TWELFTH AMENDMENT TO THE FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ESSEX PORTFOLIO, L.P. Dated as of July 26, 2006
TWELFTH
AMENDMENT TO THE
FIRST
AMENDED AND RESTATED
AGREEMENT
OF LIMITED PARTNERSHIP OF
ESSEX
PORTFOLIO, L.P.
Dated
as of July 26, 2006
This
Twelfth Amendment to the First Amended and Restated Agreement of Limited
Partnership of Essex Portfolio, L.P., as amended (as amended, the "Partnership
Agreement"), dated as of the date shown above (the "Amendment"), is executed
by
Essex Property Trust, Inc. a Maryland Corporation (the "Company"), as the
General Partner and on behalf of the existing Limited Partners of Essex
Portfolio, L.P. (the "Partnership").
RECITALS
WHEREAS,
the
Partnership was formed pursuant to the Partnership Agreement;
WHEREAS,
on the
date hereof, the Company is selling and issuing 5,200,000 shares of 4.875%
Series G Cumulative Convertible Preferred Stock pursuant to a public offering
and the Company has granted to the underwriter an option to purchase up to
an
additional 780,000 shares of such stock;
WHEREAS,
the
Series A Preferred Stock has all been converted into Common Stock and the Series
A Preferred Interest is no longer relevant;
WHEREAS,
the
Partnership has redeemed all of its outstanding Series C Preferred Units and
Series E Preferred Units;
WHEREAS,
the
Series C Preferred Stock and the Series E Preferred Stock, which relate to
the
redeemed Series C Preferred Units and the redeemed Series E Preferred Units,
respectively, will not be issued;
WHEREAS,
the
Series C Preferred Interest and the Series E Preferred Interest, which relate
to
the Series C Preferred Stock and the Series E Preferred Stock, respectively,
are
no longer relevant; and
WHEREAS,
pursuant
to the authority granted to the General Partner under the Partnership Agreement,
the General Partner desires to amend the Partnership Agreement to reflect (i)
the issuance of the Series G Preferred Stock and (ii) certain other matters
described herein.
NOW
THEREFORE,
in
consideration of the premises and for other good and valuable consideration,
the
receipt and sufficiency of which hereby are acknowledged, the General Partner
hereby amends the Partnership Agreement as follows:
| 1. |
Definitions.
Capitalized terms used herein, unless otherwise defined herein, shall
have
the same meanings as set forth in the Partnership
Agreement.
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| 2. |
Deleted
Definitions.
Section 1.1 of the Partnership Agreement is hereby amended to delete
the
following definitions: Series A Preferred Stock, Series C Preferred
Interest, Series C Preferred Stock, Series C Preferred Units, Series
E
Preferred Interest, Series E Preferred Stock and Series E Preferred
Units.
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| 3. |
Percentage
Interest.
Section 1.1 of the Partnership Agreement is hereby amended to delete
the
definition of "Percentage Interest" in its entirety and to substitute
the
following definition of "Percentage Interest," in its
place:
|
"Percentage
Interest"
shall
mean with
respect to any Partner other than holders of Series B Preferred Units, Series
D
Preferred Units, Series Z Incentive Units or Series Z-1 Incentive Units, the
undivided percentage ownership interest of such Partner in the Partnership,
as
determined by dividing
(i) the number of Partnership Units owned by such Partner by
(ii) the sum of (A) the total number of Partnership Units then outstanding
(excluding the Series B Preferred Interest, the
1
Series
B
Partnership Units, the Series D Preferred Interest, the Series D Preferred
Units, the Series F Preferred Interest, Series G Preferred Interest, Series
Z
Incentive Units and the Series Z-1 Incentive Units), (B) the total number of
outstanding Series Z Incentive Units multiplied by the Distribution Ratchet
Percentage with respect to each such Series Z Incentive Unit, calculated on
a
unit-by-unit basis, and (C) the total number of outstanding Series Z-1 Incentive
Units multiplied by the Series Z-1 Distribution Ratchet Percentage with respect
to each such Series Z-1 Incentive Unit, calculated on a unit-by-unit basis.
With
respect to any holder of Series Z Incentive Units, such Partner's Percentage
Interest shall be equal to such Partner's Series Z Percentage Interest. With
respect to any holder of Series Z- 1 Incentive Units, such Partner's Percentage
Interest shall be equal to such Partner's Series Z-1 Percentage Interest. If
any
Partner holds a combination of Common Units, Series Z Incentive Units and/or
Series Z-1 Incentive Units, then such Partner's Percentage Interest shall
be equal to the sum of (A) the Percentage Interest as calculated pursuant
to the first sentence of this definition (assuming for purposes of such
calculation that such Partner holds only Common Units, if any), (B) the
Series Z Percentage Interest (assuming for purposes of such calculation that
such Partner holds only Series Z Incentive Units, if any) and (C) the
Series Z-1 Percentage Interest (assuming for purposes of such calculation that
such Partner holds only Series Z-1 Incentive Units, if any).
| 4. |
Common
Unit.
Section 1.1 of the Partnership Agreement is hereby amended to delete
the
definition of "Common Unit" in its entirety and to substitute the
following definition of "Common Unit," in its
place:
|
"Common
Unit"
shall
mean a Partnership Unit representing an interest in the Partnership, other
than
a Series B Preferred Unit, Series B Preferred Interest, Series D Preferred
Unit,
Series D Preferred Interest, Series F Preferred Interest, Series G Preferred
Interest, Series Z Incentive Unit, Series Z-1 Incentive Unit or any other
Preferred Interest or Preferred Partnership Units.
| 5. |
Series
Z Percentage Interest.
Section 1.1 of the Partnership Agreement is hereby amended to delete
the
definition of "Series Z Percentage Interest" in its entirety and
to
substitute the following definition of "Series Z Percentage Interest,"
in
its place:
|
"Series
Z Percentage Interest"
shall
mean, with respect to any holder of Series Z Incentive Units, the undivided
percentage ownership interest of such Partner in the Partnership as determined
by dividing
(A) the
product resulting from multiplying the total number of outstanding Series Z
Incentive Units owned by such Partner by the Series Z Distribution Ratchet
Percentage attributed to such holder's Series Z Incentive Units, by
(B) the
sum of (x) the total number of Partnership Units then outstanding (excluding
the
Series B Preferred Interest, the Series B Partnership Units, the Series D
Preferred Interest, the Series D Preferred Units, the Series F Preferred
Interest, Series G Preferred Interest, the Series Z Incentive Units and the
Series Z-1 Incentive Units), (y) the total number of outstanding Series Z
Incentive Units multiplied by the Distribution Ratchet Percentage with respect
to each Series Z Incentive Unit, calculated on a unit-by-unit basis, and (z)
the
total number of outstanding Series Z-1 Incentive Units multiplied by the Series
Z-1 Distribution Ratchet Percentage with respect to each such Series Z-1
Incentive Unit, calculated on a unit-by-unit basis.
| 6. |
Series
Z-1 Percentage Interest.
Section 1.1 of the Partnership Agreement is hereby amended to delete
the
definition of "Series Z-1 Percentage Interest" in its entirety and
to
substitute the following definition of "Series Z-1 Percentage Interest,"
in its place:
|
"Series
Z-1 Percentage Interest"
shall
mean, with respect to any holder of Series Z-1 Incentive Units, the undivided
percentage ownership interest of such Partner in the Partnership as determined
by dividing
(A) the
product resulting from multiplying the total number of outstanding Series Z-
1
Incentive Units owned by such Partner by the Series Z-1 Distribution Ratchet
Percentage attributed to such holder's Series Z-1 Incentive Units, by
(B) the
sum of (x) the total number of Partnership Units then outstanding (excluding
the
Series B Preferred Interest, the Series B Partnership Units, the Series D
Preferred Interest, the Series D Preferred Units, the Series F
2
Preferred
Interest, Series G Preferred Interest, the Series Z Incentive Units and the
Series Z-1 Incentive Units), (y) the total number of outstanding Series Z
Incentive Units multiplied by the Distribution Ratchet Percentage with respect
to each Series Z Incentive Unit, calculated on a unit-by-unit basis, and (z)
the
total number of outstanding Series Z-1 Incentive Units multiplied by the Series
Z-1 Distribution Ratchet Percentage with respect to each such Series Z-1
Incentive Unit, calculated on a unit-by-unit basis.
| 7. |
Series
G Preferred Interest.
Section 1.1 of the Partnership Agreement is hereby amended to include
the
following definition, to be inserted in alphabetical order in such
Section
1.1:
|
"Series
G Preferred Interest"
shall
mean the interest in the Partnership received by the General Partner in
connection with the issuance of shares of Series G Preferred Stock, as and
when
issued, which Series G Preferred Interest includes and shall include the right
to receive preferential distributions and certain other rights as set forth
in
this Agreement.
| 8. |
Series
G Preferred Stock.
Section 1.1 of the Partnership Agreement is hereby amended to include
the
following definition, to be inserted in alphabetical order in such
Section
1.1:
|
"Series
G Preferred Stock"
shall
mean the preferred stock of the General Partner described in Article THIRD
of
the Articles Supplementary, reclassifying 5,980,000 shares of Common Stock
as
5,980,000 shares of 4.875% Series G Cumulative Convertible Preferred Stock
filed
with the Department on or about July 26, 2006.
| 9. |
Distributions.
Section 6.2(a) of the Partnership Agreement is hereby deleted in
its
entirety, and the following is hereby substituted in the place
thereof:
|
| a. |
Distributions
shall be made in accordance with the following order of
priority:
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| i. |
First,
on a pro
rata
basis, (based upon the same ratio that accrued distributions per
share of
Series B Preferred Stock, Series D Preferred Stock, Series F Preferred
Stock and Series G Preferred Stock and per unit of Series B Preferred
Units and Series D Preferred Units (which shall not include any
accumulation in respect of unpaid distributions for prior distribution
periods if such stock or units do not have cumulative distribution
rights)
bear to each other) (w) to the General Partner, on account of the
Series B
Preferred Interest, Series D Preferred Interest, Series F Preferred
Interest and Series G Preferred Interest until the total amount of
distributions made pursuant to this Section 6.2(a)(i)(w) equals the
total
amount of accrued but unpaid distributions (if any) payable with
respect
to the Series B Preferred Stock, the Series D Preferred Stock, the
Series
F Preferred Stock and Series G Preferred Stock as of the date of
such
distribution; (y) to the Limited Partners holding Series B Preferred
Units, on account of the Series B Preferred Units until the total
amount
of distributions made pursuant to this Section 6.2(a)(i)(y) equals
the
total amount of accrued but unpaid distributions (if any) payable
with
respect to the Series B Preferred Units, in accordance with Exhibit
N of
the Partnership Agreement, as of the date of such distribution; and
(z) to
the Limited Partners holding Series D Preferred Units, on account
of the
Series D Preferred Units until the distributions made pursuant to
this
Section 6.2(a)(i)(z) equals the total amount of accrued but unpaid
distributions (if any) payable with respect to the Series D Preferred
Units, in accordance with Exhibit P of the Partnership Agreement,
as of
the date of such distribution.
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| ii. |
Next,
to the Partners, pro
rata
in
accordance with the Partners' then Percentage
Interests.
|
3
Neither
the Partnership nor the Limited Partners shall have any obligation to see that
any funds distributed to the General Partner pursuant to
subparagraph (a)(i) of this Section 6.2 are in turn used by the General
Partner to pay dividends on the Series B Preferred Stock, Series D Preferred
Stock, the Series F Preferred Stock or the Series G Preferred Stock (or any
other Preferred Stock) or that funds distributed to the General Partner pursuant
to subparagraph (a)(ii) of this Section 6.2 are in turn used by the General
Partner to pay dividends on the Common Stock or for any other
purpose."
| 10. |
Distributions
in Kind.
Section 8.5 of the Partnership Agreement is hereby amended by adding
the
following sentence to the end of such
section:
|
"Notwithstanding
the foregoing, the Liquidating Trustee shall not distribute to the holders
of
Series B Partnership Units, Series D Partnership Units, Series B Preferred
Interest, Series D Preferred Interest, Series E Preferred Interest, Series
F Preferred Interest Partnership and Series G Preferred Interest assets other
than cash."
| 11. |
Redemption
Distribution.
Section 6.2(c) of the Partnership Agreement is hereby deleted in
its
entirety, and the following is hereby substituted in the place
thereof:
|
(c)
Notwithstanding the foregoing, the General Partner may, in its sole discretion,
at any time when any Preferred Stock (including any Series B Preferred Stock,
Series D Preferred Stock, Series F Preferred Stock, Series G Preferred Stock
or
any other Preferred Stock) is outstanding, make a special distribution to
itself, alone, on account of the Preferred Interest relating to such Preferred
Stock, for the sole purpose of, and in an amount no greater than such amount
as
will be used by the General Partner for, redemption of all or any part of such
outstanding Preferred Stock (any such distribution shall be referred to as
a
"Redemption Distribution"). There shall be no adjustments of the Percentage
Interests of the Partners on account of any Redemption
Distribution.
| 12. |
Exhibit
E.
Exhibit E to the Partnership Agreement is hereby deleted in its entirety,
and the attached Exhibit E is hereby inserted in the place
thereof.
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| 13. |
Exhibits
O and Q.
Exhibits O and Q set forth the terms of the Series C Preferred Units
and
Series E Preferred Units, which have been redeemed. Exhibits O and
Q are
hereby deleted in their entirety.
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| 14. |
Agreement
to Contribute Proceeds from Issuance of Series G Preferred
Stock. Immediately
upon receipt by the General Partner of the net proceeds from the
sale of
Series G Preferred Stock, as and when shares of Series G Preferred
Stock
are sold by the General Partner (after deducting all costs and expenses
incurred by the General Partner in connection with the sale of such
shares
of Series G Preferred Stock including, without limitation, all
underwriters’ commissions, and attorneys' and consultants' fees and
costs), the General Partner shall contribute to the Partnership,
as an
additional Capital Contribution, the entire amount of such net proceeds.
In exchange for each such additional Capital Contribution, the General
Partner shall receive a Series G Preferred Interest in the Partnership,
and the General Partner's Capital Account shall be increased by an
amount
equal to the number of shares of Series G Preferred Stock sold multiplied
by the purchase price per share of the Series G Preferred Stock.
Notwithstanding the provisions of Section 4.3(a) of the Partnership
Agreement, there shall be no adjustment of the Percentage Interests
of the
Partners on account of any such additional Capital
Contribution.
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| 15. |
Continuing
Effect of Partnership Agreement.
Except as modified herein, the Partnership Agreement is hereby ratified
and confirmed in its entirety and shall remain and continue in full
force
and effect, provided, however, that to the extent there shall be
a
conflict between the provisions of the Partnership Agreement and
this
Amendment the provisions in this Amendment will prevail. All references
in
any document to the Partnership Agreement shall mean the Partnership
Agreement, as amended hereby.
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4
| 16. |
Counterparts.
This Agreement may be executed in any number of counterparts, each
of
which shall be deemed to be an original and all of which shall constitute
one and the same agreement. Facsimile signatures shall be deemed
effective
execution of this Agreement and may be relied upon as such by the
other
party. In the event facsimile signatures are delivered, originals
of such
signatures shall be delivered to the other party within three (3)
business
days after execution.
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
5
IN
WITNESS WHEREOF, the General Partner has executed this Amendment as of the
date
indicated above.
GENERAL
PARTNER
ESSEX
PROPERTY TRUST, INC.,
a
Maryland corporation as General Partner
of
Essex
Portfolio, L.P. and on behalf of the
existing
Limited Partners
By:
/s/
Xxxxxxx X. Dance_____
Name:
Xxxxxxx
X. Dance
Title:
Executive Vice President and
Chief Financial Officer
6
EXHIBIT
E
ALLOCATIONS
1. Allocation
of Net Operating Income and Net Operating Loss.
(a) Net
Operating Income.
Except
as otherwise provided herein, Net Operating Income for any fiscal year or other
applicable period shall be allocated in the following order and
priority:
(1) First,
to
the Partners, until the cumulative Net Operating Income allocated pursuant
to
this subparagraph
1(a)(1)
for the
current and all prior periods equals the cumulative Net Operating Loss allocated
pursuant to subparagraph
1(b)(2)
hereof
for all prior periods, among the Partners in the same ratio and reverse order
that such Net Operating Loss was allocated to the Partners pursuant to
subparagraph
1(b)(2)
hereof
(and, in the event of a shift of a Partner's interest in the Partnership, to
the
Partners in a manner that most equitably reflects the successors in interest
to
the Partners).
(2) Thereafter,
the balance of the Net Operating Income, if any, shall be allocated to the
Partners in accordance with their respective Percentage Interests.
(b) Net
Operating Loss.
Except
as otherwise provided herein, Net Operating Loss of the Partnership for each
fiscal year or other applicable period shall be allocated as
follows:
(1) To
the
Partners in accordance with their respective Percentage Interests.
(2) Notwithstanding
subparagraph
1(b)(1)
hereof,
to the extent any Net Operating Loss allocated to a Partner under subparagraph
1(b)(1)
hereof
or this subparagraph
1(b)(2)
would
cause such Partner (hereinafter, a "Restricted
Partner")
to
have an Adjusted Capital Account Deficit as of the end of the fiscal year to
which such Net Operating Loss relates, such Net Operating Loss shall not be
allocated to such Restricted Partner and instead shall be allocated to the
other
Partner(s) (hereinafter, the "Permitted
Partners")
pro
rata
in
accordance with their relative Percentage Interests.
(c) Notwithstanding
Sections
1(a)
and
(b)
above,
on any date on which any Series B Preferred Stock, any Series D Preferred Stock,
any Series F Preferred Stock, any Series G Preferred Stock, any Series B
Preferred Unit, any Series D Preferred Unit (or other Preferred Stock or other
Preferred Units) is outstanding, Net Operating Income and Net Operating Loss
shall be allocated as follows:
(1) Net
Operating Income for any fiscal year or other applicable period shall be
allocated in the following order and priority:
(i) First,
to
the Partners, until the cumulative Net Operating Income allocated pursuant
to
this subparagraph
1(c)(1)(i)
for the
current and all prior periods equals the cumulative Net Operating Loss allocated
pursuant to subparagraphs
1(c)(2)(iii) and (iv) hereof
for all prior periods, among the Partners in the same ratio and reverse order
that such Net Operating Loss was allocated (and, in the event of a shift of
a
Partner's interest in the Partnership, to the Partners in a manner that most
equitably reflects the successors-in-interest to such Partners).
(ii) Second,
to the General Partner, until the cumulative Net Operating Income allocated
pursuant to this subparagraph
1(c)(1)(ii)
for the
current and all prior periods equals the cumulative Net Operating Loss allocated
pursuant to subparagraph
1(c)(2)(ii)
hereof
for all prior periods;
(iii) Third,
on
a pari passu basis, to (A) the General Partner until the cumulative amount
of
Net Operating Income allocated pursuant to this subparagraph
1(c)(1)(iii)
equals
the total amount of dividends paid on the Series B Preferred Stock, the Series
D
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock
(and other Preferred Stock) as of or prior to the date of such allocation plus
the total amount of accrued but unpaid dividends on the Series B Preferred
Stock, the Series D Preferred Stock, the Series F Preferred Stock and the Series
G Preferred Stock (and other Preferred Stock) as of such date; (B) to the
holders of Series B Preferred Units until the cumulative amount of Net Operating
Income allocated pursuant to this subparagraph
1(c)(1)(iii)
equals
the total amount of Priority Return paid on the Series B Preferred Units as
of
or prior to the date of such
1
allocation
plus the total amount of accrued but unpaid Priority Return on the Series B
Preferred Units; and (C) to the holders of Series D Preferred Units until the
cumulative amount of Net Operating Income allocated pursuant to this
subparagraph 1(c)(1)(iii)
equals
the total amount of Priority Return paid on the Series D Preferred Units as
of
or prior to the date of such allocation plus the total amount of accrued but
unpaid Priority Return on the Series D Preferred Units.
(iv) Thereafter,
the balance of the Net Operating Income, if any, shall be allocated to the
Partners in accordance with their respective Percentage Interests.
(2) Net
Operating Loss of the Partnership for each fiscal year or other applicable
period shall be allocated as follows:
(i) First,
to
the Partners in accordance with their respective Percentage Interests until
the
Capital Account balances of the Limited Partners (not including the holders
of
the Series B Preferred Units and the Series D Preferred Units) are reduced
to
zero (for purposes of this calculation, each Partner's Capital Account balance
shall be credited with the amount such Partner is obligated to restore pursuant
to the provisions of Section 1.704-1(b)(2)(ii)(c) of the Regulations, or is
deemed to be obligated to restore with respect to any deficit balance pursuant
to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations);
(ii) Second,
on a pari passu basis, to (A) the General Partner until its Capital Account
balance has been reduced to zero; (B) to the holders of Series B Preferred
Units
until their Capital Account balances have been reduced to zero (for purposes
of
this calculation, such Partners' share of Partnership Minimum Gain shall be
added back to their Capital Accounts); and (C) to the holders of Series D
Preferred Units until their Capital Account balances have been reduced to zero
(for purposes of each such calculation, each Partner's Capital Account balance
shall be credited with the amount such Partner is obligated to restore pursuant
to the provisions of Section 1.704-1(b)(2)(ii)(c) of the Regulations, or is
deemed to be obligated to restore with respect to any deficit balance pursuant
to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(1)(5) of
the
Regulations);
(iii) Thereafter,
to the Partners in accordance with their then Percentage Interests;
(iv) Notwithstanding
subparagraph 2(c)(2)(iii) hereof, to the extent any Net Operating Loss allocated
to a Partner under subparagraph 2(c)(2) would cause such Partner (hereinafter,
a
"Restricted
Partner")
to
have an Adjusted Capital Account Deficit as of the end of the fiscal year to
which such Net Operating Loss relates, such Net Operating Loss shall not be
allocated to such Restricted Partner and instead shall be allocated to the
other
Partner(s) (hereinafter, the "Permitted
Partners")
pro
rata in accordance with their relative Percentage Interests.
(d) Adjustment
of Percentage Interests Upon Conversion of Convertible Preferred Stock to Common
Stock.
Upon
the conversion of any Series G Preferred Stock to Common Stock of the General
Partner, the Percentage Interests of the Partners shall be adjusted in
accordance with the provisions of Article IV
of the
Partnership Agreement as if, on the date of such conversion, the General Partner
had made an additional Capital Contribution to the Partnership in an amount
equal to the number of shares of Common Stock issued as a result of such
conversion multiplied by the fair market value of such shares on the date of
conversion, and provided
that in
calculating such adjustments, the General Partner shall be deemed not to have
incurred any expenses in connection with raising the funds used to make such
additional Capital Contribution.
2. Allocation
of Net Property Gain and Net Property Loss.
After
the
allocation of Net Operating Income or Net Operating Loss has been made pursuant
to Section
1
above,
Net Property Gain and Net Property Loss shall be allocated as
follows:
(a) Net
Property Gain.
Except
as otherwise provided herein, Net Property Gain for any fiscal year or other
applicable period shall be allocated in the following order and
priority:
(1) First,
to
the Partners, until the cumulative Net Property Gain allocated pursuant to
this
subparagraph
2(a)(1)
for the
current and all prior periods equals the cumulative Net Property Loss allocated
pursuant to subparagraph
2(b)(2)
hereof
for all prior periods, among the Partners in the same ratio and reverse order
that
2
such
Net
Property Loss was allocated to the Partners pursuant to subparagraph
2(b)(2)
hereof
(and, in the event of a shift of a Partner's interest in the Partnership, to
the
Partners in a manner that most equitably reflects the successors in interest
to
the Partners).
(2) Thereafter,
the balance of the Net Property Gain, if any, shall be allocated to the Partners
in accordance with their respective Percentage Interests.
(b) Net
Property Loss.
Except
as otherwise provided herein, Net Property Loss of the Partnership for each
fiscal year or other applicable period shall be allocated as
follows:
(1) To
the
Partners in accordance with their respective Percentage Interests.
(2) Notwithstanding
subparagraph
2(b)(1)
hereof,
to the extent any Net Property Loss allocated to a Partner under subparagraph
2(b)(1)
hereof
or this subparagraph
2(b)(2)
would
cause such Partner (hereinafter, a "Restricted
Partner")
to
have an Adjusted Capital Account Deficit as of the end of the fiscal year to
which such Net Property Loss relates, such Net Property Loss shall not be
allocated to such Restricted Partner and instead shall be allocated to the
other
Partner(s) (hereinafter, the "Permitted
Partners")
pro
rata
in
accordance with their relative Percentage Interests.
(c) Notwithstanding
Sections
2(a) and (b)
above,
on any date on which any Series B Preferred Stock, any Series D
Preferred Stock, any Series F Preferred Stock, any Series G Preferred Stock,
any
Series B Preferred Unit, or any Series D Preferred Unit (or other Preferred
Stock or other Preferred Units) is outstanding, Net Property Gain and Net
Property Loss shall be allocated as follows:
(1) Net
Property Gain for any fiscal year or other applicable period shall be allocated
in the following order and priority:
(i) First,
to
the Partners, until the cumulative Net Property Gain allocated pursuant to
this
subparagraph
2(c)(1)(i)
for the
current and all prior periods equals the cumulative Net Property Loss allocated
pursuant to subparagraphs
2(c)(2)(iii) and (iv)
hereof
for all prior periods, among the Partners in the same ratio and reverse order
that such Net Property Loss was allocated (and, in the event of a shift of
a
Partner's interest in the Partnership, to the Partners in a manner that most
equitably reflects the successors in interest to such Partners);
(ii) Second,
to the General Partner, until the cumulative Net Property Gain allocated
pursuant to this subparagraph
2(c)(1)(ii)
for the
current and all prior periods equals the cumulative Net Property Loss allocated
pursuant to subparagraph
2(c)(2)(ii)
hereof
for all prior periods;
(iii) Third,
on
a pari passu basis, to (A) the General Partner until the sum of (x) the total
cumulative amount of Net Operating Income allocated to the General Partner
under
Section
1(c)(1)(iii)
for the
current and all prior periods plus (y) the total cumulative amount of Net
Property Gain allocated pursuant to this subparagraph
2(c)(1)(iii)
equals
the total amount of dividends paid on the Series B Preferred Stock, the Series
D
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock
(and other Preferred Stock) as of or prior to the date of such allocation plus
the total amount of accrued but unpaid dividends on the Series B Preferred
Stock, the Series D Preferred Stock, the Series F Preferred Stock and the Series
G Preferred Stock (and other Preferred Stock) as of such date; (B) to the
holders of Series B Preferred Units until the sum of (x) the total cumulative
amount of Net Operating Income allocated to the holders of the Series B
Preferred Units under Section
1(c)(l)(iii)
for the
current and all prior periods plus (y) the total cumulative amount of Net
Property Gain allocated pursuant to this subparagraph
2(c)(1)(iii)
to the
holders of the Series B Preferred Units equal the total amount of Priority
Return paid on the Series B Preferred Units as of or prior to the date of such
allocation plus the total amount of accrued but unpaid Priority Return on the
Series B Preferred Units; (C) to the holders of Series D Preferred Units until
the sum of (x) the total cumulative amount of Net Operating Income allocated
under Section
1(c)(1)(iii)
for the
current and all prior periods plus (y) the cumulative amount of Net Property
Gain allocated pursuant to this subparagraph
2(c)(1)(iii)
to the
holders of the Series D Preferred Units equals the total amount of Priority
Return paid on the Series D Preferred Units as of or prior to the date of such
allocation plus the total amount of accrued but unpaid Priority Return on the
Series D Preferred Units.
3
(iv) Thereafter,
the balance of the Net Property Gain, if any, shall be allocated to the Partners
in accordance with their respective Percentage Interests.
(2) Net
Property Loss of the Partnership for each fiscal year or other applicable period
shall be allocated as follows:
(i) First,
to
the Partners in accordance with their respective Percentage Interests until
the
Capital Account balances of the Limited Partners (not including the holders
of
the Series B Preferred Units and the Series D Preferred Units) are reduced
to
zero (for purposes of this calculation, such Partners' share of Partnership
Minimum Gain shall be added back to their Capital Accounts);
(ii) Second,
on a pari passu basis, to (A) the General Partner until its Capital Account
balance has been reduced to zero (for purposes of this calculation, such
Partner's share of Partnership Minimum Gain shall be added back to its Capital
Account); (B) to the holders of Series B Preferred Units until their Capital
Account balances have been reduced to zero (for purposes of this calculation,
such Partners' share of Partnership Minimum Gain shall be added back to their
Capital Accounts); and (C) to the holders of Series D Preferred Units until
their Capital Account balances have been reduced to zero (for purposes of this
calculation, such Partners' share of Partnership Minimum Gain shall be added
back to their Capital Accounts);
(iii) Thereafter,
to the Partners in accordance with their then Percentage Interests;
(iv) Notwithstanding
subparagraph 2(c)(2)(iii) hereof, to the extent any Net Property Loss allocated
to a Partner under subparagraph 2(c)(2) would cause such Partner (hereinafter,
a
"Restricted
Partner")
to
have an Adjusted Capital Account Deficit as of the end of the fiscal year to
which such Net Property Loss relates, such Net Property Loss shall not be
allocated to such Restricted Partner and instead shall be allocated to the
other
Partner(s) (hereinafter, the "Permitted
Partners")
pro
rata in accordance with their relative Percentage Interests.
(d) Special
Allocation to Holders of Series Z Incentive Units.
(1) Subject
only to the provisions of Section
2(c)(1)(iii)
but
notwithstanding any other provision of this Section
2,
in the
year in which the Partnership sells or otherwise disposes of all or
substantially all of its assets in a single transaction or a series of related
transactions, Net Property Gain shall first be allocated to the holders of
the
Series Z Incentive Units pro
rata
in
proportion to the number of such Series Z Incentive Units outstanding, until
the
Capital Account balance attributable to each such Series Z Incentive Unit is
equal to (A) the aggregate Capital Account balance attributable to the Common
Units outstanding (including any other Partnership Units convertible into Common
Units) divided by (B) the number of such Common Units outstanding. If Net
Property Gain is insufficient to make the full allocation provided in the
preceding sentence, then, in lieu of such special allocation of Net Property
Gain provided in the preceding sentence, items of gross capital gain shall
be
allocated to the holders of Series Z Incentive Units, and, if such gross items
are insufficient to make the full required allocation, items of gross capital
loss shall be allocated pro rata with respect to such Common Units. The
allocations pursuant to this paragraph (d) shall be made after the allocation
of
Net Operating Income or Net Operating Loss for the applicable period in which
such sale or other disposition occurs. For purposes of this clause (1) of this
Section
2(d)
"all or
substantially all" means assets representing not less than 95% of the aggregate
fair market value of the Partnership's assets.
(2) Notwithstanding
anything herein to the contrary, for the 12-month period following the
occurrence of a Change of Control (A) Net Operating Loss and Net Property Loss,
if any, shall be allocated pursuant to Section
1(b)
or
1(c)(2),
as
applicable, or Section
2(b)
or
2(c)(2),
as
applicable, as if the Percentage Interest of each Series Z Partner were zero,
and (B) with respect to each Series Z Partner at the earlier of (x) the date
such Partner makes the election to convert his Series Z Incentive Units pursuant
to Section
10.9(b)(i)
or (y)
the expiration of a period of twelve (12) months after such Change in Control,
items of income, gain, deduction and loss shall be allocated so as to cause
the
Capital Account balance of each such Series Z Partner, and, as soon as possible
after the end of such twelve month period, the Capital Account balances of
all
Partners, to be in the same ratio and amounts as if the allocations required
by
clause (A) of this Section
2(d)(2)
had not
been made.
(e) Special
Allocation to Holders of Series Z-1 Incentive Units.
4
(1) Subject
only to the provisions of Section
2(c)(1)(iii)
but
notwithstanding any other provision of this Section
2,
in the
year in which the Partnership sells or otherwise disposes of all or
substantially all of its assets in a single transaction or a series of related
transactions, Net Property Gain shall first be allocated to the holders of
the
Series Z-1 Incentive Units pro rata in proportion to the number of such Series
Z-1 Incentive Units outstanding, until the Capital Account balance attributable
to each such Series Z-1 Incentive Unit is equal to (A) the aggregate Capital
Account balance attributable to the Common Units outstanding (including any
other Partnership Units convertible into Common Units) divided by (B) the number
of such Common Units outstanding. If Net Property Gain is insufficient to make
the full allocation provided in the preceding sentence, then, in lieu of such
special allocation of Net Property Gain provided in the preceding sentence,
items of gross capital gain shall be allocated to the holders of Series Z-1
Incentive Units, and, if such gross items are insufficient to make the full
required allocation, items of gross capital loss shall be allocated pro rata
with respect to such Common Units. The allocations pursuant to this paragraph
(d) shall be made after the allocation of Net Operating Income or Net Operating
Loss for the applicable period in which such sale or other disposition occurs.
For purposes of this clause (1) of this Section
2(e)
"all or
substantially all" means assets representing not less than 95% of the aggregate
fair market value of the Partnership's assets.
(2) Notwithstanding
anything herein to the contrary, for the 12-month period following the
occurrence of a Series Z-1 Change of Control (A) Net Operating Loss and Net
Property Loss, if any, shall be allocated pursuant to Section
1(b)
or
1(c)(2),
as
applicable, or Section
2(b)
or
2(c)(2),
as
applicable, as if the Percentage Interest of each Series Z-1 Partner were zero,
and (B) with respect to each Series Z-1 Partner at the earlier of (x) the date
such Partner makes the election to convert his Series Z- 1 Incentive Units
pursuant to Section
10.10(b)(i)
or (y)
the expiration of a period of twelve (12) months after such Series Z-1 Change
in
Control, items of income, gain, deduction and loss shall be allocated so as
to
cause the Capital Account balance of each such Series Z-1 Partner, and, as
soon
as possible after the end of such twelve month period, the Capital Account
balances of all Partners, to be in the same ratio and amounts as if the
allocations required by clause (A) of this Section
2(e)(2)
had not
been made.
(f) Definition
of Percentage Interest.
Solely
for purposes of allocating Net Property Gain and Net Property Loss under this
Section
2,
the
Percentage Interest of a Series Z Incentive Unit holder attributable to such
Units shall be deemed to be the undivided percentage ownership interest of
such
holder in the Partnership as determined by dividing (A) the total number of
outstanding Series Z Incentive Units owned by such holder by (B) the total
number of Partnership Units then outstanding (excluding the Series B Preferred
Interest, the Series B Preferred Units, the Series D Preferred Interest, the
Series D Preferred Units, the Series F Preferred Interest and the Series G
Preferred Interest). Solely for purposes of allocating Net Property Gain and
Net
Property Loss under this Section
2,
the
Percentage Interest of a Series Z-1 Incentive Unit holder attributable to such
Units shall be deemed to be the undivided percentage ownership interest of
such
holder in the Partnership as determined by dividing (A) the total number of
outstanding Series Z-1 Incentive Units owned by such holder by (B) the total
number of Partnership Units then outstanding (excluding the Series B Preferred
Interest, the Series B Preferred Units, the Series D Preferred Interest, the
Series D Preferred Units, the Series F Preferred Interest and the Series G
Preferred Interest).
(g) Book-Up
and Capital Account Adjustments.
On any
day on which (i) Series G Preferred Stock (or other Preferred Stock), any series
of Preferred Units or Incentive Units are redeemed or converted into Common
Stock or Common Units, (ii) Percentage Interests are adjusted in the manner
required in subparagraph 1(d), or (iii) in connection with the issuance of
the
Series Z Incentive Units or the Series Z-1 Incentive Units, the Partnership
shall adjust the Gross Asset Values of all Partnership assets to equal their
respective gross fair market values and shall allocate the amount of such
adjustment as Net Property Gain or Net Property Loss pursuant to Section
2(c)
hereof,
provided,
however,
that if
no Series G Preferred Stock (or other Preferred Stock) is outstanding after
such
redemption or conversion, such Net Property Gain or Net Property Loss shall
be
allocated in such a manner that after such allocation the Capital Accounts
of
the Partners are in proportion to their Percentage Interests.
3. Special
Allocations.
Notwithstanding
any provision of Sections
1 and 2
of this
Exhibit
E,
the
following special allocations shall be made in the following order:
5
(a) Minimum
Gain Chargeback (Nonrecourse Liabilities).
If
there is a net decrease in Partnership Minimum Gain for any Partnership fiscal
year (except as a result of conversion or refinancing of Partnership
indebtedness, certain capital contributions or revaluation of the Partnership
property as further outlined in Regulation Sections 1.704-2(d)(4), (f)(2) or
(f)(3)), each Partner shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an amount equal
to that Partner's share of the net decrease in Partnership Minimum Gain. The
items to be so allocated shall be determined in accordance with Regulation
Section 1.704- 2(f). This paragraph
3(a)
is
intended to comply with the minimum gain chargeback requirement in said section
of the Regulations and shall be interpreted consistently therewith. Allocations
pursuant to this paragraph
3(a)
shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) Minimum
Gain Attributable to Partner Nonrecourse Debt.
If
there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse
Debt
during any fiscal year (other than due to the conversion, refinancing or other
change in the debt instrument causing it to become partially or wholly
nonrecourse, certain capital contributions, or certain revaluations of
Partnership property as further outlined in Regulations Sections 1.704-2(i)(4),
each Partner shall be specially allocated Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to that Partner's
share of the net decrease in the Minimum Gain Attributable to Partner
Nonrecourse Debt. The items to be so allocated shall be determined in accordance
with Regulation Section 1.704-2(i)(4) and (j)(2). This paragraph
3(b)
is
intended to comply with the minimum gain chargeback requirement with respect
to
Partner Nonrecourse Debt contained in said section of the Regulations and shall
be interpreted consistently therewith. Allocations pursuant to this paragraph
3(b)
shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(c) Qualified
Income Offset.
In the
event a Limited Partner unexpectedly receives any adjustments, allocations
or
distributions described in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5),
or (6), and such Limited Partner has an Adjusted Capital Account Deficit, items
of Partnership income and gain shall be specially allocated to such Partner
in
an amount and manner sufficient to eliminate the Adjusted Capital Account
Deficit as quickly as possible. This paragraph
3(c)
is
intended to constitute a "qualified income offset" under Regulation
Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
(d) Nonrecourse
Deductions.
Nonrecourse Deductions for any fiscal year or other applicable period shall
be
allocated to the Partners in accordance with their respective Percentage
Interests.
(e) Partner
Nonrecourse Deductions.
Partner
Nonrecourse Deductions for any fiscal year or other applicable period shall
be
specially allocated to the Partner that bears the economic risk of loss for
the
debt (i.e., the Partner Nonrecourse Debt) in respect of which such Partner
Nonrecourse Deductions are attributable (as determined under Regulation Section
1.704-2(b)(4) and (i)(1)).
(f) Curative
Allocations.
The
allocations set forth in paragraphs
(a)-(e)
and
Section 1(b)(2),
Section 1(c)(2)(iv), Section 2(b)(2)
and
Section
2(c)(2)(iv),
(the
"Regulatory
Allocations")
are
intended to comply with the requirements of Treasury Regulations Sections
1.704-1 (b) and 1.704-2. Notwithstanding any other provisions of Sections
1 and 2,
the
Regulatory Allocations shall be taken into account in allocating other items
of
income, gain, deduction and loss among the Partners so that, to the extent
possible, the net amount of such allocations of other items and the Regulatory
Allocations to each Partner shall be equal to the net amount that would have
been allocated to each such Partner if the Regulatory Allocations had not
occurred. This paragraph
(f)
shall be
interpreted and applied in such a manner and to such extent as is reasonably
necessary to eliminate, as quickly as possible, permanent economic distortions
that would otherwise occur as a consequence of the Regulatory Allocations in
the
absence of this paragraph
(f).
4. Tax
Allocations.
(a) Generally.
Subject
to paragraphs
4(b) and (c)
hereof,
items of income, gain, loss, deduction and credit to be allocated for income
tax
purposes (collectively, "Tax
Items")
shall
be allocated among the Partners on the same basis as their respective book
items.
6
(b) Sections
1245/1250 Recapture.
If any
portion of gain form the sale of property is treated as gain which is ordinary
income by virtue of the application of Code Section 1245 or 1250 ("Affected
Gain"),
then
(A) such Affected Gain shall be allocated among the Partners in the same
proportion that the depreciation and amortization deductions giving rise to
the
Affected Gain were allocated and (B) other Tax Items of gain of the same
character that would have been recognized, but for the application of Code
Sections 1245 and/or 1250, shall be allocated away from those Partners who
are
allocated Affected Gain pursuant to Clause (A) so that, to the extent possible,
the other Partners are allocated the same amount, and type, of capital gain
that
would have been allocated to them had Code Sections 1245 and/or 1250 not
applied; provided,
however,
that
the net amount of Tax Items allocated to each Partner shall be the same as
if
this paragraph 4(b) did not exist. For purposes hereof, in order to determine
the proportionate allocations of depreciation and amortization deductions for
each fiscal year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Property Gain and Net Property Loss for
such
respective period.
(c) Allocations
Respecting Section 704(c) and Revaluations.
If any
Partnership property is subject to Code Section 704(c) or is reflected in the
Capital Accounts of the Partners and on the books of the Partnership at a book
value that differs from the adjusted tax basis of such property, then the tax
items with respect to such property shall, in accordance with the requirements
of Regulations Section 1.704-1(b)(4)(i), be shared among the Partners in a
manner that takes account of the variation between the adjusted tax basis of
the
applicable property and its book value in the same manner as variations between
the adjusted tax basis and fair market value of property contributed to the
Partnership are taken into account in determining the Partners' share of tax
items under Code Section 704(c). The General Partner is authorized to choose
any
reasonable method permitted by the Regulations pursuant to Code Section 704(c),
including the "remedial allocation" method, the "curative allocation" method
and
the traditional method; provided
that the
General Partner agrees to use reasonable efforts to minimize the amount of
taxable income in excess of book income allocated to the holders of the Series
B
Preferred Units and the Series D Preferred Units.
(d) Code
Section 752 Specification.
Pursuant to Regulations Section 1.752-3, the Partners' interest in Partnership
profits for purposes of determining the Partners' shares of excess nonrecourse
liabilities shall be their Percentage Interests.
7
