FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
INSIGNIA PROPERTIES, L.P.
TABLE OF CONTENTS
PAGE
I DEFINED TERMS............................................................... 2
II PARTNERSHIP CONTINUATION AND IDENTIFICATION................................. 15
2.1 Continuation....................................................... 15
2.2 Name, Office and Registered Agent.................................. 15
2.3 Partners........................................................... 16
2.4 Term and Dissolution............................................... 16
2.5 Filing of Certificate and Perfection of Limited Partnership........ 16
2.6 Power of Attorney.................................................. 17
III PURPOSE AND BUSINESS OF THE PARTNERSHIP..................................... 18
3.1 Purpose and Business............................................... 18
IV CAPITAL CONTRIBUTIONS AND ACCOUNTS.......................................... 18
4.1 Capital Contributions.............................................. 18
4.2 Additional Capital Contributions; Issuances of
Additional Partnership Interests................................ 18
4.3 Additional Funding................................................. 20
4.4 No Preemptive Rights............................................... 20
4.5 Capital Accounts................................................... 21
4.6 Percentage Interests............................................... 21
4.7 No Interest on Contributions....................................... 22
4.8 Return of Capital Contributions.................................... 22
4.9 No Third Party Beneficiary......................................... 22
4.10 Cash Incentive Rights.............................................. 22
4.11 Mandatory Repurchases of Partnership Interests Held by IPT......... 22
V PROFITS AND LOSSES DISTRIBUTIONS............................................ 23
5.1 Allocation of Profits and Losses................................... 23
5.2 Distributions of Cash in Respect of Common Partnership Units....... 29
5.3 REIT Distribution Requirements..................................... 29
5.4 No Right to Distributions in Kind.................................. 29
5.5 Limitations on Return of Capital Contributions..................... 29
5.6 Distributions Upon Liquidation..................................... 29
5.7 Substantial Economic Effect........................................ 30
VI MANAGEMENT OF THE PARTNERSHIP; POWERS, RIGHTS AND
OBLIGATIONS OF THE GENERAL PARTNER.......................................... 30
6.1 Management of the Partnership...................................... 30
6.2 Powers of the General Partner...................................... 30
6.3 Delegation of Authority............................................ 33
6.4 Indemnification and Exculpation of Indemnitees..................... 33
6.5 Liability of the General Partner................................... 35
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6.6 Expenditures by Partnership........................................ 36
6.7 Outside Activities................................................. 36
6.8 Title to Partnership Properties.................................... 36
6.9 Reimbursement of the General Partner............................... 36
6.10 Other Matters Concerning the General Partner....................... 37
6.11 Contracts With and Employment or Retention of Affiliates
and Insignia Entities........................................... 37
VII PROPERTY MANAGEMENT AND PARTNERSHIP ADMINISTRATION.......................... 38
7.1 Property Management Services....................................... 38
7.2 Partnership Administration Services................................ 40
7.3 Transfers of Controlling Interests in IPT Entities................. 42
VIII CHANGES IN GENERAL PARTNER.................................................. 43
8.1 Transfer of the General Partner's Partnership Interests;
Transactions Involving IPT...................................... 43
8.2 Admission of a Substitute or Successor General Partner............. 44
8.3 Removal of a General Partner....................................... 45
8.4 Effect of Deemed Removal of a General Partner...................... 45
IX RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS.............................. 46
9.1 Management of the Partnership...................................... 46
9.2 Limited Liability of Limited Partners.............................. 46
9.3 Ownership by Limited Partners of Interests in the General Partner
and its Affiliates.............................................. 46
9.4 Redemption Rights.................................................. 47
9.5 Consent Rights of the Special Limited Partner...................... 49
9.6 Put Rights......................................................... 50
X TRANSFERS OF COMMON PARTNERSHIP UNITS HELD BY LIMITED
PARTNERS.................................................................... 50
10.1 Purchase for Investment............................................ 50
10.2 Restrictions on Transfers of Common Partnership Units
Held by Limited Partners........................................ 51
10.3 Admission of Substitute Limited Partners and Additional
Limited Partners................................................ 52
10.4 Rights of Assignees of Common Partnership Units.................... 53
10.5 Effect of Bankruptcy, Death, Incompetence or Termination of
a Limited Partner............................................... 53
10.6 Joint Ownership of Interests....................................... 53
XI BOOKS AND RECORDS; ACCOUNTING AND TAX MATTERS............................... 54
11.1 Books and Records.................................................. 54
11.2 Custody and Investment of Partnership Funds; Bank Accounts......... 54
11.3 Fiscal Year........................................................ 55
11.4 Annual Tax Information............................................. 55
11.5 Tax Matters Partner; Tax Elections; Special Basis Adjustments...... 55
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11.6 Reports to Limited Partners........................................ 56
XII AMENDMENT OF AGREEMENT...................................................... 56
12.1 Amendments......................................................... 56
12.2 Meetings of the Partners........................................... 56
XIII GENERAL PROVISIONS.......................................................... 57
13.1 Notices............................................................ 57
13.2 Survival of Rights................................................. 58
13.3 Additional Documents............................................... 58
13.4 Severability....................................................... 58
13.5 Entire Agreement................................................... 58
13.6 Waiver............................................................. 58
13.7 Pronouns and Plurals............................................... 58
13.8 Headings........................................................... 58
13.9 Counterparts....................................................... 58
13.10 Governing Law...................................................... 58
Exhibit A General and Limited Partners
Exhibit B Form of Notice of Redemption
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FOURTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
INSIGNIA PROPERTIES, L.P.
This Fourth Amended and Restated Agreement of Limited Partnership of
Insignia Properties, L.P., entered into on February 17, 1998 with retroactive
effect to January 1, 1998 (this "AGREEMENT"), amends and restates in its
entirety that certain Third Amended and Restated Agreement of Limited
Partnership of Insignia Properties, L.P., dated as of August 1, 1997 (the
"PRIOR AGREEMENT"), by and between Insignia Properties Trust, a Maryland real
estate investment trust with offices at One Insignia Financial Plaza, X.X. Xxx
00000, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 ("IPT"), and Insignia Financial Group,
Inc., a Delaware corporation with offices at One Insignia Xxxxxxxxx Xxxxx,
X.X. Xxx 0000, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 ("INSIGNIA").
RECITALS
WHEREAS, Insignia Properties Corporation, a Delaware corporation
("IPC"), as general partner, and the Insignia Commercial Group, Inc. (the
"ORIGINAL LIMITED PARTNER"), as the sole limited partner, formed a Delaware
limited partnership under the name Insignia Properties, L.P. (the
"PARTNERSHIP") pursuant to a Certificate of Limited Partnership filed with the
Office of the Secretary of State of the State of Delaware on May 16, 1996 and
an Agreement of Limited Partnership, dated as of May 16, 1996, maintained at
the offices of the Partnership (the "ORIGINAL AGREEMENT");
WHEREAS, pursuant to a merger effective December 19, 1996, IPC was
merged with and into IPT, as a result of which IPT succeeded to IPC's general
partner interest in the Partnership and became the general partner of the
Partnership;
WHEREAS, pursuant to the First Amended and Restated Agreement of
Limited Partnership of the Partnership dated December 30, 1996, the Original
Agreement was amended to provide, among other things, for the withdrawal of
the Original Limited Partner from the Partnership and the admission of
Insignia as a limited partner of the Partnership;
WHEREAS, Insignia, the Partnership and IPT entered into that certain
Advisory Agreement dated December 30, 1996, as amended (the "ADVISORY
AGREEMENT"), pursuant to which Insignia provided certain advisory services to
the Partnership and IPT; and
WHEREAS, the parties to the Advisory Agreement have determined to
terminate such agreement as of the date hereof, and in connection therewith
the Partners wish to amend and restate this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of mutual
covenants between the parties hereto, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following defined terms used in this Agreement shall have the
meanings specified below:
"ACCESSION AGREEMENT" means a written agreement between the
Partnership and a Person seeking to be admitted as an Additional Limited
Partner, a Substitute Limited Partner or an additional or substitute General
Partner, as the case may be, which agreement shall, at a minimum, (i) provide
that such Person accepts and agrees to be bound by all of the terms and
provisions of this Agreement, and (ii) in the case of the admission of an
Additional Limited Partner or a Substitute Limited Partner, grant the General
Partner a power of attorney substantially the same as that contained in
Section 2.6 hereof.
"ACT" means the Uniform Limited Partnership Act of the State of
Delaware, as the same may be amended from time to time.
"ADDITIONAL ADMINISTRATION ENTITIES" has the meaning set forth in
Section 7.2 hereof.
"ADDITIONAL CONTROLLED REAL PROPERTY" means any real property other
than an Initial Controlled Real Property of which IPT or the Partnership, or
either of them, acquires direct or indirect control, whether as a result of a
direct or indirect acquisition of (i) such real property itself or (ii) a
direct or indirect controlling interest in a Business Entity that owns such
real property.
"ADDITIONAL DESIGNATED REAL PROPERTY" means each Additional
Controlled Real Property which is a Multi-Family Residential Property and--
(i) with respect to which an Insignia Entity was providing
Property Management Services immediately prior to its acquisition by
the applicable IPT Entity;
(ii) the Controlling Interest in which was acquired by the
applicable IPT Entity from an Insignia Entity or from MAE or an
Affiliate thereof; or
(iii) with respect to which any Insignia Entity paid some
form of consideration to any Person (other than another Insignia
Entity) for the purpose of acquiring, or otherwise in respect of, the
property management rights relating thereto.
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"ADDITIONAL LIMITED PARTNER" means a Person admitted to this
Partnership as a Limited Partner pursuant to Sections 4.2 hereof and 9.3.
"ADJUSTED AGGREGATE DESIGNATED FEES AMOUNT" means, as of any date of
determination, an amount equal to the product of (x) the Base Aggregate
Designated Fees Amount as of such date minus the Excluded Designated Fees
Amount as of such date, multiplied by (y) the Designated Fees Adjustment
Factor as of such date.
"ADJUSTED AGGREGATE TOTAL FEES AMOUNT" means, as of any date of
determination, an amount equal the gross aggregate amount of Property
Management Fees paid or payable to Insignia Entities during the twelve-month
period ending on such date in respect of all Controlled Real Properties
(including Designated Real Properties), but only to the extent that such
Property Management Fees were paid or payable by an IPT Entity (i.e., Property
Management Fees paid or payable to Insignia Entities prior to the acquisition
of a Controlling Interest in a Controlled Real Property shall not be included
in this calculation); provided, however, that for purposes of the foregoing,
with respect to each such Controlled Real Property (if any) which was a
Designated Real Property as of such date of determination but was not a
Designated Real Property throughout such entire twelve-month period, the
amount of Property Management Fees paid or payable to Insignia Entities during
such twelve-month period shall be deemed to be the amount of Property
Management Fees actually paid or payable by IPT Entities to Insignia Entities
during such shorter period annualized.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for
each Partner as of the end of each Fiscal Year (a) 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 (b)
decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704- 1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply
with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital
Account as of the end of the relevant Fiscal Year.
"ADJUSTED PROPERTY" means any Partnership Property the Carrying Value
of which has been adjusted pursuant to paragraphs (i)-(iv) of the definition
of Carrying Value. For federal income tax purposes, upon a termination of the
Partnership pursuant to Section 708 of the Code, the Partnership shall be
deemed to have contributed its property to a new partnership in exchange for
an interest in the new partnership and immediately thereafter the terminated
partnership shall be deemed to have distributed the interest in the new
partnership to its partners in liquidation thereof, and the property so deemed
to be contributed shall thereafter constitute a Contributed Property until the
Carrying Value of such property is further adjusted pursuant to paragraphs
(i)-(iv) of the definition of Carrying Value.
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"ADMINISTRATION ALLOCATION AMOUNT" means, with respect to any
Formation Partnership or Additional Administration Entity as of any date of
determination, the allocated aggregate costs to Insignia Entities of fixed
assets, long term obligations (leases, etc.), insurance, utilities, employees
(including severance and similar termination payments) and other related items
which were required to provide Partnership Administration Services to such
Formation Partnership or Additional Administrative Entity or were incurred in
connection with or as a result of the termination of the retention of Insignia
Entities to provide such services, which allocated costs shall be determined
by Insignia in good faith based on, among other things, the remaining useful
life or alternative use of fixed assets, the remaining term of and financial
commitments relating to long term obligations and losses or increased costs
resulting from decreased economies of scale and bulk purchasing power.
"ADMINISTRATIVE EXPENSES" means all administrative and operating
costs and expenses incurred by the Partnership, the General Partner and/or
IPT, including without limitation costs and expenses (in each case of the
Partnership, the General Partner, IPT or any Subsidiary thereof): (i) relating
to the formation and continuity of existence of thereof and any Subsidiary
thereof, including taxes, fees and assessments associated therewith, and any
and all costs, expenses or fees payable to any trustee, director, officer or
employee thereof (including any costs of indemnification); (ii) relating to
any offer or registration of equity or debt securities and all statements,
reports, fees and expenses incidental thereto, including without limitation
underwriting discounts and selling commissions applicable to any such offer of
securities and any costs and expenses associated with any claims made by any
holders of such securities or any underwriters or placement agents thereof;
(iii) incurred in connection with the issuance, repurchase or redemption of
any securities, including without limitation Common IPT Shares, Other IPT
Securities and Partnership Interests; (iv) associated with the preparation and
filing of any periodic reports under federal, state or local laws or
regulations, including filings with the Commission; (v) associated with
compliance with laws, rules and regulations promulgated by any regulatory
body, including, if applicable, the Commission and any securities exchange;
and (vi) associated with any 401(k) plan, incentive plan, bonus plan or other
plan providing for compensation for trustees, directors, officers or
employees; and (vii) otherwise incurred in the ordinary course of business.
"AFFILIATE" means, with respect to any Person, any other Person which
controls, is controlled by or is under common control with, such Person. As
used in this definition "control" (including with its correlative meanings,
"controlled by" and "under common control with") shall mean the power to
direct or cause the direction of the management or policies of such Person
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). Notwithstanding the foregoing, (a) when
used in connection with Insignia, "Affiliate" shall not include IPT, the
Partnership, MAE or any of their respective Subsidiaries; and (b) when used in
connection with IPT or the Partnership, "Affiliate" shall not include
Insignia, MAE or any of their respective Subsidiaries.
"AGREED VALUE" means the fair market value of Contributed Property or
services contributed to the Partnership as of the date of contribution as
determined in good faith by the General Partner.
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"AGREEMENT" means this Fourth Amended and Restated Agreement of
Limited Partnership, as the same may be amended from time to time.
"AUTHORIZATION DATE" has the meaning set forth in Section 7.6(e)
hereof.
"BANK" has the meaning set forth in Section 9.6 hereof.
"BANKRUPTCY CODE" means the Bankruptcy Code of 1978, as amended.
"BASE AGGREGATE DESIGNATED FEES AMOUNT" means, as of any date of
determination, the sum of (x) $13,258,528 (which represents the total Base
Designated Fee Amounts with respect to each and every Initial Designated Real
Property (notwithstanding that such real property may no longer be controlled
by any IPT Entity)), plus (y) the total Base Designated Fee Amounts with
respect to each and every Additional Designated Real Property which became
such on or prior to such date of determination (regardless of whether such
real property continues to be controlled by an IPT Entity as of such date of
determination).
"BASE DESIGNATED FEE AMOUNT" means, except as otherwise agreed in
writing by the Partnership and Insignia on a property by property basis to
account for special circumstances, (i) with respect to each Initial Designated
Real Property, the aggregate amount of Property Management Fees paid or
payable to Insignia Entities in respect of such Initial Designated Real
Property during the twelve-month period ended December 31, 1996; (ii) with
respect to each Additional Designated Real Property with respect to which an
Insignia Entity was providing Property Management Services immediately prior
to its acquisition by the applicable IPT Entity, the aggregate amount of
Property Management Fees paid or payable to Insignia Entities in respect of
such Additional Designated Real Property during the twelve-month period
immediately preceding the month during which a Controlling Interest therein
was acquired by an IPT Entity (provided, however, that if Insignia Entities
managed such Additional Designated Real Property for less than the entire
twelve-month period immediately preceding such acquisition, then the aggregate
amount of Property Management Fees paid or payable to Insignia Entities during
such shorter period shall be annualized for purposes hereof); and (iii) with
respect to each other Additional Designated Real Property, the amount of
Property Management Fees which would have been payable to Insignia Entities
during the twelve-month period immediately preceding the month during which a
Controlling Interest therein was acquired by an IPT Entity assuming the
Property Management Agreement required to be entered into with respect to such
Additional Designated Real Property pursuant to Section 7.1 hereof had been in
effect throughout such twelve-month period. The Partnership shall maintain a
regularly updated schedule setting forth the Base Designated Fee Amount with
respect to each Designated Real Property.
"BOARD" means the Board of Trustees of IPT.
"BUSINESS DAY" means 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.
"BUSINESS ENTITY" means any corporation, joint venture, partnership,
limited liability company, trust or other business entity.
5
"CAPITAL ACCOUNT" has the meaning set forth in Section 4.5 hereof.
"CAPITAL CONTRIBUTION" means a contribution of cash, services or
Contributed Property to the Partnership in exchange for Partnership Interests
pursuant to the terms of this Agreement. Any reference to the Capital
Contribution of a Partner shall include any Capital Contributions made by a
predecessor holder of the Partnership Interests of such Partner.
"CAPITAL TRANSACTION" means the refinancing, sale, exchange,
condemnation, recovery of a damage award or insurance proceeds (other than
insurance proceeds not reinvested in the repair, replacement or reconstruction
of Partnership Properties) or other disposition of all or any part of any
Partnership Property (or the Partnership's interest therein).
"CARRYING VALUE" means (a) with respect to a Contributed Property,
the Agreed Value of such property reduced (but not below zero) by all
Depreciation with respect to such property charged to the Partners' Capital
Accounts, and (b) with respect to any other Partnership Property, the adjusted
basis of such property for federal income tax purposes, in each case as of the
time of determination. The Carrying Value of any Partnership Property shall be
adjusted from time to time 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, as follows:
(i) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in the immediate following
paragraph (ii), the Carrying Values of all Partnership Properties
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 the immediate following
paragraph (ii), as if such Unrealized Gain or Unrealized Loss had
been recognized on an actual sale of each such Partnership Property
and allocated pursuant to Section 5.1 hereof.
(ii) Such adjustments shall be made as of the following
times: (A) immediately prior to the acquisition of any additional
Partnership Interests by any new or existing Partner in exchange for
more than a de minimis Capital Contribution; (B) immediately prior to
the distribution by the Partnership to a Partner of more than a de
minimis amount of Partnership Property in respect of any Partnership
Interest; and (C) immediately prior to the liquidation of the
Partnership or the General Partner's interest in the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clause (A) and (B)
above shall be made only if the General Partner reasonably determines
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership.
(iii) In accordance with Regulations Section
1.704-1(b)(2)(iv)(e), the Carrying Values of Partnership Property
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 it is distributed.
6
(iv) In determining such Unrealized Gain or Unrealized Loss,
the aggregate cash amount and fair market value of all Partnership
Properties (including cash and 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 Section 5.6 hereof, be determined and allocated by the Liquidator
using such reasonable method of valuation as it may adopt. The
General Partner or the Liquidator, as the case may be, shall allocate
such aggregate value among the Partnership's Properties (in such
manner as it determines in its sole and absolute discretion) to
arrive at a fair market value for each individual Partnership
Property.
"CASH INCENTIVE RIGHT" means any share appreciation right,
performance share award or other similar right pursuant to which the holder
thereof is entitled to receive cash payments based on the performance of
Common IPT Shares.
"CASH REDEMPTION CONSIDERATION" means, with respect to each
Redeemable Unit to be purchased by the Partnership, cash in an amount equal to
the product of (x) the IPT Share Value as of the date of receipt by the
General Partner of the applicable Notice of Redemption, multiplied by (y) the
Conversion Factor in effect on such date.
"CAUSE" means the entry of a final, nonappealable judgment by the
highest court having proper jurisdiction over the matter in question
determining that a Person has committed fraud or willful malfeasance with
respect to another Person or Persons.
"CERTIFICATE" means any instrument or document that is required under
the laws of the State of Delaware, or any other jurisdiction in which the
Partnership conducts business, to be signed and sworn to by the Partners of
the Partnership (either by themselves or pursuant to the power-of-attorney
granted to the General Partner in Section 2.6 hereof) and filed for recording
in the appropriate public offices within the State of Delaware or such other
jurisdiction to (i) perfect or maintain the Partnership as a limited
partnership, (ii) effect the admission, withdrawal or substitution of any
Partner of the Partnership or (iii) protect the limited liability of the
Limited Partners under the laws of the State of Delaware or such jurisdiction.
"CODE" means the Internal Revenue Code of 1986, as amended, and as
hereafter amended from time to time. Reference to any particular provision of
the Code shall mean that provision in the Code at the date hereof and any
successor provision of the Code.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON IPT SHARE" means a common share of beneficial interest of
IPT, $.01 par value, or a share of the common equity of any successor entity.
"COMMON PARTNERSHIP UNIT" means a fractional, undivided share of
common ownership interest in the Partnership, with economic rights and
preferences substantially the same as a Common IPT Share.
"CONTRACT LOSS FEE" has the meaning set forth in section 7.2 hereof.
7
"CONTRIBUTED PROPERTY" means any Partnership Property (excluding
cash) contributed or deemed contributed to the Partnership by a Partner
(including for this purpose any Partnership Property deemed contributed to new
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 paragraphs (i)-(iv) of the definition of Carrying Value, such
property shall no longer constitute a Contributed Property for purposes of
paragraphs (i)-(iv) of the definition of Carrying Value, but shall be deemed
an Adjusted Property for such purposes.
"CONTROLLED REAL PROPERTY" means any Initial Controlled Real Property
or Additional Controlled Real Property.
"CONTROLLING INTEREST" means, with respect to each Controlled Real
Property, the interest (whether equity, debt, contractual or otherwise, and
including fee simple ownership) directly or indirectly held by an IPT Entity
which results in or causes such real property to be classified as an "Initial
Controlled Real Property" or an "Additional Controlled Real Property," as the
case may be, pursuant to the respective definitions thereof.
"CONVERSION ADJUSTMENT EVENT" means each of the following events: (i)
IPT pays a dividend on its outstanding Common IPT Shares in Common IPT Shares,
(ii) IPT otherwise makes a distribution of Common IPT Shares to all holders of
its outstanding Common IPT Shares, (iii) IPT subdivides its outstanding Common
IPT Shares and (iv) IPT combines its outstanding Common IPT Shares into a
smaller number of Common IPT Shares.
"CONVERSION FACTOR" means 1.0, as continuously and automatically
adjusted from time to time to take into account the occurrence of Conversion
Adjustment Events, as follows: as of the "effective date" of each Conversion
Adjustment Event, the Conversion Factor in effect immediately prior to the
"effective date" of such Conversion Adjustment Event shall be multiplied by a
fraction, the numerator of which shall be the number of Common IPT Shares
which will be issued and outstanding immediately after the occurrence of such
Conversion Adjustment Event (without regard to the effect of any non-issuance
of fractional shares), and the denominator of which shall be the actual number
of Common IPT Shares issued and outstanding immediately prior to the
"effective date" of such Conversion Adjustment Event, with the result being
the new Conversion Factor in effect until such time, if ever, as another
Conversion Adjustment Event occurs. For purposes of the foregoing, the
"effective date" of a Conversion Adjustment Event shall be the earlier of (i)
the record date for such Conversion Adjustment Event, if any, or (ii) the
effective or payment date for such Conversion Adjustment Event.
"DEPRECIATION" means, with respect to any particular Partnership
Property for any period, an amount equal to the federal income tax
depreciation, amortization or other cost recovery deduction allowable with
respect to such Partnership Property for such period, except that if the
Carrying Value of such Partnership Property differs from its adjusted basis
for federal income tax purpose at the beginning of such period, Depreciation
shall mean 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 period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization
or other cost
8
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.
"DESIGNATED FEE" means any Property Management Fee paid or payable to
an Insignia Entity pursuant to a Designated Property Management Agreement.
"DESIGNATED FEES ADJUSTMENT FACTOR" means, as of any date of
determination, a fraction, the numerator of which is the aggregate amount of
Property Management Fees paid or payable to Insignia Entities during the
twelve-month period ending on such date in respect of Designated Real
Properties which were the subject of Designated Property Management Agreements
in effect throughout such twelve-month period, and the denominator of which is
the sum of the Base Designated Fee Amounts with respect to the same Designated
Real Properties.
"DESIGNATED PROPERTY MANAGEMENT AGREEMENT" means a Property
Management Agreement relating to a Designated Real Property.
"DESIGNATED REAL PROPERTY" means each Initial Designated Real
Property and Additional Designated Real Property.
"EVENT OF WITHDRAWAL" means any event specified in Section 17-402 of
the Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED DESIGNATED FEES AMOUNT" means, as of any date of
determination, the gross aggregate amount of Property Management Fees which
would have been paid or payable to Insignia Entities during the twelve-month
period ending on such date in respect of Designated Real Properties but were
not solely as a result of one or more of the following: (i) a continuous
material breach of a Designated Property Management Agreement by an Insignia
Entity, as determined by a final, nonappealable judgment of the highest court
having jurisdiction with respect to the matter question, (ii) termination of a
Designated Property Management Agreement by an Insignia Entity or (iii)
termination of a Designated Property Management Agreement by the applicable
Property-Owning Entity for Cause.
"EXISTING TERMS" has the meaning set forth in Section 7.1(a) hereof.
"EXTRAORDINARY TRANSACTION" means any (a) merger, consolidation or
other combination of IPT with or into another Person, or sale of all or
substantially all of IPT's assets (other than in connection with a change in
the jurisdiction of IPT's organization or organizational form), or (b)
reclassification of the Common IPT 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 of Common IPT Shares).
"FISCAL YEAR" has the meaning set forth in Section 11.3 hereof.
"FORMATION PARTNERSHIP" means each of the public real estate limited
partnerships listed on Schedule I hereto.
9
"GENERAL PARTNER" means IPT, in its capacity as general partner of
the Partnership, and any Person who becomes a substitute or additional General
Partner as provided herein, and any of their successors as General Partner.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of its status as General Partner, or as a director, trustee, officer or
employee of the Partnership or the General Partner, and (ii) such other
Persons (including Affiliates of the General Partner or the Partnership) as
the General Partner may designate from time to time, in its sole and absolute
discretion.
"INITIAL CONTROLLED REAL PROPERTY" means any real property owned or
otherwise controlled by a Formation Partnership as of January 1, 1997.
"INITIAL DESIGNATED REAL PROPERTY" means each Initial Controlled Real
Property which is a Multi-Family Residential Property.
"INSIGNIA" means Insignia Financial Group, Inc., in any capacity
other than that of Special Limited Partner.
"INSIGNIA ENTITY" means Insignia and each of its Affiliates.
"INVESTORS AGREEMENTS" means those certain Investors Agreements
entered into by and among IPT, the Partnership, Insignia and the investors who
purchased Common IPT Shares in private offerings, as the same may be amended
from time to time.
"IPT" means Insignia Properties Trust, a Maryland real estate
investment trust, when referred to in any capacity other than as General
Partner.
"IPT CHARTER" means the Declaration of Trust of IPT filed with the
State Department of Assessments and Taxation of the State of Maryland, as the
same has been and may be amended or restated from time to time.
"IPT ENTITY" means each of IPT, the Partnership and each Business
Entity which holds a Controlling Interest.
"IPT SHARE INCENTIVE PLAN" means any incentive compensation plan,
dividend reinvestment plan, direct share purchase plan or other incentive plan
adopted by IPT from time to time pursuant to which Common IPT Shares may be
issued to Persons entitled to participate therein.
"IPT SHARE VALUE" means, as of any date of determination, the Market
Value of a Common IPT Share as of such date.
"LIMITED PARTNER" means Insignia, in its capacity as a limited
partner in the Partnership, and each other Person who is admitted to the
Partnership as a Substitute Limited Partner or Additional Limited Partner, in
such Person's capacity as a limited partner in the Partnership.
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"LOSSES" has the meaning set forth in Section 5.1(f) hereof.
"MAE" means Metropolitan Asset Enhancement, L.P., a Delaware limited
partnership.
"MARKET VALUE" means, with respect to any security, the average daily
market price of such security for the ten consecutive trading days immediately
preceding the date of such valuation, determined as follows: (i) if such
security is listed or admitted to trading on any securities exchange or quoted
on The Nasdaq National Market, the closing price, regular way, on such day or,
if no sale takes place on such day, the average of the closing bid and asked
prices on such day; (ii) if such security is not listed or admitted to trading
on any securities exchange or quoted on The Nasdaq National Market, the last
reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
recognized quotation source designated by the General Partner; or (iii) if
such security is not listed or admitted to trading on any securities exchange
or quoted on The Nasdaq National Market and no such last reported sale price
or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a recognized
quotation source designated by the General Partner, or if there shall be no
bid and asked prices on such day, the average of the high and low asked
prices, as so reported, on the most recent day (not more than ten days prior
to the date in question) for which prices have been so reported; provided,
however, that if there are no bid and asked prices reported during the ten
days prior to the date in question, the value of such security shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate; and further provided that if such security includes any
additional rights the value of which is not included within such price, then
the value of such rights shall be determined by the General Partner acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate and included in determining
the "Market Value" thereof.
"MULTI-FAMILY RESIDENTIAL PROPERTY" means traditional apartment
rental properties located in the United States; provided, however, that
"Multi-Family Residential Property" does not include (i) condominiums, (ii)
cooperatives, (iii) congregate care facilities, (iv) apartment rental
properties with respect to which the landlord provides material services in
addition to those services traditionally provided by landlords to apartment
tenants, (v) apartment rental properties which are deemed "affordable" (based
on a majority of their dwelling units), (vi) apartment rental properties which
are developed by an Insignia Entity or (vii) apartment rental properties in
which IPT and the Partnership are prohibited from investing, whether due to
restrictions herein or in the IPT Charter or as a result of the adoption of a
policy by the Board.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Regulations
Section 1.704- 2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"NONRECOURSE LIABILITY" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"NOTICE OF REDEMPTION" means a written notice substantially in the
form attached as Exhibit B hereto.
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"ORIGINAL LIMITED PARTNER" has the meaning set forth in the recitals
of this Agreement.
"OTHER IPT SECURITY" means any of the following securities issued by
IPT: (i) any equity security of IPT other than Common IPT Shares; (ii) any
Right; (iii) any other right, option or warrant to acquire any equity security
of IPT (including Common IPT Shares); and (iv) any security which is
convertible into or exchangeable for any equity security of IPT (including
Common IPT Shares).
"OTHER PARTNERSHIP SECURITY" means any of the following securities
issued by the Partnership: (i) any equity security of the Partnership other
than Common Partnership Units; (ii) any right, option or warrant to acquire
any equity security of the Partnership (including Common Partnership Units);
and (iii) any security which is convertible into or exchangeable for any
equity security of the Partnership (including Common Partnership Units).
"PARTNER" means any General Partner or Limited Partner. The name and
address of each Partner are set forth on Exhibit A hereto, as the same may be
amended from time to time.
"PARTNER MINIMUM GAIN" means, with respect to any Partner Nonrecourse
Debt, an amount 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 Fiscal Year shall
be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"PARTNERSHIP ADMINISTRATION SERVICES" means services relating to the
administration and management of a Business Entity, including without
limitation asset management, accounting and investor relations services.
"PARTNERSHIP INTEREST" means any Common Partnership Unit or Other
Partnership Security.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704- 2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a Fiscal Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"PARTNERSHIP PROPERTY" means any asset, property or other thing of
value any kind or character, whether real, personal or mixed and whether
tangible or intangible, in which the Partnership holds an ownership interest.
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"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for any distribution of cash made pursuant to Section 5.2
hereof, which record date shall be the same as the record date established by
IPT for the corresponding dividend (or distribution) to holders of Common IPT
Shares.
"PERCENTAGE INTEREST" means, with respect to any Partner as of any
date, the percentage common ownership interest in the Partnership of such
Partner, as determined by dividing the number of Common Partnership Units
owned by such Partner on such date by the total number of Common Partnership
Units outstanding on such date.
"PERSON" means any individual, corporation, partnership, limited
liability company, estate, trust (including a trust qualified under Section
401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside
for or to be used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity, or any governmental agency
or political subdivision thereof, and includes a group as that term is used
for purposes of Section 13(d)(3) of the Exchange Act.
"PRIOR AGREEMENT" has the meaning set forth in the introductory
paragraph of this Agreement.
"PROFITS" has the meaning set forth in Section 5.1(f) hereof.
"PROPERTY-OWNING ENTITY" means a Business Entity that owns a
Controlled Real Property.
"PROPERTY MANAGEMENT AGREEMENT" means an agreement between a
Property-Owning Entity and an Insignia Entity pursuant to which an Insignia
Entity has the right to provide Property Management Services with respect to a
Controlled Real Property in exchange for cash fees and reimbursements.
"PROPERTY MANAGEMENT FEE" means any fee paid or payable to any Person
for providing Property Management Services.
"PROPERTY MANAGEMENT SERVICES" means services relating to the
day-to-day management and operations of real property.
"PROPERTY-OWNING ENTITY" means each Business Entity which owns a
Controlled Real Property, including, if applicable, each of IPT and the
Partnership.
"PUT HOLDER" has the meaning set forth in Section 9.6 hereof.
"PUT RIGHT" has the meaning set forth in Section 9.6 hereof.
"REAL ESTATE ASSET FEES" has the meaning set forth in Section 6.9
hereof.
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"REDEEMABLE UNITS" means Common Partnership Units held by a Limited
Partner which have been outstanding for at least one year.
"REDEEMING PARTNER" means a Limited Partner who has delivered a
Notice of Redemption pursuant to and in accordance with Section 9.4(a).
"REDEMPTION DATE" means the first Business Day of the month that
commences at least ten (10) Business Days after the last day of the applicable
Redemption Election Period; subject, however, to the General Partner's right
to extend the Redemption Date as provided in Section 9.4(c).
"REDEMPTION ELECTION PERIOD" means a period commencing on the first
Business Day following the date of receipt by the General Partner of a Notice
of Redemption and ending on the twentieth (20th) Business Day thereafter.
"REDEMPTION RIGHT" has the meaning set forth in Section 9.4(a) hereof.
"REGULATIONS" means the Federal Income Tax Regulations issued under
the Code, as amended and as hereafter amended from time to time. Reference to
any particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any successor provision of the Regulations.
"REGULATORY ALLOCATIONS" has the meaning set forth in Section 5.1(c)
hereof.
"REIT" means a real estate investment trust under Sections 856
through 860 of the Code.
"RIGHTS" means any rights, options, warrants or convertible or
exchangeable securities issued to all holders of Common IPT Shares entitling
the holders thereof to subscribe for or purchase, or surrender for exchange,
Common IPT Shares or any other securities or property of IPT.
"SALE NOTICE" has the meaning set forth in Section 7.6 hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARE REDEMPTION CONSIDERATION" means, with respect to each
Redeemable Unit to be acquired by IPT, a number of Common IPT Shares, rounded
down to the nearest whole number, equal to the product of (x) the number of
Redeemable Units to be acquired by IPT pursuant to its first right provided
for in Section 9.4(b), multiplied by (y) the Conversion Factor in effect on
the date of receipt by the General Partner of the applicable Notice of
Redemption; together with a correlative number of any Rights associated with a
Common IPT Share (if any); plus cash in lieu of a fractional Common IPT Share
based on the IPT Share Value on such date.
"SPECIAL LIMITED PARTNER" means Insignia in its capacity as a Limited
Partner.
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"SUBSIDIARY" means, with respect to any Person, Business Entity of
which a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests is owned, directly or indirectly, by
such Person.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.3 hereof.
"TRANSFER" has the meaning set forth in Section 10.2(a) hereof.
"TRIGGERING EVENT" has the meaning set forth in Section 7.2 hereof.
"UNREALIZED GAIN" means, with respect to any item of Partnership
Property as of any date of determination, the excess, if any, of (a) the fair
market value of such Partnership Property (as determined under the definition
of Carrying Value) as of such date, over (b) the Carrying Value of such
Partnership Property (prior to any adjustment to be made pursuant to the
definition of Carrying Value) as of such date.
"UNREALIZED LOSS" means, with respect to any item of Partnership
Property as of any date of determination, the excess, if any, of (a) the
Carrying Value of such Partnership Property (prior to any adjustment to be
made pursuant to the definition of Carrying Value) as of such date, over (b)
the fair market value of such Partnership Property (as determined under the
definition of Carrying Value) as of such date.
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
2.1 CONTINUATION. The Partners hereby agree to continue the
Partnership pursuant to the Act and upon the terms and conditions set forth in
this Agreement. Except as expressly provided herein to the contrary, the
rights and obligations of the Partners and the administration and termination
of the Partnership shall be governed by the Act. The Partnership Interests of
each Partner shall be personal property for all purposes.
2.2 NAME, OFFICE AND REGISTERED AGENT. The name of the Partnership is
"Insignia Properties, L.P." The specified office and principal place of
business of the Partnership is One Insignia Financial Plaza, X.X. Xxx 00000,
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000. The General Partner may at any time change
the location of such office, provided that the General Partner gives notice to
the other Partners of any such change. The name and address of the
Partnership's registered agent in Delaware is The Xxxxxxxx-Xxxx Corporation
Systems, Inc., 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxx xx Xxx Xxxxxx, Xxxxxxxx
00000. The sole duty of the registered agent as such is to forward to the
Partnership any notice that is served on it as registered agent.
15
2.3 PARTNERS. The Partners are those Persons identified on Exhibit A
hereto. The General Partner shall update Exhibit A from to time to time to
reflect the withdrawal of any Partner, the admission of any Additional Limited
Partner or Substitute Limited Partner and the admission of any additional or
substitute General Partner.
2.4 TERM AND DISSOLUTION.
(a) The term of the Partnership shall continue in full force
and effect until December 31, 2097, except that the Partnership shall
be sooner dissolved as provided in Section 8.4 or upon the first to
occur of any of the following events:
(i) an election to dissolve the Partnership made by
the General Partner upon approval by the Special Limited
Partner;
(ii) the passage of 90 days after the sale or other
disposition of all or substantially all of the Partnership
Properties; provided, however, that if the Partnership
receives installment obligations as consideration for such
sale or other disposition, the Partnership shall continue,
unless sooner dissolved under the provisions of this
Agreement, until such time as such obligations are paid in
full or otherwise satisfied;
(iii) the redemption of all Common Partnership
Units held by Limited Partners; or
(iv) the entry of a decree of judicial dissolution
of the Partnership pursuant to the provisions of the Act.
(b) Upon dissolution of the Partnership, the General Partner
(or its trustee, receiver, successor or legal representative) shall
amend or cancel the Certificate and liquidate the Partnership
Properties, applying and distributing the proceeds thereof in
accordance with Section 5.6 hereof. Notwithstanding the foregoing,
the liquidating General Partner may either (i) defer liquidation of
or withhold from distribution, for a reasonable time, any Partnership
Properties (including those necessary to satisfy the Partnership's
debts and obligations) or (ii) distribute Partnership Properties to
the Partners in kind.
2.5 FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP. The
General Partner shall execute, acknowledge, record and file, at the expense of
the Partnership, the Certificate and any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each
state or other jurisdiction in which the Partnership conducts business.
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2.6 POWER OF ATTORNEY.
(a) Each Limited Partner and each assignee hereby
constitutes and appoints the General Partner and its authorized
officers, each of them 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:
(i) execute, swear to, seal, acknowledge, deliver,
file and record in the appropriate public offices (a) all
certificates, documents and other instruments (including,
without limitation, the Certificate and all amendments or
restatements thereof and amendments and restatements to this
Agreement approved in accordance with this Agreement) that
the General Partner 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 to the
extent provided by applicable law) in the State of Delaware
and in all other jurisdictions in which the Partnership may
conduct business or own property; (b) all instruments that
the General Partner deems appropriate or necessary to
reflect any amendment, change, modification or restatement
of this Agreement in accordance with its terms; (c) all
conveyances and other instruments or documents that the
General Partner deems appropriate or necessary to reflect
the dissolution and liquidation of the Partnership pursuant
to the terms of this Agreement, including without limitation
a certificate of cancellation; (d) all conveyances and other
instruments or documents that the General Partner deems
appropriate or necessary to reflect the distribution or
exchange of assets of the Partnership pursuant to the terms
of this Agreement; (e) all instruments relating to the
admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in, Articles
VIII or X hereof or the Capital Contribution of any Partner;
and (f) all certificates, documents and other instruments
relating to the determination of the rights, preferences and
privileges of Partners; and
(ii) execute, swear to, acknowledge and file all
ballots, consents, approvals, waivers, certificates and
other instruments appropriate or necessary, in the sole
discretion of the General Partner, to make, evidence, given,
confirm or ratify any vote, consent, approval, agreement or
other action which is made or given by the Partners
hereunder or is consistent with the terms of this Agreement
or appropriate or necessary, in the sole discretion of the
General Partner, to effectuate the terms or intent of this
Agreement;
provided, however, that the foregoing shall not be construed as
authorizing the General Partner to amend this Agreement except in
accordance with Article XII 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 to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it
shall
17
survive and not be affected by the subsequent legal incapacity, death
or dissolution of any Limited Partner or assignee or the transfer of
all or any portion of a Limited Partner's or assignee's Common
Partnership Units and shall extend to a Limited Partner's or
assignee's heirs, successors, assigns and personal representatives.
Each Limited Partner or assignee hereby agrees to be bound by any
representation made by the General Partner, acting in good faith
pursuant to such power of attorney, and each 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, taken
in good faith under such power of attorney. Each Limited Partner or
assignee shall execute and deliver to the General Partner, within
fifteen (15) days after receipt of the General Partner's request
therefor, such further designation, powers of attorney and other
instruments as the General Partner deems necessary to effectuate this
Agreement and the purposes of the Partnership.
ARTICLE III
PURPOSE AND BUSINESS OF THE PARTNERSHIP
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 IPT at all times to qualify as a REIT; (ii) to
enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing or to own any 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 IPT's
right in its sole and absolute discretion to cease qualifying as a REIT, the
Partners acknowledge that IPT's current status as a REIT, and the avoidance of
income and excise taxes on IPT, inures to the benefit of all the Partners and
not solely to IPT. Notwithstanding the foregoing, the Limited Partners
acknowledge that IPT may terminate its status as a REIT under the Code at any
time and to the full extent permitted by the IPT Charter. Subject to Article
XII hereof, the General Partner shall also be empowered (but shall not be
required) to do any and all acts and things necessary or prudent to ensure
that the Partnership will not be classified as a "publicly traded partnership"
for the purposes of Section 7704 of the Code.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.1 CAPITAL CONTRIBUTIONS. The General Partner and the Limited
Partners have contributed to the capital of the Partnership cash, services or
Contributed Property in an amount or having an Agreed Value set forth opposite
their names on Exhibit A hereto, as amended from time to time.
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS; ISSUANCES OF ADDITIONAL
PARTNERSHIP INTERESTS. Except as provided in this Section 4.2 and Section 4.3
hereof, the Partners shall have no right or obligation to make any additional
Capital Contributions or loans to the Partnership. However, with the consent
of the General Partner, which consent may be withheld in its sole
18
and absolute discretion, the Partners may contribute additional capital to the
Partnership from time to time, and receive additional Partnership Interests in
respect thereof, in the manner contemplated in this Section 4.2.
(a) General. Subject to Section 9.5(c), the General Partner
is hereby authorized to cause the Partnership to issue additional
Partnership Interests for any Partnership purpose at any time or from
time to time, to the Partners (including the General Partner) or to
other Persons, for such consideration and on such terms and
conditions as shall be determined by the General Partner in its
discretion, all without the approval of any Limited Partners;
provided, however, that only Common Partnership Units may be issued
to Limited Partners; and further provided that no additional
Partnership Interests shall be issued to the General Partner (acting
in its capacity as such) unless such issuance is (x) pursuant to
Section 4.2(b) or (y) in connection with an issuance of Common
Partnership Units to all Partners pro rata in proportion to their
respective Percentage Interests. Without limiting the foregoing, the
General Partner is expressly authorized to cause the Partnership to
issue Partnership Interests for less than fair market value, so long
as the General Partner concludes in good faith that such issuance is
in the best interests of IPT and the Partnership. Upon each issuance
of Partnership Interests hereunder, the General Partner shall amend
Exhibit A hereto to reflect such issuance.
(b) Certain Required Additional Capital Contributions by,
and Issuances of Additional Partnership Interests to, IPT.
(i) Upon the issuance by IPT of any additional
Common IPT Shares on or after the date hereof, including
pursuant to an IPT Share Incentive Plan, IPT, in its
capacity as General Partner, shall contribute to the
Partnership as a Capital Contribution all proceeds of such
issuance (other than non-cash proceeds which, if contributed
to the Partnership, would cause IPT to lose its REIT
status), and (B) the Partnership shall issue to IPT a number
of additional Common Partnership Units equal the product of
(x) the number of additional Common IPT Shares issued by
IPT, multiplied by (y) a fraction, the numerator of which is
1.0 and the denominator of which is the Conversion Factor in
effect on the date of such issuance of additional Common IPT
Shares; provided, however, that this Section 4.2(b)(i) shall
not apply to any issuance of Other Common IPT Shares which
is made (A) in connection with a redemption of Common
Partnership Units pursuant to Section 9.4 hereof, (B) pro
rata to all holders of Common IPT Shares or (C) in
connection with an acquisition of property to be held by IPT
other than by, through of for the benefit of the
Partnership.
(ii) Upon the issuance by IPT of any Other IPT
Securities, IPT, in its capacity as General Partner, shall
contribute to the Partnership as a Capital Contribution all
proceeds of such issuance (other than non-cash proceeds
which, if contributed to the Partnership, would cause IPT to
lose its REIT status), and (B) the Partnership shall issue
to IPT a like number
19
of Other Partnership Securities, which Other Partnership
Securities shall have designations, preferences and other
rights substantially similar, with respect to the economic
interests they represent, to those of the corresponding
Other IPT Securities issued by IPT; provided, however, that
this Section 4.2(b)(ii) shall not apply to any issuance of
Other IPT Securities which is made (A) pro rata to all
holders of Common IPT Shares or (B) in connection with an
acquisition of property to be held by IPT other than by,
through or for the benefit of the Partnership.
(iii) IPT is expressly authorized to issue
additional Common IPT Shares and Other IPT Securities for
less than fair market value, and, in its capacity as General
Partner, to cause the Partnership to issue corresponding
Common Partnership Units and Other Partnership Securities to
IPT (including without limitation issuances of additional
Common IPT Shares and corresponding Common Partnership Units
pursuant to an IPT Share Incentive Plan providing for
purchases of additional Common IPT Shares at a discount from
fair market value by the Persons entitled to participate in
such plan), provided that (x) IPT concludes in good faith
that such issuances are in the best interest of IPT and the
Partnership and (y) IPT, in its capacity as General Partner,
contributes all proceeds from such issuances to the
Partnership.
(iv) For all purposes of this Agreement, if, in
connection with any issuance by IPT of additional Common IPT
Shares or Other IPT Securities subject to the provisions of
this Section 4.2(b), the proceeds from such issuance
actually received by IPT and contributed to the Partnership
as a Capital Contribution (as required by Sections 4.2(b)(i)
and (ii), respectively) constitute less than the gross
proceeds of such issuance as a result of any underwriter's
discount or other expenses paid or incurred in connection
with such issuance or the fact that certain of such non-cash
proceeds may not be contributed to the Partnership IPT to
lose its REIT status, then (x) IPT shall be deemed to have
made a Capital Contribution to the Partnership in the
aggregate amount of the gross proceeds of such issuance and
(y) the Partnership shall be deemed simultaneously to have
paid such offering expenses in connection with the required
issuance of additional Partnership Interests to IPT pursuant
to Sections 4.2(b)(i) and (ii), respectively.
4.3 ADDITIONAL FUNDING. If the General Partner determines that it is
in the best interests of the Partnership to provide for additional Partnership
funds for any Partnership purpose, the General Partner may (i) cause the
Partnership to obtain such funds from outside borrowings, (ii) cause the
Partnership to obtain such funds through the sale of additional Partnership
Interests, or (iii) elect to have the General Partner provide such funds to
the Partnership through loans or otherwise.
4.4 NO PREEMPTIVE RIGHTS. Except as specifically provided in this
Agreement, no Person shall have any preemptive, preferential or other similar
right with respect to
20
(a) additional Capital Contributions or loans to the Partnership or (b) any
issuance or sale of any Partnership Interests.
4.5 CAPITAL ACCOUNTS.
(a) General. The Partnership shall maintain for each Partner
a separate capital account (each, a "CAPITAL ACCOUNT") in accordance
with the rules of Regulations Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (a) the amount of all Capital
Contributions made by such Partner to the Partnership pursuant to
this Agreement (net of liabilities secured by Contributed Property
that the Partnership is considered to assume or take subject to under
Section 752 of the Code) and (b) all items of Profit (including
income and gain exempt from tax) computed in accordance with Section
5.1(f) hereof and allocated to such Partner pursuant to Sections
5.1(a) and (b) of this Agreement, and decreased by (i) the amount of
cash or Carrying Value (as adjusted in the definition of Carrying
Value) of all actual and deemed distributions of cash or property
made to such Partner pursuant to this Agreement (net of liabilities
secured by such distributed property that such Partner is considered
to assume or take subject to under Section 752 or the Code) and (ii)
all items of Loss computed in accordance with Section 5.1(f) hereof
and allocated to such Partner pursuant to Sections 5.1(a) and 5.1(b)
hereof.
(b) Modification by General Partner. The provisions of this
Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations.
In the event the General Partner shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including 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 any Limited Partners) are computed in order to
comply with such Regulations, the General Partner may make such
modification, provided that it will not have a material effect on the
amounts distributable to any Person pursuant to Section 5.6 hereof
upon the liquidation of the Partnership. The General Partner also
shall (a) 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 (b) make any
appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
4.6 PERCENTAGE INTERESTS. If the Partners' Percentage Interests
change during a Fiscal Year, then Profits and Losses (and solely for this
purpose, items specially allocated pursuant to Sections 5.1(b) and 5.1(c)
hereof) for such Fiscal Year shall be allocated between the part of the year
ending on the day when the Partnership's Property is revalued by the General
Partner and the part of the year beginning on the following day either (a) as
if the Fiscal Year had ended on the date of the adjustment or (a) based on the
number of days in each part, with the choice between method (a) and method (b)
being in the sole discretion of the General Partner. The allocation of Profits
and Losses for the earlier part of the year shall be based on the Partners'
21
respective Percentage Interests before the change, and the allocation of
Profits and Losses for the later part shall be based on the Partners'
respective adjusted Percentage Interests.
4.7 NO INTEREST ON CONTRIBUTIONS. No Partner shall be entitled to
interest on its Capital Contribution.
4.8 RETURN OF CAPITAL CONTRIBUTIONS. No Partner shall be entitled to
withdraw any part of its Capital Contribution or its Capital Account or to
receive any distribution from the Partnership, except as specifically provided
in this Agreement. Except as otherwise provided herein, there shall be no
obligation to return to any Partner or withdrawn Partner any part of such
Partner's Capital Contribution for so long as the Partnership continues in
existence.
4.9 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the right
or obligation of any Partner to make Capital Contributions or loans or to
pursue any other right or remedy hereunder or at law or in equity, it being
understood and agreed that the provisions of this Agreement shall be solely
for the benefit of, and may be enforced solely by, the parties hereto and
their respective successors and assigns. None of the rights or obligations of
any Partner hereunder to make Capital Contributions or loans to the
Partnership shall be deemed an asset of the Partnership for any purpose by any
creditor or other third party, nor may any such right or obligation be sold,
transferred or assigned by the Partnership or pledged or encumbered by the
Partnership to secure any debt or other obligation of the Partnership or of
any of the Partners. In addition, it is the intent of the parties hereto that
no distribution to any Limited Partner shall be deemed a return of money or
other property in violation of the Act. However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, any
Limited Partner is obligated to return such money or property, such obligation
shall be the obligation of such Limited Partner and not of the General
Partner. Without limiting the generality of the foregoing, a deficit Capital
Account of a Partner shall not be deemed to be a liability of such Partner or
a Partnership Property.
4.10 CASH INCENTIVE RIGHTS. If IPT grants any trustee, officer or
employee of, or advisor or consultant to, IPT any Cash Incentive Right, then
simultaneously the Partnership shall be deemed to have granted to IPT a
corresponding and economically equivalent right. Consequently, upon the cash
payment by IPT to a holder of a Cash Incentive Right, the Partnership shall
make an equal cash payment to IPT.
4.11 MANDATORY REPURCHASES OF PARTNERSHIP INTERESTS HELD BY IPT.
(a) Upon any redemption, repurchase or other acquisition by
IPT of any of its outstanding Common IPT Shares, the General Partner
shall cause the Partnership to purchase from IPT a number of Common
Partnership Units equal to the product of (x) the number Common IPT
Shares so redeemed, repurchased or otherwise acquired, multiplied by
(y) the Conversion Factor in effect on the date of such redemption,
repurchase or other acquisition of outstanding Common IPT Shares,
with the terms (price, form of consideration, timing of payment,
etc.) of such purchase of Common Partnership Units from IPT being as
nearly substantively identical to the terms of such
22
redemption, repurchase or other acquisition by IPT of its outstanding
Common IPT Shares as practicable.
(b) Upon any redemption, repurchase or other acquisition by
IPT of any of its outstanding Other IPT Securities, the General
Partner shall cause the Partnership to purchase from IPT a
corresponding number of economically equivalent Other Partnership
Securities, with the terms (price, form of consideration, timing of
payment, etc.) of such purchase of Other Partnership Securities from
IPT being as nearly substantively identical to the terms of such
redemption, repurchase or other acquisition by IPT of its outstanding
Other IPT Securities as practicable.
ARTICLE V
PROFITS AND LOSSES DISTRIBUTIONS
5.1 ALLOCATION OF PROFITS AND LOSSES.
(a) General. Except as otherwise provided in Sections
5.1(b), 5.1(c), 5.1(d) and 5.1(i), Profits and Losses for each Fiscal
Year of the Partnership shall be allocated among the Partners as
follows:
(i) Profits. After giving effect to the special
allocations set forth in Sections 5.1(b) and 5.1(c) hereof,
Profits for any Fiscal Year shall be allocated to the
Partners in proportion to their Percentage Interests.
(ii) Losses. After giving effect to the special
allocations set forth in Sections 5.1(b), 5.1(c) and 5.1(d)
hereof, Losses for any Fiscal Year shall be allocated to the
Partners in proportion to their Percentage Interests.
(b) Special Allocations. The following special allocations
shall be made in the following order:
(i) Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding
any other provision of this Article V, if there is a net
decrease in Partnership Minimum Gain during any Fiscal Year,
each Partner shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to
such Partner's share of the net decrease in Partnership
Minimum Gain, determined in accordance with Regulations
Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective
amounts required to be allocated to each Partner pursuant
thereto, and the items to be so allocated shall be
determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 5.1(b)(i) is
intended to comply with the minimum gain chargeback
requirement in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.
23
(ii) Partner Minimum Gain Chargeback.
Notwithstanding any other provision of this Article V (other
than Section 5.1(b)(i) hereof, except as provided in
Regulations Section 1.704-2(i)(4)), if there is a net
decrease in Partner Minimum Gain attributable to Partner
Nonrecourse Debt during any Fiscal 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
Fiscal Year (and, if necessary, subsequent Fiscal 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)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective
amounts required to be allocated to each Partner pursuant
thereto, and the items to be so allocated shall be
determined in accordance with Regulations Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.1(b)(ii) is
intended to comply with the minimum gain chargeback
requirement in Regulations Section 1.704-2(i)(4) and shall
be interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any
Limited Partner unexpectedly receives any adjustments,
allocations or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704- 1(b)(2)(ii)(d)(6), items of Partnership income and
gain shall be specially allocated to each such Limited
Partner in an amount and manner sufficient to eliminate, to
the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Limited Partner as quickly as
possible; provided, however, that an allocation pursuant to
this Section 5.1(b)(iii) shall be made only if and to the
extent that such Limited Partner would have an Adjusted
Capital Account Deficit after all other allocations provided
for in this Article V have been tentatively made as if this
Section 5.1(b)(iii) were not in this Agreement. This Section
5.1(b)(iii) is intended to constitute a "qualified income
offset" within the meaning of Regulations Section
1.704-1(b)(2)(ii) and shall be interpreted consistently
therewith.
(iv) Gross Income Allocation. In the event any
Limited Partner has an Adjusted Capital Account Deficit at
the end of any Fiscal Year which is in excess of the sum of
(x) the amount such Limited Partner is obligated to restore
pursuant to any provision of this Agreement, and (y) the
amount such Limited Partner 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), each such Limited
Partner shall be specially allocated items of Partnership
income and gain in the amount of such excess as quickly as
possible; provided, however, that an allocation pursuant to
this Section 5.1(b)(iv) shall be made only if and to the
extent that such Limited Partner would have an Adjusted
Capital Account Deficit in excess of such sum after all
other allocations provided for in this Article V have been
made as if Section 5.1(b)(iii) hereof and this Section
5.1(b)(iv) were not in this Agreement.
24
(v) Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Year shall be allocated to the Partners in
accordance with their Percentage Interests.
(vi) Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any Fiscal Year or other period
shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(vii) Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership
Property is required pursuant to Code Section 734(b) or
743(b) and Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
(4), 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 such Partnership Property)
or loss (if the adjustment decreases such basis), and such
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 Code
Sections and Regulations.
(c) Curative Allocations. The allocations set forth in
Sections 5.1(b)(i) through (vii) and 5.1(d) hereof (the "REGULATORY
ALLOCATIONS") are intended to comply with certain requirements of the
Regulations. It is the intent of the Partners that, to the extent
possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other
items of Partnership income, gain loss or deduction pursuant to this
Section 5.1(c). Therefore, notwithstanding any other provision of
this Article V (other than the Regulatory Allocations), the General
Partner shall make such offsetting special allocations of Partnership
income, gain, loss or deduction in whatever manner it determines
appropriate so that, after such offsetting allocations are made, each
Partner's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Partner would have had if the
Regulatory Allocations were not part of the Agreement and all
Partnership items were allocated pursuant to Sections 5.1(a), 5.1(b)
5.1(g) and 5,1(i) hereof; provided, however, that the General Partner
shall not make special allocations of income or gain under this
Section 5.1(c) to offset Regulatory Allocations previously made
pursuant to Sections 5.1(b)(v) and 5.1(b)(vi) hereof.
(d) Loss Limitation. Losses allocated pursuant to Section
5.1(a)(ii) hereof shall not exceed the maximum amount of Losses that
can be allocated without causing any Partner to have an Adjusted
Capital Account Deficit at the end of any Fiscal Year. In the event
some but not all of the Partners would have Adjusted Capital Account
Deficits as a consequence of an allocation of Losses pursuant to
Section 5.1(a)(ii) hereof, the limitation set forth in this Section
5.1(d) shall be applied on a Partner by Partner basis, and Losses not
allocable to any Partner as a result of such limitation shall be
allocated to the other Partners in accordance with the positive
balances in such Partner's
25
Capital Accounts so as to allocate the maximum permissible Losses to
each Partner under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
(e) Allocations Between Transferor and Transferee. If a
Partner transfers any part or all of its Partnership Interests, the
distributive shares of the various items of Profit and Loss (and
solely for this purpose, items specially allocated pursuant to
Section 5.1(b) and 5.1(c) hereof) allocable among the Partners during
such Fiscal Year of the Partnership shall be allocated between the
transferor and the transferee Partner either (i) as if the
Partnership's Fiscal Year had ended on the date of the transfer, or
(ii) based on the number of days of such Fiscal Year that each was a
Partner without regard to the results of Partnership activities in
the respective portions of such Fiscal Year in which the transferor
and the transferee were Partners, with the choice between method (i)
and method (ii) being in the sole discretion of the General Partner.
(f) Definition of Profits and Losses. "PROFITS" and "LOSSES"
mean, for any period, an amount equal to the Partners's taxable
income or loss, respectively, for such period, determined in
accordance with Code Section 703(a) (for this purpose, all items of
income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt
from federal income tax and not otherwise taken into account
in computing Profits or Losses shall be added to such
taxable income or loss;
(ii) Any expenditures of the Partnership described
in Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses shall be subtracted from such
taxable income or loss;
(iii) In the event the Carrying Value of any
Partnership Property is adjusted pursuant to the definition
of Carrying Value, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of
such Partnership Property for purposes of computing Profits
or Losses;
(iv) Gain or loss resulting from any disposition of
Partnership Property with respect to which gain or loss is
recognized for federal income tax purposes shall be computed
by reference to the Carrying Value of the Partnership
Property disposed of, notwithstanding that the adjusted tax
basis of such Partnership Property may differ from its
Carrying Value;
(v) In lieu of the depreciation, amortization and
other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken
into account Depreciation for such period (computed in
accordance with the definition of Depreciation herein);
26
(vi) To the extent an adjustment to the adjusted
tax basis of any Partnership Property pursuant to Code
Section 734(b) or Code Section 743(b) is required pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of
a distribution other than in liquidation of a Partner's
interest in the Partnership, the amount of such adjustment
shall be treated as an item of gain (if the adjustment
increases the basis of such Partnership Property) or loss
(if the adjustment decreases the basis of such Partnership
Property) from the disposition of such Partnership Property
and shall be taken into account for purposes of computing
Profits or Losses; and
(vii) Notwithstanding any other provisions of this
definition of Profits and Losses, any items which are
specially allocated pursuant to Section 5.1(b) or Section
5.1(c) hereof shall not be taken into account in computing
Profits or Losses.
The amounts of the items of Partnership income, gain, loss or
deduction available to be specially allocated pursuant to Sections
5.1(b) and 5.1(c) hereof shall be determined by applying rules
analogous to those set forth above relating to the allocation of
Profits and Losses.
(g) Other Allocation Rules.
(i) For purposes of determining the Profits, Losses
and other items allocable to any period, Profits, Losses and
any such other items shall be determined on a daily, monthly
or other basis, as determined by the General Partner using
any permissible method under Code Section 706 and the
Regulations thereunder.
(ii) All allocations to the Limited Partners
pursuant to this Article V shall, except as otherwise
expressly provided, be divided among them in proportion to
their respective Percentage Interests. In the event there is
more than one General Partner, all such allocations to the
General Partner shall be divided among them in proportion to
their respective Percentage Interests or as they may
otherwise agree.
(iii) Except as otherwise provided in this
Agreement, all items of Partnership income, gain, loss,
deduction and any other allocations not otherwise provided
for shall be divided among the Partners in the same
proportions as they share Profits or Losses, as the case may
be. However, notwithstanding any other provision of this
Agreement, the General Partner shall be allocated not less
than one percent in the aggregate of each item of
Partnership income, gain, loss, deduction or credit, except
to the extent such an allocation would be contrary to the
provisions of Code Section 704(b) or (c) and the related
Regulations.
(iv) The Partners are aware of the income tax
consequences of the allocations made by this Article V and
hereby agree to be bound by the provisions
27
of this Article V in reporting their respective shares of
Partnership income and loss for income tax purposes.
(v) 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), the Partners' interests in Partnership
profits are in proportion to their respective Percentage
Interests.
(vi) To the extent permitted by Regulations Section
1.704-2(h)(3), the General Partner shall endeavor to treat
distributions as having been made from the proceeds of a
Nonrecourse Liability or a Partner Nonrecourse Debt only to
the extent that any such distribution would not cause or
increase an Adjusted Capital Account Deficit for any Limited
Partner.
(h) Tax Allocations: Code Section 704(c). In accordance with
Code Section 704(c) and the Regulations thereunder, income, gain,
loss, and deduction with respect to any Contributed Property shall,
solely for tax purposes, be allocated among the Partners so as to
take account of any variation between the adjusted basis of such
property to the Partnership for federal income tax purposes and its
initial Agreed Value. In the event the Carrying Value of any
Partnership Property is adjusted pursuant to the definition of
Carrying Value herein, subsequent allocations of income, gain, loss
and deduction with respect to such Partnership Property shall take
account of any variation between the adjusted basis of such
Partnership Property for federal income tax purposes and its Carrying
Value in the same manner as under Code Section 704(c) and the
Regulations thereunder. For purposes of allocating income, gain, loss
and deduction under this Section 5.1(h), the Partnership shall use
the method described in Regulations Section 1.704-3(b) (i.e., the
"traditional method"), except as otherwise required by law or as may
be determined by the General Partner; provided, however, that the
General Partner may not alter the method of allocating income, gain,
loss or deduction in any manner that is materially adverse to the
Limited Partners taken as a whole, except to the extent that such
alteration by the General Partner of the method of allocating income,
gain, loss or deduction is required in order to comply with the Code
or any applicable rule, regulation or interpretation thereunder. Any
election or other decision relating to such allocations shall be made
by the General Partner in any manner that reasonably reflects the
purpose and intention of this Agreement. Allocations pursuant to this
Section 5.1(h) are solely for purposes of federal, state and local
taxes and shall not affect, or in any way be taken into account in
computing, any Partner's Capital Account or share of Profits, Losses,
other items or distributions pursuant to any provision of this
Agreement.
(i) Allocations with respect to Other Partnership
Securities. If during any Fiscal Year the Partnership has outstanding
any Other Partnership Securities issued in connection with an
issuance of Other IPT Securities by IPT, Profits and Losses shall be
allocated in respect of such Other Partnership Securities in amounts
and priorities which reflect the economic rights and preferences
attributable to such Other Partnership Securities.
28
5.2 DISTRIBUTIONS OF CASH IN RESPECT OF COMMON PARTNERSHIP UNITS.
(a) Subject to the terms and preferences of Other
Partnership Securities issued and outstanding from time to time, if
any, the General Partner shall distribute cash to the Partners from
time to time (but not less frequently than annually), at such times
and in such amounts as the General Partner shall determine in its
sole discretion, in each case to the Persons who were Partners on the
applicable Partnership Record Date in accordance with their
respective Percentage Interests on such Partnership Record Date.
(b) Any amount withheld pursuant to the Code or any
provision of any other federal, state or local tax law with respect
to any allocation, payment or distribution to any Partner shall be
treated as an amount distributed to such Partner pursuant to Section
5.2(a) for all purposes of this Agreement.
(c) In no event may a Partner receive a distribution of cash
with respect to a Common Partnership Unit if such Partner is entitled
to receive a dividend with respect to a Common IPT Share for which
all or part of such Common Partnership Unit has been or will be
exchanged.
5.3 REIT DISTRIBUTION REQUIREMENTS. The General Partner shall use its
reasonable efforts to cause the Partnership to distribute amounts sufficient
to enable IPT to pay shareholder dividends that will allow IPT to (i) meet its
distribution requirement for qualification as a REIT as set forth in Section
857(a)(1) of the Code and (ii) avoid any federal income or excise tax
liability imposed by the Code.
5.4 NO RIGHT TO DISTRIBUTIONS IN KIND. No Partner shall be entitled
to demand Partnership Property other than cash in connection with any
distributions by the Partnership.
5.5 LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS. Notwithstanding
any other provision of this Article V, no Partner shall have the right to
receive, and the General Partner shall not have the right to make, a
distribution that includes a return of all or part of a Partner's Capital
Contributions, unless after giving effect to the return of a Capital
Contribution, the sum of all Partnership liabilities, other than the
liabilities to a Partner for the return of his Capital Contribution, does not
exceed the aggregate fair market value of the Partnership Properties.
5.6 DISTRIBUTIONS UPON LIQUIDATION.
(a) Upon liquidation of the Partnership, after payment of,
or adequate provision for, all debts and obligations of the
Partnership (including any Partner loans), any remaining Partnership
Properties shall be distributed to all Partners with positive Capital
Accounts in accordance with their respective positive Capital Account
balances, subject to, and in accordance with, the liquidation
preferences of any series of Other Partnership Securities issued from
time to time in accordance with Section 4.2 hereof. For purposes of
the preceding sentence, the Capital Account of each Partner shall be
determined after all adjustments made in accordance with Sections 5.1
and 5.2 hereof resulting from Partnership operations and from all
sales and dispositions of all or any part of the Partnership
Properties. All distributions pursuant to this Section 5.6 hereof
29
shall be made by the end of the Partnership's Fiscal Year in which
the liquidation occurs (or, if later, within 90 days after the date
of the liquidation). To the extent deemed advisable by the General
Partner, appropriate arrangements (including the use of a liquidating
trust) may be made to ensure that adequate funds are available to pay
any contingent debts or obligations of the Partnership.
(b) If the General Partner has a negative balance in its
Capital Account following a liquidation of the Partnership, as
determined after taking into account all Capital Account adjustments
in accordance with Sections 5.1 and 5.2 hereof resulting from
Partnership operations and from all sales and dispositions of all or
any part of the Partnership Properties, the General Partner shall
contribute to the Partnership cash in an amount equal to the negative
balance in its Capital Account, and such cash shall be paid or
distributed by the Partnership to creditors, if any, and then to the
Limited Partners in accordance with Section 5.6(a) hereof. Such
contribution by the General Partner shall be made by the end of the
Partnership's Fiscal Year in which the liquidation occurs (or, if
later, within 90 days after the date of the liquidation).
5.7 SUBSTANTIAL ECONOMIC EFFECT. It is the intent of the Partners
that the allocations of Profit and Loss under this Agreement have substantial
economic effect (or be consistent with the Partners' interests in the
Partnership in the case of the allocation of losses attributable to
nonrecourse debt) within the meaning of Section 704(b) of the Code as
interpreted by the Regulations promulgated pursuant thereto. This Article V
and other relevant provisions of this Agreement shall be interpreted in a
manner consistent with such intent.
ARTICLE VI
MANAGEMENT OF THE PARTNERSHIP;
POWERS, RIGHTS AND OBLIGATIONS OF THE GENERAL PARTNER
6.1 MANAGEMENT OF THE PARTNERSHIP. Except as otherwise expressly
provided in this Agreement, the General Partner shall have full, complete and
exclusive discretion to manage and control the business of the Partnership for
the purposes herein stated and shall make all decisions affecting the business
and assets of the Partnership, 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.
6.2 POWERS OF THE GENERAL PARTNER. In addition to the powers now or
hereafter granted a general partner of a limited partnership under the Act or
other applicable law or which are granted to the General Partner under any
other provision of this Agreement, and subject to the restrictions
specifically contained in this Agreement, the powers of the General Partner
shall include, without limitation, the authority to take the following actions
on behalf of the Partnership:
(a) to form, acquire, own, sell or otherwise obtain or
divest of (i) equity interests (including general and limited partner
interests), whether held directly or indirectly, in public or private
limited partnerships and other Business Entities owning real estate
or real estate related assets, and (ii) debt or debt securities
secured by real
30
estate, interests in real estate, or ownership interests in Business
Entities that own or invest in real estate, in each case as the
General Partner determines such acquisitions or divestitures to be
necessary or appropriate for the conduct of the activities of the
Partnership;
(b) to make any expenditures or lend or borrow money
(including to make prepayments on loans and to borrow money to permit
the Partnership to make distributions to its Partners in such amounts
as will permit the General Partner (so long as IPT owns any
Partnership Interests and otherwise qualifies as a REIT) to avoid the
payment of any federal income tax (including, for this purpose, any
excise tax pursuant to Section 4981 of the Code) and to make
distributions to its shareholders sufficient to permit IPT to
maintain its REIT status), to assume or guarantee, or otherwise
contract for, indebtedness and other liabilities, to issue evidences
of indebtedness (including the securing of same by mortgage, deed of
trust or other lien or encumbrance on Partnership Properties) and to
incur any obligations that the General Partner deems to be necessary
or appropriate for the conduct of the activities of the Partnership;
(c) to receive or accept distributions from the operating
cash flows of the limited partnerships or other Business Entities in
which it holds interests;
(d) to acquire, purchase, own or otherwise obtain or dispose
of direct and indirect interests in Multi-family Residential
Properties and commercial properties and to develop or otherwise hire
a third party to develop such Multi-family Residential Properties and
commercial properties as the General Partner deems to be necessary or
appropriate for the conduct of the activities of the Partnership;
(e) to pay, either directly or by reimbursement, all
Administrative Expenses to third parties or to the General Partner or
IPT, as the case may be;
(f) to lease all or any portion of any Partnership Property,
regardless of whether the terms of any such lease extends beyond the
termination date of the Partnership and whether any portion of any
Partnership Property so leased are to be occupied by the lessee or,
in turn, subleased in whole or in part to others, for such
consideration and on such terms as the General Partner may determine
in its discretion to be proper or appropriate;
(g) to merge or otherwise combine the Partnership with or
into any other Business Entity, on such terms as the General Partner
may determine in its discretion to be proper or appropriate;
(h) to use Partnership Property (including cash on hand) for
any purpose not inconsistent with the terms of this Agreement and on
any terms it sees fit, including 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 the Partnership's Subsidiaries) 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, the holding of any real, personal
or mixed
31
property of the Partnership in the name of the Partnership or in the
name of a nominee or trustee, and the performance of any and all
related acts that the General Partner deems to be necessary or
appropriate for the conduct of the activities of the Partnership;
(i) to raise additional equity through such means (including
through the sale of additional Partnership Interests) and for such
purposes as the General Partner deems necessary or appropriate for
the conduct of the activities of the Partnership;
(j) to negotiate, execute and perform any contracts,
conveyances or other instruments (including with Affiliates of the
Partnership or IPT) that the General Partner deems necessary or
appropriate for the conduct of the activities of the Partnership or
the implementation of the General Partner's powers under this
Agreement;
(k) to open and close bank accounts, invest Partnership
funds in securities, certificates of deposit, debt and other
instruments, and distribute Partnership cash or other Partnership
Property in accordance with this Agreement;
(l) to prosecute, defend, arbitrate or compromise any and
all claims or liabilities in favor of or against the Partnership, on
such terms and in such manner as the General Partner may reasonably
determine, and similarly to prosecute, settle or defend litigation
with respect to the Partners, the Partnership or the Partnership
Properties;
(m) to file applications, communicate and otherwise deal
with any and all governmental agencies having jurisdiction over, or
in any way affecting, the Partnership Properties or any other aspect
of the Partnership's business;
(n) to make or revoke any election permitted or required of
the Partnership by any taxing authority;
(o) to maintain such insurance coverage for public
liability, fire and casualty, and any and all other insurance for the
protection of the Partnership, for the conservation of Partnership
Properties, or for any other purpose convenient or beneficial to the
Partnership, in such amounts and such types as the General Partner
shall determine from time to time;
(p) to determine whether or not to apply any insurance
proceeds from any Partnership Property to the restoration of such
property or to distribute the same;
(q) to select and dismiss employees of the Partnership or
the General Partner (including employees having titles such as
"president", "vice president", "secretary" and "treasurer"), and
engage and dismiss agents, outside attorneys, accountants, engineers,
appraisers, consultants, contractors and other professionals on
behalf of the General Partner or the Partnership and the
determination of their compensation and other terms of employment or
engagement;
(r) to maintain accurate accounting records and to file
promptly all federal, state and local income tax returns on behalf of
the Partnership;
32
(s) to determine the fair market value of any Partnership
Property distributed in kind using such reasonable method or methods
of valuation as it may adopt;
(t) to contribute Partnership Property to any limited or
general partnership, joint venture, limited liability company or
other Business Entity that the General Partner deems desirable
(including the contributions of Partnership Property to its
Subsidiaries and to any other Person in which it has an equity
interest from time to time);
(u) to establish Partnership reserves for working capital,
capital expenditures, contingent liabilities, or any other valid
Partnership purpose; and
(v) to take such other action, execute, acknowledge, swear
to or deliver such other documents and instruments, and perform any
and all other acts that the General Partner deems necessary or
appropriate for the formation, continuation and conduct of the
business and affairs of the Partnership (including all actions
consistent with allowing IPT at all times to qualify as a REIT unless
IPT elects to terminate its REIT status) and to possess and enjoy all
of the rights and powers of a general partner as provided by the Act.
6.3 DELEGATION OF AUTHORITY. The General Partner may delegate any or
all of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with, any Person (including without limitation
Insignia Entities) for the transaction of the business of the Partnership,
which Person may, under the supervision of the General Partner, perform any
acts or services for the Partnership as the General Partner may approve.
6.4 INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.
(a) The Partnership shall indemnify each Indemnitee from and
against any and all losses, claims, damages, liabilities (both joint
and several), expenses (including reasonable 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 as set forth in this Agreement in which
any Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise; provided, however, that the Partnership shall not
indemnify any Indemnitee (i) for willful misconduct or a knowing
violation of the law, (ii) for any act or omission of such Indemnitee
that was material to the matter giving rise to the proceeding and
that either was committed in bad faith or was the result of active
and deliberate dishonesty, (iii) for any transaction for which such
Indemnitee actually received an improper personal benefit in money,
property or services or (iv) in the case of any criminal proceeding,
for any instance in which such Indemnitee had reasonable cause to
believe that its act or omission was unlawful. The termination of any
proceeding by judgment, order or settlement does not create a
presumption that an Indemnitee did not meet the requisite standard of
conduct set forth in this Section 6.4(a). The termination of any
proceeding by conviction or upon a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment,
creates a rebuttable presumption that an Indemnitee acted in a manner
contrary to that specified in this
33
Section 6.4(a). Any indemnification pursuant to this Section 6.4
shall be made only out of the assets of the Partnership.
(b) The Partnership shall advance funds to each Indemnitee
for reasonable expenses incurred by such Indemnitee who is a party to
a proceeding prior to the final disposition of the proceeding upon
receipt by the Partnership of (i) a written affirmation by such
Indemnitee of its good faith belief that the standard of conduct
necessary for indemnification by the Partnership as authorized in
this Section 6.4 has been met and (ii) a written undertaking by or on
behalf of such Indemnitee to repay all advanced amounts if it shall
ultimately be determined that such standard of conduct has not been
met.
(c) The indemnification provided by this Section 6.4 shall
be in addition to any other rights to which an Indemnitee or any
other Person may be entitled under any agreement, pursuant to any
vote of the Partners, as a matter of law or otherwise, and shall
continue as to an Indemnitee who has ceased to serve in such
capacity.
(d) The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the General
Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by 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 pursuant to this Agreement.
(e) For purposes of this Section 6.4, (i) the Partnership
shall be deemed to have requested an Indemnitee to serve as fiduciary
of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise
involves services by, it to the plan or participants or beneficiaries
of the plan; (ii) excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall
constitute fines within the meaning of this Section 6.4; and (iii)
actions taken or omitted by an Indemnitee with respect to an employee
benefit plan in the performance of its duties for a purpose
reasonably believed by it to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited
Partners to personal liability by reason of the indemnification
provisions set forth in this Agreement.
(g) No Indemnitee shall be denied indemnification in whole
or in part under this Section 6.4 because such 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 6.4 are for the benefit
of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the
benefit of any other Persons.
34
6.5 LIABILITY OF THE GENERAL PARTNER.
(a) Except as otherwise provided herein, to the extent the
duties of the General Partner require expenditures of funds to be
paid to third parties, the General Partner shall not have any
obligations hereunder except to the extent that Partnership funds are
reasonably available to it for the performance of such duties, and
nothing herein shall be deemed to authorize or require the General
Partner to expend its individual funds for payment to third parties
or to undertake any individual liability or obligation on behalf of
the Partnership.
(b) Notwithstanding any other provision of this Agreement to
the contrary, the General Partner shall not be liable for monetary
damages to the Partnership or any Partner 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, nor shall the
General Partner be deemed to have breached any duty that the General
Partner may owe to the Limited Partners or the Partnership or any
other Person under this Agreement or any duty stated or implied by
law or equity if the General Partner, acting in good faith, abides by
the terms of this Agreement.
(c) The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership, IPT and IPT's
shareholders collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including the tax consequences to Limited Partners or the tax
consequences of some, but not all, of the Limited Partners) in
deciding whether to cause the Partnership to take (or decline to
take) any action.
(d) The General Partner may exercise any of the powers
granted to it under this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its
agents, and the General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by
it in good faith.
(e) Any amendment, modification or repeal of this Section
6.5 or any provision hereof shall be prospective only and shall not
in any way affect the limits of the General Partner's liability to
the Partnership and the Limited Partners under this Section 6.5 as in
effect immediately prior to such amendment, modification or repeal
with respect to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when claims relating
to such matters may arise or be asserted.
(f) Any obligation or liability whatsoever of the General
Partner which may arise at any time under this Agreement or any
obligation or liability which may be incurred by it pursuant to any
other instrument, transaction or undertaking contemplated hereby
shall be satisfied, if at all, out of the General Partner's assets
only. No such obligation or liability shall be personally binding
upon, nor shall resort for the enforcement thereof be had to, the
property of its shareholders, trustees, officers, employees or
agents, regardless of whether such obligation or liability is in the
nature of contract, tort or otherwise.
35
6.6 EXPENDITURES BY PARTNERSHIP. The General Partner is hereby
authorized to pay compensation for accounting, administrative, legal,
technical, management, advisory and other services rendered to the
Partnership. All of the aforesaid expenditures (including Administrative
Expenses) shall be made on behalf of the Partnership, and the General Partner
shall be entitled to reimbursement by the Partnership for any expenditure
(including Administrative Expenses) incurred by it on behalf of the
Partnership which shall be made other than out of the funds of the
Partnership. The Partnership shall also assume, and pay when due, all
Administrative Expenses.
6.7 OUTSIDE ACTIVITIES. Subject to any agreements entered into by the
General Partner or its Affiliates with the Partnership or a Subsidiary, any
officer, director, employee, agent, trustee, Affiliate or shareholder of 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 substantially similar
or identical to those of the Partnership. Neither the Partnership, any Partner
nor any other Person shall have any rights by virtue of this Agreement or the
partnership relationship established hereby in any such business ventures,
interests or activities, and the General Partner shall have no obligation
pursuant to this Agreement to offer any interest in any such business
ventures, interests and activities to the Partnership or any Limited Partner,
even if such opportunity is of a character which, if presented to the
Partnership or any Limited Partner, could be taken by such Person.
6.8 TITLE TO PARTNERSHIP PROPERTIES. Title to Partnership Properties,
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 Properties or any portion thereof. Title to any or all Partnership
Properties 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 Property 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 Partnership Properties to
be vested in the Partnership as soon as reasonably practicable. All
Partnership Properties 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 Properties is held. Notwithstanding the foregoing, the General
Partner hereby agrees to permit Insignia Entities to have unlimited access to
and unrestricted use of any and all lists of any individuals (including all
other information pertaining to such individuals) who currently reside or
hereafter reside at any Controlled Real Property.
6.9 REIMBURSEMENT OF THE GENERAL PARTNER.
(a) Except as provided in this Section 6.9 and elsewhere in
this Agreement (including the provisions of Article V regarding
distributions, payments and allocations to which it may be entitled),
the General Partner shall not receive payments from the Partnership
or be compensated for its services as general partner of the
Partnership.
36
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in
its reasonable discretion, for all of its expenses including without
limitation all Administrative Expenses of the General Partner. Such
reimbursements shall be in addition to any reimbursement of the
General Partner as a result of indemnification pursuant to Section
6.4 hereof.
6.10 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, advisors, investment
bankers, architects, engineers, environmental consultants and other
consultants and advisers selected by it, and any act taken or omitted
to be taken in reliance upon the opinion of such Persons as to
matters which the General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance
with such opinion.
(c) The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any duly
appointed attorney or attorneys-in-fact. Each such attorney shall, to
the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and
duty which is permitted or required to be done by the General Partner
hereunder.
(d) Notwithstanding any other provision 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 IPT to continue to qualify as a
REIT or (ii) to avoid IPT 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.
6.11 CONTRACTS WITH AND EMPLOYMENT OR RETENTION OF AFFILIATES AND
INSIGNIA ENTITIES.
(a) Loans. The Partnership may lend or contribute to its
Subsidiaries and 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.
37
(b) Transfers of Partnership Properties. Except as otherwise
provided in this Agreement, the Partnership may transfer any Partnership
Property to any Person upon such terms and subject to such conditions as are
consistent with this Agreement and applicable law.
(c) Employee Benefit Plans. The General Partner, in its sole
and absolute discretion and without the approval of the Limited Partners, may
propose and adopt on behalf of the Partnership employee benefit plans funded
by the Partnership for the benefit of employees of the General Partner, the
Partnership, Subsidiaries of the Partnership or any Affiliate of any of them
in respect of services performed, directly or indirectly, for the benefit of
the Partnership, the General Partner or any of the Partnership's Subsidiaries,
including any such plan which requires the Partnership, the General Partner or
any of the Partnership's Subsidiaries to issue or transfer Common Partnership
Units to employees.
(d) Conflict Avoidance Arrangements. The General Partner is
expressly authorized to enter into, in the name and on behalf of the
Partnership, right of first opportunity and/or refusal arrangements and other
conflict avoidance agreements with various Affiliates of the Partnership and
the General Partner and with Insignia Entities, on such terms as the General
Partner, in its sole and absolute discretion, believes are advisable in
connection therewith.
(e) Employment or Retention. Any Affiliate of the General
Partner and any Insignia Entity may be employed or retained by the Partnership
and may otherwise deal with the Partnership (whether as a buyer, seller,
lessor, lessee, advisor, manager, furnisher of goods or services, broker,
agent, lender or otherwise) and may receive from the Partnership any
compensation, price or other payment therefor which the General Partner
determines to be fair and reasonable, including without limitation as
contemplated by Article VII hereof.
ARTICLE VII
PROPERTY MANAGEMENT AND PARTNERSHIP ADMINISTRATION
7.1 PROPERTY MANAGEMENT SERVICES. IPT, the Partnership and the
Limited Partners hereby acknowledge and agree that (i) Insignia contributed
(or caused to be contributed) to IPT equity interests in Business Entities
which comprised or controlled the managing general partners of the Formation
Partnerships, which in turn owned or otherwise controlled (as of January 1,
1997) the Initial Controlled Real Properties; (ii) at the time of such
contributions one or more Insignia Entities provided Property Management
Services with respect to each of the Initial Controlled Real Properties; (iii)
the covenants below to continue to retain one or more Insignia Entities to
provide Property Management Services with respect to the Initial Controlled
Real Properties, as well as to retain an Insignia Entity to provide Property
Management Services with respect to each Additional Acquired Property,
constituted a material inducement for Insignia's contribution of such equity
interests to IPT and, in view of Insignia's substantial resources and
recognized expertise in providing Property Management Services, for the
willingness of IPT, the General Partner and the Limited Partners to enter into
this Agreement. Accordingly, IPT and the Partnership hereby covenant and agree
as follows:
(a) Initial Controlled Real Properties. IPT and the
Partnership shall cause the applicable Property-Owning Entity to
continue to retain an Insignia Entity to provide
38
Property Management Services with respect to each Initial Controlled
Real Property pursuant to a Property Management Agreement containing
the same or substantially the same terms, including compensation and
reimbursement, as were in effect on January 1, 1997. IPT's and the
Partnership's obligations to cause an Insignia Entity to continue to
be retained to provide Property Management Services pursuant to a
Property Management Agreement with respect to each Initial Controlled
Real Property shall terminate, on a property by property basis, upon
the earliest to occur of (i) the termination of this Agreement, (ii)
the termination of the applicable Property Management Agreement by
Insignia, (iii) the termination of the applicable Property Management
Agreement by the applicable Property-Owning Entity for Cause (but not
for any other reason, notwithstanding that such termination may have
been expressly permitted by the terms of such Property Management
Agreement), or (iv) such time as no IPT Entity holds a Controlling
Interest in such Initial Controlled Real Property.
(b) Additional Controlled Real Properties. Promptly after
acquiring a Controlling Interest in each Additional Controlled Real
Property, IPT and the Partnership shall cause the applicable
Property-Owning Entity to retain an Insignia Entity to provide
Property Management Services with respect to such Additional
Controlled Real Property pursuant to a Property Management Agreement
containing terms which are: (i) the same or substantially the same as
the terms, including compensation and reimbursement, upon which such
Additional Controlled Real Property was being managed immediately
prior to its acquisition by such Property-Owning Entity, if such
Additional Controlled Real Property was being managed by an Insignia
Entity immediately prior to such acquisition; or (ii) comparable to
those employed by other major, full service real estate management
companies given the characteristics and geographic location of such
Additional Controlled Real Property as determined by Insignia in good
faith, if such Additional Controlled Real Property was not being
managed by an Insignia Entity immediately prior to such acquisition.
IPT's and the Partnership's obligations to cause an Insignia Entity
to be retained to provide Property Management Services pursuant to a
Property Management Agreement with respect to each Additional
Controlled Real Property shall terminate, on a property by property
basis, upon the earliest to occur of (i) the termination of this
Agreement, (ii) the termination of the applicable Property Management
Agreement by Insignia, (iii) the termination of the applicable
Property Management Agreement by the applicable Property-Owning
Entity for Cause (but not for any other reason, notwithstanding that
such termination may have been expressly permitted by the terms of
such Property Management Agreement), or (iv) such time as no IPT
Entity holds a Controlling Interest in such Additional Controlled
Real Property.
(c) Contract Loss Fee. If the Adjusted Aggregate Total Fees
Amount as of the last day of any calendar quarter is less than 90% of
the Adjusted Aggregate Designated Fees Amount for the same
twelve-month period (a "TRIGGERING EVENT"), then the Partnership
shall pay to Insignia a fee (a "CONTRACT LOSS FEE") equal to the
greater of (x) the decrease in market value of Insignia resulting, or
reasonably expected to result, from such Triggering Event and (y) the
increase in market value of IPT resulting, or reasonably expected to
result, from such Triggering Event. The amount of the Contract Loss
Fee arising from a Triggering Event shall be (a) calculated within 30
days following the end of the applicable calendar quarter by a Bank
selected in manner provided in
39
Section 9.6(b) hereof (with the Partnership bearing the cost of the
Bank's services), and (b) paid by the Partnership to Insignia, in
cash, within 45 days following the end of such calendar quarter.
Notwithstanding the foregoing, the Partnership shall not be liable
for the payment of any Contract Loss Fee resulting from a Triggering
Event if: (i) a majority of IPT's Board consists of individuals who
also serve as a director, officer or employee of Insignia and (ii)
the Triggering Event occurs before the earlier of (x) June 30, 1998
and (y) the date on which any class of IPT's equity securities are
first registered under the Exchange Act. Further, the Partnership
shall not be required to pay that portion, if any, of a Contract Loss
Fee resulting from a Triggering Event to the extent that such portion
is attributable to a prior Triggering Event with respect to which the
Partnership has previously paid Insignia a Contract Loss Fee.
7.2 PARTNERSHIP ADMINISTRATION SERVICES. IPT, the Partnership and the
Limited Partners hereby acknowledge and agree that (i) Insignia contributed
(or caused to be contributed) to IPT equity interests in Business Entities
which comprised or controlled the managing general partners of the Formation
Partnerships, (ii) at the time of such contributions one or more Insignia
Entities provided certain Partnership Administration Services to or on behalf
of the Formation Partnerships, (iii) IPT and/or the Partnership may (but are
not required to) in the future cause Insignia Entities to be retained to
provide Partnership Administration Services to or on behalf of other Business
Entities directly or indirectly controlled by IPT and/or the Partnership
("ADDITIONAL ADMINISTRATION ENTITIES"), (iv) the ability to provide high
quality Partnership Administration Services to the Formation Partnerships and
the Additional Administration Entities has required and will continue to
require that Insignia invest in a significant amount of fixed assets and
commit to significant long term obligations which Insignia would not have
otherwise invested in or committed to but for the fact that it has provided
and will provide Partnership Administration Services to the Formation
Partnerships and the Additional Administration Entities, (v) Partnership
Administration Services are generally provided on a reimbursements only basis
(i.e., the Insignia Entities generally do not make a profit on such services),
and (vi) the covenants below to continue to retain Insignia Entities to
provide Partnership Administration Services with respect to the Formation
Partnerships, as well as to continue to retain Additional Administration
Entities, constituted a material inducement for Insignia's contribution of
such equity interests to IPT and, in view of Insignia's substantial resources
and recognized expertise in providing Property Management Services, for the
willingness of IPT, the General Partner and the Limited Partners to enter into
this Agreement. Accordingly, IPT and the Partnership hereby covenant and agree
as follows:
(a) IPT and the Partnership shall cause an Insignia Entity
to continue to be retained to provide Partnership Administration
Services to or on behalf of each Formation Partnership on the same or
substantially the same terms, including compensation and
reimbursement, as were in effect on January 1, 1997. IPT's and the
Partnership's obligations to cause an Insignia Entity to continue to
be retained to provide Partnership Administration Services to or on
behalf of each Formation Partnership shall terminate, on an entity by
entity basis, upon the earliest to occur of (i) the termination of
this Agreement, (ii) the termination of the provision of Partnership
Administration Services by Insignia, (iii) the termination of the
retention of an Insignia Entity to provide Partnership Administration
Services by the applicable Formation Partnership for Cause (but not
for any other reason), or (iv) such time as the applicable Formation
Partnership
40
is dissolved and its affairs are wound up in connection with an
orderly liquidation thereof. In the event that a Formation
Partnership dissolves or ceases to exist in connection with or as a
result of a merger or other business combination (including a sale of
all or substantially all of its assets in a single or series of
related transactions), the termination of the retention of an
Insignia Entity to provide Partnership Administration Services as a
result thereof shall be deemed to be a breach of this Section 7.2(a)
which gives rise to the obligations set forth in Section 7.2(c).
(b) IPT and the Partnership shall cause an Insignia Entity
to continue to be retained to provide Partnership Administration
Services to or on behalf of each Additional Administration Entity on
the same or substantially the same terms, including compensation and
reimbursement, as those which were agreed to by Insignia and such
Additional Administration Entity at the time of the initial
retention. IPT's and the Partnership's obligations to cause an
Insignia Entity to continue to be retained to provide Partnership
Administration Services to or on behalf of each Additional
Administration Entity shall terminate, on an entity by entity basis,
upon the earliest to occur of (i) the termination of this Agreement,
(ii) the termination of the provision of Partnership Administration
Services by Insignia, (iii) the termination of the retention of an
Insignia Entity to provide Partnership Administration Services by the
applicable Additional Administration Entity for Cause (but not for
any other reason), or (iv) such time as the applicable Additional
Administration Entity is dissolved and its affairs are wound up in
connection with an orderly liquidation thereof. In the event that a
Formation Partnership dissolves or ceases to exist in connection with
or as a result of a merger or other business combination transaction
(including a sale of all or substantially all of its assets in a
single or series of related transactions), the termination of the
retention of an Insignia Entity to provide Partnership Administration
Services as a result thereof shall be deemed to be a breach of this
Section 7.2(b) which gives rise to the obligations set forth in
Section 7.2(c).
(c) In the event of any default under Section 7.2(a) or (b)
with respect to any Formation Partnership or Additional
Administration Entity, the Partnership shall promptly pay or cause to
be paid to Insignia (i) all amounts then due to Insignia Entities in
respect of Partnership Administration Services provided to or on
behalf of such Formation Partnership or Additional Administration
Entity and (ii) the applicable Administration Allocation Amount
attributable to such Formation Partnership or Additional
Administration Entity.
(d) IPT, the Partnership and the Limited Partners
acknowledge and agree that (i) Insignia is currently receiving
certain non-equity incentive management and similar fees from certain
of the Formation Partnerships payable under the terms of the
governing organizational documents thereof to the general partners
thereof, which fees are based in whole or in part on the performance
of the assets owned by such Formation Partnerships or the amount of
cash distributed to the investors in such Formation Partnerships,
(ii) Insignia (as opposed to the general partners) is receiving such
fees because the rights thereto were not contributed to IPT in
connection with the formation thereof, and (iii) Insignia may in the
future acquire or retain rights to receive similar fees relating to
Additional Controlled Properties. If IPT or the Partnership takes any
action
41
in the future which causes Insignia not to receive any such future
fees to which it otherwise would have been entitled, the Partnership
shall pay to Insignia the amount of such lost fees; provided,
however, that the Partnership shall not be obligated to pay to
Insignia the amount of any such fees not received by Insignia as a
result of the sale of the underlying assets (other than in connection
with a transaction described in the last sentence of Section 7.2(a)
or (b)).
7.3 TRANSFERS OF CONTROLLING INTERESTS IN IPT ENTITIES.
(a) IPT and the Partnership shall not, and shall not cause
or permit any other IPT Entity to, to sell, transfer or otherwise
assign any controlling interest in any IPT Entity to any Person other
than an Insignia Entity except in accordance with this Section
7.3(a). At least 60 days prior to the sale, transfer or other
assignment of a controlling interest in an IPT Entity to any Person
other than an Insignia Entity, IPT shall deliver a written notice (a
"SALE NOTICE") to Insignia, which notice shall (i) disclose in
reasonable detail the identity of such Person and the material terms
and conditions of such proposed sale, transfer or other assignment
and (ii) constitute an irrevocable offer by IPT and the Partnership
to cause all, but not less than all, of such controlling interest in
an IPT Entity to be sold, transferred or otherwise assigned to any
Insignia Entity designated by Insignia upon the same terms and
conditions as such proposed sale, transfer or other assignment to
such other Person. Insignia shall have 30 days (during which time IPT
and the Partnership shall not, and shall not cause or permit any
other IPT Entity to, consummate such proposed sale, transfer or other
assignment) to elect whether to accept or reject such offer, and
within such 30-day period shall deliver written notice of its
election to IPT; provided, however, that if Insignia fails to timely
deliver such written notice to IPT, it shall be deemed to have
elected to reject such offer. If Insignia elects to accept such offer
and provides timely notice of such election to IPT, IPT and the
Partnership shall cause the sale, transfer or other assignment of
such controlling interest in an IPT Entity to the Insignia Entity
designated by Insignia. If Insignia elects (or is deemed to have
elected) not to accept such offer, then such controlling interest in
an IPT Entity may be sold, transferred or otherwise assigned to any
other Person, at a price and on terms no more favorable to such
Person than those specified in the Sale Notice, at any time during
the 60-day period following the expiration of the 30-day period
referred to in the second preceding sentence; provided, however, that
if such controlling interest in an IPT Entity is not sold,
transferred or otherwise assigned to any other Person within such
60-day period, any proposed sale, transfer or other assignment of
such controlling interest in an IPT Entity will again become subject
to the provisions of this Section 7.3(a).
(b) If a permitted sale, transfer or other assignment of a
controlling interest in an IPT Entity to a Person other than an
Insignia Entity occurs pursuant to Section 7.3(a), and if such Person
does not promptly retain or cause the retention of an Insignia Entity
to provided Property Management Services with respect to each real
property controlled by such former IPT Entity, then the Partnership
shall pay to Insignia an amount equal to the amount (if any) by which
the consideration paid or payable (as set forth in the Sale Notice)
for such controlling interest which exceeds the fair market value of
such controlling interest (determined based on the liquidation value
of such former IPT Entity).
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(c) Nothing contained in Section 7.3(a) or (b) shall in any
way affect any obligations the Partnership may have pursuant to
Section 7.1(c).
ARTICLE VIII
CHANGES IN GENERAL PARTNER
8.1 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTERESTS;
TRANSACTIONS INVOLVING IPT.
(a) The General Partner shall not sell, transfer or
otherwise assign all or any portion of its Partnership Interests or
withdraw as General Partner, except as provided in Section 8.1(b)
hereof or in connection with a transaction described in Section
8.1(c) or 8.1(d) hereof.
(b) The General Partner may pledge or hypothecate the right
to receive all or any portion of any cash distributions or any other
payments received by it in its capacity as the General Partner.
(c) Except as otherwise provided in Section 8.1(d) hereof,
IPT shall not enter into or effect any Extraordinary Transaction
unless such Extraordinary Transaction also includes a merger of the
Partnership or sale of substantially all of the assets of the
Partnership, as a result of which all Limited Partners will receive,
for each Common Partnership Unit, an amount of cash, securities or
other property equal to the product of the Conversion Factor
multiplied by the greatest amount of cash, securities or other
property paid in such Extraordinary Transaction to a holder of one
Common IPT Share in consideration of one Common IPT Share; provided,
however, that if such Extraordinary Transaction shall have been
preceded by a related front-end purchase, tender or exchange offer
made to and accepted by the holders of more than 50% of the
outstanding Common IPT Shares, then IPT shall not enter into or
effect such Extraordinary Transaction unless each Limited Partner is
also given the right to receive, in respect of its Common Partnership
Units, the greatest amount of cash, securities or other property such
Limited Partner would have received in the event its Common
Partnership Units had been acquired by IPT pursuant to a theoretical
redemption for Share Redemption Consideration pursuant to Section
9.4(b) and such Limited Partner had sold, tendered or exchanged the
Common IPT Shares received in exchange therefor pursuant to such
front-end offer immediately prior to the expiration thereof.
(d) Notwithstanding the provisions of Section 8.1(c) hereof,
IPT may merge or consolidate with or into another Person if
immediately after such merger or consolidation (i) substantially all
of the assets of the successor or surviving entity (the "SURVIVING
ENTITY"), other than Common Partnership Units held by IPT, are
contributed, directly or indirectly, to the Partnership as a Capital
Contribution in exchange for Common Partnership Units with a fair
market value equal to the value of the assets so contributed as
determined by the Surviving Entity in good faith, and (ii) if IPT is
not the Surviving Entity, the Surviving Entity expressly agrees to
assume all obligations of IPT and the General Partner under this
Agreement. Upon such contribution and assumption,
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the Surviving Entity shall have the right and duty to amend this
Agreement to the extent necessary for purposes of the following: (i)
to establish, in good faith, a new method for the calculations of the
Cash Redemption Consideration, the Share Redemption Consideration and
Conversion Factor for a Common Partnership Unit after any such merger
or consolidation so as to approximate the existing method for such
calculation as closely as reasonably possible (such calculations to
take into account, among other things, the kind and amount of
securities, cash and other property that was receivable upon such
merger or consolidation by a holder of Common IPT Shares or options,
warrants or other rights relating thereto, and which a Limited
Partner could have received in the event its Common Partnership Units
had been acquired by IPT pursuant to a theoretical redemption for
Share Redemption Consideration pursuant to Section 9.4(b) effected
immediately prior to such merger or consolidation); and (ii) to
modify, in good faith, the definition of Common IPT Shares; and (iii)
to make such amendments to Section 9.4 hereof as are necessary so as
to approximate the existing rights and obligations set forth in
Section 9.4 hereof as closely as reasonably possible. The forgoing
provisions of this Section 8.1(d) shall similarly apply to successive
mergers or consolidations permitted hereunder.
8.2 ADMISSION OF A SUBSTITUTE OR SUCCESSOR GENERAL PARTNER. A Person
shall be admitted as a substitute or successor General Partner of the
Partnership only if the following terms and conditions are satisfied:
(a) a majority in interest of the Limited Partners (other
than the Special Limited Partner) and the Special Limited Partner
shall have consented in writing to the admission of the substitute or
successor General Partner, which consent may be withheld in the sole
and absolute discretion of such Limited Partners;
(b) the Person to be admitted as a substitute or additional
General Partner (whether by assignment or by operation of law) shall
have executed and delivered an Accession Agreement thereof and such
other documents or instruments as may be required or appropriate in
order to effect the admission of such Person as a General Partner,
and a certificate evidencing the admission of such Person as a
General Partner shall have been filed for recordation and all other
actions required by Section 2.5 hereof in connection with such
admission shall have been performed;
(c) if the Person to be admitted as a substitute or
additional General Partner is a Business Entity, it shall have
provided the Partnership with evidence satisfactory to counsel for
the Partnership of such Person's authority to become a General
Partner and to be bound by the terms and provisions of this
Agreement; and
(d) counsel for the Partnership shall have rendered an
opinion (relying on such opinions from other counsel as may be
necessary) that the admission of the Person to be admitted as a
substitute or additional General Partner is in conformity with the
Act, and that none of the actions taken in connection with the
admission of such Person as a substitute or additional General
Partner should cause (i) the Partnership to be classified other than
as a partnership for federal income tax purposes or (ii) the loss of
any Limited Partner's limited liability.
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8.3 REMOVAL OF A GENERAL PARTNER.
(a) A General Partner may not be involuntarily removed by
action of the Limited Partners, or by any other General Partner(s),
for any reason.
(b) A General Partner shall be deemed to have been removed
automatically upon the occurrence of any Event of Withdrawal of such
General Partner.
8.4 EFFECT OF DEEMED REMOVAL OF A GENERAL PARTNER.
(a) Upon the deemed removal of a General Partner pursuant to
and in accordance with Section 8.3(b), the Partnership shall be
dissolved and terminated unless the Limited Partners, within 90 days
after such removal, elect to reconstitute the Partnership and
continue the business of the Partnership for the balance of the term
specified in Section 2.4 by selecting and admitting a substitute
General Partner in accordance with Section 8.2 hereof. If the Limited
Partners so elect to reconstitute the Partnership and admit a
substitute General Partner, the relationship of such substitute
General Partner with the Limited Partners and with any other Persons
who have acquired Partnership Interests shall be governed by this
Agreement.
(b) If a General Partner has been deemed removed pursuant to
Section 8.3(b) and the Partnership is continued pursuant to Section
8.4(a), such removed General Partner shall promptly transfer and
assign its Partnership Interests to the substitute General Partner
admitted to the Partnership in accordance with Section 8.2 hereof. At
the time of assignment, the removed General Partner shall be entitled
to receive from the substitute General Partner the fair market value
of such Partnership Interests, reduced by the amount, if any, of
damages caused to the Partnership as a result of the occurrence of
the event which resulted in the deemed removal of such removed
General Partner; provided, however, that such removed General Partner
shall only be liable for such damages as are expressly set forth in
Section 6.5 hereof. Such fair market value shall be determined by an
appraiser mutually agreed upon by the removed General Partner and a
majority in interest of the Limited Partners within 10 days following
the removal of the General Partner (or as they may otherwise agree in
writing). For purposes of the preceding sentence, all Limited
Partners shall be permitted to vote upon the selection of an
appraiser, and the outcome of such vote shall be determined by a
majority in interest of only those Limited Partners who participate
in such vote. In the event that the parties are unable to agree upon
an appraiser, the removed General Partner and a designee representing
a majority in interest of the Limited Partners who participate in the
vote each shall select an appraiser. Each such appraiser shall
complete an appraisal of the fair market value of the removed General
Partner's Partnership Interests within 30 days of the General
Partner's removal, and the fair market value of the removed General
Partner's Partnership Interests shall be the average of the two
appraisals; provided, however, that if the higher appraisal exceeds
the lower appraisal by more than 20% of the amount of the lower
appraisal, the two appraisers, no later than 40 days after the
removal of the General Partner, shall select a third appraiser who
shall complete an appraisal of the fair market value of the removed
General Partner's Partnership Interests no later than 60 days after
the removal of the General Partner. In such case, the fair
45
market value of the removed General Partner's Partnership Interests
shall be the average of the two appraisals closest in value.
(c) The interests of a removed General Partner, from and
after the time of removal and until such time, if ever, as a
substitute General Partner is approved and admitted to the
Partnership in accordance with Section 8.2 hereof, shall be converted
to that of a "special" Limited Partner; provided, however, that such
removed General Partner shall not have any rights to participate in
the management and affairs of the Partnership, and shall not be
entitled to any portion of the income, expense, profit, gain or loss
allocations or cash distributions allocable or payable, as the case
may be, to the Limited Partners. Instead, during such period such
removed General Partner shall receive and be entitled only to retain
distributions or allocations of such items that it would have been
entitled to receive in its capacity as General Partner in respect of
its Partnership Interests.
(d) All Partners shall take such actions and execute such
documents as shall be legally necessary and sufficient to effect the
intent of the foregoing provisions of this Section 8.4
ARTICLE IX
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
9.1 MANAGEMENT OF THE PARTNERSHIP. The Limited Partners, in their
capacity as such, shall not be entitled or empowered to, and shall not,
participate in the operation, management or control of Partnership business,
transact any business for or in the name of the Partnership or sign for or
otherwise bind the Partnership, such powers being vested solely and
exclusively in the General Partner (and such Persons as the General Partner
may delegate to act on its behalf pursuant to Section 6.3).
9.2 LIMITED LIABILITY OF LIMITED PARTNERS. No Limited Partner shall
be liable for any debts, liabilities, contracts or obligations of the
Partnership. After its initial Capital Contribution is fully paid, no Limited
Partner shall, except as expressly provided in this Agreement or otherwise
required by the Act, be required to make any further Capital Contributions or
other payments or lend any funds to the Partnership.
9.3 OWNERSHIP BY LIMITED PARTNERS OF INTERESTS IN THE GENERAL PARTNER
AND ITS AFFILIATES. No Limited Partner other than Insignia shall at any time
own, directly or indirectly, any equity interest in the General Partner or in
any Affiliate thereof if such ownership, by itself or in conjunction with
other equity interests owned by other Limited Partners, would, in the opinion
of counsel for the Partnership, jeopardize the classification of the
Partnership as a partnership for federal income tax purposes. The General
Partner shall be entitled to make such reasonable inquiry of the Limited
Partners as is required to establish compliance by the Limited Partners with
the provisions of this Section.
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9.4 REDEMPTION RIGHTS.
(a) Grant of Redemption Right. Each Limited Partner has the
right (a "REDEMPTION RIGHT"), subject to the succeeding provisions of
this Section 9.4 and the provisions of any other agreement between
the Partnership and such Limited Partner, to require the Partnership
to redeem all or any portion of such Limited Partner's Redeemable
Units for Cash Redemption Consideration by delivering a Notice of
Redemption to the General Partner; provided, however, that any
exercise of a Redemption Right must be with respect to a minimum of
1,000 Redeemable Units, unless such Limited Partner holds less than
1,000 Redeemable Units, in which case the Redemption Right may only
be exercised with respect to all Redeemable Units held by such
Limited Partner; and further provided that a Limited Partner may not
exercise its Redemption Right more than twice during any calendar
quarter.
(b) First Right of IPT. The delivery of a Notice of
Redemption by a Redeeming Partner pursuant to Section 9.4(a) shall
also constitute an offer by such Limited Partner to sell any or all
of the Redeemable Units that are the subject of such Notice of
Redemption to IPT in exchange for Share Redemption Consideration,
which offer shall be deemed open and irrevocable during the
Redemption Election Period. On or prior to the last day of the
Redemption Election Period, IPT shall deliver a notice to the
Redeeming Partner and the Partnership notifying them whether IPT has
elected (i) to accept the Redeeming Partner's offer to sell some or
all of such Redeemable Units, in which case such notice shall specify
the number of Redeemable Units which IPT has elected to purchase, or
(ii) not to purchase any such Redeemable Units; provided, however,
that if the Redeeming Partner is Insignia or MAE, the determination
of whether to acquire any or all of such Redeemable Units shall be
made by a committee of the Board consisting solely of individuals who
are not officers, directors or employees of Insignia; and further
provided that if IPT fails to timely deliver such notice, then IPT
shall be deemed to have elected not to purchase any such Redeemable
Units. In the event that IPT elects to purchase some but not all of
such Redeemable Units for Share Redemption Consideration pursuant
this Section 9.4(b), the Partnership shall be required to purchase
the balance of such Redeemable Units for Cash Redemption
Consideration.
(c) Payment. Any Cash Redemption Consideration to be paid to
a Redeeming Partner pursuant to this Section 9.4 shall be paid on the
applicable Redemption Date; provided, however, that the Partnership
may elect to cause the Redemption Date to be delayed for up to an
additional 180 days to the extent required for IPT to cause
additional Common IPT Shares to be issued to provide financing to be
used to make such payment of the Cash Redemption Consideration. Any
Share Redemption Consideration to be paid to a Redeeming Partner
pursuant to this Section 9.4 shall be paid on the applicable
Redemption Date (or as soon there after as is reasonably practicable
in the event that IPT elects (pursuant to the following sentence) to
issue the securities that comprise the Share Redemption Consideration
pursuant to an effective registration statement under the Securities
Act). Subject to the terms of any other written agreement between IPT
and the Redeeming Partner, any securities that comprise part of any
Share Redemption Consideration paid to a Redeeming Partner shall be
issued, at the election of IPT in its
47
sole and absolute discretion, either (i) pursuant to an exemption
from registration requirements under the Securities Act or (ii)
pursuant to an effective registration statement under the Securities
Act. The Partnership and IPT agree to use their reasonable efforts to
cause the closing of a redemption of Redeemable Units for Cash
Redemption Consideration or Share Redemption Consideration, as the
case may be, hereunder to occur as quickly as reasonably practicable
(but in no event sooner than the applicable Redemption Date).
(d) Miscellaneous.
(i) Notwithstanding any other provision of this
Section 9.4 to the contrary, no Limited Partner shall be
entitled to exercise its Redemption Right if (i) the
delivery of Share Redemption Consideration to such Limited
Partner on the Redemption Date by IPT pursuant to Sections
9.4(b) and (c) (regardless of whether or not IPT would in
fact exercise its rights under Section 9.4(b)) would (A)
result in such Limited Partner or any other Person owning,
directly or indirectly, Common IPT Shares in excess of the
Ownership Limit (as defined in and calculated in accordance
with the IPT Charter), except as provided in the IPT
Charter, (B) result in Common IPT Shares being owned by
fewer than 100 Persons (determined without regard to any
rules of attribution), except as provided in the IPT
Charter, (C) result in IPT being "closely held" within the
meaning of Section 856(h) of the Code, (D) cause IPT to own,
directly or constructively, 10% or more of the ownership
interests in a tenant of a Controlled Real Property within
the meaning of Section 856(d)(2)(B) of the Code, or (E)
cause the acquisition of Common IPT Shares by such Limited
Partner to be "integrated" with any other distribution of
Common IPT Shares for purposes of complying with the
registration provisions of the Securities Act; or (ii) on
the Redemption Date IPT would not either have a class of
equity securities registered under the Exchange Act or have
an exemption from the registration requirements under the
Securities Act available to it with respect to any Share
Redemption Consideration that would be delivered to such
Limited Partner pursuant to Section 9.4(b); provided,
however, that IPT may, in its sole and absolute discretion,
waive the restriction on redemption set forth in the
immediately preceding clause (ii), but in such an event IPT
shall not have any rights under Section 9.4(b) to acquire
the applicable Redeemable Units.
(ii) In the event that IPT acquires some or all of
a Redeeming Partner's Redeemable Units by paying to such
Redeeming Partner Share Redemption Consideration in respect
thereof: (A) the Partnership shall have no obligation to pay
any amount to the Redeeming Partner in respect of such
Redeemable Units; (B) each of the Redeeming Partner, the
Partnership and IPT shall treat the transaction between IPT
and the Redeeming Partner as a sale of such Redeemable Units
to IPT by such Redeeming Partner for federal income tax
purposes; (C) such Redeeming Partner shall enter into a
written agreement substantially similar in form and
substance to the Investors Agreements, provided, however,
that if the Redeeming Partner fails or refuses to enter into
such an agreement, the Redeeming Partner shall nonetheless
be deemed to have entered into such an
48
agreement and to be bound by the terms and provisions
thereof, except that such Redeeming Partner shall not be
deemed to have the registration rights granted therein; and
(D) such Redeeming Partner shall execute such other
documents as IPT may reasonably require in connection with
the issuance of such Share Redemption Consideration.
(iii) Notwithstanding any other provision of this
Agreement to the contrary, the General Partner shall be
entitled to, and shall, place appropriate restrictions on
the ability of the Limited Partners to exercise their
Redemption Rights as and if deemed necessary by the General
Partner to ensure that the Partnership does not constitute a
"publicly traded partnership" under Section 7704 of the
Code. If and when the General Partner determines that the
imposition of such restrictions is necessary, the General
Partner shall give prompt notice thereof to each Limited
Partner, which notice shall be accompanied by a copy of an
opinion of counsel to the Partnership which states that, in
the opinion of such counsel, restrictions are necessary in
order to avoid the Partnership being treated as a "publicly
traded partnership" under Section 7704 of the Code. Any such
restriction shall become effective on the later of (i) the
fifth Business Day after such notice is sent by the General
Partner or (ii) the date on which the Regulations under
section 7704 of the Code that would cause the Partnership to
be classified as a "publicly traded partnership" become
effective.
(iv) In the event that the General Partner permits
the pledge of a Limited Partner's Common Partnership Units
to a lender, the General Partner may agree to allow such
lender, in the event of a foreclosure of such Common
Partnership Units, to redeem such Common Partnership Units
regardless of the fact that they may not constitute
Redeemable Units; provided, however, that any such
redemption may be effected only by the Partnership by paying
the Cash Redemption Consideration in respect thereof.
9.5 CONSENT RIGHTS OF THE SPECIAL LIMITED PARTNER. The General
Partner is expressly prohibited from, and agrees not to, take any of the
following actions in the name or on behalf of the Partnership without the
prior written consent of the Special Limited Partner (which consent may be
given or withheld in its sole and absolute discretion), and any attempt to
take any such action without the prior written consent of the Special Limited
Partner shall be deemed ultra xxxxx, ineffective and void ab initio:
(a) the entering into or amending, modifying or terminating
of any conflict avoidance arrangement or conflict avoidance
arrangement contemplated by Section 6.7(d) hereof;
(b) the sale of all or substantially all of the assets of
the Partnership or the merger or consolidation of the Partnership
with or into any other entity; or
(c) the issuance of any additional Partnership Interests by
the Partnership pursuant to Section 4.2 as a result of which the
relative economic interest of the Special Limited Partner in the
Partnership would be materially diluted.
49
9.6 PUT RIGHTS.
(a) Upon the occurrence and during the continuation of any
material breach of this Agreement by IPT, the General Partner or the
Partnership (including without limitation the failure to pay any
Contract Loss Fee due), the Insignia Entities, MAE and its Affiliates
(each a "PUT HOLDER") shall each have the right (a "PUT RIGHT"), at
any time and from time to time, to:
(i) require the Partnership to retain, at the
Partnership's expense, a Bank (to be selected as provided in
Section 9.6(b)) to appraise the value of any Partnership
Interests, and Common IPT Shares and Other IPT Securities
held by such Put Holder, which appraisals shall be based on,
respectively, the greatest value ascribed to the Partnership
and IPT based on each of the following analyses: (i) an
independent going concern/continuing operations analysis,
(ii) a sale of the entire entity analysis and (iii) a
liquidation analysis;
(ii) require the Partnership to purchase any or all
of such Partnership Interests for cash based on the
appraised value thereof determined by the Bank; and
(iii) require IPT to purchase any or all of such
Common IPT Shares and/or Other IPT Securities for cash based
on the appraised value thereof determined by the Bank.
(b) The selection of the investment bank to perform the
required appraisal (the "BANK") shall be determined as follows:
Insignia shall select any three of the 15 largest national investment
banks in the United States (as measured by the aggregate dollar
amount of equity underwritings during the previous calendar year),
and the General Partner shall then select one of such three
investment banks; provided, however, that if the General Partner
fails or refuses to select a Bank in accordance with the foregoing
within 10 days of receiving notice of Insignia's selections, Insignia
shall be entitled to select the Bank from among its three selections.
(c) The provisions of this Section 9.6 are in addition to,
and not in lieu of, the Redemption Rights a Put Holder may have
pursuant to Section 9.4 hereof.
ARTICLE X
TRANSFERS OF COMMON
PARTNERSHIP UNITS HELD BY LIMITED PARTNERS
10.1 PURCHASE FOR INVESTMENT.
(a) Each Limited Partner hereby reaffirms to the General
Partner, to IPT and to the Partnership that the acquisition of its
Common Partnership Units was made as a
50
principal for its account for investment purposes only and not with a
view to the resale or distribution of such Common Partnership Units.
(b) Each Limited Partner agrees that it will not sell,
transfer or otherwise assign its Common Partnership Units or any
fraction thereof or interest therein, whether voluntarily or by
operation of law or at judicial sale or otherwise, to any Person who
does not make the representations and warranties to the General
Partner set forth in Section 10.1(a) above and similarly agree not to
sell, transfer or otherwise assign such Common Partnership Units or
fraction thereof or interest therein to any Person who does not
similarly represent, warrant and agree.
10.2 RESTRICTIONS ON TRANSFERS OF COMMON PARTNERSHIP UNITS HELD
BY LIMITED PARTNERS.
(a) Subject to the following provisions of this Sections
10.2, each Limited Partner may offer, sell, assign, hypothecate,
pledge or otherwise transfer (collectively, "TRANSFER") all or any
portion of its Common Partnership Units, or any of such Limited
Partner's economic rights as a Limited Partner, to any Person,
whether voluntarily or by operation of law or at judicial sale or
otherwise. The General Partner may require, as a condition of any
Transfer, that the transferor Limited Partner assume all costs
incurred by the Partnership in connection therewith. Any purported
Transfer of Common Partnership Units by a Limited Partner in
contravention of any of the provisions of this Article X shall be
void and of no effect and shall not be binding upon, or recognized
by, the Partnership.
(b) No Limited Partner may Transfer its Common Partnership
Units, in whole or in part, if, in the opinion of legal counsel for
the Partnership, such Transfer would require the registration of the
Limited Partner Interest under the Securities Act or would otherwise
violate any applicable federal or state securities or blue sky law
(including investment suitability standards).
(c) No Transfer by a Limited Partner of its Common
Partnership Units, in whole or in part, may be made to any Person if
(i) in the opinion of legal counsel for the Partnership, such
Transfer would result in the Partnership being treated as an
association taxable as a corporation (other than a "qualified REIT
subsidiary" within the meaning of Section 856(i) of the Code), (ii)
in the opinion of legal counsel for the Partnership, it would
adversely affect the ability of IPT to continue to qualify as a REIT
or subject IPT to any additional taxes under Section 857 or Section
4981 of the Code, or (iii) 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.
(d) No Transfer by a Limited Partner of its Common
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" (within the meaning of Regulations Section
1.752-l(a)(2)) without the consent of the General Partner, which may
be withheld in its sole and absolute discretion, it being understood
and agreed that as a condition to such
51
consent the lender will be required to enter into an arrangement with
the Partnership and the General Partner to exchange or redeem for
Cash Redemption Consideration any Common 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.
10.3 ADMISSION OF SUBSTITUTE LIMITED PARTNERS AND ADDITIONAL
LIMITED PARTNERS.
(a) Subject to the other provisions of this Article X, any
Person who is an assignee of Common Partnership Units of a Limited
Partner (which shall be understood to include any purchaser,
transferee, donee or other recipient of any disposition of such
Common Partnership Units) seeking to be admitted as a Substitute
Limited Partner, and any Person seeking to be admitted as an
Additional Limited Partner, as the case may be, shall be deemed
admitted as a Limited Partner of the Partnership only upon the
satisfactory completion of the following:
(i) Such Person shall have executed and delivered
an Accession Agreement and such other documents or
instruments as the General Partner may require in order to
effect the admission of such Person as a Limited Partner;
(ii) If such Person is a Business Entity, such
Person shall have provided the General Partner with evidence
satisfactory to counsel for the Partnership of such Person's
authority to become a Limited Partner under the terms and
provisions of this Agreement and such Person's governing
organizational documents;
(iii) Such Person shall have paid (A) all
reasonable legal fees and expenses of the Partnership and
the General Partner, (B) all administrative costs of the
Partnership and the General Partner and (C) all other
reasonable expenses incurred by the General Partner in
effecting the admission of Person; and
(iv) Such Person shall have obtained a written
statement (which statement may be contained in the
applicable Accession Agreement) from the General Partner
that such Person's admission as a Substitute Limited Partner
or an Additional Limited Partner, as the case may be, will
not, in the reasonable business judgment of the General
Partner, jeopardize IPT's status as a REIT or cause the
Partnership to be classified as a "publicly traded
partnership" under the Code.
(b) For the purpose of allocating Profits and Losses and
distributing cash received by the Partnership, a Substitute Limited
Partner or Additional Limited Partner, as the case may be, shall be
treated as having become, and appearing in the records of the
Partnership as, a Partner as of the later of (x) the date specified
in the applicable Accession Agreement or (y) the date on which the
last of the conditions specified in Section 10.3(a) has been
satisfied.
52
(c) The General Partner shall cooperate with the Person
seeking to become a Substitute Limited Partner or an Additional
Limited Partner, as the case may be, by preparing the documentation
required by this Section and making all official filings and
publications. The Partnership shall take all such action as promptly
as practicable after the satisfaction of the conditions in this
Article X to effect the admission of such Person as a Limited Partner
of the Partnership.
(d) To the extent a Person who is an assignee of Common
Partnership Units of a Limited Partner or who is seeking to be
admitted as an Additional Limited Partner, as the case may be, is not
admitted as a Limited Partner of the Partnership, such Person shall
have no rights or privileges under this Agreement, including
Redemption Rights under Section 9.4 hereof.
10.4 RIGHTS OF ASSIGNEES OF COMMON PARTNERSHIP UNITS.
(a) Subject to the provisions of Sections 10.1 and 10.2
hereof, and except as required by operation of law, the Partnership
shall not be obligated for any purpose whatsoever to recognize the
assignment by any Limited Partner of any of its Common Partnership
Units (or any fraction thereof or interest therein) until the
Partnership has received notice thereof.
(b) Any Person who is the assignee of all or any portion of
a Limited Partner's Limited Partner Interest, but does not become a
Substitute Limited Partner and desires to make a further assignment
of such Limited Partner Interest, shall be subject to all the
provisions of this Article IX to the same extent and in the same
manner as any Limited Partner desiring to make an assignment of its
Limited Partner Interest.
10.5 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A
LIMITED PARTNER. In the event that a Limited Partner becomes bankrupt, dies or
is finally adjudicated as incompetent (which term shall include, but not be
limited to, insanity), (a) the occurrence of such event shall not cause the
termination or dissolution of the Partnership, (b) the business of the
Partnership shall continue and (c) the trustee, receiver, estate, executor,
administrator, committee, guardian or conservator of such Limited Partner, as
the case may be, shall have the rights of such Limited Partner for the purpose
of settling or managing its affairs and the power to assign all or any part of
its Common Partnership Units and to join with the assignee in satisfying the
conditions precedent to the admission of such assignee as a Substitute Limited
Partner, in each case to the same extent and subject to the same terms and
conditions as would have applied to such Limited Partner had such bankruptcy,
death or incompetency not occurred.
10.6 JOINT OWNERSHIP OF INTERESTS.
(a) Common Partnership Units may be acquired by two
individuals as joint tenants with right of survivorship, provided
that such individuals either are married or are related and share the
same home as tenants in common. The written consent or vote of both
owners of any such jointly held Common Partnership Units shall be
required to constitute the action of the owners of such Common
Partnership Units; provided, however, that the written consent of
only one joint owner will be required if the
53
Partnership has been provided with evidence satisfactory to the
counsel for the Partnership that the actions of a single joint owner
can bind both owners under the applicable laws of the state of
residence of such joint owners.
(b) Upon the death of one owner of Common Partnership Units
held in a joint tenancy with a right of survivorship, such Common
Partnership Units shall become owned solely by the survivor as a
Limited Partner and not as an assignee. The Partnership need not
recognize the death of one of the owners of jointly-held Common
Partnership Units until it shall have received notice of such death.
(c) Upon the written request to the General Partner by
either owner of Common Partnership Units held in a joint tenancy with
a right of survivorship, the General Partner shall cause such Common
Partnership Units to be divided into two equal allotments of Common
Partnership Units, which shall thereafter be owned separately by each
of the former owners as Limited Partners.
ARTICLE XI
BOOKS AND RECORDS; ACCOUNTING AND TAX MATTERS
11.1 BOOKS AND RECORDS. At all times during the continuance of the
Partnership, the General Partner shall keep or cause to be kept at the
Partnership's specified office true and complete books of account in
accordance with generally accepted accounting principles, including without
limitation (a) a current list of the full name and last known business address
of each Partner, (b) a copy of the Certificate of Limited Partnership and all
certificates of amendment thereto, (c) copies of any financial statements of
the Partnership and the Partnership's federal, state and local income tax
returns and reports for the three most recent years, (d) a copy of this
Agreement and (e) all documents and information required under the Act. Any
Limited Partner or its duly authorized representative, upon paying any costs
of collection and duplication, shall be entitled to inspect or copy such
records during certain business hours to be determined in the sole discretion
of the General Partner at the Partnership's specified office; provided,
however, that such Limited Partner must first make written demand to the
General Partner to view such records and set forth a non-fraudulent and
otherwise proper purpose that is reasonably related to such Limited Partner's
interest as a Limited Partner. 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, any information storage device, provided that any records so
maintained are convertible into clearly legible written form within a
reasonable period of time.
11.2 CUSTODY AND INVESTMENT OF PARTNERSHIP FUNDS; BANK ACCOUNTS.
(a) All funds of the Partnership not otherwise invested
shall be deposited in one or more accounts maintained in such banking
or brokerage institutions as the General Partner shall determine, and
withdrawals shall be made only on such signature or signatures as the
General Partner may, from time to time, determine.
(b) All deposits and other funds not needed in the operation
of the business of the Partnership may be invested by the General
Partner in investment grade
54
instruments (or investment companies whose portfolio consists
primarily thereof), government obligations, certificates of deposit,
bankers' acceptances and municipal notes and bonds. The funds of the
Partnership shall not be commingled with the funds of any other
Person, except for such commingling as may necessarily result from an
investment in an investment company permitted by this Section
11.2(b).
(c) Insignia may establish and maintain on behalf of each
Property-Owning Entity (other than IPT and the Partnership) one or
more bank accounts in the name of such IPT Entity, under such terms
and conditions as IPT may approve, and may collect and deposit into
such account or accounts and disburse therefrom any monies on behalf
of such IPT Entity, under such terms and conditions as IPT may
approve, and shall upon request render an appropriate accounting of
such collections and payments to the Board and to the auditors of
IPT.
11.3 FISCAL YEAR. The "FISCAL YEAR" of the Partnership shall be the
calendar year.
11.4 ANNUAL TAX INFORMATION. Within the time prescribed for filing
tax returns plus any extensions thereof after the end of each Fiscal Year of
the Partnership, the General Partner shall furnish to each Person who was a
Limited Partner at any time during such year, the tax information necessary to
file such Limited Partner's individual tax returns as shall be required by
law.
11.5 TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS.
(a) The General Partner shall be the Tax Matters Partner of
the Partnership within the meaning of Section 6231(a)(7) of the Code.
As Tax Matters Partner, the General Partner shall have the right and
obligation to take all actions authorized and required, respectively,
by the Code for the Tax Matters Partner. The General Partner shall
have the right to retain professional assistance in respect of any
audit of the Partnership by the Internal Revenue Service, and all
out-of-pocket expenses and fees incurred by the General Partner on
behalf of the Partnership as Tax Matters Partner shall constitute
Administrative Expenses. In the event the General Partner receives
notice of a final Partnership adjustment under Section 6223(a)(2) of
the Code, the General Partner shall either (i) file a court petition
for judicial review of such final adjustment within the period
provided under Section 6226(a) of the Code, a copy of which petition
shall be mailed to all Limited Partners on the date such petition is
filed, or (ii) mail a written notice to all Limited Partners, within
such period, that describes the General Partner's reasons for
determining not to file such a petition.
(b) All elections required or permitted to be made by the
Partnership under the Code or any applicable state or local tax law
shall be made by the General Partner in its sole discretion.
(c) In the event of a transfer of all or any part of the
Common Partnership Units of any Partner, the Partnership, at the
option of the General Partner, may elect pursuant to Section 754 of
the Code to adjust the basis of the Partnership Properties.
Notwithstanding anything contained in Article V of this Agreement,
any adjustments
55
made pursuant to Section 754 shall affect only the successor in
interest to the transferring Partner and shall in no event be taken
into account in establishing, maintaining or computing Capital
Accounts for the other Partners for any purpose under this Agreement.
Each Partner agrees to furnish the Partnership with all information
necessary to give effect to such election.
11.6 REPORTS TO LIMITED PARTNERS.
(a) As soon as practicable after the close of each fiscal
quarter (other than the last quarter of the Fiscal Year), the General
Partner shall cause to be mailed to each Limited Partner a quarterly
report containing unaudited financial statements of the Partnership,
or of IPT if such statements are prepared solely on a consolidated
basis with IPT, for such fiscal quarter, presented in accordance with
generally accepted accounting principles, and such other information
as may be required by applicable law or regulation, or as the General
Partner determines to be appropriate. As soon as practicable after
the close of each Fiscal Year, the General Partner shall cause to be
mailed to each Limited Partner an annual report containing financial
statements of the Partnership, or of IPT if such statements are
prepared solely on a consolidated basis with IPT, for such Fiscal
Year, presented in accordance with generally accepted accounting
principles. The annual financial statements shall be audited by
accountants selected by the General Partner.
(b) Each Partner shall have the further right to obtain, at
it own expense, a private audit of the books and records of the
Partnership, provided that such audit is conducted (i) for a proper
Partnership purpose, (ii) at the Partnership's specified office, and
(iii) during certain business hours to be determined in the sole
discretion of the General Partner.
ARTICLE XII
AMENDMENT OF AGREEMENT; MEETINGS
12.1 AMENDMENTS. The General Partner, with the consent of the Special
Limited Partner but without the consent of any other Limited Partner, may
amend or modify this Agreement in any respect; provided, however, that any
amendment which would (i) impose on any Limited Partner any obligation to make
any additional Capital Contribution or (ii) materially adversely affect the
economic rights of such Limited Partner hereunder shall require the consent of
such Limited Partner. Except as expressly set forth in this Section 12.1, or
as otherwise required by law, the Limited Partners shall not have any right to
vote on or consent to any amendment to or modification of this Agreement.
12.2 MEETINGS OF THE PARTNERS.
(a) General. Meetings of the Partners may be called by the
General Partner at any time. In addition, meetings of the Partners
shall be called upon the receipt by the General Partner of a written
request by (i) Limited Partners holding 25 percent or more of the
then outstanding Common Partnership Units or (ii) the Special Limited
Partner,
56
provided that such request states the nature of the proposed business
to be transacted and such proposed business relates to a matter which
the Limited Partners (including the Special Limited Partner) have
been granted the authority to act upon pursuant to this Agreement.
Notice of any such meeting shall be given to all Partners not less
than 10 days nor more than 30 days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the
vote or consent of Partners is permitted or required under this
Agreement, such vote or consent may be given at a meeting of Partners
or may be given in accordance with the procedure prescribed in
12.2(b) hereof. Except as otherwise expressly provided in this
Agreement (including Section 12.1 hereof), the consent of holders of
a majority of the Common Partnership Units shall control.
(b) Action by Written Consent. Any action required or
permitted to be taken at a meeting of the Partners may be taken
without a meeting if one or more written consents setting forth the
action so taken is signed by Partners holding a majority (or such
other percentage as is expressly required by this Agreement) of the
outstanding Common Partnership Units. Such consents shall be filed
with the General Partner, and any action taken pursuant thereto shall
have the same force and effect as if taken pursuant to a vote of
Partners at a duly constituted meeting.
(c) Proxies. Each Limited Partner may authorize any Person
or Persons to act for him by proxy on all matters in which a Limited
Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must be
signed by the Limited Partner or his attorney-in-fact. No proxy shall
be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be
revocable by the Limited Partner executing it.
(d) Conduct of Meeting. Each meeting of Partners shall be
conducted by the General Partner or such other Person as the General
Partner may appoint pursuant to such rules for the conduct of the
meeting as the General Partner or such other Person deems
appropriate.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been received (a) if delivered personally, on the date delivered, (b) if
delivered by overnight courier or registered United States mail (postage
prepaid, return receipt requested), on the date on which the package is signed
for on behalf of the addressee, and (c) if delivered in any other manner, on
the date on which the addressee actually receives such notice or other
communication. Notices to the Partners shall be delivered to their respective
addresses set forth on Exhibit A hereto; provided, however, that any Partner
may specify a different address by notifying the General Partner in writing of
such different address. Notices to the Partnership shall be delivered to the
address of its specified office.
57
13.2 SURVIVAL OF RIGHTS. Subject to the provisions hereof limiting
Transfers of Common Partnership Units, this Agreement shall be binding upon
and inure to the benefit of the Partners and the Partnership and their
respective heirs, executors, administrators, legal representatives,
successors, transferees and assigns.
13.3 ADDITIONAL DOCUMENTS. Each Partner agrees to perform all further
acts and execute, swear to, acknowledge and deliver all further documents
which may be reasonable, necessary, appropriate or desirable to effect the
intent of this Agreement or which may be required under the Act.
13.4 SEVERABILITY. If any provision of this Agreement shall be
declared illegal, invalid, or unenforceable in any jurisdiction, then such
provision shall be deemed to be severable from the remaining provisions of
this Agreement (to the extent permitted by law) and shall not affect such
remaining provisions.
13.5 ENTIRE AGREEMENT. This Agreement and the schedules and exhibits
attached hereto, together with that certain Acquisition and Disposition
Services Agreement of even date herewith among IPT, the Partnership and
Insignia (as the same may be amended from time to time in accordance
therewith), constitutes the entire Agreement of the Partners and supersedes
all prior written agreements and prior and contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof.
Upon the execution of this Agreement, the Prior Agreement shall be deemed void
and of no further force or effect.
13.6 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.
13.7 PRONOUNS AND PLURALS. When the context in which words are used
in the Agreement indicates that such is the intent, words in the singular
number shall include the plural and the masculine gender shall include the
neuter or female gender as the context may require.
13.8 HEADINGS. The Article and Section headings in this Agreement are
for convenience of reference only and shall not be used in construing the
scope or intent of this Agreement or any particular provision hereof.
13.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one and the same instrument binding on all
parties hereto, notwithstanding that all parties may not have signed the same
counterpart.
13.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of Delaware.
[Signature Pages Follow]
58
IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this Fourth Amended and Restated Agreement of Limited
Partnership as of the 17th day of February, 1998.
GENERAL PARTNER:
INSIGNIA PROPERTIES TRUST
By:
-------------------------------------
Xxxxx X. Aston
President
[ADDITIONAL AND SUBSTITUTE GENERAL
PARTNERS, IF ANY, WILL EXECUTE THIS
AGREEMENT BY MEANS OF AN ACCESSION
AGREEMENT]
LIMITED PARTNERS:
INSIGNIA FINANCIAL GROUP, INC.
By:
-------------------------------------
Xxxxx X. Xxxxxxxx
Executive Managing Director
[ADDITIONAL AND SUBSTITUTE LIMITED
PARTNERS, IF ANY, WILL EXECUTE THIS
AGREEMENT BY MEANS OF AN ACCESSION
AGREEMENT]
59
Insignia Properties Trust, a Maryland real estate investment trust,
hereby enters into this Agreement for the limited purpose of agreeing to be
bound by any terms hereof which apply to it in any capacity other than that of
a Partner. Executed as of this 17th day of February, 1998.
INSIGNIA PROPERTIES TRUST
By:
-------------------------------------
Xxxxx X. Aston
President
Insignia Financial Group, Inc., a Delaware corporation, hereby enters
into this Agreement for the limited purpose of agreeing to be bound by any
terms hereof which apply to it in any capacity other than that of a Partner.
Executed as of this 17th day of February, 1998.
INSIGNIA FINANCIAL GROUP, INC.
By:
-------------------------------------
Xxxxx X. Xxxxxxxx
Executive Managing Director
60
SCHEDULE I
FORMATION PARTNERSHIPS
Consolidated Capital Growth Fund
Consolidated Capital Institutional Properties
Consolidated Capital Institutional Properties/2
Consolidated Capital Institutional Properties/3
Consolidated Capital Properties III
Consolidated Capital Properties IV
Consolidated Capital Properties V
Consolidated Capital Properties VI
Johnstown/Consolidated Income Partners
Johnstown/Consolidated Income Partners/2
Shelter Properties I Limited Partnership
Shelter Properties II Limited Partnership
Shelter Properties III Limited Partnership
Shelter Properties IV Limited Partnership
Shelter Properties V Limited Partnership
Shelter Properties VI Limited Partnership
Shelter Properties VII Limited Partnership
Davidson Growth Plus, L.P.
National Property Investors III
National Property Investors 4
National Property Investors 5
National Property Investors 6
National Property Investors 7
National Property Investors 8
Fox Strategic Housing Income Partners
Century Properties Fund XIV
Century Properties Fund XV
Century Properties Fund XVI
Century Properties Fund XVII
Century Properties Fund XVIII
Century Properties Fund XIX
Century Properties Fund XX
Century Properties Growth Fund XXII
Century Pension Income Fund XXIII
Century Pension Income Fund XXIV
Multi-Benefit Realty Fund '87-1
U.S. Realty Partners Limited Partnership
I-1
EXHIBIT A
GENERAL AND LIMITED PARTNERS
As of January 1, 1998
NO. OF
CAPITAL PARTNERSHIP PERCENTAGE
NAME AND ADDRESS CONTRIBUTIONS UNITS HELD INTEREST
------------------------------- ------------- ----------- ----------
GENERAL PARTNER:
Insignia Properties Trust $185,731,510 18,573,151 64.43%
One Insignia Financial Plaza
P.O. Box 19059
Xxxxxxxxxx, XX 00000
LIMITED PARTNERS:
Insignia Financial Group, Inc. 94,159,470 9,415,947 33.57%
One Insignia Financial Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
TOTALS.......................... $279,890,980 27,989,098 100%
============ ========== ====
A-1
EXHIBIT B
[FORM OF]
NOTICE OF REDEMPTION
Reference is made to that certain Fourth Amended and Restated
Agreement of Limited Partnership ("Partnership Agreement") of Insignia
Properties, L.P., a Delaware limited partnership (the "Partnership"), dated as
of February 17, 1998 with retroactive effect to January 1, 1998. Capitalized
terms used but not defined herein have the meanings ascribed to the in the
Partnership Agreement.
Pursuant to Section 9.4 of the Partnership Agreement, the undersigned
hereby irrevocably exercise its Redemption Right with respect to _________ of
its Redeemable Units. The undersigned understands and acknowledges that the
delivery of this Notice of Redemption also constitutes an offer by the
undersigned to sell any or all of such Redeemable Units to IPT in exchange for
Share Redemption Consideration, which offer is irrevocable during the
Redemption Election Period.
Please deliver the Cash Redemption Consideration and/or Share
Redemption Consideration, as applicable, to the address indicated below, and
if Common IPT Shares are to be issued, please issue such shares as indicated
below.
Dated:
----------------------
Respectfully submitted,
---------------------------- ---------------------------------------
(Print or Type Name of Limited Partner)
----------------------------
---------------------------- By:
(Address of Limited Partner) ------------------------------------
(Signature)
IF COMMON IPT SHARES ARE TO BE ISSUED,
ISSUE TO:
---------------------------------------
Name: (Print or Type Name and Authority of
------------------------ Person Signing on Behalf of
Address: Limited Partner)
---------------------
---------------------
Social Security ---------------------------------------
or Tax ID No.: (Signature Guarantee)
---------------
B-1
