EXHIBIT 10.1.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
▇▇▇▇▇▇▇ PACIFIC OPERATING PARTNERSHIP, L.P.
Dated as of November 14, 1997
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Table of Contents
ARTICLE I - DEFINED TERMS......................................................1
ARTICLE II - ORGANIZATIONAL MATTERS...........................................14
Section 2.1 Organization...................................................14
Section 2.2 Name...........................................................14
Section 2.3 Registered Office and Agent; Principal Office..................14
Section 2.4 Term...........................................................15
ARTICLE III - PURPOSE.........................................................15
Section 3.1 Purpose and Business...........................................15
Section 3.2 Powers.........................................................15
ARTICLE IV - CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS.....16
Section 4.1 Capital Contributions of the Partners..........................16
Section 4.2 Issuances of Partnership Interests.............................16
Section 4.3 No Preemptive Rights...........................................18
Section 4.4 Other Contribution Provisions..................................18
Section 4.5 No Interest on Capital.........................................18
ARTICLE V - DISTRIBUTIONS.....................................................18
Section 5.1 Requirement and Characterization of Distributions..............18
Section 5.2 Amounts Withheld...............................................21
Section 5.3 Distributions Upon Liquidation.................................21
Section 5.4 Revisions to Reflect Issuance of Partnership Interests.........21
ARTICLE VI - ALLOCATIONS......................................................21
Section 6.1 Allocations for Capital Account Purposes.......................21
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership
Interests......................................................22
Section 6.3 Intent of Allocations..........................................23
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS...........................23
Section 7.1 Management.....................................................23
Section 7.2 Certificate of Limited Partnership.............................28
Section 7.3 Title to Partnership Assets....................................28
Section 7.4 Reimbursement of the General Partner...........................29
Section 7.5 Additional General Partner Contributions; Outside Activities
of the General Partner; Relationship of REIT Shares To
Partnership Units; Funding Debt................................30
Section 7.6 Transactions with Affiliates...................................33
Section 7.7 Indemnification................................................34
Section 7.8 Liability of the General Partner...............................36
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Section 7.9 Other Matters Concerning the General Partner...................37
Section 7.10 Reliance By Third Parties......................................37
Section 7.11 Restrictions on General Partner's Authority....................38
Section 7.12 Loans By Third Parties.........................................38
ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.....................38
Section 8.1 Limitation of Liability........................................38
Section 8.2 Management of Business.........................................39
Section 8.3 Outside Activities of Limited Partners.........................39
Section 8.4 Return of Capital..............................................39
Section 8.5 Rights of Limited Partners Relating to the Partnership.........39
Section 8.6 Redemption Right...............................................41
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS...........................44
Section 9.1 Records and Accounting.........................................44
Section 9.2 Fiscal Year....................................................44
Section 9.3 Reports........................................................44
ARTICLE X - TAX MATTERS.......................................................45
Section 10.1 Preparation of Tax Returns.....................................45
Section 10.2 Tax Elections..................................................45
Section 10.3 Tax Matters Partner............................................45
Section 10.4 Withholding....................................................46
ARTICLE XI - TRANSFERS AND WITHDRAWALS........................................47
Section 11.1 Transfer.......................................................47
Section 11.2 Transfers of Partnership Interests of General Partner..........48
Section 11.3 Limited Partners' Rights to Transfer...........................48
Section 11.4 Substituted Limited Partner....................................49
Section 11.5 Assignees......................................................50
Section 11.6 General Provisions.............................................50
ARTICLE XII - ADMISSION OF PARTNERS...........................................53
Section 12.1 Admission of a Successor General Partner.......................53
Section 12.2 Admission of Additional Limited Partners.......................53
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership....................................................54
ARTICLE XIII - DISSOLUTION AND LIQUIDATION....................................54
Section 13.1 Dissolution....................................................54
Section 13.2 Winding Up.....................................................55
Section 13.3 Compliance With Timing Requirements of Regulations.............56
Section 13.4 Deemed Distribution and Recontribution.........................56
Section 13.5 Rights of Limited Partners.....................................57
Section 13.6 Notice of Dissolution..........................................57
Section 13.7 Cancellation of Certificate of Limited Partnership.............57
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Section 13.8 Reasonable Time for Winding Up.................................57
Section 13.9 Waiver of Partition............................................57
Section 13.10 Liability of Liquidator........................................57
ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS....................57
Section 14.1 Amendments.....................................................58
Section 14.2 Meetings of the Partners.......................................59
ARTICLE XV - GENERAL PROVISIONS..............................................60
Section 15.1 Addresses and Notice...........................................60
Section 15.2 Titles and Captions............................................60
Section 15.3 Pronouns and Plurals...........................................61
Section 15.4 Further Action.................................................61
Section 15.5 Binding Effect.................................................61
Section 15.6 Creditors......................................................61
Section 15.7 Waiver.........................................................61
Section 15.8 Counterparts...................................................61
Section 15.9 Applicable Law.................................................61
Section 15.10 Invalidity of Provisions.......................................61
Section 15.11 Power of Attorney..............................................62
Section 15.12 Attorneys' Fees................................................63
Section 15.13 California Venue...............................................63
Section 15.14 Waiver of Jury Trial...........................................63
Section 15.15 Entire Agreement...............................................63
Section 15.16 No Rights as REIT Stockholders.................................63
Section 15.17 Limitation to Preserve REIT Status.............................64
EXHIBIT A - PARTNERS AND PARTNERSHIP INTERESTS...............................A-1
EXHIBIT B - CAPITAL ACCOUNT MAINTENANCE......................................B-1
EXHIBIT C - SPECIAL ALLOCATION RULES.........................................C-1
EXHIBIT D - NOTICE OF REDEMPTION.............................................D-1
EXHIBIT E - VALUE OF CONTRIBUTED PROPERTY....................................E-1
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AGREEMENT OF LIMITED PARTNERSHIP
OF
▇▇▇▇▇▇▇ PACIFIC OPERATING PARTNERSHIP, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of November 14, 1997, is
entered into by and among ▇▇▇▇▇▇▇ Pacific Properties, Inc., a Maryland
corporation, as the General Partner, and the Persons whose names are set forth
on Exhibit A as Limited Partners, together with any other Persons who become
Partners in the Partnership as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree to form the
Partnership as a limited partnership under the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time, as follows:
ARTICLE I - DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 12.2 and who is shown as such on the books
and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each Partnership Year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (ii)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership Year.
"Adjusted Property" means any property, the Carrying Value of which has
been adjusted pursuant to Exhibit B.
"Adjustment Date" has the meaning set forth in Section 4.2.B.
"Affiliate" means, with respect to any Person, (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(ii) any Person owning or controlling
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ten percent (10%) or more of the outstanding voting interests of such Person,
(iii) any Person of which such Person owns or controls ten percent (10%) or more
of the voting interests or (iv) any officer, director, general partner or
trustee of such Person or any Person referred to in clauses (i), (ii), and (iii)
above. For purposes of this definition, "control," when used with respect to
any Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreed Value" means (i) in the case of any Contributed Property, the
704(c) Value of such property as of the time of its contribution to the
Partnership, reduced by any liabilities either assumed by the Partnership upon
such contribution or to which such property is subject when contributed; and
(ii) in the case of any property distributed to a Partner by the Partnership,
the Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations.
The aggregate Agreed Value of the Contributed Property contributed or deemed
contributed by each Partner as of the date hereof is set forth in Exhibit E.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Applicable Contribution Agreement" means a Contribution Agreement whose
terms are binding upon the Partnership and the parties specified therein but not
upon any Limited Partner who is not a party thereto.
"Articles" means the Articles of Incorporation or other organizational
document governing the General Partner, as amended or restated from time to
time.
"Assignee" means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made:
(a) all cash revenues and funds received by the Partnership from
whatever source (excluding the proceeds of any Capital Contribution) plus
the amount of any reduction (including, without limitation, a reduction
resulting because the General Partner determines such amounts are no longer
necessary) in reserves of the Partnership, which reserves are referred to
in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made with the
proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments made during
such period by the Partnership,
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(ii) all cash expenditures (including capital expenditures) made
by the Partnership during such period,
(iii) investments in any entity (including loans made
thereto) to the extent that such investments are permitted under this
Agreement and are not otherwise described in clauses (b)(i) or (ii),
and
(iv) the amount of any increase in reserves established during
such period which the General Partner determines is necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all
of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"BPP Mortgage Debt" has the meaning set forth in Section 7.5.A.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in either California or New York are authorized or
required by law to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B.
"Capital Contribution" means, with respect to any Partner, any cash, cash
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1 or 4.2.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts
following the contribution of or adjustment with respect to such Property; and
(ii) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Exhibit B, and to reflect changes, additions (including capital
improvements thereto) or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General
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Partner.
"Cash Amount" means an amount of cash equal to the Value on the Valuation
Date of the REIT Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Delaware Secretary of State, as amended
from time to time in accordance with the terms hereof and the Act.
"Class A" has the meaning set forth in Section 5.1.C.
"Class A REIT Portion" has the meaning set forth in Section 5.1.C.
"Class A Unit" means any Partnership Unit that is not specifically
designated by the General Partner as being of another specified class of
Partnership Units.
"Class B" has the meaning set forth in Section 5.1.C.
"Class B REIT Portion" has the meaning set forth in Section 5.1.C.
"Class B Unit" means a Partnership Unit that is specifically designated by
the General Partner as being a Class B Unit.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with Section 14.2.
"Consent of the Outside Limited Partners" means the Consent of Limited
Partners (excluding for this purpose any Limited Partnership Interests held by
the General Partner, any other Person of which the General Partner owns or
controls more than fifty percent (50%) of the voting interests and any Person
directly or indirectly owning or controlling more than fifty percent (50%) of
the outstanding voting interests of the General Partner) holding Percentage
Interests that are greater than fifty percent (50%) of the aggregate Percentage
Interest of all Limited Partners who are not excluded for the purposes hereof.
"Contributed Property" means each property or other asset contributed to
the Partnership, in such form as may be permitted by the Act (but excluding
cash), contributed or deemed contributed to the Partnership (including deemed
contributions to the Partnership on termination and reconstitution thereof
pursuant to Section 708 of the Code). Once the Carrying Value of a Contributed
Property is adjusted pursuant to Exhibit B, such property shall no longer
constitute a Contributed Property for purposes of Exhibit B, but shall be deemed
an Adjusted Property for
Page 9
such purposes.
"Contribution Agreement" means any agreement entered into between the
Partnership or the General Partner on behalf of the Partnership with respect to
the admission of a Limited Partner, Additional Capital Contribution by a Limited
Partner, Capital Contributions by Partners, or the issuance of Partnership Units
or other Partnership Interests pursuant to Article IV, and includes the terms of
any agreement (such as, without limitation, terms pertaining to registration
rights, permission to pledge, waivers of restrictions on transfer, supplemental
redemption rights, debt maintenance obligations, restriction on property
transfers, management participation rights, transactions with contributors and
their affiliates, rights of a contributor to receive property upon exchange of
Units and other specially negotiated provisions, if any) relating to the rights
of a Limited Partner as a result of the contribution of property provided for
therein, which terms are not prohibited by law or by the provisions of this
Agreement or any Contribution Agreement.
"Conversion Factor" means 1.0 unless otherwise indicated, provided that, if
the General Partner Entity (i) declares or pays a dividend on its outstanding
REIT Shares in REIT Shares or makes a distribution to all holders of its
outstanding REIT Shares in REIT Shares; (ii) subdivides its outstanding REIT
Shares; or (iii) combines its outstanding REIT Shares into a smaller number of
REIT Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number of
REIT Shares issued and outstanding on the record date for such dividend,
distribution, subdivision or combination (assuming for such purpose that such
dividend, distribution, subdivision or combination has occurred as of such
time), and the denominator of which shall be the actual number of REIT Shares
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination; and provided
further that if an entity shall cease to be the General Partner Entity (the
"Predecessor Entity") and another entity shall become the General Partner Entity
(the "Successor Entity"), the Conversion Factor shall be adjusted by multiplying
the Conversion Factor by a fraction, the numerator of which is the Value of one
REIT Share of the Predecessor Entity, determined as of the date when the
Successor Entity becomes the General Partner Entity, and the denominator of
which is the Value of one REIT Share of the Successor Entity, determined as of
that same date. (For purposes of the second proviso in the preceding sentence,
if any stockholders of the Predecessor Entity will receive consideration in
connection with the transaction in which the Successor Entity becomes the
General Partner Entity, the numerator in the fraction described above for
determining the adjustment to the Conversion Factor (that is, the Value of one
REIT Share of the Predecessor Entity) shall be the sum of the greatest amount of
cash and the fair market value (as determined in good faith by the General
Partner) of any securities and other consideration that the holder of one REIT
Share in the Predecessor Entity could have received in such transaction
(determined without regard to any provisions governing fractional shares.) Any
adjustment to the Conversion Factor shall become effective immediately after the
effective date of the event retroactive to the record date, if any, for the
event giving rise thereto, it being intended that (x) adjustments to the
Conversion Factor are to be made to avoid unintended dilution or anti-dilution
as a result of transactions in which REIT Shares are issued, redeemed or
exchanged without a corresponding issuance, redemption or exchange of
Partnership Units and (y) if a Specified Redemption Date shall fall between the
record date and the effective date of any event of the type described above,
that the Conversion Factor applicable to such
Page 10
redemption shall be adjusted to take into account such event.
"Convertible Funding Debt" has the meaning set forth in Section 7.5.F.
"Debt" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) obligations of such Person
incurred in connection with entering into a lease which, in accordance with
generally accepted accounting principles, should be capitalized.
"Deemed Partnership Interest Value" means, as of any date with respect to
any class of Partnership Interests, the Deemed Value of the Partnership Interest
of such class multiplied by the applicable Partner's Percentage Interest of such
class.
"Deemed Value of the Partnership Interest" means, as of any date with
respect to any class of Partnership Interests, (a) if the common stock (or other
comparable equity interests) of the General Partner Entity are Publicly Traded
(i) the total number of shares of stock (or other comparable equity interest) of
the General Partner Entity corresponding to such class of Partnership Interest
(as provided for in Section 4.2.B) issued and outstanding as of the close of
business on such date (excluding any treasury shares) multiplied by the Value of
a share of such stock (or other comparable equity interest) on such date divided
by (ii) the Percentage Interest of the General Partner in such class of
Partnership Interests on such date, and (b) otherwise, the aggregate Value of
such class of Partnership Interests determined as set forth in the fourth and
fifth sentences of the definition of Value.
"Depreciation" means, for each taxable year, an amount equal to the federal
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Distribution Period" has the meaning set forth in Section 5.1.C.
"Effective Date" means the date set forth at the beginning of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
Page 11
"ERISA Plan" means an "employee benefit plan" as that term is defined in 29
U.S.C. Section 1002(3), and which is not exempt from regulation under ERISA by
virtue of 29 U.S.C. Section 1003(b).
"Excess General Partner Payments" has the meaning set forth in Section
15.17 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funding Debt" means the incurrence of any Debt by or on behalf of the
General Partner Entity for the purpose of providing funds to the Partnership.
"General Partner" means ▇▇▇▇▇▇▇ Pacific Properties, Inc. in its capacity as
the General Partner of the Partnership or its successor as general partner of
the Partnership.
"General Partner Entity" means the General Partner; provided, however, that
if (i) the common stock (or other comparable equity interests) of the General
Partner are at any time not Publicly Traded and (ii) the common stock (or other
comparable equity interests) of an entity that owns, directly or indirectly,
fifty percent (50%) or more of the common stock (or other comparable equity
interests) of the General Partner are Publicly Traded, the term "General Partner
Entity" shall refer to such entity whose common stock (or other comparable
equity securities) is Publicly Traded. If both requirements set forth in
clauses (i) and (ii) above are not satisfied, then the term "General Partner
Entity" shall mean the General Partner.
"General Partnership Interest" means a Partnership Interest held by a
General Partner that is a general partnership interest. A General Partnership
Interest may be expressed as a number of Partnership Units.
"General Partner Payee" has the meaning set forth in Section 15.17 hereof.
"General Partner Payment" has the meaning set forth in Section 15.17
hereof.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating such Partner incompetent to manage his or her Person or estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership or limited liability company which is a
Partner, the dissolution and commencement of winding up of the partnership or
limited liability company; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this
definition, bankruptcy of a Partner shall be deemed to have occurred when (a)
the
Page 12
Partner commences a voluntary proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect; (b) the Partner is adjudged as bankrupt or insolvent, or a
final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Partner; (c)
the Partner executes and delivers a general assignment for the benefit of the
Partner's creditors; (d) the Partner files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof; (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within ninety (90) days of such appointment; or (h) an
appointment referred to in clause (g) which has been stayed and is not vacated
within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason of
its status as (A) the General Partner, (B) a Limited Partner, or (C) a trustee,
director or officer of the Partnership, or the General Partner and (ii) such
other Persons (including Affiliates of the General Partner, a Limited Partner or
the Partnership) as the General Partner may designate from time to time (whether
before or after the event giving rise to potential liability), in its sole and
absolute discretion.
"Limited Partner" means any Person (including the General Partner) named as
a Limited Partner in Exhibit A, as such Exhibit may be amended from time to
time, or any Substituted Limited Partner or Additional Limited Partner, in such
Person's capacity as a Limited Partner of the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Limited Partners and includes any and all benefits to which the
holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement. A Limited Partnership Interest may be
expressed as a number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.A.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain as determined for book purposes for such
taxable period over the Partnership's items of loss and deduction as determined
for book purposes for such taxable period. The items included in the
calculation of Net Income shall be determined in accordance with Exhibit B. If
an item of income, gain, loss or deduction that has been included in the initial
computation of Net
Page 13
Income is subjected to the special allocation rules in Exhibit C, Net Income or
the resulting Net Loss, whichever the case may be, shall be recomputed without
regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period as determined
for book purposes over the Partnership's items of income and gain for such
taxable period as determined for book purposes. The items included in the
calculation of Net Loss shall be determined in accordance with Exhibit B. If an
item of income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to the special allocation rules in Exhibit
C, Net Loss or the resulting Net Income, whichever the case may be, shall be
recomputed without regard to such item.
"New Securities" means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase common
stock (or other comparable equity interest) of the General Partner, excluding
grants under any Share Option Plan, or (ii) any Debt issued by the General
Partner that provides any of the rights described in clause (i).
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Notice of Redemption" means a Notice of Redemption substantially in the
form of Exhibit D or as otherwise provided for in an Applicable Contribution
Agreement.
"Outside Limited Partners" has the meaning set forth in "Consent of the
Outside Limited Partners".
"Partner" means the General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section
Page 14
1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to
a Partner Nonrecourse Debt for a Partnership Year shall be determined in
accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement as it may be amended and/or restated, and any
successor thereto.
"Partnership Interest" means a Limited Partnership Interest or a General
Partnership Interest and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in Partnership Minimum Gain, for a Partnership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner either (i) for the distribution of Available Cash pursuant to Section
5.1 hereof, which record date shall be the same as the record date established
by the General Partner Entity for a distribution to its stockholders of some or
all of its portion of such distribution, or (ii) if applicable, for determining
the Partners entitled to vote on or consent to any proposed action for which the
consent or approval of the Partners is sought pursuant to Section 14.2 hereof.
"Partnership Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1 and 4.2, and includes
Class A Units, Class B Units and any other classes or series of Partnership
Units established after the date hereof. The ownership of Partnership Units
shall be evidenced by such form of certificate for Units as the General Partner
adopts from time to time unless the General Partner determines that the
Partnership Units shall be uncertificated securities. The number of Partnership
Units outstanding and the Percentage Interests in the Partnership represented by
such Partnership Units are set forth in Exhibit A, as such Exhibit may be
amended from time to time.
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"Percentage Interest" means, as to a Partner holding a class of Partnership
Interests, its interest in such class, determined by dividing the Partnership
Units of such class owned by such Partner by the total number of Partnership
Units of such class then outstanding as specified in Exhibit A, as such exhibit
may be amended from time to time, multiplied by the aggregate Percentage
Interest allocable to such class of Partnership Interests. If the Partnership
shall at any time have outstanding more than one class of Partnership Interests,
the Percentage Interest attributable to each class of Partnership Interests
shall be determined as set forth in Section 4.2.B.
"Person" means a natural person, partnership (whether general or limited),
trust, estate,
Page 15
association, corporation, limited liability company, unincorporated
organization, custodian, nominee or any other individual or entity in its own
or any representative capacity.
"Pledge" means any pledge, hypothecation, grant of security interest or
other transaction in connection with a derivative contract entered into with
respect to a Limited Partner's Interest.
"Predecessor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Preferred Partnership Units" means Limited Partnership Units or Limited
Partnership Interests issued by the Partnership and designated by the General
Partner in one or more classes, or in one or more series of any such classes,
having distribution and such other rights senior to Limited Partnership Units
and Limited Partnership Interests, as provided in and in accordance with Article
IV hereof.
"Publicly Traded" means listed or admitted to trading on the New York Stock
Exchange, the American Stock Exchange or another national securities exchange or
designated for quotation on the NASDAQ National Market, or any successor to any
of the foregoing.
"Qualified REIT Subsidiary" means any Subsidiary of the General Partner
that is a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6.A.
"Redemption Amount" means either the Cash Amount or the REIT Shares Amount,
as determined by the General Partner, in its sole and absolute discretion;
provided that if the REIT Shares are not Publicly Traded at the time a Redeeming
Partner exercises its Redemption Right, the Redemption Amount shall be paid only
in the form of the Cash Amount unless the Redeeming Partner, in its sole and
absolute discretion, consents to payment of the Redemption Amount in the form of
the REIT Shares Amount. A Redeeming Partner shall have no right, without the
General Partner's consent, in its sole and absolute discretion, to receive the
Redemption Amount in the form of the REIT Shares Amount.
"Redemption Right" has the meaning set forth in Section 8.6.A.
"Regulation" or "Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
Page 16
"REIT Requirements" has the meaning set forth in Section 5.1.A.
"REIT Share" means a share of the capital stock of the General Partner
Entity. REIT Shares may be issued in one or more classes or series in
accordance with the terms of the Articles (or, if the General Partner is not the
General Partner Entity, the organizational documents of the General Partner
Entity). If there is more than one class or series of REIT Shares, the term
"REIT Shares" shall, as the context requires, be deemed to refer to the class or
series of REIT Shares that correspond to the class or series of Partnership
Interests for which the reference to REIT Shares is made. When used with
reference to Class A Units, the term "REIT Shares" refers to Shares of common
stock (or other comparable equity interest) of the General Partner Entity.
"REIT Shares Amount" means a number of REIT Shares equal to the product of
the number of Partnership Units offered for redemption by a Redeeming Partner
times the Conversion Factor; provided that, if the General Partner Entity issues
to all holders of REIT Shares rights, options, warrants or convertible or
exchangeable securities entitling such holders to subscribe for or purchase REIT
Shares or any other securities or property (collectively, the "rights"), then
the REIT Shares Amount shall also include such rights that a holder of that
number of REIT Shares would be entitled to receive.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"Safe Harbor" has the meaning set forth in Section 11.6.F.
"Securities Act" means the Securities Act of 1933, as amended.
"704(c) Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution, as determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the 704(c) Value of any property deemed
contributed by the Partnership for federal income tax purposes upon the
termination and reconstitution thereof pursuant to Section 7.08(b)(1)(B) of the
Code shall be determined in accordance with Exhibit B. Subject to Exhibit B,
the General Partner shall, in its sole and absolute discretion, use such method
as is reasonable and appropriate under the Regulations to allocate the aggregate
of the 704(c) Values of Contributed Properties in a single or integrated
transaction among each separate property on a basis proportional to its fair
market value.
"Share Option Plan" means any equity incentive plan of the General Partner,
the Partnership and/or any Affiliate of the Partnership.
"Specified Redemption Date" means the tenth Business Day after receipt by
the General
Page 17
Partner of a Notice of Redemption; provided that, if the REIT Shares are not
Publicly Traded, the Specified Redemption Date means the thirtieth Business Day
after receipt by the General Partner of a Notice of Redemption.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, trust, partnership or joint venture, or other entity of which
a majority of (i) the voting power of the voting equity securities; or (ii) the
outstanding equity interests, is owned, directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
"Successor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership for cash or a related
series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership for
cash.
"Termination Transaction" has the meaning set forth in Section 11.2.B.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B) as of such date; over
(ii) the Carrying Value of such property (prior to any adjustment to be made
pursuant to Exhibit B) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B) as
of such date, over (ii) the fair market value of such property (as determined
under Exhibit B) as of such date.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to any outstanding REIT Shares of the General
Partner Entity that are Publicly Traded, the average of the daily market price
for the ten consecutive trading days immediately preceding the date with respect
to which value must be determined. The market price for each such trading day
shall be the closing price, regular way, on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on such day.
If the outstanding REIT Shares of the General Partner Entity are Publicly Traded
and the REIT Shares Amount includes rights that a holder of REIT Shares would be
entitled to receive, then the Value of such rights shall be determined by the
General Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. If the
REIT Shares of the General Partner Entity are not Publicly Traded, the Value of
the REIT Shares Amount per Partnership Unit offered for redemption (which will
be the Cash Amount per
Page 18
Partnership Unit offered for redemption payable pursuant to Section 8.6.A) means
the amount that a holder of one Partnership Unit would receive if each of the
assets of the Partnership were to be sold for its fair market value on the
Specified Redemption Date, the Partnership were to pay all of its outstanding
liabilities, and the remaining proceeds were to be distributed to the Partners
in accordance with the terms of this Agreement. Such Value shall be determined
by the General Partner, acting in good faith and based upon a commercially
reasonable estimate of the amount that would be realized by the Partnership if
each asset of the Partnership (and each asset of each partnership, limited
liability company, trust, joint venture or other entity in which the Partnership
owns a direct or indirect interest) were sold to an unrelated purchaser in an
arms' length transaction where neither the purchaser nor the seller were under
economic compulsion to enter into the transaction (without regard to any
discount in value as a result of the Partnership's minority interest in any
property or any illiquidity of the Partnership's interest in any property). In
connection with determining the Deemed Value of the Partnership Interest for
purposes of determining the number of additional Partnership Units issuable upon
a Capital Contribution funded by an underwritten public offering or an arm's
length private placement of shares of beneficial interest (or other comparable
equity interest) of the General Partner, the Value of such shares shall be the
public offering or arm's length private placement price per share of such class
of beneficial interest (or other comparable equity interest) sold.
ARTICLE II - ORGANIZATIONAL MATTERS
Section 2.1 Organization. The Partnership is a limited partnership
organized pursuant to the provisions of the Act and upon the terms and
conditions set forth in this Agreement. Except as expressly provided herein to
the contrary, the rights and obligations of the Partners and the administration
and termination of the Partnership shall be governed by the Act. The
Partnership Interest of each Partner shall be personal property for all
purposes.
Section 2.2 Name. The name of the Partnership is ▇▇▇▇▇▇▇ Pacific
Operating Partnership, L.P. The Partnership's business may be conducted under
any other name or names deemed advisable by the General Partner, including the
name of the General Partner or any Affiliate thereof. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included in
the Partnership's name where necessary for the purposes of complying with the
laws of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from
time to time and shall notify the Limited Partners of such change in the next
regular communication to the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office. The address of
the registered office of the Partnership in the State of Delaware shall be
located at Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent for service of process on
the Partnership in the State of Delaware at such registered office shall be
Corporation Trust Company. The principal office of the Partnership shall be ▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as
the General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner
Page 19
deems advisable.
Section 2.4 Term. The term of the Partnership shall commence on November
14, 1997 and shall continue until December 31, 2095, unless it is dissolved
sooner pursuant to the provisions of Article XIII or as otherwise provided by
law.
ARTICLE III - PURPOSE
Section 3.1 Purpose and Business. The purpose and nature of the business
to be conducted by the Partnership is (i) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Act;
provided, however, that such business shall be limited to and conducted in such
a manner as to permit the General Partner Entity at all times to be classified
as a REIT, unless the General Partner Entity ceases to qualify or is not
qualified as a REIT for any reason or reasons not related to the business
conducted by the Partnership; (ii) to enter into any corporation, partnership,
joint venture, trust, limited liability company or other similar arrangement to
engage in any of the foregoing or the ownership of interests in any entity
engaged, directly or indirectly, in any of the foregoing; and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, the Partners acknowledge that the status of the General Partner
Entity as a REIT inures to the benefit of all the Partners and not solely to the
General Partner Entity or its Affiliates. The General Partner shall also be
empowered to do any and all acts and things necessary or prudent to ensure that
the Partnership will not be classified as a "publicly traded partnership" for
purposes of Section 7704 of the Code, including but not limited to imposing
restrictions on redemptions.
Section 3.2 Powers. The Partnership is empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership,
including, without limitation, full power and authority, directly or through its
ownership interest in other entities, to enter into, perform and carry out
contracts of any kind, borrow money and issue evidences of indebtedness, whether
or not secured by mortgage, deed of trust, pledge or other lien, acquire, own,
manage, improve and develop real property, and lease, sell, transfer and dispose
of real property; provided, however, that the Partnership shall not take, or
refrain from taking, any action which, in the judgment of the General Partner,
in its sole and absolute discretion, (i) could adversely affect the ability of
the General Partner Entity to continue to qualify as a REIT; (ii) could subject
the General Partner Entity to any additional taxes under Section 857 or Section
4981 of the Code; or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.
ARTICLE IV - CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
Page 20
Section 4.1 Capital Contributions of the Partners. At the time of the
execution of this Agreement, the Partners shall make or shall have made the
Capital Contributions as set forth in Exhibit A. The Partners shall own
Partnership Units in the amounts set forth in Exhibit A and shall have a
Percentage Interest in the Partnership as set forth in Exhibit A, which
Percentage Interest shall be adjusted in Exhibit A from time to time by the
General Partner to the extent necessary to reflect accurately redemptions,
Capital Contributions, the issuance of additional Partnership Units or similar
events having an effect on a Partner's Percentage Interest. To the extent the
Partnership is acquiring any property by the merger of any other Person into the
Partnership or the contribution of assets by any other Person, Persons who
receive Partnership Interests in exchange for their interests in the Person
merging into or contributing assets to the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement or Applicable Contribution Agreement and as reflected in
amendments to Exhibit A and Exhibit E. The number of Partnership Units held by
the General Partner equal to one percent (1%) of all outstanding Partnership
Units (as of the Effective Date or such later date as is the first date upon
which property is first contributed to the Partnership) shall be deemed to be
the General Partner Partnership Units and shall be the General Partnership
Interest of the General Partner. All other Partnership Units held by the
General Partner shall be deemed to be Limited Partnership Interests and shall be
held by the General Partner in its capacity as a Limited Partner in the
Partnership. Except as provided in Sections 7.5 and 10.5 hereof or in an
Applicable Contribution Agreement, the Partners shall have no obligation to make
any additional Capital Contributions or provide any additional funding to the
Partnership (whether in the form of loans, repayments of loans or otherwise) and
no Partner shall have any obligation to restore any deficit that may exist in
its Capital Account, either upon a liquidation of the Partnership or otherwise.
Section 4.2 Issuances of Partnership Interests.
A. General. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to Partners (including the General
Partner and its Affiliates) or other Persons (including, without limitation, in
connection with the contribution of property to the Partnership) Partnership
Units or other Partnership Interests in one or more classes, or in one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partnership Interests, all as shall
be determined, subject to applicable Delaware law, by the General Partner in its
sole and absolute discretion, including, without limitation, (i) the allocations
of items of Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests, (ii) the right of each such class or
series of Partnership Interests to share in Partnership distributions and (iii)
the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership; provided that, no such
Partnership Units or other Partnership Interests shall be issued to the General
Partner unless either (a) the Partnership Interests are issued in connection
with the grant, award or issuance of REIT Shares or other equity interests in
the General Partner having designations, preferences and other rights such that
the economic interests attributable to such REIT Shares or other equity
interests are substantially similar to the designations, preferences and other
rights (except voting rights) of the Partnership Interests issued to the General
Partner in accordance with this Section 4.2.A or (b) the additional
Page 21
Partnership Interests are issued to all Partners holding Partnership Interests
in the same class in proportion to their respective Percentage Interests in such
class. If the Partnership issues Partnership Interests pursuant to this Section
4.2.A, the General Partner shall make such revisions to this Agreement
(including but not limited to the revisions described in Section 5.4, Section
6.2 and Section 8.6) as it deems necessary to reflect the issuance of such
Partnership Interests; and the failure of such revisions to this Agreement to
include all of the provisions of an Applicable Contribution Agreement relating
to the issuance of such Partnership Interest shall not limit the effectiveness
of such Contribution Agreement as between the parties thereto.
B. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional Capital
Contributions in exchange for Partnership Units and if the Partnership shall
have outstanding more than one class of Partnership Interests, the Percentage
Interest related thereto shall be equal to a fraction, the numerator of which is
equal to the amount of cash, if any, plus the Agreed Value of Contributed
Property, if any, contributed with respect to such additional Partnership Units
and the denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests for all outstanding classes (computed as of the Business
Day immediately preceding the date on which the additional Capital Contributions
are made (an "Adjustment Date")) plus (ii) the aggregate amount of additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Units. The Percentage Interest of each
other Partner holding Partnership Interests not making a full pro rata Capital
Contribution shall be adjusted to a fraction the numerator of which is equal to
the sum of (i) the Deemed Partnership Interest Value of such Limited Partner
(computed as of the Business Day immediately preceding the Adjustment Date) plus
(ii) the amount of additional Capital Contributions (such amount being equal to
the amount of cash, if any, plus the Agreed Value of Contributed Property, if
any, so contributed), if any, made by such Partner to the Partnership in respect
of such Partnership Interest as of such Adjustment Date and the denominator of
which is equal to the sum of (i) the Deemed Value of the Partnership Interests
of all outstanding classes (computed as of the Business Day immediately
preceding such Adjustment Date) plus (ii) the aggregate amount of the additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Interests. For purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.2.B, cash Capital
Contributions by the General Partner will be deemed to equal the cash
contributed by the General Partner plus (a) in the case of cash contributions
funded by an offering of any equity interests in or other securities of the
General Partner, the offering costs attributable to the cash contributed to the
Partnership, and (b) in the case of Partnership Units issued pursuant to Section
7.5.E, an amount equal to the difference between the Value of the REIT Shares
sold pursuant to any Share Option Plan and the net proceeds of such sale.
C. Classes of Partnership Units. From and after the Effective Date,
subject to Section 4.2.A above, the Partnership shall have two subclasses of
Partnership Units entitled "Class A Units" and "Class B Units." Either Class A
Units or Class B Units, at the election of the General Partner, in its sole and
absolute discretion, may be issued to newly admitted Partners in exchange for
the contribution by such Partners of cash, real estate partnership interests,
stock, notes or other assets or consideration; provided, that any Partnership
Unit that is not specifically designated by the General Partner as being of a
particular class shall be deemed to be a Class A Unit. Each Class
Page 22
B Unit shall be converted automatically into a Class A Unit on the day
immediately following the Partnership Record Date for the Distribution Period
(as defined in Section 5.1.C) in which such Class B Unit was issued, without the
requirement for any action by either the Partnership or the Partner holding the
Class B Unit.
At such time as the Partnership has issued Preferred Units, there shall
also be two subclasses of each class or series of Preferred Units designated
"Class A Preferred Units" and "Class B Preferred Units" (or such other
designation as the General Partner may determine) in order to provide for the
respective distributions as between holders of the Units of such class or series
of Preferred Units who have held such Units for less than the full Distribution
Period relating to such class or series in a manner consistent with the
allocation of distributions made pursuant to Section 5.1 hereof among holders of
Limited Partner Units that are not Preferred Partnership Units.
Section 4.3 No Preemptive Rights. Except to the extent expressly granted
by the Partnership pursuant to an Applicable Contribution Agreement, no Person
shall have any preemptive, preferential or other similar right with respect to
(i) additional Capital Contributions or loans to the Partnership; or (ii) the
issuance or sale of any Partnership Units or other Partnership Interests.
Section 4.4 Other Contribution Provisions. If any Partner is admitted to
the Partnership and is given a Capital Account in exchange for services rendered
to the Partnership or to the General Partner on behalf of the Partnership, such
transaction shall be treated by the Partnership and the affected Partner as if
the Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership.
Section 4.5 No Interest on Capital. No Partner shall be entitled to
interest on its Capital Contributions or its Capital Account.
ARTICLE V - DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions.
A. General. Subject to any superior distribution rights of any
Preferred Partnership Units that may be issued pursuant to Article IV, the
General Partner shall distribute at least quarterly an amount equal to one
hundred percent (100%) of Available Cash generated by the Partnership during
such quarter or shorter period to the Partners who are Partners on the
Partnership Record Date with respect to such quarter or shorter period as
provided in Sections 5.1.B, 5.1.C and 5.1.D. Notwithstanding anything to the
contrary contained herein, in no event may a Partner receive a distribution of
Available Cash with respect to a Partnership Unit for a quarter or shorter
period to the extent such Partner is entitled to receive a distribution for such
period with respect to a REIT Share for which such Partnership Unit has been
redeemed or exchanged. Unless otherwise expressly provided for herein or in an
agreement at the time a new class of Partnership Interests is created in
accordance with Article IV hereof, no Partnership Interest shall be entitled to
a distribution in preference to any other Partnership Interest. The General
Partner shall make such reasonable efforts, as determined by it in its sole and
absolute
Page 23
discretion and consistent with the qualification of the General Partner Entity
as a REIT, to distribute Available Cash (a) to Limited Partners so as to
preclude any such distribution or portion thereof from being treated as part of
a sale of property of the Partnership by a Limited Partner under Section 707 of
the Code or the Regulations thereunder; provided that, the General Partner and
the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner being so
treated; and (b) to the General Partner in an amount sufficient to enable the
General Partner Entity to pay stockholder dividends that will (1) satisfy the
requirements for qualification as a REIT under the Code and the Regulations (the
"REIT Requirements") thereunder; and (2) avoid any federal income or excise tax
liability for the General Partner Entity; provided, however, that amounts to be
distributed to the General Partner under this clause (b) shall not reduce the
amount distributable to Limited Partners under any provision of this Agreement.
B. Method.
(i) Each holder of Partnership Interests that is entitled to any
preference in distribution shall be entitled to a distribution in
accordance with the rights of any such class of Partnership Interests (and,
within such class, pro rata in proportion to the respective Percentage
Interests on such Partnership Record Date); and
(ii) To the extent there is Available Cash remaining after the
payment of any preference in distribution in accordance with the
foregoing clause (i), with respect to Partnership Interests that are
not entitled to any preference in distribution, pro rata to each such
class in accordance with the terms of such class (and, within each
such class, pro rata in proportion to the respective Percentage
Interests on such Partnership Record Date).
C. Distributions When Class B Units Are Outstanding. If for any
quarter or shorter period with respect to which a distribution is to be made (a
"Distribution Period") Class B Units are outstanding on the Partnership Record
Date for such Distribution Period, the General Partner shall allocate the
Available Cash with respect to such Distribution Period available for
distribution with respect to the Class A Units and Class B Units collectively
between the Partners who are holders of Class A Units ("Class A") and the
Partners who are holders of Class B Units ("Class B") as follows:
(1) Class A shall receive that portion of the Available Cash
(the "Class A REIT Portion") determined by multiplying the amount of
Available Cash by the following fraction:
A x Y
----------------
(A x Y)+(B x X)
(2) Class B shall receive that portion of the Available Cash
(the "Class B REIT Portion") determined by multiplying the amount of
Available Cash by the following fraction:
Page 24
B x X
---------------
(A x Y)+(B x X)
(3) For purposes of the foregoing formulas, (i) "A" equals the
number of Class A Units outstanding on the Partnership Record Date for
such Distribution Period; (ii) "B" equals the number of Class B Units
outstanding on the Partnership Record Date for such Distribution
Period; (iii) "Y" equals the number of days in the Distribution
Period; and (iv) "X" equals the number of days in the Distribution
Period for which the Class B Units were issued and outstanding.
The Class A REIT Portion shall be distributed among Partners holding Class
A Units on the Partnership Record Date for the Distribution Period in accordance
with the number of Class A Units held by each Partner on such Partnership Record
Date; provided that, in no event may a Partner receive a distribution of
Available Cash with respect to a Class A Unit if a Partner is entitled to
receive a distribution out of such Available Cash with respect to a REIT Portion
for which such Class A Unit has been redeemed or exchanged. The Class B REIT
Shares shall be distributed among the Partners holding Class B Units on the
Partnership Record Date for the Distribution Period in accordance with the
number of Class B Units held by each Partner on such Partnership Record Date. In
no event shall any Class B Units be entitled to receive any distribution of
Available Cash for any Distribution Period ending prior to the date on which
such Class B Units are issued.
D. Distributions When Class B Units Have Been Issued on Different
Dates. If Class B Units which have been issued on different dates are
outstanding on the Partnership Record Date for any Distribution Period, then the
Class B Units issued on each particular date shall be treated as a separate
series of Partnership Units for purposes of making the allocation of Available
Cash for such Distribution Period among the holders of Partnership Units (and
the formula for making such allocation, and the definitions of variables used
therein, shall be modified accordingly). Thus, for example, if two series of
Class B Units are outstanding on the Partnership Record Date for any
Distribution Period, the allocation formula for each series, "Series B1" and
"Series B2" would be as follows:
(1) Series B1 shall receive that portion of the Available Cash
determined by multiplying the amount of Available Cash by the
following fraction:
B1 x X1
---------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
(2) Series B2 shall receive that portion of the Available Cash
determined by multiplying the amount of Available Cash by the
following fraction:
B2 x X2
---------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
Page 25
(3) For purposes of the foregoing formulas the definitions set
forth in Section 5.1.C.3 remain the same except that (i) "B1" equals
the number of Partnership Units in Series B1 outstanding on the
Partnership Record Date for such Distribution Period; (ii) "B2" equals
the number of Partnership Units in Series B2 outstanding on the
Partnership Record Date for such Distribution Period; (iii) "X1"
equals the number of days in the Distribution Period for which the
Partnership Units in Series B1 were issued and outstanding; and (iv)
"X2" equals the number of days in the Distribution Period for which
the Partnership Units in Series B2 were issued and outstanding.
Section 5.2 Amounts Withheld. All amounts withheld pursuant to the Code
or any provisions of any state or local tax law and Section 10.5 with respect to
any allocation, payment or distribution to the General Partner, the Limited
Partners or Assignees shall be treated as amounts distributed to the General
Partner, Limited Partners or Assignees pursuant to Section 5.1 for all purposes
under this Agreement.
Section 5.3 Distributions Upon Liquidation. Proceeds from a Terminating
Capital Transaction shall be distributed to the Partners in accordance with
Section 13.2.
Section 5.4 Revisions to Reflect Issuance of Partnership Interests.
Subject to the terms of Applicable Contribution Agreements, if the Partnership
issues Partnership Interests to the General Partner or any Additional Limited
Partner pursuant to Article IV hereof, the General Partner shall make such
revisions to this Article V and Exhibit A as it reasonably deems necessary to
reflect the issuance of such additional Partnership Interests without the
requirements for any other consents or approvals.
ARTICLE VI - ALLOCATIONS
Section 6.1 Allocations for Capital Account Purposes. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Exhibit B) shall be allocated among the Partners in
each taxable year (or portion thereof) as provided herein below.
A. Net Income. After giving effect to the special allocations set
forth in Section 1 of Exhibit C and subject to the provisions of Section 6.3,
Net Income shall be allocated (i) first, to the General Partner to the extent
that Net Losses previously allocated to the General Partner pursuant to the last
sentence of Section 6.1.B exceed Net Income previously allocated to the General
Partner pursuant to this clause (i) of Section 6.1.A; (ii) second, to the
holders of any Partnership Interests that are entitled to any preference in
distribution in accordance with the rights of any such class of Partnership
Interests until each such Partnership Interest has been allocated, on a
cumulative basis pursuant to this clause (ii), Net Income equal to the amount of
distributions received which are attributable to the preference of such class of
Partnership Interests (and, within such class, pro rata in proportion to the
respective Percentage Interests as of the last day of the period for which such
allocation is being made); and (iii) third, with respect to
Page 26
Partnership Interests that are not entitled to any preference in the allocation
of Net Income, pro rata to each such class in accordance with the terms of such
class (and, within such class, pro rata in proportion to the respective
Percentage Interests as of the last day of the period for which such allocation
is being made).
B. Net Losses. After giving effect to the special allocations set
forth in Section 1 of Exhibit C, Net Losses shall be allocated (i) first, to the
holders of any Partnership Interests that are entitled to any preference in
distribution in accordance with the rights of any such class of Partnership
Interests to the extent that any prior allocations of Net Income to such class
of Partnership Interests pursuant to Section 6.1.A(ii) exceed, on a cumulative
basis, distributions with respect to such Partnership Interests pursuant to
clause (i) of Section 5.1.B (and, within such class, pro rata in proportion to
the respective Percentage Interests as of the last day of the period for which
such allocation is being made); and (ii) second, with respect to classes of
Partnership Interests that are not entitled to any preference in distribution,
pro rata to each such class in accordance with the terms of such class (and,
within such class, pro rata in proportion to the respective Percentage Interests
as of the last day of the period for which such allocation is being made);
provided that Net Losses and/or items of deduction (as computed for book
purposes) shall not be allocated to any Limited Partner pursuant to this Section
6.1.B to the extent that such allocation would cause such Limited Partner to
have an Adjusted Capital Account Deficit (or increase any existing Adjusted
Capital Account Deficit) at the end of such taxable year (or portion thereof).
All Net Losses and/or items of deduction (as computed for book purposes) in
excess of the limitations set forth in this Section 6.1.B shall be allocated to
the General Partner.
C. Allocation of Nonrecourse Debt. For purposes of Regulation
Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain
and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
D. Recapture Income. Any gain allocated to the Partners upon the
sale or other taxable disposition of any Partnership asset shall, to the extent
possible, after taking into account other required allocations of gain pursuant
to Exhibit C, be characterized as Recapture Income in the same proportions and
to the same extent as such Partners have been allocated any deductions directly
or indirectly giving rise to the treatment of such gains as Recapture Income.
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership
Interests. If the Partnership issues Partnership Interests to the General
Partner or any Additional Limited Partner pursuant to Article IV hereof, the
General Partner shall make such revisions to this Article VI and Exhibit A as it
deems reasonably necessary to reflect the terms of the issuance of such
Partnership Interests, including making preferential allocations to classes of
Partnership Interests that are entitled thereto. Such revisions shall not
require the consent or approval of any other Partner except as provided in an
Applicable Contribution Agreement.
Section 6.3 Intent of Allocations. The parties intend that the allocation
provisions of Article VI, Exhibit B and Exhibit C hereto shall produce final
Capital Account balances of the Partners that will permit liquidating
distributions that are made in accordance with final Capital Account balances to
be made (after unpaid loans and interest thereon, including those owed to
Partners
Page 27
have been paid) in a manner identical to the order of priorities set forth in
Section 5.1 hereof. To the extent that the allocation provisions of Article VI,
Exhibit B and Exhibit C would fail to produce such final Capital Account
balances, (I) such provisions shall be amended by the General Partner if and to
the extent necessary to produce such result and (ii) income and loss of the
Partnership, as computed for book purposes, for prior open years (or items of
gross income and deduction of the Partnership, as computed for book purposes,
for such years) shall be reallocated among the Partners to the extent it is not
possible to achieve such result with allocations of items of income (including
gross income) and deduction, as computed for book purposes, for the current year
and future years, as reasonably approved by the General Partner. This Section
6.3 shall control notwithstanding any reallocation or adjustment of taxable
income, taxable loss, or items thereof by the Internal Revenue Service or any
other taxing authority.
ARTICLE VII - MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management.
▇. ▇▇▇▇▇▇ of General Partner. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership are and shall be exclusively vested in the General Partner,
and no Limited Partner shall have any right to participate in or exercise
control or management power over the business and affairs of the Partnership.
The General Partner may not be removed by the Limited Partners with or without
cause. In addition to the powers now or hereafter granted a general partner of
a limited partnership under applicable law or which are granted to the General
Partner under any other provision of this Agreement, the General Partner,
subject to Section 7.11, shall have full power and authority to do all things
deemed necessary or desirable by it to conduct the business of the Partnership,
to exercise all powers set forth in Section 3.2 and to effectuate the purposes
set forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit
the General Partner Entity (so long as the General Partner
Entity qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any excise
tax pursuant to Section 4981 of the Code) and to make
distributions to its stockholders sufficient to permit the
General Partner Entity to maintain REIT status), the
assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of the
same by mortgage, deed of trust or other lien or encumbrance
on the Partnership's assets) and the incurring of any
obligations the General Partner Entity deems necessary for
the conduct of the activities of the Partnership;
Page 28
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or
other agencies having jurisdiction over the business or
assets of the Partnership the registration of any class of
securities of the Partnership under the Securities Act, and
the listing of any debt securities of the Partnership on any
exchange;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the
Partnership (including the exercise or grant of any
conversion, option, privilege or subscription right or other
right available in connection with any assets at any time
held by the Partnership) or the merger or other combination
of the Partnership with or into another entity on such terms
as the General Partner deems proper;
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms it sees fit,
including, without limitation, but subject to Section 7.6
hereof, the financing of the conduct of the operations of
the General Partner, the Partnership or any of the
Partnership's Subsidiaries, the lending of funds to other
Persons (including, without limitation, the General Partner,
its Subsidiaries and the Partnership's Subsidiaries) and the
repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which the Partnership
has an equity investment and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property
or improvements owned by the Partnership or any Subsidiary
of the Partnership or any Person in which the Partnership
has made a direct or indirect equity investment;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the
General Partner's powers under this Agreement, including
contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and
other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the mortgage, pledge, encumbrance or hypothecation of any
assets of the Partnership, and the use of the assets of the
Partnership (including,
Page 29
without limitation, cash on hand) for any purpose consistent
with the terms of this Agreement and on any terms it sees
fit, including, without limitation, but subject to Section
7.6 hereof, the financing of the conduct or the operations
of the General Partner or the Partnership, the lending of
funds to other Persons (including, without limitation, any
Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership, any of its Subsidiaries and
any other Person in which it has an equity investment;
(8) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(9) the holding, managing, investing and reinvesting of cash and
other assets of the Partnership;
(10) the collection and receipt of revenues and income of the
Partnership;
(11) the establishment of one or more divisions of the
Partnership, the selection, appointment, designation of
powers, authority and duties and the termination and
dismissal of employees of the Partnership (including,
without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer")
and agents, outside attorneys, accountants, consultants and
contractors of the Partnership and the determination of
their compensation and other terms of employment or hiring;
(12) the maintenance of such insurance for the benefit of the
Partnership and the Partners and directors and officers
thereof as it deems necessary or appropriate;
(13) the formation of, or acquisition of an interest (including
non-voting interests in entities controlled by Affiliates of
the Partnership or third parties) in, and the contribution
of property to, any further limited or general partnerships,
joint ventures, limited liability companies or other
relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the
contributions of funds or property to, or making of loans
to, its Subsidiaries and any other Person in which it has an
equity investment from time to time, or the incurrence of
indebtedness on behalf of such Persons or the guarantee of
the obligations of such Persons); provided that, as long as
the General Partner has determined to continue to qualify as
a REIT, the Partnership may not engage in any such
formation, acquisition or contribution that would cause the
General Partner to fail to qualify as a REIT;
(14) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to
Page 30
arbitration or any other form of dispute resolution or
abandonment of any claim, cause of action, liability, debt
or damages due or owing to or from the Partnership, the
commencement or defense of suits, legal proceedings,
administrative proceedings, arbitrations or other forms of
dispute resolution, the representation of the Partnership in
all suits or legal proceedings, administrative proceedings,
arbitration or other forms of dispute resolution, the
incurring of legal expense and the indemnification of any
Person against liabilities and contingencies to the
extent permitted by law;
(15) the determination of the fair market value of any
Partnership property distributed in kind, using such
reasonable method of valuation as the General Partner may
adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of
attorney, of any right, including the right to vote,
appurtenant to any assets or investment held by the
Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Partnership or any other Person
in which the Partnership has a direct or indirect interest,
individually or jointly with any such Subsidiary or other
Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in
which the Partnership does not have any interest pursuant to
contractual or other arrangements with such Person;
(19) the making, executing and delivering of any and all deeds,
leases, notes, deeds to secure debt, mortgages, deeds of
trust, security agreements, conveyances, contracts,
guarantees, warranties, indemnities, waivers, releases or
other legal instruments or agreements in writing necessary
or appropriate in the judgment of the General Partner for
the accomplishment of any of the powers of the General
Partner enumerated in this Agreement; and
(20) the distribution of cash to acquire Partnership Units held
by a Limited Partner in connection with a Limited Partner's
exercise of its Redemption Right under Section 8.6 or of any
comparable or other redemption or exchange right of any
Partner holding Partnership Interests in one or more classes
or series of Partnership Units regardless of whether such
Partnership Units are senior to Limited Partnership
Interests;
Page 31
(21) the issuance, on behalf of the Partnership, of Additional
Partnership Units, as appropriate, in connection with
Capital Contributions by Additional Limited Partners and
Additional Capital Contributions by Partners pursuant to
Article IV and the mailing, executing, delivery and
performance of Contribution Agreements relating thereto; and
(22) the amendment and restatement of Exhibit A and Exhibit E to
reflect accurately at all times the Capital Contributions
and Percentage Interests of the Partners as the same are
adjusted from time to time to the extent necessary to
reflect redemptions, Capital Contributions, the issuance of
Partnership Units, the admission of any Additional Limited
Partner or any Substituted Limited Partner or otherwise,
which amendment and restatement, notwithstanding anything in
this Agreement to the contrary, shall not be deemed an
amendment of this Agreement, as long as the matter or event
being reflected in Exhibit A and Exhibit E otherwise is
authorized by this Agreement.
B. No Approval by Limited Partners. Except as provided in Section
7.11 or in any Applicable Contribution Agreement, each of the Limited Partners
agrees that the General Partner is authorized to execute, deliver and perform
the above-mentioned agreements and transactions on behalf of the Partnership
without any further act, approval or vote of the Partners, notwithstanding any
other provision of this Agreement, the Act or any applicable law, rule or
regulation, to the fullest extent permitted under the Act or other applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. Insurance. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain (i) casualty,
liability and other insurance on the properties of the Partnership; (ii)
liability insurance for the Indemnitees hereunder; and (iii) such other
insurance as the General Partner, in its sole and absolute discretion,
determines to be appropriate and reasonable.
D. Working Capital and Other Reserves. At all times from and after
the date hereof, the General Partner may cause the Partnership to establish and
maintain working capital reserves in such amounts as the General Partner, in its
sole and absolute discretion, deems appropriate and reasonable from time to
time, including upon liquidation of the Partnership under Section 13.
E. No Obligations to Consider Tax Consequences of Limited Partners.
In exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner (including the General Partner) of any action taken (or not taken) by
it. The General Partner and the Partnership shall not have liability
Page 32
to a Limited Partner for monetary damages or otherwise for losses sustained,
liabilities incurred or benefits not derived by such Limited Partner in
connection with such decisions, provided that the General Partner has acted in
good faith and pursuant to its authority under this Agreement. The Limited
Partners expressly acknowledge that the General Partner is acting on behalf of
the Partnership, the General Partner, and the General Partner's stockholders,
collectively
Section 7.2 Certificate of Limited Partnership. The General Partner has
previously filed the Certificate with the Secretary of State of Delaware. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, the District of Columbia or other jurisdiction in which
the Partnership may elect to do business or own property. Subject to the terms
of Section 8.5.A(4), the General Partner shall not be required, before or after
filing, to deliver or mail a copy of the Certificate or any amendment thereto to
any Limited Partner. The General Partner shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and any other state,
the District of Columbia or other jurisdiction in which the Partnership may
elect to do business or own property.
Section 7.3 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partners,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may determine, including
Affiliates of the General Partner. The General Partner hereby declares and
warrants that any Partnership assets for which legal title is held in the name
of the General Partner or any nominee or Affiliate of the General Partner shall
be held by the General Partner for the use and benefit of the Partnership in
accordance with the provisions of this Agreement (excluding only assets
permitted to be held by the General Partner pursuant to Section 7.5.A);
provided, however, that the General Partner shall use its best efforts to cause
beneficial and record title to such assets to be vested in the Partnership as
soon as reasonably practicable if failure to so vest such title would have a
material adverse effect on the Partnership or its Partners. All Partnership
assets shall be recorded as the property of the Partnership in its books and
records, irrespective of the name in which legal title to such Partnership
assets is held.
Section 7.4 Reimbursement of the General Partner.
A. No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions, payments and allocations to which it may be entitled),
the General Partner shall not be compensated for its services as general partner
of the Partnership.
B. Responsibility for Partnership Expenses. The Partnership shall
be responsible for and shall pay all expenses relating to the Partnership's
organization, the ownership of its assets and
Page 33
its operations. The General Partner shall be reimbursed on a monthly basis, or
such other basis as the General Partner may determine in its sole and absolute
discretion, for all expenses it incurs relating to the ownership and operation
of, or for the benefit of, the Partnership (including, without limitation,
expenses related to the operations of the General Partner and to the management
and administration of any Subsidiaries of the General Partner or the Partnership
or Affiliates of the Partnership, such as auditing expenses and filing fees) but
excluding any portion of expenses reasonably attributable to assets not owned by
or for the benefit of, or to operations not for the benefit of, the Partnership
or Affiliates of the Partnership; provided that, the amount of any such
reimbursement shall be reduced by (i) any interest earned by the General Partner
with respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership as permitted in Section 7.5.A (which interest is
considered to belong to the Partnership and shall be paid over to the
Partnership to the extent not applied to reimburse the General Partner for
expenses hereunder); and (ii) any amount derived by the General Partner from any
investments permitted in Section 7.5.A. The General Partner shall determine in
good faith the amount of expenses incurred by it related to the ownership and
operation of, or for the benefit of, the Partnership. If certain expenses are
incurred for the benefit of the Partnership and other entities (including the
General Partner), such expenses will be allocated to the Partnership and such
other entities in such a manner as the General Partner in its reasonable
discretion deems fair and reasonable. Such reimbursements shall be in addition
to any reimbursement to the General Partner pursuant to Section 10.3.C and as a
result of indemnification pursuant to Section 7.7. All payments and
reimbursements hereunder shall be characterized for federal income tax purposes
as expenses of the Partnership incurred on its behalf, and not as expenses of
the General Partner.
C. Partnership Interest Issuance Expenses. The General Partner
shall also be reimbursed for all expenses it incurs relating to any issuance of
Partnership Interests, REIT Shares, Debt of the Partnership or the General
Partner or rights, options, warrants or convertible or exchangeable securities
pursuant to Article IV (including, without limitation, all costs, expenses,
damages and other payments resulting from or arising in connection with
litigation related to any of the foregoing), all of which expenses are
considered by the Partners to constitute expenses of, and for the benefit of,
the Partnership except to the extent of any portion of such expenses reasonably
attributable to assets not owned by or for the benefit of, or to operations not
for the benefit of, the Partnership or Affiliates of the Partnership.
D. Purchases of REIT Shares by the General Partner. If the General
Partner exercises its rights under the Articles to purchase REIT Shares or
otherwise elects to purchase from its stockholders REIT Shares in connection
with a share repurchase or similar program or for the purpose of delivering such
REIT Shares to satisfy an obligation under any dividend reinvestment or equity
purchase program adopted by the General Partner, any employee equity purchase
plan adopted by the General Partner or any similar obligation or arrangement
undertaken by the General Partner in the future, the purchase price paid by the
General Partner for those REIT Shares and any other expenses incurred by the
General Partner in connection with such purchase shall be considered expenses of
the Partnership and shall be reimbursable to the General Partner, subject to the
conditions that: (i) if those REIT Shares subsequently are to be sold by the
General Partner, the General Partner shall pay to the Partnership any proceeds
received by the General Partner for those REIT Shares (provided that a transfer
of REIT Shares for Partnership Units
Page 34
pursuant to Section 8.6 would not be considered a sale for such purposes);
and (ii) if such REIT Shares are not retransferred by the General Partner
within thirty (30) days after the purchase thereof, the General Partner shall
cause the Partnership to cancel a number of Partnership Units (rounded to the
nearest whole Partnership Unit) held by the General Partner equal to the
product attained by multiplying the number of those REIT Shares by a
fraction, the numerator of which is one and the denominator of which is the
Conversion Factor.
E. Reimbursement not a Distribution. If and to the extent any
reimbursement made pursuant to this Section 7.4 is determined for federal income
tax purposes not to constitute a payment of expenses of the Partnership, the
amount so determined shall constitute a guaranteed payment with respect to
capital within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners and shall not be
treated as a distribution for purposes of computing the Partners' Capital
Accounts.
Section 7.5 Additional General Partner Contributions; Outside Activities
of the General Partner; Relationship of REIT Shares To Partnership Units;
Funding Debt.
A. General. Except with respect to assets that are not required to
be part of the General Partner's contribution of assets to the Partnership,
without the Consent of the Outside Limited Partners, the General Partner shall
not, directly or indirectly, enter into or conduct any business other than in
connection with the ownership, acquisition and disposition of Partnership
Interests as a General Partner or Limited Partner and the management of the
business of the Partnership and such activities as are incidental thereto.
Except with respect to assets that are not required to be part of the General
Partner's contribution of assets to the Partnership, without the Consent of the
Outside Limited Partners, the assets of the General Partner shall be limited to
Partnership Interests and permitted debt obligations of the Partnership (as
contemplated by Section 7.5.F), so that REIT Shares and Partnership Units are
completely fungible except as otherwise specifically provided herein; provided
that the General Partner shall be permitted to hold such bank accounts or
similar instruments or accounts in its name as it deems necessary to carry out
its responsibilities and purposes as contemplated under this Agreement and its
organizational documents (provided that accounts held on behalf of the
Partnership to permit the General Partner to carry out its responsibilities
under this Agreement shall be considered to belong to the Partnership and the
interest earned thereon shall, subject to Section 7.4.B, be applied for the
benefit of the Partnership); and provided further that the General Partner shall
be permitted to continue to own and may acquire, directly or through a Qualified
REIT Subsidiary or limited liability company (all of the ownership interest in
which may be held directly by the General Partner), up to a one percent (1%)
interest in any partnership or limited liability company if at least ninety-nine
percent (99%) of the equity interest of the General Partner and of the
Partnership therein is owned, directly or indirectly, by the Partnership (it
being understood that third parties may also own equity interests in such
partnership or limited liability company); and provided further, that the
General Partner may make one or more direct acquisitions of assets, but if and
only if such direct acquisitions have been approved and determined to be in the
best interests of the General Partner, the Partnership and the Partners (taking
into account any adverse tax consequences to the Partners) by a majority of the
board of directors of the General Partner. The General Partner and any of its
Affiliates may acquire Limited Partnership Interests and shall be
Page 35
entitled to exercise all rights of a Limited Partner relating to such Limited
Partnership Interests. Notwithstanding anything in this Agreement to the
contrary, the General Partner intends to contribute to the Partnership legal or
beneficial ownership of (a) the entire interest immediately prior to the date of
this Agreement in all real property and related personal property owned directly
by the General Partner or any Subsidiary of the General Partner and (b) at least
99% of the beneficial interest owned by the General Partner and its Subsidiaries
immediately prior to the date of this Agreement in any partnership or limited
liability company (including any so-called "downreit partnership") that owns a
direct or indirect interest in real property and related personal property (and
in connection therewith the Partnership may form one or more Subsidiaries to
which any such 99% interest may be contributed by the Partnership). To the
extent that the terms of mortgage debt secured by real property and related
personal property and interests therein owned by the General Partner, its
Subsidiaries or entities in which they have an ownership interest ("BPP Mortgage
Debt") prohibit, or the consent of any other person is required for, any
contribution of property to the Partnership or its Subsidiaries described in
this Section 7.5, the General Partner shall at all times after the date hereof
use its best efforts to secure the consent of the holders of the BPP Mortgage
Debt (and/or any other person whose consent to such contribution is required) to
such contribution and to cause the entire beneficial interest, and record title
if practicable, to such property to be vested in the Partnership as soon as is
reasonably practicable after the date hereof.
B. Repurchase of REIT Shares. If the General Partner exercises its
rights under the Articles to purchase REIT Shares or otherwise elects to
purchase from its stockholders REIT Shares in connection with a share repurchase
or similar program or for the purpose of delivering such shares to satisfy an
obligation under any dividend reinvestment or share purchase program adopted by
the General Partner, any employee share purchase plan adopted by the General
Partner or any similar obligation or arrangement undertaken by the General
Partner in the future, then the General Partner shall cause the Partnership to
purchase from the General Partner that number of Partnership Units of the
appropriate class equal to the product obtained by multiplying the number of
REIT Shares purchased by the General Partner times a fraction, the numerator of
which is one and the denominator of which is the Conversion Factor, on the same
terms and for the same aggregate price that the General Partner purchased such
REIT Shares.
C. Forfeiture of REIT Shares. If the Partnership or the General
Partner acquires REIT Shares as a result of the forfeiture of such REIT Shares
under a restricted or similar share plan, then the General Partner shall cause
the Partnership to cancel that number of Partnership Units equal to the number
of REIT Shares so acquired, and, if the Partnership acquired such REIT Shares,
it shall transfer such REIT Shares to the General Partner for cancellation.
D. Issuances of REIT Shares. The General Partner shall not grant,
award, or issue any additional REIT Shares (other than REIT Shares issued
pursuant to Section 8.6 hereof or pursuant to a dividend or distribution
(including any share split) of REIT Shares to all of its stockholders), other
equity securities of the General Partner, New Securities or Convertible Funding
Debt unless (i) the General Partner shall cause, pursuant to Section 4.2.A
hereof, the Partnership to issue to the General Partner Partnership Interests or
rights, options, warrants or convertible or exchangeable securities of the
Partnership having designations, preferences and other rights, all such that the
economic interests are substantially the same as those of such additional REIT
Shares, other equity securities, New Securities or Convertible Funding Debt, as
the case may be; and (ii) the General Partner transfers to the Partnership, as
an additional Capital Contribution, the proceeds from the grant, award, or
issuance of such additional REIT Shares, other equity securities, New Securities
or Convertible Funding Debt, as the case may be, or from the exercise of rights
contained in such additional REIT Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be. Without limiting
the foregoing, the General Partner is expressly authorized to issue additional
REIT Shares, other equity securities, New Securities or
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Convertible Funding Debt, as the case may be, for less than fair market value,
and the General Partner is expressly authorized, pursuant to Section 4.2.A
hereof, to cause the Partnership to issue to the General Partner corresponding
Partnership Interests, as long as (a) the General Partner concludes in good
faith that such issuance is in the interests of the General Partner and the
Partnership (for example, and not by way of limitation, the issuance of REIT
Shares and corresponding Partnership Units pursuant to a share purchase plan
providing for purchases of REIT Shares, either by employees or stockholders, at
a discount from fair market value or pursuant to employee share options that
have an exercise price that is less than the fair market value of the REIT
Shares, either at the time of issuance or at the time of exercise or as part of
a compensation package to any person rendering services to the General Partner
and the Partnership including without limitation persons serving as directors of
the General Partner); and (b) the General Partner transfers all proceeds from
any such issuance or exercise to the Partnership as an additional Capital
Contribution.
E. Share Option Plan. If at any time or from time to time, the
General Partner sells REIT Shares pursuant to any Share Option Plan, the General
Partner shall transfer the net proceeds of the sale of such REIT Shares to the
Partnership as an additional Capital Contribution in exchange for an amount of
additional Partnership Units equal to the number of REIT Shares so sold divided
by the Conversion Factor.
F. Funding Debt. The General Partner may incur a Funding Debt,
including, without limitation, a Funding Debt that is convertible into REIT
Shares or otherwise constitutes a class of New Securities ("Convertible Funding
Debt"), subject to the condition that the General Partner lend to the
Partnership the net proceeds of such Funding Debt; provided, that Convertible
Funding Debt shall be issued pursuant to Section 7.5.D above; and, provided
further, that the General Partner shall not be obligated to lend the net
proceeds of any Funding Debt to the Partnership in a manner that would be
inconsistent with the General Partner's ability to remain qualified as a REIT.
If the General Partner enters into any Funding Debt, the loan to the Partnership
shall be on comparable terms and conditions, including interest rate, repayment
schedule and costs and expenses, as are applicable with respect to or incurred
in connection with such Funding Debt.
Section 7.6 Transactions with Affiliates.
A. Transfers of Funds. The Partnership may lend or contribute funds
or other assets to its Subsidiaries or other Persons in which it has an equity
investment and such Persons may borrow funds from the Partnership, in each case
subject to the following provisions of this Section 7.6. The foregoing authority
shall not create any right or benefit in favor of any Subsidiary or any other
Person.
B. Transfers of Assets. Except as provided in Section 7.5, the
Partnership may transfer assets to joint ventures, limited liability companies,
partnerships, corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions consistent
with this Agreement and applicable law as the General Partner, in its sole and
absolute discretion, believes are advisable.
C. Transfers of Property. Except as expressly permitted by this
Agreement, neither the General Partner nor any of its
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Affiliates shall sell, transfer or convey any property to, or purchase any
property from, or lend to or borrow from the Partnership, directly or
indirectly, except pursuant to transactions that are determined by the General
Partner in good faith to be fair and reasonable.
D. Transactions with Certain Affiliates. Except as expressly
permitted by this Agreement, the Partnership shall not, directly or indirectly,
sell, transfer or convey any property to, or purchase any property from, or
borrow funds from, or lend funds to, any Partner or any Affiliate of the
Partnership that is not also a Subsidiary of the Partnership, except pursuant to
transactions that are on terms that are determined by the General Partner in
good faith to be fair and reasonable and no less favorable to the Partnership
than would be obtained from an unaffiliated third party.
E. Conflict Avoidance. The General Partner is expressly authorized
to enter into, in the name and on behalf of the Partnership, a right of first
opportunity arrangement and other conflict avoidance agreements with various
Affiliates of the Partnership and the General Partner on such terms as the
General Partner, in its sole and absolute discretion, believes are advisable.
F. Benefit Plans Sponsored by the Partnership. The General Partner
in its sole and absolute discretion and without the approval of the Limited
Partners, may propose and adopt on behalf of the Partnership employee benefit
plans funded by the Partnership for the benefit of employees of the General
Partner, the Partnership, Subsidiaries of the Partnership or any Affiliate of
any of them in respect of services performed, directly or indirectly, for the
benefit of the Partnership, the General Partner, or any Subsidiaries of the
General Partner.
Section 7.7 Indemnification.
A. General. The Partnership shall indemnify each Indemnitee to the
fullest extent provided by the Act from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
attorneys fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from or in connection with any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, incurred by the Indemnitee and relating to the Partnership or
the General Partner or the operation of, or the ownership of property by, any of
them as set forth in this Agreement, in which any such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established by a final determination of a court of competent jurisdiction that:
(i) the act or omission of the Indemnitee was material to the matter giving rise
to the proceeding and either was committed in bad faith or was the result of
active and deliberate dishonesty; (ii) the Indemnitee actually received an
improper personal benefit in money, property or services; or (iii) in the case
of any criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Without limitation, the foregoing indemnity
shall extend to any liability of any Indemnitee, pursuant to a loan guaranty
(except a guaranty by a limited partner of nonrecourse indebtedness of the
Partnership or as otherwise provided in any such loan guaranty), contractual
obligation for any indebtedness or other obligation or otherwise, for any
indebtedness of the Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness which the Partnership or any Subsidiary of
the Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into one
or more indemnity agreements consistent with the provisions of this Section 7.7
in favor
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of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 7.7.A. The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent by
an Indemnitee, or an entry of an order of probation against an Indemnitee prior
to judgment, creates a rebuttable presumption that such Indemnitee acted in a
manner contrary to that specified in this Section 7.7.A with respect to the
subject matter of such proceeding. Any indemnification pursuant to this Section
7.7 shall be made only out of the assets of the Partnership, and any insurance
proceeds from the liability policy covering the General Partners and any
Indemnitee, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership, or otherwise
provide funds to enable the Partnership to fund its obligations under this
Section 7.7.
B. Advancement of Expenses. Reasonable expenses expected to be
incurred by an Indemnitee shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met; and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. No Limitation of Rights. The indemnification provided by this
Section 7.7 shall be in addition to any other rights to which an Indemnitee or
any other Person may be entitled under any agreement, pursuant to any vote of
the Partners, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity unless otherwise provided in
a written agreement pursuant to which such Indemnitee is indemnified.
D. Insurance. The Partnership may, but shall not be obligated to,
purchase and maintain insurance, on behalf of the Indemnitees and such other
Persons as the General Partner shall determine, against any liability that may
be asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such liability
under the provisions of this Agreement.
E. Benefit Plan Fiduciary. For purposes of this Section 7.7, the
Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an ERISA Plan whenever the performance by it of its duties to the
Partnership also imposes duties on, or otherwise involves services by, it to
such ERISA Plan or participants or beneficiaries of such ERISA Plan. Excise
taxes assessed on an Indemnitee, of for which the Indemnitee is otherwise found
liable, with respect to an ERISA Plan pursuant to applicable law shall
constitute fines within the meaning of this Section 7.7, and actions taken or
omitted by the Indemnitee with respect to an ERISA Plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of such ERISA Plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Partnership.
Page 39
F. No Personal Liability for Limited Partners. In no event may an
Indemnitee subject any of the Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.
G. Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.
H. Benefit. The provisions of this Section 7.7 are for the benefit
of the Indemnitees, their employees, officers, directors, trustees, heirs,
successors, assigns and administrators and shall not be deemed to create any
rights for the benefit of any other Persons. Any amendment, modification or
repeal of this Section 7.7, or any provision hereof, shall be prospective only
and shall not in any way affect the limitation on the Partnership's liability to
any Indemnitee under this Section 7.7 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or related
to matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when such claims may arise or be asserted.
I. Indemnification Payments Not Distributions. If and to the extent
any payments to the General Partner pursuant to this Section 7.7 constitute
gross income to the General Partner (as opposed to the repayment of advances
made on behalf of the Partnership), such amounts shall constitute guaranteed
payments within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners, and shall not be
treated as distributions for purposes of computing the Partners' Capital
Accounts.
J. Exception to Indemnification. Notwithstanding anything to the
contrary in this Agreement, the General Partner shall not be entitled to
indemnification hereunder for any loss, claim, damage, liability or expense for
which the General Partner is obligated to indemnify the Partnership under any
other agreement between the General Partner and the Partnership.
Section 7.8 Liability of the General Partner.
A. General. Notwithstanding anything to the contrary set forth in
this Agreement and except as set forth in an Applicable Contribution Agreement,
the General Partner and its officers and directors shall not be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained, liabilities incurred or benefits not derived as a result of errors in
judgment or mistakes of fact or law or of any act or omission unless the General
Partner acted in bad faith and the act or omission was material to the matter
giving rise to the loss, liability or benefit not derived.
B. No Obligation to Consider Separate Interests of Limited Partners
or REIT Stockholders. The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the stockholders of
the General Partner collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or
Assignees) in deciding whether to
Page 40
cause the Partnership to take (or decline to take) any actions, and that, except
as set forth in an Applicable Contribution Agreement, the General Partner shall
not be liable for monetary damages for losses sustained, liabilities incurred or
benefits not derived by Limited Partners in connection with such decisions,
provided that the General Partner has acted in good faith.
C. Actions of Agents. Subject to its obligations and duties as
General Partner set forth in Section 7.1.A, the General Partner may exercise any
of the powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agents. The
General Partner shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by the General Partner in good faith.
D. Effect of Amendment. Notwithstanding any other provision
contained herein, any amendment, modification or repeal of this Section 7.8 or
any provision hereof shall be prospective only and shall not in any way affect
the limitations on the General Partner's and its officers' and directors'
liability to the Partnership and the Limited Partners under this Section 7.8 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner.
A. Reliance on Documents. The General Partner may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture or other paper or document believed by it in good faith to be genuine
and to have been signed or presented by the proper party or parties.
B. Reliance on Advisors. The General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters which the General Partner
reasonably believes to be within such Person's professional or expert competence
shall be conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.
C. Action Through Agents. The General Partner shall have the right,
in respect of any of its powers or obligations hereunder, to act through any of
its duly authorized officers and duly appointed attorneys-in-fact. Each such
attorney shall, to the extent provided by the General Partner in the power of
attorney, have full power and authority to do and perform all and every act and
duty which is permitted or required to be done by the General Partner hereunder.
D. Actions to Maintain REIT Status or Avoid Taxation of the General
Partner Entity. Notwithstanding any other provisions of this Agreement or the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the General
Partner Entity to continue
Page 41
to qualify as a REIT; or (ii) to allow the General Partner Entity to avoid
incurring any liability for taxes under Section 857 or 4981 of the Code, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
Section 7.10 Reliance By Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority,
without consent or approval of any other Partner or Person, to encumber, sell or
otherwise use in any manner any and all assets of the Partnership, to enter into
any contracts on behalf of the Partnership and to take any and all actions on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if the General Partner were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
Section 7.11 Restrictions on General Partner's Authority.
A. Consent Required. The General Partner may not take any action in
contravention of an express prohibition or limitation of this Agreement without
the written Consent of (i) all Partners adversely affected or (ii) such lower
percentage of the Limited Partnership Interests as may be specifically provided
for under a provision of this Agreement or an Applicable Contribution Agreement.
B. Sale of All Assets of the Partnership. Except as provided in
Article XIII, the General Partner may not, directly or indirectly, cause the
Partnership to sell, exchange, transfer or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or a
series of related transactions (including by way of merger (including a
triangular merger), consolidation or other combination with any other Persons)
(i) if such merger, sale or other transaction is in connection with a
Termination Transaction permitted under Section 11.2.B hereof, without the
Consent of the Partners holding at least a majority of the then outstanding
Partnership Units (including any Partnership Units held by the General
Partners), or (ii) otherwise, without the Consent of the Outside Limited
Partners.
Section 7.12 Loans By Third Parties. The Partnership may incur Debt, or
enter into similar credit, guarantee, financing or refinancing arrangements for
any purpose (including, without limitation, in connection with any acquisition
of property) with any Person other than the General
Page 42
Partner or an Affiliate of the General Partner upon such terms as the General
Partner determines appropriate.
ARTICLE VIII - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this Agreement,
including Section 10.5, or under the Act.
Section 8.2 Management of Business. No Limited Partner or Assignee (other
than the General Partner, any of its Affiliates or any officer, director,
employee, partner, member, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such) shall take
part in the operation, management or control (within the meaning of the Act) of
the Partnership's business (except as limited rights may be specified in an
Applicable Contribution Agreement), transact any business in the Partnership's
name or have the power to sign documents for or otherwise bind the Partnership.
The transaction of any such business by the General Partner, any of its
Affiliates or any officer, director, employee, partner, member, agent or trustee
of the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners. Subject to Section
7.5 hereof, and subject to any agreements entered into pursuant to Section 7.6.E
hereof and to any other agreements entered into by a Limited Partner or its
Affiliates with the Partnership or any of its Subsidiaries, any Limited Partner
(other than the General Partner) and any officer, director, employee, partner,
member, agent, trustee, Affiliate or Shareholder of any Limited Partner shall be
entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and
activities, in direct or indirect competition with, the Partnership. Neither
the Partnership nor any Partners shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee. None of
the Limited Partners (other than the General Partner) nor any other Person shall
have any rights by virtue of this Agreement or the Partnership relationship
established hereby in any business ventures of any other Person (other than the
General Partner to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
Section 8.4 Return of Capital. Except pursuant to the right of redemption
set forth in Section 8.6 or except as may otherwise be provided in an Applicable
Contribution Agreement, no Limited Partner shall be entitled to the withdrawal
or return of its Capital Contribution, except to the extent of distributions
made pursuant to this Agreement or upon termination of the Partnership as
provided herein. No Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee either as to the return of Capital
Contributions (except as permitted by Section 4.2.A) or, except to the extent
provided by Exhibit C or as permitted by Sections 4.2.A,
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5.1.B(i), 6.1.A(ii) and 6.1.B(i), or otherwise expressly provided in this
Agreement, as to profits, losses, distributions or credits.
Section 8.5 Rights of Limited Partners Relating to the Partnership.
A. General. In addition to the other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.D, each Limited
Partner shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written demand
with a statement of the purpose of such demand and at such Limited Partner's own
expense (including copying and administrative charges as the General Partner may
establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by
the General Partner Entity pursuant to the Exchange Act;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and
all amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the
Certificate and all amendments thereto have been executed;
and
(5) to obtain true and full information regarding the amount of
cash and a description and statement of any other property
or services contributed by each Partner and which each
Partner has agreed to contribute in the future, and the date
on which each became a Partner.
B. Notice of Conversion Factor. The Partnership shall notify each
Limited Partner upon request of the then current Conversion Factor and any
changes that have been made thereto.
C. Notice of Extraordinary Transaction of the General Partner
Entity. The General Partner Entity shall not make any extraordinary
distributions of cash or property to its stockholders or effect a merger
(including, without limitation, a triangular merger), a sale of all or
substantially all of its assets or any other similar extraordinary transaction
without notifying the Limited Partners of its intention to make such
distribution or effect such merger, sale or other extraordinary transaction at
least twenty (20) Business Days prior to the record date to determine
stockholders eligible to receive such distribution or to vote upon the approval
of such merger, sale or other extraordinary transaction (or, if no such record
date is applicable, at least twenty (20) business days before consummation of
such merger, sale or other extraordinary transaction). This
Page 44
provision for such notice shall not be deemed (i) to permit any transaction that
otherwise is prohibited by this Agreement or requires a Consent of the Partners;
or (ii) to require a Consent of the Outside Limited Partners to a transaction
that does not otherwise require Consent under this Agreement. Each Limited
Partner agrees, as a condition to the receipt of the notice pursuant hereto, to
keep confidential the information set forth therein until such time as the
General Partner Entity has made public disclosure thereof and to use such
information during such period of confidentiality solely for purposes of
determining whether to exercise the Redemption Right; provided, however, that a
Limited Partner may disclose such information to its attorney, accountant and/or
financial advisor for purposes of obtaining advice with respect to such exercise
so long as such attorney, accountant and/or financial advisor agrees to receive
and hold such information subject to this confidentiality requirement.
D. Confidentiality. Notwithstanding any other provision of this
Section 8.5, the General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determines in its sole
and absolute discretion to be reasonable, any information that (i) the General
Partner reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or could damage the Partnership
or its business; or (ii) the Partnership is required by law or by agreements
with unaffiliated third parties to keep confidential.
Section 8.6 Redemption Right.
A. General.
(i) Subject to Section 8.6.C, at (A) any time after December 31
of the calendar year next following the calendar year in which a
Partnership Unit is issued to a Limited Partner pursuant to Article IV
hereof (regardless of whether such Partnership Unit is designated upon
issuance as a Class A Unit, a Class B Unit or otherwise), or (B) any
time after such earlier date as the General Partner, in its sole and
absolute discretion, designates with respect to any or all Class A
Units then outstanding, or (C) any time after such other date as may
be provided in an Applicable Contribution Agreement, the holder of a
Partnership Unit (if other than the General Partner or the General
Partner Entity or any Subsidiary of either the General Partner or the
General Partner Entity) shall have the right (the "Redemption Right")
to require the Partnership to redeem such Partnership Unit, with such
redemption to occur on the Specified Redemption Date and at a
redemption price equal to and in the form of the Cash Amount to be
paid by the Partnership. Any such Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with
a copy to the General Partner) by the Limited Partner who is
exercising the Redemption Right (the "Redeeming Partner"). A Limited
Partner may exercise the Redemption Right from time to time with
respect to part or all of the Units that it owns, as selected by the
Limited Partner, provided that, except as provided in an Applicable
Contribution Agreement, a Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership
Units unless such Redeeming Partner then holds
Page 45
less than one thousand (1,000) Partnership Units, in which
event the Redeeming Partner must exercise the Redemption
Right for all of the Partnership Units held by such Redeeming Partner.
(ii) The Redeeming Partner shall have no right with respect to
any Partnership Units so redeemed to receive any distributions paid
after the Specified Redemption Date with respect to such Partnership
Units.
(iii) The Assignee of any Limited Partner may exercise the
rights of such Limited Partner pursuant to this Section 8.6, and such
Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such
Limited Partner's Assignee. In connection with any exercise of such
rights by such Assignee on behalf of such Limited Partner, the Cash
Amount shall be paid by the Partnership directly to such Assignee and
not to such Limited Partner.
(iv) If the General Partner provides notice to the Limited
Partners, pursuant to Section 8.5.C hereof, the Redemption Right shall
be exercisable, without regard to whether the Partnership Units have
been outstanding for any specified period, during the period
commencing on the date on which the General Partner provides such
notice and ending on the record date to determine stockholders
eligible to receive such distribution or to vote upon the approval of
such merger, sale or other extraordinary transaction (or, if no such
record date is applicable, at least twenty (20) business days before
the consummation of such merger, sale or other extraordinary
transaction). If this subparagraph (iv) applies, the Specified
Redemption Date is the date on which the Partnership and the General
Partner receive notice of exercise of the Redemption Right, rather
than ten (10) Business Days after receipt of the notice of redemption.
B. General Partner Assumption of Right.
(i) If a Limited Partner has delivered a Notice of Redemption,
the General Partner may, in its sole and absolute discretion (subject
to the limitations on ownership and transfer of REIT Shares set forth
in the Articles), elect to assume directly and satisfy a Redemption
Right by paying to the Redeeming Partner either the Cash Amount or the
REIT Shares Amount, as the General Partner determines in its sole and
absolute discretion (provided that payment of the Redemption Amount in
the form of REIT Shares shall be in REIT Shares registered for resale
under Section 12 of the Exchange Act and listed for trading on the
exchange or national market on which the REIT Shares are Publicly
Traded, and provided further that, if the REIT Shares are not Publicly
Traded at the time a Redeeming Partner exercises its Redemption Right,
the Redemption Amount shall be paid only in the form of the Cash
Amount unless the Redeeming Partner, in its sole and absolute
discretion, consents to payment of the Redemption Amount in the form
of the REIT Shares Amount), on the Specified Redemption Date,
whereupon the
Page 46
General Partner shall acquire the Partnership Units offered for
redemption by the Redeeming Partner and shall be treated for all
purposes of this Agreement as the owner of such Partnership Units.
Unless the General Partner, in its sole and absolute discretion, shall
exercise its right to assume directly and satisfy the Redemption
Right, the General Partner shall not have any obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming
Partner's exercise of the Redemption Right. If the General Partner
shall exercise its right to satisfy the Redemption Right in the manner
described in the first sentence of this Section 8.6B and shall fully
perform its obligations in connection therewith, the Partnership shall
have no right or obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner's exercise of the Redemption
Right, and each of the Redeeming Partner, the Partnership and the
General Partner shall, for federal income tax purposes, treat the
transaction between the General Partner and the Redeeming Partner as a
sale of the Redeeming Partner's Partnership Units to the General
Partner. Nothing contained in this Section 8.6.B shall imply any right
of the General Partner to require any Limited Partner to exercise the
Redemption Right afforded to such Limited Partner pursuant to Section
8.6.A.
(ii) If the General Partner determines to pay the Redeeming
Partner the Redemption Amount in the form of REIT Shares, the total
number of REIT Shares to be paid to the Redeeming Partner in exchange
for the Redeeming Partner's Partnership Units shall be the applicable
REIT Shares Amount. If this amount is not a whole number of REIT
Shares, the Redeeming Partner shall be paid (i) that number of REIT
Shares which equals the nearest whole number less than such amount
plus (ii) an amount of cash which the General Partner determines, in
its reasonable discretion, to represent the fair value of the
remaining fractional REIT Share which would otherwise be payable to
the Redeeming Partner.
(iii) Each Redeeming Partner agrees to execute such documents
as the General Partner may reasonably require in connection with the
issuance of REIT Shares upon exercise of the Redemption Right.
C. Exceptions to Exercise of Redemption Right. Notwithstanding the
provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled to
exercise the Redemption Right pursuant to Section 8.6.A if (but only as long as)
the delivery of REIT Shares to such Partner on the Specified Redemption Date (i)
would, based upon the advice of outside counsel, be prohibited under the
Articles or (ii) would, based upon the advice of outside counsel, be prohibited
under applicable federal or state securities laws or regulations (in each case
regardless of whether the General Partner would in fact assume and satisfy the
Redemption Right).
D. No Liens on Partnership Units Delivered for Redemption. Each
Limited Partner covenants and agrees with the General Partner that all
Partnership Units delivered for redemption shall be delivered to the Partnership
or the General Partner, as the case may be, free and clear of all liens, and,
notwithstanding anything contained herein to the contrary, neither the General
Partner nor the Partnership shall be under any obligation to acquire Partnership
Units which are or
Page 47
may be subject to any liens. Unless otherwise provided for in an Applicable
Contribution Agreement, each Limited Partner further agrees that, if any state
or local property transfer tax is payable as a result of the transfer of its
Partnership Units to the Partnership or the General Partner, such Limited
Partner shall assume and pay such transfer tax.
E. Additional Partnership Interests. If the Partnership issues
Partnership Interests to any Additional Limited Partner pursuant to Article IV,
the General Partner shall make such revisions to this Section 8.6 as it
reasonably determines are necessary to reflect the issuance of such Partnership
Interests (including setting forth any restrictions on the exercise of the
Redemption Right with respect to such Partnership Interests). The General
Partner may grant redemption rights having terms other than as set forth in this
Section 8.6 as provided in an Applicable Contribution Agreement.
ARTICLE IX - BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership those records and
documents required to be maintained by the Act and other books deemed by the
General Partner to be appropriate with respect to the Partnership's business,
including, without limitation, all books and records necessary to provide to the
Limited Partners any information, lists and copies of documents required to be
provided pursuant to Section 9.3. Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or be in the
form of, punch cards, magnetic tape, photographs, micrographics or any other
information storage device, provided that the records so maintained are
convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial and tax
reporting purposes, on an accrual basis in accordance with generally accepted
accounting principles, or such other basis as the General Partner deems
necessary or appropriate.
Section 9.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
Section 9.3 Reports.
A. Annual Reports. As soon as practicable, but in no event later
than the date on which the General Partner Entity mails its annual report to its
stockholders, the General Partner Entity shall cause to be mailed to each
Limited Partner an annual report, as of the close of the most recently ended
Partnership Year, containing financial statements of the Partnership, or of the
General Partner Entity if such statements are prepared solely on a consolidated
basis with the Partnership, for such Partnership Year, presented in accordance
with generally accepted accounting principles, such statements to be audited by
a nationally recognized firm of independent public accountants selected by the
General Partner Entity.
B. Quarterly Reports. If and to the extent that the General Partner
Entity mails quarterly reports to its stockholders, as soon as practicable, but
in no event later than the date on such reports are mailed, the General Partner
Entity shall cause to be mailed to each Limited
Page 48
Partner a report containing unaudited financial statements, as of the last day
of such calendar quarter, of the Partnership, or of the General Partner Entity
if such statements are prepared solely on a consolidated basis with the
Partnership, and such other information as may be required by applicable law or
regulation, or as the General Partner determines to be appropriate.
ARTICLE X - TAX MATTERS
Section 10.1 Preparation of Tax Returns. The General Partner shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the Partnership
for federal and state income tax purposes and shall use all reasonable efforts
to furnish, within ninety (90) days of the close of each taxable year, the tax
information reasonably required by Limited Partners for federal and state income
tax reporting purposes.
Section 10.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole and absolute discretion, determine whether to
make any available election pursuant to the Code. The General Partner shall
have the right to seek to revoke any such election (including, without
limitation, the election under Section 754 of the Code) upon the General
Partner's determination in its sole and absolute discretion that such revocation
is in the best interests of the Partners.
Section 10.3 Tax Matters Partner.
A. General. The General Partner shall be the "tax matters partner"
of the Partnership for federal income tax purposes. Pursuant to Section 6230(e)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer identification
number and profit interest of each of the Limited Partners and any Assignees;
provided, however, that such information is provided to the Partnership by the
Limited Partners.
▇. ▇▇▇▇▇▇. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the tax
matters partner may expressly state that such agreement
shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files
a statement with the IRS providing that the tax matters
partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner; or (ii) who
is a
Page 49
"notice partner" (as defined in Section 6231(a)(8) of the
Code) or a member of a "notice group" (as defined in Section
6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to
be taken into account by a Partner for tax purposes (a
"final adjustment") is mailed to the tax matters partner, to
seek judicial review of such final adjustment, including the
filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States
Claims Court or the District Court of the United States for
the district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
IRS at any time and, if any part of such request is not
allowed by the IRS, to file an appropriate pleading
(petition or complaint) for judicial review with respect to
such request;
(5) to enter into an agreement with the IRS to extend the period
for assessing any tax which is attributable to any item
required to be taken into account by a Partner for tax
purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law
or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 shall be fully applicable to the tax matters
partner in its capacity as such.
C. Reimbursement. The tax matters partner shall receive no
compensation for its services. All third party costs and expenses incurred by
the tax matters partner in performing its duties as such (including legal and
accounting fees and expenses) shall be borne by the Partnership. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
and/or law firm to assist the tax matters partner in discharging its duties
hereunder, so long as the compensation paid by the Partnership for such services
is reasonable.
Section 10.4 Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from, or pay on behalf of or with respect to, such
Limited Partner any amount of federal,
Page 50
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Section 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. If a Limited Partner fails to pay any
amounts owed to the Partnership pursuant to this Section 10.5 when due, the
General Partner may, in its sole and absolute discretion, elect to make the
payment to the Partnership on behalf of such defaulting Limited Partner, and in
such event shall be deemed to have loaned such amount to such defaulting Limited
Partner and shall succeed to all rights and remedies of the Partnership as
against such defaulting Limited Partner (including, without limitation, the
right to receive distributions). Any amounts payable by a Limited Partner
hereunder shall bear interest at the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points (but not higher than
the maximum lawful rate under the laws of the State of California from the date
such amount is due (i.e., fifteen (15) days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE XI - TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer.
A. Definition. The term "transfer," when used in this Article XI
with respect to a Partnership Interest or a Partnership Unit, shall be deemed to
refer to a transaction by which the General Partner purports to assign all or
any part of its General Partnership Interest to another Person or by which a
Limited Partner purports to assign all or any part of its Limited Partnership
Interest to another Person, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. The term "transfer" when used in this Article XI does not include
any redemption or repurchase of Partnership Units by the Partnership from a
Partner or acquisition of Partnership Units from a Limited Partner by the
General Partner pursuant to Section 8.6 or otherwise. No part of the interest
of a Limited Partner shall be subject to the claims of any creditor, any spouse
for alimony or support, or to legal process, and may not be voluntarily or
involuntarily alienated or encumbered except as may be specifically provided for
in this Agreement, in an Applicable
Page 51
Contribution Agreement or consented to by the General Partner.
B. General. No Partnership Interest shall be transferred, in whole
or in part, except in accordance with the terms and conditions set forth in this
Article XI or in an Applicable Contribution Agreement. Any transfer or
purported transfer of a Partnership Interest not made in accordance with this
Article XI or in an Applicable Contribution Agreement shall be null and void.
Section 11.2 Transfers of Partnership Interests of General Partner.
A. Except for transfers of Partnership Units to the Partnership as
provided in Section 7.5 or Section 8.6, the General Partner may not transfer any
of its Partnership Interest (including both its General Partnership Interest and
its Limited Partnership Interest) except in connection with a transaction
described in Section 11.2.B or as otherwise expressly permitted under this
Agreement, nor shall the General Partner withdraw as the General Partner except
in connection with a transaction described in Section 11.2.B.
B. The General Partner shall not engage in any merger (including a
triangular merger), consolidation or other combination of the General Partner
with or into another person (other than a combination in which the General
Partner is the surviving entity), sale of all or substantially all of its assets
or any reclassification, recapitalization or change of outstanding REIT Shares
(other than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination as described in the definition of
"Conversion Factor") ("Termination Transaction"), unless the Termination
Transaction has been approved by the Consent of the Partners holding at least a
majority of the then outstanding Partnership Units (including any Partnership
Units held by the General Partner) and in connection with which all Limited
Partners either will receive, or will have the right to elect to receive, for
each Partnership Unit an amount of cash, securities, or other property equal to
the product of the Conversion Factor multiplied by the greatest amount of cash,
securities or other property paid to a holder of REIT Shares corresponding to
such Partnership Unit in consideration of one such REIT Share at any time during
the period from and after the date on which the Termination Transaction is
consummated; provided that, if, in connection with the Termination Transaction,
a purchase, tender or exchange offer shall have been made to and accepted by the
holders of more than fifty percent (50%) of the outstanding REIT Shares, each
holder of Partnership Units shall receive, or shall have the right to elect to
receive without any right of Consent set forth above in this subsection B, the
greatest amount of cash, securities, or other property which such holder would
have received had it exercised the Redemption Right and received REIT Shares in
exchange for its Partnership Units immediately prior to the expiration of such
purchase, tender or exchange offer and had thereupon accepted such purchase,
tender or exchange offer.
Section 11.3 Limited Partners' Rights to Transfer.
A. General. Subject to the provisions of Sections 11.3.C, 11.3.D,
11.3.E, 11.4 and 11.6 and of an Applicable Contribution Agreement, a Limited
Partner (other than the General Partner) may transfer, with or without the
consent of the General Partner, all or any portion of its Partnership Interest,
or any of such Limited Partner's economic rights as a Limited Partner.
Page 52
B. Incapacitated Limited Partners. If a Limited Partner is subject
to Incapacity, the executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall have all of the
rights of a Limited Partner, but not more rights than those enjoyed by other
Limited Partners or as provided in an Applicable Contribution Agreement, for the
purpose of settling or managing the estate and such power as the Incapacitated
Limited Partner possessed to transfer all or any part of his or its interest in
the Partnership. The Incapacity of a Limited Partner, in and of itself, shall
not dissolve or terminate the Partnership.
C. No Transfers Violating Securities Laws. The General Partner may
prohibit, subject to the provisions of an Applicable Contribution Agreement, any
transfer by a Limited Partner of its Partnership Units unless it receives a
written opinion of legal counsel (which opinion and consent shall be reasonably
satisfactory to the Partnership) to such Limited Partner that such transfer
would not require filing of a registration statement under the Securities Act or
would not otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Units or at the option of the
Partnership, an opinion of legal counsel to the Partnership to the same effect.
D. No Transfers Affecting the Tax Status of the Partnership. No
transfer by a Limited Partner of its Partnership Units may be made to any Person
if (i) in the opinion of legal counsel for the Partnership, it would result in
the Partnership being treated as an association taxable as a corporation; (ii)
such transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" with the meaning of
Section 7704 of the Code; (iii) such transfer would cause the Partnership to
become, with respect to any ERISA Plan, 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); (iv) such transfer would, in the opinion of legal counsel
for the Partnership, cause any portion of the assets of the Partnership to
constitute assets of any ERISA Plan pursuant to Department of Labor Regulations
Section 2510.2-101; or (v) such transfer would subject the Partnership to be
regulated under the Investment Company Act of 1940, the Investment Advisors Act
of 1940 or the Employee Retirement Income Security Act of 1974, each as amended.
E. No Transfers to Holders of Nonrecourse Liabilities. No transfer
of any Partnership Units may be made to a lender to the Partnership or any
Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a
Nonrecourse Liability, without the consent of the General Partner, in its sole
and absolute discretion; provided that as a condition to such consent the lender
will be required to enter into an arrangement with the Partnership and the
General Partner to redeem for the Cash Amount any Partnership Units in which a
security interest is held simultaneously with the time at which such lender
would be deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partner.
A. Consent of General Partner. No Limited Partner shall have the
right to substitute a
Page 53
transferee as a Limited Partner in its place other than as provided in an
Applicable Contribution Agreement. The General Partner shall, however, have the
right to consent to the admission of a transferee of the interest of a Limited
Partner pursuant to this Section 11.4 as a Substituted Limited Partner, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner. The General
Partner hereby grants its consent to the admission as a Substituted Limited
Partner to any bona fide financial institution that loans money or otherwise
extends credit to a holder of Units and thereafter becomes the owner of such
Units pursuant to the exercise by such financial institution of its rights under
a Pledge of such Units granted in connection with such loan or extension of
credit.
B. Rights of Substituted Limited Partner. A transferee who has been
admitted as a Substituted Limited Partner in accordance with this Article XI
shall have all the rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement. The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this Agreement (including, without limitation, the
provisions of Section 15.11) and such other documents or instruments as may be
required to effect the admission.
C. Amendment of Exhibit A. Upon the admission of a Substituted
Limited Partner, the General Partner shall amend Exhibit A to reflect the name,
address, Capital Account, number of Partnership Units, and Percentage Interest
of such Substituted Limited Partner and to eliminate or adjust, if necessary,
the name, address, Capital Account and Percentage Interest and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees. If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any permitted transferee under
Section 11.3 as a Substituted Limited Partner, as described in Section 11.4,
such transferee shall be considered an Assignee for purposes of this Agreement.
An Assignee shall be entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive distributions
from the Partnership and the share of Net Income, Net Losses, gain, loss and
Recapture Income attributable to the Partnership Units assigned to such
transferee, and shall have the rights granted to the Limited Partners under
Section 8.6, but shall not be deemed to be a holder of Partnership Units for any
other purpose under this Agreement, and shall not be entitled to vote such
Partnership Units in any matter presented to the Limited Partners for a vote
(such Partnership Units being deemed to have been voted on such matter in the
same proportion as all other Partnership Units held by Limited Partners are
voted). If any such transferee desires to make a further assignment of any such
Partnership Units, such transferee shall be subject to all the provisions of
this Article XI to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions.
A. Withdrawal of Limited Partner. No Limited Partner may withdraw
from the
Page 54
Partnership other than as a result of a permitted transfer of all of such
Limited Partner's Partnership Units in accordance with this Article XI or
pursuant to redemption of all of its Partnership Units under Section 8.6.
B. Termination of Status as Limited Partner. Any Limited Partner
who shall transfer all of its Partnership Units in a transfer permitted pursuant
to this Article XI shall cease to be a Limited Partner upon the admission of all
Assignees of such Partnership Units as Substitute Limited Partners. Similarly,
any Limited Partner who shall transfer all of its Partnership Units pursuant to
redemption of all of its Partnership Units under Section 8.6 shall cease to be a
Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article XI may
only be made on the first day of a fiscal quarter of the Partnership, unless the
General Partner otherwise agrees.
D. Allocations. If any Partnership Interest is transferred during
any quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article XI or redeemed or transferred pursuant to Section
8.6, Net Income, Net Losses, each item thereof and all other items attributable
to such interest for such fiscal year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the fiscal year in accordance with Section 706(d) of
the Code, using the interim closing of the books method (unless the General
Partner, in its sole and absolute discretion, elects to adopt a daily, weekly,
or a monthly proration period, in which event Net Income, Net Losses, each item
thereof and all other items attributable to such interest for such fiscal year
shall be prorated based upon the applicable method selected by the General
Partner). Solely for purposes of making such allocations, each of such items
for the calendar month in which the transfer or redemption occurs shall be
allocated to the Person who is a Partner as of midnight on the last day of said
month. All distributions of Available Cash attributable to any Partnership Unit
with respect to which the Partnership Record Date is before the date of such
transfer, assignment or redemption shall be made to the transferor Partner or
the Redeeming Partner, as the case may be, and, in the case of a transfer or
assignment other than a redemption, all distributions of Available Cash
thereafter attributable to such Partnership Unit shall be made to the transferee
Partner.
E. Additional Restrictions. In addition to any other restrictions
on transfer herein contained, including without limitation the provisions of
this Article XI, in no event may any transfer or assignment of a Partnership
Interest by any Partner (including pursuant to Section 8.6) be made without the
express consent of the General Partner, in its sole and absolute discretion, (i)
to any person or entity who lacks the legal right, power or capacity to own a
Partnership Interest; (ii) in violation of applicable law; (iii) of any
component portion of a Partnership Interest, such as the Capital Account, or
rights to distributions, separate and apart from all other components of a
Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership
such transfer would cause a termination of the Partnership for federal or state
income tax purposes (except as a result of the redemption or exchange for REIT
Shares of all Partnership Units held by all Limited Partners or pursuant to a
transaction expressly permitted under Section 7.11.B or Section 11.2); (v) if in
the opinion of counsel to the Partnership, such transfer would cause the
Partnership to cease to be classified as a partnership for federal income tax
purposes (except as a result of the
Page 55
redemption or exchange for REIT Shares of all Partnership Units held by all
Limited Partners or pursuant to a transaction expressly permitted under Section
7.11.B or Section 11.2); (vi) if such transfer would cause the Partnership
Interests of "benefit plan investors" to become "significant," as those terms
are used in Section 7.9.E., or would cause the Partnership to become, with
respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975 of the Code); (vii) if such transfer would,
in the opinion of counsel to the Partnership, cause any portion of the assets of
the Partnership to constitute assets of any employee benefit plan pursuant to
Department of Labor Regulations Section 2510.1-101; (viii) if such transfer
requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (ix) if such transfer is
effectuated through an "established securities market" or a "secondary market"
(or the substantial equivalent thereof) within the meaning of Section 7704 of
the Code or such transfer causes the Partnership to become a "publicly traded
partnership," as such term is defined in Section 469(k)(2) or Section 7704(b) of
the Code (provided that this clause (ix) shall not be the basis for limiting or
restricting in any manner the exercise of the Redemption Right under Section 8.6
unless, and only to the extent that, outside tax counsel provides to the General
Partner an opinion to the effect that, in the absence of such limitation or
restriction, there is a significant risk that the Partnership will be treated as
a "publicly traded partnership" and, by reason thereof, taxable as a
corporation); (x) if such transfer subjects the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended; (xi) such transfer could adversely affect the ability of
the General Partner Entity to remain qualified as a REIT; or (xii) if in the
opinion of legal counsel for the transferring Partner (which opinion and counsel
shall be reasonably satisfactory to the Partnership) or legal counsel for the
Partnership, such transfer would adversely affect the ability of the General
Partner Entity to continue to qualify as a REIT or subject the General Partner
Entity to any additional taxes under Section 857 or Section 4981 of the Code.
F. Avoidance of "Publicly Traded Partnership" Status. The General
Partner shall monitor the transfers of interests in the Partnership to determine
(i) if such interests are being traded on an "established securities market" or
a "secondary market (or the substantial equivalent thereof)" within the meaning
of Section 7704 of the Code; and (ii) whether additional transfers of interests
would result in the Partnership being unable to qualify for at least one of the
"safe harbors" set forth in Regulations Section 1.7704-1 (or such other guidance
subsequently published by the IRS setting forth safe harbors under which
interests will not be treated as "readily tradable on a secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the Code)
(the "Safe Harbors"). The General Partner shall take all steps reasonably
necessary or appropriate to prevent any trading of interests or any recognition
by the Partnership of transfers made on such markets and, except as otherwise
provided herein, to insure that at least one of the Safe Harbors is met;
provided, however, that the foregoing shall not authorize the General Partner to
limit or restrict in any manner the right of any holder of a Partnership Unit to
exercise the Redemption Right in accordance with the terms of Section 8.6
unless, and only to the extent that, outside tax counsel provides to the General
Partner an opinion to the effect that, in the absence of such limitation or
restriction, there is a significant risk that the Partnership will be treated as
a "publicly traded partnership" and, by reason thereof, taxable as a
corporation.
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ARTICLE XII - ADMISSION OF PARTNERS
Section 12.1 Admission of a Successor General Partner. A successor to all
of the General Partner's General Partnership Interest pursuant to Section 11.2
who is proposed to be admitted as a successor General Partner shall be admitted
to the Partnership as the General Partner, effective upon such transfer. Any
such transferee shall carry on the business of the Partnership without
dissolution. In each case, the admission shall be subject to the successor
General Partner executing and delivering to the Partnership an acceptance of all
of the terms and conditions of this Agreement and such other documents or
instruments as may be required to effect the admission. In the case of such
admission on any day other than the first day of a Partnership Year, all items
attributable to the General Partner Interest for such Partnership Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners.
A. General. No Person shall be admitted as an Additional Limited
Partner without the consent of the General Partner, which consent shall be given
or withheld in the General Partner's sole and absolute discretion. A Person who
makes a Capital Contribution to the Partnership in accordance with this
Agreement, including without limitation, under Section 4.1.C, or who exercises
an option to receive Partnership Units shall be admitted to the Partnership as
an Additional Limited Partner only with the consent of the General Partner and
only upon furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Section 15.11 and (ii) such other documents or instruments as may be required in
the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
B. Allocations to Additional Limited Partners. If any Additional
Limited Partner is admitted to the Partnership on any day other than the first
day of a Partnership Year, then Net Income, Net Losses, each item thereof and
all other items allocable among Partners and Assignees for such Partnership Year
shall be allocated among such Additional Limited Partner and all other Partners
and Assignees by taking into account their varying interests during the
Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing of the books method (unless the General Partner, in its sole and
absolute discretion, elects to adopt a daily, weekly or monthly proration
method, in which event Net Income, Net Losses, and each item thereof would be
prorated based upon the applicable period selected by the General Partner).
Solely for purposes of making such allocations, each of such items for the
calendar month in which an admission of any Additional Limited Partner occurs
shall be allocated among all of the Partners and Assignees, including such
Additional Limited Partner; provided, however, that the General Partner may
adopt such other conventions relating to Allocations to Additional Limited
Partners as it determines are necessary or appropriate. All distributions of
Available Cash with respect to which the Partnership Record Date is before the
date of such admission shall be made solely to
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Partners and Assignees, other than the Additional Limited Partner, and all
distributions of Available Cash thereafter shall be made to all of the Partners
and Assignees, including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership. For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 15.11 hereof.
ARTICLE XIII - DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs shall be wound up, only upon the first to occur
of any of the following ("Liquidating Events") :
(i) the expiration of its term as provided in Section 2.4 hereof;
(ii) an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless within ninety
(90) days after such event of withdrawal a "majority in interest"
(as defined below) of the remaining Partners Consent in writing
to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a
successor General Partner;
(iii) through December 31, 2057, an election to dissolve the
Partnership made by the General Partner with the consent of
Limited Partners who hold eighty-five percent (85%) of the
outstanding Units held by Limited Partners (including Units
held by the General Partner);
(iv) an election to dissolve the Partnership made by the General
Partner, in its sole and absolute discretion after December
31, 2057;
(v) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and properties
of the Partnership for cash or for marketable securities; or
(vii) a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is
bankrupt or insolvent, or a final and
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non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in
each case under any federal or state bankruptcy or
insolvency laws as now or hereafter in effect, unless prior
to or at the time of the entry of such order or judgment a
"majority in interest" (as defined below) of the remaining
Partners Consent in writing to continue the business of the
Partnership and to the appointment, effective as of a date
prior to the date of such order or judgment, of a substitute
General Partner.
As used herein, a "majority in interest" shall refer to Partners (excluding
the General Partners) who hold more than fifty percent (50%) of the outstanding
Percentage Interests not held by the General Partners.
Section 13.2 Winding Up.
A. General. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner, or, in the event there
is no General Partner, any Person elected by a majority in interest of the
Limited Partners (the General Partner of such other person being referred to
herein as the "Liquidator") shall be responsible for overseeing the winding up
and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partner, include equity or other securities of the General Partner or any other
entity) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than
the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the Limited Partners;
and
(4) The balance, if any, to the Partners in accordance with
their Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all
periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article XIII.
B. Deferred Liquidation. Notwithstanding the provisions of Section
13.2.A which
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require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A, undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation. Any
such distributions in kind shall be made only if, in the good faith judgment of
the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
Subject to the provisions of any Applicable Contribution Agreement,
distributions in kind shall be made pro-rata to all Partners in accordance with
their interests with the value of such distributions to be as reasonably
determined by the Liquidator.
Section 13.3 Compliance With Timing Requirements of Regulations. Subject
to Section 13.4, if the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made under this
Article XIII to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in its Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any contribution to the capital of the Partnership
with respect to such deficit, and such deficit shall not be considered a debt
owed to the Partnership or to any other Person for any purpose whatsoever. In
the discretion of the Liquidator, a pro rata portion of the distributions that
would otherwise be made to the General Partner and Limited Partners pursuant to
this Article XIII may be: (A) distributed to a trust established for the
benefit of the General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the Partnership and
paying any contingent or unforeseen liabilities or obligations of the
Partnership or of the General Partner arising out of or in connection with the
Partnership (in which case the assets of any such trust shall be distributed to
the General Partner and Limited Partners from time to time, in the reasonable
discretion of the General Partner, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the General Partner and Limited Partners pursuant to this
Agreement); or (B) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
Section 13.4 Deemed Distribution and Recontribution. Notwithstanding any
other provision of this Article XIII, if the Partnership is considered
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but
no Liquidating Event has occurred, the Partnership's property shall not be
liquidated, the Partnership's liabilities shall not be paid or discharged and
the Partnership's affairs shall not be wound up. Instead, for federal income tax
purposes and for
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purposes of maintaining Capital Accounts pursuant to Exhibit B, the Partnership
shall be deemed to have contributed its assets in kind as provided in the
Regulations under Code Section 708(b)(1)(B).
Section 13.5 Rights of Limited Partners. Except as otherwise provided in
this Agreement, each Limited Partner shall look solely to the assets of the
Partnership for the return of its Capital Contributions and shall have no right
or power to demand or receive property other than cash from the Partnership.
Except as otherwise expressly provided in this Agreement, no Limited Partner
shall have priority over any other Limited Partner as to the return of its
Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution. In the event a Liquidating Event
occurs or an event occurs that would, but for provisions of an election or
objection by one or more Partners pursuant to Section 13.1, result in a
dissolution of the Partnership, the General Partner shall, within thirty (30)
days thereafter, provide written notice thereof to each of the Partners and to
all other parties with whom the Partnership regularly conducts business (as
determined in the discretion of the General Partner).
Section 13.7 Cancellation of Certificate of Limited Partnership. Upon the
completion of the liquidation of the Partnership's assets as provided in Section
13.2, the Partnership shall be terminated, a certificate of cancellation shall
be filed, and the Certificate and all qualifications of the Partnership as a
foreign limited partnership in jurisdictions other than the State of Delaware
shall be canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.
Section 13.8 Reasonable Time for Winding Up. A reasonable time shall be
allowed for the orderly winding up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 13.2, to
minimize any losses otherwise attendant upon such winding-up, and the provisions
of this Agreement shall remain in effect among the Partners during the period of
liquidation.
Section 13.9 Waiver of Partition. Each Partner hereby waives any right to
partition of the Partnership property.
Section 13.10 Liability of Liquidator. The Liquidator shall be
indemnified and held harmless by the Partnership in the same manner and to the
same degree as an Indemnitee may be indemnified pursuant to Section 7.7.
ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments.
A. General. Amendments to this Agreement may be proposed by the
General Partner or by any Limited Partners holding twenty-five percent (25%) or
more of the Partnership Interests. Following such proposal, the General Partner
shall submit any proposed amendment to the
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Limited Partners. The General Partner shall seek the written vote of the
Partners on the proposed amendment or shall call a meeting to vote thereon and
to transact any other business that it may deem appropriate. For purposes of
obtaining a written vote, the General Partner may require a response within a
reasonable specified time, but not less than fifteen (15) days, and failure to
respond in such time period shall constitute a vote which is consistent with the
General Partner's recommendation with respect to the proposal. Except as
provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed amendment shall be
adopted and be effective as an amendment hereto if it is approved by the General
Partners and it receives the Consent of Partners holding a majority of the
Percentage Interests of the Limited Partners (including Limited Partnership
Interests held by the General Partners).
B. Amendments Not Requiring Limited Partner Approval.
Notwithstanding Section 14.1.A or 14.1.C, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner
or any Affiliate of the General Partner for the benefit of
the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement
(which may be effected through the replacement of Exhibit A
and Exhibit E with an amended Exhibit A and Exhibit E);
(3) to set forth and reflect in this Agreement the designations,
rights, powers, duties, and preferences of the holders of
any additional Partnership Interests issued pursuant to
Article IV;
(4) to reflect a change that does not adversely affect the
Limited Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision of this
Agreement not inconsistent with law or with other provisions
of this Agreement, or make other changes with respect to
matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this
Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal, state or local agency or contained
in federal, state or local law.
The General Partner shall notify the Limited Partners when any action under
this Section 14.1.B is taken in the next regular communication to the Limited
Partners.
C. Amendments Requiring Limited Partner Approval (Excluding General
Partners). Notwithstanding Section 14.1.A and 14.1.B, without the Consent of
the Outside Limited Partners, the General Partner shall not amend Section 4.2.A,
Section 7.1.A (second sentence only), Section
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7.5, Section 7.6, Section 7.8, Section 7.11, Section 11.2, Section 11.3, Section
13.1 (other than Section 13.1(iii) which can be amended only with a Consent of a
majority of each class of Partnership Units (including Partnership Units held by
the General Partner) (treating Class A Units and Class B Units as part of a
single class for this purpose), the last sentence of Section 11.4 (provided that
no such amendment shall in any event adversely affect the rights of any lender
who made a loan or who extended credit and received in connection therewith a
Pledge of Units prior to the date such amendment is adopted unless, and only to
the extent such lender consents thereto), this Section 14.1.C or Section 14.2.
D. Other Amendments Requiring Certain Limited Partner Approval.
Notwithstanding anything in this Section 14.1 to the contrary, this Agreement
shall not be amended with respect to any Partner adversely affected without the
Consent of such Partner adversely affected if such amendment would (i) convert a
Limited Partner's interest in the Partnership into a general partner's interest;
(ii) modify the limited liability of a Limited Partner in a manner adverse to
such Limited Partner; (iii) amend Section 7.11.A; (iv) amend Article V or
Article VI (except as permitted pursuant to Sections 4.2, 5.1.E, 5.4, 6.2 and
14.1(B)(3)); (v) amend Section 8.6 or any defined terms set forth in Article I
that relate to the Redemption Right (except as permitted in Section 8.6.E); or
(vi) amend this Section 14.1.D or override the terms of an Applicable
Contribution Agreement to which such Limited Partner is a party. This Section
14.1.D does not require unanimous consent of all Partners adversely affected
unless the amendment is to be effective against all Partners adversely affected.
Section 14.2 Meetings of the Partners.
A. General. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding twenty-five percent (25%) or more of the
Partnership Interests. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or Consent of the Partners is permitted or required under this Agreement,
such vote or Consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 14.1.A. Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Percentage Interests held by Limited Partners (including Limited
Partnership Interests held by the General Partner) shall control.
B. Actions Without a Meeting. Any action required or permitted to
be taken at a meeting of the Partners may be taken without a meeting if a
written consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or in
several instruments, and shall have the same force and effect as a vote of a
majority of the Percentage Interests of the Partners (or such other percentage
as is expressly required by this Agreement). Such consent shall be filed with
the General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
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C. Proxy. Each Limited Partner may authorize any Person or Persons
to act for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or its
attorney-in-fact. No proxy shall be valid after the expiration of twelve (12)
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it,
such revocation to be effective upon the Partnership's receipt of written notice
thereof.
D. Conduct of Meeting. Each meeting of Partners shall be conducted
by the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate. Without limiting the foregoing, meetings
of Partners may be conducted in the same manner as meetings of the stockholders
of the General Partner and may be held at the same time, and as part of,
meetings of the stockholders of the General Partner.
ARTICLE XV - GENERAL PROVISIONS
Section 15.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to a Partner or Assignee under this
Agreement shall be in writing and shall be deemed given or made when delivered
in person or when sent by first class United States mail or by other means of
written communication to the Partner or Assignee at the address set forth in
Exhibit A or such other address as the Partners shall notify the General Partner
in writing. The time to respond to any notice, demand, request or report shall
commence to run on the date of delivery at such addresses (or attempted delivery
if delivery is refused during normal business hours).
Section 15.2 Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the scope
or intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles," "Sections" and "Exhibits" are to Articles, Sections
and Exhibits of this Agreement.
Section 15.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
Section 15.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be reasonably necessary or appropriate to achieve the purposes of this
Agreement.
Section 15.5 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
Section 15.6 Creditors. Other than as expressly set forth herein with
regard to any
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Indemnitee, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
Section 15.8 Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all of the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.
Section 15.9 Applicable Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware,
without regard to the principles of conflicts of law.
Section 15.10 Invalidity of Provisions. If any provision of this
Agreement shall to any extent be held void or unenforceable (as to duration,
scope, activity, subject or otherwise) by a court of competent jurisdiction,
such provision shall be deemed to be modified so as to constitute a provision
conforming as nearly as possible to the original provision while still remaining
valid and enforceable. In such event, the remainder of this Agreement (or the
application of such provision to persons or circumstances other than those in
respect of which it is deemed to be void or unenforceable) shall not be affected
thereby. Each other provision of this Agreement, unless specifically
conditioned upon the voided aspect of such provision, shall remain valid and
enforceable to the fullest extent permitted by law; any other provisions of this
Agreement that are specifically conditioned on the voided aspect of such invalid
provision shall also be deemed to be modified so as to constitute a provision
conforming as nearly as possible to the original provision while still remaining
valid and enforceable to the fullest extent permitted by law.
Section 15.11 Power of Attorney.
A. General. Each Limited Partner and each Assignee who accepts
Partnership Units (or any rights, benefits or privileges associated therewith)
is deemed to irrevocably constitute and appoint the General Partner, any
Liquidator and authorized officers and attorneys-in-fact of each, and each of
those acting singly, in each case with full power of substitution, as its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates,
documents and other instruments (including, without
limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner
or any Liquidator deems appropriate or necessary to form,
qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in
which the limited
Page 65
partners have limited liability) in the State of Delaware
and in all other jurisdictions in which the Partnership may
conduct business or own property, (b) all instruments that
the General Partner or any Liquidator reasonably deems
appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance
with its terms, (c) all conveyances and other instruments or
documents that the General Partner or any Liquidator deems
appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation, (d) all instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article XI, XII or XIII
hereof or the Capital Contribution of any Partner to the
extent permitted by this Agreement, and (e) all
certificates, documents and other instruments relating to
the determination of the rights, preferences and privileges
of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner or any
Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action which is
made or given by the Partners hereunder or is consistent
with the terms of this Agreement or appropriate or
necessary, in the reasonable discretion of the General
Partner or any Liquidator, to effectuate the terms or intent
of this Agreement.
Nothing contained in this Section 15.11 shall be construed as authorizing
the General Partner or any Liquidator to amend this Agreement except in
accordance with Article XIV hereof or as may be otherwise expressly provided for
in this Agreement.
B. Irrevocable Nature. The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an interest, in recognition
of the fact that each of the Partners will be relying upon the power of the
General Partner or any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited Partner
or Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or any Liquidator, acting in good faith pursuant to such
power of attorney; and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver
to the General Partner or the Liquidator, within fifteen (15)
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days after receipt of the General Partner's or Liquidator's request therefor,
such further designation, powers of attorney and other instruments as the
General Partner or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Partnership.
Section 15.12 Attorneys' Fees. In any dispute among the Partners
concerning the Partnership or this Agreement, the prevailing Partner(s) shall be
entitled to recover its reasonable attorneys' fees and costs (including
litigation and collection costs) from the non-prevailing party(ies).
▇▇▇▇▇▇▇ ▇▇.▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ District Courts for
California and any Superior Court in California shall be the exclusive
appropriate venues to litigate questions of interpretation under this Agreement
or the rights of the parties hereunder.
Section 15.14 Waiver of Jury Trial. Each of the parties hereto hereby
waives any and all rights to a trial by jury with respect to any dispute among
the Partners or their Affiliates or among a Partner (or its Affiliates) and the
Partnership concerning this Agreement.
Section 15.15 Entire Agreement. This Agreement contains the entire
understanding and agreement among the Partners with respect to the subject
matter hereof and supersedes any prior written oral understandings or agreements
among them with respect thereto.
Section 15.16 No Rights as REIT Stockholders. Nothing contained in this
Agreement shall be construed as conferring upon the holders of the Partnership
Units any rights whatsoever as stockholders of the General Partner, including,
without limitation, any right to receive dividends or other distributions made
to stockholders of the General Partner or to vote or to consent or receive
notice as stockholders in respect to any meeting of stockholders for the
election of Directors of the General Partner or any other matter.
Section 15.17 Limitation to Preserve REIT Status. To the extent (i) that
any amount paid or credited to the General Partner or any of its officers,
directors, trustees, employees or agents (a "General Partner Payee") pursuant to
Section 7.4 or Section 7.7 would constitute gross income to the General Partner
for purposes of Section 856(c)(2) or 856(c)(3) of the Code (a "General Partner
Payment") and (ii) such General Partner Payment in any fiscal year would cause
the General Partner to lose its status as a real estate investment for federal
income tax purposes, then, notwithstanding any other provision of this
Agreement, such portion of such General Partner Payment ("Excess General Partner
Payments") shall not be paid or payable to such General Partner Payee (and to
the extent previously paid to such General Partner Payee, shall be repaid by
such General Partner Payee upon receipt of notice of such excess General Partner
Payment from the Partnership); provided, however, that Excess General Partner
Payments may be made if the General Partner, as a condition precedent, obtains
an opinion of tax counsel that the receipt thereof would not adversely affect
the General Partner's ability to qualify as a REIT. To the extent General
Partner Payments may not be made in a year due to the foregoing limitations,
such General Partner Payments shall carry over and be treated as arising in the
following year, provided, however, that such amounts shall not carry over for
more than five years, and if not paid within such five year period, shall
expire; provided further, that (i) as General Partner Payments
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are made, such payments shall be applied first to pay carry over amounts
outstanding, if any, and (ii) with respect to carry over amounts for more than
one Partnership Year, such payments shall be applied to the earliest Partnership
Year first.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
[Signature pages to follow]
Page 68
GENERAL PARTNER:
▇▇▇▇▇▇▇ Pacific Properties, Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
LIMITED PARTNERS:
▇▇▇▇▇▇▇ Pacific L.P., Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
▇▇▇▇▇▇▇ Pacific Properties, Inc.
By:__________________________________
Name:________________________________
Title:_______________________________
Page 69
EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
Name and Address of Class A Agreed Initial Capital Percentage
Partner Units Class B Units Account Interest
------------------ ------- ------- ------ -------- -----------
GENERAL PARTNER:
▇▇▇▇▇▇▇ Pacific Properties, Inc. 1%
LIMITED PARTNERS:
▇▇▇▇▇▇▇ Pacific Properties, Inc. 98%
▇▇▇▇▇▇▇ Pacific L.P., Inc. 1%
TOTAL 100%
Page 70
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Regulations Section
l.704-l(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions and any other deemed contributions made by such
Partner to the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax) computed
in accordance with Section 1.B hereof and allocated to such Partner pursuant to
Section 6.1 of the Agreement and Exhibit C thereof, and decreased by (x) the
amount of cash or Agreed Value of all actual and deemed distributions of cash or
property made to such Partner pursuant to this Agreement and (y) all items of
Partnership deduction and loss computed in accordance with Section 1.B hereof
and allocated to such Partner pursuant to Section 6.1 of the Agreement and
Exhibit C thereof.
B. For purposes of computing Net Income and Net Loss and the amount
of any other item of income, gain, deduction or loss to be reflected in the
Partners' Capital Accounts, unless otherwise specified in this Agreement, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes 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) (1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the
Code which may be made by the Partnership, provided that the amounts of any
adjustments to the adjusted bases of the assets of the Partnership made pursuant
to Section 734 of the Code as a result of the distribution of property by the
Partnership to a Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts) shall be reflected
in the Capital Accounts of the Partners in the manner and subject to the
limitations prescribed in Regulations Section l.704-1(b)(2)(iv) (m)(4).
(2) The computation of all items of income, gain, and deduction
shall be made without regard to the fact that items described in Sections
705(a)(l)(B) or 705(a)(2)(B) of the Code (or that are treated as such
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i)) are not
includable in gross income or are neither currently deductible nor capitalized
for federal income tax purposes.
(3) 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 Carrying Value with respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost
recovery deductions
Page 71
taken into account in computing such taxable income or loss, there shall be
taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such adjustment shall
be taken into account as gain or loss from the disposition of such asset.
(6) Any items specially allocated under Section 2 of Exhibit C
hereof shall not be taken into account.
C. Generally, a transferee (including any Assignee) of a Partnership Unit
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)(l)(B) of the Code, the Partnership's properties shall be
deemed, solely for federal income tax purposes, to have been contributed to a
new partnership as required by Regulations under Section 708(b) of the Code. In
such event, the Carrying Values of the Partnership properties shall be adjusted
immediately prior to such deemed distribution pursuant to Section 1.D(2) hereof.
The Capital Accounts of such reconstituted Partnership shall be maintained in
accordance with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Values of
all Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property and allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times:
(a) immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) 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 (c) immediately prior to
the liquidation of the Partnership within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g), provided however that adjustments pursuant to clauses (a)
and (b) above shall be made only if the General Partner determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-
l(b)(2)(iv)(e), the Carrying 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.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount and fair market value of
all Partnership assets (including cash or cash equivalents) shall be determined
by the General Partner using such reasonable method of valuation as it may
adopt, or in the case of a liquidating distribution pursuant to Article XIII of
Page 72
the Agreement, shall be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The General Partner, or the
Liquidator, as the case may be, shall allocate such aggregate fair market value
among the assets of the Partnership in such manner as it determines in its
reasonable discretion to arrive at a fair market value for individual properties
and shall make no distribution in kind other than pro rata among all Partners in
accordance with their interests unless otherwise provided in an Applicable
Contribution Agreement.
E. The provisions of the Agreement (including this Exhibit B and the
other Exhibits to the Agreement) relating to the maintenance of Capital Accounts
are intended to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in order
to comply with such Regulations, the General Partner may make such modification
without regard to Article XIV of the Agreement, provided that it is not likely
to have a material effect on the amounts distributable to any Person pursuant to
Article XIII of the Agreement upon the dissolution of the Partnership. The
General Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
l.704-l(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section l.704-1(b).
2. No Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
3. No Withdrawal. No Partner shall be entitled to withdraw any part of
its Capital Contribution or Capital Account or to receive any distribution from
the Partnership, except as provided in Articles IV, V, VII and XIII of the
Agreement.
Page 73
EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules. Notwithstanding any other provision of the
Agreement or this Exhibit C, the following special allocations shall be made in
the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there
is a net decrease in Partnership Minimum Gain during any Partnership Year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's Share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and for purposes of this Section 1.A only,
each Partner's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to Section 6.1 of this Agreement with respect to such
Partnership Year and without regard to any decrease in Partner Minimum Gain
during such Partnership Year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each General
Partner and Limited Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(i)(4). This
Section 1.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.B, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit with respect to such
Partnership Year, other than allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704-
l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under
Sections 1.A and 1.B hereof with respect to such Partnership Year, such Partner
has an Adjusted Capital Account Deficit, items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for the Partnership
Page 74
Year) shall be specifically allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible. This Section 1.C is intended to
constitute a "qualified income offset" under Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
▇. ▇▇▇▇▇ Income Allocation. In the event that any Partner would
have an Adjusted Capital Account Deficit at the end of any Partnership Year
(after tentatively taking into account allocations to be made under the
preceding paragraphs hereof with respect to such Partnership Year), each such
Partner shall be specially allocated items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for such Partnership Year or, if insufficient, future
Partnership Years) in an amount and manner sufficient to prevent or eliminate,
to the extent required by the Regulations, its Adjusted Capital Account Deficit.
E. Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership Year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio for such
Partnership Year to the numerically closest ratio which would satisfy such
requirements.
F. Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse Debt
to which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
G. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-l(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.
2. Allocations for Tax Purposes.
A. Except as otherwise provided in this Section 2, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Sections 6.1 and
6.3 of the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed
Page 75
Property or Adjusted Property, items of income, gain, loss, and deduction shall
be allocated for federal income tax purposes among the Partners as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners consistent with the
principles of Section 704(c) of the Code to take into account the variation
between the 704(c) Value of such property and its adjusted basis at the time of
contribution (taking into account Section 2.C of this Exhibit C); and
(b) any item of Residual Gain or Residual Loss attributable
to a Contributed Property shall be allocated among the Partners in the same
manner as its correlative item of "book" gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(i) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized Loss attributable to such property and
the allocations thereof pursuant to Exhibit B;
(ii) second, in the event such property was originally
a Contributed Property, be allocated among the Partners in a manner consistent
with Section 2.B(1) of this Exhibit C; and
(b) any item of Residual Gain or Residual Loss attributable
to an Adjusted Property shall be allocated among the Partners in the same manner
its correlative item of "book" gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their correlative item of "book"
gain or loss is allocated pursuant to Section 6.1 of the Agreement and Section 1
of this Exhibit C.
C. To the extent Regulations promulgated pursuant to Section 704(c)
of the Code permit a Partnership to utilize alternative methods to eliminate the
disparities between the Carrying Value of property and its adjusted basis, the
General Partner shall, subject to the terms of any Applicable Contribution
Agreement, have the authority to elect the method to be used by the Partnership
and such election shall be binding on all Partners; provided, however, that the
Section 704(c) method to be used by the Partnership in connection with the
transfer of assets to the Partnership by the General Partner shall be the
traditional method with curative allocations limited solely to allocations of
gain and ordinary income recapture recognized by the Partnership upon the sale
of such assets to the extent allocations of depreciation (as computed for tax
purposes) with respect to such assets to the other Partners have been limited by
the "ceiling rule," as described in Regulations Section 1.704-3(c)(iii)(B).
Page 76
EXHIBIT D
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) redeems _________ Common/Preferred
[select one] Partnership Units in ▇▇▇▇▇▇▇ Pacific Operating Partnership, L.P. in
accordance with the terms of the Agreement of Limited Partnership of ▇▇▇▇▇▇▇
Pacific Operating Partnership, L.P., as amended, and the Redemption Right
referred to therein, (ii) surrenders such Partnership Units and all right, title
and interest therein and (iii) directs that the Cash Amount or REIT Shares
Amount (as determined by the General Partner) deliverable upon exercise of the
Redemption Right be delivered to the address specified below, and if REIT Shares
are to be delivered, such REIT Shares be registered or placed in the name(s) and
at the address(es) specified below. The undersigned hereby represents,
warrants, and certifies that the undersigned (a) has marketable and unencumbered
title to such Partnership Units, free and clear of the rights of or interests of
any other person or entity, (b) has the full right, power and authority to
redeem and surrender such Partnership Units as provided herein and (c) has
obtained the consent or approval of all persons or entities, if any, having the
right to consent to or approve such redemption and surrender.
Dated:_________________ Name of Limited Partner:
Signature of Limited Partner)
(Street Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
IF SHARES ARE TO BE ISSUED, ISSUE TO:
Name:
Please insert social security or identifying number:
Page 77
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
Underlying Property 704(c) Value Agreed Value