EXHIBIT 10.6
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THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
HINES-SUMISEI U.S. CORE OFFICE FUND, L.P.
APRIL 23, 2004
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TABLE OF CONTENTS
PAGE
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ARTICLE I.................................................................................................1
SECTION 1.1 Definitions.............................................................................1
SECTION 1.2 Interpretation; Terms Generally........................................................15
ARTICLE II General Provisions............................................................................16
SECTION 2.1 Formation and Continuation.............................................................16
SECTION 2.2 Name...................................................................................16
SECTION 2.3 Organizational Certificates and Other Filings..........................................16
SECTION 2.4 Principal and Other Offices............................................................17
SECTION 2.5 Registered Office; Registered Agent....................................................17
SECTION 2.6 Purpose................................................................................17
SECTION 2.7 Powers.................................................................................17
SECTION 2.8 Fiscal Year............................................................................18
SECTION 2.9 Term...................................................................................18
SECTION 2.10 Feeder Entities.......................................................................18
SECTION 2.11 REIT Covenant.........................................................................18
ARTICLE III Partnership Capital..........................................................................19
SECTION 3.1 Initial Capital........................................................................19
SECTION 3.2 Capital Commitments....................................................................19
SECTION 3.3 Initial Offering Period................................................................20
SECTION 3.4 Initial Investment Period..............................................................21
SECTION 3.5 Additional Capital.....................................................................21
SECTION 3.6 Fund Indebtedness......................................................................21
SECTION 3.7 Issuance of Units and Participation Interest...........................................23
SECTION 3.8 Redemption Rights......................................................................24
SECTION 3.9 Priority Redemption Rights.............................................................26
SECTION 3.10 Hines Bridge Equity and Priority Redemption Right.....................................26
SECTION 3.11 Hines Investment......................................................................27
ARTICLE IV General Partner...............................................................................28
SECTION 4.1 General Partner........................................................................28
SECTION 4.2 Powers of the General Partner..........................................................28
SECTION 4.3 Time Commitment........................................................................30
SECTION 4.4 Outside Investments....................................................................30
SECTION 4.5 Transactions with Affiliates...........................................................31
SECTION 4.6 Strategic Investors....................................................................31
SECTION 4.7 Other Activities not Restricted........................................................32
ARTICLE V Partnership Management.........................................................................32
SECTION 5.1 Fund Structure.........................................................................32
SECTION 5.2 Investment Guidelines..................................................................33
SECTION 5.3 Management Board.......................................................................34
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SECTION 5.4 Advisory Committee.....................................................................37
SECTION 5.5 Management Team........................................................................39
SECTION 5.6 Management Rights of Limited Partners..................................................39
SECTION 5.7 Advisory Agreement.....................................................................40
SECTION 5.8 Property Services Agreements...........................................................40
SECTION 5.9 Asset Valuations; Determination of Current Unit Value; Cancellation of Units...........40
SECTION 5.10 Management of Operating Companies.....................................................43
SECTION 5.11 Non-Managing General Partner..........................................................43
ARTICLE VI Exculpation and Indemnification...............................................................43
SECTION 6.1 Exculpation of the General Partner.....................................................43
SECTION 6.2 Indemnification of General Partner.....................................................44
SECTION 6.3 Treatment of Management Board, Advisory Committee, Et al...............................45
SECTION 6.4 Limited Liability of Limited Partners..................................................46
SECTION 6.5 Other Activities of Limited Partners...................................................46
ARTICLE VII Expenses and Fees............................................................................46
SECTION 7.1 General Partner Expenses...............................................................46
SECTION 7.2 Asset Management Fee...................................................................47
SECTION 7.3 Acquisition Fees.......................................................................48
SECTION 7.4 Partnership Expenses...................................................................49
SECTION 7.5 Operating Company Expenses.............................................................49
SECTION 7.6 Organization Expenses..................................................................51
ARTICLE VIII Capital Accounts; Allocations...............................................................51
SECTION 8.1 Capital Accounts.......................................................................51
SECTION 8.2 Interest on and Return of Capital......................................................52
SECTION 8.3 Negative Capital Accounts..............................................................52
SECTION 8.4 Allocation of Profits..................................................................52
SECTION 8.5 Allocations of Losses..................................................................53
SECTION 8.6 Special Allocations....................................................................54
SECTION 8.7 Curative Allocations...................................................................55
SECTION 8.8 Tax Allocations: Code Section 704(c)...................................................56
ARTICLE IX Distributions.................................................................................56
SECTION 9.1 Operating Cash Flow....................................................................56
SECTION 9.2 Capital Cash Flow......................................................................57
SECTION 9.3 Reinvestment of Capital Cash Flow......................................................57
SECTION 9.4 Right to Limit Distributions...........................................................57
SECTION 9.5 Limitations on Distribution Rights.....................................................57
ARTICLE X Transfers; Withdrawals and Defaults............................................................58
SECTION 10.1 Voluntary Transfer of General Partner Interest........................................58
SECTION 10.2 Removal of General Partner............................................................58
SECTION 10.3 Transfers of Partnership Interests by Hines Partners..................................59
SECTION 10.4 Transfers of Units by Partners Other than Hines Partners..............................59
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SECTION 10.5 Conditions to Transfer................................................................60
SECTION 10.6 Admissions and Withdrawals Generally..................................................61
SECTION 10.7 Required/Elective Withdrawals.........................................................61
SECTION 10.8 Defaulting Partner....................................................................61
ARTICLE XI Partnership Administration....................................................................63
SECTION 11.1 Books and Records.....................................................................63
SECTION 11.2 Partnership Auditor...................................................................64
SECTION 11.3 Filing of Tax Returns.................................................................64
SECTION 11.4 Tax Matters...........................................................................64
SECTION 11.5 Reports to Partners...................................................................65
SECTION 11.6 Meetings of Partners..................................................................66
SECTION 11.7 Meetings of Fund Investors............................................................68
ARTICLE XII Dissolution, Termination and Winding Up......................................................68
SECTION 12.1 Dissolution...........................................................................68
SECTION 12.2 Termination of Partnership by Majority Fund Vote......................................69
SECTION 12.3 Winding up............................................................................69
SECTION 12.4 Liquidating Distributions.............................................................69
ARTICLE XIII Miscellaneous...............................................................................70
SECTION 13.1 Waiver of Partition...................................................................70
SECTION 13.2 Power of Attorney.....................................................................70
SECTION 13.3 Amendments............................................................................71
SECTION 13.4 Confidentiality.......................................................................72
SECTION 13.5 Entire Agreement......................................................................73
SECTION 13.6 Severability..........................................................................73
SECTION 13.7 Notices...............................................................................73
SECTION 13.8 Governing Law.........................................................................74
SECTION 13.9 Successors and Assigns................................................................74
SECTION 13.10 Headings.............................................................................74
SECTION 13.11 Counterparts.........................................................................74
SECTION 13.12 Third Party Beneficiary..............................................................74
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LIST OF SCHEDULES:
2.1 Limited Partners
2.7 Approved Agreements
3.1 Partnership Units and Funded Commitments
4.4 Hines Investment Allocation Procedure
5.1 Fund Organization Chart
5.9 Percentage Interest and Unit Cancellation Example
5.11 Non-Managing General Partner Provisions
9.1 Operating Cash Flow Distribution Example
9.2 Capital Cash Flow Distribution Example
LIST OF EXHIBITS:
Exhibit A Property Services Agreement Form
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THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
HINES-SUMISEI U.S. CORE OFFICE FUND, L.P.
This THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF HINES-SUMISEI U.S. CORE OFFICE FUND L.P., a
Delaware limited
partnership (together with its successors, the "Partnership"), is entered into
as of April 23, 2004, by and among Hines US Core Office Capital LLC, a
Delaware
limited liability company, as the General Partner, and the Persons identified as
Limited Partners on the signature pages hereto, as Limited Partners.
RECITALS
WHEREAS, the General Partner and the Hines Limited Partner
entered into the Agreement of Limited Partnership of the Partnership on August
19, 2003 (the "Original Agreement"),
WHEREAS, the Original Agreement was amended and restated as
provided in the Amended and Restated Agreement of Limited Partnership of the
Partnership, dated August 28, 2003 (the "First Restated Agreement");
WHEREAS, the First Restated Agreement was amended and restated
as provided in the Second Amended and Restated Agreement of Limited Partnership
of the Partnership, dated April 1, 2004 (the "Second Restated Agreement");
WHEREAS, the General Partner and the Limited Partners desire
to amend and restate the Second Restated Agreement in its entirety as provided
herein.
NOW, THEREFORE, in consideration of the premises, the terms
and conditions set forth herein, the mutual benefits to be gained by the
performance thereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the General Partner and the
Limited Partners hereby amend and restate the Second Restated Agreement in its
entirety as follows:
ARTICLE I
SECTION 1.1 Definitions. As used in this Agreement, the terms
set forth below have the meanings indicated.
"Act": The
Delaware Revised Uniform Limited Partnership Act,
as amended from time to time, and any successor statute.
"Acquisition Fee": As defined in Section 7.3.
"Adjusted Capital Account": At any time, the then balance in
the Capital Account of a Partner, after giving effect to the following
adjustments:
(i) add to such Capital Account any amounts that such
Partner is obligated to restore under any provision of this
Agreement or such Partners' Subscription Agreement or is
deemed obligated to restore as described in the penultimate
sentences of Regulations Section 1.704-2(g)(1) and Regulations
Section 1.704-2(i)(5), or any successor provisions; and
(ii) subtract from such Capital Account the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5)
and (6).
"Adjusted Capital Account Deficit": With respect to any
Partner, the deficit balance, if any, in that Partner's Adjusted Capital
Account.
"Advisory Agreement": The Amended and Restated Advisory
Agreement, dated as of April 1, 2004, by and among the Partnership, the General
Partner, SLR and such other Fund Entities as may become party thereto as
contemplated by Section 5.7.
"Advisory Committee": As defined in Section 5.4.
"Affiliate": With respect to any Person, a Person which,
directly or indirectly, Controls, is Controlled by or is under common Control
with such Person.
"Aggregate Debt Limit": As defined in Section 3.6(a)(ii)(A).
"Agreement": This Third Amended and Restated Agreement of
Limited Partnership of the Partnership, together with all Schedules and Exhibits
hereto, dated as of the date hereof and as each may be amended from time to
time.
"Appraiser": As defined in Section 5.9(b).
"Approved Agreements": The agreements listed on Schedule 2.7
and any agreement that the Partnership is obligated or permitted to enter into
pursuant to any such agreement.
"Asset Management Fee": As defined in Section 7.2(a).
"Business Day": Any day other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which banking institutions in New York
City are authorized or required by law, regulation or executive order to close.
"Capital Account": As defined in Section 8.1.
"Capital Call Notice": As defined in Section 3.2(a).
"Capital Calls": As defined in Section 3.2(a).
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"Capital Cash Flow": As defined in Section 9.2.
"Capital Commitment": As defined in Section 3.2(a).
"Capital Contribution": With respect to any Partner, any
contribution to the capital of the Partnership by such Partner in accordance
with this Agreement.
"Capital Transaction Gain or Loss" shall mean any Profits or
Losses described in paragraphs (iii), (iv) and (vi) of the definition of Profits
and Losses contained in this Section 1.1.
"Cash Needs": Any cash needs or requirements of whatever kind
of the Partnership for which sufficient funds are not available from investment
income or from reserves held by the Partnership, including (i) funds required to
be contributed by the Partnership to any Fund Entity for the purpose of
acquiring Investments or paying costs and expenses related thereto, (ii)
Organizational Expenses and any other Partnership Expenses, and (iii) the cost
of redeeming Partnership Interests in accordance with this Agreement.
"CBD": As defined in Section 5.2(b)(i).
"Certificate": As defined in Section 2.1.
"Class A Major Investor": An Investor with an aggregate
Capital Commitment of at least $300 million.
"Class B Major Investor" An Investor with an aggregate Capital
Commitment of at least $150 million, but less than $300 million.
"Class C Major Investor" An Investor with an aggregate Capital
Commitment of at least $75 million, but less than $150 million.
"Class D Major Investor" An Investor with an aggregate Capital
Commitment of at least $50 million, but less than $75 million.
"Code": The Internal Revenue Code of 1986, as amended as of
the date hereof and as the same may be amended from time to time, and any
successor statute.
"Committed Capital": (i) As to any Partner, the sum of (A)
Partnership's total equity capital multiplied by a fraction, the numerator of
which is the total number of Units held by such Partner and the denominator of
which is the total number of Units outstanding plus, prior to the termination of
the Investment Period, (B) the Unfunded Commitment of such Partner, (ii) as to
any Fund Investor, the Fund's total equity capital multiplied by the percentage
of the Fund's total equity capital attributed to the equity interests held by
such Fund Investor in the Partnership and any Operating Company plus the amount
of any additional capital that such Fund Investor is obligated to contribute,
but has not yet contributed, to the Partnership or any Operating Company, (iii)
as to the Partnership, the aggregate of the Committed Capital of all Partners
and (iv) as to the Fund, the aggregate of the Committed Capital of all Fund
Investors.
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"Constituent Documents": With respect to any Entity, its
constituent, governing or organizational documents, including (a) in the case of
a limited partnership, its certificate of limited partnership and its
limited
partnership agreement, (b) in the case of a limited liability company, its
articles or certificate of formation and its operating agreement or limited
liability company agreement, (c) in the case of a corporation, its articles or
certificate of incorporation and its bylaws and (d) in the case of a trust, its
declaration of trust and bylaws.
"Control": With respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Contributing Partner": As defined in Section 3.7.
"Current Market Value": As defined in Section 5.9(c)(i).
"Current Participation Interest Value": As defined in Section
5.9(c)(iii).
"Current Total Equity Value": As defined in Section
5.9(c)(ii).
"Current Unit Value": As defined in Section 5.9(c)(iv).
"Defaulting Partner": As defined in Section 10.8(b).
"Default Rate": The rate of interest per annum equal to the
lesser of (i) the Prime Rate plus four percent and (ii) the highest rate
permitted by applicable law.
"Depreciation": For any Fiscal Year or portion thereof, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such period for federal income tax
purposes, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such period,
Depreciation shall be an amount that bears the same relationship to such
beginning Gross Asset Value as the depreciation, amortization or cost recovery
deduction in such period for federal income tax purposes bears to the beginning
adjusted tax basis; provided, however, that if the adjusted basis for federal
income tax purposes of an asset at the beginning of such period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the General Partner.
"Entity": Any corporation, partnership, limited partnership,
limited liability company, trust, association, joint stock company or other
legal entity.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Event of Withdrawal": As defined in Section 12.1(a).
"Fees": Asset Management Fees and Acquisition Fees.
"Feeder Entity": As defined in Section 2.10.
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"Finding of Cause": As defined in Section 10.2(a).
"Fiscal Quarter": As defined in Section 2.8.
"Fiscal Year": As defined in Section 2.8.
"Fund": As defined in Section 5.1.
"Fund Entity": As defined in Section 5.1.
"Fund Investor": As defined in Section 5.1.
"Fund Vote": As defined in Section 11.6(g).
"Funded Commitment": As defined in Section 3.2.
"GAAP": Generally accepted accounting principles in the United
States, consistently applied.
"GECC": General Electric Capital Corporation, and its
successors.
"General Partner": Hines US Core Office Capital LLC, a
Delaware limited liability company, and its successors, and any Person hereafter
admitted as general partner of the Partnership in accordance with the terms of
this Agreement.
"General Partner Expenses": As defined in Section 7.1.
"Gross Asset Value": With respect to any Partnership asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross
fair market value of such asset, as determined by the General
Partner and agreed to by the Contributing Partner;
(ii) The Gross Asset Value of all Partnership assets
shall be adjusted to equal their respective gross fair market
values, as determined by the General Partner (which
determination shall be based upon, and consistent with, the
most recent Current Market Values), as of the following times:
(a) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution; (b) the
distribution by the Partnership to a Partner of more than a de
minimis amount of Partnership property as consideration for an
interest in the Partnership; (c) the liquidation of the
Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); and (d) upon the occurrence of any other
event for which such an adjustment is permitted under the
Regulations; provided, however, that adjustments pursuant to
clauses (a), (b) and (d) above shall be made only if the
General Partner reasonably determines that such adjustments
are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
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(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the
gross fair market value of such asset on the date of
distribution as determined by the General Partner (which
determination shall be based upon, and consistent with, the
most recent Current Market Values); and
(iv) The Gross Asset Value of Partnership assets
shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that
such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and paragraph (vi) of the definition of Profits and Losses and
Section 8.6(g); provided, however, that Gross Asset Value
shall not be adjusted pursuant to this paragraph (iv) to the
extent the General Partner determines that an adjustment
pursuant to paragraph (ii) above is necessary or appropriate
in connection with a transaction that would otherwise result
in an adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraphs (i), (ii) or (iv) above, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses.
"▇▇▇▇▇": ▇▇▇▇▇ Interests Limited Partnership, a
Delaware
limited partnership, and its successors.
"Hines Bridge Equity": As defined in Section 3.10.
"Hines Capital Requirement": As defined in Section 3.11
"Hines Controlled Entity": Any partnership, limited liability
company, corporation, trust or other entity which is, directly or indirectly,
Controlled by (a) Hines, and/or (b) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and/or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or,
in the event of the death or disability of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and/or ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, the heirs, legal representatives or estates of either or both of them.
"Hines Group: (a) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and/or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
their parents, brothers and sisters, and the respective spouses, children or
grandchildren of any of the foregoing (including children or grandchildren by
adoption), and (b) any current or former employee of ▇▇▇▇▇.
"▇▇▇▇▇ Investment Allocation Committee": As defined on
Schedule 4.4.
"Hines Limited Partner": Hines US Core Office Capital
Associates II Limited Partnership, a Texas limited partnership, and its
successors.
"HSOV": Hines Suburban Office Venture, LLC, an entity formed
by an Affiliate of Hines and an Affiliate of GECC for the purpose of acquiring
suburban office buildings on a national basis.
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"Indebtedness": With respect to any Person, (i) any
indebtedness for borrowed money evidenced by a note payable by such Person, (ii)
any obligation to pay money secured by any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind existing on any asset owned or held by
such Person, whether or not such Person has assumed or become personally liable
for the obligations secured thereby, and (iii) any guaranty by such Person of
the Indebtedness (as defined in clause (i) and (ii) of this definition) of
another Person; provided that "Indebtedness" with respect to any Person shall
not include obligations in respect of any accounts payable that are incurred in
the ordinary course of such Person's business (or guarantees by such Person of
such obligations of another Person) and are not delinquent or are being
contested in good faith by appropriate proceedings.
"Indemnified Person": As defined in Section 6.1.
"Initial Asset Group": The three office properties acquired
from Sumitomo by NY Trust and 600 Lexington.
"Initial Investment Period": As defined in Section 3.4.
"Initial Offering Period": As defined in Section 3.3(a).
"Initial Offering Price": $1,000.00 per Unit.
"Investment Advisor": An Affiliate of Hines or SLR that
provides advisory services to the General Partner pursuant to the Advisory
Agreement as contemplated by Section 5.7.
"Investment Company Act": The Investment Company Act of 1940,
as amended as of the date hereof and as the same may be amended from time to
time, and any successor statute.
"Investment Guidelines": As defined in Section 5.2(b).
"Investments": As defined in Section 5.2(a).
"Investor": As defined in Section 3.2.
"Limited Partner": Any Person now or hereafter admitted as a
limited partner in accordance with the terms of this Agreement. The Limited
Partners as of the date hereof are the Persons identified as such on Schedule
2.1.
"Liquidating Event": As defined in Section 12.1.
"Liquidating Redemption": As defined in Section 3.8 and, as
the context requires, as defined in the corresponding provisions of the
Constituent Documents of US Core Trust and US Core Properties.
"LP Vote": As defined in Section 11.6(g).
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"Major Investor": An Investor with a Capital Commitment of at
least $50 million.
"Majority Fund Vote": As defined in Section 11.7.
"Majority LP Vote": As defined in Section 11.6(g).
"Majority Partner Vote": As defined in Section 11.6(g).
"Management Board": As defined in Section 5.3(a).
"Management Fee Base": As defined in Section 7.2(b).
"Management Team": As defined in Section 5.5.
"Managing General Partner": As defined in Section 5.11.
"Moody's": ▇▇▇▇▇'▇ Investor Services, Inc.
"Non-Managing General Partner": As defined in Section 5.11.
"NOP": National Office Partners Limited Partnership, a limited
partnership formed by the State of California Public Employees' Retirement
System and an Affiliate of Hines.
"Notice of Redemption": As defined in Section 3.8 and, as the
context requires, as defined in the corresponding provisions of the Constituent
Documents of US Core Trust and US Core Properties.
"NY Trust": Hines-Sumisei NY Core Office Trust, a Maryland
real estate investment trust, and its successors.
"NY Trust II": Hines-Sumisei NY Core Office Trust II, a
Maryland real estate investment trust, and its successors.
"NY Trust Mezzanine Loan": The Mezzanine Loan Agreement, dated
as of August 19, 2003, among Hines NY Office Properties LLC, as borrower, and
Bank of America, N.A. and Connecticut General Life Insurance Company, as
lenders.
"Operating Company": As defined in Section 5.1.
"Operating Cash Flow": As defined in Section 9.1.
"Organization Agreement": The Amended and Restated
Organization Agreement, dated as of December 23, 2003, among General Motors
Investment Management Corporation, a New York corporation, certain institutional
investors advised thereby, ▇▇▇▇▇ Interests Limited Partnership, a
Delaware
limited partnership, Hines US Core Office Capital Associates III Limited
Partnership, a Texas limited partnership, Hines-Sumisei U.S. Core Office
8
Fund, L.P., a
Delaware limited partnership and Hines-Sumisei NY Core Office
Trust, a Maryland real estate investment trust.
"Organizational Expenses" As defined in Section 7.5.
"Original Agreement": As defined in the Recitals of this
Agreement.
"Owner": As defined in the Property Services Agreement.
"Participation Interest" As defined in Section 3.7(b).
"Partner Nonrecourse Debt": As defined in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain": As defined in
Regulations Section 1.704-2(i).
"Partner Nonrecourse Deductions": As defined in Regulations
Section 1.704-2(i).
"Partner Vote": As defined in Section 11.6(g).
"Partners": Collectively, the General Partner and the Limited
Partners, or any additional or successor partners of the Partnership admitted to
the Partnership in accordance with the terms of this Agreement. References to a
Partner shall be to any one of the Partners.
"Partnership": As defined in the Preamble to this Agreement.
"Partnership Auditor": As defined in Section 11.2.
"Partnership Expenses": As defined in Section 7.4(a).
"Partnership Interest": The ownership interest of a Partner in
the Partnership at any particular time, including the right of such Partner to
any and all benefits to which such Partner may be entitled as provided in this
Agreement, and to the extent not inconsistent with this Agreement, under the
Act, together with the obligations of such Partner to comply with all of the
terms and provisions of this Agreement and the Act.
"Partnership Minimum Gain": As defined in Regulations Sections
1.704-2(b)(2) and 1.704-2(d).
"Partnership Unit" or "Unit": A unit of Partnership Interest
having the rights, privileges and restrictions prescribed therefor by the terms
of this Agreement.
"Payment Date": As defined in Section 3.2.
"Percentage Interest": With respect to each Partner (i) for
each Fiscal Quarter ending prior to the termination of the Initial Investment
Period, a percentage equal to the number of Partnership Units then owned by such
Partner, divided by the number of Partnership Units then outstanding, and (ii)
for each Fiscal Quarter ending after termination of the Initial
9
Investment Period, a percentage determined for each Partner as of each Quarterly
Payment Date in the following manner:
(a) End of Quarter Calculation of Percentage Interest Attributable to
Participation Interests. As of each Quarterly Payment Date, each of Hines and
SLR shall have a Percentage Interest in respect of its Participation Interest
equal to the sum of:
(i) (A) the Percentage Interest attributable to such
Participation Interest as of the end of the immediately preceding
Fiscal Quarter (which shall be 0% in the case of each Fiscal Quarter
beginning prior to the termination of the Initial Investment Period),
adjusted as provided in clause (c) below for Partnership Units issued
during the Fiscal Quarter just ended; plus
(ii) its AM Sharing Percentage (as defined below) of a
fraction (A) whose numerator is 0.03125% of the Unrecovered Capital of
SLR, plus 0.09375% of the aggregate Unrecovered Capital of all Class A
Major Investors, plus 0.10625% of the aggregate Unrecovered Capital of
all Class B Major Investors, plus 0.1125% of the aggregate Unrecovered
Capital of all Class C Major Investors, plus 0.11875% of the aggregate
Unrecovered Capital of all Class D Major Investors, plus 0.125% of the
aggregate Unrecovered Capital of all Unaffiliated Limited Partners that
are not Major Investors, each determined as of the end of the current
Fiscal Quarter, and (B) whose denominator is the Current Total Equity
Value of the Partnership as of the end of the current quarter; plus
(iii) (A) its AQ Sharing Percentage (as defined below) of 0.5%
of the Gross Real Estate Investments (as defined below) made by the
Partnership during the Fiscal Quarter just ended, multiplied by (B) the
aggregate Percentage Interest of the Unaffiliated Limited Partners in
respect of their Partnership Units only immediately prior to any
adjustment under clause (d) below, divided by (C) the Current Total
Equity Value of the Partnership as of the end of the Fiscal Quarter
just ended.
o "AM Sharing Percentage": As to Hines or SLR, as
applicable, that percentage of the total Asset
Management Fee that such Person is entitled to
receive pursuant to Section 2 of the Advisory
Agreement.
o "AQ Sharing Percentage" : As to Hines or SLR, as
applicable, that percentage of the total Acquisition
Fee that such Person is entitled to receive pursuant
to Section 3 of the Advisory Agreement.
o "Gross Real Estate Investments" : The value of the
total consideration (including any assumed
Indebtedness) paid in respect of each Investment made
by an Operating Company (other than an Operating
Company which makes its investments indirectly
through another Operating Company), other than any
Investment in a Property acquired by such Operating
Company from SLR or any of its Affiliates.
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o "Outstanding Unit Equivalents": As of the end of a
Fiscal Quarter or other relevant time, a number equal
to the number of Partnership Units outstanding as of
the end of such quarter or other relevant time,
divided by the difference between 100% and the total
Percentage Interests attributable to the
Participation Interests as of the end of such Fiscal
Quarter or other relevant time.
(b) When Change to Participation Interest Becomes Effective. The
Percentage Interest determined under clause (a) as of the end of a particular
Fiscal Quarter shall become effective as of the beginning of the immediately
following Fiscal Quarter.
(c) Adjustment of Percentage Interests Attributable to Participation
Interest Following Issuance or Redemption of Partnership Units. Immediately
after the issuance or redemption by the Partnership of any Partnership Units,
the Percentage Interest attributable to the Participation Interest shall be
adjusted so that it equals (i) the Percentage Interest attributable to the
Participation Interest immediately prior to the issuance or redemption of such
Partnership Units, multiplied by (ii) a fraction whose numerator is (A) the
number of Outstanding Unit Equivalents immediately prior to the issuance or
redemption of such Partnership Units and whose denominator equals (B) the number
of Outstanding Unit Equivalents immediately prior to the issuance or redemption
of such Partnership, plus the number of Partnership Units then being issued, or
minus the number of Partnership Units then being redeemed, as the case may be.
(d) Calculation of Percentage Interests of Partners' Holding
Partnership Units. As of each Quarterly Payment Date, each Partner holding
Partnership Units shall have a Percentage Interest in respect of such
Partnership Units equal to (i) 100%, minus the sum of the Percentage Interests
attributable to the Participation Interests determined pursuant to clauses (a)
and (c) above, multiplied by (ii) a fraction whose numerator is the number of
Partnership Units then owned by such Partner and whose denominator is the total
number of Partnership Units outstanding.
(e) Calculation of Total Percentage Interests of Hines and SLR. The
total Percentage Interest of Hines and SLR, as the case may be, shall equal such
person's Percentage Interest in respect of its Participation Interest
(determined under clauses (a) and (c) above), plus such person's Percentage
Interest in respect of its Partnership Units (determined under clause (d)
above).
"Person": An individual, corporation, partnership, limited
liability company, estate, trust, association, joint stock company or other
legal entity, or a group as that term is used for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended.
"President": As defined in Section 5.5.
"Prime Rate": The rate of interest per annum announced from
time to time by JPMorgan Chase Bank, or its successor, at its principal office
in New York City as its prime rate.
"Priority Redemptions": As defined in Section 3.9.
11
"Priority Redemption Right": As defined in Section 3.9.
"Private Placement PTP Exemption": The exemption from publicly
traded partnership status provided in Regulation Section 1.7704-1(h) (which
generally applies if (i) all interests in a partnership are issued in a
transaction or series of transactions that are not required to be registered
under the Securities Act and (ii) the partnership does not have more than 100
partners at any time during taxable year of the partnership).
"Private Transfer": Any of the following:
(i) transfers in which the basis of the Partnership
Interest in the hands of the transferee is determined, in
whole or in part, by reference to its basis in the hands of
the transferor or is determined under Code Section 732;
(ii) transfers at death, including transfers from an
estate or testamentary trust;
(iii) transfers between members of a family;
(iv) transfers involving the issuance of interests by
(or on behalf of) the Partnership in exchange for cash,
property, or services;
(v) transfers involving distributions from a
qualified retirement plan or an individual retirement account;
(vi) the transfer by a Partner and any related
persons (within the meaning of Code Section 267(b) or
707(b)(1)) in one or more transactions during any thirty
calendar day period of Partnership Interests representing in
the aggregate more than 2 percent of the total interests in
Partnership capital or profits;
(vii) transfers by one or more Partners of interests
representing in the aggregate 50 percent or more of the total
interests in Partnership capital and profits in one
transaction or a series of related transactions; and
(viii) transfers not recognized by the Partnership
within the meaning of Regulation Section 1.7704-1(d)(2) (i.e.,
the Partnership neither admits the transferee as a partner nor
recognizes any rights of the transferee as a partner).
"Profits" and "Losses": For each Fiscal Year or portion
thereof, an amount equal to the Partnership's items of taxable income or loss
for such year or period, determined by the General Partner in accordance with
Code Section 703(a) with the following adjustments:
(i) any income which is exempt from federal income
tax and not otherwise taken into account in computing Profits
or Losses shall be added to taxable income or loss;
12
(ii) any expenditures of the Partnership described in
Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures under Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in
computing Profits or Losses, will be subtracted from taxable
income or loss;
(iii) in the event that the Gross Asset Value of any
Partnership asset is adjusted pursuant to the definition of
Gross Asset Value contained in this Article I, the amount of
such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing
Profits and Losses;
(iv) gain or loss resulting from any disposition of
Partnership assets with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization and
other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year or other period;
(vi) to the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution
other than in complete liquidation of a Partner's Partnership
Interest, or is required pursuant to the last sentence of
Regulations Section 1.704-1(b)(2)(iv)(m)(2) to be taken into
account in determining Capital Accounts 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 Profits or Losses; and
(vii) any items specially allocated pursuant to
Section 8.6 or Section 8.7 shall not be considered in
determining Profits or Losses.
"Property": As defined in Section 5.2(a).
"Property Manager": As defined in Section 5.8.
"Property Services Agreement": As defined in Section 5.8.
"Property Services Agreement Form": As defined in Section 5.8.
"Quarterly Payment Date": The first Business Day following the
end of each Fiscal Quarter.
"Redeeming Partner": As defined in Section 3.8.
"Redemption Right": As defined in Section 3.8.
13
"Regulations": The Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Regulatory Allocations": As defined in Section 8.7.
"REIT": A "real estate investment trust" as defined in Section
856 of the Code and applicable Regulations.
"REIT Election Effective Date": As defined in Section 2.11.
"Required Vote": As defined in Section 13.3(a).
"S&P": Standard & Poor's, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc.
"Securities Act": The Securities Act of 1933, as amended.
"Similar Law": Any federal, state, local, non-U.S. or other
law or regulation that contains one or more provisions that are similar to any
of the provisions contained in Title I of ERISA or Section 4975 of the Code.
"Single Asset Debt Limit": As defined in Section
3.6(a)(ii)(B).
"SLR": Sumitomo Life Realty (N.Y.), Inc., a New York
corporation.
"SLR Designee": As defined in Section 5.3(a).
"SLRI": SLR Investments, Inc., a
Delaware corporation.
"Strategic Investors": As defined in Section 4.6.
"Subscription Agreement": As defined in Section 3.2.
"Subsequent Closing": As defined in Section 3.3(b).
"Sumitomo": SLR and SLRI, collectively.
"Super Majority Fund Vote": As defined in Section 11.7.
"Super Majority LP Vote": As defined in Section 11.6(g).
"Super Majority Partner Vote": As defined in Section 11.6(g).
"Tax Matters Partner": As defined in Section 11.4(a).
"Temporary Investment": Any repurchase agreements of primary
Federal Reserve dealers using treasury securities only; bankers acceptances
which are legal for purchase by the Federal Reserve Bank; United States Treasury
bills and agency discount notes; commercial paper that is rated by Moody's or
S&P in its highest rating category; accounts or
14
mutual funds which invest in any of the foregoing; and any other investment
approved by the Advisory Committee as a Temporary Investment.
"Term": As defined in Section 2.9.
"Transfer": As a noun, any sale, transfer, gift, exchange,
assignment, devise or other disposition, as well as any other event that causes
any Person to acquire beneficial ownership, or any agreement to take any such
actions or cause any such events, with respect to Partnership Interests, or the
right to vote or receive distributions with respect to Partnership Interests,
including (a) the granting or exercise of any option (or any disposition of any
option), (b) any disposition of any securities or rights convertible into or
exchangeable for Partnership Interests or any interest in Partnership Interests
or any exercise of any such conversion or exchange right and (c) Transfers of
interests in other entities that result in changes in beneficial ownership of
Partnership Interests; in each case, whether voluntary or involuntary, whether
owned of record or beneficially owned, and whether by operation of law or
otherwise. The terms "Transferor," "Transferee," "Transferred" and
"Transferring" have correlative meanings.
"Unaffiliated Limited Partner" A Limited Partner that is not
an Affiliate of the General Partner.
"Unfunded Commitment": As defined in Section 3.2.
"Unrecovered Capital": An amount, determined for each Limited
Partner, which equals the aggregate amount of all Capital Contributions made by
such Limited Partner to the Partnership less the aggregate amount of capital
returned to such Limited Partner by the Partnership by either the redemption of
Partnership Units or the distribution of Capital Cash Flow.
"US Core Properties": Hines-Sumisei US Core Office Properties
LP, a
Delaware limited partnership, and its successors.
"US Core Trust": Hines-Sumisei US Core Office Trust, a
Maryland real estate investment trust, and its successors.
"Withdrawn General Partner": As defined in Section 12.1.
"600 Lexington": The office property having such name located
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇/▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇.
"75% Majority Fund Vote": As defined in Section 11.7.
"75% Majority LP Vote": As defined in Section 11.6(g).
"75% Majority Partner Vote": As defined in Section 11.6(g).
SECTION 1.2 Interpretation; Terms Generally. The definitions
set forth in Section 1.1 and elsewhere in this Agreement shall apply equally to
both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the
15
corresponding masculine, feminine and neuter forms. Unless otherwise indicated,
the words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The words "herein", "hereof" and "hereunder"
and words of similar import shall be deemed to refer to this Agreement
(including the Exhibits and Schedules) in its entirety and not to any part
hereof, unless the context shall otherwise require. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed to refer to Articles
and Sections of, and Exhibits and Schedules to, this Agreement, unless the
context shall otherwise require. Unless the context shall otherwise require, any
references to any agreement or other instrument or statute or regulation are to
it as amended and supplemented from time to time (and, in the case of a statute
or regulation, to any corresponding provisions of successor statutes or
regulations). Any reference in this Agreement to a "day" or number of "days"
(that does not refer explicitly to a "Business Day" or "Business Days") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given on, the next Business Day.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.1 Formation and Continuation. The Partnership was
formed as a limited partnership under the Act by the filing of its certificate
of limited partnership (the "Certificate") with the Secretary of State of the
State of
Delaware on August 8, 2003. The General Partner shall continue as the
general partner of the Partnership, and each Person admitted as a Limited
Partner prior to the date hereof shall continue as a limited partner of the
Partnership. Each Person that has entered into a Subscription Agreement, dated
as of the date hereof, with the Partnership and signed this Agreement as a
Limited Partner is hereby admitted to the Partnership as a Limited Partner.
SECTION 2.2 Name. The name of the Partnership shall be
"Hines-Sumisei U.S. Core Office Fund, L.P." The General Partner shall, with the
affirmative written consent of SLR (which consent shall not be unreasonably
withheld) and upon notice to the other Partners, have the right to change the
name of the Partnership and, in connection therewith, may execute and file
(pursuant to the power-of-attorney provided for in Section 13.2, where
necessary) such amendments to this Agreement, the Certificate and such other
documentation, as shall be necessary or desirable to effect such name change.
The Partnership shall do business under the name of the Partnership or under
such other name (including any assumed name) as the General Partner may from
time to time determine in its sole discretion. Upon the dissolution and
termination of the Partnership, the General Partner shall retain all rights with
respect to the name of the Partnership and the use of such name.
SECTION 2.3 Organizational Certificates and Other Filings. If
requested by the General Partner, the Limited Partners will promptly execute all
certificates and other documents consistent with the terms of this Agreement
necessary for the General Partner to accomplish all filing, recording,
publishing and other acts as may be appropriate to comply with all requirements
for (a) the formation and operation of a limited partnership under the laws of
the State of Delaware, (b) if the General Partner deems it advisable, the
operation of the Partnership
16
as a limited partnership, or partnership in which the Limited Partners have
limited liability, in all jurisdictions where the Partnership proposes to
operate and (c) all other filings required to be made by the Partnership.
SECTION 2.4 Principal and Other Offices. The principal
executive office of the Partnership shall be c/o Hines Interests Limited
Partnership, ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or
such other place as may from time to time be designated by the General Partner
in its sole discretion. The General Partner shall give prompt notice to each
Partner of any change in the principal office of the Partnership. The
Partnership may also have such other offices and places of business as the
General Partner determines to be appropriate.
SECTION 2.5 Registered Office; Registered Agent. The address
of the registered office of the Partnership in the State of Delaware shall be
c/o Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or
such other place as may be designated from time to time by the General Partner
in its sole discretion. The name and address of the registered agent for the
Partnership in the State of Delaware which shall act as its agent for service of
process in the State of Delaware shall be The Corporation Trust Company, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other agent as may be
designated from time to time by the General Partner in its sole discretion.
SECTION 2.6 Purpose. The purpose of the Partnership is to hold
an interest in NY Trust, NY Trust II and any other Operating Company that may
hereafter be organized, to make capital contributions to, and otherwise provide
for the financing of, such Operating Companies, to influence or exercise control
over the management and policies of such Operating Companies through the
ownership of voting securities, the power to appoint members to the board of
trustees or other governing body of such Operating Companies, by contract or
otherwise, and to engage in such other activities as are permitted under this
Agreement or are incidental or ancillary thereto as the General Partner deems
necessary or advisable, all upon the terms and conditions set forth in this
Agreement.
SECTION 2.7 Powers.
(a) The Partnership shall have all the powers now or hereafter
conferred by the laws of the State of Delaware on limited partnerships
formed under the Act and, subject to the express limitations set forth
in this Agreement, may do any and all lawful acts or things that are
necessary, appropriate, incidental or convenient for the furtherance
and accomplishment of the purposes of the Partnership or for the
protection and benefit of the Partnership or its properties and assets.
Without limiting the generality of the foregoing, and subject to the
terms of this Agreement, the Partnership may enter into, deliver and
perform all contracts, agreements and other undertakings and engage in
all activities and transactions as may be necessary or appropriate to
carry out its purposes and conduct its business.
(b) Without limiting the foregoing, and notwithstanding
anything in this Agreement to the contrary, the Partnership, and the
General Partner on behalf of the
17
Partnership, is authorized and empowered to enter into, deliver and
perform its obligations and exercise its rights under each of Approved
Agreements.
SECTION 2.8 Fiscal Year. The fiscal year ("Fiscal Year") and
taxable year of the Partnership will be the calendar year, and its fiscal
quarters (each, a "Fiscal Quarter") shall end on the last day of each calendar
quarter. The General Partner may change the ending date of the Fiscal Year if
the General Partner determines in good faith that such change is necessary or
appropriate. The General Partner will change the taxable year of the Partnership
if and to the extent necessary to comply with Code Section 706 and the
Regulations thereunder. The General Partner will give prompt written notice of
any such change to the other Partners.
SECTION 2.9 Term. The term of the Partnership (the "Term")
commenced upon the filing of the Certificate and shall continue until the
Partnership is dissolved and its affairs are wound up in accordance with Article
XII.
SECTION 2.10 Feeder Entities. In order to facilitate
investment in the Partnership by certain investors, the General Partner may
establish or facilitate the establishment of one or more collective investment
vehicles or other arrangements (each such vehicle or arrangement, a "Feeder
Entity") through which investors may invest in the Partnership by acquiring
interests in such Feeder Entity. Affiliates of the General Partner may hold
interests in any such Feeder Entity or in the general partner (or advisor or
similar entity) of such Feeder Entity. In case of a default by any such Feeder
Entity, the General Partner may treat one or more of such investors (rather than
such Feeder Entity) as a Defaulting Partner as provided in Section 10.8. In
addition, the terms of the governance and/or organizational documents of any
such Feeder Entity may permit the payment to the general partner (or advisor or
similar entity) of such Feeder Entity of management, advisory or other fees, and
any such fees paid by such Feeder Entity to its general partner (or advisor or
other entity) may be used to reduce and offset the Asset Management Fee or
Acquisition Fees payable under this Agreement, in which event the General
Partner shall amend this Agreement so that the benefit of any such reduction
inures to such Feeder Entity.
SECTION 2.11 REIT Covenant. It is the goal of the Partners
that each Operating Company that is a REIT shall at all times be a "domestically
controlled REIT" as defined in Section 897(h)(4) of the Code. The Partnership
shall not take any action or engage in any activities (including exercising
operating control over Operating Companies) on and after the date that the
elections of NY Trust, NY Trust II or any other Operating Company under Section
856 of the Code to be taxed as a real estate investment trust first becomes
effective (the "REIT Election Effective Date") if both (i) such actions or
activities would cause the Partnership to be treated as engaged in a U.S. trade
or business for U.S. federal income tax purposes, or as owning U.S. real
property interests within the meaning of Section 897 of the Code, at any time on
and after the REIT Election Effective Date, and (ii) the Partnership is so
treated as engaged in a U.S. trade or business or as owning U.S. real property
interests other than because of the application and/or operation of Section
897(h) of the Code or because of the ownership of any interest in a real estate
investment trust that is treated as a U.S. real property corporation under
Section 897(c)(2) of the Code.
18
ARTICLE III
Partnership Capital
SECTION 3.1 Initial Capital. As of the date of this Agreement,
the Partners have been issued Units and have Funded Commitments in the amounts
set forth opposite their names on Schedule 3.1.
SECTION 3.2 Capital Commitments.
(a) The Partnership may from time to time, in the discretion
of the General Partner, issue additional Partnership Units and admit
additional Limited Partners to the Partnership. Any Person that
acquires Partnership Units for cash (an "Investor") will acquire such
Units pursuant to an agreement (a "Subscription Agreement") between
such Investor and the Partnership pursuant to which such Investor
agrees to acquire, and the Partnership agrees to issue, a specified
number of Units in exchange for Capital Contributions in cash at a
specified price per Unit, all on such terms and conditions as are
provided in this Agreement and as may be provided in such Subscription
Agreement. A Subscription Agreement shall become effective as of the
date it has been executed and delivered by the Investor party thereto
and accepted by the General Partner on behalf of the Partnership. Units
issuable pursuant to a Subscription Agreement may be issuable in
installments, with each installment being issuable, and the Capital
Contribution therefor being payable, in accordance with calls for
capital ("Capital Calls") issued pursuant to written notice (the
"Capital Call Notice") to the Investor party to such Subscription
Agreement. The total purchase price payable by any Investor under a
Subscription Agreement for the Units issuable pursuant thereto is
referred to as such Investor's "Capital Commitment". Each Investor
which acquires any Units pursuant to a Subscription Agreement shall be
deemed to be admitted to the Partnership as a Partner immediately upon
the payment of the purchase price for the first Units so issued to such
Investor. The aggregate amount of Capital Contributions made by a
Partner (in cash or property) is referred to herein as such Partner's
"Funded Commitment", and the portion of the Capital Commitment provided
for in any Subscription Agreement that remains unpaid after any closing
of a purchase and issuance of Units thereto shall be referred to as the
"Unfunded Commitment" of the Partner party to such Subscription
Agreement. Except as provided in Section 11.4(c), in no event will any
Partner be required to contribute any capital to the Partnership in
excess of such Partner's Capital Commitment.
(b) If at any time the General Partner determines to raise
capital by issuing Capital Calls to Partners having Unfunded
Commitments, it shall generally issue such Capital Calls pro rata to
each such Partner in proportion to the number of Units issuable in
respect of the Unfunded Commitment of each such Partner. However, the
General Partner may, in its discretion, issue Capital Calls other than
pro rata to the extent required by the terms of any Subscription
Agreement or other agreement between the Partnership or the General
Partner and one or more Partners, or if the General Partner otherwise
deems it advisable to issue Capital Calls in some manner other than pro
rata (for example, to assist in achieving or maintaining the status of
any Operating Company as a "domestically controlled" REIT). Each
Capital Call Notice issued by the General Partner
19
shall specify the account to which Capital Contributions are to be
delivered pursuant thereto and the date on which such Capital
Contributions are due ("Payment Date"), which date shall be no sooner
than ten Business Days after the date such Capital Call Notice is
issued. All Capital Contributions made on or before the Payment Date
specified in a Capital Call Notice shall be deemed to have been made on
such Payment Date.
SECTION 3.3 Initial Offering Period.
(a) The period beginning on February 2, 2004, and ending on
November 2, 2004, is referred to herein as the "Initial Offering
Period". All Subscription Agreements entered into prior to the end of
the Initial Offering Period shall provide for the issuance of Units at
the Initial Offering Price; provided that any such Subscription
Agreement may, in the discretion of the General Partner, provide for
the issuance of Units at a price different from the Initial Offering
Price in any Subscription Agreement entered into after the date of this
Agreement if, in the reasonable determination of the General Partner in
its sole discretion, such different price is appropriate based on any
appreciation or depreciation of any Investments from the date of this
Agreement to the effective date of such Subscription Agreement;
provided further that no Subscription Agreement entered into during the
Initial Offering Period shall provide for the issuance of Units at a
price per Unit less than the Initial Offering Price without the consent
of the Partners holding Units immediately prior to the effective date
of such Subscription Agreement by a Super Majority Partner Vote.
(b) If, following a closing of the issuance of Units during
the Initial Offering Period (any such closing, a "Subsequent Closing"),
there remain any Unfunded Commitments, then each Partner that was
admitted or increased its Capital Commitment at such Subsequent Closing
(a "Subsequent Closing Partner") may, at the discretion of the General
Partner, be required to make a Capital Contribution (and be issued
Units in respect thereof) in an amount up to its pro rata share (based
on the Capital Commitments of all Partners immediately after such
Subsequent Closing) of the Funded Commitments of all Partners holding
Units immediately prior to such Subsequent Closing. The General Partner
may, in its discretion, use the proceeds of any such Capital
Contributions to redeem Units held by one or more Partners (selected at
the discretion of the General Partner) holding Units immediately prior
to such Subsequent Closing (each, a "Selected Prior Closing Partner")
at the same price per Unit at which such Units were acquired by such
Selected Prior Closing Partner, such that, after making such Capital
Contributions and redemptions, each Subsequent Closing Partner's Funded
Commitment relative to its Capital Commitment is the same as or less
than the Funded Commitment of each Selected Prior Closing Partner
relative to its Capital Commitment. The Funded Commitment of any
Partner having Units redeemed pursuant to the preceding sentence shall
be reduced by the amount received by such Partner for the Units
redeemed, such Partner's Unfunded Commitment shall be increased by such
amount, and such Partner shall remain obligated to purchase additional
Units at the price per share provided for in its Subscription Agreement
to the full extent of its Unfunded Commitment as so increased.
20
SECTION 3.4 Initial Investment Period. The three-year period
beginning on February 2, 2004, and ending on February 2, 2007, is referred to
herein as the "Initial Investment Period"; provided that the General Partner may
extend the Initial Investment Period to end on the latest closing date of any
Investment with respect to which the Partnership, or the General Partner on
behalf of the Partnership, entered into a binding agreement on or prior to the
last day of such initial three year period; provided further that the Initial
Investment Period shall in no event be extended beyond February 2, 2008. Upon
the termination of the Initial Investment Period, as it may be extended pursuant
to the preceding sentence, any remaining Unfunded Commitments attributable to
Subscription Agreements entered into during the Initial Offering Period shall be
canceled automatically and without any further action by any party, and the
General Partner shall have no further right to issue Capital Calls, and
Investors shall have no further right to purchase Units in respect of such
canceled Unfunded Commitments pursuant to any such Subscription Agreement;
provided that the foregoing shall not affect (i) the right of the General
Partner or the Partnership to pursue any remedies available to it under this
Agreement or at law in respect of any default in respect of a Capital Call
issued prior to the termination of the Initial Investment Period, or (ii) the
obligation of any Partner with respect to a Capital Commitment attributable to a
Subscription Agreement entered into after the Initial Offering Period.
SECTION 3.5 Additional Capital. Except as specifically
provided in this Agreement or any Subscription Agreement, no Partner (including
the General Partner) shall be required to, and no Limited Partner shall have the
right to, contribute additional funds or other property to the Partnership. The
Partnership may from time to time incur Indebtedness in accordance with Section
3.6 and issue additional Units in accordance with Section 3.7.
SECTION 3.6 Fund Indebtedness.
(a) The General Partner shall have the right, at its option,
to cause any Fund Entity other than the Partnership to incur or assume
Indebtedness from any Person to finance Investments made, directly or
indirectly, and to pledge or otherwise encumber assets of any such Fund
Entity to secure any such Indebtedness, subject to the following:
(i) Following repayment of the NY Trust Mezzanine
Loan, the Partnership shall not consent to NY Trust and its
subsidiaries incurring any Indebtedness in excess of 55% of
the Current Market Value of the Investments held by NY Trust
at the time any such Indebtedness is incurred, and, the
Partnership will not consent to NY Trust II and its
subsidiaries incurring any Indebtedness in excess of 55% of
the Current Market Value of 600 Lexington at the time any such
Indebtedness is incurred.
(ii) The Fund shall not incur any Indebtedness other
than the Indebtedness permitted under clause (i) of this
Section 3.6(a) unless, after giving effect to such incurrence,
(A) the aggregate amount of such other
Indebtedness is not more than 50% of the Current
Market Value of all Investments other than the
21
Initial Asset Group at the time any such other
Indebtedness is incurred (the "Aggregate Debt
Limit"); and
(B) the total amount of Indebtedness that is
secured by any one Investment other than one of the
Initial Asset Group shall not exceed 65% of the
Current Market Value of such Investment at the time
such Indebtedness is incurred (the "Single Asset Debt
Limit").
(iii) Notwithstanding clause (ii)(A) of this Section
3.6(a), the General Partner may cause the Partnership to
consent to the Fund incurring Indebtedness in excess of the
Aggregate Debt Limit, if the General Partner determines that
it is advisable to do so in connection with the acquisition by
any Operating Company of a new Investment; provided that, at
the time such excess Indebtedness is incurred, the General
Partner makes a reasonable determination that Fund
Indebtedness will be within the Aggregate Debt Limit within
one year after the incurrence of such excess Indebtedness.
(b) In connection with the incurrence of Indebtedness by any
Fund Entity, the General Partner shall have the right, in its
discretion, to pledge to the lender the right of the General Partner to
issue Capital Calls in respect of the Unfunded Commitments of the
Partners, and to enforce the obligations of the Partners to make
Capital Contributions in respect thereof, in accordance with the terms
and conditions of this Agreement and the Subscription Agreements. Each
Partner having an Unfunded Commitment shall, upon the written request
of the General Partner, for the benefit of one or more lenders or other
Persons extending credit to the Partnership, (A) acknowledge its
obligations pursuant to this Agreement and its Subscription Agreement
to make Capital Contributions (which may, as determined by the General
Partner, include an acknowledgment that the General Partner, or the
lender on behalf of the General Partner (in accordance with the
agreements between such lender and the Partnership and/or the General
Partner), may call such Capital Contributions in accordance with this
Agreement and such Partner's Subscription Agreement to pay the
outstanding obligations to such lenders without, except as expressly
set forth in this Agreement, defense, counterclaim or offset of any
kind); provided that the liability of the Partners to make Capital
Contributions shall not be increased thereby and shall not result in
the loss of a Partner's limited liability status under this Agreement,
and (B) execute such documents as may be reasonably required to create
a security interest in such Partner's obligations to make such Capital
Contributions, which the General Partner may perfect and assign for the
benefit of a lender as determined by the General Partner in its sole
discretion. For purposes of determining whether the Fund's Indebtedness
is within the Aggregate Debt Limit, Indebtedness secured by a pledge of
the General Partner's right to make Capital Calls in respect of the
Partners' Unfunded Commitments (or in respect of the unfunded
commitments of any investor in any Fund Entity) shall not be treated as
outstanding Indebtedness; provided that no assets of the Partnership
are pledged to secure such Indebtedness other than the right of the
General Partner to issue Capital Calls in respect of the Unfunded
Commitments of the Partners and to enforce the obligations of the
Partners to make Capital Contributions in respect thereof.
22
SECTION 3.7 Issuance of Units and Participation Interest.
(a) The Partnership may issue Units, as determined by the
General Partner, in its discretion, to existing or newly-admitted
Partners, (i) in exchange for the making by such a Partner (a
"Contributing Partner") of a Capital Contribution to the Partnership in
cash, or (ii) in connection with the acquisition, directly or
indirectly, of an Investment from such Contributing Partner or an
Affiliate of such Contributing Partner by one or more Operating
Companies; provided, that no Units may be issued pursuant to this
Section 3.7 at a price per Unit that is less than the Current Unit
Value as of the date on which the Partnership enters into a binding
agreement to issue such Units without the consent of the Partners by a
Super Majority Partner Vote. This Section 3.7(a) is subject to Section
5.3(b)(iv).
(b) (i) Effective as of the date hereof, the Partnership is
issuing to each of ▇▇▇▇▇ and SLR a limited partnership interest
denominated as a "Participation Interest." The Participation Interest
is an equity interest in the Partnership which is granted in
consideration for services rendered by ▇▇▇▇▇ and SLR as Investment
Advisors to the General Partner and the Partnership pursuant to the
Advisory Agreement. The Participation Interest is in addition to, and
distinct from, the Units described above, and any references to "Units"
or "Partnership Units" shall not be deemed to include the Participation
Interest. A Partner's percentage interest attributable to its
Participation Interest (if any), together with the percentage of the
total outstanding Units held by it, equal its Percentage Interest in
the Partnership. The Participation Interest is an interest solely in
profits and shall not have any Capital Commitment or initial Capital
Account associated with it. It is intended that the Participation
Interest constitute a profits interest within the meaning of Section
2.02 of IRS Revenue Procedure 93-27, 1993-2 C.B. 343.
(ii) The formula for calculation of the Participation
Interest is included in the definition of Percentage Interest in
Section 1.1, and Schedule 5.9 provides an example of how the Percentage
Interest for the holder of a Participation Interest is calculated. The
Participation Interest is intended to provide each Investment Advisor
holding it with an interest in the Partnership that approximates the
interest it would acquire if it received Asset Management Fees and
Acquisition Fees after the Initial Investment Period in the same
amounts payable in respect of such fees during the Initial Investment
Period and then invested half of such amounts in the Partnership
through the acquisition of additional Partnership Units. (However,
since the Participation Interest is a profits interest, this interest
will be substantially economically equivalent to the ownership of
Partnership Units only if the Partnership has adequate gain or profit
to allocate to the holder of the Participation Interest.) Without
considering the effect of additional equity investments or redemptions
by existing or new Partners, the grant of the Participation Interest
has the effect of decreasing the Percentage Interest of all
Unaffiliated Limited Partners after the Initial Investment Period as
the Percentage Interest associated with the Participation Interests
increases in a manner corresponding to the accrual of additional Asset
Management Fees and Acquisition Fees that would occur if such fees were
payable in cash after the Initial Investment Period in the same amounts
as such fees are payable during the Initial Investment Period pursuant
to the terms of this Agreement. This is accomplished by the Unit
cancellation procedure described in Section 5.9. (Schedule 5.9 provides
an example of Unit cancellations as contemplated by Section 5.9.)
23
(iii) SLR may, at any time prior to the end of the
Initial Investment Period, elect to return its Participation Interest
to the Partnership by giving written notice to such effect to the
General Partner. In such event, the General Partner shall amend this
Agreement and the Advisory Agreement (in a manner reasonably acceptable
to SLR) as necessary to provide for (A) only ▇▇▇▇▇ having a Percentage
Interest calculated by reference to a Participation Interest, and (B)
the payment to the General Partner for the benefit of SLR of additional
cash amounts in respect of Asset Management Fees and Acquisition Fees
to which SLR would be entitled under the Advisory Agreement if the
Partnership continued to pay such fees after the Initial Investment
Period in the manner that such fees are required to be paid under this
Agreement during the Initial Investment Period.
SECTION 3.8 Redemption Rights. Subject to and in accordance
with the provisions of this Section 3.8, each Partner shall have the right (a
"Redemption Right") to request that the Partnership redeem for cash at the
Current Unit Value in the case of Units, or at the Current Participation
Interest Value in the case of a Participation Interest, all or a portion of the
Units or Participation Interest held by such Partner by delivering a notice (a
"Notice of Redemption") to the Partnership and the General Partner specifying
the number of Units or the portion of the Participation Interest held by such
Partner (a "Redeeming Partner") that it requests to be redeemed at any time
within the last 45 days of any calendar year ending after the later of (i) the
last day of the Initial Investment Period and (ii) the first anniversary of the
date such Partner acquired the Units or such portion of its Participation
Interest that it seeks to redeem. If, and beginning with the first day of the
first taxable year in which, the Partnership no longer qualifies for the Private
Placement PTP Exemption, the Redemption Right shall comply with the requirements
of Regulations Section 1.7704-1(f) and shall be construed and administered in
accordance therewith. The General Partner may modify the Redemption Right from
time to time in its discretion to ensure that the terms of the Redemption Right
comply and continue to comply with such requirements. If a Partner requests a
redemption pursuant to the first sentence of this Section 3.8 (a "Liquidating
Redemption"), the General Partner shall use its reasonable best efforts to
redeem the number of Units or the portion of the Participation Interest
specified in the Notice of Redemption for cash at the Current Unit Value in the
case of Units, or at the Current Participation Interest Value in the case of a
Participation Interest, on or before the last day of the calendar year following
the year in which such Notice of Redemption was delivered, subject to the
following:
(a) In no event shall the Partnership be required to redeem
for cash in any calendar year Partnership Units and Participation
Interests which, when taken together with all interests in US Core
Trust and US Core Properties which Fund Investors having interests
therein are seeking to redeem pursuant to corresponding redemption
rights under the Constituent Documents of such Entities, exceed, in the
aggregate, 10% of the total equity capitalization of the Partnership,
US Core Trust and US Core Properties (calculated without duplication of
equity held directly or indirectly in any such Entity by any other such
Entity) as of the first day of such calendar year. If, for any calendar
year, Partners and such Fund Investors request such liquidating
redemptions in excess of such
24
10% limit, then each Partner entitled to participate in such redemption
shall be entitled to redeem its pro rata share of the total equity in
the Partnership, US Core Trust and US Core Properties requested to be
redeemed in such calendar year based on the amount of such equity
requested to be redeemed in each such Fund Investor's Notice of
Redemption.
(b) If more than one Fund Investor submits a request for a
Liquidating Redemption in a calendar year, then funds available to
effect such redemptions shall be applied pro rata to the redemption of
the interests in the Partnership, US Core Trust and/or US Core
Properties subject to each such Fund Investor's Notice of Redemption,
based on such Fund Investor's share of the total equity in such
Entities.
(c) In no event will any Units or Participation Interests (or
interests in US Core Trust or US Core Properties) be redeemed pursuant
to a Liquidating Redemption to the extent that (i) the General Partner
determines in good faith that such redemption would be inconsistent
with the best interests of the Partnership or any Operating Entity, or
(ii) the Partnership is unable to raise or acquire sufficient funds to
make such Liquidating Redemption on terms acceptable to the
Partnership, as determined by the General Partner in good faith.
(d) If, and beginning with the first day of the first taxable
year in which, the Partnership no longer qualifies for the Private
Placement PTP Exemption:
(i) A Partner shall be entitled to exercise the
Redemption Right only if (x) the redemption or purchase of the
Partner's Units and/or Participation Interest would constitute
a Private Transfer or (y) the Percentage Interest attributable
to the Units and Participation Interest to be redeemed, when
aggregated with other Transfers of Partnership Interests
within the same taxable year of the Partnership (but not
including Private Transfers), would constitute a Percentage
Interest of ten percent (10%) or less in the Partnership.
(ii) The General Partner may establish such policies
and procedures as it may deem necessary or desirable in its
discretion, including imposing limitations on the number of
Units and portion of Participation Interest with respect to
which the Redemption Right may be exercised during any period
of time shorter than a calendar year (and causing similar
limitations to be imposed with respect to redemptions of
interests in US Core Trust and US Core Properties) and
establishing procedures to allocate the ability to exercise
the Redemption Right among the Partners (and causing similar
procedures to be established with respect to US Core Trust and
US Core Properties).
(iii) The restrictions set forth in subparagraphs (i)
and (ii) of this Section 3.8(d) shall continue in effect until
such time as the Partnership is no longer potentially subject
to classification as a publicly traded partnership, as defined
in Code Section 7704, in the absence of such restrictions, as
determined by the General Partner in its discretion. The
restrictions set forth in such clauses (i) and (ii), together
with the restrictions on the Transfer of Partnership Interests
25
set forth in Section 10.5(b)(ii), are intended to limit
transfers of interests in the Partnership in such a manner as
to permit the Partnership to qualify for the safe harbors from
treatment as a publicly traded partnership set forth in
Treasury Regulations Sections 1.7704-1(d), (e), (f) and (j)
and shall be construed and administered in accordance
therewith. The General Partner may modify the restrictions set
forth in such clauses (i) and (ii), and the provisions of
Section 10.5(c), from time to time in its discretion to ensure
that the Partnership complies and continues to comply with the
requirements of the Code and Regulations described above.
(e) Each Notice of Redemption requesting a Liquidating
Redemption will expire and be of no further force or effect as of the
last day of the calendar year following the year in which such Notice
of Redemption was delivered. A Partner (or other Fund Investor) will be
entitled to participate in Liquidating Redemptions in any given
calendar year only to the extent of the Units and the portion of the
Participation Interest (or other interest in the Fund) subject to a
Notice of Redemption requesting a Liquidating Redemption within the
last forty-five days of the preceding calendar year.
(f) A Limited Partner shall not be entitled to exercise a
Redemption Right if it prejudices or affects the continuity of the
Partnership for purposes of Code Section 708. Prior to any such
redemption, the General Partner may require an opinion of counsel,
which counsel and opinion shall be satisfactory to the General Partner,
to the effect that such redemption will not cause adverse tax
consequences to the non-redeeming Partners, and such Limited Partner
exercising the Redemption Right shall be responsible for paying said
counsel's fee for such opinion.
SECTION 3.9 Priority Redemption Rights. In connection with the
issuance of Units to a Contributing Partner, the Partnership may agree, subject
to the terms of any outstanding Priority Redemption Rights, in the sole
discretion of the General Partner, as part of the terms and conditions for such
issuance, to grant such Contributing Partner a right to redeem all or a portion
of the Units issued to such Limited Partner in such issuance at a redemption
price equal to the Current Unit Value at the time of redemption on or before a
specified date or dates (any such preferential or modified redemption right, a
"Priority Redemption Right"). Pursuant to any such agreement, the General
Partner may apply any Capital Cash Flow and any funds received from Capital
Contributions of Partners that would otherwise be available for making
distributions to the Partners or redeeming Units pursuant to Redemption Rights
generally to the making of any redemptions required to be made pursuant to any
Priority Redemption Rights. Redemptions made or required to be made pursuant to
the exercise of Priority Redemption Rights are referred to herein as "Priority
Redemptions".
SECTION 3.10 ▇▇▇▇▇ Bridge Equity and Priority Redemption
Right. Prior to the date hereof, the General Partner and the ▇▇▇▇▇ Limited
Partner have collectively made Capital Contributions to the Partnership in
excess of the ▇▇▇▇▇ Capital Requirement at a price per Unit equal to the Initial
Offering Price. Affiliates of ▇▇▇▇▇ may from time to time in the future
contribute equity to the Partnership and/or one or more Operating Companies or
other Fund Entities which, taken together with other contributions by Affiliates
of ▇▇▇▇▇, exceed the ▇▇▇▇▇ Capital Requirement if the General Partner determines
that such contributions are necessary or
26
advisable for the Fund to finance an Investment, meet the domestic control
requirements set forth in the Constituent Documents of any Operating Company
that is a REIT or for other purposes deemed appropriate by the General Partner.
Any such future contributions shall be at a price per Unit (or equivalent
interest in another Fund Entity) equal to (i) the Initial Offering Price, during
the Initial Offering Period and (ii) the Current Unit Value (or its equivalent),
thereafter. All past contributions and future contributions in excess of the
▇▇▇▇▇ Capital Requirement by Affiliates of ▇▇▇▇▇ to the Partnership or any
Operating Company or other Fund Entity are referred to herein as "▇▇▇▇▇ Bridge
Equity". Notwithstanding any other provision of this Agreement, the General
Partner shall cause the Partnership (or applicable Operating Company) to apply
the proceeds of all Capital Contributions made to the Partnership or any
Operating Company from and after the date hereof to the redemption of any ▇▇▇▇▇
Bridge Equity, to the extent that the General Partner reasonably determines that
such ▇▇▇▇▇ Bridge Equity is no longer required. Such redemption shall be for
cash in an amount per Unit (or equivalent interest) equal to the price per Unit
(or equivalent interest) paid by the applicable ▇▇▇▇▇ Affiliate for such
interest. The right to have any ▇▇▇▇▇ Bridge Equity redeemed pursuant to this
Section 3.10 shall be a Priority Redemption Right of the ▇▇▇▇▇ Affiliate that
contributed such equity. To the extent the General Partner, the ▇▇▇▇▇ Limited
Partner or another Affiliate of ▇▇▇▇▇ elects to exercise such Priority
Redemption Right, the General Partner may require all Partners whose Unfunded
Commitments are greater than zero to make Capital Contributions in accordance
with Section 3.2 up to the full amount of such Unfunded Commitments to the
extent necessary to fund such redemption. Notwithstanding the foregoing, each of
the ▇▇▇▇▇ Limited Partner, the General Partner and any other Affiliate of ▇▇▇▇▇
that contributes ▇▇▇▇▇ Bridge Equity may, in its sole and absolute discretion,
waive or defer, in whole or in part, the exercise of the Priority Redemption
Right granted to it pursuant to this Section 3.10. Each Affiliate of ▇▇▇▇▇ that
contributes or has contributed ▇▇▇▇▇ Bridge Equity to the Partnership or any
other Fund Entity shall be a third party beneficiary of this Section 3.10.
SECTION 3.11 ▇▇▇▇▇ Investment. The General Partner, the ▇▇▇▇▇
Limited Partner and/or such other Affiliates of ▇▇▇▇▇ as the General Partner may
determine from time to time, shall maintain Committed Capital to the Fund in an
aggregate amount of not less than the lesser of (i) 1% of the Committed Capital
of all Fund Investors, or (ii) $25 million (the "▇▇▇▇▇ Capital Requirement"). In
connection with any increase of Committed Capital of the Fund, whether through
the acceptance of new or increased Capital Commitments, the issuance of
additional Partnership Units by the Partnership, the issuance of additional
equity securities by any Operating Company or otherwise, the General Partner
shall, or shall cause an Affiliate of the General Partner to, increase its
Capital Commitment or acquire additional Partnership Units or equity securities
of one or more Operating Companies at the Current Unit Value to the extent
necessary to comply with the ▇▇▇▇▇ Capital Requirement. In order to manage the
equity interests in the Fund held by the General Partner and its Affiliates for
purposes of complying with the ▇▇▇▇▇ Capital Requirement, (A) the General
Partner, the ▇▇▇▇▇ Limited Partner or any other Affiliate of ▇▇▇▇▇ may, at any
time, at the discretion of the General Partner, contribute interests such Person
holds in any Operating Company in which the Partnership has an interest to the
Partnership in exchange for Partnership Units at Current Unit Value; and (B) the
General Partner may, at any time, in its discretion, cause the Partnership to
exchange, at Current Unit Value, interests in any Operating Company held by the
Partnership for interests in another Operating Company in which the Partnership
holds an interest, or for Partnership Units, held by the General Partner, the
▇▇▇▇▇ Limited Partner or any other Affiliate of ▇▇▇▇▇; provided that, in any
27
such case, such exchange does not result in the recognition of material amounts
of taxable income or gain by the Partnership or any Fund Entity. Neither the
General Partner nor any other Affiliate of ▇▇▇▇▇ shall be in breach of this
Agreement if at any time the ▇▇▇▇▇ Capital Requirement is not met as a result of
dilution following the issuance of Partnership Units or interests in any Fund
Entity so long as the General Partner takes, or causes any Affiliate to take,
such action as is necessary to cause the ▇▇▇▇▇ Capital Requirement to be met as
promptly as practicable following any such issuance.
ARTICLE IV
GENERAL PARTNER
SECTION 4.1 General Partner. Subject to Section 5.11 and the
other express limitations set forth in this Agreement, all rights and powers to
manage and control the business and affairs of the Partnership shall be vested
exclusively in the General Partner, which shall have full authority to exercise
in its discretion, on behalf of and in the name of the Partnership, all rights
and powers of the sole general partner of a limited partnership formed under the
Act. The General Partner shall have the power to delegate all or any part of its
rights and powers to manage and control the business and affairs of the
Partnership to such officers, employees, Affiliates, agents and representatives
of the General Partner or the Partnership as it may from time to time deem
appropriate. Any authority delegated by the General Partner to any other Person
shall be subject to the limitations on the rights and powers of the General
Partner specifically set forth in this Agreement.
SECTION 4.2 Powers of the General Partner.
(a) Subject to Section 5.11 and the other express limitations
set forth in this Agreement, the power to direct the management,
operation and policies of the Partnership shall be vested exclusively
in the General Partner, which shall have the power by itself and shall
be authorized and empowered on behalf and in the name of the
Partnership to carry out any and all of the objects and purposes of the
Partnership and to perform all acts and enter into and perform all
contracts and other undertakings that it may in its sole discretion
deem necessary or advisable or incidental thereto, all in accordance
with and subject to the other terms of this Agreement.
(b) Without limiting the foregoing general powers and duties,
the General Partner is hereby authorized and empowered on behalf and in
the name of the Partnership, or on its own behalf and in its own name,
or through agents as may be appropriate, subject to the limitations
contained elsewhere in this Agreement, to:
(i) make all decisions concerning the Partnership's
interest in any Operating Company, including with respect to
the voting of securities of such Operating Company, the
appointment, removal and replacement of trustees, managers or
directors of such Operating Company and the exercise of any
rights and compliance with any obligations of the Partnership
under any agreements with such Operating Company or to which
such Operating Company is subject or with any Person having an
interest in such Operating Company.
28
(ii) make all decisions concerning, and enter into
Advisory Agreements with Investment Advisors under which such
Investment Advisors provide advice and recommendations to the
General Partner or the Partnership with respect to, the
financing or operation of the Partnership, and the
structuring, organization, formation, capitalization or
financing of any Operating Company;
(iii) direct the formulation of investment policies
and strategies for the Partnership and any Operating Company,
and select and approve the investment of Partnership funds in
any Operating Company, all in accordance with the Investment
Guidelines and the other limitations of this Agreement;
(iv) sell, exchange, or otherwise dispose of all or
any portion of the Partnership's interest in any Operating
Company and, in connection therewith, accept, collect, hold,
sell, exchange, or otherwise dispose of evidences of
Indebtedness or other property received pursuant thereto;
(v) cause or consent to a merger, combination,
recombination or consolidation of any Operating Company or
other Fund Entity with any unrelated Entity or between or
among two or more Operating Companies or other Fund Entities,
or cause or consent to a transfer or exchange of Properties,
interests in Fund Entities or other assets of or between one
or more Operating Companies or other Fund Entities;
(vi) consent to any amendment to or restatement of
the Constituent Documents of any Operating Company;
(vii) open, maintain and close bank accounts and draw
checks or other orders for the payment of money and open,
maintain and close brokerage, money market fund and similar
accounts;
(viii) hire for usual and customary payments and
expenses consultants, investment bankers, brokers, appraisers,
attorneys, accountants and such other agents for the
Partnership as it may deem necessary or advisable, and
authorize any such agent to act for and on behalf of the
Partnership;
(ix) enter into, execute, maintain and/or terminate
contracts, undertakings, agreements and any and all other
documents and instruments in the name of the Partnership, and
do or perform all such things as may be necessary or advisable
in furtherance of the Partnership's powers, objects or
purposes or to the conduct of the Partnership's activities,
including entering into agreements to acquire or dispose of
interests in Operating Companies which may include such
representations, warranties, covenants, indemnities and
guaranties as the General Partner deems necessary or
advisable;
(x) incur Indebtedness and provide indemnities in
connection therewith, on a recourse (only with respect to the
assets of the Partnership or any Fund Entity) or non-recourse
basis, on behalf of any Fund Entity other than the Partnership
and, in its discretion, secure any and all of such
Indebtedness with the
29
assets of any Fund Entity, including the Unfunded Commitments
of the Partners, and to assign the Partnership's and the
General Partner's rights to issue Capital Calls and to deliver
Capital Call Notices to the Partners, to receive Capital
Contributions from Partners and to enforce such rights under
the terms of this Agreement and any Subscription Agreement;
(xi) act as the "tax matters partner" under the Code
and in any similar capacity under state, local or foreign law;
(xii) make, in its sole discretion, any and all
elections for U.S. federal, state, local and foreign tax
matters, including any election to adjust the basis of
Partnership property pursuant to Sections 734(b), 743(b) and
754 of the Code or comparable provisions of state, local or
foreign law;
(xiii) delegate any powers or responsibilities of the
General Partner under this Agreement as they relate to any
Operating Company to the trustees, directors, or managers, as
applicable, of such Operating Company.
(c) Notwithstanding subsections (a) and (b) of this Section
4.2, the General Partner shall not take any action in the name or on
behalf of the Partnership which under the terms of this Agreement
requires the approval or consent of the Management Board, the Advisory
Committee, Partners other than the General Partner (including, if
applicable, the Non-Managing General Partner) or Fund Investors, unless
the approval or consent required by this Agreement has been obtained.
SECTION 4.3 Time Commitment.
(a) The General Partner shall, and shall cause its Affiliates
and their respective employees, officers and agents to, devote to the
Partnership, Operating Companies and Investments such time as shall be
necessary to conduct the business and affairs of the Partnership,
Operating Companies and Investments in an appropriate manner consistent
with the terms of this Agreement and the Constituent Documents of each
Operating Company. The Partners acknowledge that the General Partner
and other Affiliates of ▇▇▇▇▇ and their respective employees, officers
and agents may also engage in activities unrelated to the Fund and may
provide services to Persons other than the Partnership, the Operating
Companies or any of their Affiliates.
(b) The General Partner shall cause the Management Team to
devote such time as the General Partner reasonably determines is
necessary to manage and operate the business affairs of Fund in an
appropriate manner consistent with the terms of this Agreement.
SECTION 4.4 Outside Investments. So long as the Fund has the
capacity to make new Investments, neither the General Partner nor any other
Affiliate of ▇▇▇▇▇ will make any equity investment which satisfies the
Investment Guidelines (other than through an interest in the Fund); provided
that such restriction shall not apply to the following:
30
(a) any investment which the General Partner has decided not
to make or pursue based on a good faith determination that such
investment is inappropriate or inadvisable for the Fund, whether due to
capacity, diversification, rate of return objectives or other
considerations; provided that to the extent the General Partner
determines in good faith that it is desirable for the Fund to make some
but not all of a particular investment, then the Fund may make such
investment to such extent and the General Partner or another Affiliate
of ▇▇▇▇▇ (alone or with other Strategic Investors) may co-invest with
the Fund in such investment on a side-by-side basis on terms no more
favorable than those applicable to the Fund's share of the investment;
(b) any investment by the ▇▇▇▇▇ U.S. Office Value Added Fund,
or any other fund or investment program affiliated with ▇▇▇▇▇ which has
investment policies and objectives which differ substantially from
those of the Fund and which, in the good faith judgment of the General
Partner, does not compete in any material way for investments that
would be suitable for the Fund;
(c) any investment in an office building more than 75% leased
to a single tenant under a lease having at least two years remaining on
its term (excluding extension options);
(d) any non-brokered suburban office asset with a purchase
price of $65 million or less that was originated by GECC for HSOV;
(e) passive investments (i.e., investments which do not
involve active participation in management by any Affiliate of ▇▇▇▇▇);
and
(f) any investment made by NOP or HSOV pursuant to an
investment opportunity allocated to NOP or HSOV in accordance with the
▇▇▇▇▇ investment allocation procedure described in Schedule 4.4.
SECTION 4.5 Transactions with Affiliates. Except for
transactions the terms of which are expressly contemplated or approved by this
Agreement or any Approved Agreement, neither the General Partner nor any other
Affiliate of ▇▇▇▇▇ shall engage in any material transaction with the Partnership
or any Fund Entity unless the terms of the transaction are on terms which are no
less favorable to the Partnership or such Fund Entity than would be obtained in
a transaction with an unaffiliated party; provided that the terms of any
transaction approved by the Advisory Committee shall be conclusively deemed to
be made on such a basis. The General Partner shall disclose to the Advisory
Committee the terms of all material transactions between the General Partner,
▇▇▇▇▇ or any Affiliate of the General Partner or ▇▇▇▇▇, on the one hand, and the
Partnership or any Fund Entity on the other.
SECTION 4.6 Strategic Investors. The General Partner may
consent, on behalf of the Partnership, to an Operating Company permitting one or
more strategic investors, including Affiliates of the General Partner
("Strategic Investors") investing in Properties in which the Fund invests if the
General Partner determines that such investment would be beneficial to the Fund;
for example, in diversifying the investments made or to be made by the Fund, in
successful operation of the Property, or in disposing of the Property or
otherwise adding
31
value to the Property. If such Strategic Investor is a Partner or Fund Investor,
any such co-investment may be made through an investment vehicle in which such
Strategic Investor has an interest separate from its interest in the Fund, and
if the General Partner and/or its Affiliates are the Strategic Investor, such
co-investment shall have economic terms that are materially no more favorable to
the General Partner and/or its Affiliates, as applicable, than the terms of this
Agreement or the terms contemplated by any Approved Agreement. If the General
Partner, ▇▇▇▇▇ or any Affiliate of the General Partner or ▇▇▇▇▇ co-invests in a
Property with the Fund, then, unless otherwise approved by the Advisory
Committee, the General Partner, ▇▇▇▇▇ or such Affiliate, as applicable, shall be
required to dispose of its interest in such Property at the same time as the
Fund disposes of its interest in the Property on terms no more favorable to such
Person than those received by the Fund.
SECTION 4.7 Other Activities not Restricted. Except as
provided in Section 4.2(c), Sections 4.3 through 4.6 and Article V, this
Agreement shall not be construed in any manner that precludes the General
Partner or any other Affiliate of ▇▇▇▇▇, or any of their respective officers,
employees or agents from engaging in any activity whatsoever permitted by
applicable law.
ARTICLE V
PARTNERSHIP MANAGEMENT
SECTION 5.1 Fund Structure.
(a) The Partnership will invest in real estate properties in
the United States indirectly through Operating Companies in which the
Partnership holds or hereafter acquires a direct or indirect interest.
The term "Operating Company" means an Entity in which the Partnership
holds a direct or indirect equity interest and which may issue equity
interests to one or more Persons which are not Affiliates of the
Partnership. The Partnership may from time to time organize such
Operating Companies as the General Partner deems necessary or advisable
to accomplish the objectives of the Partnership, so long as the
Constituent Documents of any such Operating Company, together with any
other agreements entered into in connection with the organization of
such Operating Company, provide the Partnership, the General Partner or
another ▇▇▇▇▇ Controlled Entity, directly or indirectly, with Control
of such Operating Company. The Partnership, each Operating Company and
any Entity in which an Operating Company holds a direct or indirect
interest is sometimes referred to in this Agreement as a "Fund Entity".
The Partnership and all other Fund Entities collectively are sometimes
referred to herein as the "Fund". Each Partner, and each Person that
acquires or subscribes for an equity interest in any Operating Company
or other Fund Entity or which makes an equity investment in any
Property in which any Operating Company invests, and which is
designated as such by the General Partner, shall be deemed a "Fund
Investor". The General Partner shall promptly notify each Partner of
the identity and notice address of any Person designated a Fund
Investor.
(b) As of the date of this Agreement, the Fund consists of the
Partnership, NY Trust and the subsidiaries of NY Trust and NY Trust II
and the subsidiary of NY Trust II.
32
It is the present intention of the General Partner to cause the
Partnership to acquire an interest in US Core Trust, and to cause US
Core Trust to acquire a general partner interest in US Core Properties,
prior to or in connection with the first investment by US Core
Properties, directly or indirectly, in a Property. In such event, the
organizational structure of the Fund shall be as set forth on Schedule
5.1. Following the acquisition by the Partnership of an interest in US
Core Trust, the Partnership shall take such action as from time to time
may be necessary to ensure that the Partnership has the right, by
virtue of share ownership, voting agreement or otherwise, to designate
a majority of the Board of Trustees of US Core Trust and to vote or
direct the vote of a majority of the voting securities of US Core Trust
at anytime outstanding. Following the acquisition by US Core Trust of a
general partner interest in US Core Properties, the Partnership shall
not, without the consent of the Partners by a Majority Partner Vote,
consent to or take any action that results in (i) US Core Trust ceasing
to be the general partner of US Core Properties, or (ii) US Core Trust
issuing any equity securities having rights, privileges or preferences
superior to those of the securities of US Core Trust held by the
Partnership (provided that, the Partnership may, without any such
consent, cause US Core Trust to issue securities having preferential or
modified redemption rights to the same extent that the Partnership may
grant Priority Redemption Rights as contemplated by Section 3.9). The
Partners acknowledge that it is the intent of the General Partner to
arrange for an Affiliate of ▇▇▇▇▇ to acquire an interest in US Core
Trust for the purpose of causing US Core Trust to be "domestically
controlled" as contemplated by the Constituent Documents of US Core
Trust. Such interest shall constitute ▇▇▇▇▇ Bridge Equity and such
Affiliate of ▇▇▇▇▇ shall be entitled to the benefits of Section 3.10.
SECTION 5.2 Investment Guidelines.
(a) Each Operating Company will invest, indirectly through one
or more Fund Entities, in real estate properties in the United States
in accordance with the Investment Guidelines. Any real estate property
in which the Fund invests is referred to herein as a "Property". An
Operating Company's interests in Properties and in any intermediate
Entity through which such Operating Company invests in a Property are
referred to generally as "Investments." The Partnership will maintain
in Temporary Investments or cash any funds of the Partnership that are
not invested in Operating Companies, distributed to the Partners or
applied toward the expenses of the Partnership.
(b) The investment objective of the Partnership is to (A)
achieve an average cash return to Limited Partners of 7% to 8% on their
capital invested in respect of Units and (B) generate an internal rate
of return to Limited Partners of 10% to 12% on their capital invested
in respect of Units, net of Partnership expenses, over an assumed ten
year holding period, by investing in and funding Operating Companies
which adhere to the following guidelines (the "Investment Guidelines"):
(i) Each Operating Company will invest in existing
office properties that the General Partner believes are
desirable long term "core" holdings. Each Operating Company
will target high quality properties in attractive Central
Business District ("CBD") and suburban locations, with the
expectation that approximately 70% of the Partnership's
Committed Capital will be invested in CBD Properties.
33
(ii) An Operating Company may invest in mixed-use
Properties (i.e., some part of value and/or operating income
is attributable to non-office components), so long as at least
70% of the projected net operating income of any such Property
is attributable to office components.
(iii) An Operating Company will not invest in raw
land, except where such investment is incidental to an
investment in an existing developed office property or made as
part of an investment in a portfolio of existing office
properties; provided that, in any case, subject to clause (v)
below, an Operating Company shall not make an investment in
raw land if such investment would cause the value of the
Fund's total investment in raw land to exceed 2% of the total
value of all Investments of the Fund at the time the Operating
Company makes such investment.
(iv) Subject to clause (v) below, an Operating
Company will not invest in any property or asset that has a
material hotel or lodging component.
(v) Notwithstanding clauses (iii) and (iv) of this
Section 5.2(b), an Operating Company may make an investment in
raw land or hotel or lodging assets that would otherwise be
prohibited by such clauses (iii) and (iv) if such investment
is made as part of a transaction involving existing office
properties, and such Operating Company has a reasonable plan
for disposing of the investment in the prohibited assets to
the extent necessary to comply with the requirements of such
clauses (iii) and (iv) within twelve months after making such
investment.
(vi) After the Initial Investment Period, the
Partnership will not provide funding to an Operating Company
for investment in any single Investment in excess of 25% of
the Partnership's Committed Capital; provided that the
Partnership may provide funding for an Investment by an
Operating Company that exceeds such 25% limit (but which does
not in any event exceed 50% of the Partnership's Committed
Capital), if such Operating Company has a reasonable plan, in
the judgment of the General Partner, to reduce the Committed
Capital of the Partnership invested in such Investment to 25%
or less of the Committed Capital of the Partnership within
nine months after making such investment.
SECTION 5.3 Management Board.
(a) The General Partner shall be subject to the oversight of a
management board (the "Management Board"). The Management Board will
initially have seven members. The General Partner shall have the right
to appoint five members of the Management Board and SLR shall have the
right to appoint two members (each, an "SLR Designee"). The General
Partner shall promptly notify each other Partner of the name of each
member of the Management Board and of the party that appointed such
person and of any changes
34
thereto. Each member of the Management Board shall serve until the
removal, resignation, death or incapacity of such member. Any member of
the Management Board may be removed or replaced at any time by the
party that appointed such member with or without cause. Members of the
Management Board shall not receive any compensation from the
Partnership for their services as such. The Management Board may
require the removal of any Partnership officer, and may increase or
decrease the size of the Management Board, at any time and from time to
time, subject to the appointment rights of the General Partner and SLR.
(b) The General Partner shall not take any of the following
actions without the approval of the Management Board:
(i) acquire an interest in, or advance funds to, an
Operating Company;
(ii) dispose of all or any material part of its
interest in an Operating Company;
(iii) remove or appoint any officer of the
Partnership,
(iv) issue any Units pursuant to Section 3.7(a),
(v) make any change to the number of persons
comprising the Management Board or the right of any Person to
appoint representatives to the Management Board,
(vi) take any action contemplated by clause (v) or
(vi) of Section 4.2(b),
(vii) approve or modify any annual budget of the
Partnership, or
(viii) such other matters as are specified in this
Agreement.
(c) The General Partner will not give its consent, on behalf
of the Partnership, for an Operating Company to take any of the
following actions without the approval of the Management Board:
(i) acquire an Investment,
(ii) dispose of all or any material part of an
Investment,
(iii) incur any Indebtedness for which such Operating
Company is liable or which is secured in whole or in part by
any Investment,
(iv) remove or appoint any officer of such Operating
Company,
(v) issue any equity interest in such Operating
Company,
(vi) make any change to the fees payable by any Fund
Entity in which such Operating Company has an interest under
any Property Services Agreement,
35
(vii) make any change to the number of persons
comprising the governing body of such Operating Company or the
right of any Person to appoint representatives to such
governing body,
(viii) approve or modify any annual capital or
operating budget of such Operating Company, or
(ix) such other matters as are specified in this
Agreement.
(d) Meetings of the Management Board may be called at any time
by the General Partner, the President or by any member of the
Management Board on five Business Days' written notice, which notice
shall include a description of the matters to be discussed at such
meeting. Action may be taken by the Management Board at any meeting at
which a quorum is present, which quorum shall consist of a majority
(attending personally or represented by proxy) of the persons then
serving as members of the Management Board; provided that a quorum
shall not exist at any meeting unless at least one SLR Designee is
present (either personally or represented by proxy) at such meeting.
Notwithstanding the preceding sentence, if none of the SLR Designees,
acting in good faith, is able to attend a meeting of the Management
Board on the meeting date specified in the notice of such meeting or
within two Business Days thereafter, the quorum for such meeting shall
consist of a majority (attending personally or represented by proxy) of
the persons then serving as members of the Management Board (other than
the SLR Designees). Members of the Management Board may participate in
meetings in person, including by telephone conference call at which all
persons participating can hear and be heard, and shall be also deemed
to participate at any meeting at which (and to the extent which) such
member is represented by proxy.
(e) Any matter presented to the Management Board for its
consideration at a meeting duly called and held in accordance with this
Section 5.3 at which a quorum is present shall be deemed to have been
approved and consented to by the Management Board if a majority of the
members of the Management Board who are present at the meeting or
represented by proxy vote in favor of such action; provided that such
majority must include at least one SLR Designee in the case of any
consent to be given by the Management Board with respect to any of the
following:
(i) solicitation of Persons resident in Japan or East
Asia as prospective investors in the Partnership, and the
acceptance by the General Partner, on behalf of the
Partnership, of any subscription for Units by any such Person,
(ii) any change in the fees payable under the
Property Services Agreement in respect of Assets acquired from
SLR,
(iii) any change in the members of the Management
Board appointed by SLR; or
(iv) any change in the name of the Partnership.
36
(f) Notwithstanding the provisions of paragraph (d) of this
Section 5.3, and subject to the provisions of paragraph (e) of this
Section 5.3, any action required or permitted to be taken at a meeting
of the Management Board may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by such members of
the Management Board as would be necessary to approve such action at a
meeting of the Management Board at which all members were present.
(g) Notwithstanding the provisions of this Section 5.3, no
Investment will be considered by the Management Board for its approval
without endorsement of such Investment by the President.
(h) If SLR, after the date hereof and prior to December 31,
2005, ceases to hold any Partnership Interest, then unless, on or
before December 31, 2005, SLR and/or Affiliates of SLR, (1) contribute
at least $25 million to the capital of the Fund in exchange for
Partnership Units (or other units of Fund equity), or (2) raise, on
behalf of the Fund, as least $25 million in capital contributions or
capital commitments to the Fund; then the SLR Designees on the
Management Board and on any governing body of any Fund Entity shall
cease to have any voting rights on any such governing body but shall be
observers to the meetings of each such governing body; provided that if
neither of the events described in clauses (1) and (2) of this Section
5.3(h) has occurred on or before the fifth anniversary of the date as
of which SLR and its Affiliates cease to hold any Partnership Units,
then, on such date, all rights of SLR and the SLR Designees under this
Agreement shall cease, and the General Partner shall, without the
consent of SLR or any other party, amend this Agreement to reflect that
such is the case.
SECTION 5.4 Advisory Committee.
(a) The Partnership shall have a committee (the "Advisory
Committee") consisting of Fund Investors or their representatives or
designees selected by the General Partner; provided that no member of
the Advisory Committee shall be an Affiliate of the General Partner (or
a designee or representative thereof). The General Partner will meet
with the Advisory Committee at least semi-annually to consult on
various matters concerning the Partnership, including financial
statements and appraisals, the status of existing investments and such
other matters as the General Partner may determine or any member of the
Advisory Committee may reasonably propose.
(b) The Advisory Committee's approval will not be required for
any actions or decisions of the General Partner or the Management
Board, except that approval of the Advisory Committee shall be required
for:
(i) any transaction between the Partnership or any
Fund Entity, on the one hand, and the General Partner, ▇▇▇▇▇
or any Affiliate of the General Partner or ▇▇▇▇▇, on the other
hand, other than: (A) the provision of services pursuant to
any Property Services Agreement, (B) the leasing of a limited
amount of office space in a Property on market terms by ▇▇▇▇▇
or any of its Affiliates for conducting its operations, (C)
the sale of Units or of any equity securities (other
37
than the Participation Interest) of any Fund Entity to ▇▇▇▇▇
or any of its Affiliates at the same price per share or unit
as is offered to other investors or, if no such securities are
being offered to unaffiliated investors, at the Current Unit
Value or at such other price as may be approved by the
Partners by a Super Majority Vote, (D) the redemption of
Partnership Interests or interests in other Fund Entities held
by Affiliates of ▇▇▇▇▇ pursuant to the terms of this Agreement
and/or the Constituent Documents of the applicable Fund
Entity, (E) the execution, delivery or performance of any
Approved Agreement, (F) any other transaction specifically
permitted by this Agreement, and (G) any transaction which is
on terms no less favorable to the Partnership or such Fund
Entity than would be obtained from an unaffiliated third
party.
(ii) the ratification of any Appraiser selected by
the General Partner, pursuant to Section 5.9 hereof;
(iii) any in kind distribution by the Partnership of
publicly traded securities; and
(iv) notwithstanding clause (i)(A) above, any
increase of fees payable to any Property Manager pursuant to
any Property Services Agreement to amounts greater than those
provided for in the Property Services Agreement Form.
(c) Any action of, or approval required by, the Advisory
Committee shall require the vote of members of the Advisory Committee
who account for at least a majority of the aggregate Committed Capital
collectively held by Fund Investors represented on the Advisory
Committee.
(d) The quorum required for a meeting of the Advisory
Committee shall be a majority in interest of its members (determined by
reference to the Committed Capital of the Fund Investors represented by
such members). Members of the Advisory Committee may participate in a
meeting of the Advisory Committee by means of conference telephone or
video conferencing by means of which all persons participating in the
meeting can hear and be heard. Any member of the Advisory Committee who
is unable to attend a meeting of the Advisory Committee may grant in
writing to another member of the Advisory Committee or any other Person
such member's proxy to vote on any matter upon which action is to be
taken at such meeting. The Advisory Committee shall conduct its
business by such procedures as a majority of its members consider
appropriate.
(e) Any action required or permitted to be taken at a meeting
of the Advisory Committee may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by such members of
Advisory Committee as would be necessary to approve such action at a
meeting of the Advisory Committee at which all members were present;
provided, that all members of the Advisory Committee received notice of
the solicitation of consent at least five (5) days prior to the
effectiveness thereof.
38
(f) No fees shall be paid by the Partnership or any Operating
Company to members of the Advisory Committee for their services as
such, but the members of the Advisory Committee shall be reimbursed by
the Partnership for all reasonable out-of-pocket expenses incurred in
attending meetings of the Advisory Committee.
(g) Any member of the Advisory Committee may resign upon
delivery of written notice from such member to the General Partner, and
shall be deemed removed if the Limited Partner that the member
represents requests such removal in writing to the General Partner or
becomes a Defaulting Partner. Any vacancy in the Advisory Committee
created by the resignation or death of a member or by the removal of a
member at the request of the Limited Partner represented by such member
shall be filled by a representative of the Limited Partner represented
by such member.
(h) The General Partner may, in its discretion, grant to any
Fund Investor which does not have a representative on the Advisory
Committee the right to have a non-voting observer attend each meeting
of the Advisory Committee. The General Partner shall provide to any
such observer notice of the time and place of any meeting of the
Advisory Committee, and of any written consent being solicited from the
Advisory Committee, in the same manner and at the same time as notice
is sent to the members of the Advisory Committee. The General Partner
shall also provide to any such observer copies of all notices, reports,
minutes, consents and other documents at the time and in the manner as
they are provided to the Advisory Committee. Any observer who attends
any meetings of the Advisory Committee shall execute and comply with an
agreement with the Partnership and the General Partner containing such
restrictions on the use and disclosure of confidential information and
other matters as the General Partner may reasonably request.
SECTION 5.5 Management Team. The General Partner shall, and
hereby does, delegate authority and responsibility for the day-to-day management
of the business of the Partnership to a President (the "President"), a Senior
Investment Manager and a Senior Asset Manager of the Partnership, and such other
officers of the Partnership as the General Partner may deem appropriate, with
the establishment of any office and the appointment of any person to fill such
office by the General Partner being subject to the approval of the Management
Board. Each officer of the Partnership shall be an employee of ▇▇▇▇▇ and shall,
other than the President, report to the President. The officers of the
Partnership, together with such other employees of ▇▇▇▇▇ as may be assigned to
conduct the business of the Partnership under the supervision of such officers
are collectively referred to as the "Management Team." The General Partner shall
promptly notify each other Partner of the identity of the officers of the
Partnership and their offices and any changes thereto.
SECTION 5.6 Management Rights of Limited Partners. Except as
expressly provided in this Agreement, no Limited Partner shall have the right or
power to participate in the management or affairs of the Partnership, nor shall
any Limited Partner have the power to sign for or bind the Partnership. The
exercise by any Limited Partner of any right conferred on Limited Partners by
this Agreement shall not be construed to constitute participation by such
Limited Partner in the control of the business of the Partnership so as to make
such Limited Partner liable as a general partner for the debts and obligations
of the Partnership for purposes of the Act.
39
SECTION 5.7 Advisory Agreement. The General Partner may from
time to time cause additional Fund Entities to become party to the Advisory
Agreement for the provision of advice and recommendations with respect to (to
the extent applicable to such Fund Entity) the origination, investigation,
structuring, finance, acquisition, monitoring and/or disposition of Investments
by, and/or the structuring, organization, capitalization and/or financing of,
such Fund Entity (subject to the consent of the other parties to the Advisory
Agreement). The General Partner shall remain liable to the Partnership for the
performance of its obligations under this Agreement notwithstanding the
delegation of any such obligations to the Investment Advisors pursuant to the
Advisory Agreement. The General Partner shall bear the costs of all services
provided by the Investment Advisors under the Advisory Agreement; provided that
the Investment Advisors shall be entitled to receive Asset Management Fees and
Acquisition Fees as provided in the Advisory Agreement and Sections 7.2 and 7.3
of this Agreement.
SECTION 5.8 Property Services Agreements. For each Property in
which an Operating Company invests, a Fund Entity through which such Operating
Company owns such Property shall enter into a property services agreement (a
"Property Services Agreement") with ▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇ (a "Property
Manager") substantially in the form attached hereto as Exhibit A (the "Property
Services Agreement Form") pursuant to which the Property Manager will provide
property management, redevelopment and leasing services for such Property. By
executing this Agreement, each Limited Partner approves the provisions of the
Property Services Agreement Form and consents to the execution, delivery and
performance by a Fund Entity of a Property Services Agreement substantially in
such form with respect to each Property in which any Operating Company invests.
Changes may be made to the Property Services Agreement as the General Partner or
the applicable Operating Company deems necessary or appropriate to accommodate
the particular circumstances of each Property; provided that the General Partner
shall not authorize any increase in the Property Services Fees payable to the
Property Manager or any material increase in the risks or obligations to be
borne by the Owner under any Property Services Agreement over those provided for
in or contemplated by the Property Services Agreement Form, without the consent
of the Advisory Committee pursuant to Section 5.4 hereof.
SECTION 5.9 Asset Valuations; Determination of Current Unit
Value; Cancellation of Units.
(a) Commencing in the first full Fiscal Quarter following the
termination of the Initial Offering Period, all Properties shall be
appraised by an Appraiser on a rolling basis whereby approximately
one-quarter of the Properties are appraised each Fiscal Quarter and
each Property is appraised not less frequently than once in any
twelve-month period. Each appraisal shall be updated quarterly by the
Appraiser that conducted the appraisal (or, if such Appraiser is not
available, such other Appraiser as the General Partner may select),
until the next full appraisal of such Property is conducted.
(b) Any Person selected to appraise a Property (an
"Appraiser") shall be a Person qualified to appraise assets such as the
Property in the market in which the Property is located. At least two
Appraisers will be retained for any calendar year, with each
40
Appraiser retained appraising approximately equal portions of the
Partnership's portfolio of Properties. Appraisers will be rotated or
replaced so that no Property is appraised by the same Appraiser for
more than three consecutive years. Each Appraiser will be selected by
the General Partner, subject to the approval of the Advisory Committee
pursuant to Section 5.4 hereof. The General Partner may from time to
time submit a list of Appraisers to the Advisory Committee. Any
Appraiser on such list will be deemed approved by the Advisory
Committee unless, within thirty days of the submission of such list to
the Advisory Committee, the Advisory Committee votes to disapprove such
Appraiser.
(c) Each Fiscal Quarter the General Partner shall establish
the Current Market Value of each Property, the Current Total Equity
Value, the Current Participation Interest Value, and the Current Unit
Values derived from the Current Market Values, as so established, of
all Properties. A hypothetical example calculation of Percentage
Interests and Unit cancellations as contemplated by this Section 5.9
and the definition of Percentage Interest is provided at Schedule 5.9.
(i) The "Current Market Value" of a Property shall be
(x) the value established by the most recent appraisal of the
Property conducted by an Appraiser in accordance with Sections
5.9(a) and (b), (y) if such Property has not been appraised
since its acquisition by the Partnership, the value attributed
to such Property upon its acquisition by the Partnership, or
(z) such other value as the General Partner determines is more
appropriate than the value provided in clause (x) or (y) based
on changes in the condition of the Property, the market in
which it is located or other relevant factors since the date
such Property was appraised or acquired, as applicable.
(ii) The "Current Total Equity Value" as of any date
shall equal the net distributions that would be received by
the Partnership if all Properties were sold at their Current
Market Value in an all cash sale as of such date, and the net
proceeds of such sale and all other cash and cash equivalents
of each Fund Entity, determined after taking into account
expected transaction costs (including all closing costs
customarily borne by a seller in the market where each
Property is located and estimated legal fees and expenses) and
the repayment of all debts of each Fund Entity, as reasonably
determined by the General Partner, were distributed by each
Fund Entity to its owners.
(iii) The "Current Participation Interest Value" for
the entire Participation Interest as of any date shall equal
the lesser of (a) the product of (i) the Percentage Interest
attributable to the Participation Interest as of such date,
multiplied by (ii) the Current Total Equity Value as of such
date or (b) the aggregate amount that would be distributed in
respect of the Participation Interest in accordance with
Section 12.4(b) if the Partnership were to distribute an
amount equal to the Current Total Equity Value among its
Partners in accordance with Section 12.4(b) on such date. The
Current Participation Interest Value of any portion of a
Participation Interest shall be proportionate to the Current
Participation Interest Value of the entire Participation
Interest (e.g., 20% of the
41
Participation Interest shall have a Current Participation
Interest Value equal to 20% of the Current Participation
Interest Value of the entire Participation Interest).
(iv) The "Current Unit Value" of any Partnership Unit
as of any date shall be the amount determined by dividing (x)
the difference between the Current Total Equity Value and the
Current Participation Interest Value of the entire
Participation Interest as of such date, by (y) the total
number of Partnership Units outstanding as of such date
(including, if applicable, any other securities that are
convertible into or exchangeable for Units as of such date).
(d) At the end of each Fiscal Quarter ending after termination
of the Initial Investment Period, a number of Partnership Units held by
each Unaffiliated Limited Partner shall automatically, without any
action by any party, be canceled, with the number of Units so cancelled
being equal to (i) such Unaffiliated Limited Partner's Applicable
Percentage (as defined below) of the aggregate Unrecovered Capital of
such Unaffiliated Limited Partner as of the end of such Fiscal Quarter,
divided by the Current Unit Value as of the end of such Fiscal Quarter;
plus (ii) (A) 0.5% of the Gross Real Estate Investments made by the
Partnership during such Fiscal Quarter, multiplied by (B) the
Percentage Interest of such Limited Partner in respect of its
Partnership Units only as of the end of such Fiscal Quarter, divided by
(C) the Current Unit Value as of the end of the Fiscal Quarter just
ended.
(i) The "Applicable Percentage" of each Unaffiliated
Limited Partner shall be (i) as to SLR, 0.03125%, (ii) as to
each Class A Major Investor, 0.09375%, (iii) as to each Class
B Major Investor, 0.10625%, (iv) as to each Class C Major
Investor, 0.1125%, (v) as to each Class D Major Investor,
0.11875%, and (vi) as to each other Unaffiliated Limited
Partner, 0.125%.
(ii) For purposes of effecting the computations set
forth in this Section 5.9(d) for a particular Fiscal Quarter,
(A) the Percentage Interest of a Limited Partner, and the
Current Unit Value, as of the end of the Fiscal Quarter just
ended shall be determined immediately prior to the
cancellation of Partnership Units pursuant to this Section
5.9(d); and (B) the Current Unit Value as of the end of the
Fiscal Quarter just ended shall be determined without taking
into account any reduction therein which occurs as a result of
the adjustment to Percentage Interests which occurs as of the
end of such Fiscal Quarter pursuant to clauses (a) and (b) of
the definition of Percentage Interest set forth in Section 1.1
hereof.
(iii) The cancellation of Partnership Units pursuant
to this Section 5.9(d) shall be determined and taken into
account immediately after (A) the adjustments to Percentage
Interests that occur pursuant to clauses (a) and (b) of the
definition of Percentage Interest set forth in Section 1.1
hereof and (B) the calculations of Asset Management Fees and
Acquisition Fees that occur pursuant to Sections 7.2 and 7.3,
have been effected.
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(iv) The cancellation of Partnership Units pursuant
to this Section 5.9(d) as of the end of any Fiscal Quarter
shall become effective as of the beginning of the immediately
following Fiscal Quarter.
SECTION 5.10 Management of Operating Companies. Each Operating
Company shall be governed by a board of trustees, board of directors, board of
managers or similar governing body whose membership includes all of the members
of the Management Board. The day to day operations of each Operating Company
shall be managed by a management team which is headed by the President and which
includes the other members of the Management Team. The Constituent Documents of
each Operating Company, together with any other agreements that may be entered
into in connection with the organization of such Operating Company, shall
provide (i) the governing body thereof with oversight and approval rights with
respect to the business and affairs of such Operating Company which are
comparable to the oversight and approval rights which this Agreement provides to
the Management Board with respect to the business and affairs of the
Partnership, and (ii) SLR Designees with rights to participate in the management
of such Operating Company which are comparable to the rights which this
Agreement provides to SLR Designees to participate in the management of the
Partnership. The General Partner shall, or shall cause the Partnership to, take
such actions as may be permitted or required under the terms of the Constituent
Documents of each Operating Company, and under the terms of any agreement
entered into by the Partnership or the General Partner in connection with the
organization of such Operating Company, to ensure that the requirements of this
Section 5.10 are met with respect to each Operating Company.
SECTION 5.11 Non-Managing General Partner. Notwithstanding
anything to the contrary contained in this Agreement, the General Partner may,
in its discretion at any time and without the prior consent of the Limited
Partners or the Advisory Committee, admit ▇▇▇▇▇ REIT Properties, L.P., a
Delaware limited partnership whose general partner is ▇▇▇▇▇ Real Estate
Investment Trust, Inc., a Maryland corporation, as a non-managing general
partner of the Partnership (the "Non-Managing General Partner"). In such event,
(i) the Non-Managing General Partner shall be deemed to be a general partner of
the Partnership for all purposes under the Act, but shall have only those
rights, privileges, powers and obligations set forth on Schedule 5.11, (ii) the
General Partner shall automatically be deemed to be the managing general partner
of the Partnership (the "Managing General Partner") and, as such, shall have all
rights, privileges, powers and obligations as the General Partner has under this
Agreement, and (iii) this Agreement shall be amended by the Managing General
Partner, without the consent of any other Partners, in the manner set forth on
Schedule 5.11.
ARTICLE VI
EXCULPATION AND INDEMNIFICATION
SECTION 6.1 Exculpation of the General Partner. The General
Partner and its Affiliates, and the direct or indirect members, managers,
partners, shareholders, officers, directors, employees, agents and legal
representatives of the General Partner and any such Affiliate, including any
officer of the Partnership and any Investment Advisor (in each case, an
"Indemnified Person"), shall not be liable to any Partner or the Partnership for
any act or failure to act on behalf of the Partnership or of any Operating
Company, except to the extent such act or
43
failure to act constitutes gross negligence, recklessness, willful misconduct or
bad faith on the part of the Indemnified Person, a knowing violation of law by
the Indemnified Person or a material breach by the Indemnified Person of its
obligations under this Agreement. The General Partner may exercise any of the
powers granted to it hereunder and perform any of the duties imposed upon it
hereunder either directly or by or through agents and shall not be responsible
for any misconduct or negligence on the part of any such agent selected with
reasonable care. The General Partner may rely, and shall be protected in acting
or refraining from acting, and shall be deemed to have acted in good faith and
without gross negligence or willful misconduct, upon any consent, approval or
any other action taken by the Limited Partners or the Advisory Committee, and
upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, or other paper or document
believed by it in good faith to be genuine and to have been signed or presented
by the proper party or parties. The General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other professional
consultants and advisers selected by it with reasonable care, and shall be fully
protected and justified and shall be deemed to have acted in good faith and
without gross negligence or willful misconduct, in any action or inaction which
is taken or omitted to be taken in reasonable reliance upon the advice or
opinion of such Persons as to matters within such Persons' professional or
expert competence. The General Partner shall not be liable to the Partnership or
the Partners for the failure to perform any obligation that the General Partner
cannot perform because the Partnership has insufficient funds to pay the cost
and expense relative to such obligation.
SECTION 6.2 Indemnification of General Partner.
(a) The Partnership, to the fullest extent permitted by law,
shall indemnify and hold harmless each Indemnified Person from and
against any loss, liability, expense, judgment, settlement cost, fees
and related expenses (including reasonable attorneys' fees and
expenses), costs or damages arising out of or in connection with any
act taken or omitted to be taken in respect of the affairs of the
Partnership or of any Operating Company, unless such act or omission
constitutes (i) following the admission of the Non-Managing General
Partner to the Partnership, for as long as the Non-Managing General
Partner holds a Partnership Interest, in the case of the Managing
General Partner and any other Indemnified Person that is an Affiliate
of ▇▇▇▇▇ or an officer or director of ▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇
(other than an "independent director" of the general partner of the
Non-Managing General Partner as defined in the Articles of
Incorporation of the general partner of the Non-Managing General
Partner), the misconduct or negligence of such person, or (ii) at all
other times, and at all times in the case of any other Indemnified
Person, the gross negligence, recklessness, willful misconduct or bad
faith on the part of the Indemnified Person, a knowing violation of law
by the Indemnified Person or a material breach by the Indemnified
Person of its obligations under this Agreement. The termination of any
action, suit or proceeding by settlement shall not, of itself, create a
presumption that an Indemnified Person did not act in good faith or in
a manner that was reasonably believed to be in, or not opposed to, the
best interests of the Partnership or such Operating Company or was
guilty of gross negligence, willful misconduct, bad faith or a knowing
violation of law.
44
(b) The Partnership, in the discretion of the General Partner,
may advance to any Indemnified Person reasonable attorneys' fees and
other costs and expenses incurred in connection with the defense of any
action or proceeding which arises out of conduct which is the subject
of the indemnification provided hereunder; provided, however, that (i)
the General Partner hereby agrees, and each other Indemnified Person
shall agree as a condition to receiving any such advance, that in the
event an Indemnified Person receives any advance, the Indemnified
Person shall reimburse the Partnership for the advance to the extent
that it is judicially determined, in a final, non-appealable judgment
or binding arbitration, that the Indemnified Person was not entitled to
indemnification under this Section 6.2 and (ii) neither the General
Partner nor any other Indemnified Person shall be entitled to any
advance of costs and expenses in any action (either direct or
derivative) brought against such Indemnified Person by Limited Partners
pursuant to a Majority LP Vote, except to the extent that a court of
competent jurisdiction issues a ruling (whether preliminary or final)
substantially to the effect that the claim is one as to which it is
likely that such Indemnified Person is entitled to the benefits of the
exculpatory provisions set forth in Section 6.1. Notwithstanding
anything to the contrary contained in this Section 6.2, neither the
General Partner nor any other Indemnified Person shall be entitled to
indemnification for, or be indemnified by the Partnership against, any
claim in any action (either direct or derivative) brought against such
Indemnified Person by any Limited Partner if it is established, by a
final non-appealable judgment, that such claim was one as to which such
Indemnified Person is not entitled to the benefits of the exculpatory
provisions set forth in Section 6.1.
SECTION 6.3 Treatment of Management Board, Advisory Committee,
Et al. No member of the Management Board, the Management Team or the Advisory
Committee (and no Limited Partner represented by any such Person) shall be a
fiduciary of the Partnership or of any Partner. No member of the Advisory
Committee and no SLR Designee shall be liable to any Partner or the Partnership
for any reason (other than fraud or willful misconduct on the part of such
person) including for any mistake in judgment, any action or inaction taken or
omitted to be taken, or for any loss due to any mistake, action or inaction, and
no Limited Partner represented by any such Person shall be liable to the
Partnership or any Partner for the acts or omissions of such person in such
capacity (or than as a result of fraud or willful misconduct). The participation
by a person on the Management Board, the Management Team or the Advisory
Committee shall not be construed to constitute participation by such person in
the control of the business of the Partnership so as to make such person liable
as a general partner for the debts and obligations of the Partnership for
purposes of the Act. The participation by the representative of any Limited
Partner on the Management Board or the Advisory Committee in the activities of
the Management Board or Advisory Committee shall not be construed to constitute
participation by such Limited Partner in the control of the business of the
Partnership so as to make such Limited Partner liable as a general partner for
the debts and obligations of the Partnership for purposes of the Act. No Limited
Partner who has appointed a member of the Management Board or Advisory Committee
shall be deemed to be an Affiliate of the Partnership or the General Partner
solely by reason of such appointment. In the absence of fraud or willful
misconduct on the part of a member of the Advisory Committee or an SLR Designee,
the Partnership shall, to the fullest extent permitted by law, indemnify and
hold harmless each such member of the Advisory Committee and each SLR Designee,
and each Limited Partner represented by any such person, with respect to the
Partnership (and their respective heirs and
45
legal and personal representatives) who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of the Partnership or any of the Partners), by
reason of any actions or omissions or alleged acts or omissions arising out of
such Person's activities in connection with serving on the Management Board or
the Advisory Committee against losses, damages or expenses (including reasonable
attorney's fees, judgments, fines and amounts paid in settlement) actually
incurred by such person in connection with such actions, suit or proceedings;
provided that any person entitled to indemnification from the Partnership
hereunder shall obtain the written consent of the General Partner (which consent
shall not be unreasonably withheld) prior to entering into any compromise or
settlement which would result in an obligation of the Partnership to indemnify
such person. The Partnership shall advance to any member of the Advisory
Committee, any SLR Designee or any Limited Partner represented by any such
person, reasonable attorneys' fees and other costs and expenses incurred in
connection with the defense of any action or proceeding which arises out of
conduct which is the subject of the indemnification provided hereunder;
provided, however, that each such Person must agree, as a condition to receiving
any such advance, that in the event such person receives any advance, such
Person shall reimburse the Partnership for the advance to the extent that it is
judicially determined, in a final, non-appealable judgment or binding
arbitration, that such person was not entitled to indemnification under this
Section 6.3.
SECTION 6.4 Limited Liability of Limited Partners. Except as
provided by the Act or other applicable law and subject to the obligations to
make Capital Contributions in accordance with this Agreement and its
Subscription Agreement and to pay taxes to the extent provided in Section
11.4(c), no Limited Partner (including any Limited Partner that is an Affiliate
of ▇▇▇▇▇ or of SLR) shall have any personal liability whatsoever in its capacity
as a Limited Partner, whether to the Partnership, to any of the Partners, or to
the creditors of the Partnership, for the debts, liabilities, contracts, or
other obligations of the Partnership or for any losses of the Partnership.
SECTION 6.5 Other Activities of Limited Partners. Subject to
Section 4.4 with respect to each Limited Partner that is an Affiliate of the
General Partner, each Limited Partner shall be entitled to and may have business
interests and engage in activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership and the entities in which the Partnership invests and may
engage in transactions with, and provide services to, the Partnership or any
such entity. Neither the Partnership, any other Partner nor any other Person
shall have any rights by virtue of this Agreement in any business ventures of
any Limited Partner.
ARTICLE VII
EXPENSES AND FEES
SECTION 7.1 General Partner Expenses. The Partnership shall
not have any salaried personnel. The General Partner and its Affiliates, but not
the Partnership or any Limited Partner, shall bear and be charged with the
following costs and expenses of the Partnership's activities: (a) any costs and
expenses of providing to the Management Team the office space, facilities,
supplies, and necessary ongoing overhead support services for the Partnership's
46
operations and (b) the compensation of the Management Team. The expenses that
the General Partner is obligated or elects to pay under this Section 7.1 are
collectively referred to herein as the "General Partner Expenses".
Notwithstanding anything herein to the contrary, no costs or expenses payable by
the Owner of any Property under the terms of the Property Services Agreement
entered into with respect to such Property shall be deemed General Partner
Expenses.
SECTION 7.2 Asset Management Fee.
(a) The Partnership shall pay a periodic management fee (the
"Asset Management Fee") to the General Partner; provided that, to the
extent the General Partner assigns the right to receive the Asset
Management Fee to the Investment Advisors pursuant to the Advisory
Agreement, the Partnership shall pay such fee to the Investment
Advisors as provided in the Advisory Agreement. The Asset Management
Fee shall accrue quarterly in arrears and shall be payable, subject to
the penultimate sentence of Section 7.2(b), on each Quarterly Payment
Date. A portion of the Asset Management Fee accrued as of each
Quarterly Payment Date shall be charged to each Unaffiliated Limited
Partner in an amount equal to the product of (i) the Asset Management
Fee Base of such Limited Partner on the first day of the Fiscal Quarter
just ended, multiplied by (ii) (A) in the case of any Fiscal Quarter
occurring during the Initial Investment Period, 25%, or (B) in the case
of any Fiscal Quarter occurring after the termination of the Initial
Investment Period, 12.5%, multiplied by (iii) (A) for SLR, 0.25%, (B)
for each Class A Major Investor, 0.75%, (C) for each Class B Major
Investor, 0.85%, (D) for each Class C Major Investor, 0.90%, (E) for
each Class D Major Investor, 0.95%, or (F) for each Unaffiliated
Limited Partner that is not a Major Investor, 1.00%. The "Asset
Management Fee Base" for any Unaffiliated Limited Partner shall be (A)
prior to the termination of the Initial Investment Period, the
Unrecovered Capital of such Unaffiliated Limited Partner plus such
Unaffiliated Limited Partner's Unfunded Commitment, and (B) after the
termination of the Initial Investment Period, the Unrecovered Capital
of such Unaffiliated Limited Partner. The Asset Management Fee shall be
prorated for any partial quarter and for the quarter in which the
termination of the Initial Investment Period occurs based on the number
of days in such quarter or the number of days in such quarter before
and after such termination occurs, as applicable.
(b) The total Asset Management Fee accrued as of any Quarterly
Payment Date shall be the sum of the amounts chargeable to each
Unaffiliated Limited Partner as of such Quarterly Payment Date pursuant
to Section 7.2(a). The Partnership shall deduct the amount chargeable
to each Unaffiliated Limited Partner in respect of the Asset Management
Fee from any amounts otherwise distributable to such Unaffiliated
Limited Partner on or after the Quarterly Payment Date as of which the
Asset Management Fee has accrued. If the amount accrued in respect of
the Asset Management Fee and chargeable to an Unaffiliated Limited
Partner as of any Quarterly Payment Date exceeds any amount otherwise
distributable to such Unaffiliated Limited Partner, then payment of the
Asset Management Fee to the General Partner (or, if applicable, to the
Investment Advisors) shall be deferred, without interest, to the extent
of such excess until such time as additional amounts are otherwise
available for distribution to such Unaffiliated Limited Partner. All
amounts deducted from amounts otherwise distributable to an
Unaffiliated Limited Partner and paid to the General Partner (or the
Investment Advisors)
47
pursuant to this Section 7.2 shall be deemed to have been distributed
to such Unaffiliated Limited Partner for all purposes under this
Agreement.
SECTION 7.3 Acquisition Fees
(a) For each Investment in a Property made by an Operating
Company (other than an Operating Company which makes its investments
indirectly through another Operating Company), other than any
Investment in a Property acquired by such Operating Company from SLR or
any of its Affiliates, the Partnership shall, subject to penultimate
sentence of Section 7.3(b), pay to the General Partner a fee (an
"Acquisition Fee") in an amount equal to (1) in the case of any
Acquisition Fees payable in respect of an Investment that closes on or
prior to the termination of the Initial Investment Period, 1%, or in
the case of any Acquisition Fees payable in respect of an Investment
that closes after the termination of the Initial Investment Period,
0.5%, multiplied by (2) the value of the total consideration (including
any assumed Indebtedness) paid in respect of such Property, multiplied
by (3) a fraction whose numerator equals the total equity capital
contributed to the acquisition of such Property by such Operating
Company and whose denominator is the total equity capital contributed
to the acquisition of such Property by all sources, multiplied by (4) a
fraction whose numerator is the total outstanding equity capital of
such Operating Company held, directly or indirectly, by the Partnership
and whose denominator equals the total outstanding equity capital of
such Operating Company, multiplied by (5) the aggregate Percentage
Interest of the Unaffiliated Limited Partners in respect of their
Partnership Units only immediately following the closing of the Fund's
investment in such Property. Notwithstanding the foregoing, if the
General Partner has assigned the right to receive Acquisition Fees to
the Investment Advisors pursuant to the Advisory Agreement, the
Partnership shall pay such Acquisition Fees to the Investment Advisors
to the extent provided therein.
(b) Each Unaffiliated Limited Partner shall be charged for a
portion of any Acquisition Fee payable by the Partnership in an amount
equal to the product of (x) the total amount of such Acquisition Fee
payable by the Partnership, multiplied by (y) a fraction whose
numerator is the Percentage Interest of such Unaffiliated Limited
Partner in respect of its Partnership Units only and whose denominator
is the aggregate Percentage Interest of all Unaffiliated Limited
Partners in respect of their Partnership Units only . The Partnership
shall deduct the amount chargeable to each Unaffiliated Limited Partner
in respect of an Acquisition Fee from any amounts otherwise
distributable to such Unaffiliated Limited Partner on or after the
closing date of the Investment giving rise to such Acquisition Fee. If
the amount payable in respect of an Acquisition Fee and chargeable to
an Unaffiliated Limited Partner exceeds any amount otherwise
distributable to such Unaffiliated Limited Partner, then payment of
such Acquisition Fee to the General Partner (or, if applicable, to the
Investment Advisors) shall be deferred, without interest, to the extent
of such excess until such time as additional amounts are otherwise
available for distribution to such Unaffiliated Limited Partner. All
amounts deducted from amounts otherwise distributable to an
Unaffiliated Limited Partner and paid to the General Partner (or the
Investment Advisors) pursuant to this Section 7.3 shall be deemed to
have been distributed to such Unaffiliated Limited Partner for all
purposes under this Agreement.
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(c) If any Unaffiliated Limited Partner is admitted to the
Partnership or increases its Capital Commitment after March 31, 2004,
and on or before the last day of the Initial Offering Period, then (i)
the Acquisition Fee shall be recomputed for each Property in which the
Partnership made an investment during such period as if such admission
or increase had occurred on March 31, 2004, and (ii) the additional
amount of the Acquisition Fees from prior periods resulting from such
recomputation shall be charged against future distributions otherwise
payable to such Unaffiliated Limited Partners as provided in Section
7.3(b).
SECTION 7.4 Partnership Expenses
(a) The Partnership shall bear and be charged with the
following costs and expenses of the Partnership (and shall promptly
reimburse the General Partner or its Affiliates, as the case may be, to
the extent that any of such costs and expenses are paid directly by
such entities) (the "Partnership Expenses"):
(i) fees and expenses for attorneys and accountants;
(ii) all out-of-pocket costs and expenses, if any,
incurred by the Partnership in developing, negotiating,
structuring and organizing any Operating Company;
(iii) the costs of any litigation, D&O liability or
other insurance and indemnification or extraordinary expense
or liability relating to the affairs of the Partnership;
(iv) expenses of liquidating the Partnership;
(v) any taxes, fees or other governmental charges
levied against the Partnership and all expenses incurred in
connection with any tax audit, investigation, settlement or
review of the Partnership; and
(vi) the out-of-pocket expenses of the members of the
Advisory Committee reimbursable under Section 5.4(f) to the
extent such expenses are not reimbursed by an Operating
Company.
(b) Partnership Expenses may be allocated among the
Partnership's investments in a manner reasonably determined by the
General Partner. Partners may be required to make Capital Contributions
to the extent of their Unfunded Commitments for the payment of such
Partnership Expenses to the extent the Partnership does not have
sufficient funds to pay such expenses.
SECTION 7.5 Operating Company Expenses.
(a) Each Operating Company shall bear and be charged with the
following costs and expenses of such Operating Company (and shall
promptly reimburse the General Partner or its Affiliates, as the case
may be, to the extent that any of such costs and expenses are paid
directly by such entities) (the "Operating Company Expenses"):
49
(i) fees and expenses for attorneys and accountants;
(ii) all out-of-pocket costs and expenses, if any,
incurred by such Operating Company in acquiring, developing,
negotiating, structuring, improving, and disposing of actual
Investments, including any financing, legal, accounting,
advisory and consulting expenses in connection therewith (to
the extent not subject to any reimbursement of such costs and
expenses by entities in which the Partnership invests or other
third parties);
(iii) brokerage commissions, custodial expenses and
other investment costs actually incurred in connection with
actual Investments;
(iv) the costs of any litigation, D&O liability or
other insurance and indemnification or extraordinary expense
or liability relating to the affairs of such Operating Company
(or, to the extent such expenses are paid by the Partnership
pursuant to clause (iii) of Section 7.4(a), an allocable share
of such expenses shall be charged to such Operating Company by
the Partnership);
(v) expenses of liquidating such Operating Company;
(vi) any taxes, fees or other governmental charges
levied against such Operating Company and all expenses
incurred in connection with any tax audit, investigation,
settlement or review of such Operating Company; and
(vii) a reasonably allocable share (as determined by
the General Partner) of the out-of-pocket expenses of the
members of the Advisory Committee paid by the Partnership
pursuant to clause (vi) of Section 7.4(a).
(b) Operating Company Expenses may be allocated among an
Operating Company's Investments in a manner reasonably determined by
such Operating Company. Partners may be required to make Capital
Contributions to the extent of their Unfunded Commitments to enable the
Partnership to provide funds to any Operating Company to pay Operating
Company Expenses to the extent that such Operating Company does not
have sufficient funds to pay such expenses.
(c) Any amounts paid by the Partnership for or resulting from
any instrument or other arrangement designed to hedge or reduce one or
more risks associated with an Investment shall be considered a
Partnership Expense relating to such Investment. Any distributions
resulting from any such arrangements shall be treated as Operating Cash
Flow from such Investment.
(d) The General Partner may withhold on a pro rata basis from
any distributions amounts necessary to create, in its sole discretion,
appropriate reserves for expenses (including Acquisition Fees) and
liabilities, contingent or otherwise, of the Partnership, and may
withhold from distributions otherwise payable to any Limited Partner
amounts necessary to pay any unpaid amounts of any Asset Management Fee
payable by such Limited Partner (in which case any such withheld
distributions shall be deemed to have been made to such Limited Partner
for all purposes under this Agreement).
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SECTION 7.6 Organization Expenses. The Partnership shall pay
all out-of-pocket costs and expenses (including legal, accounting, tax,
consulting and other professional fees and expenses and travel and entertainment
expenses) incurred by the Partnership and the General Partner and its Affiliates
in connection with the structuring and organization of the Partnership, NY
Trust, NY Trust II, US Core Trust and US Core Properties and the offering and
sale of Partnership Units and, if applicable, securities issued by NY Trust, NY
Trust II, US Core Trust and US Core Properties, including expenses (other than
placement fees) incurred in connection with the solicitation of Capital
Commitments through and including all Subsequent Closings and the negotiation,
execution and delivery of this Agreement and all other documents entered into in
connection herewith (any such amounts, the "Organizational Expenses").
ARTICLE VIII
CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 8.1 Capital Accounts. A separate capital account
("Capital Account") shall be maintained for each Partner.
(a) To each Partner's Capital Account there shall be added
such Partner's Capital Contributions, such Partner's distributive share
of Profits and any items in the nature of income or gain which are
specially allocated pursuant to Section 8.6 or Section 8.7, and the
amount of any Partnership liabilities assumed by such Partner or which
are secured by any Partnership property distributed to such Partner.
(b) From each Partner's Capital Account there shall be
subtracted the amount of cash and the Gross Asset Value of any
Partnership property distributed to such Partner pursuant to any
provision of this Agreement, such Partner's distributive share of
Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 8.6 or Section 8.7, and the
amount of any liabilities of such Partner assumed by the Partnership or
which are secured by any property contributed by such Partner to the
Partnership.
(c) In the event all or a portion of a Partnership Interest is
Transferred in accordance with the terms of this Agreement, the
Transferee shall succeed to the Capital Account of the Transferor to
the extent it relates to the Transferred Partnership Interest.
(d) In determining the amount of any liability for purposes of
Sections 8.1(a) and (b), there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
(e) This Section 8.1 and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event
the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including debits or credits relating to liabilities which are secured
by contributed or distributed property or which are assumed by the
Partnership, or the Partners) are computed in order to comply with
51
such Regulations, the General Partner may make such modification,
provided that it is not likely to have a material effect on the amounts
distributed to any Partner pursuant to Section 12.4 upon the
liquidation of the Partnership. The General Partner also shall (i) make
any adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as
computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(g), and (ii) make any appropriate modifications in
the event unanticipated events might otherwise cause this Agreement not
to comply with Regulations Section 1.704-1(b).
SECTION 8.2 Interest on and Return of Capital.
(a) No Partner shall be entitled to any interest on its
Capital Account or on its Capital Contributions to the Partnership.
(b) Except as expressly provided for in this Agreement, no
Partner shall have the right to demand or to receive the return of all
or any part of its Capital Contributions to the Partnership and there
shall be no priority of one Partner over another Partner as to the
return of Capital Contributions or withdrawals or distributions of
Profits and Losses. No Partner shall have the right to demand or
receive property other than cash in return for the contributions of
such Partner to the Partnership.
SECTION 8.3 Negative Capital Accounts. Upon the liquidation of
the Partnership or the liquidation of the Participation Interest, the holder of
the Participation Interest shall be required to pay to the Partnership any
deficit or negative balance which may exist in its Capital Account at such time
(determined after taking into account the allocations described in Article VIII
or Section 12.4(b) for the year in which such liquidation or redemption occurs).
Subject to the provisions of any guarantee or other written agreement between a
Partner and the Partnership, no Partner shall otherwise be required to pay to
the Partnership any deficit or negative balance which may exist in its Capital
Account.
SECTION 8.4 Allocation of Profits.
(a) After giving effect to the allocations set forth in
Sections 8.6 and 8.7, Profits for any fiscal year other than Capital
Transactions Gains shall be allocated as follows:
(i) first, Profits and, if necessary, items of gross
profit and income, shall be allocated to the holder of the
Participation Interest, until the cumulative amount of Profits
and items of gross profit and income allocated to such holder
pursuant to this Section 8.4(a) with respect to its
Participation Interest equals the cumulative amount of
distributions made to such holder pursuant to Section 9.1
hereof with respect to its Participation Interest; and
(ii) thereafter, Profits shall be allocated among the
Partners in proportion to the number of Partnership Units held
by each such Partner.
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(b) After giving effect to the allocations set forth in
Sections 8.6 and 8.7, Capital Transaction Gains shall be computed
separately with respect to each property and shall be allocated among
the Partners as follows:
(i) first, among the Partners in proportion to, and
to the extent of, any deficit balance in each such Partner's
Capital Account;
(ii) second, among the Partners in proportion to, and
until each Partner has been allocated Profits pursuant to this
clause (ii) in an amount equal to, the minimum amounts
necessary to cause the Capital Account balances of the
Partners to be in proportion to the Percentage Interests of
the Partners; and
(iii) thereafter, among the Partners in proportion to
their respective Percentage Interests.
(c) In the event that the Partnership issues or redeems
Partnership Interests pursuant to Article III hereof, the General
Partner shall make such revisions to the method of allocating Profits
in this Section 8.4 as it determines are necessary to reflect the terms
of the issuance or redemption of Partnership Interests, including such
revisions as are needed to ensure that such allocations (i) will comply
with the terms of Regulation Sections 1.704-1 and -2, (ii) will
properly reflect the varying interests of the Partners in the
Partnership, and (iii) will cause the Capital Accounts of the Partners
in respect of Partnership Interests held by them to be in the ratios in
which the Partners are entitled to receive distributions with respect
to their Partnership Interests pursuant to Article IX hereof.
SECTION 8.5 Allocations of Losses.
(a) After giving effect to the special allocations set forth
in Sections 8.6 and 8.7, Losses (including Capital Transaction Losses,
which shall be computed and allocated separately with respect to each
property) shall be allocated among the Partners as follows:
(i) first, among the Partners in proportion to, and
until each Partner has been allocated Losses pursuant to this
clause (i) in an amount equal to, the minimum amount necessary
to cause the Capital Account balances of the Partners to be in
proportion to the Percentage Interests of the Partners;
(ii) second, among the Partners in proportion to
their respective positive Capital Account balances, until the
Partners' Capital Accounts are equal to zero; and
(iii) thereafter, among the Partners in proportion to
the number of Partnership Units owned by each such Partner.
(b) The Losses allocated pursuant to Section 8.5(a) shall not
exceed the maximum amount of Losses that can be so allocated without
causing any Partner to have an Adjusted Capital Account Deficit at the
end of any Fiscal Year. Subject to the limitations
53
in the preceding sentence, all Losses in excess of the limitations set
forth in this Section 8.5(b) shall be allocated pro rata to the other
Partners in proportion to the number of Units held by each Partner.
(c) In the event that the Partnership issues or redeems
Partnership Interests pursuant to Article III hereof, the General
Partner shall make such revisions to the method of allocating Losses in
this Section 8.5 as it determines are necessary to reflect the terms of
the issuance or redemption of Partnership Interests, including such
revisions as are needed to ensure that such allocations (i) will comply
with the terms of Regulation Section 1.704-1 and -2, (ii) will properly
reflect the varying interests of the Partners in the Partnership and
(iii) will cause the Capital Accounts of the Partners in respect of
Partnership Interests held by them to be in the ratios in which the
Partners are entitled to receive distributions with respect to their
Partnership Interests pursuant to Article IX hereof.
SECTION 8.6 Special Allocations. The following special
allocations shall be made in the following order:
(a) Except as otherwise provided in Regulations Section
1.704-2(f), and notwithstanding any other provision of this Article
VIII, if there is a net decrease in Partnership Minimum Gain during any
Fiscal Year, each Partner shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain, determined in accordance
with Regulations Section 1.704-2(g). The items to be so allocated shall
be determined in accordance with Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 8.6(a) is intended to comply with the
minimum gain chargeback requirement in Regulations Section 1.704-2(f)
and shall be interpreted consistently therewith.
(b) Except as otherwise provided in Regulations Section
1.704-2(i)(4), and notwithstanding any other provision of this Article
VIII, if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to a Partner Nonrecourse Debt during any Partnership
Fiscal Year, each Partner who has a share of the Partner Nonrecourse
Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall
be specially allocated items of Partnership income and gain for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to such Partner's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
The items to be so allocated shall be determined in accordance with
Regulations Sections 1.704-2(i)(4) and 1.704-2(i)(2). This Section
8.6(b) is intended to comply with the minimum gain chargeback
requirement in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(c) In the event any Partner unexpectedly receives any
adjustments, allocations, or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
54
specially allocated to each such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Partner as quickly as
possible, provided that an allocation pursuant to this Section 8.6(c)
shall be made only if and to the extent that such Partner would have an
Adjusted Capital Account Deficit after all other allocations provided
for in this Article VIII have been tentatively made, as if this Section
8.6(c) were not in this Agreement.
(d) In the event any Partner has an Adjusted Capital Account
Deficit at the end of any Partnership Fiscal Year, each such Partner
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 8.6(d) shall be made only if and to
the extent that such Partner would have a deficit Capital Account after
all other allocations provided for in this Article VIII have been made
as if Section 8.6(c) hereof and this Section 8.6(d) were not in this
Agreement.
(e) Partnership Nonrecourse Deductions for any Fiscal Year
shall be allocated among the Partners in proportion to their respective
Percentage Interests.
(f) Any Partner Nonrecourse Deductions for any Fiscal Year
shall be specially allocated to the Partner who bears the economic risk
of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable, in accordance with
Regulations Section 1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(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 the result of a
distribution to a Partner in complete liquidation of its interest in
the Partnership, the amount of such adjustment to Capital Accounts
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis)
and such gain or loss shall be specifically allocated to the Partner to
whom such distribution was made.
SECTION 8.7 Curative Allocations. The allocations set forth in
Section 8.5(b) and Sections 8.6(a), (b), (c) (d), (e) and (g) (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations under Code Section 704(b). It is the intent of the Partners that, to
the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss, or deduction pursuant to this Section 8.7.
Therefore, notwithstanding any other provision of this Article 8 (other than the
Regulatory Allocations), the General Partner shall make such offsetting special
allocations of Partnership income, gain, loss, or deduction in whatever manner
it determines appropriate so that, after such offsetting allocations are made,
each Partner's Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of the Agreement and all Partnership items were
allocated pursuant to Section 8.4(a)(ii) and 8.5(a). In exercising its
discretion under this Section 8.7, the General Partner shall take into account
future Regulatory Allocations under Sections 8.6(a) and (b) that, although not
yet made, are likely to offset other Regulatory Allocations previously made
under Sections 8.6(e) and (f).
55
SECTION 8.8 Tax Allocations: Code Section 704(c).
(a) Income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall, solely
for tax purposes, be allocated among the Partners so as to take account
of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial Gross Asset
Value in accordance with any permissible method or methods under Code
Section 704(c) and the Regulations thereunder.
(b) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to the definition of "Gross Asset Value",
subsequent allocations of income, gain, loss and deduction with respect
to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner or manners permitted under Code Section 704(c)
and the Regulations thereunder.
(c) Any elections or other decisions relating to the
allocations provided under this Article VIII shall be made by the
General Partner using any permissible manner under the Code or the
Regulations that the General Partner may elect in its sole discretion.
Allocations pursuant to this Section 8.8 are solely for purposes of
federal, state, and local taxes and shall not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share
of Profits, Losses, other items, or distributions pursuant to any
provision in this Agreement.
ARTICLE IX
DISTRIBUTIONS
SECTION 9.1 Operating Cash Flow. As used in this Agreement,
"Operating Cash Flow" shall mean and be defined, for any fiscal period, as all
cash receipts of the Partnership from whatever source (but excluding Capital
Cash Flow and excluding the proceeds of any Capital Contributions to the
Partnership) during such period in question in excess of all items of
Partnership expense (other than non-cash expenses such as depreciation) and
other cash needs of the Partnership, including, without limitation, amounts paid
by the Partnership as principal on debts and advances, during such period,
capital expenditures and any reserves (as determined by the General Partner)
established or increased during such period. Operating Cash Flow shall be
distributed to or for the benefit of the Partners of record as of the applicable
record date not less frequently than quarterly, and shall be allocated among the
Partners as follows:
(a) A portion of such distribution, equal to the sum of the
Percentage Interests attributable to the Participation Interests
multiplied by the total amount of such distribution, shall be
distributed to the holders of the Participation Interests in proportion
to their respective Percentage Interests.
(b) The remaining portion of such distribution shall be
distributed among the Partners in proportion to the number of
Partnership Units held by each such Partner.
56
A hypothetical example calculation of Operating Cash Flow distributions to
holders of Units and Participation Interests based on certain stated assumptions
is set forth at Schedule 9.1.
SECTION 9.2 Capital Cash Flow. As used in this Agreement,
"Capital Cash Flow" shall mean and be defined as collectively (a) gross proceeds
realized in connection with the sale of any assets of the Partnership, (b) gross
financing or refinancing proceeds, (c) gross condemnation proceeds (excluding
condemnation proceeds applied to restoration of remaining property), (d) gross
insurance proceeds (excluding rental insurance proceeds or insurance proceeds
applied to restoration of property), (e) return from an Operating Company of
capital contributed or advanced to such Operating Company by the Partnership,
and (f) distributions by an Operating Company of capital contributed or advanced
to such Operating Company, less (a) closing costs, (b) the cost to discharge any
Partnership financing encumbering or otherwise associated with the asset(s) in
question, (c) the establishment of reserves (as determined by the General
Partner, and which may include cash held for future acquisitions), and (d) other
expenses of the Partnership then due and owing. Subject to Section 9.3, Capital
Cash Flow shall be distributed to or for the benefit of the Partners of record
as of the applicable record date not less frequently than quarterly and, subject
to Section 12.4(b), shall be allocated among the Partners as follows:
(a) A portion of such distribution, equal to the sum of the
Percentage Interests attributable to the Participation Interests
multiplied by the total amount of such distribution, shall be
distributed to the holders of the Participation Interests in proportion
to their respective Percentage Interests.
(b) The remaining portion of such distribution shall be
distributed among the Partners in proportion to the number of
Partnership Units held by each such Partner.
A hypothetical example calculation of Capital Cash Flow distributions to holders
of Units and Participation Interests based on certain stated assumptions is set
forth at Schedule 9.2.
SECTION 9.3 Reinvestment of Capital Cash Flow. The General
Partner may, in its discretion, apply all or part of Capital Cash Flow to
provide funds to Operating Companies to make new Investments or repay
Indebtedness, make additional investments in existing Investments or to fund the
redemption of interests in the Fund pursuant to the terms of this Agreement or
the Constituent Documents of any Fund Entity.
SECTION 9.4 Right to Limit Distributions. The right of any
Partner to receive distributions of any nature pursuant to the terms of this
Agreement shall be subject to Sections 7.2, 7.3 and 9.3, any other applicable
provisions of this Agreement and the terms of any agreement between such Partner
and the Partnership limiting, restricting or providing rights of set-off with
respect to such distributions.
SECTION 9.5 Limitations on Distribution Rights.
Notwithstanding any provision to the contrary contained in this Agreement, the
Partnership, and the General Partner on behalf of the Partnership, shall not be
required to make a distribution to a Partner on account of its interest in the
Partnership if such distribution would violate the Act or any other applicable
law. The Partnership will not make any distribution in kind without the approval
of the Limited
57
Partners by a Majority LP Vote, except for distributions of publicly-traded
securities made with the Advisory Committee's approval pursuant to Section 5.4
hereof.
ARTICLE X
TRANSFERS; WITHDRAWALS AND DEFAULTS
SECTION 10.1 Voluntary Transfer of General Partner Interest.
Without the consent of the Fund Investors by a Super Majority Fund Vote, the
General Partner shall not have the right to assign or otherwise transfer its
interest as the general partner of the Partnership (but may pledge its interest
in connection with any Partnership borrowing) other than to another ▇▇▇▇▇
Controlled Entity, and the General Partner shall not have the right to withdraw
from the Partnership; provided that without the consent of the Limited Partners
or any other Fund Investors, the General Partner may be reconstituted as or
converted into a corporation, limited partnership or other form of entity (any
such reconstituted or converted entity being deemed to be the General Partner
for all purposes hereof) by merger, consolidation or otherwise, so long as (i)
the General Partner continues to be a ▇▇▇▇▇ Controlled Entity; (ii) such
reconstitution, conversion or transfer does not have adverse tax or legal
consequences for the Limited Partners or the Partnership; (iii) the General
Partner has notified the Limited Partners of such transaction at least thirty
days prior to the effective date of such transaction; and (iv) the Limited
Partners shall not have made a reasonable objection to such transaction prior to
the effective date of such transaction by a Majority LP Vote. No such assignment
or other transfer of all of the General Partner's interest as a general partner
of the Partnership shall be effective until its assignee or transferee has been
substituted in its place as general partner of the Partnership. Any such
substitute general partner shall be admitted as a general partner of the
Partnership upon its execution and delivery of this Agreement as General
Partner, and immediately thereafter the replaced general partner shall withdraw
as a general partner of the Partnership.
SECTION 10.2 Removal of General Partner.
(a) The General Partner may be removed by a Majority Fund Vote
if a Finding of Cause shall have been made and shall have become
effective and shall not have been withdrawn or rescinded in accordance
with the provisions of this Section 10.2(a). For purposes of this
Agreement, the term "Finding of Cause" means a written determination by
Fund Investors by a Majority Fund Vote that the General Partner has
committed willful malfeasance in the performance of any of its material
duties under this Agreement or has committed gross negligence, willful
misconduct or fraud which is the primary cause of a material adverse
effect on the Partnership and has continued without being substantially
cured for a period of at least thirty Business Days after the date upon
which written notice shall have been given to the General Partner by
Fund Investors pursuant to a Majority Fund Vote stating that they
believe such willful malfeasance, gross negligence, willful misconduct
or fraud has occurred and identifying with reasonable particularity the
actions constituting or resulting in such willful malfeasance, gross
negligence, willful misconduct or fraud; provided, however, that the
General Partner shall have the right to dispute any determination that
such willful malfeasance, gross negligence, willful misconduct or fraud
has occurred or is continuing or that such willful malfeasance, gross
negligence, willful misconduct or fraud is the primary cause of a
58
material adverse effect on the Partnership and, if the General Partner
does so, a Finding of Cause shall not become effective until the date
upon which the dispute with respect to such determination has been
resolved (whether by agreement between the General Partner and Fund
Investors by a Majority Fund Vote or as a result of a judgment or award
in any judicial proceeding). Any determination of or by the Fund
Investors, and the effectiveness, of any Finding of Cause may be
rescinded or withdrawn at any time by the Fund Investors by a Majority
Fund Vote.
(b) At any time after the Initial Investment Period, the
General Partner may be removed by a 75% Majority Fund Vote with or
without a Finding of Cause by causing the Partnership to redeem all
Partnership Interests held by the General Partner and its Affiliates
(including the ▇▇▇▇▇ Limited Partner) by issuance of a promissory note
with a term of not more than three years, bearing interest at the Prime
Rate, and with a principal amount equal to the sum of the Current Unit
Value of all Units and the Current Participation Interest Value of the
Participation Interest held by the General Partner and its Affiliates
(including the ▇▇▇▇▇ Limited Partner).
(c) No removal of the General Partner pursuant to this Section
10.2 shall be effective until a successor general partner has been
admitted to the Partnership in place of the General Partner. Upon such
admittance to the Partnership, such successor general partner will be
entitled to appoint members of the Management Board in substitution of
those appointed by the General Partner immediately prior to such
removal of the General Partner.
SECTION 10.3 Transfers of Partnership Interests by ▇▇▇▇▇
Partners.
(a) Subject to Sections 10.1 and 10.2, each of the General
Partner and the ▇▇▇▇▇ Limited Partner may Transfer part or all of the
Partnership Units and Participation Interests held by it in accordance
with the provisions of this Agreement; provided that, (i) unless
otherwise approved by the Limited Partners pursuant to a Super Majority
LP Vote, no such Transfer shall be permitted that would result in the
▇▇▇▇▇ Capital Requirement failing to be met, and (ii) except for the
admission of ▇▇▇▇▇ REIT Properties L.P. as Non-Managing General Partner
pursuant to section 5.11, any Transferee of any such Partnership Units
or Participation Interest shall take them only in respect of a limited
partner interest in the Partnership and not as a general partner,
except to the extent a Transfer of a general partner interest has been
approved in accordance with Section 10.1.
(b) Unless otherwise approved by Fund Investors by a Super
Majority Fund Vote, the General Partner shall ensure that the General
Partner is at all times a ▇▇▇▇▇ Controlled Entity and that ▇▇▇▇▇
Controlled Entities and the ▇▇▇▇▇ Group, in the aggregate, own
(directly or indirectly) a majority of the equity in the General
Partner.
SECTION 10.4 Transfers of Units by Partners Other than ▇▇▇▇▇
Partners. Any Partner other than the General Partner and the ▇▇▇▇▇ Limited
Partner may Transfer any Units and all or part of any Participation Interest
held by it at any time, subject only to the provisions of Section 10.5. Any such
Partner that Transfers all or any part of the Units or Participation Interest
59
held by it shall pay all reasonable expenses, including attorneys' fees,
incurred by the Partnership or the General Partner in connection with such
Transfer.
SECTION 10.5 Conditions to Transfer.
(a) No Transfer of part or all of any Partnership Interest
shall be made unless in the opinion of responsible counsel (which may
be counsel for the Partnership), which opinion of counsel shall be
reasonably satisfactory to the General Partner and which opinion may be
waived, in whole or in part, in the sole and absolute discretion of the
General Partner:
(i) such Transfer would not violate the Securities
Act or any state securities or "Blue Sky" laws or the
securities laws of any other jurisdiction applicable to the
Partnership or the Partnership Interests to be assigned or
transferred;
(ii) such Transfer would not cause the Partnership to
lose its status as a partnership for U.S. federal income tax
purposes or cause the Partnership to become subject to the
Investment Company Act;
(iii) such Transfer would not cause the Partnership
to be treated as a "publicly traded partnership" within the
meaning of Section 7704 of the Code and the Regulations
promulgated thereunder;
(iv) such Transfer would not cause (A) all or any
portion of the assets of the Partnership (1) to constitute
"plan assets" (under ERISA, the Code or the applicable
provisions of any Similar Law) of any existing or contemplated
investor, or (2) to be subject to the provisions of ERISA, the
Code or any applicable Similar Law, or (B) the General Partner
to become a fiduciary with respect to any existing or
contemplated investor, pursuant to ERISA or the applicable
provisions of any Similar Law, or otherwise;
(v) such Transfer would not cause a termination of
the Partnership under Code Section 708; and
(vi) such Transfer would not violate or result in a
violation of the Constituent Documents of any Operating
Company in which the Partnership has a direct or indirect
interest.
(b) No Transfer of a Partnership Interest, in whole or in
part, may be made if, in the opinion of legal counsel to the
Partnership,
(i) such Transfer would result in the Partnership's
being treated as an association taxable as a corporation; or
(ii) such Transfer would result in the Partnership no
longer qualifying for the Private Placement PTP Exemption.
60
(c) If, and beginning with the first day of the first taxable
year in which, the Partnership no longer qualifies for the Private
Placement PTP Exemption, no Transfer of a Partnership Interest, in
whole or in part, may be made unless such Transfer constitutes a
Private Transfer.
(d) Any purported Transfer attempted in contravention of any
of the provisions of this Section 10.5 shall be void ab initio and
ineffectual and shall not be binding upon, or recognized by, the
General Partner or the Partnership. Prior to the consummation of any
Transfer by a Limited Partner, such Limited Partner shall deliver to
the General Partner such legal opinions, certificates and other
documents as the General Partner shall reasonably request in connection
with such Transfer.
(e) Redemptions of Partnership Interests pursuant to Sections
3.8, 3.9 or 3.10 shall not be considered Transfers for purposes of this
Section 10.5.
SECTION 10.6 Admissions and Withdrawals Generally. Except as
expressly provided in this Agreement, no Partner shall have the right to
withdraw from the Partnership or to withdraw any part of its Capital Account and
no additional Partner may be admitted to the Partnership. Each new Partner shall
be admitted as a Partner upon the execution by or on behalf of it of an
agreement pursuant to which it becomes bound by the terms of this Agreement and
acceptance thereof by the General Partner. The names and addresses of all
Persons admitted as Partners and their status as General Partner or a Limited
Partner shall be maintained in the records of the Partnership.
SECTION 10.7 Required/Elective Withdrawals. The General
Partner may require a Limited Partner to withdraw from the Partnership if (i) in
the reasonable judgment of the General Partner based upon an opinion of counsel
to the Partnership, by virtue of that Limited Partner's Partnership Interest,
the Partnership or any Partner is reasonably likely to be subject to any
requirement to register under the Investment Company Act, or (ii) in the
reasonable judgment of the General Partner, a significant delay, extraordinary
expense or material adverse effect on the Partnership or any of its Affiliates,
any Fund Entity or any prospective investment is likely to result from the
retention by such Limited Partner of a Partnership Interest. Notice of any such
withdrawal shall be given to all Limited Partners as well as a copy of the
opinion of counsel referred to above in the case of a withdrawal pursuant to
clause (i) above. Withdrawals pursuant to this Section 10.7 will be effected by
the Partnership's redeeming the Units held by such Limited Partner at the
Current Unit Value, with the redemption price being payable by a promissory note
having a term of not more than three years and bearing interest at the Prime
Rate.
SECTION 10.8 Defaulting Partner.
(a) Any Partner that fails to make, when due, any portion of
the Capital Contributions required to be made by such Partner pursuant
to this Agreement and the Subscription Agreement to which such Partner
is a party may, in the discretion of the General Partner, be charged an
additional amount on the unpaid balance of any such Capital
Contribution at the Default Rate from the date such balance was due and
payable through the date full payment for such balance is actually
made, and to the extent such
61
additional amount is not otherwise paid such additional amount may be
deducted from any distribution otherwise payable to such Partner.
(b) If any Partner fails to make, when due, any portion of the
Capital Contribution required to be contributed by such Partner
pursuant to this Agreement and the Subscription Agreement to which such
Partner is a party, then the Partnership shall promptly provide written
notice of such failure to such Partner. If such Partner fails to make
such Capital Contribution within five Business Days after receipt of
such notice, then (i) such Partner shall be deemed a "Defaulting
Partner" and the following Sections 10.8(c) through (h) shall apply.
(c) The General Partner shall have the right to determine, in
its sole discretion, that whenever the vote, consent or decision of a
Partner or of the Partners is required or permitted pursuant to this
Agreement, except as required by the Act, any Defaulting Partner shall
not be entitled to participate in such vote or consent, or to make such
decision, and such vote, consent or decision shall be tabulated or made
as if such Defaulting Partner were not a Partner.
(d) The General Partner shall have the right in its sole
discretion to either (i)(A) determine that a Defaulting Partner shall
forfeit to the non-defaulting Partners as recompense for damages
suffered, and the Partnership shall withhold (for the account of such
other Partners), all distributions of Operating Cash Flow and Capital
Cash Flow and liquidating distributions that such Defaulting Partner
would otherwise receive, and (B) effect a forfeiture by such Partner of
20% of its aggregate Partnership Interest (including 20% of its Capital
Account balance); or (ii) upon delivery of written notice to the
Defaulting Partner, cause the Defaulting Partner to transfer all of its
interest in the Partnership to one or more other Partners (or any other
Person or Persons to the extent not purchased by any Partner) selected
by the General Partner in its sole discretion, which have agreed to
purchase such interest at a transfer price equal to at least 80% of
such Defaulting Partner's Capital Account balance.
(e) In the event that a Partner defaults in making all or any
portion of a Capital Contribution to the Partnership, the General
Partner may require all of the non-defaulting Partners to increase
their Capital Contributions by an aggregate amount equal to the Capital
Contribution of the Defaulting Partner on which it defaulted; provided
that no Partner will be required to contribute any amounts in excess of
its Unfunded Commitment without such Partner's consent. If the General
Partner elects to require such increase, the General Partner shall
deliver to each non-defaulting Partner written notice of such default
as promptly as practicable after its occurrence and, thereafter, with
respect to each Investment, the General Partner shall as promptly as
practicable deliver to each such non-defaulting Partner a Capital Call
Notice in respect of the Capital Contribution which the Defaulting
Partner failed to make.
Subject to the provisos set forth above in this Section 10.8(e), such
Capital Call Notice shall (i) call for a Capital Contribution by each
such non-defaulting Partner in an amount equal to the amount of such
non-defaulting Partner's pro rata share of such additional Capital
Contribution, based on the Unfunded Commitments of the Partners, and
(ii)
62
specify a Payment Date for such Capital Contribution, which date shall
be at least ten calendar days from the date of delivery of such Capital
Call Notice by the General Partner. If any Partner is not required to
make a Capital Contribution in accordance with this Section 10.8(e)
because such Capital Contribution would be in excess of such Partner's
Unfunded Commitment, then, subject to the provisos set forth in this
Section 10.8(e), the General Partner shall send to each other Partner
which is not subject to such constraint a Capital Call Notice providing
the amount of any additional Capital Contribution which such other
Partner shall be required to make as a result of such excess not being
funded by the Partner which is subject to such constraint, which amount
shall bear the same ratio to the aggregate of the additional amounts
payable by all such other non-defaulting Partners as such other
Partner's Unfunded Commitment bears to the Unfunded Commitments of all
such other non-defaulting Partners. The provisions of this Section
10.8(e) shall operate successively until either all Partners are
subject to such constraint or the full amount of the defaulted Capital
Contribution of the Defaulting Partner has been provided for.
(f) No right, power or remedy conferred upon the General
Partner in this Section 10.8 shall be exclusive, and each such right,
power or remedy shall be cumulative and in addition to every other
right, power or remedy whether conferred in this Section 10.8 or now or
hereafter available at law or in equity or by statute or otherwise. No
course of dealing between the General Partner and any Defaulting
Partner and no delay in exercising any right, power or remedy conferred
in this Section 10.8 or now or hereafter existing at law or in equity
or by statute or otherwise shall operate as a waiver or otherwise
prejudice any such right, power or remedy.
(g) Each Partner acknowledges by its execution hereof that it
has been admitted to the Partnership in reliance upon its agreements
under this Agreement and in its Subscription Agreement, that the
General Partner and the Partnership may have no adequate remedy at law
for a breach of such agreements and that damages resulting from a
breach of such agreements may be impossible to ascertain at the time
hereof or of such breach.
(h) For purposes of this Section 10.8, if any Defaulting
Partner is any Entity the equity owners of which consist of two or more
unaffiliated investors, the General Partner may, in its sole
discretion, treat the owner of such entity that was responsible for
such default (and not such entity or any general partner, managing
member or other controlling person of such entity) as the Defaulting
Partner and may invoke the rights, powers and remedies specified herein
separately with respect to such owner, and hold such owner solely
responsible for such default.
ARTICLE XI
PARTNERSHIP ADMINISTRATION
SECTION 11.1 Books and Records. The General Partner shall keep
or cause to be kept complete and appropriate records and books of account for
the Partnership. Except as otherwise expressly provided herein, such books and
records shall be maintained on a basis
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which allows the proper preparation of the Partnership's financial statements
and tax returns. The books and records shall be maintained at the principal
office of the Partnership. Any Partner or its duly authorized representatives
shall be permitted to inspect the books and records of the Partnership for any
proper purpose and make copies thereof consistent with reasonable
confidentiality restrictions established by the General Partner at any
reasonable time during normal business hours.
SECTION 11.2 Partnership Auditor. The General Partner shall
cause the books and records of the Partnership to be audited as of the end of
each Fiscal Year by an independent certified public accounting firm of national
or international standing and reputation equivalent to the existing "big four"
firms selected by the General Partner (the firm so selected, the "Partnership
Auditor"). As of the date of this Agreement, the Partnership Auditor is
Delloitte & Touche LLP.
SECTION 11.3 Filing of Tax Returns. The General Partner shall
prepare and file, or cause the accountants of the Partnership to prepare and
file, a U.S. federal information tax return in compliance with Section 6031 of
the Code and any required state, local and foreign income tax and information
returns for each tax year of the Partnership.
SECTION 11.4 Tax Matters.
(a) The General Partner shall be designated on the
Partnership's annual U.S. federal information tax return as the "tax
matters partner" of the Partnership (the "Tax Matters Partner") as
provided in Section 6231(a)(7) of the Code. If the Partnership is the
subject of an income tax audit by any federal, state, local or foreign
authority, then to the extent the Partnership is treated as an entity
for purposes of the audit, including administrative settlement and
judicial review, the Tax Matters Partner shall be authorized to act
for, and its decision shall be final and binding upon, the Partnership
and each Partner. All expenses incurred in connection with any audit,
investigation, settlement or review shall be borne by the Partnership.
(b) The General Partner shall take such steps as are necessary
to ensure that the Partnership is taxed as a partnership under the
Code. Subject to the preceding sentence, the General Partner shall have
the exclusive right to make any determination whether the Partnership
shall make available elections (including any election pursuant to Code
Section 754 to adjust the tax basis of Partnership assets) for federal,
state, or local tax purposes, and the General Partner shall be absolved
from all liability and other consequences from its making or failing to
make any such election. All decisions and other matters concerning the
computation and allocation or tax items and attributes which are not
otherwise specifically provided for by the terms of this Agreement
shall be determined by the General Partner, and the General Partner
shall be absolved from all liability and other consequences from any
such decisions which are made in good faith.
(c) The General Partner shall take all such actions as are
reasonably necessary for the Partnership to comply with any withholding
or comparable requirements under federal, state, local and foreign law
and shall remit any amounts withheld to, and file required forms with,
the applicable taxing jurisdictions. All amounts withheld from
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distributions shall be treated as having been distributed to the
Partner with respect to whom the withholding was made. Any amounts that
are required to be withheld by the Partnership with respect to a
Partner which are in excess or in advance of distributions to such
Partnership shall be paid over by such Partner to the Partnership and
shall not reduce the Unfunded Commitment or increase the Funded
Commitment of such Partner. Each Partner agrees to furnish the
Partnership with such representations and forms as the General Partner
shall reasonably request to assist in complying with the Partnership's
withholding obligations. A Partner subject to withholding shall pay to
or reimburse the Partnership for taxes, related interest and penalties,
and all other costs and expenses incurred by the Partnership in
connection with such withholding obligation, except for interest,
penalties or costs (but not taxes) that are incurred as a result of the
gross negligence or willful misconduct of the Partnership or the
General Partner.
SECTION 11.5 Reports to Partners.
(a) Within forty-five days after the end of each Fiscal
Quarter other than the fourth Fiscal Quarter, and within ninety days
after the end of each Fiscal Year, the General Partner shall send to
each Person who was a Partner in the Partnership at any time during the
prior Fiscal Year:
(i) the following financial statements for the
Partnership prepared on an accrual basis and in accordance
with GAAP (provided that, for purposes of preparing these
statements, each Investment shall be valued at cost, unless
(1) if such Investment has been appraised since its
acquisition in accordance with Section 5.9, in which case the
Investment will be valued at its Current Market Value, or (2)
if in the reasonable judgment of the General Partner,
circumstances dictate that an Investment be valued on a
different basis than cost or Current Market Value, in which
case the Investment shall be valued on such basis as the
General Partner shall reasonably determine, and the General
Partner shall include in such statements an explanation of the
reason for such determination and the basis for the valuation
of such Investment):
(A) a balance sheet as of the end of such
period,
(B) a statement of income or loss and a
statement of Partners' capital for such period, and
(C) a statement of changes in Partners'
equity;
(ii) a schedule of changes in Capital Account
balances by Partner;
(iii) a schedule and summary description of each
Investment owned by the Partnership as of the end of such
period; and
(iv) in the case of an annual report with respect to
any Fiscal Year, an opinion of the Partnership Auditor based
upon its audit of the financial statements referred to in
clause (i) above.
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(b) Within ninety days after the end of each Fiscal Year of
the Partnership, the General Partner shall send to each Person who was
a Partner during such period a statement of cash flows of the
Partnership.
(c) Concurrently with the delivery of the audited financial
statements for each Fiscal Year pursuant to Section 11.5(a), the
General Partner shall prepare and mail, or cause the Partnership's
accountants to prepare and mail, to each Partner and, to the extent
necessary, to each former Partner (or such Partner's designated
representatives), a report setting forth in sufficient detail such
information relating to the Partnership and its activities as shall
enable such Partner or former Partner (or such Partner's designated
representatives) to prepare its respective federal, state, local and
foreign income tax returns in accordance with the laws, rules and
regulations then prevailing.
(d) With reasonable promptness, the General Partner will
deliver such other information available to the General Partner,
including financial statements and computations, as any Partner may
from time to time reasonably request in order to comply with regulatory
requirements, including reporting requirements, to which such Partner
is subject.
SECTION 11.6 Meetings of Partners.
(a) The General Partner shall hold an annual meeting of
Partners beginning in the first full calendar year following the end of
the Initial Offering Period. The General Partner shall give at least
forty-five days notice of the time and place of such meeting to each
Partner, which notice shall set out the agenda for such meeting.
(b) The General Partner may call a special meeting of the
Partnership by giving at least ten days notice of the time and place of
such meeting to each Partner, which notice shall set out the agenda for
such meeting.
(c) Any action required to be, or which may be, taken at any
meeting of the Partners may be taken in writing without a meeting if
consents thereto are given by the General Partner and Partners owning
Partnership Interests having an aggregate Percentage Interest not less
than the amount that would be necessary to take such action at a
meeting; provided that a vote to terminate the Partnership pursuant to
Section 12.2 may be held only at a meeting duly called, and not by
written consent in lieu thereof.
(d) A Partner may vote at any meeting either in person or by a
proxy which such Partner has duly executed in writing.
(e) The chairman of any special meeting shall be the President
or another Person affiliated with and designated by the General
Partner. A Person designated by the General Partner shall keep written
minutes of all of the proceedings and votes of any such meeting.
(f) The General Partner may set in advance a record date for
determining the Partners entitled to notice of and to vote at any
meeting or entitled to express consent to any action in writing without
a meeting. No record date shall be less than ten nor more
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than sixty days prior to the date of any meeting to which such record
date relates nor more than ten days after the date on which the General
Partner sets the record date for any action by written consent. If the
General Partner does not set a record date, the record date for a
meeting of Partners shall be the date of such meeting, and the record
date for a written consent of Partners shall be the date of the notice
to the Partners by which the General Partner requests such written
consent.
(g) A quorum shall be present at any meeting of Partners with
respect to any matter to be voted on at such meeting, if Partners
holding voting power at least equal to that required to take action
with respect to such matter are present at such meeting. Except as
otherwise required by the Act, the Limited Partners may not require the
Partnership to take any action, and the consent of the Limited Partners
shall not be required for the Partnership to take any action, except to
the extent this Agreement requires the taking of an action approved by,
or prohibits the taking of any action unless approved by, a specified
LP Vote, Partner Vote or Fund Vote. An "LP Vote" is a vote taken among
all Limited Partners. A "Partner Vote" is a vote taken among all
Partners. A "Fund Vote" is a vote taken among all Fund Investors. A
"Majority LP Vote" means the affirmative vote of Limited Partners
holding Partnership Interests representing more than fifty percent
(50%) of the Percentage Interests in the Partnership on the record date
set for an LP Vote. A "Super Majority LP Vote" means the affirmative
vote of Limited Partners holding Partnership Interests representing
sixty-six and two-thirds percent (66 2/3%) or more of the Percentage
Interests in the Partnership on the record date set for an LP Vote. A
"75% Majority LP Vote" means the affirmative vote of Limited Partners
holding Partnership Interests representing seventy-five percent (75%)
or more of the Percentage Interests in the Partnership on the record
date set for an LP Vote. A "Majority Partner Vote" means the
affirmative vote of Partners holding Partnership Interests representing
more than fifty percent (50%) of the Percentage Interests in the
Partnership on the record date set for a Partner Vote. A "Super
Majority Partner Vote" means the affirmative vote of Partners holding
Partnership Interests representing sixty-six and two-thirds percent
(66 2/3%) or more of the Percentage Interests in the Partnership on the
record date set for a Partner Vote. A "75% Majority Partner Vote" means
the affirmative vote of Partners holding Partnership Interests
representing seventy-five percent (75%) or more of the Percentage
Interests in the Partnership on the record date set for a Partner Vote.
(h) Each Partner entitled to vote on any matter which under
the terms of this Agreement requires an LP Vote or Partner Vote shall
have a voting percentage equal to the Percentage Interest attributable
to all Partnership Interests held by such Partner on the record date
set for the meeting or consent at or by which a vote is to be held. Any
Feeder Entity may vote for and/or against any matter presented to the
Partners for a vote in such manner and proportions as may be provided
for in the constituent documents of such Feeder Entity, as applicable.
The General Partner and any Partner that is an Affiliate of the General
Partner (including the ▇▇▇▇▇ Limited Partner) shall be deemed to have
voted and/or abstained with respect to any matter put to a vote of
Partners in the same manner and proportions as the Partnership
Interests of the other Partners are voted and/or abstained on such
matter.
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(i) The General Partner may, in its discretion, grant
to any Fund Investor which is not a Partner the right to have
a non-voting observer attend each meeting of the Partners. The
General Partner shall provide to any such observer notice of
the time and place of any meeting of the Partners, and of any
written consent being solicited from the Partner, in the same
manner and at the same time as notice is sent to the Partners.
The General Partner shall also provide to any such observer
copies of all notices, reports, minutes, consents and other
documents at the time and in the manner as they are provided
to the Partners. Any observer who attends any meetings of the
Partners shall execute and comply with an agreement with the
Partnership and the General Partner containing such
restrictions on the use and disclosure of confidential
information and other matters as the General Partner may
reasonably request.
SECTION 11.7 Meetings of Fund Investors. If this Agreement
requires any action be taken by or with the consent of Fund Investors by a Fund
Vote, such action may be taken only at a meeting of Fund Investors pursuant to a
written notice authorized by a Majority LP Vote to all Fund Investors, which
notice shall specify the time and place of such meeting (which shall be not less
than 30 Business Days after the date of such notice) and the purpose for which
such meeting is called. At any meeting of Fund Investors called pursuant to the
preceding sentence, each Fund Investor at such meeting, in person or by proxy,
that is not an Affiliate of the General Partner shall be entitled to vote at
such meeting on the matters specified in the notice by which such meeting was
called. A "Majority Fund Vote" means the affirmative vote of Fund Investors that
are not Affiliates of the General Partner holding direct or indirect equity
interests in Properties in which the Fund has an interest equal to more than 50%
of all equity interests held directly or indirectly by all Fund Investors that
are not Affiliates of the General Partner in such Properties. A "Super Majority
Fund Vote" means the affirmative vote of Fund Investors that are not Affiliates
of the General Partner holding direct or indirect equity interests in Properties
in which the Fund has an interest equal to sixty-six and two-thirds percent
(66 2/3%) or more of all equity interests held directly or indirectly by all
Fund Investors that are not Affiliates of the General Partner in such
Properties. A "75% Majority Fund Vote" means the affirmative vote of Fund
Investors that are not Affiliates of the General Partner holding direct or
indirect equity interests in Properties in which the Fund has an interest equal
to seventy-five percent (75%) or more of all equity interests held directly or
indirectly by all Fund Investors that are not Affiliates of the General Partner
in such Properties. For purposes of this Section 11.7, each Partner shall be
deemed to hold an indirect equity interest in each Property in which the
Partnership has an indirect interest in an amount equal to the Partnership's
indirect equity interest in such Property multiplied by the Percentage Interest
attributable to all Partnership Interests held by such Partner.
ARTICLE XII
DISSOLUTION, TERMINATION AND WINDING UP
SECTION 12.1 Dissolution. The Partnership shall dissolve and
its affairs shall be wound up upon the earliest to occur of the following events
(each, a "Liquidating Event"):
(a) an event of withdrawal as defined in Section 17-402 of the
Act (such event, an "Event of Withdrawal");
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(b) there ceasing to be any Limited Partners, as set forth in
Section 17-801(4) of the Act (subject to the provisions thereof);
(c) the entry of a decree of judicial dissolution under
Section 17-802 of the Act;
(d) the election of the General Partner, at any time after the
date on which all or substantially all of the assets of the Partnership
have been sold or otherwise disposed of; and
(e) after the Initial Investment Period, the Fund Investors
vote to terminate the Partnership in accordance with the provisions of
Section 12.2.
provided, however, that upon the occurrence of an Event of Withdrawal with
respect to the General Partner (the "Withdrawn General Partner"), the
Partnership may continue its operations if within ninety days after such Event
of Withdrawal the Limited Partners elect by Super Majority LP Vote to continue
the business of the Partnership and elect a new General Partner, effective as of
the date of withdrawal, before or within ninety days after the Event of
Withdrawal (in which event a Liquidating Event shall not be deemed to have
occurred).
SECTION 12.2 Termination of Partnership by Majority Fund Vote.
After the Initial Investment Period, any Partner may propose that the
Partnership be terminated and its affairs wound up in accordance with this
Article 12 by delivering a written notice to the General Partner proposing that
such action be taken and setting forth the reasons for such proposal. Following
receipt of any such notice, the General Partner shall call a special meeting of
the Fund Investors in accordance with the provisions of Section 11.7, such
meeting to be held on a date not later than the ninetieth day following the
General Partner's receipt of the notice from the Partner proposing such action.
A Majority Fund Vote to terminate the Partnership at a special meeting called
and held in accordance with the provisions of Section 11.7 and this Section
12.2, shall be deemed a Liquidating Event, following which the Partnership shall
be wound up in accordance with Section 12.3.
SECTION 12.3 Winding up. Upon the occurrence of a Liquidating
Event, the Partnership shall proceed to wind up its affairs and liquidate its
property and assets as promptly as practicable, but in an orderly manner so as
not to involve undue sacrifice. The General Partner, or if there is no general
partner, a liquidator appointed by a Majority LP Vote, shall be the liquidator
to wind up the affairs of the Partnership and to manage the Partnership's assets
during the winding up. Following a Liquidating Event resulting from a Majority
Fund Vote to terminate the Partnership pursuant to Section 12.2, the General
Partner shall complete the winding up of the Partnership no later than the
second anniversary of the date of the special meeting of Fund Investors at which
such vote occurred.
SECTION 12.4 Liquidating Distributions. Proceeds from the
sales of the Partnership's assets pursuant to Section 12.3 shall be distributed
in one or more installments in the following order of priority:
(a) Such proceeds shall first be applied to the satisfaction
all creditors of the Partnership (including the payment of expenses of
the winding-up, liquidation and dissolution of the Partnership),
including Partners who are creditors of the Partnership, to
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the extent otherwise permitted by law, either by the payment thereof or
the making of reasonable provision therefor (including the
establishment of reserves, in amounts established by the General
Partner or, if applicable, the liquidator); and
(b) The remaining proceeds, if any, plus any remaining assets
of the Partnership, shall be applied and distributed to the Partners in
accordance with the positive balances of the Partners' Capital
Accounts, as determined after taking into account all adjustments to
Capital Accounts for the Partnership taxable year during which the
liquidation occurs, by the end of such taxable year or, if later,
within ninety days after the date of such liquidation. For purposes of
the application of this Section 12.4 and determining Capital Accounts
on liquidation, all unrealized gains, losses and accrued income and
deductions of the Partnership shall be treated as realized and
recognized immediately before the date of distribution. If a Limited
Partner shall, upon the advice of counsel, determine that there is a
reasonable likelihood that any distribution in kind of an asset would
cause such Limited Partner to be in violation of any law, regulation or
governmental order, such Limited Partner and the General Partner or the
liquidator shall each use its best efforts to make alternative
arrangements for the sale or transfer into an escrow account of any
such distribution on mutually agreeable terms.
(c) The parties to this Agreement intend that the allocation
provisions contained herein shall produce final Capital Account
balances of the Partners that will permit liquidating distributions to
be made to the Partners pursuant to this Section 12.4 in accordance
with their Percentage Interests. To the extent that the allocation
provisions contained in this Agreement fail to produce such final
adjusted Capital Account balances, (i) such provisions shall be amended
if and to the extent necessary to produce such result, (ii) Profits and
Losses of the Partnership (or items of gross income and deduction of
the Partnership) shall be allocated by the Partnership among the
Partners for current and future years if and to the extent necessary to
produce such result, and (iii) the provisions of this sentence shall
control notwithstanding any reallocation or adjustment of Profits or
Losses (or items thereof) by the Internal Revenue Service or other
taxing authority.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Waiver of Partition. Except as may be otherwise
required by law, each Partner hereby irrevocably waives any and all rights that
it may have to maintain an action for partition or similar action of any of the
Partnership's property.
SECTION 13.2 Power of Attorney. Each Limited Partner hereby
irrevocably constitutes and appoints the General Partner, with full power of
substitution, the true and lawful attorney-in-fact and agent of such Limited
Partner, to execute, acknowledge, verify, swear to, deliver, record and file, in
its or its assignee's name, place and stead, all in accordance with the terms of
this Agreement, all instruments, documents and certificates which may from time
to time be required by the laws of the United States of America, the State of
Delaware, any other jurisdiction in which the Partnership conducts or plans to
conduct its affairs, or any political subdivision or agency thereof to
effectuate, implement and continue the valid existence and
70
affairs of the Partnership, including, without limitation, the power and
authority to verify, swear to, acknowledge, deliver, record and file:
(a) all certificates and other instruments, including any
amendments to this Agreement or to the Certificate, which the General
Partner deems appropriate to form, qualify or continue the Partnership
as a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and all other
jurisdictions in which the Partnership conducts or plans to conduct its
affairs,
(b) any amendments to this Agreement or any other agreement or
instrument which the General Partner deems appropriate to (i) effect
the addition, substitution or removal of any Limited Partner or General
Partner pursuant to this Agreement or (ii) effect any other amendment
or modification to this Agreement, but only if such amendment or
modification is duly adopted in accordance with the terms hereof,
(c) all conveyances and other instruments which the General
Partner deems appropriate to reflect the dissolution and termination of
the Partnership pursuant to the terms hereof, including the writing
required by the Act to cancel the Certificate,
(d) all instruments relating to transfers of Partnership
Interests of Limited Partners or to the admission of any substitute
Limited Partner, and
(e) certificates of assumed name and such other certificates
and instruments as may be necessary under the fictitious or assumed
name statutes from time to time in effect in the State of Delaware and
all other jurisdictions in which the Partnership conducts or plans to
conduct its affairs, but only if such names are duly approved in
accordance with the terms of this Agreement.
Such attorney-in-fact and agent shall not, however, have the right, power or
authority to amend or modify this Agreement when acting in such capacities,
except to the extent authorized herein. This power of attorney shall not
terminate upon the bankruptcy, dissolution, disability or incompetence of the
General Partner. To the fullest extent permitted by law, the power of attorney
granted herein shall be deemed to be coupled with an interest, shall be
irrevocable, shall survive and not be affected by the dissolution, bankruptcy or
legal disability of the Limited Partner and shall extend to its successors and
assigns; and may be exercisable by such attorney-in-fact and agent for all
Limited Partners (or any of them) by listing all (or any) of such Limited
Partners required to execute any such instrument, and executing such instrument
acting as attorney-in-fact. Any Person dealing with the Partnership may
conclusively presume and rely upon the fact that any instrument referred to
above, executed by such attorney-in-fact and agent, is authorized, regular and
binding, without further inquiry. If required, each Limited Partner shall
execute and deliver to the General Partner within five days after the receipt of
a request therefor, such further designations, powers of attorney or other
instruments as the General Partner shall reasonably deem necessary for the
purposes hereof.
SECTION 13.3 Amendments.
(a) Except as required by law, this Agreement (including the
Exhibits and Schedules hereto) may be amended or supplemented by
written consent of the General
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Partner and the Limited Partners by a Majority LP Vote; provided that
no such amendment shall (i) increase any Partner's Capital Commitment,
reduce its share of the Partnership's distributions, income and gains
or materially and adversely affect the rights granted to or liabilities
(including tax liabilities) of such Partner hereunder, without the
written consent of each Partner so affected, (ii) change the LP Vote,
Partner Vote or Fund Vote required hereunder (the "Required Vote") for
the taking of an action unless such amendment is approved by the
Required Vote for the subject of such proposed amendment, (iii) amend
this Section 13.3 or the Investment Guidelines without the consent of
each Partner, (iv) amend the definition of Percentage Interest, Section
3.7(b), subsection (a), (d), (e) or (h) of Section 5.3 or Section 5.10
in a way that would materially and adversely affect SLR without the
consent of at least one SLR Designee or amend the first or second
sentence of Section 2.2 or this clause (iv) of this Section 13.3(a)
without the consent of SLR. Notwithstanding the foregoing, this
Agreement may be amended by the General Partner without the consent of
any other Partner to (a) cure any ambiguity or correct or supplement
any provision hereof which is incomplete or inconsistent with any other
provision hereof or correct any printing, stenographic or clerical
error or omissions, provided that such amendment does not materially
adversely affect the interests of the Partners, (b) amend Sections 8.4
to 8.8 as provided therein, (c) in connection with a Subsequent
Closing, amend any provision of this Agreement, provided that such
amendment does not materially adversely affect the rights or
obligations of the existing Partners, and (d) make any amendment that
is not objected to in writing by any Partner within twenty Business
Days after notice of such amendment is given to all Partners.
(b) The General Partner shall have the right to amend this
Agreement without the approval of any other Partner to the extent the
General Partner reasonably determines, based upon written advice of tax
counsel to the Partnership, that the amendment is necessary to provide
assurance that the Partnership will not be treated as a "publicly
traded partnership," because it is entitled to "safe harbor" treatment
under Section 7704 of the Code and the regulations promulgated
thereunder; provided that (i) such amendment shall not change the
relative economic interests of the Partners, reduce any Partner's share
of distributions, or increase any Partner's Capital Commitment or its
liability hereunder, (ii) the General Partner provides a copy of such
written advice and amendment to the Limited Partners at least twenty
Business Days prior to the effective date of any such amendment and the
Partners shall not have made a reasonable objection to such amendment
prior to the effective date of such amendment by a Majority Partner
Vote.
(c) The General Partner shall have the right to amend this
Agreement as provided in Schedule 5.11 without the approval of any
other Partner in connection with the admission of a Non-Managing
General Partner.
SECTION 13.4 Confidentiality. Each Limited Partner agrees to
keep confidential, and not to make use of (other than for purposes reasonably
related to its interest in the Partnership or for purposes of filing such
Limited Partner's tax returns or for other routine matters required by law) or
disclose to any Person, any information or matter relating to the Partnership
and its affairs and any information or matter related to any Investment (other
than disclosure to such Limited Partner's employees, agents, advisors, or
representatives responsible
72
for matters relating to the Partnership), including any information contained in
any Capital Call or any report distributed pursuant to Section 11.5; provided
that a Limited Partner may disclose any such information to the extent that (i)
such information is or becomes generally available to the public through no act
or omission of such Limited Partner, (ii) such information otherwise is or
becomes known to such Limited Partner other than by disclosure by the
Partnership or the General Partner, provided that the source of such information
is not bound by a confidentiality agreement or other contractual, legal or
fiduciary obligation of confidentiality, or (iii) such Limited Partner is
required by law to disclose such information. Each Limited Partner shall cause
its employees, agents, advisors, or representatives to comply with the
provisions of this Section 13.4, and shall be liable to the Partnership and the
General Partner for any breach of this Section 13.4 by any such Person.
SECTION 13.5 Entire Agreement. This Agreement and the other
agreements referred to herein constitute the entire agreement among the Partners
with respect to the subject matter hereof and supersede any prior agreement or
understanding among or between them with respect to such subject matter;
provided that the Partnership or the General Partner, without any further act,
approval or vote of any Partner, may (subject to Section 13.3) enter into side
letters or other writings with individual Partners which have the effect of
establishing rights under, or altering or supplementing, the terms of, this
Agreement as to such Partner. Any rights established, or any terms of this
Agreement altered or supplemented, in a side letter with a Partner shall govern
with respect to such Partner notwithstanding any other provision of this
Agreement. The representations and warranties of the Partners in, and the other
provisions of, the Subscription Agreements shall survive the execution and
delivery of this Agreement.
SECTION 13.6 Severability. Each provision of this Agreement
shall be considered severable and if for any reason any provision which is not
essential to the effectuation of the basic purposes of this Agreement is
determined by a court of competent jurisdiction to be invalid or unenforceable
and contrary to the Act or existing or future applicable law, such invalidity
shall not impair the operation of or affect those provisions of this Agreement
which are valid. In that case, this Agreement shall be construed so as to limit
any term or provision so as to make it enforceable or valid within the
requirements of any applicable law, and in the event such term or provision
cannot be so limited, this Agreement shall be construed to omit such invalid or
unenforceable provisions.
SECTION 13.7 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) mailed, registered mail, first-class postage paid, (ii) sent
by overnight mail or courier, or (iii) delivered by hand, if to any Partner, at
such Partner's address, or to such Partner's facsimile number, set forth on
Schedule 2.1, if applicable, or as set forth in such Partner's Subscription
Agreement, and if to the Partnership, to the General Partner at the General
Partner's address, or to the General Partner's facsimile number, set forth on
Schedule 2.1, or to such other person or address as any Partner shall have last
designated by notice to the Partnership, and in the case of a change in address
by the General Partner, by notice to the Limited Partners. Any notice shall be
deemed to have been duly given if personally delivered or sent by the mails or
courier or by electronic mail or facsimile confirmed by letter and will be
deemed received, unless earlier received, (i) if sent by certified or registered
mail, return receipt requested, when actually
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received, (ii) if sent by overnight mail or courier, when actually received, and
(iii) if delivered by hand, on the date of receipt.
SECTION 13.8 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware. In
particular, the Partnership is formed pursuant to the Act, and the rights and
liabilities of the Partners shall be as provided therein, except as herein
otherwise expressly provided.
SECTION 13.9 Successors and Assigns. Except with respect to
the rights of Indemnified Parties hereunder, none of the provisions of this
Agreement shall be for the benefit of or enforceable by the creditors (other
than a lender pursuant to the terms of any agreement governing or securing
Indebtedness to which such lender and the Partnership are parties) of the
Partnership and this Agreement shall be binding upon and inure to the benefit of
the Partners and their legal representatives, heirs, successors and permitted
assigns.
SECTION 13.10 Headings. The Article and Section headings in
this Agreement are for convenience of reference only, and shall not be deemed to
alter or affect the meaning or interpretation of any provisions hereof.
SECTION 13.11 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall constitute one and the same instrument.
SECTION 13.12 Third Party Beneficiary. If SLR ceases to be a
Limited Partner, then, subject to Section 5.3(h), SLR shall be a third party
beneficiary under this Agreement as to all rights granted to SLR hereunder. The
rights granted to SLR in this Agreement were a material inducement to Sumitomo
in its agreement to convey the Initial Asset Group to the Fund, SLR is relying
upon such rights, and SLR shall have the right, without limitation of any other
rights it may have as a third party beneficiary of this Agreement, to seek
enforcement of such rights in its own name in accordance with the terms of this
Agreement and the Act.
[Signature Pages Follow]
74
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the date first set forth above.
GENERAL PARTNER:
HINES US CORE OFFICE CAPITAL LLC
By: ▇▇▇▇▇ Interests Limited Partnership
By: ▇▇▇▇▇ Holdings, Inc.
By:
---------------------------
Name:
Title:
LIMITED PARTNERS:
HINES US CORE OFFICE CAPITAL ASSOCIATES
II LIMITED PARTNERSHIP
By: ▇▇▇▇▇ Interests Limited Partnership
By: ▇▇▇▇▇ Holdings, Inc.
By:
---------------------------
Name:
Title:
▇▇▇▇▇ INTERESTS LIMITED PARTNERSHIP
By: ▇▇▇▇▇ Holdings, Inc.
By:
-------------------------------------
Name:
Title:
SUMITOMO LIFE REALTY (N.Y.), INC.
By:
-------------------------------------
Name:
Title:
Revere Holdings Limited
By:
-------------------------------------
Name:
Title:
SCHEDULE 2.1
PARTNERS NAMES AND ADDRESSES
GENERAL PARTNER
Hines US Core Office Capital LLC
Notice Address: c/o Hines Interests Limited Partnership
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
LIMITED PARTNERS
Hines US Core Office Capital Associates II Limited Partnership
Notice Address: c/o Hines Interests Limited Partnership
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ Interests Limited Partnership
Notice Address: c/o Hines Interests Limited Partnership
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Sumitomo Life Realty (N.Y.), Inc.
Notice Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Revere Holdings Limited
Notice Address: Real ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ Al Dhaheri
SCHEDULE 2.7
APPROVED AGREEMENTS
1. Assignment and Assumption Agreement, dated as of August 19, 2003, by which
the Partnership assumed certain obligations under the Amended and Restated
Master Agreement, dated as of March 31, 2003, among HILP, Hines US Core
Office Properties LP and SLR for the creation of Hines U.S. Core Office
Fund, as modified by two letter agreements dated March 31, 2003, and an
extension letter agreement dated June 26, 2003, and as amended by the
amendment thereto dated July 22, 2003, as supplemented and amended by the
letter agreement, dated as of July 22, 2003, among HILP, Hines US Core
Office Properties LP and SLR and by the letter agreement dated as of August
19, 2003, among the parties thereto.
2. Amended and Restated Organization Agreement, dated as of December 23, 2003,
among General Motors Investment Management Corporation, a New York
corporation, certain institutional investors advised thereby, ▇▇▇▇▇
Interests Limited Partnership, a Delaware limited partnership, Hines US
Core Office Capital Associates III Limited Partnership, a Texas limited
partnership, Hines-Sumisei U.S. Core Office Fund, L.P., a Delaware limited
partnership and Hines-Sumisei NY Core Office Trust, a Maryland real estate
investment trust (the "Organization Agreement").
3. Shareholders Agreement (as defined in the Organization Agreement)
4. Investor Rights Agreement (as defined in the Organization Agreement)
5. Subscription Agreement for Hines-Sumisei U.S. Core Office Fund, L.P., dated
February 2, 2004, by and between the Partnership and SLR.
6. Subscription Agreement for Hines-Sumisei NY Core Office Trust and
Hines-Sumisei NY Core Office Trust II, dated February 2, 2004, by and among
General Motors Investment Management Corporation, a New York corporation,
certain institutional investors advised thereby, Hines-Sumisei U.S. Core
Office Fund, L.P., a Delaware limited partnership, Hines US Core Office
Capital Associates III Limited Partnership, a Texas limited partnership,
▇▇▇▇▇ Interests Limited Partnership, a Delaware limited partnership,
Hines-Sumisei NY Core Office Trust, a Maryland real estate investment
trust, and Hines-Sumisei NY Core Office Trust II, a Maryland real estate
investment trust.
7. Shareholders Agreement, dated February 2, 2004, by and among General Motors
Investment Management Corporation, a New York corporation, certain
institutional investors advised thereby, Hines-Sumisei U.S. Core Office
Fund, L.P., a Delaware limited partnership, Hines US Core Office Capital
Associates III Limited Partnership, a Texas limited partnership, and
Hines-Sumisei NY Core Office Trust II, a Maryland real estate investment
trust.
8. The Advisory Agreement.
9. The Subscription Agreements of each Investor.
10. Letter Agreement, substantially in the form of the draft dated April 1,
2004, among the Partnership, Hines and ▇▇▇▇▇ Real Estate Investment Trust
Inc, providing Hines Real Estate Investment Trust certain rights to acquire
an interest in the Partnership and make additional investments in the
Partnership.
11. Articles of Amendment and Restatement of Hines-Sumisei U.S. Core Office
Trust, substantially in the form of the draft dated April 14, 2004.
12. Amended and Restated Agreement of Limited Partnership of Hines-Sumisei US
Core Office Properties LP, substantially in the form of the draft dated
April 14, 2004.
SCHEDULE 3.1
PARTNERSHIP UNITS AND FUNDED COMMITMENTS
PARTNER PARTNERSHIP UNITS(#) FUNDED COMMITMENT ($)
------- --------------------- ---------------------
General Partner 127.671 127,671
Hines Limited Partner 52,543.576 52,543,576
SLR 25,000 25,000,000
Hines(1) 0 0
Revere Holdings Limited 50,000 50,000,000
----------
(1) Only Partnership Interest held is Participation Interest.
SCHEDULE 4.4
HINES INVESTMENT ALLOCATION PROCEDURE
If Hines becomes aware of investment opportunities which are permitted
investments for the Partnership and are not covered by clauses (a) through (d)
of Section 4.4, and which one or both of the fund managers of NOP and HSOV
wishes to pursue on behalf of its respective fund, Hines shall cause such
investment opportunities to be allocated as follows: (A) if the investment
opportunity is a suburban office real estate property, the expected price of
which is less than or equal to $65 million, such investment opportunity shall be
allocated on a rotating basis among the Partnership, NOP and HSOV or (B) if the
investment opportunity either is not a suburban real estate property or the
expected price of such investment opportunity is greater than $65 million, such
investment opportunity shall be allocated on a rotating basis between the
Partnership and NOP, in each case based on the chronological order in which such
opportunities arose (as determined in good faith by the Hines Investment
Allocation Committee).
The "Hines Investment Allocation Committee" is a committee of Hines executives
and advisors that is responsible for implementing the investment allocation
procedure described above.
SCHEDULE 5.1 - CORE FUND STRUCTURE
(FLOW CHART)
SCHEDULE 5.9
PERCENTAGE INTEREST AND UNIT CANCELLATION EXAMPLE
(ATTACHED)
The attached schedule illustrates, for the first two Fiscal
Quarters after the Initial Investment Period: (1) how the Percentage Interest of
the holder of a Participation Interest is calculated in each quarter (assuming
that Hines is the only Partner which acquires a Participation Interest during
this period), and (2) how the Units of the Unaffiliated Limited Partners are
automatically cancelled as the result of the grant of the Participation Interest
in each quarter. These calculations are based upon hypothetical investments by
various classes of Partners, assumed capital contributions, hypothetical equity
investments in new properties, and a Current Unit Value of $1,000.
SCHEDULE 5.11
NON-MANAGING GENERAL PARTNER PROVISIONS
If a Non-Managing General Partner is admitted as a general partner of the
Partnership as provided in Section 5.11, then the General Partner shall become
the Managing General Partner and shall amend this Agreement as follows:
1. All references in this Agreement to the "General Partner" shall be revised
to be references to the "Managing General Partner."
2. The approval of both the Managing General Partner and the Non-Managing
General Partner shall be required to:
(a) declare distributions to Partners in accordance with this Agreement;
(b) incur Indebtedness in the name of the Partnership or which is recourse
to the Partnership;
(c) select any Appraiser;
(d) make any decision concerning the sale, transfer or disposition of any
Investment in any third-party transaction; provided, that the value of
such Investments is greater than 20% of the Gross Asset Value of the
Partnership's assets;
(e) approve the merger or consolidation of the Partnership with an
unrelated third party;
(f) make any amendments, revisions or modifications to Section 5.2 hereof
or any other provisions of this Agreement with respect to investment
policies or procedures;
(g) acquire any Investment that does not meet the requirements of Section
5.2;
(h) make any amendment to the Partnership Agreement which, under the terms
of the Partnership Agreement, requires the consent of the Managing
General Partner and of Limited Partners by a Majority LP Vote or
higher vote;
(i) remove and appoint any Property Manager or approve renewals,
amendments or modifications to any Property Services Agreement;
(j) remove and appoint any Investment Advisor that is an Affiliate of
▇▇▇▇▇, and approve renewals, amendments or modifications to any
Advisory Agreement between the Partnership or any Operating Company,
on the one hand, and any Investment Advisor that is an Affiliate of
▇▇▇▇▇, on the other;
(k) sell Investments to ▇▇▇▇▇ or any Affiliate of ▇▇▇▇▇ or acquire
Investments from ▇▇▇▇▇ or any Affiliate of ▇▇▇▇▇; and
(l) merge or consolidate the Partnership with any Affiliate of ▇▇▇▇▇.
3. The Non-Managing General Partner and its Affiliates, and the direct or
indirect members, managers, partners, shareholders, officers, directors,
employees, agents and legal representatives of the Non-Managing General
Partner and any such Affiliate shall be Indemnified Persons entitled to the
benefits under Sections 6.1 (Exculpation of the General Partner) and 6.2
(Indemnification of the General Partner) to the same extent, and subject to
the same conditions and limitations, as all other Indemnified Persons.
4. The Non-Managing General Partner shall be entitled to call meetings of
Partners to the same extent as the Managing General Partner.
5. The Non-Managing General Partner and Affiliates of the Non-Managing General
Partner shall be deemed not to be Affiliates of the General Partner, ▇▇▇▇▇
or the Partnership, and the General Partner, ▇▇▇▇▇ and their respective
Affiliates shall be deemed not to be Affiliates of the Non-Managing General
Partner or any of its Affiliates.
6. The Non-Managing General Partner shall be deemed not to be a Fund Investor
for purposes of calculating the ▇▇▇▇▇ Capital Requirement.
7. The Non-Managing General Partner shall be entitled to Transfer any Units
held by it to the same extent as any Unaffiliated Limited Partner; provided
that any Transferee of Units from the Non-Managing General Partner shall
take such Units only in respect of a limited partner interest in the
Partnership and not as a general partner.
SCHEDULE 9.1
EXAMPLE OPERATING CASH FLOW DISTRIBUTION
(ATTACHED)
The attached schedule provides an example of how distributions
of Operating Cash Flow are made in the first two Fiscal Quarters following the
end of the Initial Investment Period. The assumptions regarding the various
classes of Partners, the Partners' capital and Percentage Interests are those
set forth in Schedule 5.9. This schedule also assumes that Operating Cash Flow
in the amount of $13,737,500 will be available for distribution in the first
Fiscal Quarter, and Operating Cash Flow in the amount of $18,007,500 will be
available for distribution at the end of the second Fiscal Quarter, after the
end of the Initial Investment Period.
SCHEDULE 9.2
EXAMPLE CAPITAL CASH FLOW DISTRIBUTION
(ATTACHED)
The attached schedule provides an example of how distributions
of Capital Cash Flow could be made in the third quarter following the end of the
Initial Investment Period. The assumptions regarding the various classes of
Partners, the Partners' capital and Percentage Interests are those set forth in
Schedule 5.9. This example also assumes that Capital Cash Flow in the amount of
$1,029,000,000 will be available for distribution.
EXHIBIT A
PROPERTY SERVICES AGREEMENT FORM
(ATTACHED)