AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
FAC PROPERTIES, L.P.
As of this 18th day of December, 1997, the Agreement of Limited Partnership
of FAC Properties, L.P. dated December 12, 1997 (the "Agreement"), is hereby
amended as follows:
Section 1. Definitions.
Article I is hereby amended to add the following new definitions:
"Common Partnership Unit" means a Partnership Unit that is not a
Preferred Partnership Unit.
"Preferred Partnership Unit" means any Partnership Unit issued from
time to time pursuant to Section 4.2 hereof that is designated by the
General Partner at the time of its issuance as a Preferred Partnership
Unit. Each Preferred Partnership Unit shall have such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights, powers and duties senior to Limited
Partner Interests and Common Partnership Units, all as shall be determined
by the General Partner subject to the requirements of Section 4.2 hereof.
"Series A Preferred Partnership Unit" means a Partnership Unit issued
by the Partnership to FAC Properties Holding Corp. The Series A Preferred
Partnership Units shall constitute Preferred Partnership Units. Holders of
the Series A Preferred Partnership Units shall have the same voting powers,
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions with respect
to the Series A Preferred Partnership Units as holders of the Series A
Preferred Stock have with respect to such Series A Preferred Stock. It is
the intention of the General Partner, in establishing the Series A
Preferred Partnership Units, that each Series A Preferred Partnership Unit
shall be substantially the economic equivalent of a share of Series A
Preferred Stock.
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock, par value $25.00 per share, having a liquidation preference
equivalent to $25.00 per share, issued by the General Partner.
In addition, the definitions of "Partnership Unit," "Partnership Interest" and
"REIT Shares Amount" appearing in Article I are hereby deleted in their entirety
and the following definitions are inserted in their place:
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and
4.2. The number of Partnership Units
outstanding and the Percentage Interests in the Partnership represented by
such Units are set forth in Exhibit A attached hereto, as such Exhibit may
be amended from time to time. 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. Fractional Units may
be held and counted by the General Partner as necessary to meet the
requirements of Section 4.1. Without limitation on the authority of the
General Partner as set forth in Section 4.2 hereof, the General Partner may
designate any Partnership Units, when issued, as Common Partnership Units
or as Preferred Partnership Units, may establish any other class of
Partnership Units, and may designate one or more series of any class of
Partnership Units.
"Percentage Interest" means, as to a Partner, with respect to any
class of Partnership Units held by such Partner, its interest in such class
of Partnership Units as determined by dividing the number of Partnership
Units in such class owned by such Partner by the total number of
Partnership Units in such class then outstanding.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Common Partnership Units offered for redemption by
a Redeeming Partner, multiplied by the Conversion Factor; provided that in
the event the General Partner issues to all holders of REIT Shares rights,
options, warrants or convertible or exchangeable securities entitling the
shareholders 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.
Section 2. Requirement and Characterization of Distributions.
Section 5.1 of the Agreement is hereby deleted in its entirety and the
following new Section 5.1 is inserted in its place:
"Section 5.1 Requirement and Characterization of Distributions
The General Partner shall cause the Partnership to distribute at least
annually all, or such portion as the General Partner may in its discretion
determine, of Available Cash generated by the Partnership during such year
to the Partners who are Partners on the Partnership Record Date with
respect to such year, (1) first, with respect to any Partnership Interests
that are entitled to any preference in distribution, in accordance with the
rights of such class of Partnership Interests (and within such class, pro
rata in proportion to the respective Percentage Interests on such
Partnership Record Date), and, (2) second, 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 with the respective Percentage
Interests on such Partnership Record Date). Unless otherwise expressly
provided for herein, no Partnership Interest shall be entitled to a
distribution in preference to any other
Partnership Interest.
Section 3. Tax Provisions.
Section 6.1 of the Agreement is hereby deleted in its entirety and the
following new Section 6.1 is inserted in its place:
"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
hereof) 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 attached hereto, 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, and (ii) thereafter,
Net Income shall be allocated to the Partners who hold Common Partnership
Units in proportion to their respective Percentage Interests as holders of
Common Partnership Units.
B. Net Losses. After giving effect to the special allocations set
forth in Section 1 of Exhibit C attached hereto, Net Losses shall be
allocated to the Partners who hold Common Partnership Units in accordance
with their respective Percentage Interests as holders of Common Partnership
Units; provided, however, that Net Losses 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 at the end of such taxable year (or increase any existing
Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in this Section 6.1.B shall be allocated to the
General Partner."
In addition, Exhibit C to the Agreement is hereby amended to add the following
new Section 1.G.:
"G. Priority Allocation With Respect To Preferred Partnership Units.
All or a portion of the remaining items of Partnership gross income or gain
for the Partnership Year, if any, shall be specially allocated to FAC
Properties Holding Corp. in an amount equal to the excess, if any, of the
cumulative distributions received by FAC Properties Holding Corp. pursuant
to Section 5.1(i) hereof for the current Partnership Year and all prior
Partnership Years (other than any distributions that are treated as being
in satisfaction of the Liquidation Preference Amount for any Preferred
Partnership Units) over the cumulative allocations of Partnership gross
income and gain to FAC Properties Holding Corp. under this Section 1.G for
all prior Partnership Years."
Section 4. Redemption Right.
The Agreement is hereby amended by adding the following new Sections 8.6.D
and 8.6.E to the Agreement, immediately following Section 8.6.C:
"D. Notwithstanding anything contained in Sections 8.6.A, 8.6.B and
8.6.C, no Partner shall be entitled to exercise the Redemption Right
pursuant to Section 8.6.A with respect to any Preferred Partnership Unit
unless (i) such Preferred Partnership Unit has been issued to and is held
by a Partner other than the General Partner or a Subsidiary, and (ii) the
General Partner has expressly granted to such Partner the right to redeem
such Preferred Partnership Units pursuant to Section 8.6.A.
E. Preferred Partnership Units shall be redeemed, if at all, only in
accordance with such redemption rights or options as are set forth with
respect to such Preferred Partnership Units (or class or series thereof) in
the instruments designating such Preferred Partnership Units (or class or
series thereof)."
Section 5. Exhibits to Agreement.
The General Partner shall maintain the information set forth in Exhibit A
to the Agreement, as such information shall change from time to time, in such
form as the General Partner deems appropriate for the conduct of the Partnership
affairs, and Exhibit A shall be deemed amended from time to time to reflect the
information so maintained by the General Partner, whether or not a formal
amendment to the Agreement has been executed amending such Exhibit A. Such
information shall reflect (and Exhibit A shall be deemed amended from time to
time to reflect) the issuance of any additional Partnership Units to the General
Partner or any other Person, the transfer of Partnership Units and the
redemption of any Partnership Units, all as contemplated in the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
date first written above.
FAC REALTY TRUST, INC.,
By:
----------------------------------------
▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chief Executive Officer
FAC PROPERTIES HOLDING CORP.
By:
----------------------------------------
▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chief Executive Officer
AGREEMENT OF LIMITED PARTNERSHIP
OF
FAC PROPERTIES, L.P.
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINED TERMS............................................................................................1
ARTICLE 2 ORGANIZATIONAL MATTERS..................................................................................10
Section 2.1 Organization and Continuation..............................................................10
Section 2.2 Name ......................................................................................10
Section 2.3 Registered Office and Agent; Principal Office..............................................11
Section 2.4 Power of Attorney..........................................................................11
Section 2.5 Term ......................................................................................12
ARTICLE 3 PURPOSE.................................................................................................12
Section 3.1 Purpose and Business.......................................................................12
Section 3.2 Powers ....................................................................................13
ARTICLE 4 CAPITAL CONTRIBUTIONS...................................................................................13
Section 4.1 Capital Contributions of the Partners......................................................13
Section 4.2 Issuances of Additional Partnership Interests..............................................14
ARTICLE 5 DISTRIBUTIONS...........................................................................................14
Section 5.1 Requirement and Characterization of Distributions..........................................14
Section 5.2 Amounts Withheld...........................................................................14
Section 5.3 Distributions Upon Liquidation.............................................................14
ARTICLE 6 ALLOCATIONS.............................................................................................15
Section 6.1 Allocations For Capital Account Purposes...................................................15
Section 6.2 Other Allocation Rules.....................................................................15
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS...................................................................15
Section 7.1 Management.................................................................................15
Section 7.2 Certificate of Limited Partnership.........................................................19
Section 7.3 Restrictions on General Partner Authority..................................................20
Section 7.4 Reimbursement of the General Partner.......................................................20
Section 7.5 Outside Activities of the General Partner..................................................20
Section 7.6 Contracts with Affiliates..................................................................21
Section 7.7 Indemnification............................................................................21
Section 7.8 Liability of the General Partner...........................................................23
Section 7.9 Other Matters Concerning the General Partner...............................................24
Section 7.10 Title to Partnership Assets................................................................25
Section 7.11 Reliance by Third Parties..................................................................25
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNER...............................................................26
Section 8.1 Limitation of Liability....................................................................26
Section 8.2 Management of Business....................................................................26
Section 8.3 Outside Activities of Limited Partners....................................................26
Section 8.4 Return of Capital.........................................................................26
Section 8.5 Rights of Limited Partners Relating to the Partnership....................................27
Section 8.6 Redemption Right..........................................................................28
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS.................................................................29
Section 9.1 Records and Accounting....................................................................29
Section 9.2 Partnership Year..........................................................................29
Section 9.3 Reports ..................................................................................29
ARTICLE 10 TAX MATTERS............................................................................................30
Section 10.1 Preparation of Tax Returns................................................................30
Section 10.2 Tax Elections.............................................................................30
Section 10.3 Tax Matters Partner.......................................................................30
Section 10.4 Organizational Expenses...................................................................31
Section 10.5 Withholding...............................................................................32
ARTICLE 11 TRANSFERS AND WITHDRAWALS..............................................................................32
Section 11.1 Transfer .................................................................................32
Section 11.2 Transfer of General Partner's Partnership Interests.......................................33
Section 11.3 Limited Partners' Rights to Transfer......................................................33
Section 11.4 Substituted Limited Partners..............................................................34
Section 11.5 Assignees.................................................................................35
Section 11.6 General Provisions........................................................................35
ARTICLE 12 ADMISSION OF PARTNERS..................................................................................36
Section 12.1 Admission of Successor General Partner....................................................36
Section 12.2 Admission of Additional Limited Partners..................................................36
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership.............................37
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION...............................................................37
Section 13.1 Dissolution...............................................................................37
Section 13.2 Winding Up................................................................................38
Section 13.3 Negative Capital Accounts.................................................................39
Section 13.4 Deemed Distribution and Recontribution....................................................39
Section 13.5 Rights of Limited Partners................................................................39
Section 13.6 Notice of Dissolution.....................................................................40
Section 13.7 Termination of Partnership and Cancellation of Certificate
of Limited Partnership......................................................40
Section 13.8 Reasonable Time for Winding-Up............................................................40
Section 13.9 Waiver of Partition.......................................................................40
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS...........................................................40
Section 14.1 Amendments................................................................................40
ARTICLE 15 GENERAL PROVISIONS.....................................................................................41
Section 15.1 Addresses and Notice......................................................................41
Section 15.2 Titles and Captions.......................................................................41
Section 15.3 Pronouns and Plurals......................................................................41
Section 15.4 Further Action............................................................................41
Section 15.5 Binding Effect............................................................................41
Section 15.6 Creditors.................................................................................41
Section 15.7 Waiver ...................................................................................42
Section 15.8 Counterparts..............................................................................42
Section 15.9 Applicable Law............................................................................42
Section 15.10 Invalidity of Provisions.................................................................42
Section 15.11 Entire Agreement.........................................................................42
EXHIBIT A PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS
EXHIBIT B CAPITAL ACCOUNT MAINTENANCE
EXHIBIT C SPECIAL ALLOCATION RULES
EXHIBIT D VALUE OF CONTRIBUTED PROPERTY
EXHIBIT E NOTICE OF REDEMPTION
EXHIBIT F INDEMNIFICATION UNDER SECTION 7.7(I)
AGREEMENT OF LIMITED PARTNERSHIP
OF
FAC PROPERTIES, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF FAC PROPERTIES, L.P. (the
"Agreement"), dated as of December 12, 1997, is entered into by and among FAC
Realty Trust, Inc., a Maryland corporation, as the General Partner, and FAC
Properties Holding Corp., as a Limited Partner (as such terms are defined
hereinafter).
WHEREAS, the Partnership was organized on December 4, 1997 by FAC Realty
Trust, Inc., as general partner, and FAC Outparcels, Inc., as Organizational
Limited Partner;
WHEREAS, FAC Properties Holding Corp. is making a contribution to the
capital of the Partnership and the Organizational Limited Partner is hereby
withdrawing from the Partnership;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and other valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 12.2 hereof and who is shown as such on
the books and records of the Partnership.
"Adjusted Capital Account" means 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), (5), and (6). The foregoing definition of Adjusted
Capital Account is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
"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 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 of any
Person referred to in clauses (i), (ii), (iii) above.
"Agreed Value" means (i) in the case of any Contributed Property set forth
in Exhibit D and as of the time of its contribution to the Partnership, the
Agreed Value of such property as set forth in Exhibit D or if no value is set
forth in Exhibit D, the fair market value of such property or other
consideration at the time of contribution as determined by the General Partner
using such method of valuation as it may adopt, which value in any event shall
reflect any liabilities either assumed by the Partnership upon such contribution
or to which such property is subject when contributed, (ii) in the case of any
Contributed Property not set forth in Exhibit D and as of the time of its
contribution to the Partnership, the 704(c) Value of such property, reduced by
any liabilities either assumed by the Partnership upon such contribution or to
which such property is subject when contributed, and (iii) in the case of any
property distributed to a Partner by the Partnership, the 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 thereunder.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Amended and Restated Articles of
Incorporation of the General Partner filed in the State of Maryland on December
12, 1997 and 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
2
made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may be) for
such period;
(b) Depreciation and all other noncash charges deducted in determining
Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such amounts
are no longer necessary);
(d) the excess of proceeds from the sale, exchange, disposition, or
refinancing of Partnership property for such period over the gain, if any,
recognized from such sale, exchange, disposition, or refinancing during
such period (excluding Terminating Capital Transactions); and
(e) all other cash received by the Partnership for such period that
was not included in determining Net Income or Net Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during such
period;
(b) capital expenditures made by the Partnership during such period;
(c) investments in any entity (including loans made thereto) to the
extent that such investments are not otherwise described in clause (ii)(a)
or (ii)(b);
(d) all other expenditures and payments not deducted in determining
Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss for such
period that was not received by the Partnership during such period;
(f) the amount of any increase in reserves during such period which
the General Partner determines to be necessary or appropriate in its sole
and absolute discretion;
(g) the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary or
appropriate, in its sole and absolute discretion; and
(h) the amount which is not available for distribution due to
regulatory, legal or other restrictions.
3
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.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"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 Sections
4.1, 4.2, or 4.3 hereof.
"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 Property 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 hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cash Amount" means an amount of cash per Partnership Unit 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.
"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.
4
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Partnership (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 hereof, such property shall no longer constitute a
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that the General
Partner (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. Any adjustment to the Conversion Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
"Depreciation" means, for each Partnership Year an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the 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.
"Dissolution Event" has the meaning set forth in Section 13.1.
"General Partner" means FAC Realty Trust, Inc., in its capacity as the
general partner of the Partnership, or its successors as general partner of the
Partnership.
"General Partner Interest" means a Partnership Interest held by the General
Partner that is a general partnership interest. A General Partner Interest may
be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
5
"Immediate Family" means, with respect to any natural Person, such natural
Person's spouse and such natural Person's natural or adoptive parents,
descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his Person or his estate; (ii) as to any
corporation which is a Partner, the filing of a certificate of dissolution, or
its equivalent, for the corporation or the revocation of its charter; (iii) as
to any partnership which is a Partner, the dissolution and commencement of
winding up of the partnership; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner, (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors, (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above, (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties, (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within 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 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
(A) his status as the General Partner, or a director or officer of the
Partnership or the General Partner, or (B) his or its liabilities, pursuant to a
loan guarantee 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
assets subject to), and (ii) such other Persons (including Affiliates of the
General 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 named as a Limited Partner in Exhibit A
attached hereto, as such Exhibit may be amended from time to time, or any
Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes
6
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
Partner Interest may be expressed as a number of Partnership Units.
"Liquidator" has the meaning set forth in Section 13.2.
"Net Income" means, for any Partnership Year or any portion of a
Partnership Year, the excess, if any, of the Partnership's items of income and
gain for such Partnership Year over the Partnership's items of loss and
deduction for such Partnership Year. The items included in the calculation of
Net Income shall be determined in accordance with Exhibit B. Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net 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 Partnership Year, the excess, if any, of the
Partnership's items of loss and deduction for such Partnership Year over the
Partnership's items of income and gain for such Partnership Year. The items
included in the calculation of Net Loss shall be determined in accordance
Exhibit B. Once 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" has the meaning set forth in Section 4.2.B.
"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-l(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
form of Exhibit E to this Agreement.
"Organizational Limited Partner" means FAC Outparcels, Inc.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
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"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership Year shall be determined
in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. 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 a Partnership Minimum Gain, for a Partnership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner for the distribution of Available Cash pursuant to Section 5.1 hereof,
which record date shall be the same as the record date established by the
General Partner for a distribution to its shareholders of some or all of its
portion of such distribution.
"Partnership Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of Partnership Units outstanding and the Percentage Interest in the
Partnership represented by such Units are set forth in Exhibit A attached
hereto, as such Exhibit may be amended from time to time. 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.
Fractional Units may be held and counted by the General Partner as necessary to
meet the requirements of Section 4.1.
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined
8
by dividing the Partnership Units owned by such Partner by the total number of
Partnership Units then outstanding and as specified in Exhibit A attached
hereto, as such Exhibit may be amended from time to time.
"Person" means an individual or a corporation, partnership, limited
liability company, trust, unincorporated organization, association or other
entity.
"Recapture Income" means any gain recognized by the Partnership upon the
disposition of any property or asset of the Partnership, which gain is
characterized for federal income tax purposes 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 hereof.
"Redemption Right" shall have the meaning set forth in Section 8.6 hereof.
"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.
"REIT Share" shall mean a share of common stock of the General Partner.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor, provided that in the event the
General Partner issues to all holders of REIT Shares rights, options, warrants
or convertible or exchangeable securities entitling the shareholders 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.▇.▇(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"704(c) Value" of any Contributed Property means the value of such property
as set forth in Exhibit D or if no value is set forth in Exhibit D, 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 to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof, the
General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate the
9
aggregate of the 704(c) Values of Contributed Properties in a single or
integrated transaction among the separate properties on a basis proportional to
their respective fair market values.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the General Partner of a Notice of Redemption.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of either (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.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"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 hereof) as of such date,
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B hereof) 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
hereof) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit B hereof) 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 a REIT Share, the market price for the
trading day immediately preceding the Valuation Date. 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.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization and Continuation
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth herein. 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.
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Section 2.2 Name
The name of the Partnership shall be FAC Properties, 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 name and address of the registered agent for service of process on the
Partnership in the State of Delaware is Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of New Castle. The principal office of the
Partnership shall be located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The address of the registered
office of the Partnership in the State of North Carolina is the address of the
principal office. The Partnership may maintain offices at such other place or
places within or outside the State of Delaware as the General Partner deems
advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the
General Partner or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of Delaware and
in all other jurisdictions in which the Partnership may or plans to
conduct business or own property; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in accordance
with its terms; (c) all conveyances and other instruments or documents
that the General Partner or the Liquidator deems appropriate or
necessary to reflect the dissolution
11
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, Articles 11, 12 or 13 hereof or the Capital
Contribution of any Partner; and (e) all certificates, documents and
other instruments relating to the determination of the rights,
preferences and privileges of a Partnership Interest; and
(2) execute, swear to, seal, 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 sole discretion of
the General Partner or any Liquidator, to effectuate the terms or
intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable and
a power coupled with an interest, in recognition of the fact that each of the
Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership commenced on December 4, 1997, the date the
Certificate was filed in the office of the Secretary of State of Delaware in
accordance with the Act, and shall continue until December 31, 2097, unless the
Partnership is dissolved sooner pursuant to the
12
provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act, provided, however, that such business
shall be limited to and conducted in such a manner as to permit the General
Partner at all times to be classified as a REIT, unless the General Partner
ceases to qualify as a REIT for reasons other than the conduct of the business
of the Partnership, (ii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing or to own interests in any
entity engaged in any of the foregoing, and (iii) to do anything necessary or
incidental to the foregoing. In connection with the foregoing, and without
limiting the General Partner's right, in its sole discretion, to cease
qualifying as a REIT, the Partners acknowledge the General Partner's current
status as a REIT inures to the benefit of all of the Partners and not solely the
General Partner.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, provided that the Partnership shall
not take, or refrain from taking, any action which, in the judgment of the
General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the General Partner to continue to qualify as a REIT, (ii) could
subject the General Partner to any additional taxes under Section 857 or Section
4981 of the Code, 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 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
At the time of the execution of this Agreement, the Partners shall make
Capital Contributions as set forth in Exhibit A to this Agreement. The Partners
shall own Partnership Units in the amounts set forth for each such Partner 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 any Partner's Percentage Interest.
The number of Partnership
13
Units held directly by the General Partner (equal to one percent (1%) of all
outstanding Partnership Units from time to time) shall be deemed to be the
General Partner Interest. Except as provided in Sections 4.2, 7.7(I) and 10.5,
the Partners shall have no obligation to make any additional Capital
Contributions or loans to the Partnership. The General Partner shall maintain
the information set forth in Exhibit A to the Agreement, as such information
shall change from time to time, in such form as the General Partner deems
appropriate for the conduct of the Partnership affairs, and Exhibit A shall be
deemed amended from time to time to reflect the information so maintained by the
General Partner, whether or not a formal amendment to the Agreement has been
executed amending such Exhibit A. Such information shall reflect (and Exhibit A
shall be deemed amended from time to time to reflect) the issuance of any
additional Partnership Units to the General Partner or any other Person, the
transfer of Partnership Units and the redemption of any Partnership Units, all
as contemplated in the Agreement.
Section 4.2 Issuances of Additional Partnership Interests
The General Partner is hereby authorized to cause the Partnership from time
to time to issue to the Partners (including the General Partner) or other
Persons additional Partnership Units or other Partnership Interests in one or
more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to Limited
Partner Interests, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, 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.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
The General Partner shall distribute at least annually an amount equal to
100% of Available Cash generated by the Partnership during such annual or
shorter period to the Partners who are Partners on the Partnership Record Date
with respect to such annual or shorter period in accordance with their
respective Percentage Interests on such Partnership Record Date; provided that
in no event may a Partner receive a distribution of Available Cash with respect
to a Partnership Unit if such Partner is entitled to receive a distribution out
of such Available Cash with respect to a REIT Share for which such Partnership
Unit has been redeemed or exchanged.
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 hereof with respect to any allocation, payment or
distribution to the General Partner, the Limited Partners or Assignees shall be
treated as amounts distributed to the General Partner, Limited Partners, or
Assignees pursuant to Section 5.1 for all purposes under this
14
Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash received
or reductions in reserves made after commencement of the liquidation of the
Partnership shall be distributed to the Partners in accordance with Section
13.2.
ARTICLE 6
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 hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided hereinbelow.
A. Net Income. After giving effect to the special allocations set forth in
Section 1 of Exhibit C attached hereto, 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, and (ii) thereafter, Net Income shall be allocated to the
Partners in accordance with their respective Percentage Interests.
B. Net Losses. After giving effect to the special allocations set forth in
Section 1 of Exhibit C attached hereto, Net Losses shall be allocated to the
Partners in accordance with their respective Percentage Interests; provided,
however, that Net Losses 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 at the end of such
taxable year (or increase any existing Adjusted Capital Account Deficit). All
Net Losses in excess of the limitations set forth in this Section 6.1.B shall be
allocated to the General Partner.
Section 6.2 Other Allocation Rules.
A. Excess Nonrecourse Liabilities. Solely for purposes of determining a
Partner's proportionate share of the "excess nonrecourse liabilities" of the
Partnership within the meaning of Regulations Section 1.752-3(a)(3), such
"excess nonrecourse liabilities" first shall be allocated to those Partners who
have, and in an amount equal to, such Partners' built-in gain under Regulations
Section 1.704-3(a)(3)(ii) less any Nonrecourse Built-in Gain, and then shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
B. Recapture Income. Recapture Income shall be allocated in accordance with
Regulations Sections 1.1245-1(c) or 1.1250-1(f) as applicable.
15
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement, all management
powers over the business and affairs 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 to 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 7.3 hereof, shall have
full power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and
borrowing money to permit the Partnership to make distributions to its
Partners in such amounts as will permit the General Partner (so long
as the General Partner 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 the
General Partner such that the General Partner can distribute to its
shareholders amounts sufficient to permit the General Partner to
maintain REIT status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of
evidence of indebtedness (including the securing of same by deed to
secure debt, mortgage, deed of trust or other lien or encumbrance on
the Partnership's assets) and the incurring of any obligations it
deems necessary for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership (including
the exercise or grant of any conversion, option, privilege or
subscription right or other right available in connection with any
assets at any time held by the Partnership) or the combination of the
Partnership with or into another entity (all of the foregoing subject
to any prior approval only to the extent required by Section 7.3
hereof);
16
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of
this Agreement and on any terms it sees fit, including, without
limitation, the financing of the conduct of the operations of the
General Partner, the Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other Persons (including,
without limitation, the Subsidiaries of the Partnership and/or the
General Partner) and the repayment of obligations of the Partnership
and its Subsidiaries and any other Person in which it has an equity
investment, and the making of capital contributions to its
Subsidiaries;
(5) the management, operation, leasing, landscaping, repair, alteration,
demolition or improvement of any real property or improvements owned
by the Partnership or any Subsidiary of the Partnership;
(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 distribution of Partnership cash or other Partnership assets in
accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other assets of
the Partnership;
(9) the collection and receipt of revenues and income of the Partnership;
(10) the establishment of one or more divisions of the Partnership, the
selection and dismissal of employees of the Partnership, any division
of the Partnership, or the General Partner (including, without
limitation, employees having titles such as "president," "vice
president," "secretary" and "treasurer" of the Partnership, any
division of the Partnership, or the General Partner), and agents,
outside attorneys, accountants, consultants and contractors of the
General Partner or the Partnership or any division of the Partnership,
and the determination of their compensation and other terms of
employment or hiring;
17
(11) the maintenance of such insurance for the benefit of the Partnership
and the Partners as it deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems
desirable (including, without limitation, the acquisition of interests
in, and the contributions of property to, its Subsidiaries and any
other Person in which it has an equity investment from time to time);
(13) the control of any matters affecting the rights and obligations of the
Partnership, including the settlement, compromise, submission to
arbitration or any other form of dispute resolution, or abandonment
of, any claim, cause of action, liability, debt or damages, due or
owing to or from the Partnership, the commencement or defense of
suits, legal proceedings, administrative proceedings, arbitration or
other forms of dispute, resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution, the
incurring of legal expense, and the indemnification of any Person
against liabilities and contingencies to the extent permitted by law;
(14) the undertaking of any action in connection with the Partnership's
direct or indirect investment in its Subsidiaries or any other Person
(including, without limitation, the contribution or loan of funds by
the Partnership to such Persons);
(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 asset 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, or jointly with any such Subsidiary or
other Person;
(18) the exercise of any of the powers of the General Partner
18
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or other
arrangements with such Person; and
(19) the making, execution and delivery of any and all deeds, leases,
notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or agreement 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.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement
(except as provided in Section 7.3), the Act or any applicable law, rule or
regulation, to the fullest extent permitted under the Act or other applicable
law. 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. At all times from and after the date hereof, the General Partner may
cause the Partnership to obtain and maintain (i) casualty, liability and other
insurance on the properties of the Partnership and (ii) liability insurance for
the Indemnities hereunder.
D. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E. In exercising its authority under this Agreement and except as provided
at Section 5.1, the General Partner may, but shall be under no obligation to,
take into account the tax consequences to any Partner of any action taken by it.
The General Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of an income tax liability incurred
by such Limited Partner as a result of an action (or inaction) by the General
Partner pursuant to its authority under this Agreement.
Section 7.2 Certificate of Limited Partnership
The General Partner has previously filed the Certificate with the Secretary
of State of Delaware as required by the Act. 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
19
other state, or the District of Columbia, in which the Partnership may elect to
do business or own property. 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 or the District of Columbia in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate or any
amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner Authority
The General Partner may not take any action in contravention of an express
prohibition or limitation of this Agreement without the written consent of all
of the Limited Partners.
Section 7.4 Reimbursement of the General Partner
A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. 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 that it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership; provided that the amount
of any such reimbursement shall be reduced by any interest earned by the General
Partner with respect to bank accounts or other instruments or accounts held by
it on behalf of the Partnership as permitted in Section 7.5.A. The Limited
Partners acknowledge that, for purposes of this Section 7.4.B, all expenses of
the General Partner are deemed incurred for the benefit of the Partnership. Such
reimbursements shall be in addition to any reimbursement to the General Partner
as a result of indemnification pursuant to Section 7.7 hereof.
C. As set forth in Section 4.3, the General Partner shall be treated as
having made a Capital Contribution in the amount of all expenses that it incurs
relating to the organization and/or reorganization of the Partnership and the
General Partner, and any other issuance of additional Partnership Interests or
REIT Shares pursuant to Section 4.2 hereof.
Section 7.5 Outside Activities of the General Partner
Nothing herein contained shall prevent or prohibit the General Partner or
any employee or other Affiliate of the General Partner from entering into,
engaging in or conducting any other activity or performing for a fee any service
including (without limiting the generality of the foregoing) engaging in any
business dealing with real property of any type or location, including, without
limitation, property of a type similar to those properties owned by the
Partnership, its Subsidiaries or any other Person in which the Partnership has
an equity investment; acting as a
20
director, officer or employee of any corporation, as a trustee of any trust, as
a general partner of any partnership, as a managing member of any limited
liability company, or as an administrative official of any other business
entity; or receiving compensation for services to, or participating in profits
derived from, the investments of any such corporation, trust, partnership,
limited liability company or other entity, regardless of whether such activities
are competitive with the Partnership, and nothing herein shall require the
General Partner or any employee or Affiliate thereof to offer any interest in
such activities to the Partnership or any Partner.
Section 7.6 Contracts with Affiliates
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.5.A, the Partnership may transfer assets
to joint ventures, other partnerships, corporations or other business entities
in which it is or thereby becomes a participant upon such terms and subject to
such conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, believes are advisable.
C. The Partnership may enter into agreements with Affiliates for the
provision of services to the Partnership 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.
D. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
Section 7.7 Indemnification
A. Except as provided at Section 7.7(I), hereof, the Partnership shall
indemnify each Indemnitee 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 any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership, the General Partner as set
forth in this Agreement in which such Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise, unless it is established
that: (i) the act or omission of the Indemnitee was material to the matter
giving rise to the proceeding and either was committed in bad faith or was the
result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
21
believe that the act or omission was unlawful. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A with respect to the subject matter of such proceeding. The
termination of any proceeding by conviction of an Indemnitee or upon a plea of
nolo contendere or its equivalent by an Indemnitee, or an entry of an order of
probation against an Indemnitee prior to judgment, creates a rebuttable
presumption that such Indemnitee acted in a manner contrary to that specified in
this Section 7.7.A. Any indemnification pursuant to this Section 7.7 shall be
made only out of the assets of the Partnership, 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. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in Section 7.7.A. has been met, and (ii) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition to
any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. Any liabilities which an Indemnitee incurs as a result of acting on
behalf of the Partnership or the General Partner (whether as a fiduciary or
otherwise) in connection with the operation, administration or maintenance of an
employee benefit plan or any related trust or funding mechanism (whether such
liabilities are in the form of excise taxes assessed by the Internal Revenue
Service, penalties assessed by the Department of Labor, restitutions to such a
plan or trust or other funding mechanism or to a participant or beneficiary of
such plan, trust of
22
other funding mechanism, or otherwise) shall be treated as liabilities or
judgments or fines under this Section 7.7 unless such liabilities arise as a
result of (i) such Indemnitee's intentional misconduct or knowing violations of
the law, or (ii) any transaction in which such Indemnitee received a personal
benefit in violation or breach of any provision of this Agreement or applicable
law.
F. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnities, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 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.
I. The Partners hereby acknowledge that, in conjunction with the financing
and the refinancing of the property owned by the Partnership, the General
Partner may agree to guarantee part or all of such debt. The Partners understand
that, pursuant to Regulations Section 1.752-(2)(b)(3)(i), such guaranty
obligation would, absent the indemnification provided hereinafter, serve to
increase the General Partner's share of such debt pursuant to Regulations
Section 1.752-2(a). Inasmuch as, notwithstanding such guaranty obligation, each
of the Limited Partners desires to increase his share of such debt and the
General Partner desires to decrease its share of such debt (for purposes of
Regulations Section 1.752-2(a)), each of the Limited Partners, to the extent
provided in Exhibit F, attached hereto, hereby agrees to indemnify the General
Partner in the event and to the extent that the General Partner both is required
to make a payment to the lender under any such guaranty obligation and is unable
to sell any or all of the assets of the Partnership for money or moneys worth to
make the General Partner whole on account of such payment. This indemnification
is effective only at the time, in the event and to the extent that upon a
dissolution and liquidation of the Partnership, the General Partner is a
creditor of the Partnership due to its guaranty of Partnership debt and the
proceeds of sale in such dissolution and liquidation are insufficient to
reimburse the General Partner for any amounts paid on such guaranty obligation
as contemplated in this Section 7.7(I). As provided in Exhibit F, this
indemnification is limited on a per Unit basis to Units owned by an indemnifying
Limited Partner at the time an indemnification is due to the General Partner as
provided by this Section 7.7(I), such that each Limited Partner's obligation is
reduced upon a redemption of Units as provided in Section 8.6 or upon any other
transfer or disposition of Units.
Section 7.8 Liability of the General Partner
23
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner shall not be liable for monetary damages to the Partnership,
any Partners or any Assignees for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith and with due care and loyalty.
B. The Limited Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership and the General Partner's shareholders
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 cause
the Partnership to take (or decline to take) any actions, and that 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. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's 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. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every
24
act and duty which is permitted or required to be done by the General Partner
hereunder.
D. Notwithstanding any other provisions of this Agreement or 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 to continue
to qualify as a REIT or (ii) to avoid the General Partner incurring any taxes
under Section 857 or Section 4981 of the Code, is expressly authorized under
this Agreement and is deemed approved by all of the Limited Partners.
E. As of the date hereof, the General Partner holds its Limited Partnership
Interests through a Subsidiary, FAC Properties Holding Corp. As a result, where
the Partnership Agreement refers to (i) contributions from the General Partner
to the Partnership, (ii) the General Partner's ownership of Partnership
Interests, (iii) issuances of Units to the General Partner, (iv) repurchases of
Units by the Partnership from the General Partner or (v) similar matters, it is
understood that such actions may involve the General Partner directly or
indirectly through a Subsidiary.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, 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 or such nominee or Affiliate for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, 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 and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies 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
25
shall any Person dealing with the General Partner or its representatives be
obligated to ascertain that the terms of this Agreement have been complied with
or to inquire into the necessity or expedience of any act or action of the
General Partner or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner or
its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (i) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (ii) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
ARTICLE 8
S RIGHTS AND OBLIGATIONS OF LIMITED PARTNER
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Sections 7.7(I) and 10.5 hereof,
or under the Act.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, partner, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such) shall take part in the operation, management or control (within the
meaning of the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into pursuant to Section 7.6.E hereof and
any other agreements entered into by a Limited Partner or its Affiliates with
the Partnership or a Subsidiary, any Limited Partner (other than the General
Partner) and any officer, director, employee, agent, trustee, Affiliate or
shareholder of any Limited Partner (other than the General Partner) shall be
entitled to and may have business interests and engage in business activities in
addition to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee. 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
26
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, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C hereof or as permitted by Section 4.2.B, or
otherwise expressly provided in this Agreement, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
A. In addition to other rights provided by this Agreement or by the Act,
and except as limited by Section 8.5.C hereof, each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon written demand with a statement of
the purpose of such demand and at such Limited Partner's own expense (including
such 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
pursuant to the Securities Exchange Act of 1934;
(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.
27
B. The Partnership shall notify each Limited Partner upon request of the
then current and applicable Conversion Factor.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner 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 an unaffiliated third party
to keep confidential.
Section 8.6 Redemption Right
A. Subject to Sections 8.6.B and 8.6.C, each Limited Partner, other than
the General Partner or a Subsidiary of the General Partner, shall have the right
(the "Redemption Right") to require the Partnership to redeem on a Specified
Redemption Date all or a portion of the Partnership Units held by such Limited
Partner at a redemption price equal to and in the form of the Cash Amount to be
paid by the Partnership. The 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"); provided, however, that the Partnership shall not be
obligated to satisfy such Redemption Right if the General Partner elects to
purchase the Partnership Units subject to the Notice of Redemption pursuant to
Section 8.6.B. A Limited Partner may not exercise the Redemption Right for less
than the lesser of (i) all of the Partnership Units held by such Partner or (ii)
1,000 of the Partnership Units held by such Partner. The Redeeming Partner shall
have no right, with respect to any Partnership Units so redeemed, to receive any
Partnership distributions paid on or after the Specified Redemption Date. 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 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.
B. Notwithstanding the provisions of Section 8.6.A, a Limited Partner that
exercises the Redemption Right shall be deemed to have offered to sell the
Partnership Units described in the Notice of Redemption to the General Partner
and the General Partner may, in its sole and absolute discretion, elect to
purchase directly and acquire such Partnership Units by paying to the Redeeming
Partner either the Cash Amount or the REIT Shares Amount, as elected by the
General Partner (in its sole and absolute discretion), on the Specified
Redemption Date, whereupon the 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. If the
General Partner shall elect to exercise its right to purchase Partnership Units
under this Section 8.6.B with respect to a Notice of Redemption, it shall so
notify the Redeeming Partner within five (5) Business Days after the receipt by
the General Partner of such Notice of Redemption. Unless the General Partner (in
its sole and absolute discretion) shall
28
exercise its right to purchase Partnership Units from the Redeeming Partner
pursuant to its right to purchase Partnership Units under this Section 8.6.B,
the General Partner shall not have any obligation to the Redeeming Partner or
the Partnership with respect to the Redeeming Partner's exercise of the
Redemption Right. In the event the General Partner shall exercise its right to
purchase Partnership Units with respect to the exercise of a Redemption Right in
the manner described in the first sentence of this Section 8.6.B, the
Partnership shall have no obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner's exercise of such Redemption Right, and
each of the Redeeming Partner, the Partnership, and the General Partner shall
treat the transaction between the General Partner and the Redeeming Partner for
federal income tax purposes as a sale of the Redeeming Partner's Partnership
Units to the General Partner. 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. Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the General Partner pursuant to Section 8.6.B (regardless of
whether or not the General Partner would in fact exercise its rights under
Section 8.6.B) would be prohibited under the Articles of Incorporation.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Sections 8.5.A
and 9.3 hereof. 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 determines to be necessary or
appropriate.
Section 9.2 Partnership Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. As soon as practicable, but in no event later than the date when mailed
to the shareholders of the General Partner, the General Partner shall cause to
be mailed to each Limited
29
Partner, as of the close of the Partnership Year, an annual report containing
financial statements of the Partnership, or of the General Partner if such
statements are prepared solely on a consolidated basis with the General Partner,
for such Partnership Year, presented in accordance with generally accepted
accounting principles, such statements to be audited by a nationally recognized
firm of independent public accountants selected by the General Partner.
B. As soon as practicable, but in no event later than the date when mailed
to the shareholders of the General Partner, the General Partner shall cause to
be mailed to each Limited Partner, as of the last day of the calendar quarter, a
report containing unaudited financial statements of the Partnership or of the
General Partner, if such statements are prepared solely on a consolidated basis
with the General Partner, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to be
appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
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. 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 the Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to
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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 "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 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 any item affected
by such item; and
(6) to take any other action on behalf of the Partners or the Partnership
in connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services.
All third
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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 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 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to withhold from or
pay on behalf of or with respect to such Limited Partner any amount of federal,
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any such
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 repayment must be made, unless (i) the Partnership withholds
such repayment 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 repayment may be satisfied out of the available funds of
the Partnership which would, but for such repayment, be distributed to the
Limited Partner. Any amounts withheld pursuant to the foregoing clauses (i) or
(ii) shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner. Without limitation, in such event the General
Partner (i) shall have the right to receive distributions that would otherwise
be distributable to such defaulting Limited Partner until such time as such
loan, together with all interest thereon, has been paid in full, and any such
distributions so received by the General Partner shall be treated as having been
distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan and
(ii) shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner. Any amounts payable by a Limited Partner hereunder
shall bear interest at the lesser of (A) 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, or (B) the
maximum lawful rate of interest on such obligation, such interest to accrue from
the date such amount is due (i.e., fifteen (15) days after demand) until such
amount
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is paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer", when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner 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 11 does not include any redemption of Partnership Interests by the
Partnership from a Limited Partner or any acquisition of Partnership Units from
a Limited Partner by the General Partner or from the General Partner pursuant to
Section 8.6.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of General Partner's Partnership Interests
A. Without the written consent of the Limited Partners, the General Partner
may not transfer any of its General Partner Interest (other than any transfer to
an entity in which the General Partner owns beneficially 100 percent) other than
in connection with a transaction permitted under Section 11.2.B or Section
11.2.C. Any transfer or purported transfer of the General Partner's Interest in
violation of this Section 11.2 shall be null and void.
B. Except as permitted elsewhere in this Agreement, the General Partner
shall not engage in any merger, consolidation or other business combination with
or into another Person or sale of all or substantially all of its assets, or any
reclassification, or recapitalization or change of outstanding 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) ("Transaction"), unless as a result of the Transaction the
Limited Partner thereafter remains entitled to exchange each Partnership Unit
owned by the Limited Partner (after application of the Conversion Factor) for an
amount of cash, securities, or other property equal to the greatest amount of
cash, securities or other property paid to a holder of one REIT Share in
consideration of one REIT Share at any time during the period from and after the
date on which the Transaction is consummated which the Limited Partner would
have received after such Transaction, as if the Limited Partner had exercised
its Redemption Right immediately prior to the Transaction, provided that if, in
connection with the Transaction, a purchase, tender or exchange offer shall have
been made to and accepted by the holders of more than 50 percent of the
outstanding REIT
33
Shares, the holders of Partnership Units shall receive the greatest amount of
cash, securities, or other property which the Limited Partner 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.
C. With the written consent of the Limited Partners, the General Partner
may withdraw as general partner or instate a substitute general partner.
Section 11.3 Limited Partners' Rights to Transfer
A. No transfer of a Limited Partner Interest by any Limited Partner is
permitted without the prior written consent of the General Partner, which the
General Partner may withhold in its sole and absolute discretion.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those enjoyed by other Limited Partners, for the purpose of
selling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited Partner of
its Partnership Units if, in the opinion of legal counsel to the Partnership,
such transfer would (i) require filing of a registration statement under the
Securities Act of 1933; (ii) otherwise violate any federal or state securities
laws or regulations applicable to the Partnership or the Partnership Unit; or
(iii) cause the Partnership to register the Partnership Units under Section
12(g) of the Securities Exchange Act of 1934, as amended or any successor
provision.
D. 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, or (ii) such transfer is effectuated through an "established
securities market" or a "secondary market" (or the substantial equivalent
thereof) within the meaning of Section 7704 of the Code.
E. 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 Regulations
Section 1.752-4(b)) 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 exchange or 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 Partners
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A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in his place. The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General Partner
shall amend Exhibit A to reflect the name, address, number of Partnership Units,
and Percentage Interest of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address and interest of the predecessor of such
Substituted Limited Partner.
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
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any other items, gain, loss deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to 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).
In the event any such transferee desires to make a further assignment of any
such Partnership Units, such transferee shall be subject to all the provisions
of this Article 11 to the same extent and in the same manner as any Limited
Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership Units in a
transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substituted Limited Partners. Similarly, any Limited Partner who shall transfer
all of its Partnership Units pursuant to a redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.
35
C. Transfers pursuant to this Article 11 may only be made on the first day
of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership Year in compliance with the provisions of
this Article 11 or redeemed or transferred pursuant to Section 8.6, on any day
other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items attributable to such interest for such
Partnership Year shall be divided and allocated between the transferor Partner
and the transferee Partner by taking into account their varying interests during
the Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing of the books method. Solely for purposes of making such
allocations, each of such items for the calendar month in which the transfer or
assignment occurs shall be allocated to the transferee Partner, and none of such
items for the calendar month in which a redemption occurs shall be allocated to
the Redeeming Partner. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or 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.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to Section 11.2
hereof who is proposed to be admitted as a successor General Partner shall be
admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership year
shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
A. After the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General
36
Partner in order to effect such Person's admission as an Additional Limited
Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person
shall be admitted as an Additional Limited Partner without the consent of the
General Partner, which consent may be given or withheld in the General Partner's
sole and absolute discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items allocable among Partners and Assignees for
such Partnership Year shall be allocated among such Additional Limited Partner
and all other Partners and Assignees by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. 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
the Partners and Assigns including such Additional Limited Partner. All
distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
Assignees other than the Additional Limited Partner 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 2.4
hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
("Dissolution Events"):
A. the expiration of its term as provided in Section 2.5 hereof.
37
B. 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 of the remaining Partners agree 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;
C. an election to dissolve the Partnership made by the General Partner, in
its sole and absolute discretion;
D. entry of a decree of judicial dissolution of the Partnership pursuant to
the provisions of the Act;
E. the sale of all or substantially all of the assets and properties of the
Partnership; or
F. 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 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 the entry of such order or judgment all of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute General Partner.
Section 13.2 Winding Up
A. Upon the occurrence of a Dissolution Event or a Terminating Capital
Transaction, the Partnership shall continue solely for the purposes of winding
up its affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up of the
Partnership's business and affairs. The General Partner, or, in the event there
is no remaining General Partner, any Person elected by a majority in interest of
the Limited Partners (the General Partner or such other Person being referred to
herein as the "Liquidator"), shall be responsible for overseeing the winding up
and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partner, include shares of stock in the General Partner) 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 other Partners; and
38
(4) The balance, if any, after giving effect to all contributions,
distributions, and allocations for all periods, to those Partners with
positive Capital Account balances, to the extent of such positive
Capital Account balances.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the
Partnership, the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including those to Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the 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 13 may be:
(1) 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 the General Partner arising out of or in connection
with the Partnership. The assets of any such trust shall be
distributed to the General Partner and Limited Partners from time to
time, in the reasonable discretion of the Liquidator, 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
(2) withheld or escrowed to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized
portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed
to the General Partner and Limited Partners in the manner and order of
priority set forth in Section 13.2.A as soon as practicable.
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Section 13.3 Negative Capital Accounts
No Partner, General or Limited, shall be liable to the Partnership or to
any other Partner for any negative balance outstanding in each such Partner's
Capital Account, whether such negative Capital Account results from the
allocation of Net Losses or other items of deduction and loss to such Partner or
from distributions to such Partner.
Section 13.4 Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article 13, in the event the
Partnership is considered liquidated within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g), but no Dissolution 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.
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 provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distribution or allocations.
Section 13.6 Notice of Dissolution
In the event a Dissolution Event occurs or an event occurs that would, but
for the 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 provide within thirty (30) days thereafter written notice thereof to each
of the Partners.
Section 13.7 Termination of Partnership and Cancellation of Certificate of
Limited Partnership
Upon the completion of the liquidation of the Partnership cash and property
as provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this
40
Agreement shall remain in effect between the Partners during the period of
liquidation.
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. Except as set forth in Section 14.1.B, the General Partner shall have
the power, without the consent of the Limited Partners, to amend any provision
of this Agreement other than Section 7.3 in its sole and absolute discretion.
The General Partner will provide ten (10) days prior written notice to the
Limited Partners when any action under this Section 14.1.A is taken.
B. Notwithstanding Section 14.1.A hereof, this Agreement shall not be
amended without the consent of each Partner adversely affected if such amendment
would (i) convert a Limited Partner's interest in the Partnership into a General
Partner Interest, (ii) alter rights of the Partner to receive distributions
pursuant to Article 5 or Article 13, or the allocations specified in Article 6
(except as permitted pursuant to Section 4.2 and Section 14.1.B(3) hereof),
(iii) alter or modify the Redemption Right and REIT Shares Amount as set forth
in Section 8.6, and the related definitions, in a manner adverse to such
Partner, or (iv) amend this Section 14.1.B. Further, no amendment may alter the
restrictions on the General Partner's authority set forth in Section 7.3 without
the consent specified in that section.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A or such other address of which
the Partner shall notify the General Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
41
Whenever the context may require, any pronoun used in this Agreement shall
include the plural and vice versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purpose of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors
Other than as expressly set forth herein with respect to the Indemnities,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditors 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 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 is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
42
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreement among them with respect
thereto.
43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
FAC REALTY TRUST, INC.
By: ___________________________
LIMITED PARTNER:
FAC PROPERTIES HOLDING CORP.
By: ____________________________
44
EXHIBIT A
PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS
----------------------------------- ----------------------------- ------------------------- ------------------------------------
Name and Address Agreed Value of Partnership Percentage
of Partners Contributed Property Units Interest
----------------------------------- ----------------------------- ------------------------- ------------------------------------
----------------------------------- ----------------------------- ------------------------- ------------------------------------
----------------------------------- ----------------------------- ------------------------- ------------------------------------
General Partner
----------------------------------- ----------------------------- ------------------------- ------------------------------------
FAC Realty Trust, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ $1.00 1%
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------- ----------------------------- ------------------------- ------------------------------------
----------------------------------- ----------------------------- ------------------------- ------------------------------------
----------------------------------- ----------------------------- ------------------------- ------------------------------------
Limited Partners
----------------------------------- ----------------------------- ------------------------- ------------------------------------
FAC Properties Holding Corp.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ $99.00 99%
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------- ----------------------------- ------------------------- ------------------------------------
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 1.704-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.A of
the Agreement and Exhibit C hereof, 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.B of the Agreement and Exhibit C hereof.
B. For purposes of computing the amount of any 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-l(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 1.704-1(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 Section
705(a)(2)(B) of the Code are not includible 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 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 specifically allocated under Section 2 of Exhibit C hereof
shall not be taken into account.
C. Generally, a transferee (including an Assignee) of a Partnership Unit
shall succeed to a pro rata portion of the Capital Account of the transferor.
D. (1) Consistent with the provisions of Regulations Section
1.704-l(b)(2)(iv)(f), and as provided in Section ▇.▇(2), the Carrying
Value 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 ▇.▇(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 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 1.704-1(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 13 of 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 value among the assets of the Partnership (in
such manner as it determines in its sole and absolute discretion to
arrive at a fair market value for individual properties).
E. The provisions of this Agreement (including this Exhibit B and other
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto (including, 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 14 of the Agreement, provided that it is not likely to have a
material effect on the amounts distributable to any Person pursuant to Article
13 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 1.704-1(b)(2)(iv)(q),
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
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 his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.
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 shall be interpreted consistently therewith. Solely for purposes of this
Section 1.A, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 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 l.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 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 l.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 l.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly receives
any adjustments, allocations or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), and
after giving effect to the allocations required under Sections l.A and l.B
hereof, 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
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.
D. 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 to the
numerically closest ratio for such Partnership Year which would satisfy such
requirements.
E. 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
Section 1.704-2(i).
F. 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 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
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 Section 6.1 of the Agreement and
Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed 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; 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
(1) 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, and
(2) 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 the Exhibit C.
C. To the extent Treasury 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 may elect, in its sole discretion, the
traditional method without curative allocations to be used by the Partnership
(or the remedial method) or any other permitted alternative method, and such
election shall be binding on all Partners.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.
EXHIBIT D
VALUE OF CONTRIBUTED PROPERTY
DELIBERATELY OMITTED
EXHIBIT E
NOTICE OF REDEMPTION
The undersigned Limited Partner hereby irrevocably (i) redeems Limited
Partnership Units in FAC Properties, L.P. in accordance with the terms of the
Amended and Restated Agreement of Limited Partnership of FAC Properties, L.P.
and the Redemption Right referred to therein, (ii) surrenders such Limited
Partnership Units and all right, title and interest therein, and (iii) directs
that the Cash Amount of 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 Limited
Partnership Units, free and clear of the rights or interests of any other person
or entity, (b) has the full right, power, and authority to redeem and surrender
such Limited Partnership Units as provided herein, and (c) has obtained the
consent or approval of all person or entities, if any, having the right to
consent or approve such redemption and surrender.
Dated:__________________________
Name of Limited Partner:___________________________________
Please Print
_________________________________
(Signature of Limited Partner)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
If REIT Shares are to be issued, issue to:
Name:_____________________________________
Please insert social security or identifying number:____________
2
EXHIBIT F
INDEMNIFICATION UNDER SECTION 7.7(I)
-------------------------------------------- ----------------------------- ------------------------
Indemnification DELIBERATELY OMITTED
Limited Partner Per Unit
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