated by the Partnership during such quarter to
the Partners who are Partners on the applicable Partnership Record Date with
respect to such quarter in the following order of priority (PROVIDED, HOWEVER,
that in no event may a Partner receive a distribution of Available Cash with
respect to a Partnership Unit if such Partner is entitled to receive a
distribution as the holder of record of REIT Common Shares, Series A Preferred
Shares or Other Preferred Shares for which such Partnership Unit has been
exchanged):
27
(i) FIRST, to the Preferred Limited Partners, up to the amount
required for the Partnership to pay all distributions with respect to the
Preferred Limited Partner Units held by such Preferred Limited Partners due or
payable in accordance with the Designation Instrument or Instruments for such
Preferred Limited Partner Units through the last day of such quarter (or the
last day of the quarterly period set forth in such Designation Instrument or
Instruments), such distributions to be made to the Preferred Limited Partners
(x) in such order of priority and with such preferences as have been established
with respect to such Preferred Limited Partner Units as set forth in the
Designation Instrument or Instruments and (y) with respect to Preferred Limited
Partners holding Preferred Limited Partner Interests of a particular class or
series, in proportion to their respective Percentage Interests on such
Partnership Record Date except as otherwise provided in this Section 5.1; and
(ii) THEN, to the General Partner and the Common Limited
Partners in accordance with their respective Junior Percentage Interests on such
Partnership Record Date except as otherwise provided in this Section 5.1.
If a new or existing Partner acquires an additional Partnership
Interest in exchange for a Capital Contribution on any date other than a
Partnership Record Date, the cash distribution attributable to such additional
Partnership Interest relating to the Partnership Record Date next following the
issuance of such additional Partnership Interest shall be reduced in the
proportion equal to one minus (i) the number of days that such additional
Partnership Interest is held by such Partner bears to (ii) the number of days
between such Partnership Record Date and the immediately preceding Partnership
Record Date.
Subject to the prior rights of holders of Preferred Limited Partner
Units with respect to distributions of Available Cash, the General Partner in
its sole discretion may distribute to the General Partner and the Common Limited
Partners Available Cash (excluding amounts previously distributed to Preferred
Limited Partners as provided above) in accordance with their Junior Percentage
Interests on a more frequent basis and provide for an appropriate record date.
Unless the Special Limited Partner agrees otherwise, the General Partner shall
take such reasonable efforts, consistent with the Special Limited Partner's
qualification as a REIT, to cause the Partnership to distribute sufficient
amounts to enable the Special Limited Partner to make distributions that will
(a) satisfy the requirements for qualifying as a REIT, and (b) avoid any federal
income or excise tax liability imposed by the Code. The General Partner also
shall take all reasonable efforts to cause the Partnership to distribute
appropriate amounts to ensure that the KRF GIT Limit does not at any time exceed
30% with respect to each of ▇▇▇▇▇ Government Income Trust and ▇▇▇▇▇ Government
Income Trust II, as computed based on distributions made by the Partnership
under this Article 5 or based on amounts that would be distributed under Section
13.2 if the Partnership were to be liquidated at such time.
Notwithstanding anything to the contrary contained herein, in no
event shall any Partner receive a distribution of Available Cash in respect of
Junior Partnership Interests with respect to any quarter or other period until
such time as the Partnership has distributed to the Preferred Limited Partners
an amount sufficient to pay all distributions payable with respect to the
Preferred Limited Partner Interests held by such Preferred Limited Partners in
accordance
28
with the Designation Instrument or Instruments through the last day of the most
recently ended quarterly period or other applicable period set forth in each
such Designation Instrument.
Section 5.2. DISTRIBUTIONS IN KIND.
No right is given to any Partner to demand and receive property
other than cash. The General Partner may determine, in its sole discretion but
subject to the rights of Preferred Limited Partner Interests, to make a
distribution in kind to the General Partner and the Common Limited Partners of
Partnership assets, and such assets shall be distributed in such a fashion as to
ensure that the fair market value is distributed and allocated in accordance
with Articles 5 and 6 hereof.
Section 5.3. DISTRIBUTIONS UPON LIQUIDATION.
Proceeds from a Terminating Capital Transaction, and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership, shall be distributed to the Partners in accordance with Section
13.2 hereof.
Section 5.4. RESTRICTED DISTRIBUTIONS.
Notwithstanding any provision to the contrary contained herein, the
Partnership, and the General Partner on behalf of the Partnership, shall not
make a distribution to any Partner on account of its interest in the Partnership
if such distribution would violate Section 17-607 of the Act or other applicable
law.
ARTICLE 6
ALLOCATIONS
Section 6.1. ALLOCATIONS IN GENERAL.
Except as otherwise provided in this Article 6, and subject to
Section 11.7(c) and 12.3(c) hereof, Net Income and Net Loss (or items thereof)
for each Partnership Year or other applicable period will be allocated among the
Partners in accordance with their respective Junior Percentage Interests.
Section 6.2. ADDITIONAL ALLOCATION PROVISIONS.
(a) REGULATORY ALLOCATIONS. Notwithstanding Section 6.1:
(1) MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(f), if there is a net
decrease in Partnership Minimum Gain during any Partnership Year,
each Partner shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years)
in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, as determined under Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto.
29
The items to be allocated shall be determined in accordance with
Regulations Section 1.704-2(f)(6) and 1.704-2(j)(2). This Section
6.2.(a)(1) is intended to qualify as a "minimum gain chargeback"
within the meaning of Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(2) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(i)(4) or in Section
6.2(a)(1) hereof, if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to
such Partner's share of the net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4) and 1.704-2(j)(2).
This Section 6.2(a)(2) is intended to qualify as a "chargeback of
partner nonrecourse debt minimum gain" within the meaning of
Regulation Section 1.704-2(i) and shall be interpreted consistently
therewith.
(3) NONRECOURSE DEDUCTIONS AND PARTNER NONRECOURSE
DEDUCTIONS. Any Nonrecourse Deductions for any Partnership Year
shall be specially allocated to the Partners in accordance with
their Junior Percentage Interests. Any Partner Nonrecourse
Deductions for any Partnership Year shall be allocated to the
Partners who bear 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).
(4) QUALIFIED INCOME OFFSET. If any Partner unexpectedly
receives an adjustment, allocation or distribution described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Partnership income and gain shall be allocated, in accordance with
Regulations Section 1.704-1(b)(2)(ii)(d), to the Partner in an
amount and manner sufficient to eliminate, to the extent required by
such Regulations, the Adjusted Capital Account Deficit of the
Partner as quickly as possible; PROVIDED, that an allocation
pursuant to this Section 6.2(a)(4) shall be made if and only to the
extent that such Partner would have an Adjusted Capital Account
Deficit after all other allocations provided in this Article 6 have
been tentatively made as if this Section 6.2(a)(4) were not in the
Agreement. It is intended that this Section 6.2(a)(4) qualify and be
construed as a "qualified income offset" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
(5) GROSS INCOME ALLOCATION. If any Partner has a
deficit Capital Account at the end of any Partnership Year that is
in excess of the sum of
30
(1) the amount (if any) such Partner is obligated to restore to the
Partnership, and (2) the amount such Partner is deemed to be
obligated to restore pursuant to the penultimate sentences of
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5), each such
Partner shall be specially allocated items of Partnership income and
gain in the amount of such excess as quickly as possible to
eliminate such deficit; PROVIDED, that an allocation pursuant to
this Section 6.2(a)(5) shall be made if and only to the extent that
such Partner would have a deficit Capital Account in excess of such
sum after all other allocations provided in this Article 6 have been
tentatively made as if this Section 6.2(a)(5) and Section 6.2(a)(4)
were not in the Agreement.
(6) LIMITATION ON ALLOCATION OF NET LOSS. To the extent
any allocation of Net Loss or items of Partnership loss or deduction
would cause or increase an Adjusted Capital Account Deficit as to
any Partner, such allocation of Net Loss or items of Partnership
loss or deduction shall be allocated instead among the other
Partners in accordance with their respective Partnership Interests,
subject to the limitations of this Section 6.2(a)(6), or if such Net
Loss or items of Partnership loss or deduction are not so allocable
by reason of this Section 6.2(a)(6), to the General Partner.
(7) SECTION 754 ADJUSTMENT. 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) to be taken into account
in determining Capital Accounts, the amount of such adjustment to
the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted
pursuant to such Section of the Regulations.
(8) CURATIVE ALLOCATION. The allocations set forth in
Section 6.2(a)(1), (2), (3), (4), (5), (6) and (7) hereof (the
"Regulatory Allocations") are intended to comply with certain
regulatory requirements, including the requirements of Regulations
Section 1.704-1(b) and 1.704-2. Notwithstanding the other provisions
of Article 6 (other than the Regulatory Allocations), the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Partners so that, to the
extent possible without violating the requirements giving rise to
the Regulatory Allocations, the net amount of such allocations of
other items and the Regulatory Allocations to each Partner shall be
equal to the net amount that would have been allocated to each such
Partner if the Regulatory Allocations were not part of this
Agreement.
(b) EXCESS NONRECOURSE LIABILITY ALLOCATION. For purposes of
determining a Partner's proportional share of the "excess nonrecourse
liabilities" of the
31
Partnership within the meaning of Regulations Section 1.752-3(a)(3), each
Partner's interest in Partnership profits shall be such Partner's Junior
Percentage Interest.
(c) PRIORITY ALLOCATION WITH RESPECT TO PREFERRED LIMITED
PARTNER INTERESTS. Notwithstanding any other provision of this Agreement, after
giving effect to the Regulatory Allocations, for each Partnership Year or other
applicable period, items of Partnership income and gain, including, if
necessary, gross income, shall be specially allocated to the Preferred Limited
Partners in the amount necessary so that all amounts allocated under this
Section 6.2(c) shall equal the cumulative distributions received by the
Preferred Limited Partners pursuant to Section 5.1(i) hereof for such
Partnership Year or other applicable period and for all prior periods (other
than any distributions that are treated as being in satisfaction of the
Liquidation Preference Amount for any Preferred Limited Partner Interest). To
the extent that there is insufficient gross income in any period to allocate the
full amount provided by this Section 6.2(c), the available gross income will be
allocated among classes or series of Preferred Limited Partner Interests in
accordance with their relative distribution priorities as set forth in the
applicable Designation Instruments and pro rata within each such class or
series.
(d) GENERAL PARTNER AND SPECIAL LIMITED PARTNER GROSS INCOME
ALLOCATION. There shall be specially allocated to the General Partner and to the
Special Limited Partner items of Partnership income and gain during each
Partnership Year or other applicable period, after giving effect to the
Regulatory Allocations but before any other allocations are made hereunder, in
an amount equal to the excess, if any, of the cumulative distributions made to
the General Partner or the Special Limited Partner, as applicable, under Section
7.6(b) over the cumulative allocations of Partnership income and gain to the
General Partner or the Special Limited Partner, as applicable, under this
Section 6.2(d).
Section 6.3. TAX ALLOCATIONS.
Except as otherwise provided in this Section 6.3, for income tax
purposes each Tax Item shall be allocated among the Partners in the same manner
as its correlative item of "book" income, gain, loss or deduction is allocated
pursuant to Section 6.1 and 6.2 hereof, except as otherwise required by Section
704(c) of the Code and Regulations Section 1.704-1(b)(4). The General Partner
shall have the authority to elect the method to be used by the Partnership for
allocating items of income, gain, deduction and loss as required by Section
704(c) of the Code, including a method that may result in a Partner receiving a
disproportionately larger share of the Partnership tax depreciation deductions,
and such election shall be binding on all Partners..
ARTICLE 7
MANAGEMENT AND OPERATION OF BUSINESS; AMENDMENTS
Section 7.1. MANAGEMENT.
(a) Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are and
shall be exclusively vested in the General Partner, and no Limited Partner shall
have any right to participate in or exercise control or management power over
the business and affairs of the Partnership. In
32
addition to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or that are granted to the General Partner
under any other provision of this Agreement, the General Partner, subject to
Section 7.3 hereof, shall have full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the Partnership, to
exercise all powers set forth in Section 3.2 hereof and to effectuate the
purposes set forth in Section 3.1 hereof, including, without limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation, making
prepayments on loans and borrowing money to permit the Partnership
to make distributions to its Partners in such amounts as will permit
the Special Limited Partner (so long as the Special Limited Partner
qualifies as a REIT) to avoid the payment of any federal income tax
and any excise tax pursuant to Section 4981 of the Code and, so long
as the Special Limited Partner qualifies as a REIT, to make
distributions to its stockholders sufficient to permit the Special
Limited Partner to maintain REIT status), the assumption or
guarantee of, or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness (including
the securing of same by deed to secure debt, mortgage, deed of trust
or other lien or encumbrance on the Property) and the incurring of
any obligations it deems necessary for the conduct of the activities
of the Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the
Partnership;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of the
Partnership (including the exercise or grant of any conversion,
option, privilege, or subscription right or any other right
available in connection with any assets at any time held by the
Partnership) or the merger or other combination of the Partnership
with or into another entity (all of the foregoing subject to any
prior approval only to the extent required by Section 7.3, 7.4 or
7.5 hereof);
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms it sees fit, including,
without limitation, the financing of the conduct of the operations
of the General Partner, the Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other Persons (including,
without limitation, the Partnership's Subsidiaries) and the
repayment of obligations of the Partnership and its Subsidiaries and
any other Person in which it has an equity investment and the making
of capital contributions to its Subsidiaries;
(5) the management, operation, leasing,
landscaping, repair, alteration, demolition, replacement or
improvement of any Property;
33
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers
under this Agreement, including contracting with contractors,
developers, consultants, appraisers, accountants, legal counsel,
other professional advisors and other agents and the payment of
their expenses and compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(8) holding, managing, investing and reinvesting
cash and other assets of the Partnership;
(9) the collection and receipt of revenues and
income of the Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of the
Partnership, any division of the Partnership or the General Partner
(including, without limitation, employees designated as officers
having titles such as "president," "vice president," "secretary" and
"treasurer" of the Partnership, any division of the Partnership or
the General Partner), and agents, outside attorneys, accountants,
consultants and contractors of the Partnership, any division of the
Partnership or the General Partner and the determination of their
compensation and other terms of employment or hiring;
(11) the maintenance of such insurance for the
benefit of the Partnership and the Partners as it deems necessary
or appropriate;
(12) the formation of, or acquisition of an interest in,
and the contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems
desirable (including, without limitation, the acquisition of
interests in, and the contributions of property to, its Subsidiaries
and any other Person in which it has an equity investment from time
to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of dispute
resolution, or abandonment of, any claim, cause of action,
liability, debt or damages, due or owing to or from the Partnership,
the commencement or defense of suits, legal proceedings,
administrative proceedings, arbitrations or other forms of dispute
resolution, and the representation of the Partnership in all suits
or legal proceedings, administrative proceedings, arbitrations or
other forms of dispute resolution, the incurring of legal expense,
and the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
34
(14) the undertaking of any action in connection with
the Partnership's direct or indirect investment or interest in its
Subsidiaries or any other Person (including, without limitation, the
contribution or loan of funds by the Partnership to such Persons);
(15) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of
attorney, of any right, including the right to vote, appurtenant to
any asset, investment or interest held by the Partnership;
(16) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Partnership or any other Person in which
the Partnership has a direct or indirect interest, or jointly with
any such Subsidiary or other Person;
(17) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any Person in
which the Partnership does not have an interest, pursuant to
contractual or other arrangements with such Person;
(18) the making, execution and delivery of any and all
deeds, leases, notes, deeds to secure debt, mortgages, deeds of
trust, security agreements, conveyances, contracts, guarantees,
warranties, indemnities, waivers, releases or legal instruments or
agreements in writing necessary or appropriate in the judgment of
the General Partner for the accomplishment of any of the powers of
the General Partner enumerated in this Agreement;
(19) the issuance of additional Partnership Units as
appropriate in connection with Capital Contributions by Additional
Limited Partners and additional Capital Contributions by Partners
pursuant to Article 4 hereof; and
(20) the modification, restructuring, waiver or
enforcement of loans held by the Partnership and the granting of
consents and approvals under the documents evidencing or securing
such loans.
(b) Except as provided in Section 7.3, 7.4 or 7.5 hereof, each
of the Limited Partners agrees that the General Partner is authorized to
execute, deliver and perform the above-mentioned agreements and transactions on
behalf of the Partnership without any further act, approval or vote of the
Partners, notwithstanding any other provision of this Agreement, the Act or any
applicable law, rule or regulation. The execution, delivery or performance by
the General Partner or the Partnership of any agreement authorized or permitted
under this Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited Partners or
any other Persons under this Agreement or of any duty stated or implied by law
or equity.
35
(c) At all times from and after the Effective Date, the
General Partner may cause the Partnership to obtain and maintain (i) casualty,
liability and other insurance on the Properties of the Partnership and (ii)
liability insurance for the Indemnitees hereunder.
(d) At all times from and after the Effective Date, the
General Partner may cause the Partnership to establish and maintain any and all
reserves, working capital accounts and other cash or cash equivalents in such
amounts as the General Partner, in its sole discretion, deems appropriate and
reasonable from time to time.
(e) In exercising its authority under this Agreement, the
General Partner may, but shall be under no obligation (other than any obligation
to the Special Limited Partner as provided in this Agreement) to, take into
account the tax consequences to any Limited Partner of any action taken by it.
The General Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of an income tax liability incurred
by such Limited Partner as a result of an action (or inaction) by the General
Partner pursuant to its authority under this Agreement so long as the action or
inaction is taken in good faith.
Section 7.2. CERTIFICATE OF LIMITED PARTNERSHIP.
To the extent that such action is determined by the General Partner
to be reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of
Delaware, the Commonwealth of Massachusetts and each other state or the District
of Columbia in which the Partnership may elect to do business or own property.
Subject to the terms of Section 8.5(d) hereof, the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate
or any amendment thereto to any Limited Partner. The General Partner shall use
all reasonable efforts to cause to be filed such other certificates or documents
as may be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited partnership (or a
partnership in which the limited partners have limited liability to the extent
provided by applicable law) in the State of Delaware, the Commonwealth of
Massachusetts, and any other state, or the District of Columbia, in which the
Partnership may elect to do business or own property.
Section 7.3. CERTAIN RESTRICTIONS ON GENERAL PARTNER'S
AUTHORITY.
(a) The General Partner may not take or omit to take any
action in contravention of this Agreement, including, without limitation:
(1) take or omit to take any action that would make it
impossible to carry on the ordinary business of the Partnership,
except as otherwise provided in this Agreement;
(2) possess Partnership property, or assign any rights
in specific Partnership property, for other than a Partnership
purpose except as otherwise provided in this Agreement;
36
(3) admit a Person as a Partner, except as otherwise
provided in this Agreement;
(4) take or omit to take any action that would cause the
Partnership to be classified as a "publicly traded partnership" for
purposes of Section 7704 of the Code or as a "taxable mortgage pool"
for purposes of Section 7701(i) of the Code;
(5) take or omit to take any action that would adversely
affect the ability of the Special Limited Partner to qualify as a
REIT unless the Special Limited Partner has ceased to qualify as a
REIT;
(6) take or omit to take any action that could cause
▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government Income Trust II to
violate the "closely held" restrictions of Section 856(h) of the
Code, unless ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government
Income Trust II, as applicable, has ceased to qualify as a REIT ;
(7) perform any act that would subject a Limited Partner
to liability as a general partner in any jurisdiction or any other
liability except as provided herein or under the Act; or
(8) enter into any contract, mortgage, loan or other
agreement that prohibits or restricts, or has the effect of
prohibiting or restricting, (i) the Special Limited Partner or the
Partnership from satisfying its obligations under Section 8.6 in
full or (ii) the ability of a Limited Partner to exercise its rights
under Section 8.6 in full; except in each case with the written
consent of each Limited Partner affected by the prohibition or
restriction.
(b) Subject to Section 7.4, the General Partner may not take
any action in contravention of an express prohibition or limitation of this
Agreement without the written Consent of a Majority-In-Interest of the Common
Limited Partners (including Common Limited Partner Interests held by the General
Partner or the Special Limited Partner) and, if such action adversely affects
any class or series of Limited Partner Interests, a majority in interest of such
class or series (including Limited Partner Interests of such class or series
held by the General Partner or the Special Limited Partner) (or such lower
percentage of such Common Limited Partners or such class or series of Limited
Partner Interests as may be specifically provided for under a provision of this
Agreement or the Act).
(c) Notwithstanding any other provision of this Agreement,
during such time as the Partnership owns any shares of beneficial interest of
either ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government Income Trust II, the
General Partner shall take all reasonable actions, and shall not omit to take
any reasonable actions, necessary or appropriate to ensure that the KRF GIT
Limit does not at any time exceed 30%.
37
Section 7.4. AMENDMENTS.
(a) Amendments to this Agreement may be proposed by the
General Partner or by a Majority-In-Interest of the Common Limited Partners.
With respect to any amendment that does not permit or require the vote or
consent of the Common Limited Partners under this Agreement, any such proposed
amendment shall be adopted and be effective as an amendment hereto upon approval
by the General Partner, and the General Partner shall provide written notice to
the Partners promptly upon the effectiveness of any such amendment. With respect
to any amendment for which the vote or consent of the Common Limited Partners is
permitted or required hereunder, the General Partner shall submit such proposed
amendment to the Common Limited Partners. The General Partner shall seek the
written vote of the Common Limited Partners on such proposed amendment or shall
call a meeting to vote thereon and to transact any other business that it may
deem appropriate. For purposes of obtaining a written vote, the General Partner
may require a response within a reasonable specified time, but not less than 15
days, and failure to respond in such time period shall constitute a vote that is
consistent with the General Partner's recommendation with respect to the
proposal. Except as provided in Section 7.4(b), 7.4(c), 7.4(d) or 7.4(e) hereof,
any such proposed amendment shall be adopted and be effective as an amendment
hereto if it is approved by the General Partner and it receives the Consent of
the Common Limited Partners.
(b) The General Partner shall have the power, without the
Consent of any Limited Partners, to amend this Agreement (which term, for
purposes of this Section 7.4(b), includes any Designation Instrument) as may be
required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any
Affiliate of the General Partner for the benefit of the Limited
Partners;
(2) to reflect the admission, substitution, or
withdrawal of Partners in accordance with this Agreement, and to
amend Exhibit A to the Agreement in connection with such admission,
substitution or withdrawal;
(3) to reflect a change that does not adversely affect
the Limited Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in this Agreement not
inconsistent with law or with other provisions in this Agreement, or
make other changes with respect to matters arising under this
Agreement to more fully reflect the intent of this Agreement;
(4) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in federal or
state law;
(5) to revise the definition of KRF GIT Limit in
accordance with any change in applicable federal income tax law
(including the Code, the Regulations or issuance of a published
ruling by the Internal Revenue Service)
38
that clarifies the appropriate method for determining a partner's
proportionate ownership of stock owned by a partnership for purposes
of Code Section 856(h);
(6) to reflect such changes as are reasonably necessary
for the Special Limited Partner to maintain status as a REIT or to
maintain the status of the Partnership as a partnership for federal
income tax purposes;
(7) to modify the manner in which Capital Accounts are
computed but only to the extent set forth in the definition of
Capital Account; and
(8) subject to the rights set forth in the Designation
Instrument of any outstanding class or series of Limited Partner
Interests, to set forth in a Designation Instrument the
designations, rights, powers, duties and preferences of holders of
any class or series of Limited Partner Interests issued pursuant to
Section 4.4(d) hereof.
The General Partner will provide notice to the Limited Partners when
any action under this Section 7.4(b) is taken.
(c) Notwithstanding Section 7.4(a) and 7.4(b) hereof, this
Agreement shall not be amended without the Consent of each Partner adversely
affected if such amendment or action would (i) convert a Limited Partner
Interest in the Partnership into a General Partner Interest (except as a result
of the General Partner acquiring such interest), (ii) modify the limited
liability of a Limited Partner, (iii) reduce any Partner's share of
distributions made by the Partnership (in a manner that is not pro rata with
respect to all Partnership Interests of the same class or series) or create any
obligations for any Partner or otherwise impair rights of any Partner under this
Agreement, other than an obligation or impairment of rights that is pro rata or
uniform with other Partners holding the same class or series of Partnership
Interests, (iv) alter or modify the right of a Limited Partner to exercise an
Exchange Right available pursuant to Section 8.6 hereof and an applicable
Designation Instrument, or amend or modify any related definitions, in each case
in a manner that adversely affects such Partner, (v) cause the termination of
the Partnership prior to the time set forth in Section 2.5 or 13.1 or (vi) amend
this Section 7.4(c); PROVIDED, that (1) with respect to the foregoing clause
(iii), the Consent of each Preferred Limited Partner adversely affected by such
amendment or action shall only be required if the applicable Designation
Instrument or Instruments require such unanimous Consent and, if not so required
by such Designation Instrument or Instruments, then such amendment or action
shall only require the approval of such percentage of Preferred Limited Partner
Interests as shall be set forth in the applicable Designation Instrument or
Instruments, (2) only the Consent of Common Limited Partners shall be required
under clause (v) above, and (3) with respect to clause (vi) above, the Consent
of Preferred Limited Partners shall be required only if the amendment to this
Section 7.4(c) materially and adversely affects the rights, preferences and
privileges of the Preferred Limited Partner Interests. Further, no amendment may
alter the restrictions on the General Partner's authority set forth in this
Article 7 without the consent provided for in the relevant section of this
Article 7.
(d) Notwithstanding Section 7.4(a), 7.4(b) and 7.4(c) hereof,
this Agreement shall not be amended without the Consent of a majority in
interest of any class or
39
series of Partnership Interests whose rights are adversely affected
disproportionately with respect to the rights of any other class or series by
such amendment, or whose rights, preferences and privileges are adversely
altered by such amendment; PROVIDED, that the General Partner may create any
additional class or series of Partnership Interests pursuant to Section 4.4(d),
whether such additional class or series ranks senior to, on a parity with or
junior to such class or series as to distributions or preference upon
liquidation, and the creation of any such additional class or series shall not
require the vote of any class or series of Partnership Interests pursuant to
this Section 7.4(d), unless required by the applicable Designation Instrument or
Instruments.
(e) Notwithstanding the foregoing provisions of this Section
7.4, during such time as the Partnership owns any shares of beneficial interest
in either ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government Income Trust II, (i)
the provisions of this Agreement relating to the KRF GIT Limit shall not be
amended other than as permitted by Section 7.4(b)(5), and (ii) the provisions of
this Agreement relating to ownership of Partnership Interests and shares of the
Special Limited Partner (or options to acquire either) by KRF shall not be
amended, in each case without the prior written approval of the Board of
Trustees of each such trust in which the Partnership owns outstanding shares at
such time.
Section 7.5. MERGERS, ETC.
(a) Except in connection with a Transaction permitted under
Section 11.3(b), the General Partner shall not, without the prior Consent of the
Common Limited Partners, agree to or consummate, on behalf of the Partnership,
any merger, consolidation, reorganization or other business combination to which
the Partnership is a party, in each case resulting in the disposition by the
then Common Limited Partners and Assignees of all outstanding Common Limited
Partner Interests and interests of Assignees therein in consideration for (i)
cash, (ii) debt instruments or other evidences of indebtedness, (iii) other
securities issued by a corporation, partnership or other entity, other than (A)
the Special Limited Partner, (B) the Partnership or (C) any entity at least 80%
of the total assets of which (on the basis of market value) are comprised of
assets that, immediately prior to such transaction, were assets of the
Partnership, or (iv) any combination of the consideration described in (i), (ii)
and/or (iii) above.
(b) Notwithstanding anything to the contrary contained in this
Agreement, any agreement of merger or consolidation of the Partnership entered
into in accordance with the provisions of this Agreement may, as provided in
Section 17-211(g) of the Delaware Revised Uniform Limited Partnership Act, (1)
effect any amendment to this Agreement or (2) effect the adoption of a new
partnership agreement for the Partnership if it is the surviving or resulting
limited partnership in the merger or consolidation (provided, that no such
amendment shall be so effected if it would, under Section 7.3, 7.4 or 7.5
hereof, require the consent of the Limited Partners or the consent of the Board
of Trustees of either of ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government
Income Trust II (unless the requisite consent or consents shall be obtained),
and no provision shall be included in any such new partnership agreement if such
provision would, under Section 7.3, 7.4 or 7.5 hereof, require the consent of
the Limited Partners or the consent of the Board of Trustees of either of ▇▇▇▇▇
Government Income Trust or ▇▇▇▇▇ Government
40
Income Trust II, if it were being incorporated in this Agreement by amendment
(unless the requisite consent or consents shall be obtained)).
(c) The Partnership or its Subsidiaries, and the General
Partner on behalf of the Partnership, may enter into and perform any and all
agreements referred to in, contemplated by, or included as an exhibit (or as an
exhibit to an exhibit) to, the Special Limited Partner's Registration Statement
on Form S-11 (No. 333-98571) relating to the Initial Public Offering or
necessary to effect the transfer of assets to the Partnership or the assignments
and assumptions of debt or other obligations or liabilities by the Partnership,
in each case without any further act, vote or approval of any Partner
notwithstanding any other provision of this Agreement. The Partnership, and the
General Partner on behalf of the Partnership, may enter into and perform any and
all agreements referred to in or contemplated by any future Registration
Statement filed by the Special Limited Partner with the Securities and Exchange
Commission with respect to the issuance of REIT Common Shares, Series A
Preferred Shares, Other Preferred Shares or any other securities of the Special
Limited Partner, without any further act, vote, consent or approval of any
Partner notwithstanding any other provisions of this Agreement.
(d) Except as provided in Section 7.4(c) or 7.4(d) hereof or
in a Designation Instrument with respect to a series of Preferred Limited
Partner Interests and except as otherwise required by the Act, the Preferred
Limited Partners shall have no right to act, approve, consent or vote on any
matter or any action (or inaction) by the General Partner pursuant to its
authority under this Agreement.
Section 7.6. REIMBURSEMENT OF THE GENERAL PARTNER;
REIMBURSEMENT OF LIMITED PARTNERS.
(a) Except as provided in this Section 7.6 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not receive payments from the Partnership or be
compensated for its services as general partner of the Partnership.
(b) The General Partner and the Special Limited Partner shall
be reimbursed on a monthly basis, or such other basis as the General Partner may
determine in its reasonable discretion, for all of their expenses including,
without limitation, (i) expenses relating to the ownership of interests in and
operation of, or for the benefit of, the Partnership, (ii) compensation of their
officers and employees, (iii) director fees and expenses and (iv) all costs and
expenses of the Special Limited Partner being a public company, including all
costs and expenses incurred in connection with (A) the Initial Public Offering,
(B) filings with the Securities and Exchange Commission, (C) the listing or
admission to trading of REIT Common Shares or Series A Preferred Shares or Other
Preferred Shares on any securities exchange or the NASDAQ National Market System
and (D) reports and other distributions to its stockholders; PROVIDED, that the
amount of any reimbursement to the General Partner shall be reduced by any
interest earned by the General Partner with respect to bank accounts or other
instruments or accounts held by it on behalf of the Partnership as permitted
pursuant to Section 7.7 hereof. Such reimbursements shall be in addition to any
reimbursement of the General Partner and the Special Limited Partner as a result
of indemnification pursuant to Section 7.9 hereof.
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Section 7.7. OUTSIDE ACTIVITIES OF THE GENERAL PARTNER AND
THE SPECIAL LIMITED PARTNER.
The General Partner and the Special Limited Partner shall not
directly or indirectly enter into or conduct any business, other than in
connection with the ownership, acquisition and disposition of Partnership
Interests and, in the case of the General Partner, the management of the
business of the Partnership, and such activities as are incidental thereto. The
General Partner and the Special Limited Partner shall not incur any debts other
than, in the case of the General Partner, debts for which it may be liable in
its capacity as general partner of the Partnership and, in the case of both the
General Partner and the Special Limited Partner, guarantees of indebtedness of
the Partnership or its Subsidiaries or debt as to which the Partnership or its
Subsidiaries are also liable. The General Partner and the Special Limited
Partner shall not own any assets or take title to assets (other than temporarily
in connection with an acquisition prior to contributing such assets to the
Partnership) other than (i) their Partnership Interests as General Partner or
Special Limited Partner, (ii) the ownership of the limited liability company
interests in the General Partner by the Special Limited Partner, and (iii) such
cash and cash equivalents, bank accounts or similar instruments or accounts as
it deems reasonably necessary, taking into account Section 7.1(d) hereof and the
requirements necessary for the Special Limited Partner to qualify as a REIT and
to carry out its responsibilities contemplated under this Agreement and the
Certificate of Incorporation. The General Partner and any Affiliates of the
General Partner may acquire Limited Partner Interests and shall be entitled to
exercise all rights of a Limited Partner relating to such Limited Partner
Interests.
Section 7.8. CONTRACTS WITH AFFILIATES.
(a) The Partnership may lend or contribute funds or other
assets to its Subsidiaries or other Persons in which it has an equity
investment, and such Persons may borrow funds from the Partnership, on terms and
conditions established in the sole discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
(b) The Partnership may transfer assets to joint ventures,
other partnerships, corporations or other business entities in which it is or
thereby becomes a participant upon such terms and subject to such conditions
consistent with this Agreement and applicable law as the General Partner, in its
sole discretion, believes are advisable.
(c) Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates shall sell, transfer or convey any
property to the Partnership, directly or indirectly, except pursuant to
transactions that are determined by the General Partner in good faith to be fair
and reasonable.
(d) The General Partner is expressly authorized to enter into,
in the name and on behalf of the Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various Affiliates of
the Partnership and the General Partner, on such terms as the General Partner,
in its sole discretion, believes are advisable.
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(e) In addition to agreements and transactions otherwise
permitted under this Agreement, the Partnership may enter into an agreement or
transaction with any Affiliate of the Partnership or the General Partner, or any
of the KRF Persons or their Affiliates, on terms that are determined by the
General Partner in good faith to be fair and reasonable and are not otherwise
prohibited under this Agreement.
Section 7.9. INDEMNIFICATION.
(a) To the fullest extent permitted by applicable law, the
Partnership shall indemnify each Indemnitee from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including, without
limitation, attorney's fees and other legal fees and expenses), judgments,
fines, settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership ("ACTIONS") in which such
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise; PROVIDED, that the Partnership shall not indemnify an Indemnitee (i)
for willful misconduct or a knowing violation of the law, or (ii) for any
transaction for which such Indemnitee received an improper personal benefit in
violation or breach of any provision of this Agreement. Without limitation, the
foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to
a loan guaranty or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including, without limitation, any indebtedness
that the Partnership or any Subsidiary of the Partnership has assumed or taken
subject to), and the General Partner is hereby authorized and empowered, on
behalf of the Partnership, to enter into one or more indemnity agreements
consistent with the provisions of this Section 7.9 in favor of any Indemnitee
having or potentially having liability for any such indebtedness. It is the
intention of this Section 7.9(a) that the Partnership indemnify each Indemnitee
to the fullest extent permitted by law. The termination of any proceeding by
judgment, order or settlement does not create a presumption that the Indemnitee
did not meet the requisite standard of conduct set forth in this Section 7.9(a).
The termination of any proceeding by conviction of an Indemnitee or upon a plea
of NOLO CONTENDERE or its equivalent by an Indemnitee, or an entry of an order
of probation against an Indemnitee prior to judgment, does not create a
presumption that such Indemnitee acted in a manner contrary to that specified in
this Section 7.9(a) with respect to the subject matter of such proceeding. Any
indemnification pursuant to this Section 7.9 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership or otherwise provide funds to enable the Partnership to fund its
obligations under this Section 7.9.
(b) To the fullest extent permitted by law, expenses incurred
by an Indemnitee who is a party to a proceeding or otherwise subject to or the
focus of or is involved in any Action shall be paid or reimbursed by the
Partnership as incurred by the Indemnitee in advance of the final disposition of
the Action upon receipt by the Partnership of (i) a written affirmation by the
Indemnitee of the Indemnitee's good faith belief that the standard of conduct
necessary for indemnification by the Partnership as authorized in Section 7.9(a)
has been met, and (ii) a written undertaking by or on behalf of the Indemnitee
to repay the amount if it shall ultimately be determined that the standard of
conduct has not been met.
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(c) The indemnification provided by this Section 7.9 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee unless otherwise
provided in a written agreement with such Indemnitee or in the writing pursuant
to which such Indemnitee is indemnified.
(d) The Partnership may, but shall not be obligated to,
purchase and maintain insurance, on behalf of any of the Indemnitees and such
other Persons as the General Partner shall determine, against any liability that
may be asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such liability
under the provisions of this Agreement.
(e) Any liabilities that an Indemnitee incurs as a result of
acting on behalf of the Partnership, the Special Limited Partner or the General
Partner (whether as a fiduciary or otherwise) in connection with the operation,
administration or maintenance of an employee benefit plan or any related trust
or funding mechanism (whether such liabilities are in the form of excise taxes
assessed by the Internal Revenue Service, penalties assessed by the Department
of Labor, restitutions to such a plan or trust or other funding mechanism or to
a participant or beneficiary of such plan, trust or other funding mechanism, or
otherwise) shall be treated as liabilities or judgments or fines under this
Section 7.9, unless such liabilities arise as a result of (i) such Indemnitee's
intentional misconduct or knowing violation of the law, or (ii) any transaction
in which such Indemnitee received a personal benefit in violation or breach of
any provision of this Agreement or applicable law.
(f) In no event may an Indemnitee subject any of the Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.9 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.9 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.9 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.9 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
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Section 7.10. LIABILITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, neither the General Partner nor any of its officers or directors
shall be liable for monetary damages to the Partnership, any Partners or any
Assignees for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission if the General Partner or such officer or
director acted in such cases in good faith.
(b) Subject to its obligations and duties as General Partner
set forth in Section 7.1(a) hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its employees or agents
(subject to the supervision and control of the General Partner). The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by it in good faith.
(c) Any amendment, modification or repeal of this Section 7.10
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability, and the liability of
its officers and directors, to the Partnership and the Limited Partners under
this Section 7.10 as in effect immediately prior to such amendment, modification
or repeal with respect to claims arising from or relating to matters occurring,
in whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.
(d) To the extent that, at law or in equity, a Limited Partner
has duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or the Partners, the Limited Partner shall not be liable to the
Partnership or to any other Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of a Limited Partner otherwise
existing at law or in equity, are agreed by the Partners to replace such other
duties and liabilities of such Limited Partner.
(e) Whenever in this Agreement the General Partner or the
Special Limited Partner is permitted or required to make a decision (i) in its
"sole discretion" or "discretion" or under a grant of similar authority or
latitude, the General Partner or the Special Limited Partner shall be entitled
to consider only such interests and factors as it desires and shall have no duty
or obligation to give any consideration to any interest of, or factors
affecting, the Partnership or the Limited Partners, or (ii) in its "good faith"
or under another express standard, the General Partner or the Special Limited
Partner shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement or any other agreement
contemplated herein or by relevant provisions of law or in equity or otherwise.
(f) The General Partner acknowledges that it owes fiduciary
duties to the Limited Partners (subject to the express provisions of this
Agreement), that the Special Limited Partner (an Affiliate of the General
Partner) owes fiduciary duties to its shareholders and that reasonable efforts
shall be used to discharge such duties to each of such constituencies; PROVIDED,
HOWEVER, that in the event of a conflict between the interests of the
shareholders of the Special Limited Partner and the interests of the Limited
Partners, the Limited Partners agree that
45
the General Partner shall discharge its fiduciary duties to the Limited Partners
by acting in the best interests of the Special Limited Partner's shareholders.
The Limited Partners further agree that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or
Assignees) except as otherwise provided herein with respect to the Special
Limited Partner in deciding whether to cause the Partnership to take (or decline
to take) any actions, and that the General Partner shall not be liable to the
Partnership or to any Partner for monetary damages for losses sustained,
liabilities incurred or benefits not derived by Limited Partners in connection
with such decisions, so long as the General Partner has acted in good faith.
Section 7.11. OTHER MATTERS CONCERNING THE GENERAL PARTNER.
(a) The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it in good faith to be genuine and to
have been signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers, architects,
engineers, environmental consultants and other consultants and advisers selected
by it, and any act taken or omitted to be taken in reliance upon the opinion of
such Persons as to matters that such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
(c) The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any duly appointed
attorney or attorneys-in-fact. Each such attorney shall, to the extent provided
by the General Partner in the power of attorney, have full power and authority
to do and perform all and every act and duty that is permitted or required to be
done by the General Partner hereunder.
(d) Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to prevent a violation of the "closely held"
restrictions of Section 856(h) of the Code by ▇▇▇▇▇ Government Income Trust or
▇▇▇▇▇ Government Income Trust II, unless ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇
Government Income Trust II, as applicable, has ceased to qualify as a REIT, (ii)
to protect the ability of the Special Limited Partner to qualify as a REIT,
unless the Special Limited Partner has ceased to qualify as a REIT or (iii) to
avoid the Special Limited Partner incurring any taxes under Section 857 or
Section 4981 of the Code unless such action or omission shall have been
specifically consented to by the Special Limited Partner in writing, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
46
Section 7.12. TITLE TO PARTNERSHIP ASSETS.
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership
or one or more nominees, as the General Partner may determine. Any Partnership
assets for which legal title is held in the name of the General Partner or any
nominee or Affiliate of the General Partner shall be held by the General Partner
for the use and benefit of the Partnership in accordance with the provisions of
this Agreement. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
Section 7.13. RELIANCE BY THIRD PARTIES.
Notwithstanding anything to the contrary in this Agreement, any
Person dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without the consent or approval of any
other Partner or Person, to encumber, sell or otherwise use in any manner any
and all assets of the Partnership and to enter into any contracts on behalf of
the Partnership, and take any and all actions on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies that may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1. LIMITATION OF LIABILITY.
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.4 hereof,
or under the Act.
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Section 8.2. MANAGEMENT OF BUSINESS.
No Limited Partner or Assignee shall take part in the operation,
management or control of the Partnership's business, transact any business in
the Partnership's name or have the power to sign documents for or otherwise bind
the Partnership. The transaction of any such business by the General Partner or
any officer, director, employee, agent, representative, or trustee of the
General Partner, in their capacity as such, shall not affect, impair or
eliminate the limitations on the liability of the Limited Partners or Assignees
under this Agreement.
Section 8.3. OUTSIDE ACTIVITIES OF LIMITED PARTNERS.
Subject to any agreements entered into pursuant to Section 7.8(d) or
7.8(e) hereof and any other agreements entered into by a Limited Partner or its
Affiliates with the General Partner, the Special Limited Partner, the
Partnership or a Subsidiary of the Partnership, any Limited Partner, other than
the Special Limited Partner, and any officer, director, employee, agent,
trustee, Affiliate, shareholder, member or partner of any Limited Partner shall
be entitled to and may have business interests and engage in business activities
in addition to those relating to the Partnership, including business interests
and activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee, other than the Special Limited
Partner. Subject to such agreements, none of the Limited Partners nor any other
Person shall have any rights by virtue of this Agreement or the partnership
relationship established hereby in any business ventures of any other Person and
such Person shall have no obligation pursuant to this Agreement, subject to
Section 7.8(d) or 7.8(e) hereof and any other agreements entered into by a
Limited Partner or its Affiliates with the General Partner, the Special Limited
Partner, the Partnership or a Subsidiary of the Partnership, to offer any
interest in any such business ventures to the Partnership, any Limited Partner
or any such other Person, even if such opportunity is of a character that, if
presented to the Partnership, any Limited Partner or such other Person, could be
taken by such Person.
Section 8.4. RETURN OF CAPITAL.
Except as provided in a Designation Instrument, no Limited Partner
shall be entitled to the withdrawal or return of its Capital Contribution,
except to the extent of distributions made pursuant to this Agreement or upon
termination of the Partnership as provided herein. Except to the extent provided
in Article 5, Article 6 or Section 13.2 hereof or otherwise expressly provided
in this Agreement (including pursuant to a Designation Instrument), no Limited
Partner or Assignee shall have priority over any other Limited Partner or
Assignee either as to the return of Capital Contributions or as to profits,
losses or distributions. Preferred Limited Partner Units of a series shall be
redeemed only in accordance with a Designation Instrument relating thereto and,
in the case of the Preferred Limited Partner Units held by the Special Limited
Partner, in accordance with Section 4.7 of this Agreement.
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Section 8.5. RIGHTS OF LIMITED PARTNERS RELATING TO THE
PARTNERSHIP.
In addition to other rights provided by this Agreement or by the
Act, each Limited Partner shall have the right, for a purpose reasonably related
to such Limited Partner's interest as a Limited Partner in the Partnership, upon
written demand:
(a) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by the Special Limited
Partner pursuant to the Securities Exchange Act of 1934, as amended;
(b) to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership Year;
(c) to obtain a current list of the name and last known
business, residence or mailing address of each Partner; and
(d) to obtain a copy of this Agreement and the Certificate and
all amendments thereto, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all amendments thereto
have been executed.
Section 8.6. EXCHANGE RIGHTS.
(a) Each Limited Partner, other than the Special Limited
Partner and the KRF Persons, shall have the right (subject to the terms and
conditions set forth herein and to the provisions of the applicable Designation
Instrument and any agreement between the Partnership and such Limited Partner
with respect to the Partnership Units held by it, the "EXCHANGE RIGHT") to
require the Partnership to acquire all or a portion of the Limited Partner Units
held by such Limited Partner (such Limited Partner Units being hereafter
"TENDERED UNITS"), in exchange for the Cash Amount to be paid by the Partnership
provided that such Partnership Units have been outstanding for at least one
year. Any Exchange Right shall be exercised pursuant to a Notice of Exercise of
Exchange Right delivered to the Partnership (with a copy to the Special Limited
Partner) by the Limited Partner who is exercising its rights hereunder (the
"EXCHANGING PARTNER").
(b) Notwithstanding the provisions of Section 8.6(a), a
Limited Partner that exercises the Exchange Right shall be deemed to have
offered to sell the Partnership Units described in the Notice of Exercise of
Exchange Right to the Special Limited Partner, and the Special Limited Partner
may, in its sole and absolute discretion, elect to purchase directly and acquire
such Partnership Units by paying to the Exchanging Partner either the Cash
Amount or the REIT Shares Amount, as elected by the Special Limited Partner (in
its sole and absolute discretion), on the Specified Exchange Date, whereupon the
Special Limited Partner shall acquire the Partnership Units offered for exchange
by the Exchanging Partner and shall be treated for all purposes of this
Agreement as the owner of such Partnership Units. If the Special Limited Partner
shall elect to exercise its right to purchase Partnership Units under this
Section 8.6(b) with respect to a Notice of Exercise of Exchange Right, it shall,
subject to Section 8.6(d)(4) hereof, so notify the Exchanging Partner within
five Business Days after the receipt by the Special Limited Partner of such
Notice of Exercise of Exchange Right. Unless the
49
Special Limited Partner (in its sole and absolute discretion) shall exercise its
right to purchase Partnership Units from the Exchanging Partner pursuant to this
Section 8.6(b), the Special Limited Partner shall have no obligation to the
Exchanging Partner or the Partnership with respect to the Exchanging Partner's
exercise of the Exchange Right. In the event the Special Limited Partner shall
exercise its right to purchase Partnership Units with respect to the exercise of
an Exchange Right in the manner described in the first sentence of this Section
8.6(b), the Partnership shall have no obligation to pay any amount to the
Exchanging Partner with respect to such Exchanging Partner's exercise of such
Exchange Right, and each of the Exchanging Partner, the Partnership and the
Special Limited Partner, as the case may be, shall treat the transaction between
the Special Limited Partner and the Exchanging Partner for federal income tax
purposes as a sale of the Exchanging Partner's Partnership Units to the Special
Limited Partner. Each Exchanging Partner agrees to execute such documents as the
Special Limited Partner may reasonably require in connection with the issuance
of REIT Common Shares, Series A Preferred Shares or Other Preferred Shares, as
applicable, upon exercise of the Exchange Right. The REIT Shares Amount
receivable hereunder shall be delivered as duly authorized, validly issued,
fully paid and nonassessable REIT Common Shares, Series A Preferred Shares or
Other Preferred Shares, as applicable, and, if applicable, common rights (as
defined in the definition of REIT Common Shares Amount) or preferred rights (as
defined in the definition of Preferred Shares Amount), free of any pledge, lien,
encumbrance or restriction, other than those provided in the Certificate of
Incorporation, the Bylaws of the Special Limited Partner, the Securities Act and
relevant state securities or blue sky laws. Notwithstanding any delay in such
delivery, the Exchanging Partner shall be deemed the owner of the REIT Common
Shares, Series A Preferred Shares or Other Preferred Shares, as applicable,
issued to it hereunder and the rights associated therewith for all purposes,
including, without limitation, rights to vote, consent, receive dividends and to
exercise rights, as of the Specified Exchange Date. In addition, the Exchanging
Partner may be granted registration rights with respect to such REIT Common
Shares, Series A Preferred Shares or Other Preferred Shares, as applicable, by
the Special Limited Partner to the extent deemed reasonable and appropriate by
the Special Limited Partner in its sole discretion.
(c) Any Cash Amount to be paid to an Exchanging Partner
pursuant to this Section 8.6 shall be paid on the Specified Exchange Date;
provided, however, that the Special Limited Partner may elect to cause the
Specified Exchange Date to be delayed for up to an additional 180 days to the
extent required for the Special Limited Partner to cause additional shares to be
issued to provide financing to be used to make such payment of the Cash Amount.
Notwithstanding the foregoing, the Special Limited Partner agrees to use its
best efforts to cause the closing of the acquisition of exchanged Partnership
Units hereunder to occur as quickly as reasonably possible.
(d) Notwithstanding anything herein to the contrary, with
respect to any exchange pursuant to this Section 8.6:
(1) All Limited Partner Units acquired by the Special
Limited Partner pursuant to such exchange shall automatically, and
without further action required, be converted into and deemed to be
Limited Partner Interests comprised of the same number of Limited
Partner Units of the same class or series.
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(2) Subject to the Ownership Limit, no Limited Partner
may exercise an Exchange Right for less than _______ Limited Partner
Units or, if such Limited Partner holds less than _______ Limited
Partner Units, all of the Limited Partner Units held by such Limited
Partner.
(3) Each Limited Partner (a) may exercise an Exchange
Right only once in each Twelve-Month Period, and (b) may not
exercise an Exchange Right during the period after the Partnership
Record Date with respect to a distribution and before the record
date established by the Special Limited Partner for a distribution
to its stockholders of some or all of its portion of such
distribution.
(4) The consummation of an exchange pursuant to this
Section 8.6 shall be subject to the expiration or termination of the
applicable waiting period, if any, under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended.
(5) Each Exchanging Partner shall continue to own all
Limited Partner Units subject to any exchange pursuant to this
Section 8.6, and be treated as a Limited Partner with respect to
such Limited Partner Units for all purposes of this Agreement, until
such Limited Partner Units are transferred to the Partnership or to
the Special Limited Partner and paid for on the Specified Exchange
Date. Until a Specified Exchange Date, the Exchanging Partner shall
have no rights as a stockholder of the Special Limited Partner with
respect to any REIT Common Shares, Series A Preferred Shares or
Other Preferred Shares to be received in such exchange.
(6) The Assignee of any Limited Partner may exercise the
rights of such Limited Partner pursuant to this Section 8.6, 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, the
Cash Amount or the REIT Shares Amount, as applicable, shall be paid
by the Partnership or the Special Limited Partner directly to such
Assignee and not to such Limited Partner.
(e) In connection with an exercise of its rights pursuant to
this Section 8.6, each Exchanging Partner shall submit the following, in
addition to the Notice of Exercise of Exchange Right:
(1) An affidavit, dated the same date as the Notice of
Exercise of Exchange Right, disclosing the Beneficial Ownership by
such Partner of REIT Common Shares, Series A Preferred Shares and
any Other Preferred Shares, and a representation in writing that
neither such Partner, nor any Person whose Beneficial Ownership of
REIT Common Shares, Series A Preferred Shares or any Other Preferred
Shares is or could be treated as shares Beneficially Owned by such
Partner, has any intention as of such date of acquiring or otherwise
51
Beneficially Owning additional REIT Common Shares, Series A
Preferred Shares or any Other Preferred Shares, between the date of
the Notice of Exercise of Exchange Right and the Specified Exchange
Date.
(2) On the Specified Exchange Date, the Exchanging
Partner shall certify (i) that the Beneficial Ownership of REIT
Common Shares, Series A Preferred Shares and any Other Preferred
Shares by such Partner remains unchanged from the affidavit
described above in (1) or (ii), if such ownership has changed, the
Exchanging Partner shall certify that it will not and will not be
deemed to own REIT Common Shares, Series A Preferred Shares or any
Other Preferred Shares of the Special Limited Partner in violation
of the Ownership Limit, (ii) that all Tendered Units shall be
delivered to the Special Limited Partner free and clear of all liens
and, notwithstanding anything herein contained to the contrary, the
Special Limited Partner shall not be under any obligation to acquire
Tendered Units that are or may be subject to any liens, and (iii)
that in the event any state or local property transfer tax is
payable as a result of the transfer of its Tendered Units, such
Partner shall assume and pay such transfer tax.
(f) Notwithstanding any other provision of this Agreement, the
General Partner shall place appropriate restrictions on the ability of the
Limited Partners to exercise their Exchange Right as and if deemed necessary to
ensure that the Partnership does not constitute a "publicly traded partnership"
under Section 7704 of the Code.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1. RECORDS AND ACCOUNTING.
The General Partner shall keep or cause to be kept at the principal
office of the Partnership those records and documents required to be maintained
by the Act and other books and records deemed by the General Partner to be
appropriate with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 8.5 or 9.2 hereof. The books of the Partnership shall be maintained,
for financial and tax reporting purposes, on an accrual basis in accordance with
generally accepted accounting principles, or on such other basis as the General
Partner determines to be necessary or appropriate.
Section 9.2. REPORTS.
(a) As soon as practicable, but in no event later than 90 days
after the close of the last fiscal quarter of each Partnership Year, the General
Partner shall cause to be mailed to each Limited Partner, an annual report
containing financial statements of the Partnership for the Partnership Year, or
of the Special Limited Partner if such statements are prepared solely on a
consolidated basis with the Special Limited Partner, for the twelve month period
ending December 31, presented in accordance with generally accepted accounting
52
principles, such statements to be audited by a nationally recognized firm of
independent public accountants selected by the General Partner.
(b) As soon as practicable, but in no event later than 45 days
after the close of each fiscal quarter (except the last fiscal quarter of each
year), the General Partner shall cause to be mailed to each Limited Partner as
of the last day of the calendar quarter, a report containing unaudited financial
statements of the Partnership, or of the Special Limited Partner if such
statements are prepared solely on a consolidated basis with the Special Limited
Partner, and such other information as may be required by applicable law or
regulation or as the General Partner determines to be appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1. PREPARATION OF TAX RETURNS; TAX ACCOUNTING.
The General Partner shall arrange for the preparation and timely
filing of all returns with respect to Partnership income, gains, deductions,
losses and other items required of the Partnership for federal, state and local
income tax purposes and shall use all reasonable efforts to furnish, on or
before March 15 of each year (for so long as the Partnership Year is the
calendar year) the tax information, reasonably required by Limited Partners for
federal, state and local income tax reporting purposes
Section 10.2. TAX ELECTIONS.
The General Partner shall, in its sole discretion, determine whether
to make any election pursuant to the Code or any applicable state or local tax
law and the General Partner shall have the right to seek to revoke any such
election upon the General Partner's determination in its sole discretion that
such revocation is in the best interests of the Partners.
Section 10.3. TAX MATTERS PARTNER.
The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. The tax matters partner shall
receive no compensation for its services. All third party costs and expenses
incurred by the tax matters partner in performing its duties as such (including
legal and accounting fees and expenses) shall be borne by the Partnership in
addition to any reimbursement pursuant to Section 7.6 hereof. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
to assist the tax matters partner in discharging its duties hereunder, so long
as the compensation paid by the Partnership for such services is reasonable. At
the request of any Limited Partner, the General Partner agrees to consult with
such Limited Partner with respect to the preparation and filing of any returns,
including, without limitation, any subsequent audit or litigation with respect
to such return; PROVIDED, that the filing of such returns shall be in the sole
discretion of the General Partner.
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Section 10.4. WITHHOLDING.
Each Partner hereby authorizes the Partnership to withhold from or
pay on behalf of or with respect to such Partner any amount of federal, state,
local, or foreign taxes that the General Partner determines that the Partnership
is required to withhold or pay with respect to any amount distributable or
allocable to such Partner pursuant to this Agreement, including without
limitation any taxes required to be withheld or paid by the Partnership pursuant
to Section 1441, 1442, 1445 or 1446 of the Code. Any amount paid on behalf of or
with respect to a Partner shall constitute a loan by the Partnership to such
Partner, which loan shall be repaid by such Partner within 15 days after notice
from the General Partner that such payment must be made unless (i) the
Partnership withholds such payment from a distribution that would otherwise be
made to the Partner or (ii) the General Partner determines that such payment may
be satisfied out of the available funds of the Partnership that would, but for
such payment, be distributed to the Partner. Any amounts withheld pursuant to
the foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Partner pursuant to Article 5 hereof. If a Limited Partner (a "Defaulting
Limited Partner") fails to pay any amount owed to the Partnership with respect
to the Partnership loan within such 15 days after notice, the General Partner,
in its sole and absolute discretion, may elect to make the payment to the
Partnership on behalf of such Defaulting Limited Partner. In such event, on the
date of payment, the General Partner shall be deemed to have extended a loan (a
"General Partner Loan") to the Defaulting Limited Partner in the amount of the
payment made by the General Partner and shall succeed to all rights and remedies
of the Partnership against the Defaulting Limited Partner as to that amount.
Without limitation, the General Partner shall have the right to receive any
distributions that otherwise would be made by the Partnership to the Defaulting
Limited Partner until such time as the General Partner Loan has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been received by the Defaulting Limited Partner and
immediately paid to the General Partner.
ARTICLE 11
TRANSFERS AND WITHDRAWALS; REMOVAL OF GENERAL PARTNER
Section 11.1. TRANSFER.
No Partnership Interest shall be Transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any Transfer or purported Transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void. The term "TRANSFER" when
used in this Article 11 does not include any exchange of Limited Partner Units
made pursuant to the applicable Designation Instrument and Section 8.6 hereof.
Section 11.2. TRANSFER OF GENERAL PARTNER'S INTEREST.
(a) The General Partner may not transfer any of its General
Partner Interest or withdraw as General Partner except in connection with a
redemption pursuant to Section 4.7 or as provided in Section 11.2(b) or 11.2(c)
hereof and, in the event the Special Limited Partner acquires any General
Partner Interests, except as provided in Section 11.3.
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(b) The General Partner may assign all or any part of its
General Partner Interest to the Special Limited Partner or a direct or indirect
Subsidiary of the Special Limited Partner.
(c) The General Partner may pledge its General Partner
Interest in connection with any borrowing of the Partnership that is guaranteed
by or otherwise recourse to the General Partner, and any Transfer of the General
Partner Interest (or of such rights) pursuant or subsequent to, or in lieu of,
the exercise of rights or remedies in connection with such pledge shall be
permitted hereunder.
Section 11.3. SPECIAL LIMITED PARTNER'S RIGHTS TO TRANSFER.
(a) The Special Limited Partner may not transfer any of its
Partnership Interests or withdraw as Special Limited Partner except in
connection with a redemption pursuant to Section 4.7 or a transaction permitted
under Section 11.3(b), 11.3(c) or 11.3(d).
(b) Except as otherwise provided in Section 11.3(c) or
11.3(d), the Special Limited Partner shall not engage in any merger,
consolidation or other combination with or into another Person or sale of all or
substantially all of its assets, or any reclassification, or recapitalization or
change of outstanding Class A REIT Common Shares, Class B REIT Common Shares,
Series A Preferred Shares or Other Preferred Shares (other than a change in par
value, or from par value to no par value, or as a result of a subdivision or
combination as described in the definition of Common Conversion Factor or the
definition of Preferred Conversion Factor) ("TRANSACTION"), unless the
Transaction also includes a merger of the Partnership or sale of substantially
all of the assets of the Partnership and as a result of which (i) all Limited
Partners other than KRF and the Special Limited Partner will receive for each
Partnership Unit an amount of cash, securities, or other property equal to the
product of the Common Conversion Factor or Preferred Conversion Factor, as
applicable, and the greatest amount of cash, securities or other property paid
to a holder of one Class A REIT Common Share, Class B REIT Common Share, Series
A Preferred Share or Other Preferred Share, as applicable, in consideration of
one such share at any time during the period from and after the date on which
the Transaction is consummated and (ii) KRF will receive an amount of cash,
securities or other property (as applicable based upon the type of consideration
and the proportions thereof paid to holders of shares of the Special Limited
Partner in the Transaction) equal to the fair market value of the Partnership
Units held by KRF at such time as determined in good faith by the General
Partner by reference to the values paid for shares of the Special Limited
Partner.
(c) Notwithstanding anything to the contrary contained in
Section 11.3(b), the Special Limited Partner may merge with another entity if
immediately after such merger substantially all of the assets of the surviving
entity other than Partnership Units held by the Special Limited Partner (whether
such Partnership Units constitute the General Partner Interest or a Limited
Partner Interest), are contributed to the Partnership as a Capital Contribution
in exchange for Common Limited Partner Units having a fair market value, as
reasonably determined by the General Partner, equal to the fair market value of
the assets so contributed to the Partnership.
55
(d) Notwithstanding Sections 11.3(a) and 11.3(b), the Special
Limited Partner may pledge its Partnership Interest in connection with any
borrowing of the Partnership that is guaranteed by or otherwise recourse to the
Special Limited Partner, and any Transfer of such Partnership Interest (or of
such rights) pursuant or subsequent to, or in lieu of, the exercise of rights or
remedies in connection with such pledge shall be permitted hereunder.
Section 11.4. OTHER LIMITED PARTNERS' RIGHTS TO TRANSFER.
(a) No Limited Partner shall have the right to transfer all or
any portion of its Limited Partner Interest to any Person, subject to the
provisions of Section 11.7 hereof without the prior written consent of the
General Partner, which consent may be given or withheld by the General Partner
in its sole and absolute discretion. Any purported Transfer of a Limited Partner
Interest by a Limited Partner in violation of this Section 11.4(a) shall be void
AB INITIO and shall not be given effect for any purpose by the Partnership.
Notwithstanding the foregoing, without the consent of the General Partner, a
Limited Partner shall have the right to transfer all or any portion of its
economic rights as a Limited Partner. The provisions of this Section 11.4 shall
not apply to any Transfer of the Partnership Interests of the Special Limited
Partner, which shall be governed by the provisions of Section 11.3. It is a
condition to any Transfer otherwise permitted hereunder that the transferee
shall be a Qualified Transferee and shall assume by operation of law or express
agreement all of the obligations of the transferor Limited Partner under this
Agreement with respect to such transferred Partnership Interest, and no such
Transfer (other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor Limited Partner are assumed by a
successor corporation by operation of law) shall relieve the transferor Limited
Partner of its obligations under this Agreement without the approval of the
General Partner, in its sole discretion. Any transferee shall take subject to
the obligations of the transferor hereunder, but such transferee shall not be
liable for the obligations of the transferor under Section 17-607 of the Act.
Until admitted as a Substituted Limited Partner, no transferee, whether by a
voluntary transfer, by operation of law or otherwise, shall have any rights
hereunder, other than the rights of an Assignee as provided in Section 11.6
hereof.
(b) If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservatory or receiver
of such Limited Partner's estate shall have all the rights of a Limited Partner,
but not more rights than those enjoyed by other Limited Partners of the same
class or series, for the purpose of settling or managing the estate, and such
power as the Incapacitated Limited Partner possessed to transfer all or any part
of his or its interest in the Partnership. The Incapacity of a Limited Partner,
in and of itself, shall not dissolve or terminate the Partnership.
(c) In connection with any Transfer, the General Partner shall
have the right to receive an opinion of counsel reasonably satisfactory to it to
the effect that the proposed Transfer may be effected without registration under
the Securities Act and will not otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Interests transferred. If, in the opinion of such counsel, such Transfer would
require the filing of a registration statement under the Securities Act or would
otherwise violate any federal or state securities laws or regulations applicable
to the Partnership or the Partnership
56
Units, the General Partner may prohibit any Transfer otherwise permitted under
this Section 11.4 by a Limited Partner of Partnership Interests.
(d) No Transfer by a Limited Partner of its Partnership
Interests (including any exchange pursuant to Section 8.6, any other acquisition
of Partnership Units by the General Partner or the Special Limited Partner or
any acquisition of Partnership Units by the Partnership) may be made to any
Person if in the reasonable judgment of the General Partner, (i) it would result
in the Partnership being taxable as a corporation or (ii) such Transfer is
effectuated through an "established securities market" or a "secondary market
(or the substantial equivalent thereof)" within the meaning of Section 7704 of
the Code.
(e) Notwithstanding the foregoing provisions of this Section
11.4, a Limited Partner may pledge or hypothecate its Limited Partner Interests,
or any of such Limited Partner's rights as a Limited Partner, or grant, sell or
purchase an option or grant a security interest with respect to its Limited
Partner Interests, or any of such Limited Partner's rights as a Limited Partner,
in connection with any borrowing of the Partnership that is guaranteed by or
otherwise recourse to such Limited Partner, [or as security for a borrowing from
a bank, insurance company or other commercial lending institution,] and any
Transfer of such Limited Partner Interests (or of such rights) pursuant or
subsequent to, or in lieu of, the exercise of rights or remedies in connection
with such pledge, option or grant shall be permitted hereunder.
(f) Notwithstanding the other provisions of this Article 11,
during such time as the Partnership owns any shares of beneficial interest of
▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government Income Trust II, no transfer
by a Limited Partner of its Partnership Units or grant by a Limited Partner of
an option to acquire its Partnership Units may be made (i) to any Person other
than the Special Limited Partner or a KRF Person to the extent that as a result
of such grant or transfer the KRF GIT Limit would equal or exceed 4.9% when
applied in respect of Beneficial Ownership by such transferee or grantee
(determined by substituting the name of such proposed transferee or grantee in
place of "KRF" each place where "KRF" appears in clause (a) of the definition of
"KRF GIT Limit" and including distributions and allocations made in respect of
all Partnership Units that would be Beneficially Owned by such transferee or
grantee); PROVIDED, THAT the General Partner may waive the 4.9% limitation of
this clause (i) to the extent that it reasonably determines based upon evidence
satisfactory to it that permitting a grant or acquisition in excess of such
limitation would not cause either ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇
Government Income Trust II to violate Code Section 856(h), (ii) to any Person,
other than KRF, who owns shares of any class or series of stock of the Special
Limited Partner or (iii) to any KRF Person, if such transfer would cause the KRF
Persons to Beneficially Own Partnership Units in excess of those acquired by KRF
on the Effective Date. In addition to the other restrictions contained in this
Article 11, during such time as the Partnership owns any shares of beneficial
interest of ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government Income Trust II, a
transfer by KRF of any of its Partnership Units or the grant by KRF of an option
to any Person to acquire any of its Partnership Units may only be made if (i)
such transfer or grant will not result in (a) a decrease in the number of
individuals that are treated as Beneficially Owning shares of ▇▇▇▇▇ Government
Income Trust or ▇▇▇▇▇ Government Income Trust II or (b) an increase in the
percentage of shares of ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇ Government Income
Trust II Beneficially Owned by any Person (taking into account the
57
substitution of the transferee or grantee with respect to Partnership Units
previously owned by KRF) and (ii) the transferee or grantee provides
representations and covenants satisfactory in the sole discretion of the General
Partner with respect to its Beneficial Ownership of such shares, shares of the
Special Limited Partner and Partnership Units.
Section 11.5. SUBSTITUTED LIMITED PARTNERS.
(a) No Limited Partner shall have the right to substitute a
transferee as a Limited Partner in its place. The General Partner shall,
however, have the right to consent to the admission of a transferee of the
Partnership Interest of a Limited Partner pursuant to this Section 11.5 as a
Substituted Limited Partner, which consent may be given or withheld by the
General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit a transferee of any such Partnership Interests to
become a Substituted Limited Partner shall not give rise to any cause of action
against the Partnership or any Partner. Upon consent of the General Partner to
such Transfer, upon satisfaction of the conditions provided under Section 3.4
and Section 11.4 hereof and upon furnishing to the General Partner (i) evidence
of acceptance in form satisfactory to the General Partner of all of the terms
and conditions of this Agreement, including, without limitation, the power of
attorney granted in Section 2.4 hereof, (ii) a counterpart signature page to
this Agreement executed by such Person and (iii) such other documents or
instruments as may be required in the discretion of the General Partner in order
to effect such Person's admission as a Substituted Limited Partner, the General
Partner shall promptly admit such transferee of the interest of a Limited
Partner as a Substituted Limited Partner.
(b) A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the rights and
powers and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
(c) Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address, number of
Limited Partner Units, and Percentage Interest of such Substituted Limited
Partner and to eliminate or adjust, if necessary, the name, address and interest
of the predecessor of such Substituted Limited Partner.
(d) Any transferee by way of an exercise of the rights and
remedies, or a Transfer in lieu of such exercise, in connection with the pledge
of a General Partner Interest pursuant to Section 11.2(c) or any Partnership
Interests of the Special Limited Partner pursuant to Section 11.3 shall have the
right, at the election of such transferee, to be admitted as a substituted
General Partner or Special Limited Partner, as the case may be. Any transferee
by way of an exercise of the rights and remedies, or a Transfer in lieu of such
exercise, in connection with the pledge, option or grant of a security interest
with respect to a Limited Partner Interest pursuant to Section 11.4(e) shall
have the right, at the election of such transferee, to be admitted as a
substituted Limited Partner.
Section 11.6. ASSIGNEES.
Until such time as a transferee has been admitted as a Substituted
Limited Partner pursuant to Section 11.5 hereof, such transferee shall be
considered an Assignee for purposes of
58
this Agreement. An Assignee shall be deemed to have had assigned to it, and
shall be entitled to receive, distributions from the Partnership and the share
of Net Income, Net Losses, and any other items of income, gain, loss, deduction
and credit of the Partnership attributable to the Limited Partner Units assigned
to such transferee, but shall not be deemed to be a holder of Limited Partner
Units for any other purpose under this Agreement, and shall not be entitled to
vote such Limited Partner Units in any matter presented to the Limited Partners
of the same class or series for a vote (such Limited Partner Units being deemed
to have been voted on such matter in the same proportion as all other Limited
Partner Units held by Limited Partners of the same class or series are voted).
In the event any such transferee desires to make a further assignment of any
such Partnership Units, such transferee shall be subject to all the provisions
of this Article 11 to the same extent and in the same manner as any Limited
Partner desiring to make an assignment of Limited Partner Units.
Section 11.7. GENERAL PROVISIONS.
(a) No Limited Partner may withdraw from the Partnership other
than as a result of a permitted Transfer of all of such Limited Partner's
Limited Partner Units in accordance with this Article 11 or pursuant to an
exchange of all of its Limited Partner Units under Section 8.6 hereof.
(b) Any Limited Partner who shall Transfer all of his Limited
Partner Units in a transfer permitted pursuant to this Article 11 shall cease to
be a Limited Partner upon the admission of all Assignees of such Limited Partner
Units as Substituted Limited Partners. Similarly, (i) any Limited Partner who
shall transfer all of its Limited Partner Units pursuant to an exchange of all
of its Limited Partner Units under Section 8.6 hereof shall cease to be a
Limited Partner and (ii) any Preferred Limited Partner whose Preferred Limited
Partner Units of a series are redeemed in full or paid in full upon the stated
maturity thereof, in each case, in accordance with the Designation Instrument
applicable to such series of Partnership Units, shall cease to be a Preferred
Limited Partner insofar as such series is concerned.
(c) If any Partnership Unit is Transferred during any
quarterly segment of the Partnership Year in compliance with the provisions of
this Article 11, or is subject to an exchange pursuant to Section 8.6 hereof, on
any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items attributable to such Partnership
Unit for such Partnership Year shall be allocated to the transferor Partner or
the Exchanging Partner, as the case may be, and, other than in the case of a
transfer to the Partnership, to the transferee Partner, by taking into account
their varying interests during the Partnership Year in accordance with Section
706(d) of the Code, using the method determined thereunder by the General
Partner in its reasonable discretion. All distributions of Available Cash
attributable to such Partnership Unit with respect to which the Partnership
Record Date is before the date of such transfer, assignment or exchange shall be
made to the transferor Partner or the Exchanging Partner, as the case may be,
and, other than in the case of a transfer to the Partnership, all distributions
of Available Cash thereafter attributable to such Partnership Unit shall be made
to the transferee Partner.
(d) In addition to any other restriction on transfer herein
contained, in no event may any transfer or assignment of a Partnership Interest
by any Partner (including any
59
exchange or any other acquisition of Partnership Units by the General Partner or
the Special Limited Partner) be made (i) to any Person or entity who lacks the
legal right, power or capacity to own a Partnership Interest; (ii) in violation
of applicable law; (iii) of any component portion of a Partnership Interest,
such as the Capital Account, or rights to distributions, separate and apart from
all other components of a Partnership Interest; (iv) if such transfer would
cause the Special Limited Partner to cease to comply with the requirements for
REIT status under the Code or would cause ▇▇▇▇▇ Government Income Trust or ▇▇▇▇▇
Government Income Trust II to violate the "closely held" restrictions of Section
856(h) of the Code, unless the Special Limited Partner, ▇▇▇▇▇ Government Income
Trust or ▇▇▇▇▇ Government Income Trust II, as applicable, has ceased to qualify
as a REIT; (v) if such transfer would, in the reasonable judgment of the General
Partner, cause the Partnership to be classified as a corporation for Federal
income tax purposes; (vi) if such transfer would cause the Partnership to
become, with respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(c) of the Code); (vii) if such transfer
would, in the opinion of counsel to the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; (viii) if such
transfer requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (ix) if such transfer requires the
Partnership to become a reporting company under the Securities Exchange Act of
1934; or (x) if such transfer subjects the Partnership to be regulated under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1. ADMISSION OF SUCCESSOR GENERAL PARTNER.
A successor to all of the General Partner Interests (a) pursuant to
Section 11.2(b) hereof who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the General Partner, effective
immediately prior to such Transfer, and (b) pursuant to Section 11.2(c) hereof
shall be admitted to the Partnership as a successor General Partner in
accordance with the provisions of Section 11.5(d). Any such successor shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement and such other documents or instruments as may be required to
effect the admission.
Section 12.2. ADMISSION OF SUCCESSOR SPECIAL LIMITED PARTNER. A
successor to all of the Partnership Interests of the Special Limited Partner (a)
pursuant to Section 11.3(b) or 11.3(c) hereof who is proposed to be admitted as
a successor Special Limited Partner shall be admitted to the Partnership as the
Special Limited Partner, effective immediately prior to such Transfer, and (b)
pursuant to Section 11.3(d) hereof shall be admitted to the Partnership as a
successor Special Limited Partner in accordance with the provisions of Section
11.5(d). In each case, the admission shall be subject to the successor Special
Limited Partner executing and
60
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement and such other documents or instruments as may be required to
effect the admission.
Section 12.3. ADMISSION OF ADDITIONAL LIMITED PARTNERS.
(a) A Person who makes a Capital Contribution to the
Partnership on or after the date hereof in accordance with this Agreement shall
be admitted to the Partnership as an Additional Limited Partner by the General
Partner, without the consent of any other Partner, only upon furnishing to the
General Partner (i) evidence of acceptance in form satisfactory to the General
Partner of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof, (ii) a
counterpart signature page to this Agreement executed by such Person and (iii)
such other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
(b) Notwithstanding anything to the contrary in this Section
12.3, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole discretion. In addition, during such time as the
Partnership owns any shares of beneficial interest of ▇▇▇▇▇ Government Income
Trust or ▇▇▇▇▇ Government Income Trust II, no grant of an option to acquire
Limited Partner Units or issuance of Limited Partner Units may be made (i) to
any Person other than the Special Limited Partner or a KRF Person to the extent
that as a result of such grant or issuance the KRF GIT Limit would equal or
exceed 4.9% when applied in respect of Beneficial Ownership by the grantee or
proposed Limited Partner (determined by substituting the name of such proposed
Limited Partner or grantee in place of "KRF" each place where "KRF" appears in
clause (a) of the definition of "KRF GIT Limit" and including distributions and
allocations made in respect of all Partnership Units that would be Beneficially
Owned by such Limited Partner or grantee); PROVIDED, THAT the General Partner
may waive the 4.9% limitation of this clause (i) to the extent that it
reasonably determines based upon evidence satisfactory to it that permitting a
grant or issuance in excess of such limitation would not cause either ▇▇▇▇▇
Government Income Trust or ▇▇▇▇▇ Government Income Trust II to violate Code
Section 856(h), (ii) to any Person, other than KRF, who owns shares of any class
or series of stock of the Special Limited Partner or (iii) to any KRF Person, if
such issuance or grant would cause the KRF Persons to Beneficially Own
Partnership Units in excess of those acquired by KRF on the Effective Date. The
admission of any Person as an Additional Limited Partner shall become effective
on the date upon which the name of such Person is recorded on the books and
records of the Partnership, following the consent of the General Partner to such
admission.
(c) If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items allocable among
Partners and Assignees for such Partnership Year shall be allocated among such
Additional Limited Partner and all other Partners and Assignees by taking into
account their varying interests during the Partnership Year in accordance with
Section 706(d) of the Code, using the method determined thereunder by the
General Partner in its reasonable discretion. All distributions of Available
Cash with respect to which the Partnership Record Date is before the date of
such admission shall be made solely to Partners and Assignees
61
other than the Additional Limited Partner, and all distributions of Available
Cash thereafter shall be made to all the Partners and Assignees including such
Additional Limited Partner.
Section 12.4. AMENDMENT OF AGREEMENT AND CERTIFICATE OF
LIMITED PARTNERSHIP.
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
Section 12.5. LIMIT ON NUMBER OF PARTNERS.
No Person shall be admitted to the Partnership as an additional
Partner if the effect of such admission would be to cause the Partnership to
have more than 100 Partners for purposes of Section 1.7704-1(h) of the
Regulations, including as Partners for this purpose those Persons indirectly
owning an interest in the Partnership through another partnership, subchapter S
corporation or a grantor trust unless after giving effect to such acquisition of
Partnership Interests less than 65% of the value of each beneficial ownership
interest in such entity is attributable to Partnership Interests, or if the
effect of such admission would be to cause the Partnership to become a reporting
company under the Securities Exchange Act of 1934, as amended.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1. DISSOLUTION.
The Partnership shall not be dissolved by the admission of
Substituted Limited Partners or Additional Limited Partners or by the admission
of a successor General Partner in accordance with the terms of this Agreement.
Upon the withdrawal or removal of the General Partner, any successor General
Partner shall continue the business of the Partnership without dissolution. The
Partnership shall dissolve, and its affairs shall be wound up, upon the first to
occur of any of the following ("LIQUIDATING EVENTS"):
(a) the expiration of its term as provided in Section 2.5
hereof;
(b) an event of withdrawal of the General Partner, as defined
in the Act (other than in connection with an assignment of the General Partner
Interests as permitted under this Agreement), unless, within 90 days after the
event of withdrawal (i) all the Common Limited Partners agree in writing to
continue the business of the Partnership and to the appointment, effective as of
the date of such event of withdrawal, of a successor General Partner; and (ii)
more than 50% of the Percentage Interests of each series of Preferred Limited
Partner Units then outstanding agree to continue the business of the Partnership
either in writing or by
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vote at a meeting of Preferred Limited Partners held in accordance with Section
14.2 and to the appointment, effective as of the date of such event of
withdrawal, of a successor General Partner;
(c) an election to dissolve the Partnership made by the
General Partner;
(d) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act; or
(e) the sale of all or substantially all of the assets
and properties of the Partnership.
Section 13.2. WINDING UP.
(a) Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner or, in the event there
is no remaining General Partner, any Person elected by the Common Limited
Partners holding in the aggregate more than 50% of the Percentage Interests of
the Common Limited Partners or, in the event there is no remaining General
Partner or Common Limited Partner, any Person elected by the Preferred Limited
Partners holding in the aggregate more than 50% of the Percentage Interests of
the Preferred Limited Partners voting as one class (the General Partner or such
other Person being referred to herein as the "LIQUIDATOR") shall be responsible
for overseeing the winding up and dissolution of the Partnership and shall take
full account of the Partnership's liabilities and property and the Partnership
property shall be liquidated as promptly as is consistent with obtaining the
fair value thereof, and the proceeds therefrom (which may, to the extent
determined by the General Partner, include shares of stock in the Special
Limited Partner) shall be applied and distributed in the following order:
(1) FIRST, to the satisfaction of all of the
Partnership's debts and liabilities to creditors other than the
Partners (whether by payment or the making of reasonable provision
for payment thereof);
(2) SECOND, to the satisfaction of all of the
Partnership's debts and liabilities to the General Partner (whether
by payment or the making of reasonable provision for payment
thereof);
(3) THIRD, to the satisfaction of all of the
Partnership's debts and liabilities to the other Partners (whether
by payment or the making of reasonable provision for payment
thereof);
(4) FOURTH, to the Preferred Limited Partners, up to the
amount required for the Partnership to pay all distributions with
respect to the Preferred Limited Partner Units held by such
Preferred Limited Partners due or payable in accordance with the
Designation Instrument or Instruments for such Preferred
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Limited Partner Units through the date of such payment and the
applicable Liquidation Preference Amount, such distributions to be
made to the Preferred Limited Partners (x) in such order of priority
and with such preferences as have been established with respect to
such Preferred Limited Partner Units as set forth in the applicable
Designation Instrument or Instruments and (y) with respect to
Preferred Limited Partners holding Preferred Limited Partner
Interests of a particular class or series, in proportion to their
respective Percentage Interests on such Partnership Record Date; and
(5) The balance, if any, to the General Partner and
Common Limited Partners in accordance with their Capital Accounts,
after giving effect to all contributions, distributions, and
allocations for all periods.
The General Partner shall not receive any additional compensation
for any services performed pursuant to this Article 13 other than reimbursement
of its expenses as provided in Section 7.6 hereof.
(b) Notwithstanding the provisions of Section 13.2(a) hereof
that require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole discretion, defer for a reasonable
time the liquidation of any assets except those necessary to satisfy liabilities
of the Partnership (including to those Partners as creditors) and/or distribute
to the Partners, in lieu of cash, as tenants in common and in accordance with
the provisions of Section 13.2(a) hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation. Any
such distributions in kind shall be made only if, in the good faith judgment of
the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
(c) In the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the General Partner and Limited Partners who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, positive Capital
Account balances. If any Partner has a deficit balance in his Capital Account
(after giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever. A pro rata portion of the distributions that would otherwise be made
to the General Partner and Limited Partners pursuant to this Article 13 may be
withheld or escrowed to provide a reasonable reserve for Partnership liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Partnership; PROVIDED, that such
64
withheld or escrowed amounts shall be distributed to the General Partner and
Limited Partners in the manner and order of priority set forth in Section
13.2(a) as soon as practicable.
Section 13.3. NOTICE OF DISSOLUTION.
In the event a Liquidating Event occurs or an event occurs that
would, but for an election or objection by one or more Partners pursuant to
Section 13.1, result in a dissolution of the Partnership, the General Partner
shall within 30 days thereafter, provide written notice thereof to each of the
Partners.
Section 13.4. TERMINATION OF PARTNERSHIP AND CANCELLATION OF
CERTIFICATE OF LIMITED PARTNERSHIP.
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 hereof, the Partnership shall be
terminated, a certificate of cancellation shall be filed, and all qualifications
of the Partnership as a foreign limited partnership in jurisdictions other than
the State of Delaware shall be canceled and such other actions as may be
necessary to terminate the Partnership shall be taken.
Section 13.5. REASONABLE TIME FOR WINDING-UP.
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.6. WAIVER OF PARTITION.
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
MEETINGS
Section 14.1. MEETINGS OF THE COMMON LIMITED PARTNERS.
(a) Meetings of the Common Limited Partners may be called by
the General Partner and shall be called upon the receipt by the General Partner
of a written request by a Majority-In-Interest of the Common Limited Partners.
The call shall state the nature of the business to be transacted. Notice of any
such meeting shall be given to all Common Limited Partners not less than seven
days nor more than 30 days prior to the date of such meeting. Partners may vote
in person or by proxy at such meeting. Whenever the vote or consent of Common
Limited Partners is permitted or required under this Agreement, such vote or
Consent may be given at a meeting of Common Limited Partners or may be given in
accordance with the procedure prescribed in Section 14.1(b) hereof. Except as
otherwise expressly provided herein, any consent of the Common Limited Partners
hereunder requires the approval of a Majority-In-Interest of the Common Limited
Partners.
65
(b) Any action required or permitted to be taken at a meeting
of the Common Limited Partners may be taken without a meeting if a written
consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Common Limited Partners (or such other percentage as
is expressly required by this Agreement). Such consent may be in one instrument
or in several instruments, and shall have the same force and effect as a vote of
a majority of the Percentage Interests of the Common Limited Partners (or such
other percentage as is expressly required by this Agreement). Such consent shall
be filed with the General Partner. An action so taken shall be deemed to have
been taken at a meeting held on the effective date so certified.
(c) Each Common Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Common Limited Partner
is entitled to participate, including waiving notice of any meeting, or voting
or participating at a meeting. Every proxy must be signed by the Common Limited
Partner or his attorney-in-fact. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy (or there
is receipt of a proxy authorizing a later date). Every proxy shall be revocable
at the pleasure of the Common Limited Partner executing it, such revocation to
be effective upon the Partnership's receipt of written notice of such revocation
from the Common Limited Partner executing such proxy.
(d) Each meeting of Common Limited Partners shall be conducted
by the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate in his sole discretion. Without limitation,
meetings of Common Limited Partners may be conducted in the same manner as
meetings of the shareholders of the General Partner and may be held at the same
time, and as part of, meetings of the shareholders of the General Partner.
Section 14.2. MEETINGS OF PREFERRED LIMITED PARTNERS.
In the event that the vote or consent of the holders of Preferred
Limited Partner Interests (or any series thereof) is required pursuant to this
Agreement (including pursuant to a Designation Instrument), such vote or consent
may be obtained at a meeting of Preferred Limited Partners or by written
consent. The provisions of Section 14.1 hereof shall apply to any such meeting
or written consent to the extent practicable, in which case all references in
such Section to Common Limited Partners shall mean the Preferred Limited
Partners as a class or the Preferred Limited Partners holding the applicable
series of Preferred Limited Partner Interests, as shall be applicable to such
vote or consent.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1. ADDRESSES AND NOTICE.
Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent by first
class United States mail or by other means
66
of written communication to the Partner or Assignee at the address set forth in
Exhibit A or such other address of which the Partner shall notify the General
Partner in writing.
Section 15.2. TITLES AND CAPTIONS.
All article or Section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" or
"Sections" are to Articles and Sections of this Agreement.
Section 15.3. PRONOUNS AND PLURALS.
Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa.
Section 15.4. FURTHER ACTION.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6. WAIVER.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.7. COUNTERPARTS.
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 15.8. APPLICABLE LAW.
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
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Section 15.9. ENTIRE AGREEMENT.
This Agreement contains all of the understandings and agreements
between the Partners with respect to the subject matter of this Agreement and
the rights, interests and obligations of the Partners with respect to the
Partnership except for (i) those additional obligations of KRF contained in
those certain letters from KRF with respect to ▇▇▇▇▇ Government Income Trust and
▇▇▇▇▇ Government Income Trust II dated August 15, 2002, (ii) those additional
obligations of the Partnership and the Special Limited Partner contained in
those certain letters from the Partnership and the Special Limited Partner with
respect to ▇▇▇▇▇ Government Income Trust and ▇▇▇▇▇ Government Income Trust II
dated August 15, 2002, (iii) the Amended and Restated Voting Agreement, dated as
of , among the Special Limited Partner, ▇▇▇▇▇ Government Income
Trust and ▇▇▇▇▇ Government Income Trust II and (iv) the Waiver and Standstill
Agreement, dated as of August 22, 2002, among ▇▇▇▇▇ Government Income Trust,
▇▇▇▇▇ Government Income Trust II, the Special Limited Partner and the
Partnership.
Section 15.10. INVALIDITY OF PROVISIONS.
If any provision of this Agreement is or becomes invalid or
unenforceable in any respect, the validity and enforceability of the remaining
provisions contained herein shall not be affected thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
or caused this Agreement to be executed as of the date and year first above
written.
GENERAL PARTNER:
BIR GP, L.L.C.
By: Berkshire Income Realty, Inc., the
sole member of BIR GP, L.L.C.
By:_________________________________________
Name:
Title:
SPECIAL LIMITED PARTNER:
BERKSHIRE INCOME REALTY, INC.
By:_________________________________________
Name:
Title:
COMMON LIMITED PARTNERS:
KRF COMPANY, L.L.C.
By: The ▇▇▇▇▇ Family Limited
Partnership-94, its sole member
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: General Partner
By:_________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: General Partner
69
EXHIBIT A
PARTNERS, CONTRIBUTIONS AND
PARTNERSHIP INTERESTS
Gross Asset
Value of Number of
Cash Contributed Partnership Percentage
Name and Address of Partner Contribution(1) Property(1) Total Property Units Interest
---------------------------- ----------------- ------------- ---------------- ------------- -------------
(1) These amounts constitute the agreed value for purposes of the Act.
A-1
EXHIBIT B
NOTICE OF EXERCISE OF EXCHANGE RIGHT
The undersigned Limited Partner hereby irrevocably (i) presents for
exchange [Class][Series] Limited Partner Units in Berkshire Income
Realty-OP, L.P. in accordance with the terms of the Amended and Restated
Agreement of Limited Partnership of Berkshire Income Realty-OP, L.P., dated as
of , 2003, as amended (the "AGREEMENT"), and the exchange rights provided
in Section 8.6 therein and in the Designation Instrument, with respect to such
[Class] [Series] Limited Partner Units, (ii) surrenders such Limited Partner
Units and all right, title and interest therein, and (iii) directs that either
(a) the Cash Amount or the REIT Shares Amount as determined by the General
Partner deliverable upon the exercise of the Exchange Right be delivered to the
address specified below and if the REIT Shares Amount is to be delivered, such
shares be registered or placed in the name(s) and at the address(es) specified
below. The undersigned hereby represents, warrants, certifies and agrees (1)
that the undersigned has good, marketable and unencumbered title to such Limited
Partner Units, free and clear of the rights or interests of any other Person or
entity, (2) that the undersigned has the full right, power and authority to
exchange and surrender such Limited Partner Units as provided herein, (3) that
the undersigned has obtained the consent or approval of all Persons or entities,
if any, having the right to consent to or approve such exchange and surrender or
tender, (4) that if shares of the Special Limited Partner are delivered, the
undersigned is acquiring such shares for its own account, for investment and
without a view to engaging in any resale or distribution thereof, (5) that if
shares of the Special Limited Partner are delivered, the shares may not be
transferred by the undersigned except in transactions pursuant to a registration
statement under the Securities Act or that are exempt from the registration
requirements of the Securities Act of 1933 and all applicable state and foreign
securities laws and (6) that the Special Limited Partner may refuse to transfer
such shares as to which evidence satisfactory to it of such registration or
exemptions is not provided to it.
All capitalized terms used herein and not otherwise defined shall
have the same meaning ascribed to them respectively in the Agreement.
B-1
Dated:______________ __________________________________
Name of Limited Partner
__________________________________
(Signature of Limited Partner)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
Signature Guaranteed by: ___________________
If shares of the Special Limited Partner are
to be issued, issue to:
Name:________________________________________
_____________________________________________
Social Security or Tax Identification Number
B-2