EXHIBIT 10.1
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
NATIONAL GOLF OPERATING PARTNERSHIP, L.P.
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP, dated as of July 28, 1999, is entered into by and among National
Golf Properties, Inc., a Maryland corporation (the "REIT"), as the General
Partner and the Persons whose names are set forth on Exhibit A as attached
hereto, as the Limited Partners, together with any other Persons who become
Partners in the Partnership as provided herein.
WHEREAS, the Partnership was formed on August 18, 1993 and an
original Agreement of Limited Partnership was entered into between the REIT, as
General Partner, and the Limited Partners;
WHEREAS, in connection with the REIT's assignment and
contribution to the Partnership of certain golf course properties acquired from
Golf Enterprises, Inc., the REIT, as General Partner, entered into the Amendment
of Agreement of Limited Partnership dated as of July 25, 1996.
WHEREAS, in order to clarify certain provisions of the
original Agreement of Limited Partnership, as amended, the REIT, as General
Partner, entered into the Second Amendment of Agreement of Limited Partnership,
dated as of July 29, 1996;
WHEREAS, in connection with certain capital contributions by
Belair Capital Fund LLC, a Massachusetts limited liability company, to the
Partnership in exchange for 8% Series A Cumulative Redeemable Preferred Units of
limited partnership interest in the Partnership the REIT, as General Partner,
entered into the Second Amended and Restated Agreement of Limited Partnership,
dated as of April 20, 1998;
WHEREAS, in order to clarify certain provisions of the Second
Amended and Restated Agreement of Limited Partnership, the REIT, as General
Partner, entered into the Amendment of Second Amended and Restated Agreement of
Limited Partnership, dated as of July 9, 1998 and the Amendment of Second
Amended and Restated Agreement of Limited Partnership, dated as of March 29,
1999;
WHEREAS, on the date hereof, Belair Real Estate Corporation
and Belcrest Realty Corporation, each a Delaware corporation (the "Series B
Contributors") are making a Capital Contribution of $35,000,000 in cash to the
Partnership in exchange for an aggregate of 1,400,000 9.30% Series B Cumulative
Redeemable Preferred Units of limited partnership interest in the Partnership
with the rights, preferences, exchange and other rights, voting powers and
restriction, limitations as to distributions, qualifications and terms and
conditions as set forth herein;
WHEREAS, the REIT, as General Partner, desires to amend and
restate the Partnership Agreement to reflect (i) the issuance of 1,400,000
Series B Cumulative Redeemable Preferred Units and (ii) certain other matters
described herein;
WHEREAS, the Series B Contributors desire to make the capital
contribution referenced above and to continue to be bound by all terms,
conditions and other provisions of the Partnership Agreement; and
WHEREAS, the REIT, as General Partner, has obtained the
written consent of Limited Partners representing at least the minimum number of
Partnership Interests (as defined in the Partnership Agreement) required to
amend the Partnership Agreement pursuant to Section 7.3 and Article 14 of the
Partnership Agreement.
NOW, THEREFORE, BE IT RESOLVED, that for good and adequate
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1.
DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied 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.
"Additional Funds" shall have the meaning set forth in Section
4.5.A.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means, with respect to any Partner,
the balance in such Partner's Capital Account as of the end of the relevant
fiscal year, after giving effect to the following adjustments:
(i) add to such balance any amounts which such Partner is
obligated to restore pursuant to this Agreement or is deemed to be obligated to
restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate
sentence of each of Regulations Sections 1.704-2(i)(5) and 1.704-2(g); and
(ii) subtract from such balance the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (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 fiscal
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year. The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Adjustment Date" shall have the meaning set forth in Section
4.5.F. hereof.
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with
such Person, and when used in Section 11.3, such Person's Immediate Family.
"Agreed Value" means (i) in the case of any Contributed
Property set forth in Exhibit A and as of the time of its contribution to the
Partnership, the Agreed Value of such property as set forth in Exhibit A; (ii)
in the case of any Contributed Property not set forth in Exhibit A and as of the
time of its contribution to the Partnership, the fair market value of such
property or other consideration as determined by the General Partner, reduced by
any liabilities either assumed by the Partnership upon such contribution or to
which such property is subject when contributed; and (iii) in the case of any
property distributed to a Partner by the Partnership, the fair market value of
such property as determined by the General Partner at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of the
distribution as determined under Section 752 of the Code and the Regulations
thereunder.
"Agreement" means this Third Amended and Restated Agreement of
Limited Partnership, as it may be amended, supplemented or restated from time to
time.
"Appraisal" means with respect to any assets, the opinion of
an independent third party experienced in the valuation of similar assets,
selected by the General Partner in good faith; such opinion may be in the form
of an opinion by such independent third party that the value for such property
or asset as set by the General Partner is fair, from a financial point of view,
to the Partnership.
"Assignee" means a Person to whom one or more Partnership
Units have been transferred in a manner permitted under this Agreement, but who
has not become a Substituted Limited Partner, and who has the rights set forth
in Section 11.5.
"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,
(b) Depreciation and all other noncash charges deducted in determining
Net Income or Net Loss for such period,
(c) the amount of any reduction in reserves of the Partnership referred
to in clause (ii)(f) below (including, without limitation, reductions resulting
because the General Partner determines such amounts are no longer necessary),
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(d) the excess of the net 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), and
(e) all other cash received by the Partnership for such period that was
not included in determining Net Income or Net Loss for such period;
(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 clauses (ii)(a) or
(b),
(d) all other expenditures and payments not deducted in determining Net
Income or Net Loss for such period,
(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
(f) the amount of any increase in reserves established during such
period which the General Partner determines are necessary or appropriate in its
sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not
include any cash received or reductions in reserves, or include any
disbursements made or reserves established, after commencement of the
dissolution, liquidation and winding up of the Partnership.
"Board of Directors" means the Board of Directors of the General
Partner.
"Business Day" shall mean each day, other than a Saturday or a
Sunday, which is not a day on which banking institutions in Los Angeles,
California, or New York, New York are authorized or required by law, regulation
or executive order 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 share of Net Income and any
items in the nature of income or gain which are specially allocated pursuant to
Section 6.3 hereof, and the amount of any Partnership liabilities assumed by
such Partner or which are secured by any property distributed to such Partner.
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(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
expenses or losses which are specially allocated pursuant to Section 6.3 hereof,
and the amount of any liabilities of such Partner assumed by the Partnership or
which are secured by any property contributed by such Partner to the
Partnership.
(c) In the event 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 relates to the
transferred interest.
(d) In determining the amount of any liability for purposes of
subsections (a) and (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
(e) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed in order to comply with
such Regulations, the General Partner may make such modification provided that
it is not likely to have a material effect on the amounts distributable to any
Person pursuant to Article 13 of this Agreement upon the dissolution of the
Partnership. The General Partner also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.
"Capital Contribution" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Partnership by such Partner.
"Cash Amount" is defined in Section 8.6.C.
"Certificate" means the Certificate of Limited Partnership of
the Partnership filed in the office of the Delaware Secretary of State, as
amended from time to time in accordance with the terms hereof and the Act.
"Charter" means the Articles of Incorporation of the General
Partner filed in the State of Maryland on August 31, 1995, as amended, restated
or supplemented from time to time.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor statute thereto, as interpreted by the
applicable regulations thereunder. Any
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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 Limited Partner" means any Person holding Common Units
and 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.
"Common Unit" means a Partnership Unit representing a Partnership
Interest that is without preference as to distributions and allocations or
rights upon voluntary or involuntary liquidation, dissolution or winding-up.
"Consent" means the consent to, approval of, or vote on a
proposed action by a Partner given in accordance with Article 14 hereof.
"Consent of the Limited Partners" means the Consent of a
Majority in Interest of the Limited Partners, which Consent shall be obtained
prior to the taking of any action for which it is required by this Agreement and
may be given or withheld by a Majority in Interest of the Limited Partners,
unless otherwise expressly provided herein, in their sole and absolute
discretion.
"Constructive Ownership" means ownership determined through
the application of the constructive ownership rules of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code, as such provisions may be modified
from time to time. The terms "Constructive," "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings.
"Contributed Properties" means each property or other asset,
in such form as may be permitted by the Act, but excluding cash, contributed or
deemed contributed to the Partnership (or, to the extent provided in applicable
Regulations, deemed contributed by the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code).
"Contribution Agreements" means the Contribution Agreement,
dated as of the date of this Agreement, by and among the Series B Contributors
and the Partnership and the REIT and with respect to the Series B Preferred
Units, together with the Contribution Agreement dated as of March 4, 1998 and
the Contribution Agreement dated as of April 20, 1998, each with respect to the
Series A Preferred Units.
"Contributors" means the Persons identified as a "contributor" or
"contributors" in the Contribution Agreements.
"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; (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
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property, even though such Person has not assumed or become liable for the
payment thereof; and (iv) lease obligations of such Person which, in accordance
with generally accepted accounting principles, should be capitalized.
"Deemed Partnership Interest Value" means, as of any date with
respect to any class of Partnership Interests, the Deemed Value of the
Partnership Interests of such class or series multiplied by the applicable
Partner's Percentage Interest of such class or series.
"Deemed Value of the Partnership Interests" means, as of any
date with respect to any class or series of Partnership Interests, (i) the total
number of Partnership Units of the General Partner in such class or series of
Partnership Interests (as provided for in Sections 4.1 and 4.5.D) issued and
outstanding as of the close of business on such date multiplied by the Value of
a share of capital stock of the General Partner which corresponds to such class
or series of Partnership Interests on such date; (ii) divided by the Percentage
Interest of the General Partner in such class or series of Partnership Interests
on such date; provided that, if no outstanding shares of capital stock of the
General Partner correspond to a class or series of Partnership Interests, the
Deemed Value of Partnership Interests with respect to such class or series shall
be equal to an amount reasonably determined by the General Partner.
"Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, 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 or other period, Depreciation
shall be an amount which 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 or other period 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.
"DGP" means ▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual.
"Effective Date" means the date of closing of the sale of REIT
Shares pursuant to that certain Underwriting Agreement among the General
Partner, the Partnership and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Incorporated et al., upon
which the Certificate was filed.
"Election Notice" is defined in Section 4.5.E.
"Excess Units" has the meaning set forth in Section 16.7.A(iii).
"Exchange" has the meaning set forth in Section 8.6.
"Funding Debt" means the incurrence of any Debt by or on
behalf of the General Partner for the purpose of providing funds to the
Partnership.
"Funding Notice" has the meaning set forth in Section 4.5.B.
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"General Partner" means the REIT or its successors as general
partner of the Partnership.
"General Partner Interest" means a Partnership Interest held
by the General Partner. A General Partner Interest may be expressed as a number
of Partnership Units.
"General Partner Loan" is defined in Section 4.5.C.
"General Partner Payment" shall have the meaning set forth in
Section 15.11.
"General Partner Properties" means the properties identified
on Exhibit A attached hereto, and any rents, proceeds or assets resulting from
the ownership and operation of such properties, so long as such properties are
owned by the General Partner.
"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 determined by the contributing Partner and the General Partner (as set forth
on Exhibit A attached hereto, as such Exhibit may be amended from time to time);
provided that, if the contributing Partner is the General Partner, then, except
with respect to the General Partner's initial Capital Contribution or capital
contributions of cash, REIT Shares or other shares of capital stock of the
General Partner, the determination of the fair market value of the contributed
asset shall be determined by (i) the price paid by the General Partner if the
asset is acquired by the General Partner contemporaneously with its contribution
to the Partnership, or (ii) by Appraisal.
(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;
provided, however, that for this purpose, the net value of all of the
Partnership assets, in the aggregate, shall be equal to the Deemed Value of the
Partnership Interests of all classes of Partnership Interests then outstanding,
regardless of the method of valuation adopted by the General Partner, 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, if the General Partner reasonably determines that such
adjustment is 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 as consideration for an
interest in the Partnership, if the General Partner reasonably determines that
such adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and
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(iv) at such other times as the General Partner shall
reasonably determine necessary or advisable in order to comply with Regulations
Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed
to a Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the General Partner; provided
that, if the distributee is the General Partner, or if the distributee and the
General Partner cannot agree on such a determination, by Appraisal.
(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 adjusted pursuant to this
subparagraph (d) to the extent that the General Partner reasonably determines
that an adjustment pursuant to subparagraph (b) is necessary or appropriate 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 Losses.
"Holder" means either the Partner or Assignee owning a Partnership
Unit.
"Immediate Family" means, with respect to any Person, such
Person's estate and heirs and current and former spouse(s), parents,
parents-in-law, children, children-in-law, siblings and grandchildren and any
trust or estate, all of the beneficiaries of which consist of such Person or
such Person's current or former spouse, parents, parents-in-law,
children-in-law, children, siblings or grandchildren.
"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 which 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 which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
estate which 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 which 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
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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 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 of 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 his status as (A) the General Partner or (B) a director of the
General Partner or officer of the Partnership or the General Partner, and (ii)
such other Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time, in its sole
and absolute discretion.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"Junior Stock" means any class or series of capital stock of
the General Partner ranking junior as to the payment of distributions or rights
upon voluntary or involuntary liquidation, winding up or dissolution of the
General Partner to the REIT Series A Preferred Shares and the REIT Series B
Preferred Shares.
"Junior Units" means any class or series of Partnership
Interest of the Partnership ranking junior as to the payment of distributions or
rights upon voluntary or involuntary liquidation, winding up or dissolution of
the Partnership to the Series A Preferred Units and the Series B Preferred
Units.
"Limited Partner" means any Common Limited Partner or Preferred
Limited Partner.
"Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners 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 Limited Partnership Interest may
be expressed as a number of Partnership Units.
"Liquidating Events" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.A.
"Majority in Interest of the Limited Partners" means those
Limited Partners (other than (i) any Limited Partner 50% or more of whose equity
is owned, directly or indirectly, by the General Partner and (ii) any Preferred
Limited Partner) holding in the aggregate Percentage Interests that are greater
than fifty percent (50%) of the aggregate Percentage Interests
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of all Limited Partners (other than (i) any Limited Partner 50% or more of whose
equity is owned, directly or indirectly, by the General Partner and (ii) any
Preferred Limited Partner).
"Net Income" or "Net Loss" means for each fiscal year of the
Partnership, an amount equal to the Partnership's taxable income or loss for
such fiscal year, 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
such taxable income or loss;
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), 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 subtracted from 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;
(d) Gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the 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 taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year;
(f) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in 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 items which are specially allocated pursuant to
Section 6.3 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 6.3 hereof
shall be determined by applying rules analogous to those set forth in this
definition of Net Income or Net Loss.
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Solely for purposes of allocating Net Income or Net Loss in any Partnership Year
to the holders of the Series A Preferred Units and the Series B Preferred Units
pursuant to Sections 6.2.B.1(b) and (d), and Section 6.2.B.2(b), items of Net
Income and Net Loss, as the case may be, shall not include Depreciation with
respect to properties that are "ceiling limited" in respect of Preferred Limited
Partners. For purposes of the preceding sentence, Partnership property shall be
considered ceiling limited in respect of a Preferred Limited Partner if
Depreciation attributable to such Partnership property which would otherwise be
allocable to such Partner, without regard to this paragraph, exceeded
depreciation determined for federal income tax purposes attributable to such
Partnership property which would otherwise be allocable to such Partner by more
than 5%.
"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 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 Exchange" means the Notice of Exchange
substantially in the form of Exhibit B to this Agreement.
"Notice of Put" means the Notice of Put substantially in the
form of Exhibit B to this Agreement.
"Original Limited Partner" means the Limited Partners of the
Partnership listed on Schedule A hereto, as of August 18, 1993.
"Original Limited Partnership Unit" means a Partnership Unit
held by an Original Limited Partner on August 18, 1993.
"Parity Preferred Stock" means any class or series of
Preferred Shares now or hereafter authorized, issued or outstanding expressly
designated by the General Partner to rank on a parity with REIT Series A
Preferred Shares and REIT Series B Preferred Shares with respect to
distributions and rights upon voluntary or involuntary liquidation, winding up
or dissolution of the General Partner in accordance with the Series A Articles
Supplementary and Series B Articles Supplementary.
"Parity Preferred Unit" means any class or series of
Partnership Interests of the Partnership now or hereafter authorized, issued or
outstanding expressly designated by the Partnership to rank on a parity with
Series A Preferred Units and Series B Preferred Units with respect to
distributions or rights upon voluntary or involuntary liquidation, winding up
and dissolution of the Partnership.
"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
12
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 this Agreement, and any successor thereto.
"Partnership Interest" means an ownership interest in the
Partnership of either a Limited Partner or the General Partner 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. There may be
one or more classes or series of Partnership Interests as provided in Section
4.5. A Partnership Interest may be expressed as a number of Partnership Units.
Unless otherwise expressly provided for by the General Partner at the time of
the original issuance of any Partnership Interests, all Partnership Interests
(whether of a Limited Partner or a General Partner) shall be of the same class
or series. The Partnership Interests represented by the Common Units, Series A
Preferred Units and the Series B Preferred Units are the only Partnership
Interests and are separate classes of Partnership Interest for all purposes of
this Agreement.
"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 with respect to
Partnership Interests that are not entitled to any preference in distribution
pursuant to Section 5.1 hereof which record date shall be the same as the record
date established by the General Partner for a distribution to its stockholders
of some or all of its portion of such distribution.
"Partnership Unit" means, with respect to any class or series
of Partnership Interest, a fractional, undivided share of such class or series
of Partnership Interest issued pursuant to Sections 4.1 and 4.5. The ownership
of Partnership Units may be evidenced by a certificate for units substantially
in the form of Exhibit C hereto or as the General Partner may determine with
respect to any class or series of Partnership Units issued from time to time
under Sections 4.1 and 4.5.
"Partnership Year" means the fiscal year of the Partnership,
which shall be the calendar year.
13
"Percentage Interest" means, as to a Partner holding a class
or series of Partnership Interests, its interest in such class or series 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. If the Partnership issues more than one class or
series of Partnership Interest, the interest in the Partnership among the
classes or series of Partnership Interests shall be determined as set forth in
the amendment to the Partnership Agreement setting forth the rights and
privileges of such additional classes or series of Partnership Interest, if any,
as contemplated by Section 4.5.D.
"Person" means an individual or a corporation, partnership,
limited liability company, trust, unincorporated organization, association or
other entity.
"Preemptive Contribution" is defined in Section 4.5.E.
"Preferred Distribution Shortfall" shall have the meaning
given to such term in Section 5.1.
"Preferred Limited Partner" means any Person holding a
Preferred Unit, and named as a Preferred Limited Partner in Exhibit A attached
hereto, as such Exhibit may be amended from time to time, or any Substitute
Limited Partner or Additional Limited Partner, in such Person's capacity as a
Preferred Limited Partner in the Partnership.
"Preferred Share" means a share of the General Partner's
preferred stock, par value $.01 per share, with such rights, priorities and
preferences as shall be designated by the Board of Directors in accordance with
the Charter.
"Preferred Unit" means a Series A Preferred Unit, a Series B
Preferred Unit and any other Partnership Unit representing a Limited Partnership
Interest, with such rights, priorities and preferences as shall be designated by
the General Partner pursuant to Section 4.5.D other than Common Units.
"Price Family Ownership" means the actual and "constructive"
(as determined for purposes of real estate investment trust income requirements)
ownership of interests in the Partnership and American Golf Corporation (a
significant tenant of the Partnership) by DGP, Dallas P. Price and by their
Immediate Family, which ownership would cause the rent received by the
Partnership, if the Partnership were a REIT, to fail to satisfy the income
requirements of Section 856 of the Code.
"Primary Offering Notice" shall have the meaning set forth in
Section 8.6.G.
"Priority Return" means with respect to (i) the Series A
Preferred Units, the Series A Priority Return and (ii) the Series B Preferred
Units, the Series B Priority Return.
"Pro Rata Contribution" has the meaning set forth in Section 4.5.E.
"Properties" means such interests in real property and
personal property, including without limitation, fee interests, interests in
ground leases, interests in joint ventures or
14
partnerships, interests in mortgages, and Debt instruments as the Partnership
may hold from time to time.
"PTP" has the meaning set forth in Section 16.6 hereof.
"Public Offering Funding" is defined in Section 8.6.D.
"Public Offering Funding Amount" is defined in Section 8.6.D.
"Put" has the meaning set forth in Section 8.6 hereof.
"Put Amount" means the lesser of (i) the Cash Amount or (ii)
the Public Offering Funding Amount.
"Qualified REIT Subsidiary" means any Subsidiary of the
General Partner that is a "qualified REIT subsidiary" within the meaning of
Section 856(i) of the Code.
"Qualified Transferee" means an "Accredited Investor" as
defined in Rule 501 promulgated under the Securities Act.
"Registrable Shares" has the meaning set forth in Section 8.6.
"Regulations" means the 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
6.3.A(viii).
"REIT" means a real estate investment trust under Sections 856
through 860 of the Code.
"REIT Requirements" has the meaning set forth in Section 5.1.
"REIT Series A Preferred Share" means a share of 8% Series A
Cumulative Redeemable Preferred Stock, par value $.01 per share, liquidation
preference $50 per share, of the General Partner.
"REIT Series B Preferred Share" means a share of 9.30% Series
B Cumulative Redeemable Preferred Stock, par value $.01 per share, liquidation
preference $25 per share, of the General Partner.
"REIT Share" shall mean a share of common stock of the General
Partner.
"REIT Shares Amount" means, as of any date, an aggregate
number of REIT Shares equal to the number of Tendered Units, as adjusted
pursuant to Section 7.5 (as a result of the General Partner owning assets held
other than on behalf of the Partnership) and, as appropriate, for stock
dividends and distributions, stock splits and subdivisions, reverse stock splits
and combinations, distributions of rights, warrants or options, and
distributions of
15
evidences of indebtedness or assets relating to assets not received by the
General Partner pursuant to a pro rata distribution by the Partnership.
"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 Limited Partner" means any Person holding Series A
Preferred Units and named as a Series A Limited Partner in Exhibit A attached
hereto, as such Exhibit may be amended from time to time, or any Substitute
Limited Partner, in such Person's capacity as a Series A Limited Partner in the
Partnership.
"Series A Preferred Capital" means a Capital Account balance
equal to the product of (i) the number of Series A Preferred Units then held by
the Holder (including the General Partner to the extent it holds such units),
multiplied by (ii) the sum of $50 and any Preferred Distribution Shortfall per
Series A Preferred Unit.
"Series A Preferred Unit Distribution Payment Date" has the
meaning set forth in Section 16.2.A.
"Series A Preferred Unit Partnership Record Date" has the
meaning set forth in Section 16.2.A.
"Series A Preferred Units" means the Partnership's 8% Series A
Cumulative Redeemable Limited Partnership Units, with the rights, priorities and
preferences set forth herein.
"Series A Priority Return" shall mean, an amount equal to 8%
per annum, determined on the basis of a 360 day year of twelve 30 day months,
and for any period shorter than a full quarterly period for which distributions
are computed, the amount of the distributions payable will be based on the ratio
of the actual number of days elapsed in such period to ninety (90) days
cumulative to the extent not distributed for any given distribution period
pursuant to Sections 5.1 and 16.2 hereof, on the stated value of $50 per Series
A Preferred Unit, commencing on the date of the issuance of such Series A
Preferred Unit.
"Series B Limited Partner" means any Person holding Series B
Preferred Units and named as a Series B Limited Partner in Exhibit A attached
hereto, as such Exhibit may be amended from time to time, or any Substitute
Limited Partner, in such Person's capacity as a Series B Limited Partner in the
Partnership.
"Series B Preferred Capital" means a Capital Account balance
equal to the product of (i) the number of Series B Preferred Units then held by
the Holder (including the General Partner to the extent it holds such units),
multiplied by (ii) the sum of $25 and any Preferred Distribution Shortfall per
Series B Preferred Unit.
"Series B Preferred Unit Distribution Payment Date" has the
meaning set forth in Section 17.2.A.
16
"Series B Preferred Unit Partnership Record Date" has the
meaning set forth in Section 17.2.A.
"Series B Preferred Units" means the Partnership's 9.30%
Series B Cumulative Redeemable Limited Partnership Units, with the rights,
priorities and preferences set forth in Article 17 herein.
"Series B Priority Return" shall mean, an amount equal to
9.30% per annum, determined on the basis of a 360 day year of twelve 30-day
months, and for any period shorter than a full quarterly period for which
distributions are computed, the amount of the distributions payable will be
based on the ratio of the actual number of days elapsed in such period to ninety
(90) days cumulative to the extent not distributed for any given distribution
period pursuant to Sections 5.1 and 17.2 hereof, on the stated value of $25 per
Series B Preferred Unit, commencing on the date of issuance of such Series B
Preferred Unit.
"Single Funding Notice" has the meaning set forth in Section
8.6.C.
"Specified Exchange Date" means the day of receipt by the
General Partner of a Notice of Exchange.
"Specified Put Date" means the tenth Business Day after
receipt by the General Partner of a Notice of Put; provided that in the event
that the General Partner elects a Public Offering Funding pursuant to Section
8.6.C, such Specified Put Date shall be deemed deferred until the next Business
Day following the date of the closing of the Public Offering Funding, provided
that the General Partner has complied in all respects with its obligations with
respect to the Public Offering Funding.
"Stock Incentive Plan" means, collectively, the 1993 Stock
Option and Incentive Plan for Key Employees of National Golf Properties, Inc.,
National Golf Operating Partnership, L.P. and American Golf Corporation; the
1995 Independent Director Equity Participation Plan of National Golf Properties,
Inc.; the 1997 Equity Participation Plan of National Golf Properties, Inc.,
National Golf Operating Partnership, L.P. and American Golf Corporation; and any
similar or successor plans.
"Subsequent Put" shall have the meaning set forth in Section
8.6.G.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company, joint venture 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 a Limited Partner to the Partnership pursuant to Section 11.4.
"Tenant" means any tenant from which the General Partner
derives rent either directly or indirectly through partnerships, including the
Partnership.
"Tendered Units" has the meaning set forth in Section 8.6.A.
17
"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.
"Tier 3 Nonrecourse Liability" means a Debt or a portion of a
Debt that (i) represents a Nonrecourse Liability of the Partnership and (ii) is
not allocated to any Holder under paragraphs (a)(1) and/or (a)(2) of Treasury
Regulations Section 1.752-3. The term "Tier 3 Nonrecourse Liabilities" shall
have a correlative meaning.
"Twelve-Month Period" means a twelve-month period ending on
the first anniversary of the Effective Date or on each subsequent anniversary
thereof.
"Valuation Date" means the date of receipt by the General
Partner of a Notice of Exchange or Notice of Put or any other date with respect
to which "Value" must be determined hereunder, or, if such date is not a
Business Day, the immediately preceding Business Day.
"Value" means, with respect to any share of capital stock of
the General Partner, the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the Valuation Date. The market
price for each such trading day shall be: (i) if such shares are listed or
admitted to trading on any securities exchange or the Nasdaq National Market,
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, (ii) if
such shares are not listed or admitted to trading on any securities exchange or
the Nasdaq National Market, 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 General
Partner, or (iii) if such shares are not listed or admitted to trading on any
securities exchange or the Nasdaq National Market 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 General 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 10 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 10 days prior to the date in question,
the Value of such shares shall be determined by the General Partner acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the REIT Shares
Amount includes rights that a holder of REIT Shares would be entitled to
receive, then the Value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate; and
provided further that, in connection with determining the Deemed Value of the
Partnership Interests for purposes of determining the number of additional Units
issuable upon a Capital Contribution funded by an underwritten public offering
of shares of capital stock of the General Partner, then the Value of such shares
shall be the public offering price per share of such class or series of capital
stock sold.
18
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1. Organization.
The Partnership is a limited partnership formed pursuant to
the provisions of the Act and upon the terms and conditions set forth in this
Agreement. 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 National Golf Operating
Partnership, L.P. The Partnership's business may be conducted under any other
name or names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners.
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 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and
the registered agent for service of process on the Partnership in the State of
Delaware at such registered office is Corporation Trust Company. The principal
office of the Partnership is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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 irrevocably
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:
(1) execute, swear to, 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)
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
19
Partner 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 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 instruments relating to the
admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in,
Article 11, 12 or 13 hereof or the Capital
Contribution of any Partner; and (e) all certificates,
documents and other instruments relating to the
determination of the rights, preferences and
privileges of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner, to make,
evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which 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, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 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 special 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 and any 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 and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or any Liquidator, acting in good faith pursuant to such
power of attorney; and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver to
the General Partner or any Liquidator, within 15 days after receipt of the
General Partner's or 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 August 18, 1993 and
shall continue until December 31, 2092 unless it is dissolved sooner pursuant to
the provisions of Article 13 or as otherwise provided by law.
20
ARTICLE 3.
PURPOSE
Section 3.1. Purpose and Business.
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT for federal income tax
purposes, unless the General Partner has determined to cease to qualify as a
REIT, (ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or the ownership of interests in
any entity engaged in any of the foregoing and (iii) to do anything necessary or
incidental to the foregoing. The business of the Partnership shall at all times
be conducted in a manner substantially consistent with the policies set forth
under the caption "Policies and Objectives With Respect to Certain Activities"
in the final prospectus with respect to the initial public offering of REIT
Shares, unless otherwise consented to in writing by the General Partner and the
Majority in Interest of the Limited Partners.
Section 3.2. Powers.
The Partnership is 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, provided that the Partnership
shall not take, or refrain from taking, any action which, in the judgment of the
General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the General Partner to continue to qualify as a REIT, (ii) could
subject the General Partner to any additional taxes under Section 857 or Section
4981 of the Code, except with respect to the distribution of Available Cash to
the Series A Limited Partners in accordance with Section 16.2 and the Series B
Limited Partners in accordance with Section 17.2, or (iii) could violate any law
or regulation of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless such action (or inaction) under (i),
(ii) or (iii) shall have been specifically consented to by the General Partner
in writing.
Section 3.3. Partnership Only for Purposes Specified.
The Partnership shall be a partnership only for the purposes
specified in Section 3.1 hereof, and this Agreement shall not be deemed to
create a partnership among the Partners with respect to any activities
whatsoever other than the activities within the purposes of the Partnership as
specified in Section 3.1 hereof. Except as otherwise provided in this Agreement,
no Partner shall have any authority to act for, bind, commit or assume any
obligation or responsibility on behalf of the Partnership, its properties or any
other Partner. No Partner, in its capacity as a Partner under this Agreement,
shall be responsible or liable for any indebtedness or obligation of another
Partner, nor shall the Partnership be responsible or liable for any indebtedness
or obligation of any Partner, incurred either before or after the execution and
delivery of this Agreement by such Partner, except as to those responsibilities,
liabilities, indebtedness or obligations incurred pursuant to and as limited by
the terms of this Agreement and the Act.
21
Section 3.4. Representations and Warranties by the Parties
A. Each Partner that is an individual represents and warrants
to each other Partner that (i) such Partner has the legal capacity to enter into
this Agreement and perform such Partner's obligations hereunder, (ii) 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 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, (iii) such Partner is not a "foreign person" within the meaning of
Section 1445(f) of the Code, (iv) except for DGP, such Partner does not own,
directly or indirectly, (a) two percent (2%) or more of the total combined
voting power of all classes of stock entitled to vote, or two percent (2%) or
more of the total number of shares of all classes of stock, of any corporation
that is a tenant of either the General Partner or the Partnership or (b) an
interest of two percent (2%) or more in the assets or net profits of any tenant
of the General Partner or the Partnership and (v) this Agreement is binding
upon, and enforceable against, such Partner in accordance with its terms.
B. Each Partner that is not an individual represents and
warrants to each other Partner that (i) its execution and delivery of this
Agreement and 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 stockholder(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 certificate of limited partnership,
partnership agreement, trust agreement, limited liability company operating
agreement, charter or by-laws, as the case may be, any agreement by which such
Partner or any of such Partner's properties or any of its partners,
beneficiaries, trustees or stockholders, as the case may be, is or are bound, or
any statute, regulation, order or other law to which such Partner or any of its
partners, trustees, beneficiaries or stockholders, as the case may be, is or are
subject, (iii) such Partner is neither a "foreign person" within the meaning of
Section 1445(f) of the Code nor a "foreign partner" within the meaning of
Section 1446(e) of the Code, (iv) except for DGP, such Partner does not own,
directly or indirectly, (a) two percent (2%) or more of the total combined
voting power of all classes of stock entitled to vote, or two percent (2%) or
more of the total number of shares of all classes of stock, of any corporation
that is a tenant of either the General Partner or the Partnership or (b) an
interest of two percent (2%) or more in the assets or net profits of any tenant
of the General Partner or the Partnership and (v) this Agreement has been duly
executed and delivered by such Partner and is binding upon, and enforceable
against, such Partner in accordance with its terms.
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. 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.
22
D. Each Limited Partner, other than ▇▇▇▇▇ ▇. ▇▇▇▇▇, Dallas
Price, those persons or entities who Constructively Own the Partnership Units
owned by the Prices, and any other Limited Partner to whom the General Partner
has granted an exception in its sole discretion to this Section 3.4.D (but, with
respect to any such other Limited Partner, only to the extent of the exception
so granted by the General Partner), further represents, warrants and agrees as
follows:
(i) At any time a Person actually owns or
Constructively Owns a 25% or greater capital interest or profits interest in the
Partnership, such Person does not and will not, without the prior written
consent of the General Partner, (a) actually own or Constructively Own (1) with
respect to any Tenant that is a corporation, any stock of such Tenant and (2)
with respect to any Tenant that is not a corporation, any interests in either
the assets or net profits of such Tenant; or (b) actually own or Constructively
Own any stock in the General Partner, other than any REIT Shares or other shares
of capital stock of the General Partner such Person may actually or
Constructively acquire (1) as a result of an exchange of Tendered Units pursuant
to Section 8.6 or (2) upon the exercise of options granted or delivery of REIT
Shares pursuant to any Stock Incentive Plan, in each case subject to the
applicable ownership limitations with respect to such shares of capital stock as
set forth in the Charter.
(ii) Upon request of the General Partner, such
Limited Partner will disclose to the General Partner the amount of REIT Shares
or other shares of capital stock of the General Partner that it actually owns or
Constructively Owns.
(iii) Such Limited Partner understands that if,
for any reason, (a) the representations, warranties or agreements set forth
in Section 3.4.D(i) are violated or (b) the Partnership's actual ownership or
Constructive Ownership of REIT Shares or other shares of capital stock of the
General Partner violates the limitations set forth in the Charter, then (x)
some or all of the redemption or exchange rights of the Limited Partners may
become non-exercisable, and (y) some or all of such shares owned by the Limited
Partners and/or some or all of the Partnership Units owned by the Limited
Partners may be automatically transferred to a trust for the benefit of a
charitable beneficiary, as provided in the Charter and Exhibit D of this
Agreement, respectively.
E. The representations and warranties contained in Sections
3.4.A, 3.4.B, 3.4.C, and 3.4.D hereof shall survive the execution and delivery
of this Agreement by each Partner and the dissolution, liquidation and
termination of the Partnership.
F. 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 General 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, which 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.
23
ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1. Capital Contributions of the Partners.
At the time of execution of this Agreement, the Partners shall
make or shall have made Capital Contributions as set forth in Exhibit A to this
Agreement. The Partners shall own Partnership Units of the class or series and
in the amounts set forth in Exhibit A and shall have a Percentage Interest in
the Partnership as set forth 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 accurately reflect exchanges, redemptions, Capital Contributions,
the issuance of additional Partnership Units or similar events having an effect
on a Partner's Percentage Interest. Except as required by law or as otherwise
provided in Sections 4.5, 4.6 and 10.5, the Partners shall have no obligation to
make any additional Capital Contributions or loans to the Partnership. Unless
otherwise specified by the General Partner at the time of the creation of any
class of Partnership Interests, such Partnership Interests shall be Common Units
and the corresponding class or series of capital stock for any Partnership Units
issued shall be REIT Shares.
Section 4.2. Additional Capital Contributions Generally.
Except as otherwise required by law or pursuant to this
Article 4, no Partner shall be required or permitted to make any additional
capital contributions to the Partnership.
Section 4.3. Loans by Partners.
Except as otherwise provided in Section 4.5, no Partner shall
be required or permitted to make any loans to the Partnership.
Section 4.4. Loans by Third Parties.
Subject to Section 4.5, the Partnership 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 that is not the General
Partner upon such terms as the General Partner determines appropriate; provided
that, the Partnership shall not incur any Debt under which a breach, violation
or default would be deemed to occur by virtue of the transfer of any Limited
Partnership Interest or General Partner Interest; and, provided, further, that
prior to the tenth anniversary of the Effective Date, without the Consent of the
Limited Partners, the Partnership will not cause its Tier 3 Nonrecourse
Liabilities to be less than $13,000,000.
Section 4.5. 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 4.5. No Person shall have
24
any preemptive, preferential or similar right or rights to subscribe for or
acquire any Partnership Interest, except as set forth in this Section 4.5.
B. Additional General Partner Capital Contributions. Upon
written notice (the "Funding Notice") to the Common Limited Partners of the need
for Additional Funds and the anticipated source(s) thereof, the General Partner
may, or, to the extent the General Partner raises all or any portion of the
Additional Funds through the sale or other issuance of REIT Shares or other
equity interests in the General Partner, the General Partner shall, contribute
the Additional Funds to the capital of the Partnership in exchange for General
Partner Interests; provided, that, the proceeds of the initial public offering
of REIT Shares may be loaned to the Partnership on such terms as are described
in the final prospectus for such offering with the Consent of the Limited
Partners, and, provided further, that no Funding Notice need be given with
respect to (i) the funds received in consideration for REIT Shares or other
interests issued by the General Partner pursuant to the Stock Incentive Plan or
(ii) REIT Shares or other interests contributed to the Partnership pursuant to
the Stock Incentive Plan. The obligations of the General Partner with respect to
Additional Funds shall not apply to the issuance of REIT Shares or other equity
interests of the General Partner the proceeds of which are used by the General
Partner to acquire Common Units pursuant to Section 8.6.
C. General Partner Loans. Upon delivery of a Funding Notice to
the Common Limited Partners, the General Partner may, or, to the extent the
General Partner enters into a Funding Debt, the General Partner shall, lend the
Additional Funds to the Partnership (a "General Partner Loan"); provided,
however, that the General Partner shall not be obligated to lend the net
proceeds of any Funding Debt to the Partnership in a manner that would be
inconsistent with the General Partner's ability to remain qualified as a REIT.
If the General Partner enters into such a Funding Debt, the General Partner Loan
will consist of the net proceeds from such Funding Debt and will be on
comparable terms and conditions, including interest rate, repayment schedule and
costs and expenses, as shall be applicable with respect to or incurred in
connection with such Funding Debt. Otherwise, all General Partner Loans made
pursuant to this Section 4.5 shall be on terms and conditions no less favorable
to the Partnership than would be available to the Partnership from any third
party. Notwithstanding any other provision of this Section 4.5, the Partners
acknowledge that, except with the Consent of the Limited Partners, all loans
from third parties relating to, or for use by, the Partnership, shall be
borrowed by the Partnership and not by the General Partner. Notwithstanding the
foregoing, in the event that the General Partner incurs Debt secured solely by
the General Partner Properties and personal property incident thereto in an
amount such that the customary loan-to-value ratio for non-recourse debt secured
by such properties is not exceeded, the proceeds of such incurrence need not be
contributed or loaned to the Partnership but may be used for such purpose as the
General Partner determines.
D. Additional Capital Contributions. Subject to the prior
delivery of a Funding Notice, the General Partner may raise all or any portion
of the Additional Funds by accepting additional Capital Contributions of cash.
The General Partner also may accept additional Capital Contributions of real
property or any other non-cash assets. In connection with any such additional
Capital Contributions (of cash or property), and subject to Sections 16.5 and
17.5 hereof, the General Partner is hereby authorized to cause the Partnership
from time to time to issue to Partners (including the General Partner) or other
Persons (including, without
25
limitation, in connection with the contribution of property to the Partnership)
additional Partnership Units or other Partnership Interests in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers, and duties, including rights, powers, and duties senior to then existing
Limited Partnership Interests, all as shall be determined by the General Partner
in its sole and absolute discretion subject to Delaware law, and as set forth by
amendment to this Agreement, including without limitation, (i) the allocations
of items of Partnership income, gain, loss, deduction, and credit to such class
or series of Partnership Interests; (ii) the right of each such class or series
of Partnership Interests to share in Partnership distributions; (iii) the rights
of each such class or series of Partnership Interests upon dissolution and
liquidation of the Partnership; and (iv) the right to vote, including, without
limitation, the Limited Partner approval rights set forth in Section 11.2.A
hereof; provided that no such additional Partnership Units or other Partnership
Interests shall be issued to the General Partner unless (a) the additional
Partnership Interests are issued in connection with the grant, award, or
issuance of shares of the General Partner pursuant to Section 4.5.B above, which
shares have designations, preferences, and other rights (except voting rights)
such that the economic interests attributable to such shares are substantially
similar to the designations, preferences and other rights of the additional
Partnership Interests issued to the General Partner in accordance with this
Section 4.5.D, (b) the additional Partnership Interests are issued to all
Partners holding Partnership Interests in the same class in proportion to their
respective Percentage Interests in such class, (c) the additional Partnership
Interests are issued in connection with the General Partner's contribution of
all or some of the General Partner Properties and personal property reasonably
incident thereto, or (d) the additional Partnership Interests are issued with
the Consent of the Limited Partners; provided further that no additional
Partnership Interests other than Common Units shall be issued after the date of
this Agreement without the unanimous consent of all Common Limited Partners. In
the event that the Partnership issues additional Partnership Interests pursuant
to this Section 4.5.D, the General Partner shall make such revisions to this
Agreement (including but not limited to the revisions described in Section 5.5,
Section 6.2.C, and Section 8.6.H) as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
E. Preemptive Rights of Partners. The Funding Notice delivered
by the General Partner prior to its making or accepting (on behalf of the
Partnership) any additional cash Capital Contributions pursuant to either
Section 4.5.B or 4.5.D herein but not pursuant to the Stock Incentive Plan shall
contain the total amount of additional Capital Contributions sought to be made
to the Partnership, and the terms and conditions pertaining thereto. Each Common
Limited Partner may elect to make an additional Capital Contribution not to
exceed the product of (i) the total amount of additional Capital Contributions
being sought, and (ii) such Common Limited Partner's Percentage Interest (with
such product deemed the "Pro Rata Contribution"). Such election shall be made,
if at all, by providing written notice thereof (the "Election Notice") to the
General Partner within ten (10) days after delivery of the Funding Notice.
Failure to respond to such notice shall be deemed to be an election not to make
such Capital Contribution. Such Election Notice shall contain the amount of the
additional Capital Contribution, if any, the Common Limited Partner is to make
(such additional Capital Contribution not to exceed the respective Pro Rata
Contribution of such Common Limited Partner) equal to all or any portion of its
Pro Rata Contribution (with all or such portion thereof that such Common Limited
Partner elects to make hereinafter referred to as the "Preemptive
Contribution").
26
F. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional Capital
Contributions in exchange for any class or series of Partnership Units, the
Percentage Interest related thereto shall be equal to a fraction, the numerator
of which is equal to the amount of cash and the Agreed Value of the Property
contributed as of the Business Day immediately preceding the date on which the
additional Capital Contributions are made (an "Adjustment Date") and the
denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests of such class or series (computed as of the Business Day
immediately preceding the Adjustment Date) and (ii) the aggregate amount of cash
and the Agreed Value of the property contributed to the Partnership on such
Adjustment Date in respect of such class or series. The Percentage Interest of
each other Partner holding Partnership Interests of such class or series not
making a full pro rata Capital Contribution shall be adjusted to equal a
fraction, the numerator of which is equal to the sum of (i) the Deemed
Partnership Interest Value of such Limited Partner in respect of such class or
series (computed as of the Business Day immediately preceding the Adjustment
Date) and (ii) the amount of cash and the Agreed Value of the property
contributed by such Partner to the Partnership in respect of such class or
series as of such Adjustment Date, and the denominator of which is equal to the
sum of (i) the Deemed Value of the Partnership Interests of such class or series
(computed as of the Business Day immediately preceding the Adjustment Date),
plus (ii) the aggregate amount of cash and the Agreed Value of the property
contributed to the Partnership on such Adjustment Date in respect of such class
or series. Notwithstanding the foregoing, solely for purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.3.F, (i) in the case of
cash Capital Contributions by the General Partner, such Capital Contributions
will be deemed to equal the cash contributed by the General Partner plus, in the
case of cash contributions funded by an offering of REIT Shares or other shares
of capital stock of the General Partner, the offering costs attributable to the
cash contributed to the Partnership, (ii) in the case of the contribution of
Properties (or any portion thereof) by the General Partner which were acquired
by the General Partner in exchange for REIT Shares immediately prior to such
contribution, the General Partner shall be issued a number of Partnership Units
equal to the number of REIT Shares issued by the General Partner in exchange for
such properties, the Partnership Units held by the other Partners shall not be
adjusted, and the Partners' Percentage Interests shall be adjusted accordingly,
and (iii) in the case of a contribution of all or any portion of the General
Partner Properties and any personal property reasonably incident thereto by the
General Partner, the Percentage Interest related to such Capital Contribution
shall be determined in good faith by the Board of Directors. The General Partner
shall promptly give each Partner written notice of its Percentage Interest, as
adjusted.
G. Special Supplemental Capital Contribution by the General
Partner. Notwithstanding the other provisions contained in this Article 4,
immediately following the closing of the General Partner's acquisition of an
interest in certain golf course properties and related assets (the "Purchased
Assets") from Golf Enterprises, Inc., a Kansas corporation ("GEI"), pursuant to
that certain Asset Purchase Agreement and Agreement and Plan of Merger (the
"Acquisition Agreement"), dated as of February 2, 1996 and amended on February
16, 1996 by that certain First Amendment to the Asset Purchase Agreement and
Plan of Merger, among the General Partner, GEI Acquisition Corporation, a Kansas
corporation ("Newco") and GEI, the General Partner contributed all of its
interest in the Purchased Assets collectively as a special supplemental Capital
Contribution to the Partnership. Upon such Capital Contribution, (i) the General
Partner was issued that number of Partnership Units equal to the number of
shares of
27
Purchaser Common Stock (as defined in the Acquisition Agreement) issued as
Acquisition Consideration (as defined in the Acquisition Agreement) pursuant to
the Acquisition Agreement, (ii) the Agreed Value and the Gross Asset Value of
the Contributed Property was deemed to be equal to $40,786,649, (iii) Exhibit A
to this Agreement was appropriately amended to reflect such issuance and the
corresponding adjustments in the Percentage Interest of each of the Partners, as
well as the Agreed Value and the Gross Asset Value of the Contributed Property,
and (iv) the Capital Account of the General Partner was appropriately adjusted.
This Paragraph G of Section 4.5 shall not be construed to permit any Capital
Contribution other than the contribution of the General Partner's interest in
the Purchased Assets by the General Partner.
Section 4.6. Stock Incentive Plan.
If at any time or from time to time the General Partner is
required, pursuant to the Stock Incentive Plan, to make a contribution of REIT
Shares to the Partnership, such contribution shall be treated as an additional
Capital Contribution as provided in Section 4.5, in an amount equal to the Value
of a REIT Share (provided, that, for these purposes, only the trading day on
which the General Partner contributes such REIT Shares to the Partnership shall
be considered) multiplied by the number of REIT Shares contributed by the
General Partner to the Partnership. In consideration for such contribution, the
General Partner's Capital Account shall be adjusted as provided in this
Agreement and the General Partner shall be issued a number of Partnership Units
equal to the number of REIT Shares so contributed. Furthermore, if at any time
or from time to time the General Partner issues or sells REIT Shares pursuant to
the Stock Incentive Plan (other than a contribution to the Partnership as
provided above), it may contribute the proceeds therefrom to the Partnership as
an additional Capital Contribution as provided in Section 4.5. In consideration
for such contribution, the General Partner's Capital Account shall be adjusted
as provided in this Agreement and the General Partner shall be issued a number
of Partnership Units equal to the number of REIT Shares so issued or sold.
Notwithstanding the foregoing, the preemptive rights provided in Section 4.5.F
shall not apply to the Capital Contributions described above in this Section
4.6.
ARTICLE 5.
DISTRIBUTIONS
Section 5.1. Requirement 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, of Available Cash generated by the Partnership to the Partners who
are Partners on the applicable record date with respect to such distribution,
(1) first, to the extent that the amount of cash distributed with respect to any
Partnership Interests that are entitled to any preference in distribution for
any prior distribution period was less than the required distribution for such
outstanding Partnership Interests for such prior distribution period, and to the
extent such deficiency has not been subsequently distributed pursuant to this
Section 5.1 (a "Preferred Distribution Shortfall"), in accordance with the
rights of such class of Partnership Interests (and within such class, pro rata
in proportion to the respective Percentage Interests on the applicable record
date) and to the Partners who are Partners on the applicable record date with
respect to such distribution, (2) second with respect to any Partnership
Interests that are entitled to any preference in distribution, in accordance
with the
28
rights of such class of Partnership Interests (and within such class, pro rata
in proportion to the respective Percentage Interests on the applicable record
date), and, (3) third, with respect to Partnership Interests that are not
entitled to any preference in distribution, pro rata to each such class on a
quarterly basis and in accordance with the terms of such class to the Partners
who are Partners of such class on the Partnership Record Date with respect to
such distribution (and within each such class, pro rata in proportion with the
respective Percentage Interests on such Partnership Record Date). Unless
otherwise expressly provided for herein or in an agreement at the time a new
class of Partnership Interests is created in accordance with Article 4 hereof,
no Partnership Interest shall be entitled to a distribution in preference to any
other Partnership Interest. The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with its qualification as a REIT, (i) to cause the Partnership to distribute
sufficient amounts to enable the General Partner to pay stockholder dividends
that will (a) satisfy the requirements for qualifying as a REIT under the Code
and Regulations ("REIT Requirements"), and (b) avoid any federal income or
excise tax liability of the General Partner, except to the extent that a
distribution pursuant to clause (b) would prevent the Partnership from making a
distribution to the holders of Series A Preferred Units in accordance with
Section 16.2 or to the holders of the Series B Preferred Units in accordance
with Section 17.2 and (ii) to distribute Available Cash to the Limited Partners
so as to preclude any such distribution or portion thereof from being treated as
part of a sale of property to the Partnership by a Limited Partner under Section
707 of the Code or the Regulations thereunder; provided that the General Partner
and the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner being so
treated.
Section 5.2. Distributions in Kind.
Except as expressly provided herein, no right is given to any
Partner to demand and receive property other than cash. The General Partner may
determine, in its sole and absolute discretion, to make a distribution in kind
to the 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, 6 and 10; provided, however, that, in
such case, the General Partner shall distribute only cash to the Series A
Limited Partners and to the Series B Limited Partners.
Section 5.3. Amounts Withheld.
All amounts withheld pursuant to the Code or any provisions of
any state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to the General Partner, the Limited Partners
or Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners, or Assignees, as the case may be, pursuant to Section 5.1 for
all purposes under this Agreement.
Section 5.4. Distributions Upon Liquidation.
Proceeds from a Terminating Capital Transaction shall be
distributed to the Partners in accordance with Section 13.2.
29
Section 5.5. Distributions to Reflect Issuance of
Additional Partnership Interests.
In the event that the Partnership issues additional
Partnership Interests to the General Partner or any Additional Limited Partner
pursuant to Section 4.5.D or 4.6, the General Partner shall make such
revisions to this Article 5 as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
ARTICLE 6.
ALLOCATIONS
Section 6.1. Timing and Amount of Allocations of Net
Income and Net Loss.
Net Income and Net Loss of the Partnership shall be determined
and allocated with respect to each fiscal year of the Partnership as of the end
of each such year. Subject to the other provisions of this Article 6, an
allocation to a Partner of a share of Net Income or Net Loss shall be treated as
an allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.
Section 6.2. General Allocations.
A. In General. Except as otherwise provided in this
Article 6, Net Income and Net Loss shall be allocated to each of the Partners
holding the same class of Partnership Interests in accordance with their
respective Percentage Interest of such class.
B.1. Net Income. Net Income for any Partnership Year shall
be allocated in the following manner and order of priority:
(a) First, 100% to the General Partner in an amount equal to the
remainder, if any, of the cumulative Net Losses allocated to the General Partner
pursuant to Section 6.2.B.2(d) for all prior Partnership Years minus the
cumulative Net Income allocated to the General Partner pursuant to this Section
6.2.B.1(a) for all prior Partnership Years;
(b) Second, 100% to each Holder of Partnership Interests in an amount
equal to the remainder, if any, of the cumulative Net Losses allocated to each
such Holder pursuant to Section 6.2.B.2(c) for all prior Partnership Years minus
the cumulative Net Income allocated to such Holder pursuant to this Section
6.2.B.1(b) for all prior Partnership Years;
(c) Third, 100% to the Holders of Preferred Units in an amount equal to
the remainder, if any, of the cumulative Net Losses allocated to each such
Holder pursuant to Section 6.2.B.2(b) for all prior Partnership Years minus the
cumulative Net Income allocated to such Holder pursuant to this Section
6.2.B.1(c) for all prior Partnership Years;
(d) Fourth, 100% to the Holders of Common Units in an amount equal to
the remainder, if any, of (i) the cumulative Net Losses allocated to each such
Holder pursuant to Section 6.2.B.2(a) for all prior Partnership Years, minus
(ii) the cumulative Net Income allocated to each Holder pursuant to this Section
6.2.B.1(d) for all prior Partnership Years;
30
(e) Fifth, 100% to the Holders of Preferred Units, with respect to each
series of Preferred Units, in an amount equal to the excess of (i) the
cumulative Priority Return to the last day of the current Partnership Year or to
the date of redemption of such Preferred Units, to the extent such Preferred
Units are redeemed during such year, over (ii) the cumulative Net Income
allocated to the Holders of such Preferred Units pursuant to this Section
6.2.B.1(e) for all Partnership Years; and
(f) Sixth, 100% to the Holders of Common Units in accordance with their
respective Percentage Interests in the Common Units. To the extent the
allocations of Net Income set forth above in any paragraph of this Section
6.2.B.1 are not sufficient to entirely satisfy the allocation set forth in such
paragraph, such allocation shall be made in proportion to the total amount that
would have been allocated pursuant to such paragraph without regard to such
shortfall.
2. Net Losses. Net Losses for any Partnership Year
shall be allocated in the following manner and order of priority.
(a) First, 100% to the Holders of Common Units in accordance with their
respective Percentage Interests in the Common Units (to the extent consistent
with this Section 6.2.B.2(a)) until the Adjusted Capital Account (not taking
into account any amounts a Holder is obligated to contribute to the capital of
the Partnership or is deemed obligated to contribute pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c)(2) and ignoring the Holder's Series A Preferred
Capital and Series B Preferred Capital) of each such Holder is zero;
(b) Second, 100% to the Holders of Preferred Units, pro rata to each
such Holder's Adjusted Capital Account (ignoring for this purpose any amounts a
Holder is obligated to contribute to the capital of the Partnership or is deemed
obligated to contribute pursuant to Regulations Section
1.704-1(b)(2)(ii)(c)(2)), until the Adjusted Capital Account (as so modified) of
each such Holder is zero;
(c) Third, 100% to the Holders of Partnership Interests to the
extent of, and in proportion to, the positive balance (if any) in their Adjusted
Capital Accounts; and
(d) Fourth, 100% to the General Partner.
C. Notwithstanding Sections 6.2.A. and B, any item of
deduction attributable to payments made by the Partnership to or on behalf of
▇▇▇▇ ▇. Major ("Major") pursuant to (i) that certain Non-Qualified Stock Option
Agreement (as amended from time to time), dated as of April 30, 1997, by and
between ▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Price"), Major, and the Partnership, with respect to
its rights and covenants contained therein, or (ii) that certain Letter
Agreement, dated as of January 28, 1998, by and between Price, Major, and the
Partnership, with respect to its rights and covenants contained therein, shall
be specially allocated to Price in an amount equal to 100% of such item of
deduction.
D. Allocations to Reflect Issuance of Additional Partnership
Interests. In the event that the Partnership issues additional Partnership
Interests to the General Partner or any Additional Limited Partner pursuant to
Section 4.5 or 4.6 hereof, the General Partner shall make
31
such revisions to this Section 6.2 as it determines are necessary to reflect the
terms of the issuance of such additional Partnership Interests, including making
preferential allocations to certain classes of Partnership Interests, subject to
the terms of the Series A Preferred Units and Series B Preferred Units.
Section 6.3. Additional Allocation Provisions.
Notwithstanding the foregoing provisions of this Article 6:
A. Regulatory Allocations.
(i) Minimum Gain Chargeback. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 of
the Agreement, or any other provision of this Article 6, if there is a net
decrease in Partnership Minimum Gain during any fiscal year, each Holder shall
be specially allocated items of Partnership income and gain for such year (and,
if necessary, subsequent years) in an amount equal to such Holder'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 Holder
pursuant thereto. The items to be allocated shall be determined in accordance
with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(i)
is intended to qualify as a "minimum gain chargeback" within the meaning of
Regulation Section 1.704-2(f) which shall be controlling in the event of a
conflict between such Regulation and this Section 6.3.A(i).
(ii) Partner Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), and notwithstanding the
provisions of Section 6.2 of the Agreement or any other provision of this
Article 6 (except Section 6.3.A(i)), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Holder 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
Holder'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 Holder
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section
6.3.A(ii) is intended to qualify as a "chargeback of partner nonrecourse debt
minimum gain" within the meaning of Regulation Section 1.704-2(i) which shall be
controlling in the event of a conflict between such Regulation and this Section
6.3.A(ii).
(iii) Nonrecourse Deductions and Partner Nonrecourse
Deductions. Any Nonrecourse Deductions for any fiscal year shall be specially
allocated to the Holders in accordance with their Percentage Interests
attributable to such deductions. Any Partner Nonrecourse Deductions for any
fiscal year shall be specially allocated to the
32
Holder(s) who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable,
in accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
(iv) Qualified Income Offset. If any Holder 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 Holder in an amount and manner sufficient to
eliminate, to the extent required by such Regulations, the Adjusted Capital
Account Deficit of the Holder as quickly as possible provided that an allocation
pursuant to this Section 6.3.A(iv) shall be made if and only to the extent that
such Holder would have an Adjusted Capital Account Deficit after all other
allocations provided in this Article 6 have been tentatively made as if this
Section 6.3.A(iv) were not in the Agreement. It is intended that this Section
6.3.A(iv) qualify and be construed as a "qualified income offset" within the
meaning of Regulations 1.704-1(b)(2)(ii)(d), which shall be controlling in the
event of a conflict between such Regulations and this Section 6.3.A(iv).
(v) Gross Income Allocation. In the event any Holder has a
deficit Capital Account at the end of any fiscal year which is in excess of the
sum of (1) the amount (if any) such Holder is obligated to restore to the
Partnership, and (2) the amount such Holder is deemed to be obligated to restore
pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Holder shall be specially allocated items of Partnership income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 6.3.A(v) shall be made if and only to the extent that
such Holder 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 6.3.A(v) and Section 6.3.A(iv) were not in the Agreement.
(vi) Limitation on Allocation of Net Loss. To the extent any
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Holder, such allocation of Net Loss shall be reallocated among
the other Holders in accordance with their respective Percentage Interests,
subject to the limitations of this Section 6.3.A(vi).
(vii) 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)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Holder in complete liquidation of his interest in the
Partnership, 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 Holders in accordance with their interests in the
Partnership in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Holders to whom such distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
33
(viii) Curative Allocation. The allocations set forth in
Sections 6.3.A(i), (ii), (iii), (iv), (v), (vi) and (vii) (the "Regulatory
Allocations") are intended to comply with certain regulatory requirements,
including the requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Sections 6.1 and 6.2, the Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, loss and deduction among the Holders so that, to the extent possible, the
net amount of such allocations of other items and the Regulatory Allocations to
each Holder shall be equal to the net amount that would have been allocated to
each such Holder if the Regulatory Allocations had not occurred.
B. For purposes of determining a Holder's proportional share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), each Holder's interest in Partnership profits
shall be such Holder's Percentage Interest, provided that the Holders of Series
A Preferred Units and Series B Preferred Units shall have no share of such
excess nonrecourse liabilities.
Section 6.4. Tax Allocations.
A. In General. Except as otherwise provided in this
Section 6.4, for income tax purposes each item of income, gain, loss and
deduction (collectively, "Tax Items") shall be allocated among the Holders in
the same manner as its correlative item of "book" income, gain, loss or
deduction is allocated pursuant to Sections 6.2 and 6.3.
B. Allocations Respecting Section 704(c) Revaluations.
Notwithstanding Section 6.4.A, Tax Items with respect to Partnership property
that is contributed to the Partnership by a Partner shall be shared among the
Holders for income tax purposes pursuant to Regulations promulgated under
Section 704(c) of the Code, so as to take into account the variation, if any,
between the basis of the property to the Partnership and its initial Gross Asset
Value. With respect to Partnership property that is initially contributed to the
Partnership upon its formation, such variation between basis and initial Gross
Asset Value shall be taken into account under the "traditional method" as
described in Regulations Section 1.704-3(b). With respect to properties
subsequently contributed to the Partnership, the Partnership shall account for
such variation under any method approved under Section 704(c) of the Code and
the applicable regulations as chosen by the General Partner. In the event the
Gross Asset Value of any Partnership asset is adjusted pursuant to subparagraph
(b) of the definition of Gross Asset Value (provided in Article 1 of this
Agreement), subsequent allocations of Tax Items with respect to such asset shall
take account of the variation, if any, between the adjusted basis of such asset
and its Gross Asset Value in the same manner as under Section 704(c) of the Code
and the applicable regulations consistent with the requirements of Regulations
Section 1.704-1(b)(2)(iv)(g) using any method approved under Section 704(c) of
the Code and the applicable regulations as chosen by the General Partner.
34
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
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
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. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to the other provisions 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 of money,
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 General Partner (so long as the
General Partner has determined to qualify as a REIT) to
avoid the payment of any federal income tax (including,
for this purpose, any excise tax pursuant to Section 4981
of the Code), to make distributions to its stockholders
sufficient to permit the General Partner to maintain REIT
status and to satisfy any Put rights pursuant to Section
8.6), 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 mortgage, deed of trust or other lien or encumbrance on
the Partnership's assets) and the incurring of any
obligations it deems necessary for the conduct of the
activities of the Partnership; provided, that all such
borrowing, incurrence of Debt and prepayments shall be
subject to the limitations set forth in Sections 4.4 and
4.5;
(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 or the merger or other combination of the
Partnership with or into another entity; provided, that,
in the event of any sale, exchange, disposition or other
transfer of any property of the Partnership contributed at
the time of the closing of the initial public offering of
REIT Shares, occurring prior to the end of the fifteenth
(15th) year following the Effective Date, the Partnership
shall no later than the end of the calendar quarter in
which such sale, exchange, disposition or other transfer
becomes a taxable event
35
to Partners effect a distribution of cash (or, at the
option of the General Partner, a promissory note, bearing
interest at the then approved price per annum equal to the
dividend yield on the REIT Shares, based on the most recent
quarterly dividend and the Value of a REIT Share as of the
date of issuance of such note), and due and payable as soon
as reasonably practicable but in no event later than 90
days after the date of issuance), in addition to its then
regular quarterly distribution, in an amount such that the
pro rata share thereof received by each Partner shall equal
or exceed the total liability of such Partner for federal,
state and local income and franchise taxes resulting from
such sale, exchange, disposition or other transfer and from
such distribution as determined in accordance with the
books and records of the Partnership (which determination
will be conclusive and binding absent manifest error);
provided, further, that any Partner may elect not to
receive all or any portion of such additional distribution
and in such event, although such Partner's Capital Account
will not be reduced to the extent that no distribution is
received by such Partner, the Partner's Percentage Interest
or the number of Partnership Units Considered owned by such
Partner shall not be adjusted, it being the intent that the
sole effect of the election not to receive a distribution
will be to increase the amount of cash or other property to
be received by such Partner upon a dissolution of the
Partnership; and provided, further, however, that any
Partner may elect not to receive all or any portion of such
distribution in cash but in lieu thereof to receive a
promissory note bearing interest at a rate per annum equal
to the annualized dividend yield on the REIT Shares based
on the most recent quarterly dividend and the Value of a
REIT Share as of the date of issuance of such note and due
and payable on the third anniversary of issuance.
(4) the mortgage, pledge, encumbrance or hypothecation of any
Assets of the Partnership, and 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 or the Partnership, the lending of funds to other
Persons (including, without limitation, the General Partner
(if necessary to permit the financing or capitalization of a
subsidiary of the General Partner or the Partnership) and any
Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership, any of its Subsidiaries and
any other Person in which it has an equity investment;
(5) the negotiation, execution and performance of any contracts,
leases, 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;
(6) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
36
(7) the selection and dismissal of employees of the Partnership
(including, without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer"),
and agents, outside attorneys, accountants, consultants and
contractors of the Partnership and the determination of their
compensation and other terms of employment or hiring;
(8) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;
(9) 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, any
Subsidiary and any other Person in which it has an equity
investment from time to time); provided that as long as the
General Partner has determined to continue to qualify as a
REIT, the Partnership may not engage in any such formation,
acquisition or contribution that would cause the General
Partner to fail to qualify as a REIT;
(10) the control of any matters affecting the rights anD obligations
of the Partnership, including the conduct of litigation and the
incurring of legal expense and the settlement of claims and
litigation, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by law;
(11) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any Person
(including, without limitation, the contribution or loan of
funds by the Partnership to such Persons);
(12) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of
valuation as it may adopt, provided that such methods are
otherwise consistent with requirements of this Agreement; and
(13) the enforcement of any rights against any Partner pursuant to
representations, warranties, covenants and indemnities relating
to such Partner's contribution of property or assets to the
Partnership.
B. 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 provisions of
this Agreement (except as provided in Section 7.3), 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
37
the Limited Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
C. At all times from and after the date hereof, 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 Indemnities hereunder.
D. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain working capital
reserves in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the
General Partner may, but, other than as expressly set forth in the Contribution
Agreements, shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partner) of any action taken
by the General Partner. The General Partner and the Partnership shall not have
liability to a Partner under any circumstances as a result of an income tax
liability incurred by such Partner as a result of an action (or inaction) by the
General Partner pursuant to its authority under this Agreement.
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
and each other state, the District of Columbia or any other jurisdiction, in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5.A(4) 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 limited liability) in the State of Delaware any other
state, or the District of Columbia, in which the Partnership may elect to do
business or own property.
Section 7.3. Restrictions on General Partner's Authority.
A. The General Partner may not take any action in
contravention of this Agreement, including, without limitation:
(1) 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;
38
(3) admit a Person as a Partner, except as otherwise provided
in this Agreement;
(4) 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
(5) enter into any contract, mortgage, loan or other agreement
that prohibits or restricts, or has the effect of
prohibiting or restricting, the ability of a Limited
Partner to exercise its rights set forth herein to effect
in full an Exchange or a Put or an exchange or redemption
pursuant to Section 16.7 or Section 17.7, except with the
written consent of such Limited Partner (for purposes of
clarification, contracts with respect to the issuance of
additional Partnership Interests pursuant to Section 4.5.D
which prohibit or restrict such Exchange or Put rights
solely by virtue of the preferences, rights, powers and
duties attributable to the Partnership Interests subject to
such contract shall be deemed not to include such
prohibitions or restrictions); provided that this
subparagraph (5) shall not apply to any contract or
agreement with respect to indebtedness under which a
Limited Partner's exercise of a Put or redemption pursuant
to Section 16.7 or Section 17.7 would constitute a default
or breach thereunder if such contract or agreement is or
was entered into with a third party on commercially
reasonable terms negotiated on an arms-length basis (it
being agreed that if such default or breach would arise by
virtue of the election by the General Partner to cause the
Partnership to redeem all or a portion of the Series A
Preferred Units or Series B Preferred Units for cash
pursuant to Section 16.7.A(ii) or Section 17.7(A)(ii), the
General Partner shall make such election only with respect
to Excess Units as defined in Section 16.7.A(iii) and
Series B Excess Units as defined in Section 17.7(A)(iii)).
B. The General Partner shall not, without the prior Consent of
the Limited Partners, undertake, on behalf of the Partnership, any of the
following actions or enter into any transaction which would have the effect of
such transactions:
(1) except as provided in Section 7.3.C., amend, modify or
terminate this Agreement other than to reflect the
admission, substitution, termination or withdrawal of
partners pursuant to Article 12 hereof;
(2) make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian,
receiver or trustee for all or any part of the assets of
the Partnership;
(3) institute any proceeding for Bankruptcy on behalf of the
Partnership; or
(4) subject to the rights of transfer provided in Section 11.2,
approve or acquiesce to the transfer of the Partnership
Interest of the General Partner,
39
or admit into the Partnership any Additional or Substitute
General Partners.
C. Notwithstanding Section 7.3.B, the General Partner shall
have the power, without the Consent of the Limited Partners, to amend this
Agreement 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 issuance of additional Partnership Interests
pursuant to Sections 4.5.D and 4.6 or the admission,
substitution, termination, or withdrawal of Partners in
accordance with this Agreement;
(3) to reflect a change that is of an inconsequential nature
and 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, or make other changes
with respect to matters arising under this Agreement, that
will not be inconsistent with law or with the provisions 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 reflect such changes as are reasonably necessary for the
General Partner to maintain its status as a REIT, including
changes which may be necessary due to a change in
applicable law (or an authoritative interpretation thereof)
or a ruling of the IRS; and
(6) to modify the manner in which Capital Accounts are computed
but only to the extent set forth in the definition of
"Capital Account." The General Partner will provide notice
to the Limited Partners when any action under this Section
7.3.C is taken.
D. Notwithstanding Sections 7.3.B and 7.3.C hereof, this
Agreement shall not be amended, and no action may be taken by the General
Partner, without the Consent of each Partner adversely affected if such
amendment or action would (i) convert a Limited Partner's interest in the
Partnership into a general partner's interest (except as the result of the
General Partner acquiring such interest), (ii) modify the limited liability of a
Limited Partner, (iii) alter rights of the Partner to receive distributions
pursuant to Article 5, Section 7.1.A(3), Section 13.2, Article 16 or Article 17,
or the allocations specified in Article 6 (except as permitted pursuant to
Section 4.2, Section 4.5 and Section 7.3.C), (iv) alter or modify the Exchange
Right, Put Right, REIT Shares Amount or Put Amount as set forth in Sections 8.6
and 11.2, and related definitions thereof, (v) cause the termination of the
Partnership prior to the time set forth in Sections 2.5 or 13.1, (vi) alter the
redemption or exchange rights as set forth in Sections 16.4, 16.7, 17.4 and
40
17.7 hereof, respectively, or (vii) amend this Section 7.3.D. Further, no
amendment may alter the restrictions on the General Partner's authority set
forth elsewhere in this Section 7.3 without the Consent specified in such
section. Any such amendment or action consented to by any Limited Partner shall
be effective as to that Limited Partner, notwithstanding the absence of such
consent by any other Limited Partner.
E. For so long as the Partnership Interests of all of the
Limited Partners of the Partnership equal, in the aggregate, not less than
fifteen percent (15%), the General Partner shall not, without the prior Consent
of the Limited Partners, undertake, on behalf of the Partnership, any of the
following actions:
(1) Dissolve the Partnership.
(2) Agree to or consummate 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 Limited Partners and Assignees of
all outstanding Common Units and interests of Assignees
therein in consideration for (a) cash, (b) debt
instruments or other evidences of indebtedness, (c) other
securities issued by a corporation, partnership or other
entity, other than (i) the General Partner, (ii) the
Partnership or (iii) any entity at least 80% of the total
assets of which (on the basis of market value) are
comprised of assets which, immediately prior to such
transaction, were assets of the Partnership, or (d) any
combination of the consideration described in (a), (b)
and/or (c) above.
(3) Sell or otherwise transfer all or substantially all of the
assets of the Partnership.
Section 7.4. Reimbursement of the General Partner.
A. Except as provided in this Section 7.4 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 be compensated for its services as general partner of
the Partnership.
B. Subject to Section 15.11, the General Partner shall be
reimbursed on a monthly basis, or such other basis as the General Partner may
determine in its sole and absolute discretion, for all expenses it incurs
relating to the ownership of interests in and operation of, or for the benefit
of, the Partnership. The Limited Partners acknowledge that the General Partner's
sole business is the ownership of interests in and operation of the Partnership
and the General Partner Properties and personal property reasonably incident
thereto and that all of the General Partner's expenses are incurred for the
benefit of the Partnership; provided that, the General Partner shall not be
reimbursed for expenses it incurs relating to the organization of the
Partnership and the General Partner or the initial public offering or subsequent
public offerings of REIT Shares, other shares of capital stock or Funding Debt
by the General Partner, but shall be reimbursed for expenses it incurs with
respect to any other issuance of additional Partnership Interests pursuant to
the provisions hereof. Such reimbursements shall be in addition to any
41
reimbursement of the General Partner as a result of indemnification pursuant to
Section 7.7 hereof.
C. If and to the extent any reimbursements to the General
Partner pursuant to this Section 7.4 constitute gross income of the General
Partner (as opposed to the repayment of advances made by the General Partner on
behalf of the Partnership), such amounts shall constitute guaranteed payments
within the meaning of Section 707(c) of the Code, shall be treated consistently
therewith by the Partnership and all Partners, and shall not be treated as
distributions for purposes of computing the Partners' Capital Accounts.
Section 7.5. Outside Activities of the General Partner.
A. The General 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 as a General Partner and
the management of the business of the Partnership, its operation as a public
reporting company with a class (or classes) of securities registered under the
Securities Exchange Act of 1934, as amended, its operation as a REIT and such
activities as are incidental to the same. Without the Consent of the Limited
Partners, the General Partner shall not, directly or indirectly, participate in
or otherwise acquire any interest in any real or personal property, except its
General Partner Interest, its minority interest in any Subsidiary Partnership(s)
(held directly or indirectly through a Qualified REIT Subsidiary) that the
General Partner holds in order to maintain such Subsidiary Partnership's status
as a partnership, and such bank accounts, similar instruments or other
short-term investments as it deems necessary to carry out its responsibilities
contemplated under this Agreement and the Charter. In the event the General
Partner desires to contribute cash to any Subsidiary Partnership to acquire or
maintain an interest of 1% or less in the capital of such partnership, the
General Partner may acquire such cash from the Partnership in exchange for a
reduction in the General Partner's Partnership Units, in an amount equal to the
amount of such cash divided by the Value of a REIT Share on the day such cash is
received by the General Partner. Notwithstanding the foregoing, the General
Partner may acquire Properties in exchange for REIT Shares, to the extent such
Properties are immediately contributed by the General Partner to the
Partnership, pursuant to the terms described in Section 4.5.F. Any Limited
Partner Interests acquired by the General Partner, whether pursuant to exercise
by a Limited Partner of its rights to Exchange or Put or exchange pursuant to
Section 16.7 or Section 17.7 or otherwise, shall be automatically converted into
a General Partner Interest comprised of an identical number of Partnership Units
with the same rights, priorities and preferences as the class or series
acquired. If, at any time after the Effective Date, the General Partner acquires
material assets (other than on behalf of the Partnership), the definition of
"REIT Shares Amount" shall be adjusted, as reasonably agreed to by the General
Partner and the other Limited Partners, to reflect the relative Value of a share
of capital stock of the General Partner relative to the Deemed Partnership
Interest Value of the related Partnership Unit. The General Partner's General
Partner Interest in the Partnership, its minority interest in any Subsidiary
Partnership(s) (held directly or indirectly through a Qualified REIT Subsidiary)
that the General Partner holds in order to maintain such Subsidiary
Partnership's status as a partnership, and interests in such short-term liquid
investments, bank accounts or similar instruments as the General Partner deems
necessary to carry out its responsibilities contemplated under this Agreement
and the Charter are interests which the General Partner is permitted to acquire
and hold for purposes of this Section 7.5.A.
42
B. In the event the General Partner exercises its rights under
the Charter to purchase REIT Shares or Preferred Shares, then the General
Partner shall cause the Partnership to purchase from it a number of Partnership
Units of the appropriate class as determined based on, in the case of REIT
Shares, an amount equal to the number of REIT Shares (as adjusted pursuant to
Section 7.5.A) so purchased or, in the case of Preferred Shares, an equal number
of Preferred Units which correspond in ranking to the Preferred Shares so
purchased, in each case on the same terms that the General Partner purchased
such REIT Shares or Preferred Shares, as applicable.
Section 7.6. Contracts with Affiliates.
A. The Partnership may lend or contribute to 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 and absolute
discretion of the General Partner. The foregoing authority shall not create any
right or benefit in favor of any Person.
B. Except as provided in Section 7.5.A, 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.
C. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership employee benefit plans funded by the Partnership for
the benefit of employees of the General Partner, the Partnership, Subsidiaries
of the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership or any of
the Partnership's Subsidiaries.
D. The General Partner is expressly authorized to enter into,
in the name and on behalf of the Partnership, such conflict avoidance agreements
with various Affiliates of the Partnership and the General Partner, on such
terms as the General Partner, in its sole and absolute discretion, believes are
advisable.
E. The General Partner, in its sole and absolute discretion
and without the approval of the Limited Partners, may propose and adopt on
behalf of the Partnership Employee benefit plans funded by the Partnership for
the benefit of employees of the General Partner, the Partnership, Subsidiaries
of the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership, the
General Partner or any of the Partnership's Subsidiaries. The General Partner
also is expressly authorized to cause the Partnership to issue to it Partnership
Units corresponding to REIT Shares issued by the General Partner pursuant to its
Stock Incentive Plan or any similar or successor plan and to repurchase such
Partnership Units from the General Partner to the extent necessary to permit the
General Partner to repurchase such REIT Shares in accordance with such plan.
Section 7.7. Indemnification.
A. The Partnership shall indemnify an Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including legal fees and expenses), judgments, fines, settlements, and
other amounts arising from any and all claims,
43
demands, actions, suits or proceedings, civil, criminal, administrative or
investigative, that relate to the operations of the Partnership as set forth in
this Agreement in which any Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. 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 which 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 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. 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 7.7.A. The termination of any proceeding by conviction or upon a plea of
nolo contendere or its equivalent, or any entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this Section 7.7.A. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Partnership. Notwithstanding the foregoing provisions, the General Partner shall
be entitled to reimbursement by the Partnership for any amounts paid by it in
satisfaction of indemnification obligations owed by the General Partner to
present or former directors of the General Partner or its predecessors, as
provided for in or pursuant to the Charter and By-Laws of the General Partner.
B. Reasonable expenses incurred by an Indemnitee who is a
party to a proceeding may be paid or reimbursed by the Partnership in advance of
the final disposition of the proceeding 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 7.7.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.
C. The indemnification provided by this Section 7.7 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.
D. The Partnership may purchase and maintain insurance, on
behalf 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 any 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. For purposes of this Section 7.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the
44
performance by it of its duties to the Partnership also imposes duties on, or
otherwise involves services by, it to the plan or participants or beneficiaries
of the plan; excise taxes assessed on an Indemnitee with respect to an employee
benefit plan pursuant to applicable law shall constitute fines within the
meaning of Section 7.7; and actions taken or omitted by the Indemnitee with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject the Limited 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 7.7 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 7.7 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 .
I. If and to the extent any reimbursements to the General
Partner pursuant to this Section 7.7 constitute gross income of the General
Partner (as opposed to the repayment of advances made by the General Partner on
behalf of the Partnership), such amounts shall constitute guaranteed payments
within the meaning of Section 707(c) of the Code, shall be treated consistently
therewith by the Partnership and all Partners, and shall not be treated as
distributions for purposes of computing the Partners' Capital Accounts.
Section 7.8. Liability of the General Partner.
A. Notwithstanding anything to the contrary set forth in this
Agreement, none of the General Partner or any of its officers, directors, agents
and employees shall be liable or accountable in damages or otherwise to the
Partnership, any Partners or any Assignees, or their successors or assigns, for
losses sustained, liabilities incurred or benefits not derived as a result of
errors in judgment or mistakes of fact or law or of any act or omission if the
General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that (i) the
General Partner is acting for the benefit of the Partnership, the Limited
Partners and the General Partner's stockholders collectively, and (ii) the
General Partner is under no obligation to give priority to the separate
interests of the Limited Partners, on the one hand, or the General Partner's
stockholders, on the other, in deciding whether to cause the Partnership to take
(or decline to take) any actions (including, without limitation, with respect to
the tax consequences to either).
C. 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 agents. 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.
45
D. Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability of the General Partner and any of its
officers, directors, agents and employees to the Partnership and the Limited
Partners under this Section 7.8 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.
E. Notwithstanding anything herein to the contrary, except for
fraud, willful misconduct and gross negligence, or pursuant to any express
indemnities given to the Partnership by any Partner pursuant to any other
written instrument, no Partner shall have any personal liability whatsoever, to
the Partnership or to the other Partner, for the debts or liabilities of the
Partnership or its obligations hereunder, and the full recourse of the other
Partner shall be limited to the interest of that Partner in the Partnership. To
the fullest extent permitted by law, no officer, director or stockholder of the
General Partner shall be liable to the Partnership for money damages except for
(i) active and deliberate dishonesty established by a final judgment or (ii)
actual receipt of an improper benefit or profit in money, property or services.
Without limitation of the foregoing, and except for fraud, willful misconduct
and gross negligence, or pursuant to any such express indemnity, no property or
assets of any Partner, other than its interest in the Partnership, shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of any judgment (or other judicial process) in favor of any other Partner(s) and
arising out of, or in connection with, this Agreement. This Agreement is
executed by the officers of the General Partner solely as officers of the same
and not in their own individual capacities.
Section 7.9. 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 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 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 which 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 of its duly
authorized officers and a 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 which is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provisions of this Agreement or
any non-mandatory provision of 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,
46
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the General Partner to continue
to qualify as a REIT or (ii) to avoid the General Partner incurring any taxes
under Section 857 or Section 4981 of the Code (except with respect to the
distribution of Available Cash to the Series A Limited Partners in accordance
with Section 16.2 and to the Series B Limited Partners in accordance with
Section 17.2), is expressly authorized under this Agreement and is deemed
approved by all of the Limited Partners.
Section 7.10. 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 Partners, 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, the General Partner or one or more nominees, as the General Partner
may determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that 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; provided,
however, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. 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 7.11. 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 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 such Person shall be entitled to
deal with the General Partner as if it were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies which 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.
47
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 or under the Act.
Section 8.2. Management of Business.
No Limited Partner or Assignee (other than the General
Partner, any of its Affiliates or any officer, director, employee, partner,
agent or trustee of the General Partner, the Partnership or any of their
Affiliates, in their capacity as such) shall take part in the operations,
management or control (within the meaning of the Act) 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, any of its Affiliates or any officer,
director, employee, partner, agent, representative, or trustee of the General
Partner, the Partnership or any of their Affiliates, 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 by a Limited Partner or
its Affiliates with the General Partner, the Partnership or a Subsidiary and any
employment agreement), any Limited Partner and any officer, director, employee,
agent, trustee, Affiliate or stockholder 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 in direct competition with 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. 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, other than the General
Partner, and such Person shall have no obligation pursuant to this Agreement 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
which, 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 pursuant to the rights of Exchange and Put set forth in
Section 8.6 and the redemption and exchange rights set forth in Sections 16.4,
16.7, 17.4 and 17.7 no Limited Partner shall be entitled to the withdrawal or
return of his Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as provided
herein. Except as expressly set forth herein with respect to the rights,
priorities and preferences of the Preferred Limited Partners holding any series
of Preferred Units, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee either as to the return of
48
Capital Contributions or as otherwise expressly provided in this Agreement, as
to profits, losses, distributions or credits.
Section 8.5. Rights of Limited Partners Relating to the
Partnership.
A. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.C hereof, 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 with a statement of the purpose of such demand and at such
Limited Partner's own expense:
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission
by the General Partner pursuant to the Securities
Exchange Act of 1934, as amended, and each report sent to
the stockholders of the General Partner;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) 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; and
(5) to obtain true and full information regarding the amount
of cash and a description and statement of any other
property or services contributed by each Partner and
which each Partner has agreed to contribute in the
future, and the date on which each became a Partner.
B. The Partnership shall notify each Common Limited Partner in
writing of any adjustment made in the calculation of the REIT Shares Amount
within 10 Business Days of the date such change becomes effective.
C. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or the General Partner or (ii) the Partnership
or the General Partner is required by law or by agreements with unaffiliated
third parties to keep confidential.
Section 8.6. Common Limited Partner Exchange and Put Rights.
A. On or after the date one (1) year after the Effective Date
or on or after such later date as expressly provided in an agreement entered
into between the partnership and any
49
Common Limited Partner, but prior to the date forty (40) years after the
Effective Date, each Common Limited Partner shall have the right (subject to the
terms and conditions set forth herein and in any other such agreement, as
applicable) to require the General Partner to acquire all or a portion of the
Common Units held by such Common Limited Partner (such Common Units being
hereafter "Tendered Units") in exchange for, at the election of such Common
Limited Partner, (i) REIT Shares, in which event such required acquisition shall
be considered a "Exchange," or (ii) cash, in which event such required
acquisition shall be considered a "Put." Any Exchange or Put shall be exercised
pursuant to a Notice of Exchange or Notice of Put, as the case may be, delivered
to the General Partner by the Common Limited Partner who is exercising the
relevant right (the "Tendering Partner").
B. A Tendering Partner effecting an Exchange shall have the
right to receive, on the Specified Exchange Date, the REIT Shares Amount
(calculated as of the Valuation Date) with respect to the Tendered Units,
subject to the limitations on ownership and provisions with respect to Excess
Shares set forth in Article IV of the Charter. The REIT Shares Amount shall be
delivered as duly authorized, validly issued, fully paid and nonassessable REIT
Shares and, if applicable, rights, free of any pledge, lien, encumbrance or
restriction, other than those provided in the Charter, the By-Laws of the
General Partner, the Securities Act and relevant state securities or blue sky
laws. Notwithstanding any delay in such delivery, the Tendering Partner shall be
deemed the owner of such REIT Shares and rights for all purposes, including
without limitation, rights to vote or consent, receive dividends, and exercise
rights, as of the Specified Exchange Date.
C. (1) A Tendering Partner effecting a Put shall have the
right to receive on the Specified Put Date cash in the amount of the Put Amount;
provided, that, within five (5) Business Days after receipt of the Notice of
Put, the General Partner shall give written notice to the Tendering Partner as
to whether the General Partner will purchase the Tendered Units with the
proceeds of a registered public offering (a "Public Offering Funding") of a
number of REIT Shares ("Registrable Shares") equal to the REIT Shares Amount
with respect to the Tendered Units. In the event that the General Partner fails
to give such notice, it will be deemed to have elected not to purchase the
Tendered Units through a Public Offering Funding and shall purchase the Tendered
Units on the Specified Put Date for cash in the amount (the "Cash Amount") equal
to the Value on the Valuation Date of the REIT Shares Amount (calculated as of
the Valuation Date) with respect to the Tendered Units.
(2) In the event that the General Partner elects a Public
Offering Funding with respect to a Put covering in excess of 75,000 Common
Units, it may at such time, give notice (a "Single Funding Notice") of such
election to all Common Limited Partners and require that all Common Limited
Partners elect whether or not to effect a Put to be funded through such Public
Offering Funding. In the event a Common Limited Partner elects to effect such a
Put, it shall give notice thereof and of the number of Common Units to be made
subject thereto in writing to the General Partner within 10 Business Days after
receipt of the Single Funding Notice, and such Common Limited Partner shall be
treated as a Tendering Partner for all purposes of this Section 8.6. In the
event that a Common Limited Partner does not so elect, it shall be deemed to
have waived its right to effect a Put for the current Twelve-Month Period,
except that it may effect a Put for no more than 20,000 Common Units during such
Twelve-Month Period.
50
D. In the event that the General Partner elects a Public
Offering Funding, it shall purchase the Tendered Units on the Specified Put Date
for cash in immediately available funds in the amount (the "Public Offering
Funding Amount") equal to the lesser of (i) the Cash Amount or (ii) the proceeds
received by the General Partner from the Public Offering Funding after deduction
of reasonable expenses related thereto, including underwriting discounts and
commissions, legal and accounting fees and expenses, Securities and Exchange
Commission ("SEC") registration fees, state blue sky and securities laws fees
and expenses, printing expenses, NASD filing fees and listing fees.
E. If the General Partner elects a Public Offering
Funding, the following additional terms and conditions shall apply:
(1) As soon as practicable after the General Partner gives the
Tendering Partner notice of its election, the General Partner shall use its best
efforts to effect as promptly as possible a registration, qualification or
compliance (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualifications under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as would permit or facilitate the sale and
distribution of the REIT Shares; provided, that, the General Partner shall not
by reason hereof, be required to submit to jurisdiction or taxation, or qualify
to do business in any jurisdiction in which such submission or qualification
would not be otherwise required; provided, further, that if the General Partner
shall deliver a certificate to the Tendering Partner stating that the General
Partner has determined in the good faith judgment of the Board of Directors that
such filing, registration or qualification would require disclosure of material
non-public information, the disclosure of which would have a material adverse
effect on the General Partner, then the General Partner may delay making any
filing or delay the effectiveness of any registration or qualification for the
shorter of (a) the period ending on the date upon which such information is
disclosed to the public or ceases to be material or (b) an aggregate period of
90 days in connection with any Public Offering Funding.
(2) The General Partner shall advise the Tendering Partner,
regularly and promptly upon any request, of the status of the registration,
including the timing of all filings, the selection of and understandings with
underwriters, dealers and brokers, the nature and contents of all communications
with the Securities and Exchange Commission and other governmental bodies, the
expenses related to the Public Offering Funding as they are being incurred, the
nature of marketing activities, and any other matters reasonably related to the
timing, price and expenses relating to the Public Offering Funding and the
compliance by the General Partner with its obligations with respect thereto. In
addition, the General Partner and each Tendering Partner may, but shall be under
no obligation to, enter into understandings in writing ("Pricing Agreements")
whereby the Tendering Partner will agree in advance as to the acceptability of
the net price (after deducting all expenses referred to in Section 8.6.D) at or
below the Value on the Valuation Date of a REIT Share, at which the Registrable
Shares are to be offered pursuant to the Public Offering Funding (the "Price").
Furthermore, the General Partner shall establish pricing notification procedures
with each such Tendering Partner, such that
51
the Tendering Partner will have the maximum opportunity practicable to determine
whether to become a Withdrawing Partner pursuant to Section 8.6.E(3) below.
(3) The General Partner, upon notification of the Price from
the managing underwriter(s) engaged by the General Partner in order to sell the
Registrable Shares, shall immediately use its best efforts to notify the
Tendering Partner of the Price. Each Tendering Partner shall have one hour (as
such time may be extended by the General Partner) to elect to withdraw his Put
(a Tendering Partner making such an election being a "Withdrawing Partner"), and
Common Units with a REIT Shares Amount equal to such excluded Registrable Shares
shall be considered to be withdrawn from the related Put. If a Tendering
Partner, within such time period, does not notify the General Partner of such
Tendering Partner's election not to become a Withdrawing Partner, then such
Tendering Partner shall, except as otherwise provided in a Pricing Agreement, be
deemed to have elected to become a Withdrawing Partner, without liability to the
General Partner. To the extent that the General Partner is unable to notify any
Tendering Partner, such unnotified Tendering Partner shall, except as otherwise
provided in any Pricing Agreement, be deemed to have elected to become a
Withdrawing Partner. Each Tendering Partner whose Put is being funded through
the Public Offering Funding who does not become a Withdrawing Partner shall have
the right, subject to the approval of the managing underwriter(s), to Put
additional Common Units in a number no greater than the number of Common Units
withdrawn. In the event that the Price is in excess of the Value on the
Valuation Date of a REIT Share, then the Withdrawing Partner shall bear its pro
rata share of the expenses described in Section 8.6.D (such share calculated as
if such Partner had not been a Withdrawing Partner). If more than one Tendering
Partner so elects to Put additional Common Units, then such Common Partnership
Units shall be Put on a pro rata basis, based on the number of additional Common
Units sought to be so Put.
(4) The General Partner shall take all reasonable action in
order to effectuate the sale of the Registrable Shares including, but not
limited to, the entering into of an underwriting agreement in customary form
with the managing underwriter(s) selected for such underwriting by the Tendering
Partner or, if there is more than one Tendering Partner, by the Tendering
Partner who, together with the affiliates of such Tendering Partner,
beneficially owns the greatest number of Common Units then being made subject to
a Put. Notwithstanding any other provision of this Agreement, if the managing
underwriter(s) advises the General Partner in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
General Partner shall so advise all Tendering Partners and the number of Common
Units to be sold to the General Partner pursuant to the Put shall be allocated
among all Tendering Partners in proportion, as nearly as practicable, to the
respective number of Common Units as to which each Tendering Partner elected to
effect a Put. No Registrable Shares excluded from the underwriting by reason of
the managing underwriter's marketing limitation shall be included in such
registration.
(5) The General Partner may include securities for its own
account in any registration filed pursuant to Section 8.6.D hereof and, if the
managing underwriter has not limited the number of Registrable Shares to be
underwritten, the General Partner
52
may include securities for the account of others in such registration, in each
case only if and to the extent that (i) the managing underwriter, the General
Partner and Tendering Partners owning Common Units representing at least
seventy-five percent (75%) of the Common Units with respect to which the Public
Offering Funding is being effected so agree in writing, and (ii) the right of
any party to Put Common Units pursuant to this Section 8.6, and the Put Amount
to be received by such party (including by virtue of the number of Registrable
Shares which would otherwise have been included in such registration and
underwriting, the offering price for such Registrable Shares and the
underwriting commissions or discounts for such Registrable Shares) will not
thereby be limited, reduced or adversely affected.
F. Notwithstanding the provisions of Section 8.6.A, a Common
Limited Partner shall not be entitled to effect an Exchange if the ownership or
right to acquire REIT Shares by such Partner on or prior to the Specified
Exchange Date would be prohibited under the Charter.
G. Notwithstanding anything herein to the contrary, with
respect to any Exchange or Put pursuant to this Section 8.6:
(1) All Common Units acquired by the General Partner pursuant
thereto shall automatically, and without further action
required, be converted into and deemed to be General
Partner Interests comprised of the same number of Common
Units.
(2) Each Common Limited Partner may not effect an Exchange (a)
for less than 2,500 Partnership Units or, if such Common
Limited Partner holds less than 2,500 Partnership Units,
all of the Common Units held by such Partner; or (b) for
more than the greater of 75,000 Common Units or one-third
of the number of Common Units set forth by its name on
Exhibit A hereto as of the closing of the initial public
offering of REIT Shares, less the number of Common Units
made subject to a Put during the same Twelve-Month Period;
(3) Each Common Limited Partner may not effect a Put (a) for
less than 5,000 Common Units or, if such Common Limited
Partner holds less than 5,000 Common Units, all of the
Common Units held by such Common Limited Partner, or (b)
for more than one-third of the number of Common Units set
forth by its name on Exhibit A hereto as of the closing of
the initial public offering of REIT Shares, less the
number of Common Units made subject to an Exchange during
the same Twelve-Month Period;
(4) Each Common Limited Partner (a) may effect an Exchange or
Put only once in each Twelve-Month Period, and (b) may not
effect an Exchange or Put during the period after the
Partnership Record Date with respect to a distribution and
before the record date established by the General Partner
for a distribution to its stockholders of some or all of
its portion of such distribution.
53
(5) Notwithstanding anything herein to the contrary, with
respect to any Put, in the event the General Partner gives
notice to all Common Limited Partners (a "Primary Offering
Notice") that it desires to effect a primary offering of
its equity securities for cash (other than an offering in
connection with a merger, consolidation or similar
transaction, or employee benefit or similar plans) then,
unless the General Partner otherwise consents, the actions
described in Section 8.6.E as to a Public Offering Funding
with respect to any Notice of Put thereafter received may
be delayed until the earlier of (a) the completion of the
primary offering or (b) 120 days following the giving of
the Primary Offering Notice; provided that, to the extent
that the managing underwriter(s) of such primary offering
advise that the inclusion of such additional REIT Shares
will not adversely affect the offering, additional REIT
Shares the proceeds of which are to be used to satisfy a
Put made subject to such a Notice of Put (a "Subsequent
Put") (without regard to the limitations of subparagraph
(3) (a) of this paragraph G) shall be included in such
offering, and the procedures of this Section 8.6 shall
otherwise be followed as closely as practicable; provided,
further that, unless the entire REIT Shares Amount
relating to the Common Units made subject to the
Subsequent Put shall be sold in such offering, such
Subsequent Put shall not count as a Put for purposes of
subparagraph (4) of this Paragraph G; and, provided,
further, that a Primary Offering Notice may be given no
more than once in any Twelve-Month Period without the
Consent of the Common Limited Partners.
(6) The General Partner may delay a Public Offering Funding,
such that it will not occur (1) during the same Twelve-
Month Period as the General Partner has effected a "Demand
Registration" pursuant to the Registration Rights
Agreement dated as of August 18, 1993, among the General
Partner and certain Common Limited Partners (it being
understood that in the event a Notice of Put is received
prior to the receipt of requisite requests for a Demand
Registration, such Notice of Put shall control, and vice
versa) or (b) within 120 days following the closing of any
prior Public Offering Funding;
(7) The consummation of such Exchange or Put shall be subject
to the expiration or termination of the applicable waiting
period, if any, under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
(8) Each Tendering Partner shall continue to own all Common
Units subject to any Exchange or Put, and be treated as a
Common Limited Partner with respect such Common Units for
all purposes of this Agreement, until such Common Units
are transferred to the General Partner and the
consideration provided by this Section 8.6 is delivered in
full on the Specified Exchange Date or Specified Put Date,
as the case may be. Until a Specified Exchange Date, the
Tendering Partner shall have no rights as a stockholder of
the General Partner.
54
(9) The right of each Common Limited Partner to effect a Put
shall be subject to the ability of the Partnership to
comply with the terms of Section 16.2.C(i) and 17.2.C(i).
For purposes of determining compliance with the restrictions set forth in
this Paragraph G, all Common Units beneficially owned by Affiliates of a Common
Limited Partner shall be considered to be owned or held by such Common Limited
Partner; provided that the Dallas P. Price Trust and the ▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust
shall be considered Affiliates of each other for purposes of this sentence, it
being expressly understood that (x) the Dallas P. Price Trust and the ▇▇▇▇▇ ▇.
▇▇▇▇▇ Trust (and their respective Affiliates) collectively shall have the right
to effect an Exchange and/or a Put in any Twelve-Month Period of up to one-third
of the Common Units owned by ▇▇▇▇▇ ▇. ▇▇▇▇▇ and his Affiliates as of the closing
of the initial public offering of REIT Shares, and (y) Dallas P. Price and ▇▇▇▇▇
▇. ▇▇▇▇▇ together may agree how to allocate between the Dallas P. Price Trust
and the ▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust (and their respective Affiliates) the number of
Common Units that each of them may Exchange and/or Put in any Twelve-Month
Period, but in the absence of such agreement, each of the Dallas P. Price Trust
and the ▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust (and their respective Affiliates) shall have the
right to effect an Exchange and/or Put in any Twelve-Month Period up to
one-sixth of the Common Units owned by both of them (and their respective
Affiliates). In addition, (i) each lending institution, if any, to which Common
Units are transferred upon the exercise of remedies in respect of a Pledge (as
defined in Section 11.3.A(iii) hereof) as contemplated by Section 11.3.A(iii)
hereof (each such lending institution a "Lending Institution Transferee") shall
be entitled to exercise all rights of a Common Limited Partner under this
Section 8.6 as if such Lending Institution Transferee were a Common Limited
Partner hereunder, provided, however, that (a) such Lending Institution
Transferee shall not be deemed to be a Substituted Limited Partner for purposes
of this Agreement on account of exercising its remedies against Partnership
Units, and (b) all Lending Institution Transferees of all or any portion of a
Limited Partner's Partnership Interest, together with such Common Limited
Partner, shall have no greater rights under this Section 8.6 than are available
to such Common Limited Partner, whether or not such Lending Institution
Transferees act individually or jointly with each other or such Common Limited
Partner; (ii) any two or more Lending Institution Transferees to which Common
Units were pledged by the same Common Limited Partner or any of such Common
Limited Partner's Affiliates may act jointly in exercising the rights of a
Common Limited Partner under this Section 8.6; and (iii) for purposes of
determining compliance with the restrictions set forth in this Paragraph G, all
Common Units of a Common Limited Partner or any of its Affiliates transferred to
Lending Institution Transferees shall be considered to be owned or held by such
Common Limited Partner or such Affiliate, such that the maximum number of Common
Units as to which an Exchange or Put may be effected by any Lending Institution
Transferee (or any two or more Lending Institution Transferees acting jointly)
at any time shall be the maximum number of Common Units that such Common Limited
Partner
55
would then be entitled to effect if such Common Limited Partner would then be
entitled to effect if such Partnership Interests had not been pledged.
H. Notwithstanding the provisions of this Section 8.6
permitting the General Partner to delay a Public Offering Funding by virtue of
an event described in Section 8.6.E, the giving of a Primary Offering Notice, or
a delay referred to in Section 8.6.G.(6), the General Partner shall use its
reasonable efforts to take all such actions, as are consistent with the purposes
of such delay provisions, to effect a Public Offering Funding at the earliest
time practicable. It is understood that such periods of delay shall run, to the
extent practicable, concurrently, and shall not limit the right of a Common
Limited Partner to deliver a Notice of Put.
I. In the event that the Partnership issues additional
Partnership Interests to any Additional Limited Partner pursuant to Section
4.5.D, the General Partner shall make such revisions to this Section 8.6 as it
determines are necessary to reflect the issuance of such additional Partnership
Interests.
J. In the event of a Put, the General Partner shall have the
right to assign to the Partnership, and the Partnership agrees to accept such
assignment, the right or obligation to acquire Common Units subject to a Put as
described in this Section 8.6.
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 appropriate books and records 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 Sections 9.3 or Section
8.5.A. Any records maintained by or on behalf of the Partnership in the regular
course of its business may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device, provided that the records so maintained are convertible into clearly
legible written form within a reasonable period of time. 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.
Section 9.2. Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
Section 9.3. Reports.
A. As soon as practicable, but in no event later than 105 days
after the close of each Partnership Year, or such later date as they are filed
with the Securities and Exchange Commission, the General Partner shall cause to
be mailed to each Limited Partner as of the close of the Partnership Year, an
annual report containing financial statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated basis
with the General Partner, for such Partnership Year, presented in accordance
with generally accepted
56
accounting 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 105 days
after the close of each calendar quarter (except the last calendar quarter of
each year) or such later date as they are filed with the Securities and Exchange
Commission, 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 General Partner, if such
statements are prepared solely on a consolidated basis with those of the General
Partner, in accordance with the applicable law or regulation, or as the General
Partner determines to be appropriate.
ARTICLE 10.
TAX MATTERS
Section 10.1. Preparation of Tax Returns.
The General Partner shall arrange for the preparation and
timely filing of all returns of Partnership income, gains, deductions, losses
and other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within 90 days of the
close of each taxable year, the tax information reasonably required by Limited
Partners for federal and state income tax reporting purposes. The Limited
Partners shall promptly provide the General Partner with such information
relating to the Contributed Properties, including tax basis and other relevant
information, as may be reasonably requested by the General Partner from time to
time.
Section 10.2. Tax Elections.
Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code, including the election under Section
754 of the Code. The General Partner shall have the right to seek to revoke any
such election (including without limitation, any election under Section 754 of
the Code) upon the General Partner's determination in its sole and absolute
discretion that such revocation is the best interests of the Partners.
Section 10.3. Tax Matters Partner.
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profit interest of each
of the Limited Partners; provided, however, that such information is provided to
the Partnership by the Limited Partners.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect
to any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken
into account by a Partner for income tax purposes (such
57
administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to
as "judicial review"), and in the settlement agreement
the tax matters partner may expressly state that such
agreement shall bind all Partners, except that such
settlement agreement shall not bind any Partner (i) who
(within the time prescribed pursuant to the Code and
Regulations) files a statement with the IRS providing
that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf
of such Partner or (ii) who is a "notice partner" (as
defined in Section 6231 of the Code) or a member of a
"notice group" (as defined in Section 6223(b)(2) of the
Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required
to be taken into account by a Partner for tax purposes
(a "final adjustment") is mailed to the tax matters
partner, to seek judicial review of such final
adjustment, including the filing of a petition for
readjustment with the Tax Court or the United States
Claims Court, or the filing of a complaint for refund
with the District Court of the United States for the
district in which the Partnership's principal place of
business is located ;
(3) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is
not allowed by the IRS, to file an appropriate pleading
(petition or complaint) for judicial review with respect
to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to
any item required to be taken into account by a Partner
for tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of
the Partnership in connection with any tax audit or
judicial review proceeding to the extent permitted by
applicable law or regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of the
tax matters partner and the provisions relating to indemnification of the
General Partner set forth in Section 7.7 of this Agreement shall be fully
applicable to the tax matters partner in its capacity as such.
C. 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 his duties as such (including legal and accounting fees)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
58
partner in discharging his duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
Section 10.4. Organizational Expenses.
The Partnership shall elect to deduct expenses, if any,
incurred by it in organizing the Partnership ratably over a 60-month period as
provided in Section 709 of the Code.
Section 10.5. Withholding.
Each Limited Partner hereby authorizes the Partnership to
withhold from or pay on behalf of or with respect to such Limited 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 Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited 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 which would otherwise be made to the Limited Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the available funds of the Partnership
which would, but for such payment, be distributed to the Limited Partner. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner (including, without limitation, the right to receive
distributions). Any amounts payable by a Limited Partner hereunder shall bear
interest at the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the Wall Street Journal,
plus four percentage points (but not higher than the maximum lawful rate) from
the date such amount is due (i.e., 15 days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership or
the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
Section 11.1. Transfer.
A. The term "transfer," when used in this Article 11 with
respect to a Partnership Unit, shall be deemed to refer to a transaction by
which the General Partner purports
59
to assign its General Partner Interest to another Person or by which a Limited
Partner purports to assign its Limited Partnership Interest to another Person,
and includes a sale, assignment, gift (outright or in trust), pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. Except to the extent otherwise specified, the term "transfer" when
used in this Article 11 does not include any redemption of Common Units by the
Partnership or acquisition of Common Units from a Common Limited Partner by the
General Partner pursuant to Section 8.6 or any exchange or redemption of Series
A Preferred Units pursuant to Section 16.7 or Series B Preferred Units pursuant
to Section 17.7. No part of the interest of a Limited Partner shall be subject
to the claims of any creditor, any spouse for alimony or support, or to legal
process, and may not be voluntarily or involuntarily alienated or encumbered,
except as may be specifically provided for in this Agreement.
B. 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 ab initio unless
otherwise consented to by the General Partner in its sole and absolute
discretion.
Section 11.2. Transfer of General Partner's Partnership
Interest.
A. Subject to Section 11.2.B., the General Partner shall not
withdraw from the Partnership and shall not sell, assign, pledge, encumber or
otherwise dispose of all or any portion of its interest in the Partnership
(whether by sale, disposition, statutory merger or consolidation, liquidation or
otherwise) without the Consent of the Limited Partners. Upon any transfer of
such a Partnership Interest pursuant to the Consent of the Limited Partners and
otherwise in accordance with the provisions of this Section 11.2.A, the
transferee shall become a substitute General Partner for all purposes herein,
and shall be vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for all duties
of the General Partner, once such transferee has executed such instruments as
may be necessary to effectuate such admission and to confirm the agreement of
such transferee to be bound by all the terms and provisions of this Agreement
with respect to the Partnership Interest so acquired. It is a condition to any
such transfer that the transferee assumes, by operation of law or express
agreement, all of the obligations of the transferor General 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 General Partner are assumed by a
successor corporation by operation of law) shall relieve the transferor General
Partner of its obligations under this Agreement without the Consent of the
Limited Partners. In the event the General Partner withdraws from the
Partnership, in violation of this Agreement or otherwise, or otherwise dissolves
or terminates, or upon the Bankruptcy of the General Partner, a Majority In
Interest of the Limited Partners may elect to continue the Partnership business
by selecting a Substitute General Partner in accordance with the Act.
B. Notwithstanding any provision herein to the contrary, the
General Partner may, without the Consent of the Limited Partners, effect a
transfer of up to one-third (1/3) of its original General Partner Interest, to
one or more transferees subject to the following restrictions and limitations:
60
(1) The General Partner shall at all times after such transfer
continue to be the sole general partner of the Partnership,
vested with the powers and rights and liable for all
obligations and responsible for all duties of same which
powers, rights, obligations and duties may not be delegated
or assigned;
(2) The transferee shall receive only the economic interest of
the General Partnership Interest as an assignee, including
the right to receive distributions from the Partnership and
the share of Net Income, Net Losses, gain and loss
attributable to the Partnership Units assigned to such
transferee, but shall not be deemed to be a holder of
Partnership Units for any other purpose under this
Agreement, and shall not be entitled to effect a Consent
with respect to such Partnership Units on any matter
presented to Partners for approval and shall not be counted
as a Limited Partner for purposes of determining the
Consent of the Limited Partners or the Majority In Interest
of the Limited Partners. The transferee shall be admitted
as a substitute or additional General Partner only upon
receipt of the Consent of the Limited Partners therefor.
(3) Such transfer shall not be effected by merger,
consolidation, liquidation, or sale of all or substantially
all of the assets of the General Partner.
Section 11.3. Limited Partners' Rights to Transfer.
A. Prior to the third (3rd) anniversary of the closing of the
initial public offering of REIT Shares, no Limited Partner shall transfer all or
any portion of its Partnership Interest to any transferee without the consent of
the General Partner, which consent may be withheld in its sole and absolute
discretion; provided, however, that any Limited Partner or transferee of
Partnership Units or Assignee may, at any time before or after such third
anniversary, without the consent of the General Partner, (i) transfer all or any
portion of its Partnership Interest to the General Partner or to the Affiliates
of the transferor or Affiliates of DGP, subject to the provisions of Section
11.6, (ii) transfer its Partnership Interest pursuant to its rights to effect an
Exchange or a Put as provided in Section 8.6 hereof or transfer its Partnership
Interest pursuant to its rights to effect an exchange as provided in Section
16.7 and Section 17.7 and (iii) subject to Section 11.6, pledge (a "Pledge") all
or any portion of its Partnership Interest to a lending institution which is not
an Affiliate of such Limited Partner, as collateral or security for a bona fide
loan or other extension of credit, and transfer such pledged Partnership
Interest to such lending institution in connection with the exercise of remedies
under such loan or extension or credit. After such third (3rd) anniversary, each
Limited Partner, and each transferee of Partnership Units or Assignee shall also
have the right to transfer all or any portion of its Partnership Interest to any
Person, subject to the provisions of Section 11.6 and to satisfaction of each of
the following conditions; provided, however, that any transfer or series of
transfers by DGP or Dallas P. Price each of 625,000 Partnership Units to Oaks
Christian High School shall not be subject to satisfaction of the conditions
contained in paragraphs (b), (c) and (d) of this Section 11.3 A:
(a) General Partner Right of First Refusal. The transferring Partner shall
give written notice of the proposed transfer to the General Partner,
which notice
61
shall state (i) the identity of the proposed transferee, and (ii) the
amount and type of consideration proposed to be received for the
transferred Partnership Units. The General Partner shall have ten (10)
Business Days upon which to give the transferring Partner notice of its
election to acquire the Partnership Units on the proposed terms. If it
so elects, it shall purchase the Partnership Units on such terms within
ten (10) Business Days after giving notice of such election; provided,
that, in the event that the proposed terms involve a purchase for cash,
the General Partner may at its election deliver in lieu of all or any
portion of such cash a note payable to the transferring Partner at a
date as soon as reasonably practicable but in no event later than 180
days after such purchase, and bearing interest at an annual rate equal
to the total dividends declared with respect to one REIT Share for the
four preceding fiscal quarters of the General Partner, divided by the
Value of a REIT Share as of the closing of such purchase; and,
provided, further, that such closing may be deferred to the extent
necessary to effect compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, if applicable, and any other applicable
requirements of law. If it does not so elect, the transferring Partner
may transfer such Partnership Units to a third party, on terms no more
favorable to the transferee than the proposed terms, subject to the
other conditions of this Section 11.3.
(b) Qualified Transferee. Any transfer of a Partnership Interest in Common
Units shall be made only to a single Qualified Transferee; provided,
that, for such purposes, all Qualified Transferees which are
Affiliates, or which comprise investment accounts or funds managed by a
single Qualified Transferee and its Affiliates, shall be considered
together to be a single Qualified Transferee; provided, further, that,
each transfer meeting the minimum transfer restriction of subsection
(c) below may be to a separate Qualified Transferee.
(c) Minimum Transfer Restriction. Any transferring Common Limited Partner
must transfer not less than the lesser of (i) greater of 50,000 Common
Units or one-third (1/3) of the number of Common Units owned by such
Partner as of the Effective Date, or (ii) all of the remaining Common
Units owned by such transferring Partner; provided, that, for purposes
of determining compliance with the foregoing restriction, all Common
Units owned by Affiliates of a Common Limited Partner shall be
considered to be owned by such Common Limited Partner.
(d) Transferee Agreement to Exchange. Any proposed transferee of Common
Units shall deliver to the General Partner a written agreement
reasonably satisfactory to the General Partner to the effect that,
subject to the ownership restrictions contained in the Charter, the
transferee will, (i) within six (6) months after consummation of the
Common Units transfer, Exchange its Common Units into REIT Shares in
accordance with the terms of the Exchange rights provided in Section
8.6, and (ii) to the extent
62
prohibited from effecting such an Exchange by virtue of such ownership
restrictions, effect a further Exchange of Common Units once during
each subsequent six-month period to the extent such ownership
restrictions then permit.
(e) No Further Transfers. The transferee of Common Units shall not be
permitted to effect any further transfer of the Common Units, other
than to its own Affiliates, Affiliates of DGP or to the General
Partner.
It is a condition to any transfer otherwise permitted
hereunder that the transferee assumes 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 Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Partner of its
obligations under this Agreement without the approval of the General Partner, in
its sole and absolute discretion. Notwithstanding the foregoing, any transferee
of any transferred Partnership Interest shall be subject to any and all
ownership limitations contained in the Charter which may limit or restrict such
transferee's ability to exercise its Exchange rights or the exchange rights set
forth in Section 16.7 and Section 17.7. Any transferee, whether or not admitted
as a Substituted Limited Partner, shall take subject to the obligations of the
transferor hereunder. Unless 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 11.5.
B. If a Limited Partner is subject to Incapacity, the
executor, administrator, trustee, committee, guardian, conservator 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, 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. The General Partner may prohibit any transfer otherwise
permitted under Section 11.3 by a Limited Partner of his Partnership Units if,
in the opinion of legal counsel to the Partnership, such transfer would require
the filing of a registration statement under the Securities Act by the
Partnership or would otherwise violate any federal or state securities laws or
regulations applicable to the Partnership or the Partnership Units.
D. No transfer by a Limited Partner of his Partnership Units
(including any Exchange or Put pursuant to Section 8.6, any redemption or
exchange pursuant to Sections 16.4, 16.7, 17.4 and 17.7, any other acquisition
of Common Units, Series A Preferred Units or Series B Preferred Units by the
General Partner or the Partnership) may be made to any person if (i) in the
opinion of legal counsel for the Partnership, it could result in the Partnership
being treated as an association taxable as a corporation, or (ii) except with
the consent of the General Partner, which may be given or withheld in its sole
and absolute discretion, 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.
63
E. No transfer of any Partnership Units may be made to a
lender to the Partnership or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose
loan constitutes a Nonrecourse Liability, without the consent of the General
Partner, in its sole and absolute discretion; provided that, as a condition to
such consent, the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem or exchange for the REIT Shares
Amount, the specified amount of REIT Series A Preferred Shares or the specified
amount of REIT Series B Preferred Shares, as the case may be, any Partnership
Units in which a security interest is held simultaneously with the time at which
such lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
F. Notwithstanding any other provisions in this Agreement to
the contrary, any transferee of Common Units that is an Affiliate of the
transferor shall be deemed to have the same rights and be subject to the same
limitations with respect to effecting an Exchange or Put pursuant to Section 8.6
or a transfer of Common Units pursuant to Section 11.3 as if such transferee had
been a Limited Partner as of the closing of the initial public offering of REIT
Shares or as of the Effective Date, as applicable.
Section 11.4. Substituted Limited Partners.
A. No Limited Partner shall have the right to substitute a
transferee (including transferees pursuant to transfers permitted by Section
11.3) as a Limited Partner in his place. The General Partner shall, however,
have the right to consent to the admission of a transferee of the interest of a
Limited Partner pursuant to this Section 11.4 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 interests to become a Substituted Limited Partner shall
not give rise to any cause of action against the Partnership or any 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. The admission of any transferee as a Substituted Limited
Partner shall be subject to the transferee executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
(including without limitation, the provisions of Section 12.4 and such other
documents or instruments as may be required to effect the admission, each in
form and substance satisfactory to the General Partner) and the acknowledgment
by such transferee that each of the representations and warranties set forth in
Section 3.4 hereof are true and correct with respect to such transferee as of
the date of the transfer of the Partnership Interest to such transferee and will
continue to be true to the extent required by such representations or
warranties.
C. Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address, number of
Partnership 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.
64
Section 11.5. Assignees.
If the General Partner, in its sole and absolute discretion,
does not consent to the admission of any permitted transferee under Section 11.3
as a Substituted Limited Partner, as described in Section 11.4, such transferee
shall be considered an Assignee for purposes of this Agreement. An Assignee
shall be entitled to all the rights of an assignee of a limited partnership
interest under the Act, including the right to receive distributions from the
Partnership and the share of Net Income, Net Losses, gain and loss attributable
to the Partnership Units assigned to such transferee, the rights to transfer the
Partnership Units provided in this Article 11, the rights to effect an Exchange
or a Put provided in Section 8.6 and the right of redemption or exchange for
REIT Series A Preferred Shares provided in Section 16.7 and the right of
redemption or exchange for REIT Series B Preferred Shares provided in Section
17.7., but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to effect a Consent with
respect to such Partnership Units on any matter presented to the Limited
Partners for approval (such Consent remaining with the transferor Limited
Partner). 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 Partnership Units.
Notwithstanding anything contained in this Agreement to the contrary, as a
condition to becoming an Assignee, any prospective Assignee must first execute
and deliver to the Partnership an acknowledgment that each of the
representations and warranties set forth in Section 3.4 hereof are true and
correct with respect to such prospective Assignee as of the date of the
prospective assignment of the Partnership Interest to such prospective Assignee
and will continue to be true to the extent required by such representations or
warranties.
Section 11.6. General Provisions.
A. No Limited Partner may withdraw from the Partnership other
than (i) as a result of a permitted transfer of all of such Limited Partner's
Partnership Units in accordance with this Article 11, with respect to which the
transferee becomes a Substituted Limited Partner, or (ii) pursuant to an
Exchange or a Put of all of its Common Units under Section 8.6 or a redemption
or exchange of all of such Limited Partner's Series A Preferred Units under
Section 16.4 or Section 16.7 or Series B Preferred Units under Section 17.4 of
Section 17.7.
B. Any Limited Partner who shall transfer all of his
Partnership Units in a transfer permitted pursuant to this Article 11 where such
transferee was admitted as a Substituted Limited Partner or pursuant to the
exercise of its rights of Exchange or Put of all of its Partnership Units under
Section 8.6 or its rights of redemption or exchange of all of its Series A
Preferred Units under Section 16.7 or its rights of redemption or exchange of
all of its Series B Preferred Units under Section 17.7 shall cease to be a
Limited Partner.
C. Transfers pursuant to this Article 11 may only be made as
of the first day of a fiscal quarter of the Partnership, unless the General
Partner otherwise consents, which shall not be unreasonably withheld.
D. If any Partnership Interest is transferred or assigned
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article 11 or
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exchanged or redeemed pursuant to Sections 8.6, 16.4, 16.7, 17.4 or 17.7 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 Interest
for such fiscal year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the fiscal year in accordance with Section 706(d) of the Code
using the interim closing of the books method. Except as otherwise required by
Section 706(d) of the Code or as otherwise determined by the General Partner (to
the extent consistent with Section 706(d) of the Code), solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or assignment occurs shall be allocated to the Person who is a Partner
as of midnight on the last day of said month and none of such items for the
calendar month in which a redemption or exchange occurs will be allocated to the
redeeming or exchanging Partner. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of such
transfer, assignment, exchange or redemption shall be made to the transferor
Partner, and all distributions of Available Cash thereafter, in the case of a
transfer or assignment other than an exchange or redemption, shall be made to
the transferee Partner.
E. In addition to any other restrictions on transfer herein
contained, including without limitation the provisions of this Article 11 and
Section 12.4, in no event may any transfer or assignment of a Partnership
Interest by any Partner (including any Exchange, Put, redemption of Series A
Preferred Units or exchange of Series A Preferred Units for REIT Series A
Preferred Shares, redemption of Series B Preferred Units or exchange of Series B
Preferred Units for REIT Series B Preferred Shares, or any other acquisition of
Common Units, Series A Preferred Units or Series B Preferred Units by the
Partnership or the General 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) except with the consent of the General
Partner, which may be given or withheld in its sole and absolute discretion, 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 a termination of the
Partnership for federal or state income tax purposes (except as a result of an
Exchange or Put, or redemption or exchange for cash or REIT Series A Preferred
Shares pursuant to Sections 16.4 and 16.7, or redemption or exchange for cash or
REIT Series B Preferred Shares, pursuant to Sections 17.4 and 17.7, of all
Partnership Units held by all Limited Partners); (v) if such transfer would, in
the opinion of counsel to the Partnership, cause the Partnership to cease to be
classified as a partnership for Federal or state income tax purposes (except as
a result of the Exchange or Put, and redemption or exchange for cash or REIT
Series A Preferred Shares pursuant to Sections 16.4 and 16.7, or redemption or
exchange for cash or REIT Series B Preferred Shares, pursuant to Sections 17.4
and 17.7 of all Partnership Units held by all Limited Partners); (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, or requires the registration of the
exchange of such Partnership Interest for any capital stock of the General
Partner, pursuant to any applicable federal or state securities laws (other than
pursuant to any applicable registration rights agreement); (ix) except with the
consent of the General Partner, which may be given or withheld in its sole and
absolute discretion, if such transfer is effectuated
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through an "established securities market" or a "secondary market" (or the
substantial equivalent thereof) within the meaning of Section 7704 of the Code
or such transfer could cause the Partnership to become a "Publicly Traded
Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of the
Code; (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; (xi) if the
transferee or assignee of such Partnership Interest is unable to make the
representations set forth in Section 3.4 or such transfer could otherwise
adversely affect the ability of the General Partner to remain qualified as a
REIT; or (xii) except with the consent of the General Partner, which consent may
be given or withheld in its sole and absolute discretion, if such transfer would
subject the General Partner to any additional taxes under Section 857 or Section
4981 of the Code.
F. The General Partner shall monitor the transfers of
interests in the Partnership (including any Exchange, Put, redemption of Series
A Preferred Units or exchange of Series A Preferred Units for REIT Series A
Preferred Shares, redemption of Series B Preferred Units or exchange of Series B
Preferred Units for REIT Preferred Shares, or any other acquisition of Common
Units, Series A Preferred Units or Series B Preferred Units by the Partnership
or the General Partner) to determine (i) if such interests are being traded on
an "established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code, and (ii)
whether such transfers of interests would result in the Partnership being unable
to qualify for at least one of the "safe harbors" set forth in Regulations
Section 1.7704-1 or such other applicable guidance published by the IRS setting
forth safe harbors under which interests will not be treated as "readily
tradable on a secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code including, without limitation, IRS
Notice 88-75, to the extent applicable (the "Safe Harbors"). The General Partner
shall have the authority, but shall not be required, to take all steps
reasonably necessary or appropriate in its sole and absolute discretion to
prevent any trading of interests which could cause the Partnership to become a
"publicly traded partnership" or any recognition by the Partnership of such
transfers or to insure that at least one of the Safe Harbors is met.
ARTICLE 12.
ADMISSION OF PARTNERS
Section 12.1. Admission of Successor General Partner.
A successor to all of the General Partner's General Partner Interest pursuant to
Section 11.2 hereof who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the General Partner effective
upon such transfer. Any such transferee 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. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring General Partner and such successor
as provided in Article 11 hereof.
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Section 12.2. Admission of Additional Limited Partners.
A. A Person (other than an existing Partner) who makes a
Capital Contribution to the Partnership in accordance with this Agreement shall
be admitted to the Partnership as an Additional Limited 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 and (ii) 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
12.2, 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 and absolute discretion (it being understood that such
consent is hereby granted with respect to all signatories of this Agreement).
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 receipt of the Capital
Contribution in respect of such Limited Partner, the documents set forth in
Paragraph A of this Section 12.2 hereof and the consent of the General Partner
to such admission. 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
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 interim closing books method. Except as otherwise
determined by the General Partner (to the extent consistent with Section 706 of
the Code), solely for purposes of making such allocations, each of such items
for the calendar month in which an admission of an Additional Limited Partner
occurs shall be allocated among all the Partners and Assignees including such
Additional Limited Partner. 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 other than the Additional Limited Partner
(other than in its capacity as an Assignee) and except as otherwise agreed to by
the Additional Limited Partners and the General Partner, and all distributions
of Available Cash thereafter shall be made to all Partners and Assignees
including such Additional Limited Partner.
Section 12.3. 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.
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Section 12.4. Limit on Number of Partners.
The Partnership shall not at any time have more than 100
Partners (including as Partners those persons indirectly owning an interest in
the Partnership through a partnership, limited liability company, S corporation
or grantor trust (such entity, a "flow through entity"), but only if
substantially all of the value of such person's interest in the flow through
entity is attributable to the flow through entity's interest (direct or
indirect) in the Partnership).
ARTICLE 13.
DISSOLUTION AND LIQUIDATION
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 of the General Partner, any successor General Partner shall
continue the business of the Partnership. 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, unless, within 90 days after the withdrawal, a Majority in Interest
of the Limited Partners and at least a Majority in Interest of all the remaining
partners agree in writing, in their sole and absolute discretion, to continue
the business of the Partnership and to the appointment, effective as of the date
of withdrawal, of a substitute General Partner;
C. an election to dissolve the Partnership made by the
General Partner, subject to the Consent of the Limited Partners;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
E. the sale of all or substantially all of the assets
and properties of the Partnership;
F. a bankruptcy of the General Partner within the
meaning of the Act, unless a majority in interest of the remaining Partners
agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such bankruptcy, of a
substitute General Partner; or
G. the Exchange, Put or other redemption or exchange
for REIT Shares or REIT Series A Preferred Shares of all Partnership Units
(other than those of the General Partner) pursuant to this Agreement.
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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 a Majority in Interest of the Limited Partners
(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 General Partner) shall be applied and distributed
in the following order:
(1) First, to the payment and discharge of or provision for all
of the Partnership's debts and liabilities to creditors
other than the Partners;
(2) Second, to the payment and discharge of or provision for
all of the Partnership's debts and liabilities to the
General Partner;
(3) Third, to the payment and discharge of or provision for all
of the Partnership's debts and liabilities to the other
Partners; and
(4) The balance, if any, to the General Partner and Limited
Partners in accordance with their positive Capital Account
balances, determined after taking into account all Capital
Account adjustments for the Partnership taxable year during
which the liquidation occurs (other than those made as a
result of the liquidating distribution set forth in this
Section 13.2.A(4)).
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 7.4.
B. Notwithstanding the provisions of Section 13.2.A hereof
which 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 and absolute 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.
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Section 13.3. Compliance with Timing Requirements of
Regulations.
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). If any Partner has a deficit balance in his Capital Account
(after giving effect to all contributions, distributions and allocations for the
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. In the discretion of the General Partner, 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:
(A) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the General Partner, in the same
proportions and the amount distributed to such trust by the Partnership would
otherwise have been distributed to the General partner and Limited Partners
pursuant to this Agreement; or
(B) withheld 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 withheld
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
Section 13.4. Deemed Distribution and Recontribution.
If the Partnership is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g) and no Liquidating Event has occurred,
and is continuing, the Partnership property shall not be liquidated, the
Partnership's debts and liabilities shall not be paid or discharged (except to
the extent due and payable in the ordinary course) and the Partnership's affairs
shall not be wound up. Instead, solely for federal income tax purposes, the
Partnership shall be deemed to have contributed the Partnership property in-kind
to a "new partnership," which shall be deemed to have taken the Partnership
property subject to all debts and liabilities of the Partnership. Immediately
thereafter, the Partnership shall be deemed to have been liquidated,
distributing new partnership interests to the Partners, all in accordance with
their respective Capital Accounts. The new partnership shall operate in
accordance with this Agreement.
Section 13.5. Rights of Limited Partners.
Except as otherwise provided in this Agreement, each Limited
Partner shall look solely to the assets of the Partnership for the return of his
Capital Contribution and shall have no right or power to demand or receive
property from the General Partner. Except as expressly set
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forth herein with respect to the rights, priorities and preferences of the
Preferred Limited Partners holding any series of Preferred Units, no Limited
Partner shall have priority over any other Limited Partner as to the return of
his Capital Contributions, distributions or allocations.
Section 13.6. Notice of Dissolution.
In the event a Liquidating Event occurs or an event occurs
that would, but for provisions of 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 and to all other parties with
whom the Partnership regularly conducts business (as determined in the
discretion of the General Partner) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Partnership
regularly conducts business (as determined in the discretion of the General
Partner).
Section 13.7. 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 and the Certificate 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 13.8. 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 13.9. Waiver of Partition.
Each Partner hereby waives any right to partition of the
Partnership property.
ARTICLE 14.
PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS
Section 14.1. Procedures For Actions And Consents of
Partners.
A. The actions requiring consent or approval of the Partners
or of the Limited Partners pursuant to this Agreement, including Sections 7.3,
16.5 and 17.5 or otherwise pursuant to applicable law, are subject to the
following procedures.
B. Amendments to this Agreement requiring the consent or
approval of Limited Partners may be proposed by the General Partner or by any
Limited Partners holding 25 percent or more of the Partnership Units held by
Limited Partners. Following such proposal, the General Partner shall submit any
proposed amendment to the Partners or to the Limited Partners, as appropriate.
The General Partner shall seek the written consent or approval of the Partners
or of the Limited Partners on the proposed amendment or shall call a meeting to
vote thereon and to
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transact any other business that it may deem appropriate. For purposes of
obtaining a written consent, 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 consent which is consistent with the General
Partner's recommendation (if so recommended) with respect to the proposal;
provided, that, an action shall become effective at such time as requisite
consents are received even if prior to such specified time.
C. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Common Limited Partners holding 25 percent or more of the Partnership
Interests held by 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
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 of the Percentage Interests of the Partners or Consent of the Limited
Partners is permitted or required under this Agreement, such vote or Consent may
be given at a meeting of Partners or may be given in accordance with the
procedure prescribed in Section 14.1.D.
D. Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by the percentage as is expressly required
by this Agreement for the action in question. Such consent may be in one
instrument or in several instruments, and shall have the same force and effect
as a vote of the Percentage Interests of the Partners (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.
E. Each Limited Partner may authorize any Person or Persons to
act for him by proxy on all matters in which a 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 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. Every proxy shall be
revocable at the pleasure of the Limited Partner executing it.
F. Each meeting of 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.
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 of written communication
(including by telecopy, facsimile, or commercial courier service) to the Partner
or Assignee at the address set forth in Exhibit A or such other address as the
Partners shall notify the General Partner in writing.
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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" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3. Pronouns and Plurals.
Whenever the context may require, any pronoun 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. Creditors.
Other than as expressly set forth herein with respect to
Indemnitees, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7. Waiver.
No failure or delay 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 any breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition,
Section 15.8. 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.
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Section 15.9. Applicable Law.
This Agreement shall be construed in accordance with and
governed by the laws (other than the law governing the choice of law) of the
State of Delaware, without regard to the principles of conflicts of law. In the
event of a conflict between any provision of this Agreement and any
non-mandatory provision of the Act, the provisions of this Agreement shall
control and take precedence.
Section 15.10. Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
Section 15.11. Limitation to Preserve REIT Status.
To the extent that any amount paid or credited to the General
Partner or its officers, directors, employees or agents pursuant to Section 7.4
or Section 7.7 would constitute gross income to the General Partner for purposes
of Sections 856(c)(2) or 856(c)(3) of the Code (a "General Partner Payment")
then, notwithstanding any other provision of this Agreement, the amount of such
General Partner Payments for any fiscal year shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.17% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in subsections
(A) through (H) of Section 856(c)(2) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(2) of the Code) derived by the
General Partner from sources other than those described in subsections (A)
through (H) of Section 856(c)(2) of the Code (but not including the amount of
any General Partner Payments); or
(ii) an amount equal to the excess, if any, of (a) 25% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in subsections
(A) through (I) of Section 856(c)(3) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(3) of the Code) derived by the
General Partner from sources other than those described in subsections (A)
through (I) of Section 856(c)(3) of the Code (but not including the amount of
any General Partner Payments);
provided, however, that General Partner Payments in excess of the amounts
set forth in subparagraphs (i) and (ii) above may be made if the General
Partner, as a condition precedent, obtains an opinion of tax counsel that the
receipt of such excess amounts would not adversely affect the General Partner's
ability to qualify as a REIT. To the extent General Partner Payments may not be
made in a year due to the foregoing limitations, such General Partner Payments
shall carry over and be treated as arising in the following year, provided,
however, that such amounts shall not carry over for more than five years, and if
not paid within such five year period, shall expire; provided further, that (i)
as General Partner Payments are made, such payments shall be applied first to
carry over amounts outstanding, if any, and (ii) with respect to carry over
amounts
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for more than one Partnership Year, such payments shall be applied to the
earliest Partnership Year first.
Section 15.12. Partition.
No Partner nor any successor-in-interest to a Partner shall
have the right while this Agreement remains in effect to have any property of
the Partnership partitioned, or to file a complaint or to institute any
proceeding at law or in equity to have such property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors and
assigns hereby waives any such right. It is the intention of the Partners that
the rights of the parties hereto and their successors-in-interest to Partnership
Property, as among themselves, shall be governed by the terms of this Agreement,
and that the rights of the Partners and their successors-in-interest shall be
subject to the limitations and restrictions as set forth in this Agreement.
Section 15.13. No Third-Party Rights Created Hereby.
The provisions of this Agreement are solely for the purpose of
defining the interests of the Partners, inter se; and no other person, firm or
entity (i.e., a party who is not a signatory hereto or a permitted successor to
such signatory hereto) shall have any right, power, title or interest by way of
subrogation or otherwise, in and to the rights, powers, title and provisions of
this Agreement.
Section 15.14. Entire Agreement.
This Agreement (together with the Contribution Agreements as
to rights and obligations in respect of the Series A Preferred Units and Series
B Preferred Units) contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
ARTICLE 16.
SERIES A PREFERRED UNITS
Section 16.1. Designation and Number
A series of Partnership Units in the Partnership designated as
8% Series A Cumulative Redeemable Preferred Units (the "Series A Preferred
Units") is hereby established. The number of Series A Preferred Units shall be
1,500,000.
Section 16.2. Distributions
A. Payment of Distributions. Subject to the rights of holders
of Parity Preferred Units as to the payment of distributions, pursuant to
Section 5.1 hereof, holders of Series A Preferred Units will be entitled to
receive, when, as and if declared by the Partnership acting through the General
Partner, out of Available Cash, cumulative preferential cash distributions at
the rate per annum of 8% of the original Capital Contribution per Series A
Preferred Unit. Such distributions shall be cumulative, shall accrue from the
original date of issuance and will be payable (A) quarterly (such quarterly
periods for purposes of payment and accrual will be the quarterly periods set
forth in this clause (A) and not calendar quarters) in arrears on or before
February 15, May 15, August 15 and November 15 of each year,
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commencing on May 15, 1998, and, (B) in the event of (i) an exchange of Series A
Preferred Units into REIT Series A Preferred Shares, or (ii) a redemption of
Series A Preferred Units, on the exchange date or redemption date, as applicable
(each a "Series A Preferred Unit Distribution Payment Date"), commencing (i) in
the case of Series A Preferred Units originally issued on March 4, 1998, on May
15, 1998 and (ii) in the case of all other Series A Preferred Units, on the
first of such payment dates to occur following their original date of issuance.
The amount of the distribution payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and for any period shorter than
a full quarterly period for which distributions are computed, the amount of the
distribution payable will be computed based on the ratio of the actual number of
days elapsed in such period to ninety (90) days. If any date on which
distributions are to be made on the Series A Preferred Units is not a Business
Day, then payment of the distribution to be made on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day is
in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. Distributions on the Series A Preferred Units will be
made to the holders of record of the Series A Preferred Units on the relevant
record dates, which will be fifteen (15) days prior to the relevant Preferred
Unit Distribution Payment Date (the "Series A Preferred Unit Partnership Record
Date").
B. Distributions Cumulative. Notwithstanding the foregoing,
distributions on the Series A Preferred Units will accrue whether or not the
terms and provisions of any agreement of the Partnership at any time prohibit
the current payment of distributions, whether or not the Partnership has
earnings, whether or not there are funds legally available for the payment of
such distributions and whether or not such distributions are authorized. Accrued
but unpaid distributions on the Series A Preferred Units will accumulate as of
the Preferred Unit Distribution Payment Date on which they first become payable.
Accumulated and unpaid distributions will not bear interest.
C. Priority as to Distributions. (iii) So long as any Series A
Preferred Units are outstanding, no distribution of cash or other property shall
be authorized, declared, paid or set apart for payment on or with respect to any
Junior Units, nor shall any cash or other property (other than capital stock of
the General Partner which corresponds in ranking to the Partnership Interests
being acquired) be set aside for or applied to the purchase, redemption or other
acquisition for consideration of any Series A Preferred Units, any Parity
Preferred Units or any Junior Units, unless, in each case, all distributions
accumulated on all Series A Preferred Units and all classes and series of
outstanding Parity Preferred Units have been paid in full. The foregoing
sentence will not prohibit (a) distributions payable solely in Junior Units, (b)
the exchange of Junior Units or Parity Preferred Units into Partnership
Interests of the Partnership ranking junior to the Series A Preferred Units, (c)
the redemption of Partnership Interests corresponding to REIT Series A Preferred
Shares, Parity Preferred Stock with respect to distributions or Junior Stock to
be purchased by the General Partner pursuant to the Charter with respect to the
General Partner's common stock and comparable charter provisions with respect to
other classes or series of capital stock of the General Partner to preserve the
General Partner's status as a real estate investment trust, provided that such
redemption shall be upon the same terms as the corresponding purchase pursuant
to Article IV of the Charter or such other comparable provisions, (d) the
acquisition of Common Units upon exercise of Put rights pursuant
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to Section 8.6 (i) with the proceeds of a sale of Common Units or other Junior
Units by the Partnership or proceeds received from the General Partner upon a
sale of REIT Shares or other Junior Stock by the General Partner or (ii) for
cash in an amount, which, when taken together with the aggregate amount of all
cash paid previously pursuant to this clause (ii) and the corresponding clause
(ii) of Section 17.2.C(i)(d), does not exceed $5.0 million, or (e) cash
distributions from the proceeds of sales of property of the Partnership pursuant
to Section 7.1.A(3).
(iv) So long as distributions have not been paid in full (or a
sum sufficient for such full payment is not irrevocably deposited in trust for
payment) upon the Series A Preferred Units, all distributions authorized and
declared on the Series A Preferred Units and all classes or series of
outstanding Parity Preferred Units shall be authorized and declared so that the
amount of distributions authorized and declared per Series A Preferred Unit and
such other classes or series of Parity Preferred Units shall in all cases bear
to each other the same ratio that accrued distributions per Series A Preferred
Unit and such other classes or series of Parity Preferred Units (which shall not
include any accumulation in respect of unpaid distributions for prior
distribution periods if such class or series of Parity Preferred Units do not
have cumulative distribution rights) bear to each other.
(v) Notwithstanding anything to the contrary set forth herein,
distributions on Partnership Interests held by either (a) the General Partner or
(b) any other holder of Partnership Interest in the Partnership, in each case
ranking junior to or on parity with the Series A Preferred Units may be made,
without preserving the priority of distributions described in Sections 16.2.C(i)
and (ii), but only to the extent such distributions are required to preserve the
real estate investment trust status of the General Partner and, in addition, in
the case of any holder other than the General Partner only to the extent
required by the Partnership Agreement.
D. No Further Rights. Holders of the Series A Preferred
Units shall not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions described
herein.
Section 16.3. Liquidation Proceeds
A. Upon voluntary or involuntary liquidation, dissolution or
winding-up of the Partnership, distributions on the Series A Preferred Units
shall be made in accordance with Article 13 of the Partnership Agreement.
B. Notice. Written notice of any such voluntary or
involuntary liquidation, dissolution or winding-up of the Partnership, stating
the payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by (i) fax
and (ii) by first class mail, postage pre-paid, not less than 30 and not more
that 60 days prior to the payment date stated therein, to each record holder of
the Series A Preferred Units at the respective addresses of such holders as the
same shall appear on the transfer records of the Partnership.
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C. No Further Rights. After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Series A Preferred Units will have no right or claim to any of the remaining
assets of the Partnership.
D. Consolidation, Merger or Certain Other Transactions.
The consolidation or merger or other business combination of the Partnership
with or into any corporation, trust or other entity (or of any corporation,
trust or other entity with or into the Partnership) shall not be deemed to
constitute a liquidation, dissolution or winding-up of the Partnership.
Section 16.4. Optional Redemption
A. Right of Optional Redemption. The Series A Preferred Units
may not be redeemed prior to March 4, 2003. On or after such date, the
Partnership shall have the right to redeem the Series A Preferred Units of any
Holder thereof, in whole or in part, at any time or from time to time, upon not
less than 30 nor more than 60 days' written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of such holder of Series A
Preferred Units (the "Series A Redemption Price"); provided, however, that no
redemption pursuant to this Section 16.4 will be permitted if the Redemption
Price does not equal or exceed the original Capital Contribution of such holder
plus the cumulative Series A Priority Return to the redemption date to the
extent not previously distributed. If fewer than all of the outstanding Series A
Preferred Units are to be redeemed, the Series A Preferred Units to be redeemed
shall be selected pro rata (as nearly as practicable without creating fractional
units).
B. Limitation on Redemption. (vi) The Series A Redemption
Price of the Series A Preferred Units (other than the portion thereof consisting
of accumulated but unpaid distributions) will be payable solely out of the sale
proceeds of capital stock of the General Partner, which will be contributed by
the General Partner to the Partnership as additional capital contribution, or
out of the sale of limited partner interests in the Partnership and from no
other source. For purposes of the preceding sentence, "capital stock" means any
equity securities (including Common Stock and Preferred Stock (as such terms are
defined in the Charter)), shares, participation or other ownership interests
(however designated) and any rights (other than debt securities convertible into
or exchangeable for equity securities) or options to purchase any of the
foregoing.
(ii) The Partnership may not redeem fewer than all of the
outstanding Series A Preferred Units unless all accumulated and unpaid
distributions have been paid on all Series A Preferred Units for all quarterly
distribution periods terminating on or prior to the date of redemption.
C. Procedures for Redemption. (i) Notice of redemption will be
(i) faxed, and (ii) mailed by the Partnership, by certified mail, postage
prepaid, not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series A Preferred Units at
their respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series A Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (a) the redemption
date, (b) the Redemption Price, (c) the aggregate number of Series
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A Preferred Units to be redeemed and if fewer than all of the outstanding Series
A Preferred Units are to be redeemed, the number of Series A Preferred Units to
be redeemed held by such holder, which number shall equal such holder's pro rata
share (based on the percentage of the aggregate number of outstanding Series A
Preferred Units that the total number of Series A Preferred Units held by such
holder represents) of the aggregate number of Series A Preferred Units to be
redeemed, (d) the place or places where such Series A Preferred Units are to be
surrendered for payment of the Redemption Price, (e) that distributions on the
Series A Preferred Units to be redeemed will cease to accumulate on such
redemption date and (f) that payment of the Redemption Price will be made upon
presentation and surrender of such Series A Preferred Units.
(ii) If the Partnership gives a notice of redemption in
respect of Series A Preferred Units (which notice will be irrevocable) then, by
12:00 noon, New York City time, on the redemption date, the Partnership will
deposit irrevocably in trust for the benefit of the holders of the Series A
Preferred Units being redeemed funds sufficient to pay the applicable Redemption
Price and will give irrevocable instructions and authority to pay such
Redemption Price to the holders of the Series A Preferred Units upon surrender
of the Series A Preferred Units by such holders at the place designated in the
notice of redemption. If the Series A Preferred Units are evidenced by a
certificate and if fewer than all Series A Preferred Units evidenced by any
certificate are being redeemed, a new certificate shall be issued upon surrender
of the certificate evidencing all Series A Preferred Units, evidencing the
unredeemed Series A Preferred Units without cost to the holder thereof. On and
after the date of redemption, distributions will cease to accumulate on the
Series A Preferred Units or portions thereof called for redemption, unless the
Partnership defaults in the payment thereof. If any date fixed for redemption of
Series A Preferred Units is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption. If
payment of the Redemption Price is improperly withheld or refused and not paid
by the Partnership, distributions on such Series A Preferred Units will continue
to accumulate from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the applicable Redemption Price.
Section 16.5. Voting Rights
A. General. Holders of the Series A Preferred Units
will not have any voting rights or right to consent to any matter requiring the
consent or approval of the Limited Partners, except as set forth below
and in Sections 7.3.D.
B. Certain Voting Rights. So long as any Series A
Preferred Units remains outstanding, the Partnership shall not, without the
affirmative vote of the holders of at least two-thirds of the Series A Preferred
Units outstanding at the time (i) authorize or create, or increase the
authorized or issued amount of, any class or series of Partnership Interests
ranking senior to the Series A Preferred Units with respect to payment of
distributions or rights upon liquidation, dissolution or winding-up or
reclassify any Partnership Interests of the Partnership into any such
80
Partnership Interest, or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any such Partnership
Interests, (ii) authorize or create, or increase the authorized or issued amount
of any Parity Preferred Units or reclassify any Partnership Interest of the
Partnership into any such Partnership Interest or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase any
such Partnership Interests, but only to the extent such Parity Preferred Units
are issued to an affiliate of the Partnership, other than the General Partner to
the extent the issuance of such interests was to allow the General Partner to
issue corresponding preferred stock to persons who are not affiliates of the
Partnership or (iii) either consolidate, merge into or with, or convey, transfer
or lease its assets substantially as an entirety to, any corporation or other
entity or amend, alter or repeal the provisions of the Partnership Agreement
(including, without limitation, this Article 16), whether by merger,
consolidation or otherwise, in each case in a manner that would materially and
adversely affect the powers, special rights, preferences, privileges or voting
power of the Series A Preferred Units or the holders thereof; provided, however,
that with respect to the occurrence of any event set forth in (iii) above, so
long as (a) the Partnership is the surviving entity and the Series A Preferred
Units remain outstanding with the terms thereof unchanged, or (b) the resulting,
surviving or transferee entity is a partnership, limited liability company or
other pass-through entity organized under the laws of any state and substitutes,
for the Series A Preferred Units, other interests in such entity having
substantially the same terms and rights as the Series A Preferred Units,
including with respect to distributions, voting rights and rights upon
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect such rights, privileges
or voting powers of the holders of the Series A Preferred Units; and provided
further that any increase in the amount of Partnership Interests or the creation
or issuance of any other class or series of Partnership Interests, in each case
ranking (a) junior to the Series A Preferred Units with respect to payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up, or (b) on a parity to the Series A Preferred Units with respect to
payment of distributions or the distribution of assets upon liquidation,
dissolution or winding-up to the extent such Partnership Interest are not issued
to an affiliate of the Partnership, other than the General Partner to the extent
the issuance of such interests was to allow the General Partner to issue
corresponding preferred stock to persons who are not affiliates of the
Partnership, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
Section 16.6. Transfer Restrictions
The Series A Preferred Units shall be subject to the
provisions of Article 11 hereof; provided, however, that the Series A Preferred
Units shall not be subject to the transfer restrictions described in Section
11.3.A hereof except for the last paragraph of Section 11.3.A (to which the
Series A Preferred Units shall be subject). No transfer of the Series A
Preferred Units is permitted, without the consent of the General Partner, which
consent may be given or withheld in its sole and absolute discretion, if such
transfer would result in more than four partners holding all outstanding Series
A Preferred Units within the meaning of Treasury Regulation Section
1.7704-1(h)(3); provided, however, that the General Partner's consent may not be
unreasonably withheld if (a) such transfer would not result in more than ten
partners holding all outstanding Series A Preferred Units within the meaning of
Treasury Regulation Section 1.7704-1(h)(3) and (b) the General Partner is
relying on a provision other than Treasury Regulation Section 1.7704-1(h) to
avoid classification of Operating Partnership as a "publicly traded partnership"
within the
81
meaning of Code Section 7704 (a "PTP"). In addition, no transfer may be made to
any person if such transfer would cause the exchange of the Series A Preferred
Units for REIT Series A Preferred Shares, as provided herein, to be required to
be registered under the Securities Act of 1933, as amended, or any state
securities laws.
Section 16.7. Exchange Rights
A. Right to Exchange. (viii) The Series A Preferred Units will
be exchangeable in whole but not in part unless expressly otherwise provided
herein at anytime on or after March 4, 2008, at the option of 51% of the holders
of all outstanding Series A Preferred Units, for authorized but previously
unissued REIT Series A Preferred Shares at an exchange rate of one REIT Series A
Preferred Share from the General Partner for one Series A Preferred Unit,
subject to adjustment as described below (the "Exchange Price"), provided that
the Series A Preferred Units will become exchangeable at any time, in whole but
not in part, unless expressly otherwise provided herein, at the option of 51% of
the holders of all outstanding Series A Preferred Units for REIT Series A
Preferred Shares, if (y) at any time full distributions shall not have been
timely made on any Series A Preferred Unit with respect to six (6) prior
quarterly distribution periods, whether or not consecutive, provided, however,
that a distribution in respect of Series A Preferred Units shall be considered
timely made if made within two (2) Business Days after the applicable Preferred
Unit Distribution Payment Date if at the time of such late payment there shall
not be any prior quarterly distribution periods in respect of which full
distributions were not timely made or (z) upon receipt by a holder or holders of
Series A Preferred Units of (A) notice from the General Partner that the General
Partner or a Subsidiary of the General Partner has taken the position that the
Partnership is, or upon the consummation of an identified event in the immediate
future will be, a PTP and (B) an opinion rendered by an outside nationally
recognized independent counsel familiar with such matters addressed to a holder
or holders of Series A Preferred Units, that the Partnership is or likely is, or
upon the occurrence of a defined event in the immediate future will be or likely
will be, a PTP. In addition, the Series A Preferred Units may be exchanged for
REIT Series A Preferred Shares, in whole but not in part unless expressly
otherwise provided herein, at the option of 51% of the holders of all
outstanding Series A Preferred Units prior to March 4, 2008 and after March 4,
2001 if such holders of a Series A Preferred Units shall deliver to the General
Partner either (i) a private ruling letter addressed to such holder of Series A
Preferred Units or (ii) an opinion of independent counsel reasonably acceptable
to the General Partner based on the enactment of temporary or final Treasury
Regulations or the publication of a Revenue Ruling, in either case to the effect
that an exchange of the Series A Preferred Units at such earlier time would not
cause the Series A Preferred Units to be considered "stock and securities"
within the meaning of section 351(e) of the Code for purposes of determining
whether the holder of such Series A Preferred Units is an "investment company"
under section 721(b) of the Code if an exchange is permitted at such earlier
date. Furthermore, the Series A Preferred Units may be exchanged in whole but
not in part if any holder is a real estate investment trust within the meaning
of Sections 856 through 859 of the Code for Series A Preferred Shares (but only
if the exchange in whole may be accomplished consistently with the ownership
limitations set forth under the Series A Articles Supplementary (as defined
herein) (taking into account exceptions thereto and exemptions therefrom)) and
if at any time, (i) the Partnership reasonably determines that the assets and
income of the Partnership for a taxable year (disregarding the Price Family
Ownership) after 1999 would not satisfy the income and assets tests of Section
856 of the Code
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for such taxable year if the Partnership were a real estate investment trust
within the meaning of the Code or (ii) any such holder of Series A Preferred
Units shall deliver to the Partnership and the General Partner an opinion of
independent counsel reasonably acceptable to the General Partner to the effect
that, based on the assets and income of the Partnership for a taxable year after
1999, the Partnership would not satisfy the income and assets tests of Section
856 of the Code (disregarding the Price Family Ownership) for such taxable year
if the Partnership were a real estate investment trust within the meaning of the
Code and that such failure would create a meaningful risk that a holder of the
Series A Preferred Units would fail to maintain qualification as a real estate
investment trust.
(ix) Notwithstanding anything to the contrary set forth in
Section 16.7.A(i), if an Exchange Notice (as defined herein) has been delivered
to the General Partner, then the General Partner may, at its option, within ten
(10) Business Days after receipt of the Exchange Notice, elect to cause the
Partnership to redeem all or a portion of the outstanding Series A Preferred
Units for cash in an amount equal to the original Capital Contribution per
Series A Preferred Unit and all accrued and unpaid distributions thereon to the
date of redemption. If the General Partner elects to redeem fewer than all of
the outstanding Series A Preferred Units, the number of Series A Preferred Units
held by each holder to be redeemed shall equal such holder's pro-rata share
(based on the percentage of the aggregate number of outstanding Series A
Preferred Units that the total number of Series A Preferred Units held by such
holder represents) of the aggregate number of Series A Preferred Units being
redeemed.
(x) In the event an exchange of all Series A Preferred Units
pursuant to Section 16.7.A would violate the provisions on ownership limitation
of the General Partner set forth in Section 7 of the Articles Supplementary to
the Charter with respect to REIT Series A Preferred Shares (the "Series A
Articles Supplementary"), each holder of Series A Preferred Units shall be
entitled to exchange, pursuant to the provisions of Section 16.7.B, a number of
Series A Preferred Units which would comply with the provisions on the ownership
limitation of the General Partner set forth in such Section 7 of the Series A
Articles Supplementary, with respect to such holder, and any Series A Preferred
Units not so exchanged (the "Excess Units") shall be redeemed by the Partnership
for cash in an amount equal to the original Capital Contribution per Excess
Unit, plus any accrued and unpaid distributions thereon to the date of
redemption subject to any restriction thereon contained in any debt instrument
or agreement of the Partnership. In the event an exchange would result in Excess
Units, as a condition to such exchange, each holder of such units agrees to
provide representations and covenants reasonably requested by the General
Partner relating to (i) the widely held nature of the interests in such holder,
sufficient to assure the General Partner that the holder's ownership of stock of
the General Partner (without regard to the limits described above) will not
cause any individual to own in excess of 9.8% of the stock of the General
Partner; and (ii) to the extent such holder can so represent and covenant
without obtaining information from its owners, the holder's ownership of tenants
of the Partnership and its affiliates. For purposes of determining the number of
Excess Units under this Section 16.7.A(iii), the "Beneficial Ownership Limit"
and "Constructive Ownership Limit" set forth in the Series A Articles
Supplementary shall be deemed to be 9%. To the extent the General Partner would
not be able to pay the cash set forth above in exchange for the Excess Units,
and to the extent consistent with the Charter, the General Partner agrees that
it will grant to the holders of the Series A Preferred Units exceptions to the
Beneficial Ownership Limit and Constructive Ownership Limit set forth in the
Series A Articles Supplementary
83
sufficient to allow such holders to exchange all of their Series A Preferred
Units for REIT Series A Preferred Stock, provided such holders furnish to the
General Partner representations acceptable to the General Partner in its sole
and absolute discretion which assure the General Partner that such exceptions
will not jeopardize the General Partner's tax status as a REIT for purposes of
federal and applicable state law. Notwithstanding any provision of this
Agreement to the contrary, no Series A Limited Partner shall be entitled to
effect an exchange of Series A Preferred Units for REIT Series A Preferred
Shares to the extent that ownership or right to acquire such shares would cause
the Partner or any other Person or, in the opinion of counsel selected by the
General Partner, may cause the Partner or any other Person, to violate the
restrictions on ownership and transfer of REIT Series A Preferred Shares set
forth in the Charter. To the extent any such attempted exchange for REIT Series
A Preferred Shares would be in violation of the previous sentence, it shall be
void ab initio and such Series A Limited Partner shall not acquire any rights or
economic interest in the REIT Series A Preferred Shares otherwise issuable upon
such exchange.
(xi) The redemption of Series A Preferred Units described in
Section 16.7.A(ii) and (iii) shall be subject to the provisions of Section
16.4.B(i) and Section 16.4.C(ii); provided, however, that the term "Redemption
Price" in such Sections 16.4.B(i) and 16.4.C(ii) shall be read to mean the
original Capital Contribution per Series A Preferred Unit being redeemed plus
all accrued and unpaid distributions to the redemption date.
B. Procedure for Exchange and/or Redemption of Series A
Preferred Units. (i) Any exchange shall be exercised pursuant to a notice of
exchange (the "Exchange Notice") delivered to the General Partner by the
Partners representing at least 51% of the outstanding Series A Preferred Units
(or by Contributors and any assignees of Contributors that are REITs in the case
of an exchange pursuant to the last sentence of Section 16.7.A.(i) hereof) by
(a) fax and (b) by certified mail postage prepaid. The General Partner may
effect any exchange of Series A Preferred Units, or exercise its option to
redeem any portion of the Series A Preferred Units for cash pursuant to Section
16.7.A(ii) or redeem Excess Units pursuant to Section 16.7.A(iii), by delivering
to each holder of record of Series A Preferred Units, within ten (10) Business
Days following receipt of the Exchange Notice, (a) if the General Partner elects
to cause the Partnership to exchange any of the Series A Preferred Units then
outstanding, (1) certificates representing the Series A Preferred Shares being
issued in exchange for the Series A Preferred Units of such holder being
exchanged and (2) a written notice (a "Redemption Notice") stating (A) the
redemption date, which may be the date of such Redemption Notice or any other
date which is not later than sixty (60) days following the receipt of the
Exchange Notice, (B) the redemption price, (C) the place or places where the
Series A Preferred Units are to be surrendered and (D) that distributions on the
Series A Preferred Units will cease to accrue on such redemption date, or (b) if
the General Partner elects to cause the Partnership to redeem all of the Series
A Preferred Units then outstanding in exchange for cash, a Redemption Notice.
Series A Preferred Units shall be deemed canceled (and any corresponding
Partnership Interest represented thereby deemed terminated) simultaneously with
the delivery of shares of Series A Preferred Shares (with respect to Series A
Preferred Units exchanged) or simultaneously with the redemption date (with
respect to Series A Preferred Units redeemed). Holders of Series A Preferred
Units shall deliver any canceled certificates representing Series A Preferred
Units which have been exchanged or redeemed to the office of General Partner
(which currently is located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
90405) within ten (10) Business Days
84
of the exchange or redemption with respect thereto. Notwithstanding anything to
the contrary contained herein, any and all Series A Preferred Units to be
exchanged for REIT Series A Preferred Stock pursuant to this Section 16.7 shall
be so exchanged in a single transaction at one time. As a condition to exchange,
the General Partner may require the holders of Series A Preferred Units to make
such representations as may be reasonably necessary for the General Partner to
establish that the issuance of REIT Series A Preferred Shares pursuant to the
exchange shall not be required to be registered under the Securities Act of
1933, as amended, or any state securities laws. Any Series A Preferred Shares
issued pursuant to this Section 16.7 shall be delivered as shares which are duly
authorized, validly issued, fully paid and nonassessable, free of any pledge,
lien, encumbrance or restriction other than those provided in the Charter, the
By-Laws of the General Partner, the Securities Act and relevant state securities
or blue sky laws.
The certificates representing the Series A Preferred Shares
issued upon exchange of the Series A Preferred Units shall contain the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR (B) IF THE CORPORATION HAS BEEN
FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS
EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE
RULES AND REGULATIONS THEREUNDER.
(ii) In the event of an exchange of Series A Preferred Units
for REIT Series A Preferred Shares, an amount equal to the accrued and unpaid
distributions to the date of exchange on any Series A Preferred Units tendered
for exchange shall (i) accrue on the REIT Series A Preferred Shares into which
such Series A Preferred Units are exchanged, and (ii) continue to accrue on such
Series A Preferred Units, which shall remain outstanding following such
exchange, with the General Partner as the holder of such REIT Series A Preferred
Units. Notwithstanding anything to the contrary set forth herein, in no event
shall a holder of a Series A Preferred Unit that was validly exchanged for REIT
Series A Preferred Shares pursuant to this section (other than the General
Partner now holding such Series A Preferred Unit), receive a distribution out of
Available Cash of the Partnership, if such holder, after exchange, is entitled
to receive a distribution out of Available Cash with respect to the REIT Series
A Preferred Shares for which such Series A Preferred Unit was exchanged or
redeemed. Further, for purposes of the foregoing, in the event of an exchange of
Series A Preferred Units for REIT Shares, if the accrued and unpaid
distributions per Series A Preferred Unit is not the same for all Series A
Preferred Units, the accrued and unpaid distributions per Series A Preferred
Unit for all Series A Preferred Units shall be equal to the greatest amount of
such accrued and unpaid distributions per Series A Preferred Unit on any such
unit.
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(iii) Fractional REIT Series A Preferred Shares are not to be
issued upon exchange but, in lieu thereof, the General Partner will pay a cash
adjustment based upon the fair market value of the REIT Series A Preferred
Shares on the day prior to the exchange date as determined in good faith by the
Board of Directors of the General Partner.
C. Adjustment of Exchange Price. In case the General Partner
shall be a party to any transaction (including, without limitation, a merger,
consolidation, statutory share exchange, tender offer for all or substantially
all of the General Partner's capital stock or sale of all or substantially all
of the General Partner's assets), in each case as a result of which the REIT
Series A Preferred Shares will be converted into the right to receive shares of
capital stock, other securities or other property (including cash or any
combination thereof), each Series A Preferred Unit will thereafter be
exchangeable into the kind and amount of shares of capital stock and other
securities and property receivable (including cash or any combination thereof)
upon the consummation of such transaction by a holder of that number of REIT
Series A Preferred Shares or fraction thereof into which one Series A Preferred
Unit was exchangeable immediately prior to such transaction. The General Partner
may not become a party to any such transaction unless the terms thereof are
consistent with the foregoing.
Section 16.8. No Conversion Rights
The holders of the Series A Preferred Units shall not have any
rights to convert such Partnership Units into any other class of Partnership
Interests or any interest in the Partnership.
Section 16.9. No Sinking Fund
No sinking fund shall be established for the retirement or
redemption of the Series A Preferred Units.
Section 16.10. Reports
In addition to the reports required pursuant to Section 9.3,
so long as any Series A Preferred Units are outstanding, the General Partner
shall cause to be mailed to each Series A Limited Partner:
A. As soon as available, but in no event later than ten
Business Days following the date on which the General Partner files its annual
report in respect of a fiscal year on Form 10-K, or such other applicable form
("Form 10-K"), with the Securities and Exchange Commission (the "Commission")
(or, in the event that the Partnership is required under rules and regulations
promulgated by the Commission to file with the Commission a Form 10-K separate
from General Partner's Form 10-K, ten business days after the filing of such
report by the Partnership with the Commission), a complete copy of the
Partnership's financial statements for such fiscal year including a balance
sheet, income statement and cash flow statement for such fiscal year prepared in
accordance with GAAP (except with respect to footnotes); and
B. As soon as available, but in no event later than ten
Business Days following the date on which the General Partner files its
quarterly report in respect of a fiscal quarter on Form 10-Q, or such other
applicable form ("Form 10-Q"), with the Commission (or, in the event the
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Partnership is required under rules and regulations promulgated by the
Commission to file with the Commission a Form 10-Q separate from the General
Partner's Form 10-Q, ten business days after the filing of such report by the
Partnership with the Commission), a complete copy of the Partnership's unaudited
quarterly financial statements for such fiscal quarter including a balance
sheet, income statement and cash flow statement for such fiscal quarter prepared
in accordance with GAAP (except with respect to footnotes).
ARTICLE XVII.
SERIES B PREFERRED UNITS
Section 17.1. Designation and Number. A series of
Partnership Units in the Partnership designated as 9.30% Series B Cumulative
Redeemable Preferred Units (the "Series B Preferred Units") is hereby
established. The number of Series B Preferred Units shall be 1,400,000.
Section 17.2. Distributions.
A. Payment of Distributions. Subject to the rights of holders
of Parity Preferred Units as to the payment of distributions, pursuant to
Section 5.1 hereof, holders of Series B Preferred Units will be entitled to
receive, when, as and if declared by the Partnership acting through the General
Partner, out of Available Cash, cumulative preferential cash distributions at
the rate per annum of 9.30% of the original Capital Contribution per Series B
Preferred Unit. Such distributions shall be cumulative, shall accrue from the
original date of issuance and will be payable (A) quarterly (such quarterly
periods for purposes of payment and accrual will be the quarterly periods ending
on the last day of the quarterly periods set forth in this clause (A) and not
calendar quarters) in arrears on February 15, May 15, August 15 and November 15
of each year, commencing on August 15, 1999, and, (B) in the event of (i) an
exchange of Series B Preferred Units into REIT Series B Preferred Shares, or
(ii) a redemption of Series B Preferred Units, on the exchange date or
redemption date, as applicable (each a "Series B Preferred Unit Distribution
Payment Date"). The amount of the distribution payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months and for any
period shorter than a full quarterly period for which distributions are
computed, the amount of the distribution payable will be computed based on the
ratio of the actual number of days elapsed in such period to ninety (90) days.
If any date on which distributions are to be made on the Series B Preferred
Units is not a Business Day, then payment of the distribution to be made on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. Distributions on the Series B Preferred Units
will be made to the holders of record of the Series B Preferred Units on the
relevant record dates, which will be fifteen (15) days prior to the relevant
Preferred Unit Distribution Payment Date (the "Series B Preferred Unit
Partnership Record Date").
B. Distributions Cumulative. Distributions on the Series B
Preferred Units will accrue whether or not declared, whether or not the terms
and provisions of any agreement of the Partnership at any time prohibit the
current payment of distributions, whether or not the Partnership has earnings,
whether or not there are funds legally available for the payment of such
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distributions and whether or not such distributions are authorized. Accrued but
unpaid distributions on the Series B Preferred Units will accumulate as of the
Preferred Unit Distribution Payment Date on which they first become payable.
Accumulated and unpaid distributions will not bear interest.
C. Priority as to Distributions. (i) So long as any Series B
Preferred Units are outstanding, no distribution of cash or other property shall
be authorized, declared, paid or set apart for payment on or with respect to
Junior Units, nor shall any cash or other property (other than capital stock of
the General Partner which corresponds in ranking to the Partnership Interests
being acquired) be set aside for or applied to the purchase, redemption or other
acquisition for consideration of any Series B Preferred Units, any Parity
Preferred Units or any Junior Units, unless, in each case, all distributions
accumulated on all Series B Preferred Units and all classes and series of
outstanding Parity Preferred Units have been paid in full. The foregoing
sentence will not prohibit (a) distributions payable solely in Junior Units, (b)
the exchange of Junior Units or Parity Preferred Units into Partnership
Interests of the Partnership ranking junior to the Series B Preferred Units as
to distributions and rights upon involuntary or voluntary liquidation,
dissolution or winding up of the Partnership, (c) the redemption of Partnership
Interests corresponding to REIT Series B Preferred Shares, Parity Preferred
Stock or Junior Stock to be purchased by the General Partner pursuant to the
Charter with respect to the General Partner's common stock and comparable
charter provisions with respect to other classes or series of capital stock of
the General Partner to preserve the General Partner's status as a real estate
investment trust, provided that such redemption shall be upon the same terms as
the corresponding purchase pursuant to Article IV of the Charter or such other
comparable provisions, (d) the acquisition of Common Units upon exercise of Put
rights pursuant to Section 8.6 (i) with the proceeds of a sale of Common Units
or other Junior Units by the Partnership or proceeds received from the General
Partner upon a sale of REIT Shares or other Junior Stock by the General Partner
or (ii) for cash in an amount, which, when taken together with the aggregate
amount of all cash paid previously pursuant to this clause (ii) and the
corresponding clause (ii) of Section 16.2.C(i)(d), does not exceed $5.0 million,
or (e) cash distributions from the proceeds of sales of property of the
Partnership pursuant to Section 7.1.A(3).
(ii) So long as distributions have not been paid in
full (or a sum sufficient for such full payment is not irrevocably deposited
in trust for payment) upon the Series B Preferred Units, all distributions
authorized and declared on the Series B Preferred Units and all classes
or series of outstanding Parity Preferred Units shall be authorized and declared
so that the amount of distributions authorized and declared per Series B
Preferred Unit and such other classes or series of Parity Preferred Units shall
in all cases bear to each other the same ratio that accrued distributions per
Series B Preferred Unit and such other classes or series of Parity Preferred
Units (which shall not include any accumulation in respect of unpaid
distributions for prior distribution periods if such class or series of Parity
Preferred Units do not have cumulative distribution rights) bear to each other.
(iii) Notwithstanding anything to the contrary set
forth herein, distributions on Partnership Interests held by either (a) the
General Partner or (b) any other holder of Partnership Interest in the
Partnership, in each case ranking junior to or on parity with the Series B
Preferred Units may be made, without preserving the priority of distributions
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described in Sections 17.2.C(i) and (ii), but only to the extent such
distributions are required to preserve the real estate investment trust status
of the General Partner and, in addition, in the case of any holder other than
the General Partner only to the extent required by the Partnership Agreement.
D. No Further Rights. Holders of the Series B Preferred
Units shall not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions described
herein.
Section 17.3. Liquidation Proceeds.
A. Upon voluntary or involuntary liquidation, dissolution or
winding-up of the Partnership, distributions on the Series B Preferred Units
shall be made in accordance with Article 13 of the Partnership Agreement.
B. Notice. Written notice of any such voluntary or
involuntary liquidation, dissolution or winding-up of the Partnership, stating
the payment date or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable, shall be given by (i) fax
and (ii) by first class mail, postage pre-paid, not less than 30 days and not
more that 60 days prior to the payment date stated therein, to each record
holder of the Series B Preferred Units at the respective addresses of such
holders as the same shall appear on the transfer records of the Partnership.
C. No Further Rights. After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
Series B Preferred Units will have no right or claim to any of the remaining
assets of the Partnership.
D. Consolidation, Merger or Certain Other Transactions.
The consolidation or merger or other business combination of the Partnership
with or into any corporation, trust or other entity (or of any corporation,
trust or other entity with or into the Partnership) shall not be deemed to
constitute a liquidation, dissolution or winding-up of the Partnership.
Section 17.4. Optional Redemption.
A. Right of Optional Redemption. The Series B Preferred Units
may not be redeemed prior to July 28, 2004. On or after such date, the
Partnership shall have the right to redeem the Series B Preferred Units of any
holder thereof, in whole or in part, at any time or from time to time, upon not
less than 30 days nor more than 60 days' written notice, at a redemption price,
payable in cash, equal to the Capital Account balance of such holder of Series B
Preferred Units (the "Series B Redemption Price"); provided, however, that no
redemption pursuant to this Section 17.4 will be permitted if the Series B
Redemption Price does not equal or exceed the original Capital Contribution of
such holder plus the cumulative Series B Priority Return to the redemption date
to the extent not previously distributed. If fewer than all of the outstanding
Series B Preferred Units are to be redeemed, the Series B Preferred Units to be
redeemed shall be selected pro rata (as nearly as practicable without creating
fractional units).
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B. Limitation on Redemption.
(i) The Series B Redemption Price of the Series
B Preferred Units (other than the portion thereof consisting of accumulated
but unpaid distributions) will be payable solely out of the sale proceeds of
capital stock of the General Partner, which will be contributed by the
General Partner to the Partnership as an additional capital contribution, or
out of the sale of limited partner interests in the Partnership and from no
other source. For purposes of the preceding sentence, "capital stock" means any
equity securities (including Common Stock and Preferred Stock (as such terms are
defined in the Charter)), shares, participation or other ownership interests
(however designated) and any rights (other than debt securities convertible into
or exchangeable for equity securities) or options to purchase any of the
foregoing.
(ii) The Partnership may not redeem fewer than
all of the outstanding Series B Preferred Units unless all accumulated and
unpaid distributions have been paid on all Series B Preferred Units for all
quarterly distribution periods terminating on or prior to the date of
redemption.
C. Procedures for Redemption.
(i) Notice of redemption will be (i) faxed, and
(ii) mailed by the Partnership, by certified mail, postage prepaid, not less
than 30 days nor more than 60 days prior to the redemption date, addressed to
the respective holders of record of the Series B Preferred Units at their
respective addresses as they appear on the records of the Partnership. No
failure to give or defect in such notice shall affect the validity of the
proceedings for the redemption of any Series B Preferred Units except as to the
holder to whom such notice was defective or not given. In addition to any
information required by law, each such notice shall state: (a) the redemption
date, (b) the Series B Redemption Price, (c) the aggregate number of Series B
Preferred Units to be redeemed and if fewer than all of the outstanding Series B
Preferred Units are to be redeemed, the number of Series B Preferred Units to be
redeemed held by such holder, which number shall equal such holder's pro rata
share (based on the percentage of the aggregate number of outstanding Series B
Preferred Units that the total number of Series B Preferred Units held by such
holder represents) of the aggregate number of Series B Preferred Units to be
redeemed, (d) the place or places where such Series B Preferred Units are to be
surrendered for payment of the Series B Redemption Price, (e) that distributions
on the Series B Preferred Units to be redeemed will cease to accumulate on such
redemption date and (f) that payment of the Series B Redemption Price will be
made upon presentation and surrender of such Series B Preferred Units.
(ii) If the Partnership gives a notice of
redemption in respect of Series B Preferred Units (which notice will be
irrevocable) then, by 12:00 noon, New York City time, on the redemption
date, the Partnership will deposit irrevocably in trust for the benefit of the
holders of the Series B Preferred Units being redeemed funds sufficient to
pay the applicable Series B Redemption Price and will give irrevocable
instructions and authority to pay such Series B Redemption Price to the
holders of the Series B Preferred Units upon surrender of the Series B
Preferred Units by such holders at the place designated in the notice of
redemption. If the Series B Preferred Units are evidenced by a certificate and
if fewer than all Series B Preferred Units evidenced by any certificate are
being redeemed, a new certificate shall be issued upon surrender
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of the certificate evidencing all Series B Preferred Units, evidencing the
unredeemed Series B Preferred Units without cost to the holder thereof. On and
after the date of redemption, distributions will cease to accumulate on the
Series B Preferred Units or portions thereof called for redemption, unless the
Partnership defaults in the payment thereof. If any date fixed for redemption of
Series B Preferred Units is not a Business Day, then payment of the Series B
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Series B Redemption Price is improperly withheld
or refused and not paid by the Partnership, distributions on such Series B
Preferred Units will continue to accumulate from the original redemption date to
the date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the applicable Series
B Redemption Price.
Section 17.5. Voting Rights.
A. General. Holders of the Series B Preferred Units
will not have any voting rights or right to consent to any matter requiring the
consent or approval of the Limited Partners, except as set forth below and in
Section 7.3.D.
B. Certain Voting Rights. So long as any Series B
Preferred Units remain outstanding, the Partnership shall not, without the
affirmative vote of the holders of at least two-thirds of the Series B Preferred
Units outstanding at the time (i) authorize or create, or increase the
authorized or issued amount of, any class or series of Partnership Interests
ranking senior to the Series B Preferred Units with respect to payment of
distributions or rights upon liquidation, dissolution or winding-up or
reclassify any Partnership Interests of the Partnership into any such senior
Partnership Interest, or create, authorize or issue any obligations or security
convertible into or evidencing the right to purchase any such senior Partnership
Interests, (ii) authorize or create, or increase the authorized or issued amount
of any Parity Preferred Units or reclassify any Partnership Interest of the
Partnership into any such Partnership Interest or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase any
such Partnership Interests, but only to the extent such Parity Preferred Units
are issued to an affiliate of the Partnership, other than the General Partner to
the extent the issuance of such interests was to allow the General Partner to
issue corresponding preferred stock to persons who are not affiliates of the
Partnership or (iii) either consolidate, merge into or with, or convey, transfer
or lease its assets substantially as an entirety to, any corporation or other
entity or amend, alter or repeal the provisions of the Partnership Agreement
(including, without limitation, this Article 17), whether by merger,
consolidation or otherwise, in each case in a manner that would materially and
adversely affect the powers, special rights, preferences, privileges or voting
power of the Series B Preferred Units or the holders thereof; provided, however,
that with respect to the occurrence of any event set forth in (iii) above, so
long as (a) the Partnership is the surviving entity and the Series B Preferred
Units remain outstanding with the terms thereof unchanged, or (b) the resulting,
surviving or transferee entity is a partnership, limited liability company or
other pass-through entity organized under the laws of any state and substitutes,
for the Series B Preferred Units, other interests in such entity having
substantially the same terms and rights as the Series B Preferred Units,
including with respect to distributions, voting rights and rights upon
91
liquidation, dissolution or winding-up, then the occurrence of any such event
shall not be deemed to materially and adversely affect such rights, privileges
or voting powers of the holders of the Series B Preferred Units; and provided
further that any increase in the amount of Partnership Interests or the creation
or issuance of any other class or series of Partnership Interests, in each case
ranking (a) junior to the Series B Preferred Units with respect to payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up, or (b) on a parity with the Series B Preferred Units with respect to
payment of distributions and the distribution of assets upon liquidation,
dissolution or winding-up to the extent such Partnership Interest are not issued
to an affiliate of the Partnership, other than the General Partner to the extent
the issuance of such interests was to allow the General Partner to issue
corresponding preferred stock to persons who are not affiliates of the
Partnership, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
Section 17.6. Transfer Restrictions.
The Series B Preferred Units shall be subject to the
provisions of Article 11 hereof; provided, however, that the Series B Preferred
Units shall not be subject to the transfer restrictions described in Section
11.3.A hereof except for the last paragraph of Section 11.3.A (to which the
Series B Preferred Units shall be subject). No transfer of the Series B
Preferred Units is permitted, without the consent of the General Partner, which
consent may be given or withheld in its sole and absolute discretion, if such
transfer would result in more than four partners holding all outstanding Series
B Preferred Units within the meaning of Treasury Regulation Section
1.7704-1(h)(1)(ii) (without regard to Treasury Regulation Section
1.7704-1(h)(3)(ii); provided, however, that the General Partner's consent may
not be unreasonably withheld if (a) such transfer would not result in more than
ten partners holding all outstanding Series B Preferred Units within the meaning
of such Treasury Regulation Sections and (b) the General Partner is relying on a
provision other than Treasury Regulation Section 1.7704-1(h) to avoid
classification of Operating Partnership as PTP. In addition, no transfer may be
made to any person if such transfer would cause the exchange of the Series B
Preferred Units for REIT Series B Preferred Shares, as provided herein, to be
required to be registered under the Securities Act, or any state securities
laws.
Section 17.7. Exchange Rights.
A. Right to Exchange.
(i) The Series B Preferred Units will be
exchangeable in whole but not in part unless expressly otherwise provided herein
at anytime on or after July 28, 2009, at the option of 51% of the holders of all
outstanding Series B Preferred Units, for authorized but previously unissued
REIT Series B Preferred Shares at an exchange rate of one REIT Series B
Preferred Share from the General Partner for one Series B Preferred Unit,
subject to adjustment as described below (the "Series B Exchange Price"),
provided that the Series B Preferred Units will become exchangeable at any time,
in whole but not in part, unless expressly otherwise provided herein, at the
option of 51% of the holders of all outstanding Series B Preferred Units for
REIT Series B Preferred Shares, if (y) at any time full distributions shall not
have been timely made on any Series B Preferred Unit with respect to six (6)
prior quarterly distribution periods, whether or not consecutive, provided,
however, that a distribution in respect of Series B
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Preferred Units shall be considered timely made if made within two (2) Business
Days after the Series B Preferred Unit Distribution Payment Date if at the time
of such late payment there shall not be any prior quarterly distribution periods
in respect of which full distributions were not timely made or (z) upon receipt
by a holder or holders of Series B Preferred Units of (A) notice from the
General Partner that the General Partner or a Subsidiary of the General Partner
has taken the position that the Partnership is, or upon the consummation of an
identified event in the immediate future will be, a PTP and (B) an opinion
rendered by an outside nationally recognized independent counsel familiar with
such matters addressed to a holder or holders of Series B Preferred Units, that
the Partnership is or likely is, or upon the occurrence of a defined event in
the immediate future will be or likely will be, a PTP. In addition, the Series B
Preferred Units may be exchanged for REIT Series B Preferred Shares, in whole
but not in part unless expressly otherwise provided herein, at the option of 51%
of the holders of all outstanding Series B Preferred Units prior to July 28,
2009 and after July 28, 2002 if such holders of a Series B Preferred Units shall
deliver to the General Partner either (i) a private ruling letter addressed to
such holder of Series B Preferred Units or (ii) an opinion of independent
counsel reasonably acceptable to the General Partner based on the enactment of
temporary or final Treasury Regulations or the publication of a Revenue Ruling,
in either case to the effect that an exchange of the Series B Preferred Units at
such earlier time would not cause the Series B Preferred Units to be considered
"stock and securities" within the meaning of section 351(e) of the Code for
purposes of determining whether the holder of such Series B Preferred Units is
an "investment company" under section 721(b) of the Code if an exchange is
permitted at such earlier date. Furthermore, the Series B Preferred Units may be
exchanged in whole but not in part if any holder is a real estate investment
trust within the meaning of Sections 856 through 859 of the Code for Series B
Preferred Shares (but only if the exchange in whole may be accomplished
consistently with the ownership limitations set forth under the Series B
Articles Supplementary (as defined herein) (taking into account exceptions
thereto and exemptions therefrom)) and if at any time, (i) the Partnership
reasonably determines that the assets and income of the Partnership for a
taxable year (disregarding the Price Family Ownership) after 1999 would not
satisfy the income and assets tests of Section 856 of the Code for such taxable
year if the Partnership were a real estate investment trust within the meaning
of the Code or (ii) any such holder of Series B Preferred Units shall deliver to
the Partnership and the General Partner an opinion of independent counsel
reasonably acceptable to the General Partner to the effect that, based on the
assets and income of the Partnership for a taxable year after 1999, the
Partnership would not satisfy the income and assets tests of Section 856 of the
Code (disregarding the Price Family Ownership) for such taxable year if the
Partnership were a real estate investment trust within the meaning of the Code
and that such failure would create a meaningful risk that a holder of the Series
B Preferred Units would fail to maintain qualification as a real estate
investment trust.
(ii) Notwithstanding anything to the contrary set
forth in Section 17.7.A(i), if a Series B Exchange Notice (as defined herein)
has been delivered to the General Partner, then the General Partner may, at its
option, within ten (10) Business Days after receipt of the Series B Exchange
Notice, elect to cause the Partnership to redeem all or a portion of the
outstanding Series B Preferred Units for cash in an amount equal to the original
Capital Contribution per Series B Preferred Unit and all accrued and unpaid
distributions thereon to the date of redemption. If the General Partner elects
to redeem fewer than all of the outstanding Series B Preferred Units, the number
of Series B Preferred Units held by each holder to be redeemed shall equal such
holder's pro rata share (based on the percentage of the aggregate
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number of outstanding Series B Preferred Units that the total number of Series B
Preferred Units held by such holder represents) of the aggregate number of
Series B Preferred Units being redeemed.
(iii) In the event an exchange of all Series B
Preferred Units pursuant to Section 17.7.A would violate the provisions on
ownership limitation of the General Partner set forth in Section 7 of Article
THIRD of the Articles Supplementary to the Charter with respect to REIT
Series B Preferred Shares (the "Series B Articles Supplementary"), each
holder of Series B Preferred Units shall be entitled to exchange, pursuant
to the provisions of Section 17.7.B, a number of Series B Preferred Units which
would comply with the provisions on the ownership limitation of the General
Partner set forth in such Section 7 of Article THIRD of the Series B Articles
Supplementary, with respect to such holder, and any Series B Preferred Units
not so exchanged (the "Series B Excess Units") shall be redeemed by the
Partnership for cash in an amount equal to the original Capital Contribution
per Excess Unit, plus any accrued and unpaid distributions thereon to the date
of redemption subject to any restriction thereon contained in any debt
instrument or agreement of the Partnership. In the event an exchange would
result in Series B Excess Units, as a condition to such exchange, each holder of
such units agrees to provide representations and covenants reasonably requested
by the General Partner relating to (i) the widely held nature of the interests
in such holder, sufficient to assure the General Partner that the holder's
ownership of stock of the General Partner (without regard to the limits
described above) will not cause any individual to own in excess of 9.8% of the
stock of the General Partner; and (ii) to the extent such holder can so
represent and covenant without obtaining information from its owners (other than
its direct or indirect parent corporation, partnership or limited liability
company and not the holders of any interests in such parent), the holder's
ownership of tenants of the Partnership and its affiliates. For purposes of
determining the number of Series B Excess Units under this Section 17.7.A(iii),
the "Beneficial Ownership Limit" and "Constructive Ownership Limit" set forth in
the Series B Articles Supplementary shall be deemed to be 9%. To the extent the
General Partner would not be able to pay the cash set forth above in exchange
for the Series B Excess Units, and to the extent consistent with the Charter,
the General Partner agrees that it will grant to the holders of the Series B
Preferred Units exceptions to the Beneficial Ownership Limit and Constructive
Ownership Limit set forth in the Series B Articles Supplementary sufficient to
allow such holders to exchange all of their Series B Preferred Units for REIT
Series B Preferred Stock, provided such holders furnish to the General Partner
representations acceptable to the General Partner in its sole and absolute
discretion which assure the General Partner that such exceptions will not
jeopardize the General Partner's tax status as a REIT for purposes of federal
and applicable state law. Notwithstanding any provision of this Agreement to the
contrary, no Series B Limited Partner shall be entitled to effect an exchange of
Series B Preferred Units for REIT Series B Preferred Shares to the extent that
ownership or right to acquire such shares would cause the Partner or any other
Person or, in the opinion of counsel selected by the General Partner, may cause
the Partner or any other Person, to violate the restrictions on ownership and
transfer of REIT Series B Preferred Shares set forth in the Charter. To the
extent any such attempted exchange for REIT Series B Preferred Shares would be
in violation of the previous sentence, it shall be void ab initio and such
Series B Limited Partner shall not acquire any rights or economic interest in
the REIT Series B Preferred Shares otherwise issuable upon such exchange.
94
(iv) The redemption of Series B Preferred Units
described in Section 17.7.A(ii) and (iii) shall be subject to the provisions of
Section 17.4.B(i) and Section 17.4.C(ii); provided, however, that the term
"Series B Redemption Price" in such Sections 17.4.B(i) and 17.4.C(ii) shall be
read to mean the original Capital Contribution per Series B Preferred Unit being
redeemed plus all accrued and unpaid distributions to the redemption date.
B. Procedure for Exchange and/or Redemption of Series B
Preferred Units.
(i) Any exchange shall be exercised pursuant to
a notice of exchange (the "Series B Exchange Notice") delivered to the General
Partner by the Partners representing at least 51% of the outstanding Series B
Preferred Units (or by Contributors and any assignees of Contributors that are
REITs in the case of an exchange pursuant to the last sentence of Section
17.7.A.(i) hereof) by (a) fax and (b) by certified mail postage prepaid.
The General Partner may effect any exchange of Series B Preferred Units, or
exercise its option to redeem any portion of the Series B Preferred Units
for cash pursuant to Section 17.7.A(ii) or redeem Series B Excess Units
pursuant to Section 17.7.A(iii), by delivering to each holder of record of
Series B Preferred Units, within ten (10) Business Days following receipt
of the Series B Exchange Notice, (a) if the General Partner elects to cause
the Partnership to exchange any of the Series B Preferred Units then
outstanding, (1) certificates representing the Series B Preferred Shares
being issued in exchange for the Series B Preferred Units of such holder being
exchanged and (2) a written notice (a "Series B Redemption Notice") stating (A)
the redemption date, which may be the date of such Redemption Notice or any
other date which is not later than sixty (60) days following the receipt of the
Series B Exchange Notice, (B) the redemption price, (C) the place or places
where the Series B Preferred Units are to be surrendered and (D) that
distributions on the Series B Preferred Units will cease to accrue on such
redemption date, or (b) if the General Partner elects to cause the Partnership
to redeem all of the Series B Preferred Units then outstanding in exchange for
cash, a Series B Redemption Notice. Series B Preferred Units shall be deemed
canceled (and any corresponding Partnership Interest represented thereby deemed
terminated) simultaneously with the delivery of shares of Series B Preferred
Shares (with respect to Series B Preferred Units exchanged) or simultaneously
with the redemption date (with respect to Series B Preferred Units redeemed).
Holders of Series B Preferred Units shall deliver any canceled certificates
representing Series B Preferred Units which have been exchanged or redeemed to
the office of General Partner (which currently is located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 90405) within ten (10) Business Days of the
exchange or redemption with respect thereto. Notwithstanding anything to the
contrary contained herein, any and all Series B Preferred Units to be exchanged
for REIT Series B Preferred Stock pursuant to this Section 17.7 shall be so
exchanged in a single transaction at one time. As a condition to exchange, the
General Partner may require the holders of Series B Preferred Units to make such
representations as may be reasonably necessary for the General Partner to
establish that the issuance of REIT Series B Preferred Shares pursuant to the
exchange shall not be required to be registered under the Securities Act or any
state securities laws. Any Series B Preferred Shares issued pursuant to this
Section 17.7 shall be delivered as shares which are duly authorized, validly
issued, fully paid and nonassessable, free of any pledge, lien, encumbrance or
restriction other than those provided in the Charter, the By-Laws of the General
Partner, the Securities Act and relevant state securities or blue sky laws.
95
The certificates representing the Series B Preferred Shares issued
upon exchange of the Series B Preferred Units shall contain the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR (B) IF THE
CORPORATION HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER OF THE SHARES REPRESENTED HEREBY, OR OTHER EVIDENCE
SATISFACTORY TO THE CORPORATION, THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS
THEREUNDER.
(ii) In the event of an exchange of Series B Preferred Units for
REIT Series B Preferred Shares, an amount equal to the accrued and unpaid
distributions to the date of exchange on any Series B Preferred Units tendered
for exchange shall (i) accrue on the REIT Series B Preferred Shares into which
such Series B Preferred Units are exchanged, and (ii) continue to accrue on such
Series B Preferred Units, which shall remain outstanding following such
exchange, with the General Partner as the holder of such REIT Series B Preferred
Units. Notwithstanding anything to the contrary set forth herein, in no event
shall a holder of a Series B Preferred Unit that was validly exchanged for REIT
Series B Preferred Shares pursuant to this section (other than the General
Partner now holding such Series B Preferred Unit), receive a distribution out of
Available Cash of the Partnership, if such holder, after exchange, is entitled
to receive a distribution out of Available Cash with respect to the REIT Series
B Preferred Shares for which such Series B Preferred Unit was exchanged or
redeemed. Further, for purposes of the foregoing, in the event of an exchange
of Series B Preferred Units for REIT Series B Preferred Shares, if the accrued
and unpaid distributions per Series B Preferred Unit is not the same for all
Series B Preferred Units, the accrued and unpaid distributions per Series B
Preferred Unit for all Series B Preferred Units shall be equal to the greatest
amount of such accrued and unpaid distributions per Series B Preferred Unit on
any such unit.
(iii) Fractional REIT Series B Preferred Shares are not to be
issued upon exchange but, in lieu thereof, the General Partner will pay a cash
adjustment based upon the fair market value of the REIT Series B Preferred
Shares on the day prior to the exchange date as determined in good faith by the
Board of Directors of the General Partner.
C. Adjustment of Series B Exchange Price. In case the General
-------------------------------------
Partner shall be a party to any transaction (including, without limitation, a
merger, consolidation, statutory share exchange, tender offer for all or
substantially all of the General Partner's capital stock or sale of all or
substantially all of the General Partner's assets), in each case as a result of
which the REIT Series B Preferred Shares will be converted into the right to
receive shares of capital stock, other securities or other property (including
cash or any combination thereof), each Series
96
B Preferred Unit will thereafter be exchangeable into the kind and amount of
shares of capital stock and other securities and property receivable (including
cash or any combination thereof) upon the consummation of such transaction by a
holder of that number of REIT Series B Preferred Shares or fraction thereof into
which one Series B Preferred Unit was exchangeable immediately prior to such
transaction. The General Partner may not become a party to any such transaction
unless the terms thereof are consistent with the foregoing. In addition, so long
as either a Series A Limited Partner or a Series B Limited Partner, or any of
their permitted successors or assigns, hold any Series A Preferred Units or
Series B Preferred Units, as the case may be, the General Partner shall not,
without the affirmative vote of the holders of at least two-thirds of the Series
A Preferred Units and Series B Preferred Units outstanding at the time: (a)
designate or create, or increase the authorized or issued amount of, any class
or series of shares ranking senior to the REIT Series A Preferred Shares and
REIT Series B Preferred Shares with respect to the payment of distributions or
rights upon liquidation, dissolution or winding-up or reclassify any authorized
shares of the General Partner into any such shares, or create, authorize or
issue any obligations or security convertible into or evidencing the right to
purchase any such shares; (b) designate or create, or increase the authorized or
issued amount of, any Parity Preferred Shares or reclassify any authorized
shares of the General Partner into any such shares, or create, authorize or
issue any obligations or security convertible into or evidencing the right to
purchase any such shares, but only to the extent that such Parity Preferred
Shares are issued to an Affiliate of the General Partner; (c) amend, alter or
repeal the provisions of the Charter or bylaws of the General Partner, whether
by merger, consolidation or otherwise, that would materially and adversely
affect the powers, special rights, preferences, privileges or voting power of
the REIT Series A Preferred Shares or REIT Series B Preferred Shares or the
holders thereof; provided, however, that any increase in the amount of
-------- -------
authorized Preferred Shares or the creation or issuance of any other series or
class of Preferred Shares, or any increase in the amount of authorized shares of
each class or series, in each case ranking either (1) junior to the REIT Series
A Preferred Shares and REIT Series B Preferred Shares with respect to the
payment of distributions and the distribution of assets upon liquidation,
dissolution or winding-up, or (2) on a parity with the REIT Series A Preferred
Shares and REIT Series B Preferred Shares with respect to the payment of
distributions and the distribution of assets upon liquidation, dissolution or
winding-up to the extent such Preferred Shares are not issued to an Affiliate of
the Company, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
Section 17.8. No Conversion Rights.
--------------------
The holders of the Series B Preferred Units shall not have any rights
to convert such Partnership Units into any other class of Partnership Interests
or any interest in the Partnership.
Section 17.9. No Sinking Fund.
---------------
No sinking fund shall be established for the retirement or redemption
of the Series B Preferred Units.
97
Section 17.10. Reports.
-------
In addition to the reports required pursuant to Section 9.3, so long
as any Series B Preferred Units are outstanding, the General Partner shall cause
to be mailed to each Series B Limited Partner:
A. As soon as available, but in no event later than ten Business Days
following the date on which the General Partner files its annual report in
respect of a fiscal year on Form 10-K, with the Commission (or, in the event
that the Partnership is required under rules and regulations promulgated by the
Commission to file with the Commission a Form 10-K separate from General
Partner's Form 10-K, ten Business Days after the filing of such report by the
Partnership with the Commission), a complete copy of the Partnership's financial
statements for such fiscal year including a balance sheet, income statement and
cash flow statement for such fiscal year prepared in accordance with GAAP
(except with respect to footnotes); and
B. As soon as available, but in no event later than ten Business Days
following the date on which the General Partner files its quarterly report in
respect of a fiscal quarter on Form 10-Q, with the Commission (or, in the event
the Partnership is required under rules and regulations promulgated by the
Commission to file with the Commission a Form 10-Q separate from the General
Partner's Form 10-Q, ten Business Days after the filing of such report by the
Partnership with the Commission), a complete copy of the Partnership's unaudited
quarterly financial statements for such fiscal quarter including a balance
sheet, income statement and cash flow statement for such fiscal quarter prepared
in accordance with GAAP (except with respect to footnotes).
(signature pages follow)
98
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
NATIONAL GOLF PROPERTIES, INC., as
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
BELAIR REAL ESTATE CORPORATION
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Executive Vice President
BELCREST REALTY CORPORATION
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: Executive Vice President
ARGOSY REALTY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------
Name:
Title:
BELMAR REALTY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------
Name:
Title:
BELPORT REALTY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------
Name:
Its:
BELRIEVE REALTY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------
Name:
Its:
EXHIBIT A
PARTNERS, CONTRIBUTIONS AND
PARTNERSHIP INTERESTS
Agreed Value of Value of
Name Cash Contributed Contributed
of Partner Contributions Property* Property
----------------- ----------------- --------------- ---------------
(In thousands,
except Units)
Common Units:
General Partner
National Golf Properties, $ 176,777 $57,516 $59,367
Inc.
Common Limited Partners
▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust - $66,169 $84,994
Dallas P. Price Trust - 66,169 84,994
Black Lake / Penasquitos - 602 602
Ltd.
American Golf Corporation - 140 140
Supermarine Aviation, Ltd. - 3,107 3,112
RSJ Golf, Inc. - 137 224
Myreshan, Inc. - 3,041 4,660
Oaks Christian High School - 25,491 32,744
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1995
Revocable Trust - 5,064 6,530
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Income Trust - 1,225 2,019
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1993
Annuity Income Trust - 1,462 1,523
▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. - 1,705 2,651
Price
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ - 1,132 1,998
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ - 182 182
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - 619 768
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ - 509 659
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ - 1,528 1,976
- 178,282 229,776
------------- ---------- -----------
Total Common Units $ 176,777 $235,798 $289,143
Preferred Units:
Series A Limited Partners
Belcrest Realty Corporation $38,000,000
Belair Real Estate $29,194,600
Corporation
Argosy Realty Corporation $ 1,951,350
Belport Realty Corporation $ 1,951,350
Belmar Realty Corporation $ 1,951,350
Belrieve Realty Corporation $ 1,951,350
----------------
$75,000,000
Series B Limited Partners
-----------------------------
Belcrest Realty Corporation $20,000,000
Belair Real Estate
Corporation $15,000,000
----------------
$35,000,000
Interest
Total Partnership (by class
Contributions Units or series)
---------------- ------------ -------------
$ 234,293 12,636,545 59.12
$ 66,169 3,244,626 15.18
66,169 3,244,627 15.18
602 24,844 0.12
140 6,854 0.03
3,107 152,498 0.71
137 6,732 0.03
3,041 149,273 0.70
25,491 1,250,000 5.85
5,064 248,517 1.16
1,225 60,146 0.28
1,462 71,731 0.34
1,705 83,701 0.39
1,132 55,550 0.26
182 8,930 0.04
619 30,361 0.14
509 25,001 0.12
1,528 75,003 0.35
$ 178,282 8,738,394 40.88
---------- ---------- ------
$ 412,575 21,374,939 100.00%
$38,000,000 760,000 50.67%
$29,194,600 583,892 38.93%
$1,951,350 39,027 2.60%
$1,951,350 39,027 2.60%
$1,951,350 39,027 2.60%
$1,951,350 39,027 2.60%
------------ ---------- ---------
$75,000,000 1,500,000 100.00%
$20,000,000 800,000 57.14%
$15,000,000 600,000 42.86%
------------ ---------- ---------
$35,000,000 1,400,000 100.00%
* * * * *
---------------------
* Net of Debt (if any) to which the Contributed Property is subject.
A-1