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EXHIBIT 10.62
PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
By and Between
MACERICH EQ LIMITED PARTNERSHIP,
MACERICH EQ GP CORP.,
SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
and
SDG EQ ASSOCIATES, INC.
Dated as of
February 24, 1998
________________________________________________________________________
TABLE OF CONTENTS
ARTICLE 1
Formation and Organization 1
1.1 Formation 1
1.2 Name 1
1.3 Character of the Business 1
1.4 Principal Office 2
1.5 Term 2
1.6 Title to Property 2
1.7 Payments of Individual Obligations 2
1.8 Other Business Interests 2
1.9 Transactions with Affiliates 3
ARTICLE 2
Capital Contributions and Other Financing Matters 3
2.1 Percentage Interests 3
2.2 Initial Capital Contributions 4
2.3 Additional Capital Contributions 6
2.5 Other Matters 9
2.6 No Third Party Beneficiary 9
2.7 Third Party Financing 10
ARTICLE 3
Distributions 10
3.1 Distributions 10
3.2 Distributions after Dissolution 10
3.3 Timing of Distributions Among Partners 10
ARTICLE 4
Allocations and Other Tax and Accounting Matters 10
4.1 Allocations 10
4.2 Accounting, Books and Records 10
4.3 Reports 11
4.4 Tax Returns; Information 11
4.5 Special Basis Adjustment 12
4.6 Tax Matters Partner 12
ARTICLE 5
Management 12
5.1 Executive Committee 12
5.2 No Individual Authority 15
5.3 Operating Committee. 16
5.4 Warranted Reliance by Executive Committee Members and
Operating Committee Members on Others 18
5.5 Intentionally Omitted 18
5.6 REIT Status 18
5.7 Budgets 20
5.8 Insurance 21
5.9 Unanimous Consent 21
5.10 Indemnification 21
5.11 Compensation and Reimbursement. 22
5.12 No Employees. 23
5.13 Personal Services Contract. 23
5.14 Defaults and Remedies 23
ARTICLE 6
Transfers of Interests 25
6.1 Restrictions on Transfers 25
6.2 Transferee Requirements 26
6.3 Partnership Interest Loans 26
6.4 Admission of Transferee as a Partner 31
6.5 Allocations and Distributions Upon Transfers 31
ARTICLE 7
Buy-Sell 32
7.1 Buy-Sell Offering Notice 32
7.2 Exercise of Buy-Sell 32
7.3 Closing 33
ARTICLE 8
Exit Call; Portfolio Sale 34
8.1 Call Rights 34
8.2 Procedures upon Call Exercise 34
8.3 Closing Procedure 35
8.5 Fair Market Value Appraisal Process 37
8.6 Portfolio Sale 37
8.7 Effect of Existing Financing 39
ARTICLE 9
Withdrawals; Actions for Partition 39
9.1 Waiver of Partition 39
9.2 Covenant Not to Withdraw or Dissolve 39
ARTICLE 10
Dissolution, Liquidation, Winding-Up and Termination 40
10.1 Causes of Dissolution 40
10.2 Winding Up and Liquidation 40
10.3 Timing Requirements; Deemed Distribution and Re-
contribution 41
10.4 Sales Receivables 42
10.5 Documentation of Dissolution and Termination 42
ARTICLE 11
Miscellaneous 42
11.1 Notices 42
11.2 Binding Effect 42
11.3 Construction of Agreement 43
11.4 Severability 43
11.5 Incorporation by Reference 43
11.6 Further Assurances 43
11.7 Governing Law 43
11.8 Counterpart Execution 43
11.9 Loans 43
11.10 No Third Party Rights 44
11.11 Estoppel Certificates 44
11.12 Usury 44
11.13 Business Day 44
11.14 Proposing and Adopting Amendments 44
11.15 Partners Not Agents 44
11.16 Entire Understanding; Etc. 44
11.17 Action Without Dissolution 45
11.18 Attorneys' Fees 45
11.19 Waiver of Jury Trial 45
11.20 Confidentiality 45
11.21 Press Releases 45
11.22 Existing Financing 46
Schedule 1 - Original Approved Pre-Closing Budget
Schedule 2 - Macerich Managed Properties
Schedule 3 - SDG Managed Properties
Schedule 4 - List of Properties
Schedule 5 - Noncompetition Area
PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
THIS PARTNERSHIP AGREEMENT (this "Agreement") is made and
entered into as of February 24, 1998, by and between SDG EQ DEVELOPERS
LIMITED PARTNERSHIP a Delaware limited partnership ("SDG"), SDG EQ
ASSOCIATES, INC., a Delaware corporation ("SSPE"), MACERICH EQ LIMITED
PARTNERSHIP, a Delaware limited partnership ("Macerich"), and MACERICH
EQ GP CORP., a Delaware corporation ("MSPE"), on the terms and
conditions set forth herein. Attached to this Agreement immediately
following the signature page is a glossary of defined terms (the
"Glossary of Defined Terms"). Each capitalized term used in this
Agreement either is defined in the Glossary of Defined Terms, or the
location of its definition is cross-referenced in the Glossary of
Defined Terms.
ARTICLE 1
Formation and Organization
1.1 Formation. SDG, Macerich, SSPE and MSPE hereby form a
limited partnership (the "Partnership") under the Act upon the terms and
conditions set forth in this Agreement. Each of SSPE and MSPE (and
their permitted successors-in-interest that are admitted as partners in
the Partnership) is a general partner in the Partnership and is referred
to herein individually as a "General Partner," and each of Macerich and
SDG (and their permitted successors-in-interest that are admitted as
partners in the Partnership) is a limited partner in the Partnership and
is referred to herein individually as a "Limited Partner." Each of the
General Partners and the Limited Partners are referred to herein
individually as a "Partner" and, collectively, as the "Partners." SSPE
and SDG, on the one hand, and MSPE and Macerich, on the other hand, are
jointly referred to herein as a "Party" and collectively as "Parties".
Any contributions by or distributions to a Party shall be deemed to have
been made to or by, as the case may be, the entities constituting such
Party in proportion to each such entity's Partnership Interest. The
General Partners shall promptly execute, publish or file all assumed or
fictitious name, or other similar, certificates required by law to be
published or filed, in connection with the formation and operation of
the Partnership in each state and locality where it is necessary or
desirable to publish or file such certificates in order to form and
operate the Partnership.
1.2 Name. The name of the Partnership shall be "SM Portfolio
Limited Partnership," and all business of the Partnership shall be
conducted in such name or such other name as the Executive Committee,
from time to time, shall unanimously select.
1.3 Character of the Business. The purpose of the
Partnership is to (a) hold a ninety-nine percent (99%) limited partner
interest in the Underlying Partnership, (b) conduct all activities
01
reasonably related to the ownership of such interests, (c) acquire, own,
develop, finance, refinance, mortgage, encumber, hypothecate, lease,
sell, maintain, improve, alter, remodel, expand, manage, exchange,
dispose, and otherwise operate and deal with real property, (d) to
transact any and all other businesses for which limited partnerships may
be formed under Delaware law, and (e) to accomplish any of the foregoing
purposes for its own account or as nominee, agent or trustee for others;
provided, however, that such business shall be limited to and conducted
in such a manner as to permit any Persons owning any interests in any of
the Partners at all times to be classified as a "real estate investment
trust" within the meaning of Section 856 of the Code (a "REIT").
1.4 Principal Office. The principal office of the
Partnership shall be at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as the Executive Committee may,
from time to time, determine (the "Principal Office").
1.5 Term. The Partnership shall commence on the date of this
Agreement and shall continue until the Partnership is dissolved and
terminated in accordance with the provisions of Article 10.
1.6 Title to Property. All real and personal property owned
by the Partnership shall be owned by the Partnership as an entity and no
Partner shall have any ownership interest in such property in its
individual name or right, and each Partner's interest in the Partnership
shall be personal property for all purposes. Except as otherwise
provided in this Agreement, the Partnership shall hold all of its real
and personal property in the name of the Partnership and not in the name
of any Partner.
1.7 Payments of Individual Obligations. The Partnership's
credit and assets shall be used solely for the benefit of the
Partnership, and no asset of the Partnership shall be transferred or
encumbered for, or in payment of, any individual obligation of a
Partner.
1.8 Other Business Interests.
(a) Each Partner shall be required to devote only such
time to the affairs of the Partnership as may be necessary for the
proper performance of such Partner's duties hereunder. Except to the
extent expressly provided to the contrary in this Section 1.8, nothing
in this Agreement shall: (i) limit the rights of each Partner and its
Affiliates, and such Partner's and Affiliate's respective officers,
directors, employees and stockholders ("Related Persons") to serve other
Persons in any capacity, to own interests in other businesses and
undertakings, to pursue and engage in other investments, opportunities
and activities, and to derive and enjoy profits, compensation and other
consideration in respect thereof, whether or not such services,
interests, businesses, undertakings, investments, opportunities and
activities (collectively, "Other Interests") are similar to or
competitive with the business or assets of the Partnership, (ii) afford
any Partner any right to share in the profits, compensation and other
consideration derived from the Other Interests of any other Partner or
any other Partner's Related Persons, or to participate in the Other
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Interests of any other Partner or any other Partner's Related Persons,
(iii) require any Partner to disclose to any other Partner or the
Partnership the existence or nature of any such Other Interest, or
(iv) obligate any Partner to first offer any such Other Interest to any
other Partner or the Partnership, or allow any other Partner or the
Partnership to participate therein.
(b) Notwithstanding the foregoing, until an individual
Property has been sold or otherwise transferred by the Underlying
Partnership or Partnership, respectively, a Party (or any Affiliate of a
Party) (each a "Proposing Party") shall not obtain an equity interest
(whether direct or indirect) in any real estate venture ("Real Estate
Activity") within the area described as the "Non-Competition Area" for
each Property on Schedule 5 attached hereto, as such Schedule 5 may be
amended from time to time, ("Non-Competition Area") unless it has first
provided the other Party (the "Nonproposing Party") with written notice
describing in reasonable detail the proposed transaction and offering
the transaction as a Partnership opportunity (the "Proposal") and the
Nonproposing Party has failed to notify the Proposing Party within
thirty (30) days of its receipt of such notice that such Nonproposing
Party desires that the Partnership, rather than the Proposing Party
individually, enter into and invest in such Real Estate Activity. In
the event that the Nonproposing Party delivers the notice described in
the immediately preceding sentence directing that the Partnership invest
in the Real Estate Activity, each Party shall make any Additional
Capital Contributions required by the Executive Committee to fund the
investment of the Partnership pursuant to the Proposal, the Real Estate
Activity will be an opportunity for the Partnership and the Real Estate
Activity shall be included as a business of the Partnership within
Section 1.3. The Proposal described above shall include all information
that the Proposing Party has with respect to the Real Estate Activity,
including proformas, plans and specifications and economic projections
relating to the Real Estate Activity. If the Nonproposing Party
consents to the Proposing Party's investment in the Real Estate Activity
individually or fails to respond to the Proposal within thirty (30) days
after its receipt thereof, the Proposing Party or its Affiliate shall be
permitted to invest in the Real Estate Activity in its individual
capacity.
1.9 Transactions with Affiliates. To the extent permitted by
applicable law and except as otherwise provided in this Agreement
(including Section 5.11 hereof), the Operating Committee and any
Property Manager, when acting through the Partnership , are hereby
authorized to purchase property and services from, sell property and
services to, or otherwise deal with any Partner, acting on its own
behalf, or any Affiliate of any Partner, provided that any such
purchase, sale, or other transaction (and any such Affiliates'
affiliation to a Partner) shall be fully disclosed to the Partners and
shall be made on market terms and conditions which are no less favorable
to the Partnership (including as to price, quality and payment terms)
than if the sale, purchase, or other transaction had been entered into
with an independent third party.
ARTICLE 2
Capital Contributions and Other Financing Matters
03
2.1 Percentage Interests. The names, addresses, and
percentage interests ("Percentage Interests") of the Partners are as
follows:
NAME AND ADDRESS PERCENTAGE INTEREST
General Partners
Macerich EQ GP Corp.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇ .1%
SDG EQ Associates, Inc.
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group
National City Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇ .1%
Limited Partners
Macerich EQ Limited Partnership
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇ 49.9%
SDG EQ Developers Limited Partnership
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group
National City Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇ 49.9%
2.2 Initial Capital Contributions. The initial Capital
Contributions ("Initial Capital Contributions") of the Parties shall be
made as follows:
(a) Concurrently with the execution of the Purchase
Agreement by the Underlying Partnership, each Party shall deliver to
Equitable (the seller of the Properties), as a contribution to the
Partnership, and as a contribution by the Partnership to the Underlying
Partnership, a clean, irrevocable letter of credit in the amount of
$12,500,000 each naming Equitable as beneficiary (such letters of credit
to satisfy the "Deposit" requirement under the Purchase Agreement). For
this purpose, each of SDG and Macerich shall be deemed to have
04
contributed to each of SSPE and MSPE, respectively, a portion of each
such letter of credit representing each's proportionate interest in the
Partnership, which letters of credit shall be deemed contributed by to
the Partnership by SSPE and MSPE.
(b) Each Party hereby agrees to contribute to the
capital of the Partnership, as a Capital Contribution, an amount equal
to fifty percent (50%) of the Closing Funding Requirement (as defined
below), subject, however, to the remaining provisions of this
Section 2.2. As used herein, the term "Closing Funding Requirement"
shall mean the sum of (i) all amounts required to be deposited by the
Underlying Partnership with Escrow Agent pursuant to the Purchase
Agreement in order to close the transaction thereunder, including
amounts due to Equitable under the Purchase Agreement as the purchase
price consideration paid for the Underlying Properties and the
Underlying Partnership's share of all closing costs and expenses
required to be deposited with and paid through Escrow Agent pursuant to
the Purchase Agreement (the "Escrow Closing Requirement"), (ii) all out-
of-pocket costs and expenses paid or payable to Persons other than the
Underlying Partnership, any Partner or any Affiliate thereof (other than
those amounts described in Clause (i) above) that have been and/or will
be incurred by the Underlying Partnership, the Partnership, the Partners
and the Partners' respective Affiliates in connection with the formation
of the Partnership and the Underlying Partnership and investigating and
acquiring the Properties (including, without limitation, costs incurred
in connection with the negotiation of the Purchase Agreement and this
Agreement and all out-of-pocket due diligence costs and fees
(collectively, "Due Diligence, Formation and Acquisition Costs"), and
(iii) the amount set forth in the Original Approved Pre-Closing Budget
(as defined below) for the funding of the Underlying Partnership's
initial capital improvement and operating reserve (as such amount may be
adjusted by the mutual consent of the Partners in their sole and
absolute discretion) (the "Initial Reserve Requirements").
(c) Attached hereto as Schedule 1 is a budget (the
"Original Approved Pre-Closing Budget") reflecting the Partners' best
and good-faith estimate of all Due Diligence, Formation and Acquisition
Costs that will be incurred in connection with the Partnership and
Underlying Partnership's formation and the acquisition of the
Properties. In the event that any Party incurs Due Diligence, Formation
and Acquisition Costs in excess of that budgeted in the Original
Approved Pre-Closing Budget, the written approval of the other Party
shall be required before such additional amount may be included in the
Closing Funding Requirement. In the event that a Party requests in
writing that the other Party approve any such additional expenditure or
cost and the other Party fails to disapprove of the same in writing
(together with its specific written objections thereto) within five (5)
business days after its receipt of such request, such expenditure or
cost shall be deemed approved (but in each case only if such written
request specifically advises the Party that failure to respond within
such five (5) business day period will result in such deemed approval).
(d) Each of the Parties separately agrees to deposit its
portion of the Escrow Closing Requirement in escrow in good funds with
Escrow Agent at least one (1) business day prior to the Underlying
Partnership's acquisition of the Underlying Properties.
05
Notwithstanding the foregoing, each Party shall be permitted to deposit
its portion of the Escrow Closing Requirement into a separate escrow
established with such Escrow Agent, which escrow shall be solely for
such Party's benefit until the closing of the acquisition of the
Underlying Properties, and shall be terminable solely by such Party
(provided that any such termination shall not relieve or release such
Party of its obligations hereunder, if any). Concurrently with such
Party's deposit of its portion of the Escrow Closing Requirement in
escrow, such Party shall enter into escrow instructions with Escrow
Agent authorizing Escrow Agent to transfer such amounts into the escrow
established for the purchase and sale of the Underlying Properties upon
the satisfaction of all conditions precedent for the closing of such
purchase and sale. Such escrow instructions shall also provide that if
the closing of the purchase and sale of the Underlying Properties does
not occur on or before the date set forth in Section 10.1(h), the escrow
shall terminate and all sums held therein (together with any interest
actually earned thereon) shall be immediately returned to such Party
(whereupon such Party shall have no further liability or duty hereunder
with respect to the making of such portion of the Escrow Closing
Requirement), unless Escrow Agent receives written instructions from
such Party to extend such escrow. Any interest earned on amounts placed
in escrow prior to such closing shall accrue for the benefit of the
Party depositing same. Each Party shall deposit into the Partnership
accounts designated by the Operating Committee prior to the acquisition
of the Underlying Properties such Party's share of the Initial Reserve
Requirement. The Parties shall meet and shall exchange invoices and
other evidence of Due Diligence, Formation and Acquisition Costs
incurred by each of them or their Affiliates in connection with the
purchase and sale transaction. Once the Parties have agreed upon all
Due Diligence, Formation and Acquisition Costs, the Party who incurred
the lesser amount of Due Diligence, Formation and Acquisition Costs
shall promptly pay to the other Party an amount sufficient to reimburse
such other Party for the share of Due Diligence, Formation and
Acquisition Costs incurred by such other Party in excess of its combined
50% share, it being the intention of the Parties that all Due Diligence,
Formation and Acquisition Costs be shared by the Parties equally.
(e) Notwithstanding anything else to the contrary
contained in this Agreement, if the Purchase Agreement is terminated or
the purchase and sale of the Underlying Properties fails to occur, each
Party shall bear fifty percent (50%) of the aggregate Due Diligence,
Formation and Acquisition Costs. If a Party has paid a disproportionate
share of the aggregate Due Diligence, Formation and Acquisition Costs,
the other Party shall pay to such Party the amount necessary such that
each Party bears such costs in the foregoing proportions, which payment
shall be made within fifteen (15) days after delivery of written notice,
together with reasonably detailed supporting documentation. Each Party
agrees to provide to the other Party such documentation as is reasonably
necessary to substantiate such costs incurred by such Party. Nothing
contained in this Section 2.2(e) shall limit or impair any right or
remedy that a Party may have against any other Party as a result of such
other Party's breach of any obligation such other Party may have under
this Agreement to make its Initial Capital Contribution.
06
2.3 Additional Capital Contributions.
(a) Additional capital contributions ("Additional
Capital Contributions") may be called for in accordance with this
Section 2.3. The Executive Committee may call for Additional Capital
Contributions for any reason. Additional Capital Contributions may also
be called for by either Party if necessary in order to fund Cash Flow
Shortfalls or Budgeted Capital Items and for no other reason without the
approval of the Executive Committee. Except as otherwise provided in
subsection (b) below, Additional Capital Contributions shall be made
upon written demand by the requesting Party upon the other Party, or by
the Executive Committee upon the Parties, as the case may be, from time
to time, shall be payable in proportion to the Percentage Interests of
the Parties, and shall be contributed by the Parties within ten (10)
business days of the receipt of the notice hereinbefore described, which
notice shall state the amount of such Additional Capital Contribution
required from each Party.
(b) Each Party agrees to make all Additional Capital
Contributions required to be made in accordance with this Agreement
within the ten (10) business day period described in subsection (a)
above; provided that, any Party may, during such ten (10) business day
period, request that the Partnership seek third party financing (in lieu
of the Parties making Additional Capital Contributions) to satisfy the
Partnership's cash need. In the event that either Party makes such
request, the period of time within which the Additional Capital
Contributions must be made will be extended as hereinafter provided, and
the Partnership shall use its commercially reasonable efforts to secure
third party financing at commercially reasonable rates to satisfy the
Partnership's cash needs. If the Partnership is unable to secure any
such financing on terms that are mutually acceptable to and approved by
the Parties within thirty (30) days after any Party's request to fund
the required amounts via third party financing, the Additional Capital
Contributions shall immediately become due and payable within five (5)
business days after the expiration of such thirty (30) day period. If
any Party fails to make its share of the Additional Capital
Contributions within the said five (5) business day period, then the
terms and provisions of subsection (c) below shall apply.
(c) If a Party fails to make its share of any required
Additional Capital Contributions after the Partnership has been unable
to secure third party financing approved by both Parties pursuant to
subsection (b) above, then such Party (the "Noncontributing Party")
shall be a Defaulting Party hereunder, and the other Party (a
"Contributing Party") who has made its share of such Additional Capital
Contributions may elect to give notice to the Noncontributing Party of
its default hereunder. If such Noncontributing Party cures such default
within the cure period set forth in Section 5.14(a) hereof, it shall
thereupon become a Contributing Party. If such Noncontributing Party
fails to cure such default within the cure period set forth in
Section 5.14(a) hereof, then the Contributing Party may, in its sole
discretion and without limitation on its other rights and remedies under
this Agreement, elect to exercise its rights under the following
subsections (d) or (e) of this Section 2.3 (subject to the terms and
conditions set forth in said subsections (d) and (e)).
07
(d) The Contributing Party shall have the right to
withdraw all of its Additional Capital Contribution immediately after
the expiration of the Noncontributing Party's cure period. Any
Contributing Party that withdraws its Additional Capital Contribution in
compliance with this provision shall not be deemed a Defaulting Party by
reason of such withdrawal.
(e) The Contributing Party shall have the right to make
a Default Loan to the Partnership pursuant to Section 2.4 equal to 100%
of the Noncontributing Party's share of the Additional Capital
Contributions that it failed to contribute.
2.4 Default Loans.
(a) Without limitation on any other rights and remedies
of the Partners, if a Noncontributing Party shall have failed to timely
pay its portion of the Closing Funding Requirement as provided in
Section 2.2 or to make any Additional Capital Contributions as required
pursuant to this Agreement, and fails to cure such default after
receiving notice thereof within the applicable cure period provided
under Section 5.14(a) hereof, the Contributing Party may advance the
amount of such delinquency to the Partnership and direct the Partnership
to pay the party or parties (which party or parties may be a Partner (or
Affiliate of a Partner) hereunder, including the Contributing Party (or
an Affiliate of the Contributing Party) making such advance, if such
amount is owed to such Person) to whom the same is owed. Any such
advance shall be treated as a loan (a "Default Loan") by such
Contributing Party to the Partnership, payable on demand, and shall bear
interest at the Base Rate plus three percent (3%) per annum (compounded
monthly as of the last day of each calendar month) from the date of such
loan to the date of payment in full. In addition and without limitation
on the foregoing, the making of such Default Loan shall also create an
obligation on the part of the Noncontributing Party to contribute to the
Partnership an amount equal to the amount of the Default Loan (together
with interest at the aforesaid rate) made by the Contributing Party to
the Partnership. As used herein, the term "Base Rate" shall mean the
commercial loan rate of interest announced publicly from time to time by
Chase Manhattan Bank in New York, New York as such bank's "prime rate",
as from time to time in effect, such interest rate to change monthly as
of the first day of the calendar month next succeeding the calendar
month in which a change in Base Rate occurs; provided that, if such rate
is unavailable for any reason, then the parties shall meet and agree
upon a different bank's "prime rate" or "reference rate" to serve as the
Base Rate hereunder.
(b) The Contributing Party shall give written notice to
the Noncontributing Party of the making of any Default Loan, and the
Noncontributing Party may contribute the amount of such advance (plus
all accrued interest) to the Partnership at any time (and shall
contribute such amount at the time prescribed by Section 10.2 hereof).
The Partnership shall immediately pay such amounts received from the
Noncontributing Party to the Contributing Party. Such payments by the
Noncontributing Party to the Partnership and from the Partnership to the
Contributing Party shall be applied first against accrued interest and
then against the principal of the Default Loan until the repayment in
full of principal and accrued interest on the Default Loan.
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Notwithstanding any provision to the contrary herein, at any time when a
Default Loan shall be outstanding, all distributions of Net Cash Flow by
the Partnership from and after the making of such Default Loan shall be
made as follows: first, all such distributions to which the Contributing
Party would normally (i.e., but for the effect and operation of the
provisions set forth in this Section 2.4) be entitled to receive under
Section 3.1 shall be calculated and made to such Contributing Party;
second, the balance, if any, shall be paid by the Partnership directly
to the Contributing Party to be applied first against interest and then
against principal of the Default Loan; and third, the balance, if any,
shall be paid to the Noncontributing Party in respect of the amounts to
which it would normally (i.e., but for the effect and operation of the
provisions set forth in this Section 2.4) be entitled to receive under
Section 3.1 (and to the extent such amounts, if any, paid to the
Noncontributing Party are less than the amounts which the
Noncontributing Party would normally be entitled to receive under
Section 3.1, such deficiency shall forever be forfeited by the
Noncontributing Party and it shall have no right to recoup or recover
the same out of future distributions hereunder). Only upon the payment
in full of the principal of and all accrued interest on a Default Loan
shall the Noncontributing Party's Event of Default with respect to which
the Default Loan was made be deemed cured and after such cure, provided
no other Event of Default of the Noncontributing Party then exists, the
Noncontributing Party's rights under this Agreement shall be immediately
reinstated.
(c) Upon request by the Contributing Party at any time
from the date of the Contributing Party's advance pursuant to subsection
(a) above until any such Default Loan shall be repaid in full by cash
payment, the Noncontributing Party shall, on its own behalf and/or on
behalf of the Partnership, execute any and all documents reasonably
requested by the Contributing Party, including, without limitation,
promissory notes or such other documentation as may be necessary to
reflect and perfect the Contributing Party's rights under this Section
2.4 (and for such purpose the Noncontributing Party hereby appoints the
Contributing Party its true and lawful attorney-in-fact with full power
of substitution to execute and deliver such documents on behalf of such
Noncontributing Party, which power of attorney shall be deemed to be a
power coupled with an interest which cannot be revoked by death,
dissolution or otherwise).
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no
Party shall demand or receive a return of its Capital Contributions or
withdraw from the Partnership without the consent of all Partners.
Under circumstances requiring a return of any Capital Contributions, no
Partner shall have the right to receive property other than cash except
as may be specifically provided herein.
(b) No Partner shall receive any interest, salary, or
draw with respect to its Capital Contributions or its Capital Account or
for services rendered on behalf of the Partnership or otherwise in its
capacity as Partner, except as otherwise provided in this Agreement. No
Partner shall be entitled to interest on its Capital Contributions or on
such Partner's Capital Account.
09
2.6 No Third Party Beneficiary. No creditor or other third
party having dealings with the Partnership shall have the right to
enforce the right or obligation of any Partner to make Capital
Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may
be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the
Partners herein set forth to make Capital Contributions to the
Partnership shall be deemed asset of the Partnership for any purpose by
any creditor or other third party, nor may such rights or obligations be
sold, transferred or assigned by the Partnership or pledged or
encumbered by the Partnership to secure any debt or other obligation of
the Partnership or of any of the Partners. Without limiting the
generality of the foregoing, a deficit capital account of a Partner
shall not be deemed to be a liability of such Partner nor an asset or
property of the Partnership.
2.7 Third Party Financing. Except as otherwise provided
herein to the contrary, the Partnership may obtain, on its own behalf,
upon the approval of the Executive Committee, all additional money and
funds necessary, at any time, to develop, construct, acquire and operate
the Partnership Assets. No Partner or Affiliate of a Partner shall be
required to guaranty or make any other financial commitment with respect
to any debt or other obligation of the Partnership. The Operating
Committee shall use commercially reasonable efforts to obtain, on behalf
of the Partnership, all additional money and funds necessary, at any
time, to conduct the business of the Partnership that cannot be funded
through the resources of the Partnership.
ARTICLE 3
Distributions
3.1 Distributions. As soon as practicable after the approval
by the Executive Committee of the quarterly statements of Net Cash Flow
prepared and delivered pursuant to Section 4.3, the Partnership shall
distribute such portion of the Net Cash Flow of the Partnership for the
quarterly period covered by each such statement as the Executive
Committee or Operating Committee may elect to distribute (which shall
not, in any event, equal less than ninety percent (90%) of the total
Funds From Operations for such quarterly period), to the Partners pro
rata in accordance with their respective Percentage Interests, subject
to the alternative allocations set forth in Section 2.4(b) in the event
that a Default Loan is then outstanding. Notwithstanding the foregoing,
the Executive Committee shall approve for each period a distribution
sufficient to satisfy the requirements of Section 5.6(f) hereof.
3.2 Distributions after Dissolution. Notwithstanding the
provisions of Section 3.1 to the contrary, all distributions of Net Cash
Flow to be made from and after the dissolution of the Partnership shall
be made in accordance with the provisions of Article 10.
10
3.3 Timing of Distributions Among Partners. Except as
provided in Section 6.3, all distributions of cash shall be distributed
to the Persons who are Partners on the day such distribution is made.
ARTICLE 4
Allocations and Other Tax and Accounting Matters
4.1 Allocations. The Net Income, Net Loss and/or other Tax
Items of the Partnership shall be allocated pursuant to the provisions
of the Allocations Exhibit.
4.2 Accounting, Books and Records. The Partnership shall
maintain or cause to be maintained at its Principal Office (with full
and complete copies thereof to be delivered to and maintained at the
offices of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Group at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 46204) separate books of account for the
Partnership which shall show a true and accurate record of all costs and
expenses incurred, all charges made, all credits made and received, and
all income derived in connection with the operation of the Partnership
business in accordance with generally accepted accounting principles
consistently applied and, to the extent inconsistent therewith, in
accordance with this Agreement. The Partnership shall use the accrual
method of accounting in preparation of its annual reports and for tax
purposes and shall keep its book accordingly. Each Partner shall, at
its sole expense, have the right, at any time, without notice to any
other Partner, to examine, copy, and audit the Partnership's books and
records during normal business hours.
4.3 Reports.
(a) In General. The Operating Committee shall be
responsible for the preparation of financial reports of the Partnership
and the coordination of financial matters of the Partnership with the
Accountants.
(b) Reports. Within sixty (60) days after the end of
each Fiscal Year and within thirty (30) days after the end of each of
the first three (3) fiscal quarters, and within thirty (30) days after
the end of each calendar month, the Operating Committee shall cause each
Executive Committee Member to be furnished with a copy of the balance
sheet of the Partnership as of the last day of the applicable period,
and a statement of income or loss for the Partnership for such period.
In addition, concurrently with the delivery of the quarterly and year-
end financial statements referred to in the preceding sentence, the
Operating Committee shall cause each Executive Committee Member to be
furnished with a copy of a statement setting forth the calculation of
the Net Cash Flow (if any) for such prior quarterly period, and setting
forth the calculation of all amounts to be distributed to the Partners
pursuant to Section 3.1 or Section 10.2, as the case may be. Annual
statements shall also include a statement of the Partners' Capital
11
Accounts and changes therein for such Fiscal Year. Annual statements
shall be audited by the Accountants, and shall be in such form as shall
enable the Partners to comply with all reporting requirements applicable
to either of them or their Affiliates under the Securities Exchange Act
of 1934, as amended. All quarterly and annual statements shall be
subject to the approval of the Executive Committee, and no action shall
be taken with respect thereto until such approval has been given. The
Operating Committee shall also cause to be prepared such reports and/or
information as are necessary for the Partners (or any Persons who
directly or indirectly own interests in the Partners) to determine their
qualification as a REIT and their compliance with all requirements to
qualify as a REIT or as may be required by any lender of the
Partnership.
4.4 Tax Returns; Information. The Operating Committee shall
arrange for the preparation and timely filing of all income and other
tax returns of the Partnership. Within ninety (90) days after the end
of each Fiscal Year, the Operating Committee shall cause the Accountants
to prepare the Partnership's tax returns for approval and execution by
the Operating Committee. The Operating Committee shall furnish to each
Partner a copy of each approved return, together with any schedules or
other information which each Partner may require in connection with such
Partner's own tax affairs. The Partnership shall be treated and shall
file its tax returns as a partnership for federal, state and municipal
income tax and other tax purposes. Upon request of any Partner, any
elections made pursuant to this Agreement under the provisions of the
Code or similar provisions hereafter enacted shall be evidenced by
appropriate filings with the Internal Revenue Service on behalf of the
Partnership.
4.5 Special Basis Adjustment. In connection with any
Transfer of a Partnership Interest permitted under Article 6, the
Operating Committee shall cause the Partnership, at the written request
of the transferor or the Transferee, but only upon the approval of the
General Partners, on behalf of the Partnership and at the time and in
the manner provided in Regulations Section 1.754-1(b), to make an
election to adjust the basis of the Partnership's property in the manner
provided in Sections 734(b) and 743(b) of the Code, and the Transferee
shall pay all costs incurred by the Partnership in connection therewith,
including reasonable attorneys' and accountants' fees.
4.6 Tax Matters Partner. MSPE is specially authorized and
appointed to act as the "Tax Matters Partner" under the Code and in any
similar capacity under state or local law; provided, however, that it
shall exercise its authority in such capacity subject to all applicable
terms and limitations set forth in this Agreement. Notwithstanding the
foregoing, the Tax Matters Partner shall not, without the prior written
approval of the other General Partner, (i) make any tax election on
behalf of the Partnership, (ii) take any action with respect to any
federal, state or local contest of any partnership item (as defined in
Section 6231(a)(7) of the Code (or any successor thereto) (and
comparable provisions of state and local income tax laws) of the
Partnership, or (iii) take any action with respect to any audit of any
federal, state or local income tax return or income tax report filed by
or on behalf of the Partnership.
12
ARTICLE 5
Management
5.1 Executive Committee. The Partnership shall at all times
have an executive committee (the "Executive Committee") composed of two
individuals (the "Executive Committee Members") who shall vote on Major
Decisions and oversee the performance of the Operating Committee.
(a) Membership and Voting.
(i) Membership. The Executive Committee will
consist of two (2) Executive Committee Members, with one (1)
Executive Committee Member appointed by each General Partner.
Concurrently with the execution and delivery of this Agreement, the
General Partners have notified one another in writing of their
respective initial appointed Executive Committee Member. Each
General Partner may, at any time, appoint an alternate Executive
Committee Member by prior written notice to the other General
Partner's appointed Executive Committee Member and such alternates
will have all the powers, authority and duties of a regular
Executive Committee Member in the absence or inability of a regular
Executive Committee Member to serve. In no event, however, shall
the other Executive Committee Member be under any obligation to
make inquiries as to, or verify or confirm, any such absence or
inability to serve of a regular Executive Committee Member, it
being understood and agreed that the Executive Committee Members
shall be entitled to rely upon and accept an alternate Executive
Committee Member's assertion of the absence or inability to serve
of the regular Executive Committee Member in question. Each
General Partner shall cause its appointed Executive Committee
Member and alternate Executive Committee Member to comply with the
terms of this Agreement. Each General Partner will have the power
to remove its Executive Committee Member or alternate Executive
Committee Member appointed by it by written notice to the other
General Partner's Executive Committee Member. Vacancies on the
Executive Committee will be filled by appointment by the General
Partner that appointed the Executive Committee Member previously
holding the position that is then vacant. The General Partners may
mutually agree to increase or decrease the size of the Executive
Committee proportionately, from time to time. Notices to an
Executive Committee Member shall be delivered to such Person's
attention at the address set forth in Section 2.1 for the General
Partner that appointed such Executive Committee Member, and in the
manner prescribed in Section 11.1. No appointment or removal by a
General Partner of an Executive Committee Member or alternate
Executive Committee Member shall be effective until written notice
of such action is received or deemed received pursuant to Section
11.1 by the Executive Committee Member of the other General
Partner. Each General Partner, its Limited Partner affiliate, and
its respective Executive Committee Member and alternate Executive
Committee Member, when dealing with the other General Partner's
13
respective Executive Committee Member and alternate Executive
Committee Member, (i) shall be entitled to rely upon and accept the
written act, approval, consent or vote of each of such other
General Partner's then-appointed Executive Committee Member and
alternate Executive Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any
of such written acts, approvals, consents or votes.
(ii) Voting. Each Executive Committee Member shall have
one vote on any decision of the Executive Committee. An Executive
Committee Member may give a written proxy to another Executive
Committee Member to vote on such Executive Committee Member's
behalf in such Executive Committee Member's absence. Except as
expressly provided to the contrary in this Agreement, all actions,
decisions, capital calls, determinations, waivers, approvals and
consents to be taken or given by the Executive Committee must be
unanimously approved by the Executive Committee Members (whether or
not present at the meeting at which such vote occurs).
(b) Meetings of the Executive Committee; Time and Place.
Unless otherwise agreed by the Executive Committee, regular meetings of
the Executive Committee shall be held no less often than quarterly at
such time and at such place as the Executive Committee shall determine.
At such regular meetings, the Operating Committee shall report on the
financial performance and condition of the Partnership on a year-to-date
basis (including cash flows, reserves, outstanding loans, and compliance
efforts), progress on capital projects, material contracts entered into,
material litigation, marketing and leasing efforts, deviations from any
Budget and such other matters relevant to the management and operation
of the Partnership and the Properties. Special meetings of the
Executive Committee shall be held on the call of any Executive Committee
Member; provided that at least three (3) business days' notice is given
to all Executive Committee Members (unless written waiver of this
requirement by all Executive Committee Members is obtained). A quorum
for any Executive Committee meeting shall consist of not less than two
(2) Executive Committee Members (one appointed by each General Partner)
present either in person or by proxy. The Executive Committee may make
use of telephones and other electronic devices to hold meetings;
provided that the Executive Committee Members participating in such
meeting can hear one another. The Executive Committee may act without a
meeting if the action taken is reduced to writing and approved by the
Executive Committee in accordance with the other voting provisions of
this Agreement. Written minutes shall be taken at each meeting of the
Executive Committee. However, any action taken or matter agreed upon by
the Executive Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized.
(c) Major Decisions. No action shall be taken, no sum
shall be expended and no obligation shall be incurred by the Operating
Committee or any Property Manager with respect to any matter affecting
the Partnership which is within the scope of a Major Decision unless
such Major Decision shall have been approved by the Executive Committee
in advance in writing. A "Major Decision" shall mean any decision:
14
(i) to sell, assign, transfer, exchange, grant
easements over, or otherwise convey or dispose of, any of the
Partnership Properties, or any portion thereof or any material
interest therein, or to lease or license the Partnership's entire
interest in any of the Partnership Properties ;
(ii) to acquire any Partnership Property or any
option or interest therein, and to appoint the Property Manager
with respect to each such Partnership Property;
(iii) to approve or make any change to any
Budget or marketing plan for the Partnership or any of the
Partnership Properties;
(iv) to amend this Agreement ;
(v) to borrow money or to apply for, execute, grant
or modify any mortgage, pledge, deed of trust, financing statement,
encumbrance or other hypothecation or security agreement affecting
the Partnership Assets or any portion thereof or any interest
therein, except as otherwise may be provided in an approved Budget;
(vi) to approve proposals submitted to, or
agreements entered into, or to authorize or give any consent with
respect to any matter relating to zoning, rezoning variances,
compliance with environmental laws, subdivision, modification of
development rights or other land use matters which affect the
Partnership or any of the Partnership Properties;
(vii) to select and retain the Accountants;
(viii) to approve the Partnership's tax returns,
or to make proposals to or to conduct any actions, litigation or
other activities with federal or state taxing authorities;
(ix) to change or permit to be changed in any
substantial way the accounting process and procedures employed in
keeping the books of account or preparing financial statements with
respect to the operation or management of the Partnership pursuant
to this Agreement;
(x) to compromise or settle any claim for insurance
proceeds, or any claim for payment of awards or damages arising out
of the exercise of eminent domain by any public or governmental
authority;
(xi) to make, execute or deliver on behalf of the
Partnership any assignment for the benefit of creditors;
15
(xii) to dissolve, terminate or liquidate the
Partnership, or to petition a court for the dissolution,
termination or liquidation of the Partnership, except in accordance
with this Agreement;
(xiii) to cause the Partnership, or any of the
Partnership Properties to be subject to the authority of any
trustee, custodian or receiver or to be subject to any proceeding
for bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, relief of debtors, or similar proceedings;
(xiv) to obligate the Partnership as a surety,
guarantor, indemnitor or accommodation party to any obligation;
(xv) to enter into, terminate, accept the surrender
of, modify, amend, supplement, or give any material approval,
consent or waiver on behalf of the Partnership under the Purchase
Agreement or any of the loan documents relating to the Existing
Financing; or
(xvi) to take any other action or decision that
this Agreement provides may only be taken or made by the Executive
Committee.
5.2 No Individual Authority. Except as otherwise expressly
provided in this Agreement, no Partner, acting alone, shall have any
authority to act for, or undertake or assume any obligation or
responsibility on behalf of, any other Partner or the Partnership.
5.3 Operating Committee. Unless otherwise agreed to by the
General Partners, the management of the Partnership, subject to the
restrictions on its authority set forth in Section 5.1, shall be vested
in the operating committee (the "Operating Committee"). The Operating
Committee shall be composed of two individuals (the "Operating Committee
Members") who shall vote on all management issues relating to the
business and operations of the Partnership.
(a) Membership and Voting.
(i) Membership. The Operating Committee will
consist of two (2) Operating Committee Members, with one (1)
Operating Committee Member appointed by each General Partner.
Concurrently with the execution and delivery of this Agreement, the
General Partners have notified one another in writing of their
respective initial appointed Operating Committee Member. Each
General Partner may, at any time, appoint one of its employees as
an alternate Operating Committee Member by prior written notice to
the other General Partner's appointed Operating Committee Member
and such alternates will have all the powers, authority and duties
of a regular Operating Committee Member in the absence or inability
of a regular Operating Committee Member to serve. In no event,
however, shall the other Operating Committee Member be under any
obligation to make inquiries as to, or verify or confirm, any such
absence or inability to serve of a regular Operating Committee
16
Member, it being understood and agreed that the Operating Committee
Members shall be entitled to rely upon and accept an alternate
Operating Committee Member's assertion of the absence or inability
to serve of the regular Operating Committee Member in question.
Each General Partner shall cause its appointed Operating Committee
Member and alternate Operating Committee Member to comply with the
terms of this Agreement. Each General Partner will have the power
to remove its Operating Committee Member or alternate Operating
Committee Member appointed by it by written notice to the other
General Partner's Operating Committee Member. Vacancies on the
Operating Committee will be filled by appointment by the General
Partner that appointed the Operating Committee Member previously
holding the position that is then vacant. The General Partners may
mutually agree to increase or decrease the size of the Operating
Committee proportionately, from time to time. Notices to an
Operating Committee Member shall be delivered to such Person's
attention at the address set forth in Section 2.1 for the General
Partner that appointed such Operating Committee Member, and in the
manner prescribed in Section 11.1. No appointment or removal by a
General Partner of an Operating Committee Member or alternate
Operating Committee Member shall be effective until written notice
of such action is received or deemed received pursuant to Section
11.1 by the Operating Committee Member of the other General
Partner. Each General Partner, its Limited Partner affiliate, and
its respective Operating Committee Member and alternate Operating
Committee Member, when dealing with the other General Partner's
respective Operating Committee Member and alternate Operating
Committee Member, (i) shall be entitled to rely upon and accept the
written act, approval, consent or vote of each of such other
General Partner's then-appointed Operating Committee Member and
alternate Operating Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any
of such written acts, approvals, consents or votes.
(ii) Voting. Each Operating Committee Member shall
have one vote on any decision of the Operating Committee. An
Operating Committee Member may give a written proxy to another
Operating Committee Member or any Partner's employee to vote on
such Operating Committee Member's behalf in such Operating
Committee Member's absence. Except as expressly provided to the
contrary in this Agreement, all actions, decisions, capital calls,
determinations, waivers, approvals and consents to be taken or
given by the Operating Committee must be unanimously approved by
the Operating Committee Members (whether or not present at the
meeting at which such vote occurs).
(b) Reports and Meetings of the Operating Committee;
Time and Place. The Operating Committee shall report to the Executive
Committee on activities undertaken by the Operating Committee, as
required by the Executive Committee and this Agreement. Unless
otherwise agreed by the Operating Committee, regular meetings of the
Operating Committee shall be held monthly at such time and at such place
as the Operating Committee shall determine. Special meetings of the
Operating Committee shall be held on the call of any Operating Committee
17
Member; provided that at least three (3) business days' notice is given
to all Operating Committee Members (unless written waiver of this
requirement by all Operating Committee Members is obtained). A quorum
for any Operating Committee meeting shall consist of not less than two
(2) Operating Committee Members (one appointed by each General Partner)
present either in person or by proxy. The Operating Committee may make
use of telephones and other electronic devices to hold meetings;
provided that the Operating Committee Members participating in such
meeting can hear one another. The Operating Committee may act without a
meeting if the action taken is reduced to writing and approved by the
Operating Committee in accordance with the other voting provisions of
this Agreement. Written minutes shall be taken at each meeting of the
Operating Committee. However, any action taken or matter agreed upon by
the Operating Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized. Operating Committee meetings
may be attended by persons other than the Operating Committee Members
(including other employees of the Partners and their Affiliates).
(c) Duties of the Operating Committee. The Operating
Committee shall be generally responsible for overseeing and managing the
day-to-day business, operations and affairs of the Partnership and
carrying out the duties delegated to it by the Executive Committee, and
shall have fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate
possession or control. The Operating Committee may, in carrying out its
duties, defend against lawsuits or other judicial or administrative
proceedings brought against the Partnership, provided that it promptly
notifies the Executive Committee of such action. The funds of the
Partnership shall not be commingled with the funds of any other Person,
and the Operating Committee shall not employ, or permit any other Person
to employ, such funds in any manner except for the benefit of the
Partnership. The bank accounts of the Partnership shall be maintained
in such banking institutions as are approved by the Operating Committee
and withdrawals shall be made only in the regular course of Partnership
business and as otherwise authorized in this Agreement on such signature
or signatures as the Operating Committee may determine. The Operating
Committee shall also have the duties imposed upon it elsewhere in this
Agreement. The Operating Committee shall devote sufficient time, effort
and managerial resources to the business of the Partnership as is
reasonably required to fulfill its obligations hereunder.
5.4 Warranted Reliance by Executive Committee Members and
Operating Committee Members on Others. In exercising their authority
and performing their duties under this Agreement, the Executive
Committee Members and the Operating Committee Members shall be entitled
to rely on information, opinions, reports, or statements of the
following persons or groups unless they have actual knowledge concerning
the matter in question that would cause such reliance to be unwarranted:
(a) one or more agents of the Partnership whom the
Executive Committee Member or Operating Committee Member, as the case
may be, reasonably believes to be reliable and competent in the matters
presented; and
18
(b) any attorney, public accountant, or other person as
to matters which the Executive Committee Member or Operating Committee
Member, as the case may be, reasonably believes to be within such
person's professional or expert competence.
5.5 Intentionally Omitted.
5.6 REIT Status. The Partners hereby acknowledge that
Macerich and SDG (and/or certain Persons directly or indirectly owning
interests in Macerich or SDG) are and intend to qualify at all times as
a REIT, and that each such Partner's or other Person's ability to
qualify as such will depend principally upon the nature of the
Partnership's operations. Accordingly, the Partnership's operations
shall be conducted at all times in a manner that will enable each of
Macerich, SDG and each Person owning, directly or indirectly, interests
in either Macerich or SDG to satisfy all requirements for REIT status
under Sections 856 through 860 of the Code and the regulations
promulgated thereunder to the extent possible. In furtherance of the
foregoing (and not in limitation thereof), notwithstanding any other
provision herein to the contrary, the Partnership shall conduct its
operations in accordance with the following provisions at all times:
(a) The Partnership shall not render any services to
any lessee or sublessee or any customer thereof, either directly or
through an "independent contractor" within the meaning of Section
856(d)(3) of the Code, if the rendering of such services shall cause all
or any part of the rents received by the Partnership to fail to qualify
as "rents from real property" within the meaning of Section 856(d) of
the Code;
(b) The Partnership shall not own, directly or
indirectly (taking into account the attribution rules referred to in
Section 856(d)(5) of the Code), in the aggregate 10% or more of the
total number of shares of all classes of stock, 10% or more of the
voting power of all classes of voting stock or 10% or more of the assets
or net profits of any lessee or sublessee of all or any part of any of
the Properties or any Partnership Property;
(c) No lease or sublease of any space at the Properties
shall provide for any rent based in whole or in part on the "income or
profits" within the meaning of Section 856(d)(2)(A) of the Code derived
by any lessee or sublessee;
(d) The Partnership shall not own more than 10% of the
outstanding voting securities of any one issuer (as determined for
purposes of Section 856(c)(5)(B) of the Code);
(e) Neither the Partnership nor any Partner shall take
any action (or fail to take any action permitted under this Agreement)
that would otherwise cause the Partnership's and Underlying
Partnership's gross income to consist of more than one percent (1%) of
income not described in Section 856(c)(2) of the Code or more than ten
percent (10%) of income not described in Section 856(c)(3) of the Code,
or cause any significant part of the Partnership Assets to consist of
19
assets other than "real estate assets" within the meaning of Section
856(c)(6)(B) of the Code;
(f) The Partnership shall distribute to the Partners
during each Fiscal Year an amount of cash such that the portion so
distributed will equal or exceed 100% of the amount of Partnership
taxable income, if any, to be allocated to Macerich and SDG,
respectively, with respect to such Fiscal Year distributed at the times
required to prevent the imposition of an excise tax under Section 4981
of the Code; provided, however, that if each such Partner's
distributable share of any Net Cash Flow of the Partnership and its
distributable share of any funds maintained in the Partnership reserves
are insufficient to meet the aforesaid distribution requirement with
respect to such Partner, then the Partnership shall have satisfied the
foregoing distribution requirement with respect to such Partner upon
distributing to it such distributable share of Net Cash Flow and funds
maintained in the Partnership reserves. In no event shall the
Partnership be required to borrow funds, or any Partner be required to
contribute funds to the Partnership, in order to permit the Partnership
to satisfy the foregoing distribution requirement. In no event shall
the foregoing provisions of this subsection (f) adversely affect the
allocation of, and Percentage Interest in, Net Cash Flow of any other
Partner.
(g) The Partnership shall not engage in any "prohibited
transactions" within the meaning of Section 857(b)(6)(B)(iii) of the
Code.
The Partners hereby acknowledge that the foregoing are the current
guidelines applicable to the qualification of REITs. If and to the
extent that any of the requirements to qualify for REIT status shall be
changed, altered, modified or added to, then such changes, alterations,
modifications or additions, as applicable, shall be deemed incorporated
herein, and this Section 5.6 shall be deemed to be amended and modified
as necessary to incorporate such changed, altered, modified or added
REIT requirements.
5.7 Budgets.
(a) Preparation and Approval. As soon as reasonably
possible hereafter, the Operating Committee shall prepare (or cause to
be prepared) and submit to the Executive Committee for approval an
interim operating budget (each an "Interim Operating Budget") for the
management, leasing and operation of each Partnership Property through
the end of Fiscal Year 1998. At least forty-five (45) days prior to the
beginning of each Fiscal Year, the Operating Committee shall prepare and
submit to the Executive Committee for approval a proposed budget (each
an "Annual Budget") for the management, leasing and operation of each
Partnership Property for the next Fiscal Year. The Interim Operating
Budgets and Annual Operating Budgets shall sometimes hereinafter be
collectively referred to individually as a "Budget" and collectively as
the "Budgets". The Executive Committee may approve or disapprove the
entire Budget or certain cost items or categories of each Budget. If
the Executive Committee disapproves any Budget or any cost item or
category thereof, the Operating Committee shall meet within five (5)
business days after the Executive Committee's disapproval and seek in
20
good faith to agree upon an acceptable revision to such disapproved
Budget(s) or cost item or category, as the case may be. Once revised,
each such disapproved Budget shall be resubmitted to the Executive
Committee for approval and such process shall continue until the
Executive Committee has approved a Budget for each Partnership Property
for the Fiscal Year in question. Such Budgets will be prepared by the
Operating Committee and approved by the Executive Committee in good
faith based upon estimates taking into account the most recent
information then available to the Operating Committee. The Operating
Committee shall update each Budget no less frequently than quarterly,
and shall promptly submit any proposed revisions to such Budgets
resulting from such updates to the Executive Committee for approval in
the manner provided above for approval of the original Budgets.
(b) Operations. The approved Budget for each
Partnership Property shall be submitted to the Property Manager for
such Partnership Property for implementation. The Operating Committee
and Property Managers shall manage and operate each Property and each
Partnership Property consistent with the approved Budget therefor (as
may be updated from time to time in accordance with subsection (a)
above). If the Executive Committee has not approved a Budget or any
cost item or category of any Budget prior to the beginning of the next
Fiscal Year, the Operating Committee shall substitute the Budget or the
actual cost of such disapproved item or category incurred by the
Partnership during the preceding Fiscal Year, if any; provided that, if
any such item or category of expense is in the nature of utility
expenses, personal or real property taxes, insurance expenses to be
incurred in accordance with Section 5.8 hereof, debt service due and
payable under any loan of the Partnership , or any payments that the
Partnership is required to make by law, then the Operating Committee
shall substitute the reasonably anticipated costs of such items or
categories of expense (based on the previous year's bills therefor, if
available).
5.8 Insurance.
(a) Coverage. The Operating Committee shall procure and
maintain, or cause to be procured and maintained, insurance sufficient
to enable the Partnership to comply with applicable laws, regulations,
and contractual requirements (including the requirements of Persons
providing financing to the Partnership), including as a minimum, the
following:
(i) Comprehensive general liability insurance
covering each Partnership Property in the amounts and upon terms
customary for businesses and assets comparable to such Partnership
Property, and otherwise satisfactory to the Executive Committee;
(ii) With respect to completed improvements, fire
and extended coverage insurance, and, whenever construction of any
improvement is taking place, builders' risk insurance, in each
case, on a replacement cost basis of not less than one hundred
percent (100%) of the full replacement cost of such improvements;
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(iii) Worker's compensation insurance as
required by law including employer's liability;
(iv) Fidelity insurance in an amount to protect
against losses due to employee dishonesty, theft by any other
Partnership contractor, and mysterious disappearances; and
(v) Such additional insurance against other risks
of loss to the Partnership Properties as, from time to time, may
be required by any lender making a loan to the Partnership or which
may be required by law.
The Operating Committee shall furnish the Executive
Committee, no less frequently than annually, a schedule of such
insurance and copies of certificates evidencing the same. The Executive
Committee must consent to the establishment or modification of any self
insurance or deductibles which exposes the Partnership to uninsured
liability. Each Partner shall be named as an additional insured to the
Partnership's comprehensive general liability insurance policies.
5.9 Unanimous Consent. Notwithstanding anything to the
contrary in this Agreement, the Partnership may take any action
contemplated under this Agreement if approved by the unanimous consent
of the General Partners.
5.10 Indemnification.
(a) The Partnership shall, to the fullest extent
permitted by law, indemnify any and all Indemnitees from and against any
and all losses, claims, damages, liabilities, costs and expenses
(including attorneys' fees and costs), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership as set forth in this
Agreement in which any Indemnitee may be involved, or is threatened to
be involved, as a party or otherwise, unless it is established that:
(i) the act or omission of the Indemnitee was material to the matter
giving rise to the claim, demand, action, suit or proceeding and either
was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal
benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Any indemnification pursuant to this
Section 5.10 shall be made only out of Partnership Assets, and no
Partner shall be required to contribute or advance funds to the
Partnership to enable the Partnership to satisfy its obligations under
this Section 5.10.
(b) Reasonable expenses incurred by an Indemnitee who is
a party to a proceeding shall be paid or reimbursed by the Partnership
in advance of the final disposition of the proceeding upon receipt by
the Partnership of (i) a written affirmation by the Indemnitee of the
Indemnitee's good faith belief that it is entitled to indemnification by
22
the Partnership pursuant to this Section 5.10(b) with respect to such
expenses and proceeding, and (ii) a written undertaking by or on behalf
of the Indemnitee, to and in favor of the Partnership, wherein the
Indemnitee agrees to repay the amount if it shall ultimately be adjudged
not to have been entitled to indemnification under this Section 5.10.
(c) The indemnification provided by this Section 5.10
shall be in addition to any other rights to which an Indemnitee or any
other Person may be entitled under any agreement, as a matter of law or
otherwise.
(d) The Partnership may purchase and maintain insurance,
on behalf of the Indemnitees and such other Persons as the Partners
shall mutually determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection
with the Partnership's activities, regardless of whether the Partnership
would have the obligation to indemnify such Person against such
liability under the provisions of this Agreement.
(e) The provisions of this Section 5.10 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the
benefit of any other Persons.
5.11 Compensation and Reimbursement. The Partnership shall
not pay a Partner or an Affiliate of a Partner any fees or other
compensation except as set forth in this Agreement or except as
otherwise agreed by the Executive Committee. The Partnership will
reimburse a Partner and its Affiliates for all reasonable actual out-of-
pocket third party expenses incurred in connection with the carrying out
of the duties set forth in this Agreement imposed upon such Partner or
its Affiliates, provided such expenses are approved by the Executive
Committee or are reflected in a Budget that has been approved by the
Executive Committee, in each case upon the presentation of reasonable
supporting documentation of the amount and purpose of such expenses.
5.12 No Employees. The Partnership shall not have employees.
Each Partner shall be solely responsible for all wages, benefits,
insurance and payroll taxes with respect to any of its respective
Executive Committee Members, Operating Committee Members or other
employees.
5.13 Personal Services Contract. The Partners acknowledge and
agree that except for their respective economic interests in the
Partnership, each Partner's respective rights, powers and privileges as
a Partner hereunder shall be deemed to be in respect of a personal
services contract, and not an executory contract, under the United
States Bankruptcy Code and any state insolvency or bankruptcy laws.
Without limitation on the foregoing, each Partner confirms and agrees
that one of the major factors that caused the Partners to form this
Partnership and to enter into this Agreement was the personal trust and
confidence each Partner reposed in the personal services, management
skills and business experience of the other Partner. The Partners do
not desire to, and agree that they shall not be required to, accept the
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exercise of management or control rights (including rights to give
approvals or consents under this Agreement) by any party other than a
Partner. Accordingly, in the event of a Bankruptcy of a General Partner
or the withdrawal of a General Partner, such General Partner's Operating
Committee Members and Executive Committee Members shall immediately be
terminated and deemed removed from the Operating Committee and Executive
Committee, respectively, and such General Partner shall have no right
whatsoever to participate in the management or control of the
Partnership; provided, however, that such General Partner shall be
entitled to all of the rights and benefits of an assignee of a
partnership interest under the Act.
5.14 Defaults and Remedies.
(a) Events of Default. The occurrence of any of the
following events by or with respect to a Partner of one Party or such
Party (the "Defaulting Party"; and the other Party shall be referred to
herein as a "Non-defaulting Party," provided that neither a Partner of
the other Party nor the other Party itself is already a Defaulting
Party) shall be a default hereunder and if not cured within the
applicable notice and cure period provided below, if any, such default
shall constitute an "Event of Default" hereunder:
(i) The failure of a Partner or Party to make any
payment as required by this Agreement that is not cured within five
(5) business days of written notice to such Partner or Party;
(ii) The failure of a Partner or Party to perform
any of its other obligations under this Agreement or the breach by
a Partner or Party of any of the terms of this Agreement, and a
continuation of such failure or breach for more than thirty (30)
days after notice by a Non-defaulting Party to the Defaulting
Partner that such Defaulting Party has failed to perform any of its
obligations under, or has breached, this Agreement; provided that
if such failure or breach is of the nature that it can be cured but
cannot reasonably be cured within such thirty (30) day period, such
period shall be extended for up to an additional sixty (60) days so
long as the Defaulting Party in good faith commences all reasonable
curative efforts within ten (10) days of its receipt of such notice
from the Non-defaulting Party and diligently and expeditiously
continues its curative efforts to completion; or
(iii) The occurrence of a Bankruptcy with
respect to a Partner or the withdrawal by a Partner.
(b) Remedies. Upon the occurrence of any Event of
Default, the Non-defaulting Party may elect to do one or more of the
following:
(i) Exercise its rights under Section 5.14(c);
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(ii) Dissolve the Partnership and commence to
liquidate its assets as provided in Article 10;
(iii) Enforce any covenant by the Defaulting
Party to advance money or to take or forbear from any other action
hereunder; or
(iv) Pursue any other remedy permitted by this
Agreement or at law or in equity.
(c) Change of Governance of Partnership. In addition to
any other rights or remedies which a Non-defaulting Party may have under
this Agreement or under applicable laws with respect to an Event of
Default, a Non-defaulting Party shall have the option to exercise the
rights set forth below in this Section 5.14(c) in the event of the
occurrence of any Event of Default. Upon the occurrence of an Event of
Default, the General Partner of the Non-defaulting Party may elect, by
giving written notice to the Defaulting Party, to assume the role of the
"Controlling Party" of the Partnership, and shall remain as such unless
and until (i) the Partners otherwise agree, (ii) such Controlling Party
is removed as such pursuant to the foregoing provisions of this
Section 5.14(c) by reason of its having become a Defaulting Party, or
(iii) such Event of Default is cured. During the period of time that an
Event of Default has occurred and is continuing, the General Partner of
the Controlling Party shall have the authority to take exclusive charge
and control of the Partnership free and clear of any and all
restrictions (including any and all restrictions set forth in this
Article 5 and any and all consent, voting or approval rights granted the
Executive Committee, Operating Committee or any Partner, other than that
of the Controlling Party) imposed by this Agreement, and the Defaulting
Party's right to, acting alone, make certain decisions and take certain
actions with respect to matters concerning the Partnership's management
agreements with the Non-defaulting Party (or its Affiliates) as provided
in Section 5.5 shall be suspended and the General Partner of the
Controlling Party shall make all such decisions and take all such
actions thereunder. The General Partner of the Controlling Party shall
have the right to amend any fictitious business name statement,
certificate of partnership, or any similar document to reflect such
election and to provide that it is the sole Partner authorized to bind
the Partnership, and to file or record any such amended documents and
change the Partnership's Principal Office, and each Partner hereby
grants to the General Partner of the Controlling Party its irrevocable
power of attorney to do the same, which power of attorney shall be
deemed to be a power coupled with an interest which may not be revoked
until the termination and winding up of the Partnership. The provisions
of this Section 5.14(c) shall take precedence over any provision to the
contrary set forth in this Agreement.
(d) Remedies Not Exclusive. No remedy conferred upon
the Partnership or any Partner in this Agreement is intended to be
exclusive of any other remedy herein or by law provided or permitted,
but rather each shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in
equity or by statute.
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ARTICLE 6
Transfers of Interests
6.1 Restrictions on Transfers.
(a) Except as permitted in Section 6.1(b) or otherwise
expressly permitted or required by this Agreement, no Partner shall
Transfer all or any portion of its Partnership Interest, and no partner
or other controlling entity or Person of a Partner shall directly or
indirectly Transfer its ownership interest in such Partner or take any
action which would have such an effect, without the unanimous prior
written consent of the Partners, which consent may be withheld by a
Partner in its sole and absolute discretion. Any Transfer or attempted
Transfer by any Partner in violation of the preceding sentence shall be
null and void and of no force or effect whatsoever. Each Partner hereby
acknowledges the reasonableness of the restrictions on Transfer imposed
by this Agreement in view of the Partnership purposes and the
relationship of the Partners and the Partnership. Accordingly, the
restrictions on Transfer contained herein shall be specifically
enforceable. Each Partner hereby further agrees to hold the Partnership
and each Partner wholly and completely harmless from any cost,
liability, or damage (including liabilities for income taxes and costs
of enforcing this indemnity) incurred by any of such indemnified Persons
as a result of a Transfer or an attempted Transfer in violation of this
Agreement.
(b) Notwithstanding anything to the contrary contained
herein, the following Transfers shall be permitted under this Agreement
without any consent being required from any Partner ("Permitted
Transfers"):
(i) Any Transfer of the entire Partnership Interest
to an Affiliate of the respective Operating Partnership or the
Partner, provided that the applicable Operating Partnership has a
direct or indirect legal or beneficial ownership interest entitled
to receive at least 25% of the dividends, distributions or other
cash proceeds of such Affiliate;
(ii) Any transaction involving (1) the Transfer,
issuance or redemption of stock or other equity securities of any
direct or indirect corporate partner of a Partner, whether or not
such Transfer, issuance or redemption occurs on any public stock
exchange, (2) the Transfer, issuance or redemption of any
partnership units in the respective Operating Partnership or the
Partner, or (3) the direct or indirect Transfer, issuance or
redemption of limited partnership interests in any Partner;
provided that following any such transaction referred to in (1) -
(3) of this subsection (ii), the entire Partnership Interest is
owned by an Affiliate of the applicable Operating Partnership and
the applicable Operating Partnership continues to have a direct or
indirect legal or beneficial ownership interest entitled to receive
at least 25% of the dividends, distributions or other cash proceeds
of such Affiliate.
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6.2 Transferee Requirements. In no event may any Partner
Transfer its Partnership Interest pursuant to the provisions of this
Article 6 or otherwise (i) to any person who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of
any provision of any mortgage or deed of trust (or note or bond secured
thereby) constituting a lien against any Partnership Property or any
part thereof, or of any other instrument, document or agreement to which
the Partnership is a party or otherwise bound; (iii) in violation of
applicable law; (iv) in the event such Transfer or issuance would cause
any Partner who is a REIT (or any Person who, directly or indirectly,
owns an interest in any Partner who is a REIT) to cease to comply with
the requirements necessary to achieve REIT status; (v) if such Transfer
would cause a termination of the Partnership for federal income tax
purposes or would cause a constructive distribution to any Partner or to
any partner of the Underlying Partnership under Section 752 of the Code;
(vi) if such Transfer would, in the opinion of counsel to the
Partnership, cause the Partnership to cease to be classified as a
partnership for federal income tax purposes; (vii) if such Transfer
would cause the Partnership to become, with respect to any employee
benefit plan subject to Title 1 of ERISA, a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as
defined in Section 4975(c) of the Code); or (xiii) if such Transfer
would, in the opinion of counsel to the Partnership, cause any portion
of the Partnership Properties to constitute assets of any employee
benefit plan pursuant to the Department of Labor Regulations Section
2510.2-101. As used in this Agreement, the term "Transferee" shall mean
any approved Transferee pursuant to Article 6 hereof.
6.3 Partnership Interest Loans.
(a) General Loan Provisions. Each Partner shall have
the right to pledge its entire Partnership Interest, and the proceeds
thereof as security for a loan or loans (or a guaranty of a loan or
loans to its partner or other controlling Entity or Person) under a
credit facility and all other obligations under the related loan
documents (collectively, a "Partnership Interest Loan Obligations") and
to obtain such loan or loans secured by its Partnership Interest and the
proceeds thereof (all loans under a single credit facility being,
collectively, a "Partnership Interest Loan") at any time during the term
of this Agreement upon the following terms and conditions:
(i) there shall never be more than one Partnership
Interest Loan with respect to each Partner's Partnership Interest
outstanding at any time;
(ii) the Partnership Interest Loan Obligations may
be secured by the Partner's Partnership Interest and the proceeds
thereof but shall not be secured by or in any way collateralized by
any of the Properties;
(iii) the Partnership Interest Loan shall be
prepayable in full at any time, subject to customary notice and
prepayment penalties;
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(iv) the Partner obtaining or guaranteeing any such
Partnership Interest Loan shall pay each other Partner's reasonable
attorneys' fees incurred in connection with the review of the loan
documents for each such Partnership Interest Loan with respect to
the compliance of such loan documents with the conditions set forth
in this Section 6.3;
(v) At the time such Partnership Interest Loan is
incurred, no default or Event of Default by or with respect to the
Partner obtaining the Partnership Interest Loan shall have occurred
and be continuing under this Agreement;
(vi) The lender or lenders under each such
Partnership Interest Loan shall be a bank, or other institutional
lender, provided that in the case of a Partnership Interest Loan
made by more than one lender (or in which there are one or more
participants), the Partners and the Partnership shall be entitled
to deal only with an agent or other representative for all such
lenders (and their participants, if any, or, in the case of a
Partnership Interest Loan held by a single lender in which there
are one or more participants, shall be entitled to deal only with
such lender) in connection with such Partnership Interest Loan and
any notice given to such representative (or lender) shall be deemed
notice to all lenders and participants, and any consent or approval
by such representative (or lender) shall be deemed given by all
lenders and participants);
(vii) The other Partners shall be reasonably
satisfied that any loan by a Partner will not result in any adverse
tax consequences to such Partners or the Partnership;
(viii) Any loan must be an arm's length "bridge"
or other financing on terms customary for financings of that type
or otherwise reasonably acceptable to the other Partners;
(ix) (a) The loan documents for each such
Partnership Interest Loan shall not include terms or conditions
which unreasonably (taking into account what is then customary in
loan documents for similar loans with similar lenders) and
adversely impact the Partnership's, the Underlying Partnership's,
the Partners' or any Property Manager's ability to operate, manage
or lease any Property or any Partnership Property; and (b) the loan
documents for each such loan shall not include terms or conditions
that grant the lender approval or consent rights with respect to
the operation, management or leasing of any Property or any
Partnership Property except, in the case of clauses (a) and (b)
immediately above, as approved by the other Partners, which
approval shall not be unreasonably withheld;
(x) The loan shall not include any participation,
contingent interest or equity conversion features (provided that
the foregoing limitations shall not preclude the calculation or
payment of any prepayment penalty based upon a yield maintenance or
28
similar formula); interest on the loan shall be payable on a basis
no less frequently than monthly (or, in the case of LIBOR loans, at
the end of the interest period applicable thereto, but not less
frequently than every three months);
(xi) A Partnership Interest Loan shall not cause a
default under any agreement to which the Partnership or the Partner
incurring or guaranteeing such Partnership Interest Loan (the
"Pledging Partner") is a party or bound and the Pledging Partner
shall have obtained all third party consents to such loan required
to be obtained by it;
(xii) The loan documents shall provide that the
lender or lenders (or such representative) will not exercise
remedies thereunder except after giving written notice to the other
Partners and the Partnership of any default under the loan
documents concurrently with the giving of such notice to the
defaulting Partner; the Pledging Partner shall agree that the loan
documents shall not be amended, modified or supplemented without
the other Partners' prior written consent; and the lender or
representative shall, at any other Partner's request, enter into a
separate agreement in form reasonably satisfactory to such other
Partner, wherein the lender reasonably agrees to provide such other
Partner and the Partnership with such notice; and
(xiii) Neither the Person making the Partnership
Interest Loan, nor any Person participating in a Partnership
Interest Loan, shall have made a loan to the Partnership or to the
Underlying Partnership or secured by any Partnership Assets or any
Underlying Partnership Assets.
(b) Within a reasonable time after receipt of a request
by the Partner obtaining a Partnership Interest Loan accompanied by a
copy of the related loan documents, the other Partners shall certify
whether the Partnership Interest Loan and the loan documents relating to
such Partnership Interest Loan comply with the conditions set forth in
clauses (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) as to the
Partnership only, (xii) and (xiii) of this Section 6.3(a), which
certification shall not be unreasonably withheld, and any such lender or
representative may conclusively rely on such certification.
(c) The Partnership shall notify the lender or
representative of any failure by the Pledging Partner to make any
payment to the Partnership or to any other Partner required under this
Agreement. Notwithstanding anything herein to the contrary, the lender
or lenders under the Partnership Interest Loan (or such representative)
shall have the right (but not the obligation) to cure such default
within 30 days after receipt of such notice by making such payment
(which shall have the same effect as if such payment had been made by
such Partner), and until the expiration of such 30 day period, the other
Partners shall not exercise any of their rights and remedies hereunder
or under the Act with respect to such default and, if and when such
secured party makes the payment, such default shall be considered cured
and shall cease to exist for all purposes of this Agreement and the Act.
29
(d) Notwithstanding anything herein to the contrary, at
any time after the date on which the Partnership receives written notice
(a "Partnership Interest Loan Default Notice") from a lender or
representative that an "event of default" of the Pledging Partner has
occurred and exists under a Partnership Interest Loan and instructing
the Partnership to make all future distributions or other payments then
required to be made to the Pledging Partner under the Partnership
Agreement or any Default Loan to such lender or representative until
further notice from such lender or representative, such payments shall
be made to such lender or representative notwithstanding receipt by the
Partnership or any other Partner of any notice by the Pledging Partner
(or any trustee or other person acting on its behalf) to the contrary.
In addition, at any time after the date on which the Partnership
receives a Partnership Interest Loan Default Notice and until such
notice is rescinded by the lender or representative after all "events of
default" of the Pledging Partner have ceased to exist, the Partnership
shall provide to the lender or representative under the Partnership
Interest Loan copies of all notices and reports being provided hereunder
or under the Act to the Pledging Partner and such other information
regarding the Properties or the Partnership Property and the operations,
assets, liabilities and business of the Partnership as the lender or
representative may reasonably request.
(e) Upon any foreclosure of the security interest
securing any Partnership Interest Loan Obligations, or any transfer in
lieu thereof, (i) the secured party, purchaser, transferee or a designee
thereof shall have the rights of an "assignee" of such Partnership
Interest under the Act, including, without limitation, all rights of the
Pledging Partner to (A) share in profits and losses of the Partnership,
(B) receive distributions from the Partnership under Article 3 or 10 or
Section 7.3(b), 8.4 or 8.6(b) hereof or the other provisions of this
Agreement or the Act and (C) all other economic rights of such Pledging
Partner with respect to the Partnership Interest (including the right to
receive any and all sale proceeds of the Partnership Interest if and
when the Partnership Interest is sold in accordance with the provisions
of this Agreement), and (ii) in all other respects the Pledging Partner
shall continue as a Partner under this Agreement with all other rights
hereunder (including, without limitation, the right to exercise any
voting, management or other consensual rights), unless and until the
secured party, purchaser, transferee or designee is admitted as a
substitute Partner pursuant to Section 6.4 at such Person's request.
Upon satisfaction by such secured party, purchaser, transferee or
designee of the conditions set forth in Section 6.4, (i) such Person
shall be admitted as a Partner and (ii) the Pledging Partner shall cease
to be a Partner, in each case without the consent of any other Partner
or other Person being required. Unless and until such secured party,
purchaser, transferee or designee becomes a Partner under this
Agreement, such secured party, purchaser, transferee or designee shall
not be liable for any of the liabilities and obligations of the
Partnership or such Pledging Partner, whether under this Agreement, the
Act or otherwise, except as otherwise provided by law.
(f) Any partner or other controlling Person of a Partner
shall be entitled to grant a security interest to a lender or lenders
(or representative) referred to in clause (vi) of Section 6.3(a) under a
Partnership Interest Loan in the direct or indirect ownership interests
that such partner or other Person holds from time to time in such
Partner or the Partnership, provided that such security interest shall
30
not be foreclosed (and no transfer in lieu thereof shall occur) at any
time prior to foreclosure of the security interest in the Partnership
Interest (or transfer in lieu thereof).
(g) Notwithstanding anything herein to the contrary, the
provisions of this Section 6 shall accrue to the benefit of all lenders
and representatives under Partnership Interest Loans.
(h) Right of Purchase. If any lender of a Partnership
Interest Loan or any third party (each a "Loan Default Transferee")
should become an assignee of any Partner's Partnership Interest as a
result of a default under any such Partnership Interest Loan, whether by
or through foreclosure of its security interest in and to such
Partnership Interest, assignment-in-lieu thereof, or otherwise, then a
Partner of the other Party shall have a one-time right to purchase from
the Loan Default Transferee such assignee's interest in the Partnership
Interest on the terms and conditions of this Section 6.3(h). No later
than five (5) business days after its acquisition of such assignee's
interest in the Partnership Interest, the Loan Default Transferee shall
deliver written notice (the "Loan Default Transfer Notice") to the
other Partners notifying such other Partners of the transfer, setting
forth such Loan Default Transferee's address for notices and stating the
credit bid, purchase price or other amount paid for the assignee's
interest in the Partnership Interest (which amount may include the
discharge of indebtedness in exchange therefor). The other Partners may
then exercise its rights under this subsection (h) by delivering to the
Loan Default Transferee, within 30 days after such other Partner's
receipt of the Loan Default Transfer Notice, written notice stating its
intention to purchase such assignee's interest in the Partnership
Interest. The purchase price for the assignee's interest in the
Partnership Interest shall equal the credit bid, purchase price or other
amount paid by such Loan Default Transferee for such assignee's interest
in the Partnership Interest as stated in the Loan Default Transfer
Notice, plus interest thereon from the date that the Loan Default
Transferee acquires title to the assignee's interest in the Partnership
Interest until the date that the sale of the assignee's interest in the
Partnership Interest to the other Partner is consummated at the default
rate stated in the loan documents. If any other Partner exercises its
option to purchase such assignee's interest in the Partnership Interest
hereunder to such other Partner or its designee, the transfer of the
assignee's interest in the Partnership Interest to the other Partner
shall be consummated no later than the sixtieth (60th) day after the
date of such Loan Default Transferee's receipt of the other Partner's
written notice exercising such purchase option. The other Partner may
designate an Affiliate of such Partner as the purchaser of such
assignee's interest in the Partnership Interest. Upon the consummation
of any transfer hereunder to such Partner or its designee, the Loan
Default Transferee shall be released from any and all obligations and
liability hereunder except for obligations, liabilities, duties and
rights arising before such transfer which have not been determined or
ascertained as of the date of transfer.
Upon request by a Partner who is obtaining a Partnership
Interest Loan in accordance with the provisions of this Section 6.3, the
Partnership and the other Partners shall each execute and deliver to the
lender or representative under such Partnership Interest Loan, in
31
addition to the certifications contemplated by Section 6.3(b), such
agreements and other documents as may be reasonably requested by such
lender or representative in connection therewith, provided such
agreements and other documents are consistent with the provisions of
this Article 6.
6.4 Admission of Transferee as a Partner. No Transferee
pursuant to the provisions of this Article 6 above shall become a
substituted Partner until all of the following conditions have been
satisfied, as applicable:
(a) A certified copy of the instrument of transfer shall
have been filed with the Partnership. The Transferee shall agree in
writing for the benefit of the Partnership to be bound by all of the
terms of this Agreement and to assume and perform all obligations and
duties of the transferring Partner, and an executed, duplicate original
of said assumption shall be delivered to the Partnership.
(b) The proposed Partner shall have executed and
acknowledged for recordation an amendment to this Agreement and the
Statement of Partnership and such other instruments as the other
Partners may reasonably deem necessary or desirable to effect such
admission or substitution.
(c) A transfer fee sufficient to cover all expenses in
connection with such assignment and substitution (including reasonable
legal and accounting fees) shall have been paid to the Partnership
either by the Transferee or the transferring Partner.
(d) The admission of a Transferee as a substituted
Partner and any release of the transferring Partner shall not be a cause
for dissolution of the Partnership under the Delaware Uniform
Partnership Act. Each Partner hereby agrees in writing that the
Partnership shall continue after such admission.
6.5 Allocations and Distributions Upon Transfers. Upon the
occurrence of a Transfer during any Fiscal Year, Profits, Losses, each
item thereof, and all other items attributable to the Partnership
Interest so transferred for such Fiscal Year shall be divided and
allocated between the transferring Partner and the Transferee by taking
into account their varying interests during the Fiscal Year in
accordance with Code Section 706(d), using any conventions permitted by
law and selected by the Operating Committee. All distributions and
allocations on or before the date of a Transfer shall be made to the
transferring Partner, and all distributions and allocations thereafter
shall be made to the Transferee. The Operating Committee and the
Partnership shall incur no liability for making allocations and
distributions in accordance with the provisions of this Section 6.5,
whether or not the Operating Committee or the Partnership has knowledge
of any Transfer of ownership of any interest in the Partnership.
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ARTICLE 7
Buy-Sell
7.1 Buy-Sell Offering Notice. Either Party may exercise its
rights under this Article 7 at any time after a deadlock over a Buy-Sell
Major Decision relating to one (1) of the Underlying Properties or
Partnership Properties (the "Subject Property") is not resolved within
thirty (30) days after the Executive Committee meeting at which the same
is voted upon; provided, however, that in the case of an Underlying
Property (i) such rights may only be exercised in connection with an in-
kind distribution of such Underlying Property to the Partnership under
Section 5.3 of the Underlying Partnership Agreement, and (ii) in the
event of any such in-kind distribution, the Party whose Affiliate
elected to cause such in-kind distribution shall be required to become
the Initiating Party with respect to such Property hereunder. At any
such time, either Party (the "Initiating Party") may give written notice
(the "Offering Notice") to the other Party (the "Responding Party") of
its intent to purchase all, but not less than all, of the Subject
Property. The Offering Notice must be given within fifteen (15) days
after the expiration of the thirty (30) day period described immediately
above. In such event, the provisions set forth in this Article 7 shall
apply. The Initiating Party shall specify in its Offering Notice the
all cash purchase price ("Purchase Price") at which the Initiating
Party would be willing to purchase a fifty percent (50%) undivided
interest in the Subject Property free and clear of all debt secured by
mortgages, deeds of trust and other security instruments thereon as of
the date the Offering Notice is given ("Date of Value"). Once given, an
Offering Notice may not be revoked or withdrawn by an Initiating Party
without the written consent of the Responding Party, which consent may
be withheld in its sole and absolute discretion. In no event shall
either Party be permitted to give an Offering Notice initiating its buy-
sell rights under this Article 7 more often than once in any twelve (12)
successive month period.
7.2 Exercise of Buy-Sell. Upon receipt of the Offering
Notice, the Responding Party shall then be obligated either:
(a) To consent to the sale of a fifty percent (50%)
undivided interest in the Subject Property to the Initiating Party for
the Purchase Price; or
(b) To purchase a fifty percent (50%) undivided interest
in the Subject Property for the Purchase Price.
The Responding Party shall notify the Initiating Party of its election
within thirty (30) days after the Date of Value. Failure to give notice
within the required time period shall be deemed consent to the sale of
the Subject Property to the Initiating Party. For purposes of this
Article 7, the terms "Purchasing Party" and "Selling Party" shall mean,
respectively, the Party who is obligated to purchase and the Party who
is obligated to sell a fifty percent (50%) undivided interest in the
Subject Property pursuant to either Section 7.2(a) or 7.2(b) (regardless
of which Party is the Initiating Party and which Party is the Responding
Party).
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7.3 Closing.
(a) The Parties shall meet and exchange documents and
pay amounts due, and otherwise do all things necessary to conclude the
transaction set forth herein at the closing of such purchase (the "Buy-
Sell Closing"). The Buy-Sell Closing shall occur at the office of the
Purchasing Party's legal counsel at 9:00 a.m. on the first Wednesday
after the ninetieth (90th) day after the Date of Value unless the day is
a Saturday, Sunday, or national or state holiday and, in that event, on
the next business day. At the Buy-Sell Closing, the Partnership shall
distribute to each of the Initiating Party and the Responding Party a
fifty percent (50%) undivided fee simple interest in the Subject
Property. Immediately thereafter, the Purchasing Party shall purchase
the interest of the Selling Party in the Subject Property for cash in an
amount equal to the Purchase Price. At the Buy-Sell Closing, there
shall be delivered to the Purchasing Party a duly executed and
acknowledged deed in such form as may be appropriate and required to
legally transfer such fee simple title in and to the Subject Property to
the Purchasing Party, and shall also, upon the request of the Purchasing
Party, concurrently therewith (or at any time and from time to time
thereafter) be executed, acknowledged and delivered such other documents
and records as the Purchasing Party determines are reasonably necessary
or desirable to conclude the Buy-Sell Closing and to otherwise vest
title in and to the Subject Property in the Purchasing Party and allow
the Purchasing Party to develop, use, sell, rent, manage or operate the
Subject Property (including, without limitation, assignments of leases,
reciprocal easement and operating agreements, contracts, personal
property and other rights or property of the Partnership necessary or
useful in the management and operation of the Subject Property).
Additionally, the Selling Party shall execute, acknowledge and deliver
such other documents and records as the Purchasing Party determines are
reasonably necessary or desirable to provide the Purchasing Party with
the same rights and interests in the Subject Property as were granted to
the Selling Party by the Partnership. The management agreement for the
Subject Property shall be immediately terminated effective as of the day
of the Buy-Sell Closing. Further, from and after the date of the Buy-
Sell Closing, both the Partnership and the Selling Party shall be
released from all obligations and liabilities accruing in connection
with the Subject Property, and the Purchasing Party shall indemnify and
hold the Partnership and the Selling Party harmless from and against any
and all such obligations and liabilities accruing from and after the Buy-
Sell Closing.
(b) At the Buy-Sell Closing, each of the Purchasing
Party and the Selling Party shall be responsible for the satisfaction of
fifty percent (50%) of any debt secured by mortgages or deeds of trust
against the Subject Property as of the Value Date and, if applicable,
the "release price" necessary to release any mortgage or deed of trust
securing the Existing Financing as of the Value Date. It is expressly
understood and agreed that (i) the transfer of a Subject Property shall
be reflected on the books and records of the Partnership and the
Underlying Partnership as a partial transfer to the general partners of
the Underlying Partnership, in accordance with their respective
Percentage Interests therein, followed by a sale of such partial
interest by the general partner that is an Affiliate of the Selling
Party to the Purchasing Party (or its Assignee), and (ii) such
satisfaction may occur through the assumption of such debt by the
Purchasing Party, or the refinancing of such debt with new indebtedness
34
secured by the Purchasing Party (in each case, with an appropriate
reduction of amounts otherwise owed by the Purchasing Party to the
Selling Party), or through other tax-efficient means agreed upon by the
Partners. It is also expressly understood and agreed that the Buy-Sell
Closing may be effected through the transfer of a duly executed and
acknowledged deed directly from the Partnership or the Underlying
Partnership, as the case may be, to the Purchasing Party (or its
designee). The Purchasing Party shall be responsible for and pay all
costs and expenses incurred in connection with the sale of the Subject
Property; provided that, each Party shall bear its own attorneys' fees
and further the Initiating Party shall pay any yield maintenance or
other interest premium on the pay-off of such debt.
(c) The Partners acknowledge and agree that each Subject
Property is extraordinary and unique, and the provisions of this
Article 7 shall be specifically enforceable.
ARTICLE 8
Exit Call; Portfolio Sale
8.1 Call Rights. At any time from and after the date which
is eighteen (18) months after the acquisition of the Underlying
Properties by the Underlying Partnership, either Party may, without
cause and in its sole and absolute discretion, elect to call for the
Partnership to dissolve and the distribution of all Partnership
Properties to the Partners in kind; provided, however, that such
election may only be made in connection with an election, pursuant to
Section 10.01(e) of the Underlying Partnership Agreement, to liquidate
the Underlying Partnership, in which case the Party whose Affiliate
elected such liquidation shall be the "Exercising Party" hereunder.
Such distribution by the Underlying Partnership shall be treated as
occurring as follows: (i) first, as a distribution to the partners in
the Underlying Partnership in accordance with their interests therein;
and (ii) as a distribution by the Partnership of its assets (including
its proportionate share of the Underlying Partnership Assets) to the
Partners in accordance with their Partnership Interests. Any Party may
exercise its right to call for the dissolution of the Partnership by
delivering to the other Party written notice stating that it is
exercising its call right under this Article 8 (a "Call Notice"). The
Party exercising its rights hereunder shall be referred to herein as the
"Exercising Party" and the other Party shall be referred as the "Non-
Exercising Party". Once a Call Notice is delivered, it cannot be
rescinded or withdrawn except with the prior written consent of the Non-
Exercising Party.
8.2 Procedures upon Call Exercise. Within fifteen (15)
business days after the delivery of a Call Notice requiring the
dissolution of the Partnership by the Exercising Party, the Partners
shall meet (a "Call Dissolution Meeting") in order to determine and
agree upon the fair market value of each Property (for purposes of this
Article 8, any such property being referred to, individually, as a "Call
Property," and collectively, as the "Call Properties"). It is expressly
acknowledged and agreed that the Call Dissolution Meeting may occur over
the course of a number of days and may be adjourned from time to time
and reconvened upon the agreement of the Parties. If the Parties are
35
unable to agree upon the fair market value of any Call Property within
thirty (30) days after the first day of such Call Dissolution Meeting,
the fair market value of such Call Property shall be determined in
accordance with the appraisal process set forth in Section 8.5 below.
Upon the determination of the fair market value of each Call Property,
whether by agreement of the Parties or appraisal, the Call Properties
will be distributed to the Parties as follows:
(a) first, the Non-Exercising Party shall select a Call
Property for acquisition;
(b) second, the Exercising Party shall select a Call Property
for acquisition; and
(c) thereafter, the Non-Exercising Party shall select a Call
Property for acquisition and the Parties shall alternate choices in such
manner until all of the Call Properties have been allocated between the
Partners.
If the total number of Call Properties is an odd number, then the Non-
Exercising Party shall be permitted to elect, in its sole and absolute
discretion, whether to acquire the final Call Property or to mandate
that the Exercising Party acquire such final Call Property. The Call
Properties to be acquired by the Exercising Party pursuant to this
Section 8.2 shall be herein referred to each as an "Exercising Party's
Property" and collectively as the "Exercising Party's Properties", and
the Call Properties to be acquired by the Non-Exercising Party pursuant
to this Section 8.2 shall be herein referred to each as a "Non-
Exercising Party's Property" and collectively as the "Non-Exercising
Party's Properties"
8.3 Closing Procedure. The Partners shall meet and exchange
documents and pay amounts due, and otherwise do all things necessary to
conclude the transactions set forth in this Article 8 at the closing
(the "Call Closing"). The Call Closing shall occur at the office of the
Exercising Party's legal counsel at 9:00 a.m. on the first Wednesday
after the thirtieth (30th) day following the day that the selection
procedure described in Section 8.2 above shall have been completed
(unless such day is a Saturday, Sunday, or national or state holiday
and, in that event, on the next business day). At the Call Closing each
of the Exercising Party and the Non-Exercising Party shall be
responsible for the satisfaction of any debt secured by mortgages or
deeds of trust against the Exercising Party's Properties and the Non-
Exercising Party's Properties, respectively, as of such date and, if
applicable, the "release price" necessary to release any mortgage or
deed of trust securing the Existing Financing as of such date. It is
expressly understood and agreed that such satisfaction may occur through
the assumption of such debt, or the refinancing of such debt with new
indebtedness, or through other tax-efficient means agreed upon by the
Partners. Immediately thereafter, the Partnership shall (i) deliver to
the Exercising Party a duly executed and acknowledged deed in such form
as may be appropriate and required to legally transfer fee simple title
in and to each Exercising Party's Property to the Exercising Party, and
shall also, upon the request of the Exercising Party, concurrently
therewith (or at any time and from time to time thereafter) execute,
acknowledge and deliver such other documents and records as the
Exercising Party determines are reasonably necessary or desirable to
36
conclude the Call Closing and to otherwise vest title in and to the
Exercising Party's Properties in the Exercising Party and allow the
Exercising Party to develop, use, sell, rent, manage or operate the
Exercising Party's Properties (including, without limitation,
assignments of leases, reciprocal easement and operating agreements,
contracts, personal property and other rights or property of the
Partnership necessary or useful in the management and operation of the
Exercising Partner's Properties), and (ii) deliver to the Non-Exercising
Party a duly executed and acknowledged deed in such form as may be
appropriate and required to legally transfer fee simple title in and to
each Non-Exercising Party's Property to the Non-Exercising Party, and
shall also, upon the request of the Non-Exercising Party, concurrently
therewith (or at any time and from time to time thereafter) execute,
acknowledge and deliver such other documents and records as the Non-
Exercising Party determines are reasonably necessary or desirable to
conclude the Call Closing and to otherwise vest title in and to the Non-
Exercising Party's Properties in the Non-Exercising Party and allow the
Non-Exercising Party to develop, use, sell, rent, manage or operate the
Non-Exercising Party's Properties (including, without limitation,
assignments of leases, reciprocal easement and operating agreements,
contracts, personal property and other rights or property of the
Partnership or the Underlying Partnership necessary or useful in the
management and operation of the Non-Exercising Party's Properties). The
Partnership shall distribute to the Exercising Party all of the
Exercising Party's Properties, and distribute to the Non-Exercising
Party all of the Non-Exercising Party's Properties. In the event that
the aggregate fair market value of the Exercising Party's Properties
(less any debt assumed by the Exercising Party) and the aggregate fair
market value of the Non-Exercising Party's Properties (less any debt
assumed by the Non-Exercising Party), as determined pursuant to Section
8.6 below, are unequal, the Partnership shall designate one Call
Property (the "Designated Property"), which Designated Property shall be
deemed to have been distributed to the Exercising and Non-Exercising
Parties in that proportion necessary to equate, as closely as possible,
the fair market values of the Call Properties distributed to the
Exercising and Non-Exercising Parties (less any debt assumed by the
Parties). If the Designated Property is an Exercising Party Property,
then the Exercising Party shall pay to the Non-Exercising Party cash, in
an amount equal to the fair market value of such Designated Property
multiplied by the percentage of the Designated Property distributed to
the Non-Exercising Party. If the Designated Property is a Non-
Exercising Party Property, then the Non-Exercising Party shall pay to
the Exercising Party cash in an amount equal to the fair market value of
such Designated Property multiplied by the percentage of the Designated
Property distributed to the Exercising Party. The Partnership shall be
responsible for and shall pay all costs and expenses incurred in
connection with the pay-off and satisfaction of all financing secured by
the Partnership Properties, or any of them (including, without
limitation, the Existing Financing) and the release of all liens created
thereby (including, without limitation, all prepayment penalties or
fees, recording charges and other such costs and expenses). Except as
otherwise provided in the immediately preceding sentence and in this
sentence below, the Exercising Party shall be responsible for and pay
all costs and expenses incurred in connection with the distribution of
the Exercising Party's Properties, and the Non-Exercising Party shall be
responsible for and pay all costs and expenses incurred in connection
with the distribution of the Non-Exercising Party's Properties; provided
that, each Party, the Partnership and the Underlying Partnership shall
bear its own attorneys' fees in connection with such transactions. Each
Party shall also, upon the request of the other Party, concurrently with
37
the Call Closing (or at any time and from time to time thereafter)
execute, acknowledge and deliver such other documents and records as
such other Party determines are reasonably necessary or desirable to
conclude the Call Closing. The management agreements for all Call
Properties shall be terminated effective as of the day of the Call
Closing. Further, from and after the date of the Call Closing, the
Partnership shall be released from all obligations and liabilities
accruing to them in connection with the Call Properties, and each Party
shall indemnify and hold the Underlying Partnership, the Partnership and
the other Party harmless from and against any and all such obligations
and liabilities with respect to or relating to the Call Properties
distributed to such Party accruing from and after the Call Closing. It
is also expressly understood and agreed that (i) the transfer of
Partnership Properties shall be reflected on the books and records of
the Partnership and the Underlying Partnership so as to take into
account, as appropriate, the ownership interests of the general partners
of the Underlying Partnership, and (ii) the Call Closing may be effected
through the transfer of a duly executed and acknowledged deed directly
from the Partnership or the Underlying Partnership, as the case may be,
to the appropriate Parties (or their designees).
8.4 Winding Up; Distribution of Proceeds. Immediately
following the Call Closing, the Partnership and the Underlying
Partnership shall be wound up, and all remaining Partnership
Properties shall be distributed to the Partners, in accordance with the
terms and provisions of Article 10 hereof.
8.5 Fair Market Value Appraisal Process. If the Parties are
unable to agree upon the fair market value of any Call Property in
accordance with and within the time period set forth in Section 8.2
above, then the fair market value of such Call Property shall be
determined in accordance with the terms and provisions of this Section
8.5. Within twenty (20) days after the conclusion of the Call
Dissolution Meeting or the expiration of the thirty (30) day period
described in Section 8.2, whichever occurs first, each Party shall
appoint an appraiser and, within ten (10) days after their appointment,
the appraisers so appointed shall appoint a third appraiser. The
appraisers so appointed shall proceed to determine the fair market value
of the Call Property (determined assuming the Call Property was not
encumbered by any debt). The fair market value of the Call Property
shall be the average of the two (2) most proximate appraisals. If the
highest and the lowest of the three (3) appraisals are exactly
equidistant from the middle appraisal, however, the fair market value of
the Call Property shall be an amount equal to the middle appraisal.
Each appraiser appointed pursuant to this Section 8.5 shall be a real
estate appraiser with at least ten (10) years' professional experience
and with knowledge of the regional shopping center market (or knowledge
of any other relevant market with respect to any particular Call
Property) within the area where the Call Property is located. If either
Party fails to appoint an appraiser within such twenty (20) day period,
the determination of the fair market value of the Call Property shall be
made by the appraiser chosen by the other Party and such determination
shall be binding upon the Parties. If the first two (2) appraisers are
unable to agree upon the third appraiser within the ten (10) day period
following their appointment, then they shall notify the then chairman of
the chapter of the American Institute of Real Estate Appraisers that is
the closest to the Call Property geographically and request such person
to select a third appraiser. Each Party shall pay the expense of the
38
appraiser that it appoints and the Parties shall share the expense of
the third appraiser.
8.6 Portfolio Sale.
(a) Any time after the date which is eighteen (18)
months after the date of the acquisition of the Properties by the
Underlying Partnership, a Party (for purposes of this Section 8.6, the
"Portfolio Selling Party") shall have the right to cause (i) the
Partnership to sell all (but not less than all) of the Partnership
Properties to any unaffiliated third-party Person, subject to compliance
with this Section 8.6; provided, however, that such right may only be
exercised in connection with an election, pursuant to Section 10.01(e)
of the Underlying Partnership Agreement, to liquidate the Underlying
Partnership, in which case the Party whose Affiliate elected such
liquidation shall be the "Portfolio Selling Party" hereunder. If the
Portfolio Selling Party desires to sell the Partnership Properties,
the Portfolio Selling Party shall give the other Party (for purposes of
this Section 8.6, the "Remaining Party") written notice of its desire to
do so (the "Portfolio Offer Notice"), which Portfolio Offer Notice shall
state the aggregate price, measured in dollars and payable solely in
cash or immediately available funds (but which may include a credit for
any existing mortgage debt to be assumed), at which the Properties as
a portfolio, will be offered for sale (the "Portfolio Offer Price").
The Remaining Party shall, within ninety (90) days after its receipt of
the Portfolio Offer Notice, notify the Portfolio Selling Party in
writing whether or not the Remaining Party will purchase the entire
Partnership Interest of the Portfolio Selling Party in the Partnership
for a purchase price equal to the amount that the Portfolio Selling
Party (and the Affiliate of such Portfolio Selling Party that is a
general portion of the Underlying Partnership) would receive if all of
the Properties were sold for cash (including a credit for any mortgage
debt to be assumed if included in the Portfolio Offer Notice) at the
Portfolio Offer Price, and the Partnership were liquidated, on a closing
date set forth in such notice which shall not be less than ten (10) nor
more than thirty (30) days after the date of delivery of the Remaining
Party's response notice. If the Remaining Party does not respond within
the said ninety (90) day period, the Remaining Party shall be deemed
conclusively to have declined to purchase the entire Partnership
Interest of the Portfolio Selling Party in the Partnership as provided
hereinabove and to have consented to the sale of the Properties to an
unaffiliated third-party Person on the terms hereinafter provided. If
the Remaining Party elects to purchase the entire Partnership Interest
of the Portfolio Selling Party in the Partnership, the Portfolio Offer
Notice and the Remaining Party's response notice shall constitute a
binding agreement of purchase and sale between the Portfolio Selling
Party and the Remaining Party and the Partnership Interest sale
transaction shall close on the date stated in the Remaining Party's
response notice. At the closing, the Parties will each execute and
deliver to one another such documents as may be necessary and
appropriate to consummate the transfer of the Selling Party's
Partnership Interest (including, without limitation, an Assignment of
Partnership Interest containing customary indemnity provisions), and the
Remaining Party shall pay to the Selling Party, in cash, the purchase
price for such Partnership Interest. All management agreements for the
Properties and Partnership Property managed by the Property Manager
affiliated with the Portfolio Selling Party shall be automatically
terminated upon the consummation of the sale of such Partnership
Interest.
39
(b) If the Remaining Party does not elect to purchase the
entire Partnership Interest of the Portfolio Selling Party in the
Partnership, the Portfolio Selling Party shall have the right, subject
to this subsection (b), to cause the Partnership to sell the Partnership
Properties for a cash (with a credit for mortgage debt to be assumed)
purchase price equal to or greater than ninety-eight percent (98%) of
the Portfolio Offer Price; provided that, the Partnership Properties
must be listed with an investment banking firm experienced in the sales
of portfolio properties similar to the Partnership Properties for the
highest and best price recommended by such investment banking firm, but
not in any event less than the Project Offer Price. The closing of such
portfolio sale shall occur not later than nine (9) months after the
earlier of (x) the expiration of the Remaining Party's one hundred
twenty (120) day response period provided in subsection (a) above, and
(y) the date that the Remaining Party delivers written notice to the
Selling Party stating that it consents to the sale of the Partnership
Properties on the terms and conditions of this Section 8.6. If the
Portfolio Selling Party does not close such sale within such nine (9)
month period in accordance with the terms hereof, then the Partnership
Properties may not thereafter be sold as a portfolio under this Section
8.6 without again giving notice to the Remaining Party pursuant to
subsection (a) above. The Remaining Party shall cooperate with the
Portfolio Selling Party in order to sell the Partnership Properties on
the terms provided in this Section 8.6.
8.7 Effect of Existing Financing. Notwithstanding anything
in this Agreement to the contrary, the foregoing provisions of this
Article 8 shall not be effective unless, prior to or contemporaneously
with any transaction described herein, the Existing Financing has been
satisfied in full.
ARTICLE 9
Withdrawals; Actions for Partition
9.1 Waiver of Partition. No Partner shall, either directly
or indirectly, take any action to require partition of any Partnership
Properties, and notwithstanding any provisions of applicable law to the
contrary, each Partner hereby irrevocably waives any and all rights it
may have to maintain any action for partition or to compel any sale with
respect to its Partnership Interest or with respect to the Partnership's
interest in the Underlying Partnership, or with respect to any
Partnership Properties, except as expressly provided in this Agreement.
9.2 Covenant Not to Withdraw or Dissolve. Each Partner
hereby covenants and agrees that the Partners have entered into this
Agreement based on their mutual expectation that all Partners will
continue as Partners and carry out the duties and obligations undertaken
by them hereunder and that, except as otherwise expressly required or
permitted hereby, each Partner hereby covenants and agrees not to
(a) take any action to file a certificate of dissolution or its
equivalent with respect to itself, (b) take any action that would cause
a Bankruptcy of such Partner, (c) withdraw or attempt to withdraw from
the Partnership, (d) exercise any power under the Act to dissolve the
Partnership, (e) Transfer all or any portion of its Partnership Interest
40
(other than pursuant to the terms and provisions of Article 6 hereof),
(f) petition for judicial dissolution of the Partnership or permit or
cause the Partnership to cause a dissolution of the Underlying
Partnership, or (g) demand a return of such Partner's contributions or
profits (or a bond or other security for the return of such
contributions or profits) without the unanimous consent of the Partners,
or except as otherwise specifically allowed under this Agreement.
ARTICLE 10
Dissolution, Liquidation, Winding-Up and Termination
10.1 Causes of Dissolution. The Partnership shall be
dissolved upon the first to occur of the following:
(a) January 1, 2095;
(b) The written agreement of the Partners or by any
Party upon the exercise of its call right pursuant to Article 8 of this
Agreement;
(c) The dissolution, termination, retirement, withdrawal
or Bankruptcy of a Partner, unless the business of the Partnership is
continued at the election of other Partners having at least a fifty
percent (50%) Partnership Interest, made by delivery of written notice
to the Partners and the Executive Committee given within ninety (90)
days of the discovery by such other Partners of such dissolution,
termination, retirement, withdrawal or Bankruptcy;
(d) The election of a Non-defaulting Party made at any
time during the continuation of an Event of Default with respect to the
other Party;
(e) The occurrence of any event that makes it unlawful
for the business of the Partnership to be carried on;
(f) The sale or other disposition of all of the
Partnership Properties;
(g) The decree of the dissolution of the Partnership by
a court of competent jurisdiction; and
(h) The failure of the Underlying Partnership to acquire
the Properties on or before April 1, 1998, unless such date is extended
in writing by all Partners.
To the fullest extent permitted by law, the Partners
agree that no act, thing, occurrence, event or circumstance shall cause
or result in the dissolution or termination of the Partnership except as
provided in this Section 10.1.
41
10.2 Winding Up and Liquidation. Upon the dissolution of the
Partnership, the Partnership shall immediately commence to wind up its
affairs, and the Partners or the Liquidator, as the case may be, shall
proceed with reasonable promptness to liquidate the Partnership Assets.
Except as provided below, during the period of the winding up of the
affairs of the Partnership, the rights and obligations of the Partners
set forth in Article 5 with respect to the management and operation of
the Partnership and its business shall continue. Notwithstanding
anything contained in this Agreement to the contrary, if any event
described in Section 10.1(c) shall be continuing with respect to a
Partner of one Party at the time the Partnership is dissolved, a Partner
of the other Party (provided no such event is then continuing with
respect to it), shall be entitled to act as the liquidating Partner
hereunder or to appoint a liquidating trustee (in either event, such
Partner or trustee being referred to herein as the "Liquidator") and
(i) such Liquidator shall be fully empowered to act on behalf of the
Partnership and to wind up the Partnership's affairs and liquidate the
Partnership Properties, and (ii) the Liquidator shall be empowered to
make, perform and implement all Major Decisions hereunder without
obtaining the consent, approval or waiver of any Partner or Person. The
Liquidator shall be entitled to receive reasonable compensation for its
services, and shall be fully indemnified, defended and held harmless by
the Partnership from and against all claims, costs and expenses
(including reasonable attorneys' fees and costs) arising in the course
of it performing its duties hereunder, except for any such claims, costs
or expenses resulting from the gross negligence or wilful misconduct of
the Liquidator. From and after the dissolution of the Partnership, the
Partnership Assets shall be liquidated and reduced to cash or cash
equivalents as soon as practicable and the resulting Net Cash Flow, and
all other Net Cash Flow, shall be applied and distributed in the
following rank and order:
(a) To the payment of creditors of the Partnership
(other than in respect of Default Loans) in the order of priority as
provided by law;
(b) To the establishment and maintenance of a reserve of
cash or other assets of the Partnership to pay contingent liabilities of
the Partnership (other than any Default Loans) in such amounts as may be
reasonably and in good faith determined by the Partners or the
Liquidator, as the case may be;
(c) To repay the principal amount of, and to pay any
interest owing with respect to, any Default Loan; and
(d) To the Partners in accordance with their respective
Percentage Interests.
If, immediately prior to the liquidation of the Partnership in
accordance with the preceding provisions, there shall continue to be
outstanding any principal or accrued interest on any Default Loan (a
"Default Loan Deficiency"), the Noncontributing Party with respect to
such Default Loan shall contribute to the Partnership the amount of such
Default Loan Deficiency, which amount shall immediately thereafter be
42
distributed to the Contributing Party in satisfaction of the Default
Loan.
10.3 Timing Requirements; Deemed Distribution and Re-
contribution. In the event that the Partnership is "liquidated" within
the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and
all distributions to the Partners pursuant to Section 10.2(c) hereof
shall be made no later than the later to occur of (i) the last day of
the taxable year of the Partnership in which such liquidation occurs or
(ii) ninety (90) days after the date of such liquidation. Subject to
the foregoing, a reasonable time shall be allowed for the orderly
winding up of the business and affairs of the Partnership and the
liquidation of its assets in order to minimize any losses otherwise
attendant upon such winding up. Notwithstanding any other provisions of
this Article 10 to the contrary, if the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)(3), but no
dissolution event described in subsections (a) through (h) of Section
10.1 has occurred, the Partnership Properties shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up.
10.4 Sales Receivables. The winding up of the Partnership
shall not be deemed finally completed until the Partnership shall have
received cash payments in full with respect to obligations such as
notes, installment sale contracts and other similar receivables received
by the Partnership in connection with the sale of Partnership
Properties. The Partners or the Liquidator, as the case may be, shall
continue to act to enforce all of the rights of the Partnership pursuant
to any such obligations until paid in full.
10.5 Documentation of Dissolution and Termination. Upon the
dissolution of the Partnership and the appointment of a Liquidator in
accordance with Section 10.2, the Liquidator shall execute, file and
record such certificates, instruments and documents as it shall deem
necessary or appropriate in each state in which the Partnership or its
affiliates do business. Upon the completion of the winding-up of the
Partnership (including the application or distribution of all cash or
other assets placed in reserve in accordance with Section 10.2(b)), the
Partnership shall be terminated and the Partners or the Liquidator, as
the case may be, shall execute, file and record such certificates,
instruments and documents as it shall deem necessary or appropriate in
each state in which the Partnership or its affiliates do business in
order to reflect or effect the termination of the Partnership.
ARTICLE 11
Miscellaneous
11.1 Notices. Notices may be delivered either by private
messenger service, by mail, or facsimile transmission. Any notice or
document required or permitted hereunder to a Partner shall be in
writing and shall be deemed to be given on the date received by the
Partner; provided, however, that all notices and documents mailed to a
Partner in the United States Mail, postage prepaid, certified mail,
43
return receipt requested, addressed to the Partner at its respective
address as shown in the records of the Partnership, shall be deemed to
have been received five (5) days after mailing and provided further,
that the sender of any such notice or document by facsimile transmission
shall bear the burden of proof as to proper transmission and date of
transmission of such facsimile. The address and the telecopier number
of each of the Partners shall for all purposes be as set forth at
Section 2.1 unless otherwise changed by the applicable Partner by notice
to the other as provided herein.
11.2 Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall
be binding upon and inure to the benefit of the Partners and their
respective permitted successors, transferees, and assigns.
11.3 Construction of Agreement. As used herein, the singular
shall be deemed to include the plural, and the plural shall be deemed to
include the singular, and all pronouns shall include the masculine,
feminine and neuter, whenever the context and facts require such
construction. The headings, captions, titles and subtitles herein are
inserted for convenience of reference only and are to be ignored in any
construction of the provisions hereof. Except as otherwise indicated,
all section and exhibit references in this Agreement shall be deemed to
refer to the sections and exhibits of and to this Agreement, and the
terms "herein", "hereof", "hereto", "hereunder" and similar terms refer
to this Agreement generally rather than to the particular provision in
which such term is used. Whenever the words "including", "include" or
"includes" are used in this Agreement, they shall be interpreted in a
non-exclusive manner as though the words "but [is] not limited to"
immediately followed the same. Time is of the essence of this
Agreement. The language in all parts of this Agreement shall in all
cases be construed simply according to the fair meaning thereof and not
strictly against the party which drafted such language. Except as
otherwise provided herein, references in this Agreement to any
agreement, articles, by-laws, instrument or other document are to such
agreement, articles, by-laws, instrument or other document as amended,
modified or supplemented from time to time.
11.4 Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall
not affect the validity or legality of the remainder of this Agreement.
11.5 Incorporation by Reference. The Glossary of Defined
Terms and every exhibit, schedule, and other appendix attached to this
Agreement and referred to herein is incorporated in this Agreement by
reference.
11.6 Further Assurances. Each of the Partners shall hereafter
execute and deliver such further instruments and do such further acts
and things as may be required or useful to carry out the intent and
purpose of this Agreement and as are not inconsistent with the terms
hereof.
44
11.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to any conflict of laws rules thereof.
11.8 Counterpart Execution. This Agreement may be executed in
any number of counterparts with the same effect as if all of the
Partners had signed the same document. All counterparts shall be
construed together and shall constitute one agreement.
11.9 Loans. Any Partner may, with the approval of the
Executive Committee or as otherwise provided by this Agreement, lend or
advance money to the Partnership. If any Partner shall make any loan or
loans to the Partnership, the amount of any such loan or advance shall
not be treated as a contribution to the capital of the Partnership but
shall be a debt due from the Partnership. Except as otherwise provided
herein, no Partner shall be obligated to make any loan or advance to the
Partnership.
11.10 No Third Party Rights. This Agreement is intended
to create enforceable rights between the parties hereto only, and
creates no rights in, or obligations to, any other Persons whatsoever.
Without limiting the generality of the foregoing, as to any third party,
a deficit capital account of a Partner shall not be deemed to be a
liability of such Partner nor an asset or property of the Partnership.
11.11 Estoppel Certificates. Upon the written request of
a Partner, the other Partner shall, within fifteen (15) days of its
receipt of such request, execute and deliver a written statement
certifying: (a) that this Agreement is unmodified and in full force and
effect (or, if modified, that this Agreement is in full force and effect
as modified and, stating any and all modifications), (b) no Event of
Default has occurred with respect to such Partner that has not been
cured and, to its actual knowledge, no Event of Default has occurred
with respect to the requesting Partner that has not been cured, in each
case except as specified in such statement and, (c) that to its actual
knowledge, no event has occurred which with the passage of time or the
giving of notice, or both, would ripen into an Event of Default
hereunder, except as specified in such statement.
11.12 Usury. If any return, interest payment, or other
charge payable under this Agreement shall at any time exceed the maximum
amount chargeable by applicable law, then the applicable rate of return
or interest shall be the maximum rate permitted by applicable law.
11.13 Business Day. "Business Day" or "business day"
means any calendar day except Saturday, Sunday, or a federal or State of
Delaware legal holiday.
11.14 Proposing and Adopting Amendments. Amendments to
this Agreement may be proposed by any Executive Committee Member by his
submitting to the Executive Committee a verbatim statement of the
proposed amendment, and such Executive Committee Member shall include in
any such submission a recommendation as to the proposed amendment. A
proposed amendment shall be adopted and be effective as an amendment
45
hereto upon the approval of the Executive Committee and its mutual
execution and delivery by the Partners. This Agreement may be amended
only upon the written agreement of both Partners, and no provision
benefiting a Partner may be waived, except by a written instrument
signed by the Partner. The giving of consent by any Partner to any
action by another Partner in any one instance shall not limit or waive
the necessity to obtain such Partner's consent in any future instance.
11.15 Partners Not Agents. Nothing contained herein shall
be construed to constitute any Partner the agent of another Partner,
except as otherwise expressly provided herein, or in any manner to limit
the Partners in the carrying on of their own respective businesses or
activities.
11.16 Entire Understanding; Etc. This Agreement
constitutes the entire agreement and understanding among the Partners,
and supersedes any prior or contemporaneous understandings and/or
written or oral agreements among them, respecting the subject matter of
this Agreement.
11.17 Action Without Dissolution. To the fullest extent
permitted by law, each Partner shall be entitled to maintain, on its own
behalf or on behalf of the Partnership, any action or proceeding against
any other Partner or the Partnership (including an action for damages,
specific performance, or injunctive or declaratory relief) for or by
reason of the tortious conduct of such party or the breach by such party
of this Agreement or any other agreement entered into with such party in
connection with the transactions contemplated hereunder, and the
bringing of such action or proceeding shall not cause or require the
dissolution of the Partnership or an accounting of the Partnership's
assets or affairs.
11.18 Attorneys' Fees. In the event of any litigation
between Partners by reason of a breach hereunder, or to enforce or
interpret any provision, right or obligation hereunder, the unsuccessful
party or parties to such litigation covenants and agree to pay the
successful party or parties all costs and expenses reasonably incurred,
including reasonable attorneys' fees. For the purpose of this
Agreement, the term "attorneys' fees" and "attorneys' fees and costs"
shall mean the fees and expenses of counsel to the parties hereto, which
may include printing, photostating, duplicating and other expenses, air
freight charges and fees billed for law clerks, paralegals, librarians
and others not admitted to the bar but performing services under the
supervision of any attorney. Such term shall also include all such fees
and expenses incurred with respect to appeals and bankruptcy
proceedings, and whether or not any action or proceeding is brought with
respect to the matter for which said fees and expenses were incurred.
11.19 Waiver of Jury Trial. To the fullest extent
permitted by law, each Partner hereby waives trial by jury in any
action, proceeding or counterclaim brought by a Partner or the
Partnership with respect to any matter whatsoever arising out of or in
any way connected with this Agreement, the relationship of the Partners,
any claim of injury or damage relating to any of the foregoing, or the
enforcement of any remedy under any statute with respect thereto.
46
11.20 Confidentiality. The terms of this Agreement, any
non-public details of the transactions contemplated hereby, any
financial, marketing or other information delivered or produced pursuant
to the terms of this Agreement not generally disclosed to the public,
the trade, or creditors, and any non-public information regarding any
other Partner or any of its Affiliates learned as a result of the
partnership relationship created by this Agreement, shall not be
disclosed by any Partner (or any of its Affiliates) to any Person other
than its Affiliates, directors, officers, trustees, employees, partners,
attorneys and agents of such Partner and their affiliates, except as may
be required by any regulatory authority having jurisdiction or by any
applicable law, regulation, ordinance or order, and except as otherwise
required to carry out the intent of this Agreement.
11.21 Press Releases. Each Partner agrees to refrain from
generating or participating in any publicity statement, press release,
or other public notice regarding the formation of this Partnership or
the identification of its Partners, the acquisition, disposition or
financing of the Properties by the Partnership or any other business or
affairs of the Partnership. All publicity statements, press releases or
other public notices relating to the formation of this Partnership or
the identification of its Partners, the acquisition, disposition or
financing of the Properties by the Partnership or any other business or
affairs of the Partnership must be approved by the Executive Committee.
Upon the full execution of the Purchase Agreement, the Partners shall
issue a joint press release in a form acceptable to both Partners.
11.22 Existing Financing. The Partners hereby acknowledge
and agree that the Underlying Properties shall be acquired by the
Underlying Partnership subject to, and the Underlying Partnership shall
assume, the Existing Financing and that the acquisition of the
Properties subject to such Existing Financing is subject to the approval
of the Rating Agencies (▇▇▇▇▇'▇ Investors Service, Inc. and Fitch
Investors Service, L.P.). Each of the Partners hereby agrees to execute
any commercially reasonable amendment to this Agreement reasonably
required by such Rating Agencies in connection with such approval.
11.23 Consents; Approvals. Unless otherwise herein
provided, in any instance in which any Partner, any Executive Committee
Member or any Operating Committee Member shall be requested to consent
to or approve of any matter with respect to which such Person's consent
or approval is required by any of the provisions of this Agreement, such
consent (or refusal to consent) or approval (or disapproval) shall be
given in writing, and such consent or approval shall not be unreasonably
withheld or delayed unless this Agreement with respect to a particular
consent or approval shall expressly provide that the same may be given
or refused in the sole judgment or discretion of such Partner, Executive
Committee Member or Operating Committee Member, as applicable.
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47
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date and year first above written.
GENERAL PARTNERS
MACERICH EQ GP CORP.,
a Delaware corporation
By:
Its:
SDG EQ ASSOCIATES, INC.,
a Delaware corporation
By:
Its:
LIMITED PARTNERS
MACERICH EQ LIMITED PARTNERSHIP,
a California limited partnership
By: MACERICH EQ GP CORP.,
a Delaware corporation,
its General Partner
By:
Its:
SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: SDG EQ ASSOCIATES, INC.,
a Delaware corporation,
its General Partner
By:
Its: Chief Executive Officer
GLOSSARY OF DEFINED TERMS
"Accountants" shall mean the firm or firms of independent certified
public accountants selected by the Partners on behalf of the Partnership
to audit the books and records of the Partnership and to prepare
statements and reports in connection therewith.
"Act" shall mean the Delaware Uniform Partnership Act, as the same
may hereafter be amended or supplemented from time to time and any
successor thereto.
"Additional Capital Contributions" is defined in Section 2.3.
"Affected Gain" is defined in the Allocations Exhibit.
"Affiliate" shall mean any Entity which directly or indirectly
through one or more intermediaries, Controls, is Controlled by, or is
under common Control with, any Person and shall include in the case of
Macerich and MSPE, Macerich Property Management Company, a California
corporation and Macerich Management Company, a California corporation,
and in the case of SDG and SSPE shall include M.S. Management
Associates, Inc., a Delaware corporation, and its subsidiaries.
"Agreement" shall mean this Partnership Agreement.
"Allocations Exhibit" shall mean Exhibit A.
"Annual Budget" is defined in Section 5.7(a).
"Audited Financial Statements" shall mean financial statements
(balance sheets, statement of income, statement of partners' equity and
statement of cash flows) prepared in accordance with generally accepted
accounting principles and accompanied by an independent auditor's
report.
"Bankruptcy" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code or any other federal
or state law relating to insolvency, bankruptcy or reorganization;
(ii) an adjudication that such Partner is insolvent or bankrupt;
(iii) the entry of an order for relief under the federal Bankruptcy Code
with respect to such Partner; (iv) the filing of any such petition or
the commencement of any such case or proceeding against such Partner,
unless such petition and the case or proceeding initiated thereby are
dismissed within ninety (90) days from the date of such filing; (v) the
filing of an answer by such Partner admitting the material allegations
of any such petition; (vi) the appointment of a trustee, receiver or
custodian for all or substantially all of the assets of such Partner
unless such appointment is vacated or dismissed within ninety (90) days
from the date of such appointment but not less than five (5) days before
the proposed sale of any assets of such Partner; (vii) the insolvency of
such Partner or the execution by such Partner of a general assignment
for the benefit of creditors; (viii) the convening by such Partner of a
meeting of its creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or composition of its debts;
(ix) the failure of such Partner to pay its debts as they mature;
(x) the levy, attachment, execution or other seizure of substantially
all of the assets of such Partner where such seizure is not discharged
within thirty (30) days thereafter; or (xi) the admission by such
Partner in writing of its inability to pay its debts as they mature or
that it is generally not paying its debts as they become due.
"Base Rate" is defined in Section 2.4(a).
"Budget" and "Budgets" is defined in Section 5.7(a).
"Budgeted Capital Items" shall mean capital expenditures set forth
in a Budget for any of the Properties.
"Business Day" is defined in Section 11.13.
"Buy-Sell Closing" is defined in Section 7.3(a).
"Buy-Sell Major Decision" shall mean a decision to sell, finance,
refinance, expand or renovate a Property involving an expenditure or
commitment by the Partnership in the case of an expansion or renovation
of not less than $10,000,000.
"Call Closing" is defined in Section 8.3.
"Call Dissolution Meeting" is defined in Section 8.2.
"Call Notice" is defined in Section 8.1.
"Call Property" is defined in Section 8.2.
"Capital Account" is defined in the Allocations Exhibit.
"Capital Contribution" shall mean, with respect to any Partner, the
amount of money and initial Gross Asset Value of any property other than
money contributed to the Partnership with respect to the Partnership
Interest held by such Partner (net of liabilities to which such property
is subject).
"Cash Flow Shortfalls" shall mean the excess, if any, of (a) the
sum (without duplication) of all operating or other cash expenditures
paid by the Partnership (other than capital expenditures of any nature),
plus all payments of principal, interest, fees and related costs made by
the Partnership with respect to Partnership indebtedness (including all
such payments, fees and costs paid in connection with the Existing
Financing), plus all additions to Partnership reserves established in
accordance with this Agreement], over (b) all cash revenues and funds
received by the Partnership from any and all sources, including
reductions of Partnership reserves established in accordance with this
Agreement, but excluding security deposit and other refundable deposits
unless and until earned or applied. Non-cash allowances such as
depreciation, amortization, cost recovery deductions, or similar items
shall not be considered when calculating Cash Flow Shortfalls.
"Closing Funding Requirement" is defined in Section 2.2(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Contributing Party" is defined in Section 2.3(c).
"Control" shall mean the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise,
to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the
power to remove and then select, a majority of those persons exercising
governing authority over an Entity. In the case of a limited
partnership, the sole general partner, all of the general partners to
the extent each has equal management control and authority, or the
managing general partner or managing general partners thereof shall be
deemed to have control of such partnership and, in the case of a trust,
any trustee thereof or any Person having the right to select any such
trustee shall be deemed to have control of such trust. The terms
"Controls" and "Controlled" shall have correlative meanings.
"Controlling Party" is defined in Section 5.14(c).
"Date of Value" is defined in Section 7.1.
"Default Loan" is defined in Section 2.4(a).
"Default Loan Deficiency" is defined in Section 10.2.
"Defaulting Party" is defined in Section 5.14(a).
"Depreciation" is defined in the Allocations Exhibit.
"Designated Property" is defined in Section 8.3.
"Due Diligence Formation and Acquisition Costs" is defined in
Section 2.2(b).
"Entity" shall mean any general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business
trust, cooperative or association.
"Escrow Agent" shall mean the "Escrow Agent" under and defined in
the Purchase Agreement.
"Escrow Closing Requirement" is defined in Section 2.2(b).
"Equitable" shall mean The Equitable Life Assurance Society of the
United States, a New York corporation, the "seller" of the Properties
under the Purchase Agreement.
"Event of Default" is defined in Section 5.14(a).
"Executive Committee" is defined in Section 5.1.
"Executive Committee Members" is defined in Section 5.1.
"Exercising Party" is defined in Section 8.1.
"Exercising Party's Property" and "Exercising Party's Properties"
are defined in Section 8.2.
"Existing Financing" shall mean that certain financing with respect
to all of the Properties evidenced by those certain collateralized fixed
and floating rate notes in the aggregate principal sum of $485,000,000
issued by Equitable, which notes are secured by, inter alia, those
documents and instruments more particularly described on Exhibit B to
the Purchase Agreement.
"Fiscal Year" is defined in the Allocations Exhibit.
"Funds from Operations" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization (excluding depreciation on personal
property and amortization of loan and financial instrument costs), and
after adjustments for unconsolidated entities. Adjustments for
unconsolidated entities are calculated at the same basis.
"Glossary of Defined Terms" is defined in the preamble paragraph to
this Agreement.
"Gross Asset Value" is defined in the Allocations Exhibit.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, parents, parents-in-law, descendants, nephews,
nieces, brothers, sisters, brothers-in-law, sisters-in-law and children-
in-law.
"Indemnitee" means (i) any Person that is (A) a Partner, (B) an
Executive Committee Member, (C) an Operating Committee Member or (D) a
director, officer, employee, trustee, agent or representative of a
Partner, and (ii) such other Persons (including Affiliates of a Partner
or the Partnership) as the Partners may mutually designate from time to
time.
"Initial Capital Contributions" is defined in Section 2.2.
"Initial Reserve Requirement" is defined in Section 2.2(b).
"Initiating Party" is defined in Section 7.1.
"Interim Operating Budget" is defined in Section 5.7(a).
"Lien" shall mean any liens, security interests, mortgages, deeds
of trust, charges, claims, encumbrances, pledges, options, rights of
first offer or first refusal and any other rights or interests of others
of any kind or nature, actual or contingent, or other similar
encumbrances of any nature whatsoever.
"Liquidator" is defined in Section 10.2.
"Loan Default Transferee" is defined in Section 6.3(c).
"Loan Default Transfer Notice" is defined in Section 6.3(c).
"Macerich" is defined in the Introduction to this Agreement.
"Macerich Management Agreement" is defined in Section 5.5.
"Major Decision" is defined in Section 5.1(c).
"Minimum Gain Attributable to Partner Nonrecourse Debt" is defined
in the Allocations Exhibit.
"Net Cash Flow" means with respect to any period, the excess, if
any, of (a) all cash revenues and funds received by the Partnership from
any and all sources during such period, including reductions of
Partnership reserves established in accordance with this Agreement, but
excluding security deposit and other refundable deposits unless and
until earned or applied, over (b) the sum (without duplication) of all
capital, operating or other cash expenditures of the Partnership paid
during such period, plus all payments of principal, interest, fees and
related costs with respect to Partnership indebtedness made during such
period (including all such payments, fees and costs paid in connection
with the Existing Financing), plus all additions to Partnership reserves
established in accordance with this Agreement. Net Cash Flow shall not
be reduced by depreciation, amortization, cost recovery deductions, or
similar non-cash allowances.
"Net Income or Net Loss" is defined in the Allocations Exhibit.
"Non-Competition Area" is defined in Section 1.8(b).
"Noncontributing Party" is defined in Section 2.3(c).
"Non-defaulting Party" is defined in Section 5.14(a).
"Non-Exercising Party" is defined in Section 8.1.
"Non-Exercising Party's Property" and "Non-Exercising Party's
Properties" are defined in Section 8.2.
"Nonproposing Party"is defined in Section 1.8(b).
"Nonrecourse Deductions" is defined in the Allocations Exhibit.
"Nonrecourse Liabilities" is defined in the Allocations Exhibit.
"Offering Notice" is defined in Section 7.1.
"Operating Committee" is defined in Section 5.3.
"Operating Committee Members" is defined in Section 5.3.
"Operating Partnership" shall mean, in the case of SDG, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Group, L.P., a Delaware limited partnership, and in the case
of Macerich, The Macerich Partnership, L.P., a Delaware limited
partnership, as well as their successors by consolidation or other
combination with or into another Person.
"Original Approved Pre-Closing Budget" is defined in Section
2.2(c).
"Other Interests" is defined in Section 1.8(a).
"Partner Nonrecourse Deductions" is defined in the Allocations
Exhibit.
"Partner Nonrecourse Debt" is defined in the Allocations Exhibit.
"Partner" shall mean Macerich, MSPE, SDG and SSPE, and their
permitted successors and assigns that are admitted as Partners,
individually.
"Partners" shall mean Macerich MSPE, SDG and SSPE, and their
permitted successors and assigns that are admitted as Partners.
"Partnership" shall mean the partnership hereby constituted, as
such partnership may from time to time be constituted.
"Partnership Interest" shall mean an ownership interest of a
Partner in the Partnership from time to time, including such Partner's
Percentage Interest and such Partner's Capital Account, and any and all
other benefits to which the holder of such Partnership Interest may be
entitled as provided in this Agreement, together with all obligations of
such Person to comply with the terms of this Agreement.
"Partnership Interest Loan" is defined in Section 6.3(a).
"Partnership Interest Loan Default Notice" is defined in Section
6.3(d).
"Partnership Interest Loan Obligations" is defined in Section
6.3(a).
"Partnership Minimum Gain" is defined in the Allocations Exhibit.
"Partnership Properties" shall mean any tangible or intangible
property hereafter acquired by the Partnership.
"Party" and "Parties" are defined in Section 1.1.
"Percentage Interest" is defined in Section 2.1.
"Permitted Transfers" is defined in Section 6.1(b).
"Person" shall mean any individual or Entity.
"Pledging Partner" is defined in Section 6.3(a)(xi).
"Portfolio Offer Notice" is defined in Section 8.6(a).
"Portfolio Offer Price" is defined in Section 8.6(a).
"Portfolio Selling Party" is defined in Section 8.6(a).
"Principal Office" is defined in Section 1.4.
"Property" shall mean any of the Properties individually.
"Properties" shall mean , collectively, the Partnership Properties
and the Underlying Properties.
"Property Manager" shall mean the property manager for any
particular Property engaged pursuant to a Macerich Management Agreement
or SDG Management Agreement, as the case may be, as well as any property
manager approved by the Executive Committee, pursuant to Section
5.1(c)(ii), with respect to any Partnership Property.
"Proposal" is defined in Section 1.8(b).
"Proposing Party" is defined in Section 1.8(b).
"Purchase Agreement" shall mean that certain Purchase and Sale
Agreement by and between Equitable and SM Portfolio Partners, which
provides for the sale of the Properties by Equitable to SM Portfolio
Partners, subject to the Existing Financing.
"Purchase Price" is defined in Section 7.1.
"Purchasing Party" is defined in Section 7.2.
"REIT" is defined in Section 1.3.
"Real Estate Activity" is defined in Section 1.8(b).
"Regulations" shall mean the final, temporary or proposed Income
Tax Regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of
succeeding regulations).
"Regulatory Allocations" is defined in the Allocations Exhibit.
"Related Persons" is defined in Section 1.8.
"Remaining Party" is defined in Section 8.6(a).
"Responding Party" is defined in Section 7.1.
"SDG" is defined in the Introduction to this Agreement.
"SDG Management Agreement" is defined in Section 5.5.
"Subject Property" is defined in Section 7.1.
"Tax Item" is defined in the Allocations Exhibit.
"Term" is defined in Section 1.5.
"Transfer" means, as a noun, any voluntary or involuntary transfer,
sale, other disposition, hypothecation or encumbrance, and, as a verb,
voluntarily or involuntarily to transfer, sell, otherwise dispose of,
hypothecate or encumber.
"Transferee" is defined in Section 6.2.
"Underlying Partnership" shall mean SDG Macerich Properties, L.P.,
a Delaware limited partnership, which owns the Properties.
"Underlying Properties" shall mean the real properties to be
acquired by the Underlying Partnership pursuant to the Purchase
Agreement, each of which real properties is more specifically identified
and defined on Schedule 4 attached hereto, together with all other
tangible and intangible property to be acquired by the Underlying
Partnership pursuant to the Purchase Agreement.
"Unrealized Gain" is defined in the Allocations Exhibit.
"Unrealized Loss" is defined in the Allocations Exhibit.
EXHIBIT A
Allocations Exhibit
Each Capitalized term used in this Allocations Exhibit either is
defined in the Glossary of Defined Terms to the Agreement or in Section
5 of this Allocations Exhibit.
1. Capital Accounts.
1.1 Establishment and Maintenance of Capital Accounts. The
Partnership shall establish and maintain for each Partner a separate
account ("Capital Account") in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv) and this Allocations Exhibit. The Capital
Account of each Partner shall be increased by (i) the amount of all
Capital Contributions and any other contributions made by such Partner
to the Partnership pursuant to the Agreement, (ii) the amount of Net
Income allocated to such Partner pursuant to Section 2.1 of this
Allocations Exhibit, and (iii) the amount of any other items of income
or gain specially allocated to such Partner pursuant to Section 3 of
this Allocations Exhibit. The Capital Account of each Partner shall be
decreased by (i) the amount of cash or Gross Asset Value (net of any
liabilities to which the Partnership Assets distributed are subject) of
any distributions of cash or property made to such Partner pursuant to
the Agreement, (ii) the amount of Net Loss allocated to such Partner
pursuant to Section 2.2 of this Allocations Exhibit, and (iii) the
amount of any other items of deduction or loss specially allocated to
such Partner pursuant to Section 3 of this Allocations Exhibit. The
initial balance of each Partner's Capital Account shall equal the amount
of such Partner's Capital Contribution to the Partnership on the date
hereof as described in Article 2 of the Agreement. The Capital Accounts
of each Partner shall be increased or decreased to reflect the
revaluation of Partnership Assets under Section 1.3 of this Allocations
Exhibit.
1.2 Transferees. Generally, a transferee (including any assignee)
of a Partnership Interest shall succeed to a pro rata portion of the
Capital Account of the transferor; provided, however, that, if the
transfer causes a termination of the Partnership under Section
708(b)(1)(B) of the Code, the Partnership's properties and liabilities
shall be deemed, solely for federal income tax purposes, to have been
contributed to a new Partnership in exchange for an interest in the new
Partnership, and the terminated Partnership distributes interests in the
new Partnership to the purchasing Partner and the other remaining
Partners in proportion to their respective Percentage Interests in
liquidation of the terminated Partnership. In such event, the Gross
Asset Values of the Partnership properties shall be adjusted immediately
prior to such deemed contribution pursuant to Section 1.3(b) of this
Allocations Exhibit. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of
this Allocations Exhibit.
1.3 Revaluations of Partnership Assets.
(a) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in this Section 1.3, the
Gross Asset Values of all Partnership Assets shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership Assets, as of the times of
the adjustments provided in Section 1.3(b) of this Allocations
Exhibit, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property and allocated
pursuant to this Allocations Exhibit.
(b) Such adjustments shall be made as of the following times:
(i) immediately prior to the acquisition of an additional interest
in the Partnership, after the date hereof, by any new or existing
Partner in exchange for more than a de minimis Capital
Contribution; (ii) immediately prior to the distribution by the
Partnership to a Partner of more than a de minimis amount of
property as consideration for an interest in the Partnership; and
(iii) immediately prior to the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (i) and
(ii) above shall be made only if the Partners determine that such
adjustments are necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership.
(c) In accordance with Regulations Section 1.704-
1(b)(2)(iv)(e) the Gross Asset Value of Partnership Assets
distributed in kind shall be adjusted upward or downward to reflect
any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as of the time any such asset is distributed.
(d) In determining Unrealized Gain or Unrealized Loss for
purposes of this Allocations Exhibit, the aggregate cash amount and
fair market value of all Partnership Assets (including cash or cash
equivalents) shall be determined by the Partners using such
reasonable methods of valuation as they may adopt, or in the case
of a liquidating distribution pursuant to Article 10 of the
Agreement, be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The Partners, or
the Liquidator, as the case may be, shall allocate such aggregate
value among the assets of the Partnership (in such manner as it
determines in its sole and absolute discretion necessary to arrive
at a fair market value for individual properties).
1.4 Compliance with Regulations. The provisions of this
Allocations Exhibit 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 Partners shall determine that it is prudent to modify
the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or
which are assumed by the Partnership, or any of the Partners), are
computed in order to comply with such Regulations, the Partners may make
such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Person pursuant to Article 10
of the Agreement upon the dissolution of the Partnership. The Partners
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Partners and the
amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations
Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause
the Agreement and this Allocations Exhibit not to comply with
Regulations Section 1.704-(b).
2. Allocation of Net Income and Net Loss. After giving effect to the
special allocations set forth in Section 3 of this Allocations Exhibit,
Net Income and Net Loss for any Fiscal Year or other applicable period
shall be allocated to the Partners in accordance with their respective
Percentage Interests.
3. Special Allocations.
Notwithstanding any other provision of the Agreement or this
Allocations Exhibit, the following special allocations shall be made in
the following order:
3.1 Minimum Gain Chargeback. Notwithstanding any other provisions
of this Allocations Exhibit, 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 year (and, if
necessary, subsequent years) in an amount equal to such Partner's share
of the net decrease in Partnership Minimum Gain, as determined under
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Section
1.704-2(f)(6). This Section 3.1 is intended to comply with the minimum
gain chargeback requirements of Regulations Section 1.704-2(f) and shall
be interpreted consistently therewith.
3.2 Partner Minimum Gain Chargeback. Notwithstanding any other
provision of this Allocations Exhibit (except Section 3.1), if there is
a net decrease in Minimum Gain Attributable to a Partner Nonrecourse
Debt during any Fiscal Year, each Partner who has a share of the
Partnership Minimum Gain Attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall
be specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain
Attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(5). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations
Section 1.704-2(i)(4). This Section 3.2 is intended to comply with the
minimum gain chargeback requirements of Regulations Section 1.704-
2(i)(4) and shall be interpreted consistently therewith.
3.3 Interest on Default Loans. Interest Deductions with respect
to any Default Loan shall be allocated to the Noncontributing Partner
with respect to such Default Loan.
3.4 Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the
Partner who bears the economic risk of loss, under Regulations Section
1.704-2(i)(1), with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(2).
3.5 Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership Asset pursuant to Section 732,
734 or 743 of the Code is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item
of gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.
3.6 Curative Allocations. The allocations set forth in Sections
3.1, 3.2, 3.3 and 3.5 (the "Regulatory Allocations") are intended to
comply with certain requirements of Regulations Sections 1.704-1(b) and
1.704-2. Notwithstanding any provisions of Sections 2 and 3 to the
contrary (other than the Regulatory Allocations), the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Partners so that, to the
extent possible, the cumulative net amount for the allocations of
Partnership items under Sections 2 and 3 hereof shall be equal to the
net amount that would have been allocated had the Regulatory Allocations
not occurred. This Section 3.8 is intended to minimize to the extent
possible and to the extent necessary any economic distortions which may
result from application of the Regulatory Allocations and shall be
interpreted in a manner consistent therewith.
4. Allocations for Tax Purposes.
4.1 Generally. Except as otherwise provided in this Section 4,
for federal income tax purposes, each item of income, gain, loss and
deduction (a "Tax Item") shall be allocated among the Partners in the
same manner as its correlative item of "book" income, gain, loss or
deduction is allocated among the Partners pursuant to Sections 2 and 3
of this Allocations Exhibit.
4.2 Sections 1245/1250 Recapture. If any portion of gain from the
sale of property is treated as gain which is ordinary income by virtue
of the application of Code Sections 1245 or 1250 ("Affected Gain"), then
(i) such Affected Gain shall be allocated among the Partners in the same
proportion that the depreciation and amortization deductions giving rise
to the Affected Gain were allocated and (ii) other Tax Items of gain of
the same character that would have been recognized, but for the
application of Code Sections 1245 and/or 1250, shall be allocated away
from those Partners who are allocated Affected Gain pursuant to
Clause (i) so that, to the extent possible, the other Partners are
allocated the same amount and type, of capital gain that would have been
allocated to them had Code Sections 1245 and/or 1250 not applied. For
purposes hereof, in order to determine the proportionate allocations of
depreciation and amortization deductions for each Fiscal Year or other
applicable period, such deductions shall be deemed allocated on the same
basis as Net Income and Net Loss for such period.
4.3 Tax Allocations: Code Section 704(c). In accordance with
Code Section 704(c) and the Regulations promulgated thereunder, 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 the event the Gross
Asset Value of any Partnership asset is adjusted pursuant to Section 1.3
of this Allocations Exhibit, 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 to the Partnership
for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations promulgated
thereunder. Without limiting the foregoing, the Partners shall allocate
income, gain, loss and deduction with respect to any property acquired
as of the date hereof, the adjusted basis of which differs from its
Gross Asset Value, among the Partners on a property by property basis,
subject to the application of the "ceiling limitation," in accordance
with Regulations Section 1.704-3(b). The Partners shall allocate
income, gain, loss and deduction with respect to any property acquired
after the date hereof, the adjusted basis of which differs from its
Gross Asset Value, among the Partners under any method the they may
elect, so long as such method is set forth in the Regulations
promulgated under Section 704(c) of the Code on the date such property
is acquired.
5. Definitions.
"Affected Gain" is defined in Section 4.2.
"Depreciation" means, for each Fiscal Year, an amount equal to
the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year, except that if
the Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such Fiscal Year,
Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction for such Fiscal Year bears
to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined
with reference to such beginning Gross Asset Value using any reasonable
method selected by the Partners.
"Fiscal Year" means each calendar year, or partial calendar
year, occurring during the term of the Partnership, or such other Fiscal
Year as may be adopted by the Executive Committee from time to time.
"Gross Asset Value" means, with respect to any 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 a Partnership shall be the gross fair market value of
such asset on the date of contribution to the Partnership, as
determined by the Partners;
(ii) the Gross Asset Values of all Partnership
Assets shall be adjusted in accordance with Section 1.3
of this Allocations Exhibit; and
(iii) the Gross Asset Value of an asset shall be
adjusted each Fiscal Year by the Depreciation with
respect to such asset taken into account for purposes of
computing Net Income and Net Loss for such year.
"Minimum Gain Attributable to Partner Nonrecourse Debt" shall
mean "partner nonrecourse debt minimum gain" as determined in accordance
with Regulation Section 1.704-2(i)(2).
"Net Income or Net Loss" shall mean, for each Fiscal Year or
other applicable period, an amount equal to the Partnership's taxable
income or loss for such year or period, determined in accordance with
Section 703(a) of the Code (for this purpose, all items of income, gain,
loss or deduction required to be stated separately pursuant to Section
703(a) of the Code shall be included in taxable income or loss), with
the following adjustments:
(i) The computation of all items of income, gain,
loss and deduction shall be made without regard to the
fact that items described in Sections 705(a)(1)(B) or
705(a)(2)(B) of the Code are not includable in gross
income or are neither currently deductible nor
capitalized for federal income tax purposes;
(ii) Any income, gain or loss attributable to the
taxable disposition of any Partnership property shall be
determined as if the adjusted basis of such property as
of such date of disposition were equal in amount to the
Partnership's Gross Asset Value with respect to such
property as of such date;
(iii) 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;
(iv) In the event the Gross Asset Value of any
Partnership property is adjusted to reflect any
Unrealized Gain or Unrealized Loss with respect to such
property pursuant to Section 1.3 hereof, the amount of
any such Unrealized Gain or Unrealized Loss shall be
taken into account as gain or loss from the disposition
of such property; and
(v) Any items specially allocated under Article 3
of this Allocations Exhibit shall not be taken into
account.
"Nonrecourse Deductions" shall have the meaning set forth in
Sections 1.704-2(b)(1) and (c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set forth in
Section 1.752-1(a)(2) of the Regulations.
"Partner Nonrecourse Deductions" shall have the meaning set
forth in Section 1.704-2(i)(1) of the Regulations.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partnership Minimum Gain" shall have the meaning set forth in
Sections 1.704-2(b)(2) and (d)(1) of the Regulations.
"Tax Item" is defined in Section 4.1 of this Allocations
Exhibit.
"Unrealized Gain" means, with respect to any Partnership
property as of any particular date, the excess of (i) the gross fair
market value of such property on such date as determined in accordance
with Section 1.3 of this Allocations Exhibit, over (ii) the Gross Asset
Value of such property to the Partnership on such date.
"Unrealized Loss" means, with respect to any Partnership
property as of any particular date, the excess of (i) the Gross Asset
Value of such property to the Partnership on such date, over (ii) the
gross fair market value of such property on such date, as determined in
accordance with Section 1.3 of this Allocations Exhibit as of such date.
SCHEDULE 1
ORIGINAL APPROVED PRE-CLOSING BUDGET
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.
SCHEDULE 2
MACERICH MANAGED PROPERTIES
1. Empire East
Sioux Falls, South Dakota
2. Empire Mall
Sioux Falls, South Dakota
3. Lindale Mall
Cedar Rapids, Iowa
4. Mesa Mall
Grand Junction, Colorado
5. Rushmore Mall
Rapid City, South Dakota
6. Southern Hills Mall
Sioux City, Iowa
7. Southridge Mall
Des Moines, Iowa
SCHEDULE 3
SDG MANAGED PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Granite Run Mall
Media, Pennsylvania
3. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
4. NorthPark Mall
Davenport, Iowa
5. SouthPark Mall
Moline, Illinois
6. Valley Mall
Harrisonburg, Virginia
SCHEDULE 4
LIST OF PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Empire East
Sioux Falls, South Dakota
3. Empire Mall
Sioux Falls, South Dakota
4. Granite Run Mall
Media, Pennsylvania
5. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
6. Lindale Mall
Cedar Rapids, Iowa
7. Mesa Mall
Grand Junction, Colorado
8. NorthPark Mall
Davenport, Iowa
9. Rushmore Mall
Rapid City, South Dakota
10. Southern Hills Mall
Sioux City, Iowa
11. SouthPark Mall
Moline, Illinois
12. Southridge Mall
Des Moines, Iowa
13. Valley Mall
Harrisonburg, Virginia
SCHEDULE 5
NONCOMPETITION AREA
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.