AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PHILIPS INTERNATIONAL REALTY, L.P.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS............................................2
ARTICLE 2 CONTINUATION OF THE PARTNERSHIP..................... .13
2.1 Continuation.............................................13
2.2 Entire Agreement.........................................14
ARTICLE 3 NAME AND OFFICES......................................14
3.1 Name.....................................................14
3.2 Principal and Registered Offices.........................14
ARTICLE 4 PURPOSE...............................................15
4.1 Purpose..................................................15
4.2 Powers...................................................15
ARTICLE 5 TERM AND FISCAL YEAR..................................16
5.1 Term.....................................................16
5.2 Fiscal Year..............................................16
ARTICLE 6 CAPITAL CONTRIBUTIONS, ADDITIONAL FUNDING AND CAPITAL
ACCOUNTS........................................................16
6.1 Capital Contributions of the General Partner and the
Interim Managing General Partner.........................16
6.2 Capital Contributions of the Limited Partners............18
6.3 General Partner Option to Contribute Additional Capital..19
6.4 General Partner Option to Issue Additional Partnership
Units to Limited Partners................................20
6.5 Capital Accounts.........................................23
6.6 Limited Liability........................................24
6.7 Return of Capital........................................24
6.8 No Interest on Capital Contributions.....................25
6.9 No Third Party Beneficiary...............................25
6.10 Common Stock Option Plans...............................25
ARTICLE 7 ALLOCATION OF PROFITS AND LOSSES......................26
7.1 General Allocation of Profits and Losses.................26
7.2 Allocations with Respect to Transferred Interests.......26
7.3 Deficit Restoration Obligation..........................26
7.4 Regulatory Allocations....................................27
(a) Minimum Gain Chargeback..............................27
(b) Exceptions to Section 7.4(a).........................27
(c) Qualified Income Offset..............................28
(d) Gross Income Allocation..............................28
(e) Partner Nonrecourse Debt.............................28
(f) Interpretation.......................................29
(g) Curative Allocations.................................29
7.5 Special Allocations with Respect to Contributed
or Revalued Property.. ...................................29
7.6 Allocations with Respect to Partnership Units other than
OP Units..................................................30
ARTICLE 8 DISTRIBUTIONS..........................................30
8.1 Distribution of Net Cash Flow.............................30
8.2 Distributions in Kind.....................................31
8.3 31
8.4 Distributions with Respect to Partnership Units other
than OP Units. ...........................................32
ARTICLE 9 MANAGEMENT.............................................32
9.1 Management of Partnership Affairs.........................32
9.2 Powers and Authorities of the General Partner.............34
9.3 Major Decisions..........................................37
9.4 Restrictions on General Partner's Authority...............38
9.5 Engagements by the Partnership............................38
9.6 Engagement of Affiliates..................................39
9.7 Liability of the General Partner..........................39
9.8 Reimbursement of Certain Expenses of the
General Partner ..........................................39
9.9 Outside Activities of the General Partner.................40
9.10 Operation in Accordance with REIT Requirements...........41
9.11 Title Holder.............................................42
ARTICLE 10 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............42
10.1 No Participation in Management of Partnership; Rights
of Limited Partners to Certain Documents.................42
10.2 Withdrawal, Retirement, Death, Incompetency,
Insolvency or Dissolution of a Limited Partner...........43
10.3 Redemption Rights........................................44
(a) Grant of Rights.......................................44
(b) Delivery of Exercise Notices..........................44
ii
(c) Assumption by General Partner........................ 44
(d) Limitation on Exercise of Redemption Rights.......... 45
(e) Computation of Number of Exchange Shares and/or
Cash To Be Paid...................................... 46
(f) Closing; Delivery of Election Notice................. 47
(g) Closing Deliveries................................... 47
(h) Restriction on Redemption of Partnership Units........48
(i) Term of Rights....................................... 49
(j) (i) Covenants of the General Partner................ 49
(k) Limited Partners' Covenant........................... 51
ARTICLE 11 BANKING, RECORDS AND TAX MATTERS..................... 51
11.1 Partnership Funds....................................... 51
11.2 Books and Records....................................... 51
11.3 Financial Statements.................................... 52
11.4 Tax Returns............................................. 52
11.5 Section 754 Matters..................................... 52
11.6 Tax Matter Partners..................................... 52
11.7 Other Reports........................................... 53
ARTICLE 12 TRANSFER OF GENERAL PARTNER INTERESTS................ 53
12.1 Transfer of Interest of the General Partner............. 53
12.2 Retirement of the General Partner....................... 53
12.3 Transferee of the General Partner's Interest............ 54
12.4 Retirement of Last Remaining General Partner............ 54
12.5 Continuation of Partnership............................. 55
12.6 Merger or Consolidation of the General Partner.......... 55
ARTICLE 13 TRANSFER OF LIMITED PARTNER INTERESTS................ 57
13.1 Transfer of Interest of a Limited Partner............... 57
13.2 Assignee and Substitute Limited Partners................ 58
13.3 Assignment.............................................. 58
13.4 Cost of Admission....................................... 59
ARTICLE 14 DISSOLUTION AND LIQUIDATION OF PARTNERSHIP........... 59
14.1 Dissolution of the Partnership.......................... 59
14.2 Winding Up of Affairs................................... 60
14.3 Accounting.............................................. 60
14.4 Final Distribution of Partnership Property.............. 60
14.5 Certificate of Cancellation............................. 61
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ARTICLE 15 POWER OF ATTORNEY.......................................61
15.1 Power of Attorney..........................................61
15.2 Grant of Authority Irrevocable.............................62
ARTICLE 16 AMENDMENT OF PARTNERSHIP AGREEMENT......................62
16.1 Amendments by Partners.....................................62
16.2 Amendment by the General Partner...........................63
16.3 Amendment of Certificate...................................64
ARTICLE 17 INDEMNIFICATION.........................................65
17.1 Indemnification............................................65
17.2 Partner Indemnification of Partnership.....................67
ARTICLE 18 MISCELLANEOUS PROVISIONS................................67
18.1 Notices....................................................67
18.2 Severability...............................................67
18.3 Parties Bound..............................................68
18.4 Applicable Law.............................................68
18.5 Partition..................................................68
18.6 Computation of Accountants.................................68
18.7 Headings...................................................68
18.8 Counterparts ..............................................68
Exhibit A - Partners and Partnership Units
Exhibit B - Form of Unit Certificate
iv
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PHILIPS INTERNATIONAL REALTY, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
(this "Agreement") of PHILIPS INTERNATIONAL REALTY, L.P., a Delaware
limited partnership (the "Partnership"), is made and entered into as
of the 16th day of April, 1998, by and among PHILIPS INTERNATIONAL
REALTY CORP., a Maryland corporation, as general partner, PHILIPS
INTERNATIONAL REALTY, LLC, a Delaware limited liability company, as
interim managing general partner, and those parties who are designated
as limited partners on Exhibit A attached hereto and made a part
hereof by this reference, as limited partners.
R E C I T A L S:
WHEREAS, the Partnership was previously formed pursuant to
that certain Agreement of Limited Partnership, dated as of July 16,
1997 (the "Original Agreement"), and that certain Certificate of
Limited Partnership, dated as of July 16, 1997, which was filed with
the Secretary of State of Delaware on July 17, 1997;
WHEREAS, the Partnership entered into that certain
Contribution and Exchange Agreement, dated as of August 11, 1997, as
amended by Amendment No. 1, dated as of December 29, 1997 (the
"Contribution and Exchange Agreement"), among the Partnership,
National Properties Investment Trust, a Massachusetts business trust
("National"), Philips International Realty Corp. and the parties
designated as limited partners on Exhibit A attached hereto, whereby
the partners contributed to the Partnership, directly or indirectly,
all of the partners' right, title and interest in and to their
respective properties, on the terms and conditions set forth therein;
WHEREAS, the Original Agreement was amended and restated
pursuant to the terms of that certain Agreement of Limited
Partnership, dated as of December 31, 1997, (the LP Agreement");
WHEREAS, the parties hereto desire to continue the
Partnership and amend and restate the terms and provisions of the
LP Agreement in its entirety, all upon the terms and provisions, and
subject to the conditions, set forth herein;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, unless otherwise clearly indicated
to the contrary, the following terms have the meanings set forth
below.
"Accountants" shall mean the firm or firms of independent
certified public accountants selected from time to time by the General
Partner on behalf of the Partnership to audit the books and records of
the Partnership and to prepare statements and reports in connection
therewith.
"Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time subsequent to the date
hereof.
"Additional Partnership Units" shall have the definition
assigned to such term in Section 6.3 hereof.
"Additional Limited Partner" shall have the definition
assigned to such term in Section 6.4 hereof.
"Affiliate" shall mean, with respect to any Partner (or as to
any other Person the affiliates of whom are relevant for purposes of
any of the provisions of this Agreement), (i) any member of the
Immediate Family of such Partner; (ii) any trustee or beneficiary of a
Partner; (iii) any legal representative or successor of such Partner
or any Person referred to in the preceding clauses (i) and (ii); (iv)
any trustee for the benefit of such Partner or any Person referred to
in the preceding clauses (i) through (iii); or (v) any Person which
directly or indirectly through one or more intermediaries, Controls,
is Controlled by, or is under common Control with such Partner or any
Person referred to in the preceding clauses (i) through (iv).
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"Agreed Value" shall mean, with respect to any property
contributed by a Partner to the Partnership hereunder, an amount equal
to (i) the Gross Asset Value of the Capital Contribution determined as
of the date of such contribution, less (ii) the amount of any and all
liabilities securing such contributed property that the Partnership is
considered to assume or take subject to with respect to such property
under Code Section 752 or the Regulations promulgated thereunder.
"Board of Directors" shall mean the Board of Directors of the
General Partner.
"Capital Account" shall have the definition assigned to such
term in Section 6.5 hereof.
"Capital Contribution" shall mean, with respect to any
Partner, the amount of money and the Agreed Value of any property
(other than money) contributed to the Partnership with respect to the
Partnership Interest held by such Partner.
"Certificate" shall mean the Partnership's Certificate of
Limited Partnership, as amended from time to time in accordance with
the terms hereof and the Act.
"Closing Price" shall mean, on any date, with respect to a
share of Common Stock, the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, for one share of Common Stock in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or if the
Common Stock is not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System or, if such system is no longer in
use, the principal other automated quotations system that may then be
in use or, if the Common Stock is not quoted by any such
3
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common
Stock as such person is selected from time to time by the Board of
Directors.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute thereto.
"Common Stock" shall mean the shares of the common stock, par
value $.01 per share, of the General Partner.
"Contribution and Exchange Agreement" shall have the meaning
assigned to such term in the Recitals set forth above.
"Control" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to
select the managing partner of a partnership, or otherwise to select,
or have the power to remove and then select, a majority of those
persons exercising governing authority over any particular entity. In
the case of a limited partnership, the sole general partner, all of
the general partners to the extent each has equal management control
and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership
and, in the case of a trust, any trustee thereof or any Person having
the right to select any such trustee shall be deemed to have control
of such trust.
"Current Per Share Market Price", on any date, shall mean the
average of the Closing Price for the five (5) consecutive Trading Days
ending on such date.
"Depreciation" shall mean, with respect to any asset of the
Partnership for any fiscal year or other period, the depreciation,
depletion, amortization or other cost recovery deduction, as the case
may be, allowed or allowable for Federal income tax purposes in
respect of such asset for such fiscal year or other period; provided,
however, that if there is a difference between the Gross Asset Value
and the adjusted tax basis of such asset, Depreciation shall mean
"book depreciation, depletion or amortization" as determined under
Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations.
4
"Excess Deficit Capital Account Balance" of any Partner shall
be the Capital Account balance of such Partner, adjusted as provided
in the immediately following sentence, to the extent, if any, that
such balance is a deficit (after adjustment). For purposes of
determining the existence and amount of an Excess Deficit Capital
Account Balance, the Capital Account balance of a Partner shall be
adjusted by: (i) crediting thereto (A) that portion of any deficit
Capital Account balance that such Partner is required to restore under
the terms of this Agreement or any other document, and (B) the amount
of such Partner's share of Minimum Gain, including any Partner
Nonrecourse Debt Minimum Gain; and (ii) charging thereto the items
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6)
that apply to such Partner. The existence and amount of Excess Deficit
Capital Account Balance at the end of any year shall be determined
before any other allocations provided for in Article 7 for such year
have been made.
"Exercise Notice" shall mean the written notice as described
in Section 10.3(b) hereof to be given by an Exercising Partner to the
General Partner to exercise Redemption Rights, the form of which
Exercise Notice is attached to the Unit Certificate as Attachment 1.
"Exercising Partners" shall have the meaning set forth in
Section 10.3(b) hereof.
"General Partner" shall mean Philips International Realty
Corp., a Maryland corporation, and any substitute or additional
General Partner(s) duly admitted pursuant to the terms of this
Agreement, or, where the context so requires, any successor General
Partner(s) acting pursuant to the provisions of this Agreement, or,
where the context so requires, the Interim Managing General Partner.
"Gross Asset Value" shall mean, with respect to any asset of
the Partnership, such asset's adjusted basis for Federal income tax
purposes, except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Partner shall be equal to the gross fair
market value of such asset without reduction for liabilities,
as determined by the General Partner, in its reasonable
discretion (as set forth on Exhibit C attached hereto and as
amended from time to time to reflect new
5
contributions); provided, however, that the Gross Asset
Value of the assets contributed by a Limited Partner
concurrent with an Offering or otherwise in exchange for
Partnership Units shall be equal to the product of (1) the
number of Partnership Units received by such Limited Partner
multiplied by (2) (i) the offering price per share of Common
Stock in connection with the Offering, or (ii) the Current
Per Share Price (as determined on the dates specified in
Article 6 of this Agreement) in connection with Partnership
Units issued subsequent to the Offering, and increased, in
both instances, by the amount of liabilities assumed or
taken subject to by the Partnership upon contribution.
(b) If the General Partner reasonably determines
that an adjustment is necessary or appropriate to reflect the
relative economic interests of the Partners, the Gross Asset
Values of all Partnership assets shall be adjusted to equal
their respective gross fair market values, as reasonably
determined by the General Partner, as of the following times:
(i) a Capital Contribution (other than a de
minimis Capital Contribution) to the
Partnership by a new or existing Limited
Partner as consideration for a Partnership
Interest;
(ii) the distribution by the Partnership to a
Partner of more than a de minimis amount of
Partnership money or property as
consideration for the redemption of a
Partnership Interest;
(iii) the liquidation of the Partnership within
the meaning of Section 1.704-1(b)(2)(ii)(g)
of the Regulations; and
(iv) any other time that such adjustment may be
made under the Code, the Regulations or any
administrative pronouncement or ruling by
the IRS.
(c) The Gross Asset Value of any Partnership asset
distributed to a Partner shall be the gross fair market
6
value of such asset as reasonably determined by the General
Partner as of the date of distribution; and
(d) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Sections
734(b) or 743(b) of the Code, but only to the extent that
such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of
the Regulations; provided, however, that Gross Asset Values
shall not be adjusted pursuant to this paragraph to the
extent that the General Partner reasonably determines that an
adjustment pursuant to paragraph (b) above is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this paragraph
(d).
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Partnership's assets for
purposes of computing Profits and Losses. Any adjustment to the Gross
Asset Values of Partnership property shall require an adjustment to
the Partners' Capital Accounts; as for the manner in which such
adjustments are allocated to the Capital Accounts, see clause (iii) of
the definition of Profits and Losses in the case of adjustment by
Depreciation, and clause (iv) of said definition in all other cases.
"Immediate Family" shall mean, with respect to any individual
Person, such individual Person's spouse, parents, parents-in-law,
descendants, nephews, nieces, brothers, sisters, brothers-in-law,
sisters-in-law and children-in-law.
"Indemnitee" means (i) the General Partner and the Interim
Managing General Partner (in their respective capacities as General
Partner and Interim Managing General Partner) and their respective
Affiliates, trustees, officers, directors, employees and agents, or
their respective successors, executors, administrators or personal
representatives, or (ii) any Partner by reason of his or its
liabilities, pursuant to a loan guarantee or otherwise, for any
indebtedness of the Partnership or any Affiliate of the Partnership
(including, without limitation, any indebtedness which the Partnership
or any Affiliate of the Partnership has assumed or taken assets
subject to).
7
"Interim Managing General Partner" shall mean Philips
International Realty, LLC, a Delaware limited liability company, and
any substitute or additional Interim Managing General Partner(s) duly
admitted pursuant to the terms of this Agreement and acting pursuant
to Section 9.1(b) of this Agreement, or, where the context so
requires, any successor Interim Managing General Partner(s), acting
pursuant to the provisions of this Agreement.
"IRS" means the Internal Revenue Service, which administers
the federal tax laws of the United States.
"Limited Partners" shall mean any Person named as a Limited
Partner on the Exhibit A attached hereto as such Exhibit may be
amended from time to time, or any substituted Limited Partner or
additional Limited Partner duly admitted to the Partnership pursuant
to the terms of this Agreement.
"Liquidation" shall mean the disposition of all or
substantially all of the assets of the Partnership pursuant to a
complete liquidation of the Partnership.
"Minimum Gain" shall have the meaning given such term in
Treasury Regulation Section 1.704-2(d), and shall generally mean the
amount by which the nonrecourse liabilities secured by any assets of
the Partnership exceed the adjusted tax basis of such assets as of the
date of determination. A Partner's share of Minimum Gain (and any net
decrease thereof) at any time shall be determined in accordance with
Treasury Regulation Section 1.704-2(g).
"Net Cash Flow" shall mean, with respect to any fiscal period
of the Partnership, the excess, if any, of "Receipts" over
"Expenditures." For purposes hereof, the term "Receipts" means the sum
of (i) all cash receipts of the Partnership from all sources for such
period, including Net Sale Proceeds and Net Financing Proceeds but
excluding Capital Contributions, and (ii) any amounts held as reserves
as of the last day of the period immediately prior to such fiscal
period that the General Partner deemed necessary for any capital or
operating expenditure permitted hereunder. The term "Expenditures"
means the sum of (a) all cash expenses of the Partnership for such
period, (b) the amount of all payments of principal and interest on
account of any indebtedness of the Partnership including payments of
principal and interest on account of any indebtedness owed to a
8
Partner during such period, (c) any amounts held as reserves as of the
last day of such fiscal period as the General Partner in its sole
discretion deems necessary for any capital or operating expenditures
permitted hereunder or reserves for any other purpose that the General
Partner in its sole discretion shall determine to be appropriate and
(d) any amounts held in working capital accounts or other cash or
similar balances which the General Partner determines to be necessary
or appropriate in its sole discretion. In the event the General
Partner issues additional classes of Partnership Units other than OP
Units, the General Partner may, to the extent necessary, in its sole
discretion, determine the amount of Net Cash Flow attributable to each
class of Partnership Units and the timing of payment thereof.
"Net Financing Proceeds" shall mean the cash proceeds
received by the Partnership in connection with any borrowing or
refinancing of borrowing by or on behalf of the Partnership (whether
or not secured), after deduction of all costs and expenses incurred by
the Partnership in connection with such borrowing, and after deduction
of that portion of such proceeds used to repay any other indebtedness
of the Partnership, or any interest or premium thereon.
"Net Sale Proceeds" means the cash proceeds received by the
Partnership in connection with a sale of any asset by or on behalf of
the Partnership after deduction of any costs or expenses incurred by
the Partnership, or payable specifically out of the proceeds of such
sale (including, without limitation, any repayment of any indebtedness
required to be repaid as a result of such sale or which the General
Partner elects to repay out of the proceeds of such sale, together
with accrued interest and premium, if any, thereon and any sales
commissions or other costs and expenses due and payable to any Person
in connection with a sale, including to a Partner or its Affiliates).
"Offered Units" shall mean the Partnership Units of the
Exercising Partners identified in an Exercise Notice which, pursuant
to the exercise of a Redemption Right, can be acquired by the General
Partner under the terms hereof.
"Offering" shall mean any public offering of the General
Partner's Common Stock under the Securities Act or private equity
placement of securities of the General Partner that occurs on or after
the date hereof.
9
"OP Units" shall mean those Partnership Units issued pursuant
to the terms of the Contribution and Exchange Agreement and any
additional OP Units issued by the General Partner pursuant to Article
6 hereof.
"Organizational Limited Partner" shall mean the initial
limited partner of the Partnership.
"Original Agreement" shall have the meaning assigned to such
term in the Recitals set forth above.
"Partner or Partners" shall mean, unless the context in which
the term is used requires otherwise, the General Partner, the Interim
Managing General Partner and the Limited Partners.
"Partner Nonrecourse Debt" shall have the meaning assigned to
such term in Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the
meaning assigned to such term in Regulation Section 1.704-2(i).
"Partnership" shall mean Philips International Realty, L.P.,
a Delaware limited partnership.
"Partnership Agreement" shall mean this Agreement of Limited
Partnership and the Exhibits and Schedules hereto, and any amendments
hereto from time to time.
"Partnership Interest" shall mean the ownership interest of a
Partner in the Partnership from time to time, including such Partner's
Percentage Interest and Capital Account and any and all other benefits
to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement and under applicable laws, together with
all obligations of such Person to comply with the terms and provisions
of this Agreement.
"Partnership Unit" shall mean a fractional, undivided share
of the Partnership Interests of all Partners issued pursuant to
Article 6 hereof; provided, however, that in the event the General
Partner issues classes of Partnership Units to Limited Partners other
than the OP Units pursuant to Section 6.4 hereof, the term Partnership
Unit shall mean with respect to each class of Partnership Units, a
fractional, undivided share of the Partnership Interests of all
Partners in such class. Currently,
10
each Partnership Unit may be redeemed for one share of Common Stock.
Accordingly, if the Common Stock of the General Partner (or any other
class of stock) undergoes any split or reverse split, then, without
any further action or consent by the General Partner or any Limited
Partner, each corresponding class of Partnership Unit that is
convertible into such stock shall similarly be split or combined by
the same ratio as was used to split or combine the stock. For example
if the Common Stock under a reverse 2 for 1 split (i.e. every two
shares of old Common Stock are converted into one share of new Common
Stock) then the corresponding class of Partnership Units shall undergo
a similar reverse split (i.e. every two old Partnership Units shall be
converted into one new Partnership Unit.
"Partnership Record Date" shall mean the record date
established by the General Partner for any particular distribution of
Net Cash Flow pursuant to Article 8 hereof, which record date shall be
the same as the record date established by the General Partner for
distribution to its stockholders of some or all of its portion of such
distribution.
"Percentage Interest" shall mean, with respect to any
Partner, its interest in the Partnership as determined by dividing the
Partnership Units owned by such Partner by the total number of
Partnership Units then issued and outstanding; provided, however, that
in the event the General Partner issues classes of Partnership Units
other than OP Units, the term Percentage Interest shall mean with
respect to any Partner, its interest in the Partnership as determined
by dividing the Partnership Units of each class owned by such Partner
by the total number of Partnership Units in such class then issued and
outstanding.
"Person" shall mean a natural person, corporation, trust,
partnership, estate, unincorporated association or other entity.
"Profits or Losses" shall mean, for each fiscal year or other
applicable period, an amount equal to the Partnership's net income or
loss for such year or period as determined for Federal income tax
purposes by the Accountants, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain, loss
or deduction required to be stated separately pursuant to Section
703(a) of the Code shall be included in taxable income or loss), with
the following adjustments: (i) by including as an item of gross income
any tax-exempt income
11
received by the Partnership; (ii) by treating as a deductible expense
any expenditure of the Partnership described in Section 705(a)(2)(B)
of the Code (including amounts paid or incurred to organize the
Partnership (unless an election is made pursuant to Code Section
709(b)) or to promote the sale of interests in the Partnership and by
treating deductions for any losses incurred in connection with the
sale or exchange of Partnership property disallowed pursuant to
Section 267(a)(1) or Section 707(b) of the Code as expenditures
described in Section 705(a)(2)(B) of the Code); (iii) in lieu of
depreciation, depletion, amortization and other cost recovery
deductions taken into account in computing total income or loss, there
shall be taken into account Depreciation; (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 Gross Asset Value of such property rather
than its adjusted tax basis; and (v) in the event of an adjustment of
the Gross Asset Value of any Partnership asset which requires that the
Capital Accounts of the Partnership be adjusted pursuant to Regulation
Section 1.704-1(b)(2)(iv)(e), (f) and (m), the amount of such
adjustment is to be taken into account as additional Profits or Losses
pursuant to Article 7.
"Properties" shall mean each of the following (i.e., those
partnerships or properties, as the case may be, in which, pursuant to
the Contribution and Exchange Agreement, the Partners are contributing
to the Partnership, directly or indirectly, all of their right, title
and interest as partners in such partnerships or owners of such
properties, as the case may be): (i) Palm Springs Mile Associates,
Ltd., (ii) Forest Avenue Shopping Associates, (iii) Philips Freeport
Associates, L.P., (iv) Xxxxxxx Shopping Associates, (v) SP Avenue U
Associates, L.P., (vi) Foxborough Shopping, L.L.C., (vii) Enfield
Shopping L.L.C., (viii) Delran Shopping L.L.C., (ix) Branhaven Plaza
LLC, and (x) The Shoppes at Xxxx Xxxx (the "National Property").
"Redemption Rights" shall have the meaning set forth in
Section 10.3(a) hereof.
"Regulations" shall mean the Treasury regulations promulgated
under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
12
"Regulatory Allocations" has the meaning set forth in Section
7.3(g) of this Agreement.
"REIT" shall mean a real estate investment trust under
Section 856 of the Code.
"REIT Requirements" shall mean any and all requirements that
must be met to qualify as a REIT under the Code and the Regulations.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Surviving Partnership" shall have the meaning set forth in
Section 12.6(b) hereof.
"Trading Day" shall mean a day on which the principal
national securities exchange on which the Common Stock is listed or
admitted to trading is open for the transaction of business or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange, any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Unit Certificate" shall have the meaning set forth in
Section 6.2 hereof.
ARTICLE 2
CONTINUATION OF THE PARTNERSHIP
2.1 Continuation. The Partners hereby continue the
Partnership as a limited partnership formed under and pursuant to the
terms and provisions of the Act, and the rights and obligations of the
Partners shall be as provided therein except as otherwise expressly
provided in this Agreement. The Partners agree to execute such
certificates or documents and do such filings and recordings and all
other acts, including the filing or recording of an amendment to the
Certificate and any assumed name certificates in the appropriate
offices in the State of Delaware and any other applicable
jurisdictions as may be required to comply with applicable law. The
Partners agree that immediately after the admission of one Limited
Partner, the
13
Organizational Limited Partner shall be deemed to have withdrawn from
the Partnership.
2.2 Entire Agreement. Each and every other agreement or
understanding, oral or written, relating in any way to the formation
or operation of the Partnership including, but not limited to, the
Original Agreement, is hereby superseded in its entirety. From and
after the execution of this Agreement, the same shall constitute the
only Agreement of Limited Partnership of the Partnership except as the
same may hereafter be amended pursuant to the provisions hereof. This
Agreement represents the entire agreement and understanding of the
parties hereto concerning the Partnership and their relationship as
Partners, and all prior or concurrent agreements, understandings,
representations and warranties in regard to the subject matter hereof
including, but not limited to, the Original Agreement, are and have
been merged herein.
ARTICLE 3
NAME AND OFFICES
3.1 Name. The business of the Partnership shall be conducted
under the name of "Philips International Realty, L.P.", or such other
name as the General Partner may from time to time designate upon
notice to the Limited Partners.
3.2 Principal and Registered Offices. The principal place of
business of the Partnership shall be located at c/o the General
Partner at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The registered
agent of the Partnership shall be United Corporate Services, Inc. The
registered office of the Partnership shall be 00 Xxxx Xxxxx Xxxxxx,
Xxxxx, Xxxx Xxxxxx, Xxxxxxxx 00000. The General Partner may from time
to time designate another registered agent or another location for the
registered office or principal place of business of the Partnership
upon notice to the other Partners. The Partnership may maintain
offices at such other place or places within or outside the State of
Delaware as the General Partner deems advisable.
14
ARTICLE 4
PURPOSE
4.1 Purpose. The purpose and nature of the business to be
conducted by the Partnership is (i) to conduct any business that may
be lawfully conducted by a limited partnership organized pursuant to
the Act; provided, however, that such business shall be limited to and
conducted in such a manner as to permit the General Partner at all
times to be classified as a REIT for federal income tax purposes,
unless the General Partner has determined to cease to qualify as a
REIT, (ii) to enter into any partnership, joint venture or other
similar arrangements to engage in any of the foregoing or the
ownership of interests in any entity engaged in any of the foregoing
and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing, and without limiting the General
Partner's right in its sole discretion to cease qualifying as a REIT,
the Partners acknowledge that the General Partner's status as a REIT
inures to the benefit of all of the Partners and not solely the
General Partner.
4.2 Powers. The Partnership is empowered to do any and all
acts and things necessary, appropriate, proper, advisable, incidental
to or convenient for the furtherance and accomplishment of the
purposes and business described herein and for the protection and
benefit of the Partnership; provided, that the Partnership shall not
take, or shall refrain from taking, any action which, in the judgment
of the General Partner, in its sole and absolute discretion, (i) could
adversely affect the ability of the General Partner to continue to
qualify as a REIT, (ii) could subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code or any
successor or newly enacted provisions of the Code imposing other
additional taxes or penalties on the General Partner, or (iii) could
violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner or its securities, unless
any such action (or inaction) under (i), (ii) or (iii) shall have been
specifically consented to by the General Partner in writing.
15
ARTICLE 5
TERM AND FISCAL YEAR
5.1 Term. The term of the Partnership commenced on July 17,
1997, the date the Certificate was filed in the appropriate offices in
the State of Delaware, and shall continue until terminated pursuant to
the provisions of Article 14 of this Agreement.
5.2 Fiscal Year. The first fiscal year of the Partnership
shall terminate on December 31, 1997, and succeeding fiscal years
shall terminate on December 31 of each year thereafter, or such other
date as the Partnership shall terminate as herein provided.
ARTICLE 6
CAPITAL CONTRIBUTIONS, ADDITIONAL FUNDING AND CAPITAL ACCOUNTS
6.1 Capital Contributions of the General Partner and the
Interim Managing General Partner.
(a) Initial Capital Contribution of the General Partner.
Concurrent with the execution of this Agreement, the General Partner,
pursuant to the Contribution and Exchange Agreement, shall contribute
to the Partnership, directly or indirectly, as its initial Capital
Contribution, all of such General Partner's right, title and interest
in and to National Property. The General Partner shall initially be
issued and thereafter shall own Partnership Units in the amount set
forth opposite its name on Exhibit A, which number of Partnership
Units shall be adjusted on such Exhibit A from time to time by the
General Partner to the extent necessary to reflect accurately
issuances, exchanges, redemptions, Capital Contributions, or similar
events having an effect on a Partner's Partnership Units.
(b) Capital Contribution of the General Partner Upon
Completion of an Offering. Upon completion of any Offering, the
General Partner shall contribute the proceeds of the Offering to the
Partnership, which proceeds will be net of the underwriter's discount
and other expenses, and the General Partner shall be credited with
having made a Capital Contribution to the Partnership in the amount of
the net proceeds of the Offering. The Partners hereby acknowledge and
agree that the aggregate number of additional Partnership Units to be
issued to the
16
General Partner upon completion of any Offering shall be exactly equal
to the number of shares of Common Stock issued in the Offering. Upon
any subsequent sales of shares of Common Stock pursuant to the
exercise of the over-allotment option in connection with the Offering,
the General Partner shall, subject to and in accordance with the terms
and conditions of this Section 6.1, contribute the proceeds of such
subsequent sale to the Partnership, and shall be issued additional
Partnership Units in an amount exactly equal to the number of shares
of Common Stock subsequently sold in connection with such
over-allotment option.
(c) Ownership Interest of the General Partner. The Partners
acknowledge and agree that the General Partner's ownership interest in
the Partnership (and therefore the number of Partnership Units owned
by it) shall at all times be equal to the fraction the numerator of
which is the number of issued and outstanding shares of Common Stock
of the General Partner (the "G.P. Shares") and the denominator of
which is the sum of the G.P. Shares plus the number of issued and
outstanding Partnership Units held by Partners other than the General
Partner; provided, however, that the foregoing shall only apply for so
long as the only class of Partnership Units is OP Units and the only
equity securities of the General Partner is Common Stock. If the
Common Stock of the General Partner (or any other class of stock)
undergoes any split or reverse split, then, without any further action
or consent by the General Partner or any Limited Partner, each
corresponding class of Partnership Unit that is convertible into such
stock shall similarly be split or combined by the same ratio as was
used to split or combine the stock. For example if the Common Stock
under a reverse 2 for 1 split (i.e. every two shares of old Common
Stock are converted into one share of new Common Stock) then the
corresponding class of Partnership Units shall undergo a similar
reverse split (i.e. every two old Partnership Units shall be converted
into one new Partnership Unit).
(d) Capital Contribution of the Interim Managing General
Partner. Concurrent with the execution of this Agreement, and subject
to Section 9.1 (b) hereof, the Interim Managing General Partner shall
contribute to the Partnership as its initial Capital Contribution such
amount necessary to give the Interim Managing General Partner a 0.001%
ownership interest in the Partnership. Upon consummation of Offerings
aggregating gross proceeds to the General Partner of at least $25
million, the
17
Interim Managing General Partner shall automatically be entitled to a
return of its Capital Contribution, and shall automatically be deemed
to have withdrawn from the Partnership.
6.2 Capital Contributions of the Limited Partners. Concurrent
with the execution of this Agreement, each Limited Partner, pursuant
to the Contribution and Exchange Agreement, shall contribute to the
Partnership, directly or indirectly, as its initial Capital
Contribution, all of such Limited Partner's right, title and interest
in and to the Properties. Each Limited Partner shall initially be
issued and thereafter shall own Partnership Units in the amount set
forth opposite such Limited Partner's name on Exhibit A, which number
of Partnership Units on such Exhibit A shall be adjusted from time to
time by the General Partner to the extent necessary to reflect
accurately exchanges, redemptions, Capital Contributions, capital
stock changes of the General Partner or similar events having an
effect on such Partner's Partnership Units. The Partnership Units
issued to each Limited Partner shall be evidenced by the issuance of a
certificate (the "Unit Certificate") in substantially the form of
Exhibit B attached hereto, which Unit Certificate shall bear the
following legend:
"THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AGREEMENT OF LIMITED PARTNERSHIP OF PHILIPS INTERNATIONAL REALTY,
L.P., DATED AS OF DECEMBER 31, 1997, AS AMENDED (A COPY OF WHICH IS ON
FILE WITH THE PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN SUCH
AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF THE
PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT
THEREUNDER. IN ADDITION, THE UNITS ARE SUBJECT TO THE PROVISIONS OF
SECTION 19.1 OF A CERTAIN CONTRIBUTION AND EXCHANGE AGREEMENT DATED AS
OF AUGUST 11, 1997 (A COPY OF WHICH IS ON FILE WITH THE PARTNERSHIP)."
18
On the date of admission of one or more Limited Partners to the
Partnership, the Organizational Limited Partner shall be entitled to a
return of its Capital Contribution, and shall be deemed to have
withdrawn from the Partnership.
6.3 General Partner Option to Contribute Additional Capital.
If the Partnership requires funds at any time or from time to time in
excess of funds available to the Partnership through borrowings and
prior or additional Capital Contributions, the General Partner may,
but shall not be required to, borrow such funds from a financial
institution or other lender or through public debt offerings and lend
such funds to the Partnership on the same terms and conditions as are
applicable to the General Partner. If, notwithstanding the foregoing,
the Partnership requires funds for any proper Partnership purpose in
excess of any other funds anticipated by the General Partner to be
available to the Partnership (including through borrowings and prior
Capital Contributions), or if the General Partner concludes that
borrowings are inappropriate, the General Partner may, but shall not
be required to, raise such additional funds pursuant to the issuance
of shares of its Common Stock (or New Securities subject to Section
6.4(b))(any such issuance which is made for the purpose of providing
additional funds to the Partnership shall be referred to herein as an
"Additional Issuance"). In the event any such Additional Issuance is
consummated, then (i) the General Partner shall contribute the net
amount of cash raised pursuant to such Additional Issuance to the
capital of the Partnership and (ii) the Partnership shall issue
additional Partnership Units ("Additional Partnership Units") to the
General Partner, on the date upon which such funds are contributed to
the Partnership, in an amount equal to that number of Partnership
Units which, if such
19
Additional Partnership Units were redeemed as of their date of
issuance by the General Partner for shares of Common Stock pursuant to
Section 10.3 hereof, would result in the General Partner receiving
that number of shares of Common Stock equal to the number of shares of
Common Stock that were issued pursuant to such Additional Issuance. In
addition, in the event that the General Partner shall issue shares of
Common Stock (and/or pay cash out of the net proceeds of any
Additional Issuance) in connection with any subsequent merger,
consolidation or other acquisition, the General Partner shall
contribute the shares of stock, assets and/or other consideration
received by the General Partner in connection therewith to the capital
of the Partnership in exchange for Additional Partnership Units in an
amount equal to that number of Partnership Units which, if such
Additional Partnership Units were redeemed as of their date of
issuance by the General Partner for shares of Common Stock pursuant to
Section 10.3 hereof, would result in the General Partner receiving
that number of shares of Common Stock equal to the number of shares of
Common Stock that were issued in connection with such merger,
consolidation or other acquisition and/or such Additional Issuance.
Notwithstanding the foregoing sentence, the General Partner shall have
the right, in its sole discretion, to treat a contribution to the
capital of the Partnership in a manner other than as described above
if, upon the advice of counsel to the General Partner and/or the
Partnership, such alternative treatment will provide a more favorable
federal and/or state tax consequence to the General Partner and/or the
Partnership.
6.4 General Partner Option to Issue Additional Partnership
Units to Limited Partners.
(a) Issuance of Additional Partnership Units. At any
time after the date hereof without the consent of any Partner, but
subject to the provisions of Section 13.1 hereof, the General Partner
may, upon its determination, which shall be made in its sole and
absolute discretion, that the issuance of Additional Partnership Units
to new or existing limited partners is in the best commercial
interests of the Partnership, cause the Partnership to issue
Additional Partnership Units to and admit as a limited partner in the
Partnership, any Person (an "Additional Limited Partner" herein) in
exchange for the contribution by such Person of cash and/or property
desirable to further the purposes of the Partnership under Article 4
hereof. In the event that Additional Partnership Units are issued by
the Partnership pursuant to this Section 6.4, the amount of such
Partnership Units issued to each Additional Limited Partner shall,
unless otherwise determined by the General Partner in the exercise of
its sole discretion but subject to its fiduciary duty to all Limited
Partners (i) be fixed by agreement between the General Partner and
such Additional Limited Partner in the General Partner's sole
discretion or (ii) be equal to that number of Partnership Units which,
if such Additional Partnership Units were redeemed as of their date of
issuance by such Additional Limited Partner pursuant to Section 10.3
hereof, would result in such Additional Limited Partner receiving that
number of shares of Common Stock equal to (x) the Agreed Value of any
property (as determined by the General Partner, in its sole and
absolute discretion), plus the amount of any cash contributed by the
20
Additional Limited Partner, as of the date of contribution to the
Partnership divided by (y) the Current Per Share Market Price
(computed as of the Trading Day immediately preceding the date of
contribution to the Partnership or such other date or average of
Trading Days as the General Partner may agree with such Additional
Limited Partner in the exercise of its sole discretion). In addition,
the General Partner is hereby authorized to cause the Partnership from
time to time to issue to the Partners (including the General Partner)
or other Persons additional Partnership Units or such other
Partnership Interests in one or more classes, or one or more series of
such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties,
including rights, powers and duties which may be senior, pari passu or
junior to OP Units, all as shall be determined by the General Partner
in its sole and absolute discretion subject to Delaware law,
including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests; (ii) the right of each such
class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the
Partnership; provided that no such additional Partnership Units or
other Partnership Interests shall be issued to the General Partner
unless either (A)(1) the additional Partnership Interests are issued
in connection with the issuance of shares of Common Stock or other
shares by the General Partner, which shares have designations,
preferences and other rights such that the economic interests
attributed to such shares are substantially similar to the
designations, preferences and other rights of the additional
Partnership Interests issued to the General Partner in accordance with
this Section 6.4, and (2) the General Partner shall make a Capital
Contribution to the Partnership in an amount equal to the proceeds
raised in connection with the issuance of such shares of the General
Partner, or (B) the additional Partnership Units are issued to all the
Partners in proportion to their respective Percentage Interests. Any
Additional Limited Partner shall be issued a Unit Certificate
representing the amount of Partnership Units issued to such Additional
Limited Partner and, in the event the General Partner issues
Partnership Units other than OP Units, indicating the class, terms,
preferences and other restrictions or rights of such Partnership Unit.
The General Partner shall be authorized on behalf of each of the
Partners to amend this Agreement to reflect the issuance of Additional
Partnership Units (including,
21
without limitation, the issuance of new classes of Partnership Units)
and/or the admission of any Additional Limited Partner(s) in
accordance with the provisions of this Section 6.4, and the General
Partner shall promptly deliver a copy of such amendment (which, in the
event that new classes of Partnership Units are issued, shall contain
the terms of such new classes of Partnership Units) to each Limited
Partner. Without limiting the foregoing, the General Partner is
expressly authorized to cause the Partnership to issue Partnership
Units for less than fair market value, so long as the General Partner
concludes in good faith that such issuance is in the interest of the
General Partner and the Partnership (for example, and not by way of
limitation, the issuance of Partnership Units pursuant to an employee
purchase plan providing for employee purchases of Partnership Units at
a discount from fair market value or employee options that have an
exercise price that is less than the fair market value of the
Partnership Units, either at the time of issuance or at the time of
exercise).
(b) Adjustments to Partnership Units. If the Common
Stock (or any other class of stock of the General Partner for which a
class of Partnership Units may be redeemed) undergoes any split or
reverse split, then without further action or consent by the General
Partner or any Limited Partner, each corresponding class of
Partnership Units that is redeemable for such stock shall be split or
combined in accordance with the same ratio used to split or combine
the stock. For example, if the Common Stock undergoes a reverse 2 for
1 split (i.e., every two shares of old Common Stock are converted into
one share of new Common Stock) then the corresponding class of
Partnership Units that are redeemable for such Common Stock shall
undergo a similar reverse split (i.e., every two old OP Units shall be
converted into one new OP Unit). Similarly, if any class of
Partnership Units into which another class of Partnership Units is
convertible undergoes any split or reverse split, then without further
action or consent by the General Partner or any Limited Partner, the
latter class of Partnership Units shall be split or combined in
accordance with the same ratio used to split or combine the first
class of Partnership Units.
(c) Fractional Units. The General Partner shall have
the right to issue fractional Partnership Units upon the conversion or
exchange of one class of Partnership Units for a second class of
Partnership Units; provided, however, that in accordance with Section
10.3(e) hereof no fractional shares of
22
Common Stock of the General Partner shall be issued upon the
redemption of any class of Partnership Units for Common Stock.
(d) Issuance of New Securities. Following completion
of any Offering, the General Partner shall not issue any additional
shares of Common Stock (other than shares of Common Stock issued
pursuant to Section 10.3 hereof), or rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of capital stock (collectively, "New
Securities"), other than to all holders of shares of Common Stock,
unless (i) the General Partner shall cause the Partnership to issue to
the General Partner Partnership Interests or rights, options, warrants
or convertible or exchangeable securities of the Partnership having
designations, preferences and other rights, all such that the economic
interests are substantially similar to those of the New Securities,
and (ii) the General Partner contributes to the Partnership the
proceeds from the issuance of such New Securities and from the
exercise of rights contained in such New Securities. Without limiting
the foregoing, the General Partner is expressly authorized to issue
New Securities for less than fair market value, and the General
Partner is expressly authorized to cause the Partnership to issue to
the General Partner corresponding Partnership Interests, so long as
(x) the General Partner concludes in good faith that such issuance is
in the interest of the General Partner and the Partnership (for
example, and not by way of limitation, the issuance of shares of
Common Stock and corresponding Units pursuant to an employee stock
purchase plan providing for employee purchases of shares of Common
Stock at a discount from fair market value or employee stock options
that have an exercise price that is less than the fair market value of
the shares of Common Stock, either at the time of issuance or at the
time of exercise), and (y) the General Partner contributes all
proceeds from such issuance and exercise to the Partnership.
6.5 Capital Accounts. A separate capital account (a "Capital
Account") shall be maintained for each Partner in accordance with the
Code and the Regulations promulgated thereunder including, but not
limited to, the rules regarding the maintenance of partners' Capital
Accounts set forth in Regulation Section 1.704-1. Subject to the
immediately preceding sentence, there shall be credited to each
Partner's Capital Account: (i) the amount of money contributed by the
Partner to the Partnership (subject, however, in the case of a Capital
Contribution by the General Partner upon completion of any Offering or
upon
23
Additional Issuances (as defined in Section 6.3 above) of Common
Stock, pursuant to the provisions of Sections 6.1(b) and 6.3 hereof,
the net amount of Offering proceeds contributed to the Partnership),
(ii) the Agreed Value of any property contributed by the Partner to
the Partnership, (iii) the amount of any Partnership liabilities
assumed by such Partner (other than liabilities secured by property
distributed to such Partner that such Partner is considered to have
assumed or taken subject to under Section 752 of the Code), and (iv)
the Partner's share of income or gain (or items thereof), including
income and gain exempt from tax. There shall be charged against each
Partner's Capital Account: (w) the amount of money distributed to the
Partner by the Partnership, (x) the Agreed Value of any property
distributed to the Partner by the Partnership, (y) the amount of any
liabilities of such Partner assumed by the Partnership (other than
liabilities secured by property contributed to the Partnership by such
Partner that the Partnership is considered to have assumed or taken
subject to pursuant to Section 752 of the Code) and (z) the Partner's
share of loss and deduction (or items thereof). To the extent a
Partner's Capital Account is greater than zero, such excess is
hereinafter referred to as a "positive balance". To the extent a
Partner's Capital Account is less than zero, said amount is
hereinafter referred to as a "deficit balance".
6.6 Limited Liability. Notwithstanding anything in this
Agreement to the contrary, the personal liability of a Limited Partner
arising out of or in any manner relating to the Partnership shall be
limited to and shall not exceed such Limited Partner's Capital
Contribution made or required to be made pursuant to this Agreement
plus the amount of any deficit balances in its Capital Account such
Limited Partner is obligated to restore pursuant to the provisions of
Section 7.3 hereof. No Limited Partner shall have any personal
liability for liabilities or obligations of the Partnership, except to
the extent of its Capital Contribution, as aforesaid or as
specifically provided in Section 7.3.
6.7 Return of Capital. Except as otherwise provided herein,
(i) no Partner shall be required to make any further or additional
contributions to the capital of the Partnership or to lend or advance
funds to the Partnership for any purpose and (ii) no Partner shall be
entitled to the return of its capital, except to the extent, if any,
that distributions are made or deemed to
24
be made to such Partner otherwise than out of Profits pursuant to this
Agreement.
6.8 No Interest on Capital Contributions. No interest or
additional share of Profits shall be paid or credited to the Partners
on their Capital Accounts, or on any undistributed Profits or funds
left on deposit with the Partnership; provided, however, that nothing
contained herein shall be construed to prevent or prohibit the payment
of interest on account of loans made by the Partners to the
Partnership. Any loans made to the Partnership by a Partner shall not
increase its Capital Contribution or interest in the Profits, Losses
or Net Cash Flow of the Partnership, but shall be a debt due from the
Partnership and repaid accordingly.
6.9 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 among
the parties hereto that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties
hereto and their respective successors and assigns. None of the rights
or obligations of the Partners herein set forth to make Capital
Contributions 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 such rights or obligations be sold, transferred or assigned by
the Partnership or pledged or encumbered by the Partnership to secure
any debt or other obligation of the Partnership or of any of the
Partners.
6.10 Common Stock Option Plans. The Partners hereby
acknowledge that prior to the date hereof the General Partner has
adopted, and the Partners hereby acknowledge and agree that from and
after the date hereof the General Partner may adopt, without the
consent of any Limited Partner, one or more stock option or incentive
plans ("Stock Plans") pursuant to which officers, directors, trustees,
employees and/or consultants of the General Partner, the Partnership
or any Affiliate of either of them may acquire shares of Common Stock.
On each date on which the General Partner issues any shares of Common
Stock to a person pursuant to a Stock Plan (i) the consideration paid
for each such share of Common Stock shall, as soon as received by the
General Partner, be contributed to the capital of the Partnership and
25
(ii) the General Partner shall be issued Partnership Units in an
amount equal to that number of Partnership Units which, if such
Partnership Units were redeemed as of their date of issuance by the
General Partner for shares of Common Stock pursuant to Section 10.3
hereof, would result in the General Partner receiving that number of
shares of Common Stock which are being issued to any such person
pursuant to the Stock Plan. For purposes of this Section 6.10 only,
shares of Common Stock issued subject to forfeiture or other similar
restrictions shall be deemed issued upon the lapse of such
restrictions. Notwithstanding anything herein to the contrary, the
mere grant of options to purchase shares of Common Stock pursuant to
any Stock Plan shall not constitute the grant or issuance of shares of
Common Stock for purposes of this Section 6.10.
ARTICLE 7
ALLOCATION OF PROFITS AND LOSSES
7.1 General Allocation of Profits and Losses. Except as
otherwise provided in this Article 7, after giving effect to any and
all allocations set forth in Section 7.4 below, all Profits and Losses
of the Partnership (including all items of income and expense entering
into the determination of such Profits and Losses), as finally
determined for Federal income tax purposes for each fiscal year of the
Partnership, shall be allocated to and among the Partners in
accordance with their respective Percentage Interests.
7.2 Allocations with Respect to Transferred Interests. Unless
otherwise required by the Code and/or the Regulations or as determined
by the General Partner, in its sole and absolute discretion, any
Profits or Losses allocable to an additional Partnership Interest
issued during any year or any fiscal quarter or to a Partnership
Interest which has been transferred during any year shall be allocated
among the Persons who were holders of such Partnership Interest during
such year in the manner described in Section 13.3(c) below.
7.3 Deficit Restoration Obligation. In the event that any
Limited Partner hereto enters into a "deficit restoration obligation"
to the Partnership pursuant to this Section 7.3, and such Limited
Partner has a deficit balance in its Capital Account following the
liquidation of its interest in the Partnership, as determined after
taking into account all Capital Account
26
adjustments for the Partnership's taxable year during which the
liquidation occurs, such Limited Partner shall be unconditionally
obligated to restore the amount of such deficit balance to the
Partnership by the later of (i) the end of such taxable year, or (ii)
90 days after the date of the liquidation of the Limited Partner's
interest in the Partnership, which amount shall, upon liquidation of
the Partnership, be paid to creditors of the Partnership or
distributed to other Partners in accordance with their positive
Capital Account balances. For purposes hereof, a "deficit restoration
obligation" shall mean an unconditional agreement by a Limited Partner
to restore a deficit balance in its Capital Account (which may be
limited in amount) in the form thereof used by the Partnership. Any
Limited Partner may, but is not obligated to, enter into such an
agreement at any time during the term hereof but not more often than
annually.
7.4 Regulatory Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any
other provision of this Agreement (except as provided in Section
7.4(b) below), if there is a net decrease in Minimum Gain for a
Partnership taxable year, each Partner shall be allocated, before any
other allocation of Partnership items for such taxable year, items of
income and gain for such year (and, if necessary, for subsequent
years) in proportion to, and to the extent of, the amount of such
Partner's share of the net decrease in Minimum Gain during such year.
The income allocated pursuant to this Section 7.4(a) in any taxable
year shall consist first of gains recognized from the disposition of
property subject to one or more nonrecourse liabilities of the
Partnership, and any remainder shall consist of a pro rata portion of
other items of income or gain of the Partnership.
(b) Exceptions to Section 7.4(a). The allocation
otherwise required pursuant to Section 7.4(a) shall not apply to a
Partner to the extent that: (a) such Partner's share of the net
decrease in Minimum Gain is caused by a guarantee, refinancing or
other change in the instrument evidencing a nonrecourse debt of the
Partnership which causes such debt to become a partially or wholly
recourse debt or a Partner Nonrecourse Debt, and such Partner bears
the economic risk of loss (within the meaning of Treasury Regulation
Section 1.752-2) for such changed debt; (b) such Partner's share of
the net decrease in Minimum Gain results from the repayment of a
nonrecourse liability of the Partnership, which repayment is made
using funds contributed by such Partner
27
to the capital of the Partnership; (iii) the IRS, pursuant to Treasury
Regulation Section 1.704-2(f)(4), waives the requirement of such
allocation in response to a request for such waiver made by the
General Partner on behalf of the Partnership (which request the
General Partner may or may not make, in its sole discretion, if it
determines that the Partnership would be eligible therefor); or (iv)
additional exceptions to the requirement of such allocation are
established by revenue rulings issued by the IRS pursuant to Treasury
Regulation Section 1.704-2(f)(5), which exceptions apply to such
Partner, as determined by the General Partner in its sole discretion.
(c) Qualified Income Offset. Notwithstanding any
other provision of this Agreement, if a Partner unexpectedly receives
an adjustment, allocation or distribution described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4),(5) or (6) that causes or increases an
Excess Deficit Capital Account Balance with respect to such Partner,
items of Partnership gross income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to
eliminate such Excess Deficit Capital Account Balance as quickly as
possible.
(d) Gross Income Allocation. If at the end of any
Partnership taxable year, a Partner has an Excess Deficit Capital
Account Balance, such Partner shall be specially allocated items of
Partnership gross income or gain in an amount and manner sufficient to
eliminate such Excess Deficit Capital Account Balance as quickly as
possible, until all Excess Deficit Capital Account Balances have been
eliminated. To the extent that any class of Partnership Units that are
convertible into OP Units has received distributions at the end of any
Partnership taxable year (including any prior taxable year) in excess
of the amounts such class of Partnership Units would have received
during such taxable year or years if all of the Partnership Units of
such class had been converted into OP Units (such excess being
referred to hereinafter as "Excess Amounts"), such items of gross
income or gain shall then be allocated proportionately to and among
the holders of such class Partnership Units until such holders have
been allocated an amount equal to all Excess Amounts.
(e) Partner Nonrecourse Debt. Notwithstanding any
other provision of this Agreement, any item of Partnership Loss,
deduction or expenditures described in Code Section 705(a)(2)(B) that
is attributable to a Partner Nonrecourse Debt shall be
28
allocated to those Partners that bear the economic risk of loss for
such Partner Nonrecourse Debt, and among such Partners in accordance
with the ratios in which they share such economic risk, determined in
accordance with Treasury Regulation Section 1.704-2(i). If there is a
net decrease for a Partnership taxable year in any Partner Nonrecourse
Debt Minimum Gain of the Partnership, each Partner with a share of
such Partner Nonrecourse Debt Minimum Gain as of the beginning of such
year shall be allocated items of gross income and gain in the manner
and to the extent provided in Treasury Regulation Section
1.704-2(i)(4).
(f) Interpretation. The foregoing provisions of this
Section 7.4 are intended to comply with Treasury Regulation Sections
1.704-1(b) and 1.704-2 and shall be interpreted consistently with this
intention. Any terms used in such provisions that are not specifically
defined in this Agreement shall have the meaning, if any, given such
terms in the Regulations cited above.
(g) Curative Allocations. If any allocation of gain,
income, loss, expense or any other item is made pursuant to Section
7.4(a), 7.4(c), 7.4(d) or 7.4(e) of this Agreement (the "Regulatory
Allocations") with respect to one or more Partners (the "Deficit
Partners"), then the balance of such items for the current and all
subsequent fiscal years shall be allocated among the Partners other
than the Deficit Partners as if such items were allocated among all
the Partners (including the Deficit Partners) without regard to this
Section 7.3, until the amount of such items that would have been
allocated to the Deficit Partners but for the Regulatory Allocations
equal the amount allocated to the Deficit Partners pursuant to the
Regulatory Allocations.
7.5 Special Allocations with Respect to Contributed or
Revalued Property. Notwithstanding anything contained herein to the
contrary, taxable income, gain, loss and deduction with respect to any
Partnership property that is contributed to the Partnership by a
Partner shall be shared among the Partners for income tax purposes
pursuant to Regulations promulgated under Section 704(c) of the Code,
so as to take into account the variation, if any, between the adjusted
tax basis of the property to the Partnership and its initial Gross
Asset Value. With respect to Partnership property that is initially
contributed to the Partnership upon its formation, such variation
between the adjusted tax basis and initial Gross Asset Value shall be
taken
29
into account under the "traditional method" as described in Treasury
Regulation Section 1.704-3(b), unless otherwise determined by the
General Partner and the contributing Partner. With respect to
properties subsequently contributed to the Partnership, the
Partnership shall account for such variation under any method approved
under Section 704(c) of the Code and the applicable regulations as
chosen by the General Partner. In the event the Gross Asset Value of
any Partnership asset is adjusted pursuant to subparagraph (b) of the
definition of Gross Asset Value (as provided in Article 1 of this
Agreement), subsequent allocations of tax items with respect to such
asset shall take account of the variation, if any, between the
adjusted tax basis of such asset and its Gross Asset Value in the same
manner as under Section 704(c) of the Code and the applicable
regulations.
7.6 Allocations with Respect to Partnership Units other than
OP Units. In the event the General Partner issues additional classes
of Partnership Units other than OP Units, then the General Partner
shall determine, in its sole discretion, the Profits and Losses
attributable to each class and shall allocate to Profits and Losses of
each class of Partnership Units among the Partners in such class in
proportion to their respective Percentage Interests in such class,
after giving effect to any and all special allocations set forth in
Section 7.4 above.
ARTICLE 8
DISTRIBUTIONS
8.1 Distribution of Net Cash Flow. Net Cash Flow of the
Partnership, if any, shall be distributed to and among the Partners as
follows:
(a) If such Net Cash Flow has not arisen pursuant to
a Liquidation of the Partnership, such Net Cash Flow shall be
distributed to and among the Partners in accordance with their
respective Percentage Interests; or
(b) If such Net Cash Flow has arisen pursuant to a
Liquidation of the Partnership, such Net Cash Flow shall be
distributed to and among the Partners having positive balances in
their Capital Accounts (after taking into account any and all Capital
Account adjustments for the Partnership taxable year
30
during which the Liquidation occurs), in proportion to and to the
extent of such positive balances.
Net Cash Flow shall be distributed to the Partners in such amounts and
at such intervals as the General Partner, in its sole discretion, may
determine, but no less frequently than quarterly. With respect to each
and every distribution of Net Cash Flow to the Partners hereunder, the
General Partner shall distribute such Net Cash Flow only to those
Partners who are Partners on the Partnership Record Date and whose
Partnership Units were outstanding during the period to which such
distribution relates and, with respect to those Partners who were
issued additional Partnership Units during such period, the General
Partner shall distribute Net Cash Flow (i) on a pro-rated basis based
upon the number of days during such period that such Partners held
such additional Partnership Units or (ii) on such other reasonable
basis as determined by the General Partner in its sole discretion;
provided, however, in no event may a Partner receive a distribution of
Net Cash Flow with respect to any particular Partnership Unit if such
Partner is entitled to receive a distribution out of such Net Cash
Flow with respect to one or more shares of Common Stock for which such
Partnership Unit has been redeemed. Notwithstanding the foregoing, the
General Partner shall take such reasonable efforts, as determined by
it in its sole and absolute discretion and consistent with its
qualification as a REIT, to cause the Partnership to distribute
sufficient amounts to enable the General Partner to pay stockholder
dividends that will (i) satisfy the REIT Requirements and (ii) avoid
any federal income or excise tax liability of the General Partner.
8.2 Distributions in Kind. No right is given to any Partner
to demand and receive property or cash. The General Partner may
determine, in its sole and absolute discretion, to make a distribution
in kind to the Partners of Partnership assets, and such assets shall
be distributed in such a fashion as to ensure that the fair market
value of such assets is distributed and allocated in accordance with
Section 8.1 hereof.
8.3 Withholding. Each Limited Partner hereby authorizes the
Partnership to withhold from or pay on behalf of or with respect to
such Limited Partner any amount of federal, state, local or foreign
taxes that the General Partner determines or reasonably believes that
the Partnership is required to withhold or pay with respect to any
amount distributable or allocable to
31
such Limited Partner pursuant to this Agreement, including, without
limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Code Sections 1441, 1442, 1445 or 1446. Any
and all amounts withheld pursuant to this Section 8.3 with respect to
any allocation, payment or distribution to any Partner hereunder shall
be treated as amounts distributed to such Partner pursuant to Section
8.1 hereof for all purposes under this Agreement. If any amount is
withheld by the Partnership pursuant to this Section 8.3 with respect
to a particular Partner and such amount would not have been
distributed to such Partner pursuant to Section 8.1 hereof at any time
on or before the date it is withheld, then such Partner shall
contribute to the capital of the Partnership an amount equal to the
amount so withheld as soon as practicable after the delivery by the
General Partner to such Partner of a notice requesting such
contribution to the Partnership. The General Partner, on behalf of the
Partnership, shall have the right to offset any obligation of a
Partner to contribute additional funds to the Partnership pursuant to
the immediately preceding sentence of this Section 8.3 against any
future distributions due to such Partner under Section 8.1 hereof.
8.4 Distributions with Respect to Partnership Units other
than OP Units. Notwithstanding the foregoing provisions of this
Article 8, in the event the General Partner issues additional classes
of Partnership Units other than OP Units to Limited Partners, then the
General Partner shall determine, in its sole discretion, the amount of
distributions of Net Cash Flow attributable to each class and shall
distribute such Net Cash Flow to each class of Partnership Units among
the Partners in such class in proportion to their respective
Percentage Interests in such class or otherwise required pursuant to
the terms of such Partner's Unit Certificates.
ARTICLE 9
MANAGEMENT
9.1 Management of Partnership Affairs.
(a) General Partner. Except as otherwise
specifically provided in this Agreement, and subject to Section 9.1(b)
below, the General Partner shall have full, exclusive and complete
responsibility and discretion in the management and control of
32
the business and affairs of the Partnership and shall make all
decisions affecting the Partnership's business and affairs. Subject to
the foregoing, the General Partner shall have all the rights, powers
and obligations of a general partner as provided in the Act, and,
except as otherwise provided, any action taken by the General Partner
(in its capacity as such) shall constitute the act of and serve to
legally bind the Partnership. Persons dealing with the Partnership
shall be entitled to rely conclusively on the power and authority of
the General Partner as set forth in this Agreement.
(b) Interim Managing General Partner. From the date
hereof until consummation of Offerings aggregating gross proceeds to
the General Partner of at least $25 million, the Interim Managing
General Partner shall, subject to the rights accorded the Limited
Partners hereunder and under the Act and subject to the prior consent
of the General Partner with respect to transactions with Affiliates of
the Interim Managing General Partner, have full, exclusive and
complete responsibility and discretion in the management and control
of the business and affairs of the Partnership and shall make all
decisions affecting the Partnership's business and affairs to the
extent otherwise granted to the General Partner hereunder, and the
General Partner shall have no such rights. Subject to the foregoing,
the Interim Managing General Partner shall have all the rights, powers
and obligations of a general partner as provided in the Act, and,
except as otherwise provided, any action taken by the Interim Managing
General Partner (in its capacity as such) shall constitute the act of
and serve to legally bind the Partnership. Persons dealing with the
Partnership shall be entitled to rely conclusively on the power and
authority of the Interim Managing General Partner as set forth in this
Agreement. The Partners agree that immediately upon consummation of
Offerings aggregating gross proceeds to the General Partner of at
least $25 million, the Interim Managing General Partner shall
automatically be deemed to have withdrawn from the Partnership, and
the General Partner shall be entitled to exercise in full the rights
and responsibilities hereunder accorded to the General Partner that it
would have received but for the rights accorded the Interim Managing
General Partner under this Section 9.1(b). Until consummation of
Offerings aggregating gross proceeds to the General Partner of at
least $25 million, references to the General Partner in this Agreement
shall be deemed to be references to the Interim Managing General
Partner, unless otherwise required by the context thereof; provided,
however,
33
that references to the General Partner herein, including, without
limitation, those set forth in Articles 6, 7 and 8 and Section 10.3
hereof, shall always refer with respect to economic issues (as opposed
to management issues) to the General Partner.
9.2 Powers and Authorities of the General Partner. Except as
otherwise specifically provided in this Agreement, and subject to
Sections 9.1(b) and 9.3 hereof, the General Partner is hereby granted
the right, power and authority to do on behalf of the Partnership all
things which, in its best business judgment, are necessary, proper or
desirable to carry out its duties and responsibilities, including but
not limited to, the right, power and authority:
(a) To manage, control, invest, reinvest, acquire by
purchase, lease or otherwise, develop, expand, sell, contract to
purchase or sell, grant, obtain or exercise options to purchase,
options to sell or conversion rights, assign, transfer, convey,
deliver, endorse, exchange, pledge, mortgage, abandon, improve,
repair, maintain, insure, lease for any term and otherwise deal with
any and all property of whatsoever kind and nature, and wheresoever
situated, in furtherance of the purposes of the Partnership;
(b) To acquire, directly or indirectly, interests in
real estate of any kind and of any type, and any and all kinds of
interests therein, and to determine the manner in which title thereto
is to be held; to manage, insure against loss, protect and subdivide
any of the real estate, interests therein or parts thereof; to
improve, develop or redevelop and expand any such real estate; to
participate in the ownership and development of any property; to
dedicate for public use, to vacate any subdivisions or parts thereof,
to resubdivide, to contract to sell, to grant options to purchase or
lease, to sell on any terms; to convey, to mortgage, pledge or
otherwise encumber said property, or any part thereof; to lease said
property or any part thereof from time to time, upon any terms and for
any period of time, and to renew or extend leases, to amend, change or
modify the terms and provisions of any leases and to grant options to
lease and options to renew leases and options to purchase; to
partition or to exchange said real property, or any part thereof, for
other real or personal property; to grant easements or charges of any
kind; to release, convey or assign any right, title or interest in or
about or easement appurtenant to said property or any part thereof; to
construct and reconstruct,
34
remodel, alter, repair, add to or take from buildings on said
premises; to insure any Person having an interest in or responsibility
for the care, management or repair of such property; to direct the
trustee of any land trust to mortgage, lease, convey or contract to
convey the real estate held in such land trust or to execute and
deliver deeds, mortgages, notes, and any and all documents pertaining
to the property subject to such land trust or in any matter regarding
such trust; to execute assignments of all or any part of the
beneficial interest in such land trust;
(c) To employ, engage or contract with or dismiss
from employment or engagement Persons to the extent deemed necessary
by the General Partner for the operation and management of the
Partnership business, including but not limited to, contractors,
subcontractors, engineers, architects, surveyors, mechanics,
consultants, accountants, attorneys, insurance brokers, real estate
brokers and others;
(d) To enter into contracts on behalf of the
Partnership;
(e) To borrow money, procure loans and advances from
any Person for Partnership purposes, and to apply for and secure, from
any Person, credit or accommodations; to contract liabilities and
obligations, direct or contingent and of every kind and nature with or
without security; and to repay, discharge, settle, adjust, compromise
or liquidate any such loan, advance, credit, obligation or liability;
(f) To pledge, hypothecate, mortgage, assign,
deposit, deliver, enter into sale and leaseback arrangements or
otherwise give as security or as additional or substitute security, or
for sale or other disposition any and all Partnership property,
tangible or intangible, including, but not limited to, real estate and
beneficial interests in land trusts, and to make substitutions
thereof, and to receive any proceeds thereof upon the release or
surrender thereof; to sign, execute and deliver any and all
assignments, deeds and other contracts and instruments in writing; to
authorize, give, make, procure, accept and receive moneys, payments,
property, notices, demands, vouchers, receipts, releases, compromises
and adjustments; to waive notices, demands, protests and authorize and
execute waivers of every kind and nature; to enter into, make,
execute, deliver and receive written agreements, undertakings and
35
instruments of every kind and nature; to give oral instructions and
make oral agreements; and generally to do any and all other acts and
things incidental to any of the foregoing or with reference to any
dealings or transactions which any attorney may deem necessary, proper
or advisable;
(g) To acquire and enter into any contract of
insurance which the General Partner deems necessary or appropriate for
the protection of the Partnership, for the conservation of the
Partnership's assets or for any purpose convenient or beneficial to
the Partnership;
(h) To conduct any and all banking transactions on
behalf of the Partnership; to adjust and settle checking, savings, and
other accounts with such institutions as the General Partner shall
deem appropriate; to draw, sign, execute, accept, endorse, guarantee,
deliver, receive and pay any checks, drafts, bills of exchange,
acceptances, notes, obligations, undertakings and other instruments
for or relating to the payment of money in, into, or from any account
in the Partnership's name; to execute, procure, consent to and
authorize extensions and renewals of the same; to make deposits and
withdraw the same and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar
drafts;
(i) To demand, xxx for, receive, and otherwise take
steps to collect or recover all debts, rents, proceeds, interests,
dividends, goods, chattels, income from property, damages and all
other property, to which the Partnership may be entitled or which are
or may become due to the Partnership from any Person; to commence,
prosecute or enforce, or to defend answer or oppose, contest and
abandon all legal proceedings in which the Partnership is or may
hereafter be interested; and to settle, compromise or submit to
arbitration any accounts, debts, claims, disputes and matters which
may arise between the Partnership and any other Person and to grant an
extension of time for the payment or satisfaction thereof on any
terms, with or without security;
(j) To make arrangements for financing, including
the taking of all action deemed necessary or appropriate by the
General Partner to cause any approved loans to be closed;
(k) To take all reasonable measures necessary to
insure compliance by the Partnership with applicable
36
arangements, and other contractual obligations and arrangements entered into by
the Partnership from time to including periodic reports as required to lenders
and using all due diligence to insure that the Partnership is in compliance with
its contractual obligations;
(l) To maintain the Partnership's books and records; and
(m) To prepare and deliver, or cause to be prepared and
delivered by the Partnership's Accountants, all financial and other reports with
respect to the operations of the Partnership, and preparation and filing of all
Federal and state tax returns and reports.
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 contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Partnership.
9.3 Major Decisions. In addition to the requirements of Sections
12.6(a) and (b), if applicable, until such time prior to the first anniversary
date hereof as the General Partner owns sixty-seven percent (67%) of the
Partnership Units, and thereafter until such time as the General Partner owns
sixty percent (60%) of the Partnership Units, the General Partner shall not,
without the prior written consent of holders of at least fifty-one percent (51%)
of the Partnership Units held by the Limited Partners, taken as a single class,
on behalf of the Partnership, undertake any of the following actions:
(a) Engage in a Termination Transaction as defined in Section
12.6(a) hereof;
(b) Dissolve, liquidate or wind-up the Partnership;
(c) Change the nature of the business of the Partnership; or
37
(d) Admit, remove or retain a general partner.
9.4 Restrictions on General Partner's Authority.
(a) The General Partner may not take any action in
contravention of this Agreement, including, without limitation:
(i) Take any action that would make it impossible to
carry on the ordinary business of the Partnership, except as
otherwise provided in this Agreement;
(ii) Admit a Person as a Partner, except as otherwise
provided in this Agreement;
(iii) Perform any act that would subject a Limited
Partner to liability as a general partner in any jurisdiction
or any other liability except as provided herein or under the
Act;
(iv) Enter into any contract, mortgage, loan or other
agreement that prohibits or restricts, or has the effect of
prohibiting or restricting, the ability of a Limited Partner
to exercise its Redemption Rights in full, except with the
written consent of such Limited Partner; or
(v) Possess Partnership property, assign any rights
in specific Partnership property, for other than a Partnership
purpose except as otherwise provided in this Agreement.
(b) The General Partner may not, except as otherwise permitted
in Sections 9.9 and 12.6 hereof, change its policy of holding its assets and
conducting its business substantially through the Partnership without the
consent of all the Limited Partners.
9.5 Engagements by the Partnership. The General Partner may engage, on
behalf and at the expense of the Partnership, such professional persons, firms
or corporations as the General Partner in its reasonable judgment shall deem
advisable for the conduct and operation of the business of the Partnership,
including, without limitation, brokers, mortgage bankers, lawyers, accountants,
architects, engineers, consultants, contractors and purveyors of other such
services for the
38
Partnership on such terms and for such compensation or costs as
the General Partner, in its reasonable judgment, shall determine.
9.6 Engagement of Affiliates. The General Partner may, on behalf and at
the expense of the Partnership, engage the General Partner or a firm in which
the General Partner, a Limited Partner, or a Partner, officer, director,
stockholder or Affiliate of any of them, has an interest, to render services to
the Partnership and/or the assets of the Partnership, provided that the fees or
other compensation payable for such services are specifically authorized by the
terms of this Agreement or are comparable to those prevailing in arm's-length
transactions for similar services and are approved by the Board of Directors.
9.7 Liability of the General Partner. The General Partner and its
Affiliates, officers, directors, agents and employees shall not be liable,
responsible or accountable in damages or otherwise to the Partnership or any of
the Partners or their successors or assigns for any acts or omissions performed
or omitted within the scope of its authority as General Partner, or otherwise
conferred on the General Partner and such Affiliates, officers, directors,
agents and employees by this Agreement, provided that the General Partner or
such Affiliates, officers, directors, agents or employees shall act in good
faith and shall not be guilty of willful misconduct or gross negligence.
9.8 Reimbursement of Certain Expenses of the General Partner.
(a) Except as provided in this Section 9.8 and elsewhere in
this Agreement (including the provisions of Articles 7 and 8 regarding
distributions, payments and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
(b) The Partnership shall be responsible for and shall pay all
expenses relating to the Partnership's organization, the ownership of its assets
and its operations. The General Partner shall be reimbursed on a monthly basis,
or such other basis as the General Partner may determine in its sole and
absolute discretion, for all expenses it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership (including, without
limitation, expenses relating to the management and administration of any
Affiliates of the General
39
Partner or the Partnership such as auditing expenses and filing fees); provided
that (1) the amount of any such reimbursement shall be reduced by (i) any
interest earned by the General Partner with respect to bank accounts or other
instruments or accounts held by it as permitted in Section 9.9 below and (ii)
any amount derived by the General Partner from any investments permitted in
Section 9.9 below and (2) any expenses that are determined by the General
Partner to be unrelated to the Partnership shall not be treated as Partnership
expenses for purposes of this Section 9.8(b). The General Partner shall
determine in good faith the amount of expenses incurred by it related to the
ownership and operation of, or for the benefit of, the Partnership. In the event
that certain expenses are incurred for the benefit of the Partnership and other
entities (including the General Partner), such expenses will be allocated to the
Partnership and such other entities in such a manner as the General Partner in
it's sole and absolute discretion deems fair and reasonable. All payments and
reimbursements hereunder shall be characterized for federal income tax purposes
as expenses of the Partnership incurred on its behalf, and not as expenses of
the General Partner.
9.9 Outside Activities of the General Partner. Notwithstanding anything
to the contrary contained herein, except as set forth in this Section 9.9, the
General Partner shall not, directly or indirectly, without the consent of a
majority in interest of the Limited Partners (excluding the General Partner),
enter into or conduct any business other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a General Partner or
Limited Partner and the management of the business of the Partnership in such
activities as are incidental to any of the foregoing. Without the consent of a
majority in interest of the Limited Partners (excluding the General Partner),
the assets of the General Partner shall be limited to Partnership Interests and
permitted debt obligations of the Partnership, so that Common Stock and OP Units
are completely fungible except as otherwise specifically provided herein;
provided, that the General Partner shall be permitted to hold (i) interests and
entities, including "Qualified REIT Subsidiaries"(which are defined in Section
856(i)(2) of the Code, as amended, as any corporation if 100% of the stock of
such corporation is held by the REIT at all times the corporation was in
existence), that hold no material assets; (ii) interests in Qualified REIT
Subsidiaries or other entities that are not taxed as corporations for federal
income tax purposes) that own only
40
interests in the Partnership and/or interests in other Qualified REIT
Subsidiaries (or other entities that are not taxed as corporations for federal
income tax purposes) that either hold no assets or hold only interests in the
Partnership; (iii) assets and or interests in entities, including Qualified REIT
Subsidiaries, that hold assets having an aggregate value not greater than five
percent (5%) of the total market value of the General Partner entity (determined
by reference to the value of all outstanding equity securities of the General
Partner), provided that (X) the General Partner entity will apply the net income
from such assets (other than net income derived as a result of a Qualified REIT
Subsidiary ownership of an interest in the Partnership) to offset REIT expenses
before utilizing the distribution provisions of Section 8 hereof, (Y) the
General Partner will contribute all net income generated by such assets and or
interests (other than net income derived as a result of a Qualified REIT
Subsidiary ownership of an interest in the Partnership) to the Partnership
(after taking into account REIT expenses as described in clause (X) above, and
(Z) the General Partner will use commercially reasonable efforts to transfer
such assets and interests (other than interests in Qualified REIT Subsidiaries
and the Partnerships) to the Partnership or an entity controlled by the
Partnership as soon as such transfer can be made without causing the General
Partner or the Partnership to incur any material expenses in connection
therewith; and (iv) such bank accounts or similar instruments or accounts in its
own name as it deems necessary to carry out its responsibilities and purposes as
contemplated under this Agreement and its organizational documents; and,
provided, further, that the General Partner shall be permitted to acquire,
directly or through a Qualified REIT Subsidiary (or other entities that are not
taxed as corporations for federal income tax purposes), up to a one percent (1%)
interest in any partnership or limited liability company at least ninety-nine
(99%) of the equity of which is owned directly or indirectly by the Partnership.
The General Partner and any of its Affiliates may acquire Limited Partner
Partnership Interests and shall be entitled to exercise all rights of a Limited
Partner relating to such Partnership Interests.
9.10 Operation in Accordance with REIT Requirements. The Partners
acknowledge and agree that the Partnership shall be operated in a manner that
will enable the General Partner to (i) satisfy the REIT Requirements and (ii)
avoid the imposition of any federal income or excise tax liability. The
Partnership
41
shall avoid taking any action which would result in the General Partner ceasing
to satisfy the REIT Requirements or would result in the imposition of any
federal income or excise tax liability on the General Partner.
9.11 Title Holder. To the extent allowable under applicable law, title
to all or any part of the properties of the Partnership may be held in the name
of the Partnership or any other individual, corporation, partnership, trust or
otherwise, 100% of the beneficial interest in which shall at all times be vested
in the Partnership except for de minimus interests held by qualified REIT
subsidiaries. Any such title holder shall perform any and all of its respective
functions to the extent and upon such terms and conditions as may be determined
from time to time by the General Partner.
ARTICLE 10
----------
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
------------------------------------------
10.1 No Participation in Management of Partnership; Rights of Limited
Partners to Certain Documents.
(a) The Limited Partners shall have such rights as are
enumerated as rights of limited partners under the Act. The Limited Partners, in
such capacity, shall not take part in, or interfere in any manner, with the
conduct or control of the Partnership's business and shall have no right or
authority to act for or bind the Partnership, said powers being vested solely
and exclusively in the General Partner. Except as specifically set forth in
Section 9.3 or otherwise in this Agreement, the Limited Partners, in their
capacities as such, shall not have any right or power whatsoever to take any
action with respect to the conduct or control of the Partnership or its business
including, but not limited to, any right to vote on, or otherwise approve, any
matters or decisions, whether material, major or otherwise, in connection with
the business of the Partnership.
(b) In addition to any other rights provided in this Agreement
or by the Act, and except as limited by Section 10.1(c) below, each Limited
Partner shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written demand
with a statement of the purpose of such demand and at such Limited Partner's own
expense:
42
(i) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and Exchange
Commission by the General Partner pursuant to the Securities
Exchange Act of 1934, as amended, and each report sent to the
stockholders of the General Partner;
(ii) to obtain a copy of the Partnership's federal,
state and local income tax returns for each fiscal year of the
Partnership;
(iii) to obtain a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this
Agreement, the Certificate and all amendments thereto have
been executed; and
(v) to obtain true and full information regarding the
amount of cash and a description and statement of any other
property or services contributed by each Partner and which
each Partner has agreed to contribute in the future, and the
date on which each became a Partner.
(c) Notwithstanding any other provisions of Section 10.1(b)
hereof, the General Partner may keep confidential from the Limited Partners, for
such period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or the General Partner or (ii) the Partnership
or the General Partner is required by law or by agreements with unaffiliated
third parties to keep confidential.
10.2 Withdrawal, Retirement, Death, Incompetency, Insolvency or
Dissolution of a Limited Partner. A Limited Partner shall have no right to
withdraw, retire or resign from the Partnership. The death, incompetency,
insolvency or dissolution of a Limited
43
Partner shall not terminate the Partnership. Upon the death of a Limited
Partner, his or her executor, administrator or successor in interest shall have
all of the rights and duties of a Limited Partner for the purpose of settling
his or her estate.
10.3 Redemption Rights.
(a) Grant of Rights. The General Partner does hereby grant to
the Limited Partners and the Limited Partners do hereby accept the right, but
not the obligation (such right shall be referred to hereinafter sometimes as the
"Redemption Rights"), to require the Partnership to redeem all or part of their
Partnership Units for shares of Common Stock and/or cash, at any time or from
time to time after the date which is one (1) year after the date of the original
issuance by the Partnership to any Limited Partner of such Partnership Units, on
the terms and subject to the conditions and restrictions contained in this
Section 10.3.
(b) Delivery of Exercise Notices. Any one or more Limited
Partners ("Exercising Partners") may, subject to the limitations set forth in
this Section 10.3, deliver to the General Partner written notice in the form
attached to the Unit Certificate as Attachment 1 (the "Exercise Notice")
pursuant to which such Exercising Partners elect to exercise their Redemption
Rights with respect to all or any portion of their Partnership Units. The
Exercise Notice shall specify the specific number of Partnership Units which the
Limited Partner intends to require the Partnership to redeem for shares of
Common Stock and the specific number of Partnership Units which the Limited
Partner intends to require the Partnership to redeem for cash. Only whole
numbers of Partnership Units may be redeemed. Once delivered, the Exercise
Notice shall be irrevocable, subject to payment by the General Partner of shares
of Common Stock and/or cash in respect of such Partnership Units in accordance
with the terms hereof.
(c) Assumption by General Partner. Notwithstanding anything
contained herein to the contrary, the General Partner may, in its sole and
absolute discretion, assume directly the obligation with respect to and satisfy
an Exercising Partner's exercise of a Redemption Right by paying to the
Exercising Partner, at the General Partner's election, shares of Common Stock
and/or cash, as determined in accordance with the provisions of Section 10.3(e)
below, whereupon the General
44
Partner shall acquire the Offered Units and shall be treated for all purposes of
this Agreement as the owner of such Offered Units. In the event the General
Partner shall exercise its right to satisfy the Redemption Right in the manner
described in the preceding sentence, the Partnership shall have no obligation to
pay any amount to the Exercising Partner with respect to such Exercising
Partner's exercise of the Redemption Right, and each of the Exercising Partner,
the Partnership and the General Partner shall treat the transaction between the
General Partner and the Exercising Partner as a sale of the Offered Units to the
General Partner for federal income tax purposes. Moreover, in the event the
General Partner shall exercise its right to satisfy the Redemption Right, any
such interests acquired by the General Partner shall be automatically converted
into General Partner Interests.
(d) Limitation on Exercise of Redemption Rights. Redemption
Rights may be exercised at any time and from time to time after the date which
is one (1) year after the date of the original issuance by the Partnership to
any Limited Partner of such Partnership Units, subject to the following
limitations:
(i) A Limited Partner may not exercise its Redemption
Rights pursuant to any one particular Exercise Notice for less
than One Thousand (1,000) Partnership Units or, if such
Limited Partner holds less than One Thousand (1,000)
Partnership Units, all of the Partnership Units held by such
Limited Partner;
(ii) A Limited Partner shall not have the right to
exercise its Redemption Rights hereunder if, in the opinion of
counsel selected by the General Partner, in its sole and
absolute discretion, such exercise and/or issuance of shares
of Common Stock may or would (A) violate the General Partner's
Articles of Incorporation, as amended from time to time, (B)
cause the General Partner to fail any one or more of the REIT
Requirements or (C) constitute a violation of applicable
securities laws; and
(iii) Each Limited Partner acknowledges and agrees
that the issuance of shares of Common Stock pursuant to the
Redemption Rights will not be registered under the Securities
Act or any state securities laws. Accordingly, shares of
Common Stock
45
issued to such Limited Partner may be required to be held
indefinitely and the General Partner shall have no obligation
to register such shares under the Securities Act or any state
securities laws unless required to do so pursuant to a
separate written agreement entered into by the General Partner
at the time of the issuance. In addition, such Limited Partner
will be required to meet such other requirements and to
provide such other information and representations as the
General Partner may require, which are required in the opinion
of its counsel to lawfully allow it to issue such shares
without registration under the Securities Act and any
applicable state securities laws. Each Limited Partner
acknowledges that the certificates representing shares of
Common Stock issued will also bear a legend with respect to
any restrictions on transfer required in the opinion of
counsel for the General Partner. The General Partner
acknowledges that the Limited Partners have been granted the
right, in certain circumstances and subject to certain
limitations, to require the registration under the Securities
Act of the shares of Common Stock issued pursuant to the
Redemption Rights.
(e) Computation of Number of Exchange Shares and/or Cash To Be
Paid. Each Partnership Unit which is to be redeemed for shares of Common Stock
shall be redeemed for one share of Common Stock, as adjusted from time to time
as provided in Section 10.3(i). Upon an election to redeem Partnership Units for
shares of Common Stock, the General Partner shall cause the Partnership to
purchase such Common Stock for the redemption either (i) from the General
Partner, or (ii) on the open market. Each Partnership Unit which is to be
redeemed for cash shall be redeemed for an amount of cash equal to the Current
Per Share Market Price (determined as of the Trading Day immediately preceding
the date upon which the closing of the redemption of Offered Units is to occur).
Notwithstanding anything contained herein to the contrary, the General Partner,
in its sole and absolute discretion, shall have the right either (i) to deliver
shares of Common Stock to each Exercising Partner in lieu of all or any portion
of the cash requested by such Exercising Partner, the number of which shares of
Common Stock shall be determined pursuant to the first sentence of this Section
10.3(e) or (ii) to cause the Partnership to pay cash to each Exercising Partner
in lieu of all or any portion of the number of shares of Common
46
Stock requested by such Exercising Partner, the amount of such cash per
Partnership Unit shall be determined pursuant to the second sentence of this
Section 10.3(e). The General Partner shall not be required to issue fractions of
shares of Common Stock in return for Partnership Units. If more than one
Partnership Unit shall be requested to be redeemed at the same time by the same
Limited Partner, the number of full shares of Common Stock that shall be
issuable upon the redemption thereof shall be computed on the basis of the
aggregate number of shares of Common Stock represented by the Partnership Units
so presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 10.3(e), be issuable on the redemption of any
Partnership Units (or specified portion thereof), the General Partner shall pay
an amount in cash equal to the Current Per Share Market Price (determined as of
the Trading Day immediately preceding the date upon the closing of the
Redemption of the Offered Units is to occur), multiplied by such fraction.
(f) Closing; Delivery of Election Notice. The closing of the
redemption of Offered Units shall, unless otherwise mutually agreed, be held at
the principal offices of the General Partner, on the date agreed to by the
General Partner and the Exercising Partners, which date shall in no event be
later than: (i) ten (10) business days after the date of delivery of the
Exercise Notice to the General Partner or (ii) the first date upon which all
legal and other conditions with respect to such redemption have been satisfied
(which shall include the expiration or termination of any applicable waiting
periods).
(g) Closing Deliveries. At the closing of the redemption of
Offered Units, (i) the Exercising Partners shall execute and deliver (A) proper
instruments of transfer and assignment of the Offered Units, (B) a Unit
Certificate or Unit Certificates representing the number of Offered Units to be
so redeemed and (C) representations and warranties with respect to their due
authority to sell all of the right, title and interest in and to such Offered
Units to the General Partner and, with respect to the status of the Offered
Units, that such Offered Units are free and clear of all liens, claims and
encumbrances whatsoever, and (ii) the General Partner shall (A) if shares of
Common Stock are to be issued, execute and deliver representations and
warranties with respect to its due authority to issue the shares of Common Stock
to be received in the exchange; deliver an opinion of counsel for the General
Partner,
47
reasonably satisfactory to the Exercising Partners, to the effect that such
shares of Common Stock have been duly authorized, are validly issued, fully-paid
and non-assessable; and deliver a stock certificate or certificates evidencing
the shares of Common Stock to be issued and registered in the name(s) of the
Exercising Partner(s) or its or their designee(s), and/or (B) if cash is to be
paid for Partnership Units, deliver a check in the amount of any cash due to the
Exercising Partner(s) at such closing. If any Exercising Partner shall have
delivered a Unit Certificate or Unit Certificates representing a number of
Partnership Units in excess of the number of Offered Units, the Partnership
shall issue to such Exercising Partner, at the expense of the Partnership, a new
Unit Certificate covering the number of Partnership Units representing the
unredeemed portion of the Unit Certificate or Unit Certificates so surrendered,
which new Unit Certificate shall entitle the holder thereof to such rights of
ownership of Partnership Units to the same extent as if the Unit Certificate
covering such unredeemed Partnership Units had not been surrendered for
redemption.
(h) Restriction on Redemption of Partnership Units.
Notwithstanding anything in paragraphs (e) and (f) above, or any other provision
of this Section 10.3 to the contrary, after the earlier of January 1, 2006, or
the date on which the number of Partners exceeds 100, upon delivery of an
Exercise Notice, the General Partner shall notify the Limited Partner, within 10
days thereof, whether such Offered Units will be redeemed for cash or Common
Stock and the closing of the redemption of Offered Units shall not occur any
earlier than the later of (i) 10 days after such notification by the General
Partner or (ii) the fifteenth (15th) day after the date on which the Exercise
Notice for such Offered Units was delivered to the General Partner (or, if
later, in both cases (i) and (ii), the first date upon which all legal and other
conditions with respect to such redemption have been satisfied, which shall
include the expiration or termination of any applicable waiting periods), and in
no event shall the current Per Share Market Price of any such Offered Units be
determined as of any Trading Date prior to the fourteenth (14th) business day
after the date of delivery of the Exercise Notice; provided, however, that the
provisions of this Section 10.3(h) shall cease to apply and shall have no
further force or effect on the date, if any, on which the Partnership receives
either a ruling from the IRS or an unqualified opinion from the General
Partner's counsel to the effect that, under the original provisions of
paragraphs (e) and (f) prior to any modification
48
thereof by this paragraph (h), the Partnership will not be treated as a
"publicly traded partnership" within the meaning of Section 7704 of the Code or
any successor provision.
(i) Term of Rights. Unless sooner terminated, the rights of
the parties with respect to the Redemption Rights shall commence as of the date
which is one (1) year after the date of this Agreement and lapse for all
purposes and in all respects upon the termination of the Partnership; provided,
however, that the parties hereto shall continue to be bound by an Exercise
Notice delivered to the General Partner prior to such termination.
(j) Covenants of the General Partner. To facilitate the
General Partner's ability to fully perform its obligations hereunder, the
General Partner covenants and agrees as follows:
(i) At all times during the pendency of the
Redemption Rights, the General Partner shall reserve for
issuance such number of shares of Common Stock as may be
necessary to enable the General Partner to issue such shares
in full exchange for all Partnership Units held by the Limited
Partners which are from time to time issued and outstanding;
(ii) During the pendency of the Redemption Rights,
each Limited Partner shall receive in a timely manner all
reports and/or other communications transmitted from time to
time by the General Partner to its stockholders generally; and
(iii) In case the General Partner shall issue rights
or warrants to all holders of shares of its Common Stock
entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Per Share
Market Price as of the date immediately prior to the date of
such issuance, the General Partner shall also issue to each
holder of a Partnership Unit such number of rights or
warrants, as the case may be, as he would have been entitled
to receive had he required the Partnership to redeem his
Partnership Units immediately prior to the record date for
such issuance by the General Partner.
49
(iv) In case the outstanding shares of Common Stock
shall be subdivided into a greater number of shares, the
number of shares of Common Stock for which each Partnership
Unit thereafter may be redeemed shall be increased
proportionately, and, conversely, in case outstanding shares
of Common Stock each shall be combined into a smaller number
of shares, the number of shares of Common Stock for which each
Partnership Unit thereafter may be redeemed shall be reduced
proportionately, such increase or reduction as the case may
be, to become effective immediately after the opening of
business on the Trading Day following the day upon which such
subdivision or combination becomes effective.
(v) In case shares of Common Stock shall be changed
into the same or a different number of shares of any class or
classes of shares of beneficial interest, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or a stock dividend
described in Section 10.3(i)(iv) above) then and in each such
event the Limited Partners shall have the right thereafter to
require the Partnership to redeem their Partnership Units for
the kind and amount of shares and other securities and
property which would have been received upon such
reorganization, reclassification or other change by holders of
the number of shares of Common Stock for which the Partnership
Units might have been redeemed immediately prior to such
reorganization, reclassification or change.
(vi) The General Partner may, but shall not be
required to, make such adjustments to the number of shares of
Common Stock issuable upon redemption of a Partnership Unit,
in addition to those required by paragraphs (iii), (iv) and
(v) of this Section 10.3(i), as the Board of Directors
considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients. The Board of
Directors shall have the power to resolve any ambiguity or
correct any error in the adjustments made pursuant to this
Section 10.3(i) and its actions in so doing shall be final and
conclusive.
50
(k) Limited Partners' Covenant. Each Limited Partner covenants
and agrees with the General Partner that all Offered Units tendered to the
General Partner in accordance with the exercise of Redemption Rights herein
provided shall be delivered to the General Partner free and clear of all liens,
claims and encumbrances whatsoever and should any such liens, claims and/or
encumbrances exist or arise with respect to such Offered Units, the General
Partner shall be under no obligation to acquire the same. Each Limited Partner
further agrees that, in the event any state or local property transfer tax is
payable as a result of the transfer of its Offered Units to the General Partner
(or its designee), such Limited Partner shall assume and pay such transfer tax.
ARTICLE 11
----------
BANKING, RECORDS AND TAX MATTERS
--------------------------------
11.1 Partnership Funds. All funds of the Partnership shall be deposited
in its name in accounts (with banks, "money-market funds," or securities of the
United States government or like investment or depository media) designated by
the General Partner, and the General Partner or its designees shall have the
right to draw checks or other orders of withdrawal thereon and make, deliver,
accept and endorse negotiable instruments in connection with the Partnership
business.
11.2 Books and Records. The following books, records, and accounts
shall be maintained by the Partnership, showing its assets, liabilities,
transactions, and financial condition: a current list of the full name and last
known address of each Partner, separately identifying the General and Limited
Partners and set forth in alphabetical order and setting forth the amount of
cash or a description and statement of the Agreed Value of other property
contributed or agreed to be contributed by each partner; the date on which each
became a Partner; a copy of the Certificate and all amendments thereto; copies
of the Partnership's federal, state and local income tax returns and reports, if
any, for the six most recent years; copies of this Agreement and any amendments
thereto; and copies of any financial statements of the Partnership for the three
most recent years. The Partnership's books shall be maintained at the principal
office of the Partnership. Each Partner shall have the right to inspect and copy
such materials at all reasonable times and
51
during ordinary business hours. The General Partner is not required to deliver
to any Limited Partner copies of the Certificate or any amendments thereto,
unless requested by such Limited Partner.
11.3 Financial Statements. Within ninety-five (95) days after the close
of each fiscal year of the Partnership, the General Partner shall cause to be
prepared (at the Partnership's expense) and furnished to each Person who was a
Partner during the fiscal year then ended, a balance sheet of the Partnership as
of the close of such fiscal year and statements of income or loss, and Net Cash
Flow, if any. Such statements shall be prepared in accordance with generally
accepted accounting principles and certified by the Accountants for the
Partnership, unless such certification is waived, in writing, by all of the
Partners.
11.4 Tax Returns. Within ninety (90) days following the close of each
fiscal year of the Partnership, the General Partner shall cause to be prepared
(at the Partnership's expense) a United States Partnership Return of Income and
cause to be furnished to each Person who was a Partner during the fiscal year a
schedule (a "K-1 Schedule") of each such Partner's share of income, credits, and
deductions on the form then prescribed by the IRS. All elections and options
available to, or determinations as to items of income or expense of, the
Partnership for federal or state income tax purposes shall be taken, rejected or
made by the Partnership in the sole discretion of the General Partner.
11.5 Section 754 Matters. The General Partner, on behalf of the
Partnership, shall file an election under Section 754 of the Code in accordance
with the procedures set forth in the applicable Regulations promulgated
thereunder, which shall be effective beginning with the first fiscal year of the
Partnership with respect to which the Partnership is eligible to make such
election, which election, for such fiscal year, may not be revoked for any
reason.
11.6 Tax Matter Partners. The General Partner is hereby appointed the
"tax matters partner" of the Partnership for all purposes pursuant to Sections
6221-6231 of the Code. The Partnership shall reimburse the tax matters partner
for any and all out-of-pocket costs and expenses (including attorneys' and
accountants' fees) incurred or sustained by it in its capacity as
52
tax matters partner. The Partnership shall indemnify, defend and hold the tax
matters partner harmless from and against any loss, liability, damage, cost or
expense (including attorneys' and accountants' fees) sustained or incurred as a
result of any act or decision concerning the Partnership tax matters and within
the scope of its responsibility as tax matters partner.
11.7 Other Reports. The General Partner shall deliver to each Limited
Partner, in a timely manner, all reports and/or other communications transmitted
from time to time by the General Partner to its stockholders.
ARTICLE 12
----------
TRANSFER OF GENERAL PARTNER INTERESTS
\ -------------------------------------
12.1 Transfer of Interest of the General Partner. Except as provided in
Section 9.3 hereof, no General Partner may at any time sell, assign, transfer,
pledge or encumber any or all of its Partnership Interest in the Partnership or
withdraw or retire from the Partnership except as otherwise provided herein.
Retirement or withdrawal from the Partnership shall not relieve the General
Partner of any obligation theretofore incurred by it hereunder. Notwithstanding
anything contained herein to the contrary, the Limited Partners shall have no
right whatsoever to remove the General Partner from the Partnership.
12.2 Retirement of the General Partner. If a General Partner other than
the Interim Managing General Partner shall liquidate or dissolve, be adjudged
bankrupt, enter into an assignment for the benefit of creditors, have a receiver
appointed to administer its interest in the Partnership, be the subject of a
voluntary or involuntary petition for bankruptcy that is not dismissed or
vacated within ninety (90) days of filing, or have its interest in the
Partnership seized by a judgment creditor, or if there shall be an individual
general partner and he shall die, be adjudicated incompetent or become
permanently disabled (each of the foregoing events is referred to hereinafter as
an "Event of Retirement"), such General Partner, without further act or notice,
immediately shall be deemed to have retired as General Partner of the
Partnership. If the General Partner retires as General Partner of the
Partnership as aforesaid, (i) such General Partner (or its administrator,
executor, personal representative or successor) (a) shall become a
nonparticipating Limited Partner (a "Nonparticipating Limited
53
Partner") retaining the General Partner's former interest in the Profits, Losses
and Net Cash Flow of the Partnership, but shall not acquire any right or
interest in any payment or distribution to the Limited Partners, as such,
pursuant hereto, (b) shall have no right to participate in the management of the
affairs of the Partnership, and (c) shall be disregarded in determining whether
any approval, consent, or other action has been given or taken by the Limited
Partners; and (ii) the surviving General Partner(s), if any, shall remain as
such and the Partners hereby agree and consent that the Partnership shall
continue in effect and shall not terminate, subject, however, to the provisions
of Section 12.5 hereof.
12.3 Transferee of the General Partner's Interest. Except for a
Termination Transaction within the meaning of Section 12.6 hereof, any Person,
other than the General Partner, who acquires, in any manner whatsoever (except
as herein otherwise provided) the interest, or any portion thereof, of the
General Partner, shall not be a General Partner, but shall be entitled to become
a Nonparticipating Limited Partner upon written acceptance and adoption of all
of the terms and provisions of this Agreement and compliance with the
requirements of Section 13.3 of this Agreement. Such Person shall, to the extent
of the interest acquired, be entitled only to the transferor General Partner's
rights, if any, in the Profits, Losses and Net Cash Flow of the Partnership, but
shall not acquire any right or interest in any payment or distribution to the
Limited Partners, as such, pursuant hereto. No such Person shall have any right
to participate in the management of the affairs of the Partnership, and the
interest acquired by such Person shall be disregarded in determining whether any
approval, consent or other action has been given or taken by the Limited
Partners.
12.4 Retirement of Last Remaining General Partner. If the last
remaining General Partner shall at any time withdraw or suffer an Event of
Retirement, the Limited Partners shall have the right, within ninety (90) days
thereafter, by a written consent executed and delivered by Limited Partners
owning a majority of the issued and outstanding Partnership Interests taken as a
single class, to appoint one or more new General Partners as replacement General
Partners, unless the Act requires a greater percentage of the Limited Partners
to consent to the continuation of the Partnership, in which case such higher
percentage shall be required for the continuation of the Partnership. In such
event, the Limited Partners shall create
54
for such replacement General Partners such interest in the Partnership Profits,
Losses and Net Cash Flow as the Limited Partners may agree upon from among their
collective interests in the Partnership.
12.5 Continuation of Partnership. In the event of the timely
appointment of a replacement or new General Partner(s) pursuant to this Article
12, the relationship of the Partners shall be governed by the provisions of this
Agreement, the Partnership shall be continued, and the replacement or new
General Partner(s) shall have all of the management rights, duties,
responsibilities, authority and powers provided the General Partner in this
Agreement. If the Limited Partners fail to select a replacement or new General
Partner(s), whichever the case may be, within ninety (90) days following
retirement of the last remaining General Partner, the Partnership shall dissolve
and terminate.
12.6 Merger or Consolidation of the General Partner.
(a) Whether or not Section 9.3 hereof is applicable, the
General Partner shall not, unless Section 12.6(b) is applicable, engage in any
merger, consolidation or other combination with or into another person, sale of
all or substantially all of its assets or any reclassification, recapitalization
or similar transaction (each, a "Termination Transaction"), unless such
Termination Transaction is one in connection with which all Limited Partners
either will receive, or will have the right to elect to receive, for each
Partnership Unit, an amount of cash, securities, or other property equal to the
product of (i) the number of shares of Common Stock into which such Partnership
Unit is convertible and (ii) the greatest amount of cash, securities or other
property paid to a holder of one share of Common Stock in consideration of one
share of Common Stock pursuant to the terms of the Termination Transaction;
provided that; if, in connection with the Termination Transaction, a purchase,
tender or exchange offer shall have been made to and accepted by the holders of
the outstanding Common Stock, each holder of Partnership Units shall receive, or
shall have the right to elect to receive, the greatest amount of cash,
securities, or other property which such holder would have received had it
exercised its right to Redemption (as set forth in Section 10.3) and received
Common Stock in exchange for its Partnership Units immediately prior to the
expiration of such purchase, tender or exchange offer and had thereupon accepted
55
such purchase, tender or exchange offer and then such Termination Transaction
shall have been consummated.
(b) Whether or not Section 9.3 hereof is applicable, the
General Partner may merge, or otherwise combine its assets, with another entity
without satisfying the requirements of Section 12.6(a) hereof if: (i)
immediately after such merger or other combination, substantially all of the
assets directly or indirectly owned by the surviving entity, other than
Partnership Units held by such General Partner, are owned directly or indirectly
by the Partnership or another limited partnership or limited liability company
which is the survivor of a merger, consolidation or combination of assets with
the Partnership (in each case, the "Surviving Partnership"); (ii) the Limited
Partners own a percentage interest of the Surviving Partnership based on the
relative fair market value of the net assets of the Partnership (as determined
pursuant to Section 12.6(c)) and the relative fair market value of the other net
assets of the Surviving Partnership (as determined pursuant to Section 12.6(c))
immediately prior to the consummation of such transaction; (iii) the rights,
preferences and privileges of the Limited Partners in the Surviving Partnership
are at least as favorable as those in effect immediately prior to the
consummation of such transaction and as those applicable to any other limited
partners or non-managing members of the Surviving Partnership; and (iv) such
rights of the Limited Partners include the right to exchange their interests in
the Surviving Partnership for at least one of: (A) the consideration available
to such Limited Partners pursuant to Section 12.6(a), or (B) if the ultimate
controlling person of the Surviving Partnership has publicly traded common
equity securities, such common equity securities, with an exchange ration based
on the relative fair market value of such securities (as determined pursuant to
Section 12.6(c)) and the Common Stock.
(c) In connection with any transaction permitted by Section
12.6(a) or 12.6(b), the relative fair market values shall be reasonably
determined by the General Partner as of the time of such transaction and, to the
extent applicable, shall be no less favorable to the Limited Partners than the
relative values reflected in the terms of such transactions.
56
ARTICLE 13
----------
TRANSFER OF LIMITED PARTNER INTERESTS
-------------------------------------
13.1 Transfer of Interest of a Limited Partner. Except as otherwise
specifically provided in this Agreement, no Limited Partner may sell, assign,
transfer, pledge, encumber or in any manner dispose of all or any part of its
Partnership Interest without the prior written consent of the General Partner,
which consent may not be unreasonably withheld. Notwithstanding the foregoing,
each Limited Partner shall have the right to (i) pledge or otherwise encumber
all or any portion of its Partnership Interest to an unrelated lender as
security for a bona fide obligation (subject, however, to applicable securities
laws) and/or (ii) transfer all or any portion of its Partnership Interest to
members of the Immediate Family of such Limited Partner and to one or more
trusts for the benefit of one or more members of the Immediate Family of such
Limited Partner for estate and/or gift tax purposes, upon prior written notice
to the General Partner. Without limiting the generality of the foregoing, in no
event shall the General Partner consent to an assignment of all or any portion
of the Partnership Interest of a Limited Partner in the Partnership if, in the
opinion of the General Partner (or of counsel satisfactory to the General
Partner), such assignment (i) will result in a termination of the Partnership
for federal income tax purposes or otherwise result in adverse tax consequences
to the Partnership or any Partner, (ii) will result in the Partnership failing
to qualify for an exemption from the registration requirements of the federal or
any applicable state securities laws, (iii) will result in the imposition of
fiduciary responsibility on the Partnership or any Partner under the Employee
Retirement Income Security Act of 1974, as amended from time to time, (iv) will
result in a violation of any provision of any mortgage or trust deed (or the
note or bond secured thereby) constituting a lien against any assets of the
Partnership, or other instrument, document or agreement to which the Partnership
is a party or otherwise bound, (v) represents a transfer of any component
portion of a Partnership Interest, such as the Capital Account, or rights to Net
Cash Flow, separate and apart from all other components of a Partnership
Interest, or (vi) will cause the General Partner to cease to comply with any and
all REIT Requirements. Subject to satisfaction of the conditions therefor set
forth or referred to herein, each Limited Partner hereby consents to the
substitution or admission of any assignee of a Limited Partner. Any sale,
57
assignment, transfer, pledge, encumbrance, hypothecation or other disposition by
a Limited Partner of all or any part of its Partnership Interest in violation of
the provisions hereof shall be void ab initio and of no force or effect
whatsoever.
13.2 Assignee and Substitute Limited Partners. No Person shall be
admitted as an assignee or substituted Limited Partner under this Agreement
unless and until:
(a) An assignment is made in writing, signed by the assigning
Partner and accepted in writing by the assignee, and a duplicate original of
such assignment has been delivered to and approved by the General Partner;
(b) The General Partner has received an opinion of counsel
favorably covering the matters described in clauses (i) through (vi) of Section
13.1 above, or waived all or any portion of this requirement;
(c) The prospective admittee executes and delivers to the
General Partner a written agreement in form reasonably satisfactory to the
General Partner pursuant to which said Person agrees to be bound by and confirms
the obligations, representations, warranties and power of attorney contained in
this Agreement; and
(d) An appropriate amendment to this Agreement is executed.
13.3 Assignment. In the event an assignment is made in accordance with
the terms hereof, unless otherwise required by the Code:
(a) The effective date of such assignment shall be the date
the written instrument of assignment is delivered to the Partnership and
approved by the General Partner;
(b) The Partnership and the General Partner shall be entitled
to treat the assignor of the assigned interest as the absolute owner thereof in
all respects and shall incur no liability for allocations of Profits or Losses
and distributions of Net Cash Flow made in good faith to such assignor until
such time as the written instrument of assignment has been actually received and
approved by the General Partner, and recorded in the books of the Partnership;
and
58
(c) The division and allocation of Profits or Losses, other
than Profits or Losses arising from a Liquidation of the Partnership,
attributable to the applicable Partnership Interests between the assignor and
assignee during any fiscal year of the Partnership shall be based upon the
length of time during such fiscal year, as measured by the effective date of
such assignment, that the assigned Partnership Interest was owned by each of
them and shall not be based upon the date or dates during such fiscal year in
which income was earned or losses were sustained by the Partnership; provided,
however, that the division and allocation of Profits or Losses resulting from a
Liquidation of the Partnership shall be based upon the date or dates such income
was earned or losses were sustained.
13.4 Cost of Admission. The cost of processing and perfecting an
admission contemplated by this Article 13 (including reasonable attorney's fees
incurred by the Partnership) shall be borne by the party seeking admission as a
Partner to the Partnership.
ARTICLE 14
----------
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP
------------------------------------------
14.1 Dissolution of the Partnership. The Partnership shall be dissolved
upon the happening of any of the following:
(a) An election to dissolve and wind up the affairs of the
Partnership by the General Partner (subject to Section 9.3 hereof);
(b) The occurrence of an Event of Retirement to the last
remaining General Partner, unless the Limited Partners elect to continue the
business of the Partnership pursuant to the provisions of Sections 12.4 and 12.5
hereof;
(c) Any event that makes it unlawful for the Partnership
business to be continued;
(d) The sale, disposition, or abandonment of all or
substantially all of the assets of the Partnership unless the General Partner,
in compliance with Section 9.3 hereof, elects to continue the Partnership
business for the purpose of the receipt and the collection of indebtedness or
the collection of any other
59
consideration to be received in exchange for the assets of the Partnership
(which activities shall be deemed to be part of the winding up of the affairs of
the Partnership);
(e) Dissolution required by operation of law; or
(f) December 31, 2097, unless a majority in interest of the
Partnership elects to continue the Partnership.
14.2 Winding Up of Affairs. In the event of the dissolution and
liquidation of the Partnership for any reason, the General Partner shall
commence to wind up the affairs of the Partnership and shall convert all of the
Partnership's assets to cash or cash equivalents within such reasonable period
of time as may be required to receive fair value therefor. All items of income,
gain, loss, deduction and credit during the period of liquidation shall be
allocated among the Partners in the same manner as before the dissolution. If
there is no General Partner to effect such Liquidation, then the Limited
Partners, pursuant to a vote of Limited Partners owning a majority of the issued
and outstanding Partnership Units owned by all Limited Partners, may designate
any person, firm or corporation, as a Liquidating Trustee, for that purpose who
shall have all of the rights, powers and authority of a General Partner stated
herein in connection therewith.
14.3 Accounting. In the case of the dissolution and termination of the
Partnership, prior to any distributions to Partners pursuant to Section 14.4(c)
below, a proper accounting shall be made of the Capital Accounts of the Partners
and of each item of income, gain, loss, deduction and credit of the Partnership
from the date of the last previous accounting to the date of dissolution. The
General Partner shall provide a copy of such accounting to all Partners.
14.4 Final Distribution of Partnership Property. Upon termination of
the Partnership, the General Partner shall apply and distribute the remaining
property of the Partnership, together with the proceeds of any sales of same, as
follows:
(a) first, all Partnership debts and liabilities shall be paid
and discharged, including debts owed to Partners and any Affiliates of Partners;
60
(b) second, to establish any reserve for any contingent or
unforeseen liabilities or obligations of the Partnership. Such funds shall be
placed in escrow by the General Partner for the purposes of disbursing such
funds in payment of any of the contingencies, liabilities or obligations, and,
at the expiration of such period as the General Partner shall deem advisable,
the balance then remaining shall be distributed pursuant to subsection (c) of
this Section 14.4; and
(c) third, to distribute the balance to the Partners in the
manner and priority set forth in Article 8 hereof, with any and all Net Cash
Flow arising pursuant to the sale and/or other liquidation of Partnership
property being distributed pursuant to Section 8.1(b) hereof.
Distributions upon liquidation of the Partnership (or any
Partner's interest in the Partnership) and related adjustments shall be made by
the end of the taxable year of such liquidation (or, if later, within 90 days
after the date of such liquidation) or as otherwise permitted by the
Regulations.
14.5 Certificate of Cancellation. Upon completion of the liquidation of
the Partnership and the distribution of all Partnership property, the
Partnership shall terminate and the General Partner shall have the authority to
execute and record one or more Certificates of Cancellation of the Partnership
as well as any and all other documents required or considered advisable by the
General Partner to effectuate the dissolution and termination of the
Partnership.
ARTICLE 15
----------
POWER OF ATTORNEY
-----------------
15.1 Power of Attorney. Each Partner, by its execution hereof,
irrevocably constitutes and appoints the General Partner, or any substitute or
replacement General Partner, with full power of substitution, as such Partner's
true and lawful attorney-in-fact, in its name, place and stead to make, execute,
sign, acknowledge, certify, deliver, file and record on its behalf and on behalf
of the Partnership, the following:
(a) This Agreement, all Certificates of Limited Partnership,
Certificates of Doing Business under an Assumed
61
Name, amendments to any or all of the foregoing, and any other certificates or
instruments which may be required to be filed by the Partnership or the Partners
under the laws of the State of Delaware or any other jurisdiction;
(b) One or more Certificates of Cancellation of the
Partnership and such other instruments or documents as may be deemed necessary
or desirable by the General Partner upon termination of the Partnership
business;
(c) Any and all amendments to this Agreement and to the
instruments described in subsections (a) and (b) above, provided such amendments
are either required by law or have been authorized by the Partner(s) in
accordance with Article 16 and/or any other provision of this Agreement
(including, without limitation, any amendment to this Agreement and to the
Certificate to reflect the substitution or admission of a Limited Partner
pursuant to this Agreement); and
(d) Any and all such other documents and instruments as may be
deemed necessary or desirable by said attorney to carry out fully the provisions
of this Agreement in accordance with its terms.
15.2 Grant of Authority Irrevocable. The foregoing grant of authority
(a) is a special power of attorney coupled with an interest, is irrevocable and
shall survive the death or incapacity of a Partner who is a natural person or,
in the case of a Partner that is not a natural person, the merger, dissolution
or other termination of its existence of the Partner, (b) may be exercised by
the General Partner on behalf of each Partner, by a facsimile signature or by
listing all of the Partners executing any instrument with a single signature as
attorney-in-fact for all of them, and (c) shall survive the assignment by a
Partner of the whole or any portion of his or its interest in the Partnership.
ARTICLE 16
----------
AMENDMENT OF PARTNERSHIP AGREEMENT
----------------------------------
16.1 Amendments by Partners. Except as may be specifically provided
below in this Section 16.1 and in Section 16.2 hereof, this Agreement may only
be amended with the written concurrence of the General Partner and the written
consent of holders of at
62
least fifty-one percent (51%) of the Partnership Units held by the Limited
Partners, taken as a single class; provided, that if at any time prior to the
first anniversary date hereof the General Partner owns sixty-seven percent (67%)
of the Partnership Units, and thereafter if at any time as the General Partner
owns sixty percent (60%) of the Partnership Units, then in either case from such
time and thereafter the amendment may be effectuated only by the General Partner
and the Limited Partners need not be solicited but shall be informed of the
amendment,; provided, further, however, that absent the concurrence of the
General Partner and the approval of all of the Limited Partners no amendment
shall:
(a) increase the obligation of any Limited Partner to make
contributions to the capital of the Partnership;
(b) modify the order of allocation of distributions of the Net
Cash Flow or liquidating distributions, or the allocation of Profits and Losses
among the Partners (other than as specifically provided for herein, including
without limitation, modifications pursuant to Section 6.4 hereof);
(c) change the Partnership to a general partnership;
(d) reduce the percentage of Limited Partners required to
consent to any matter in this Agreement;
(e) amend Section 9.4(a)(iv) or 9.4(b) hereof or amend Section
10.3 hereof in any manner that prohibits or restricts, or has the effect of
prohibiting or restricting, the ability of a Limited Partner to exercise its
Redemption Rights in full;
(f) amend Section 12.6(a), (b) or (c) hereof; or
(g) amend this Article 16.
16.2 Amendment by the General Partner. Notwithstanding anything
contained in this Agreement to the contrary, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(a) To add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or
63
any Affiliate of the General Partner for the benefit of the Limited Partners;
(b) To reflect the admission, substitution, termination or
withdrawal of Partners in accordance with this Agreement, including without
limitation, the issuance of additional classes of Partnership Units to Limited
Partners pursuant to Section 6.4 hereof;
(c) To reflect a change that is of an inconsequential nature
and does not adversely affect the Limited Partners in any material respect, or
to cure any ambiguity, correct or supplement any provision in this Agreement not
inconsistent with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(d) To satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law; and
(e) To amend the provisions of this Agreement that protect the
qualification of the General Partner as a REIT if such provisions are no longer
necessary because of a change in applicable law (or an authoritative
interpretation thereof), a ruling of the IRS, or if the General Partner has
determined to cease qualifying as a REIT.
The General Partner will provide notice to the Limited Partners when any action
under this Section 16.2 is taken.
16.3 Amendment of Certificate. If this Agreement shall be amended
pursuant to this Article 16, the General Partner shall cause the Certificate to
be amended, to the extent required by applicable law, to reflect such change.
The Partners shall be promptly notified of any amendments made under this
Article 16.
64
ARTICLE 17
----------
INDEMNIFICATION
---------------
17.1 Indemnification.
(a) Except as provided in Section 17.1(c) hereof, the
Partnership shall indemnify, defend and hold harmless each Indemnitee from and
against any and all loss, damage, liability, cost or expense (including
reasonable attorneys' fees and expenses) sustained or incurred as a result of
any act or omission concerning the business or activities of the Partnership,
the General Partner or the Interim Managing General Partner; provided, that such
act or omission of the Indemnitee was not in violation of any term or provision
of this Agreement or any provision of law. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise for any indebtedness of the Partnership or any Affiliate
of the Partnership (including without limitation, any indebtedness which the
Partnership or any Affiliate of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 17.1 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any indemnification
pursuant to this Section 17.1 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership or otherwise
provide funds, to enable the Partnership to fund its obligations under this
Section 17.1. The foregoing indemnity shall not be enforceable against any
Limited Partner personally but solely from such Limited Partner's interest in
the Partnership.
(b) The provisions of this Section 17.1 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. Any
amendment, modification or repeal of this Section 17.1 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 17.1 as in effect
immediately prior to such
65
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
(c) The Partners hereby acknowledge that, in conjunction with
the financing and the refinancing of any of the property owned by the
Partnership, the General Partner may agree to guarantee part or all of such
debt. The Partners understand that, pursuant to Regulation Section
l.752-(2)(b)(3)(i), such guaranty obligation would, absent the indemnification
provided hereinafter, serve to increase the General Partner's share of such debt
pursuant to Regulation Section 1.752-2(a). Inasmuch as, notwithstanding such
guaranty obligation, each of the Limited Partners desires to increase his share
of such debt and the General Partner desires to decrease its share of such debt
(for purposes of Regulations Section 1.752-2(a)), each of the Limited Partners,
to the extent provided in Exhibit D attached hereto, hereby agrees to indemnify
the General Partner in the event and to the extent that the General Partner both
is required to make a payment to the lender under any such guaranty obligation
and is unable to sell any or all of the assets of the Partnership for money or
moneys worth to make the General Partner whole on account of such payment. This
indemnification is effective only at the time, in the event and to the extent
that upon a dissolution and liquidation of the Partnership, the General Partner
is a creditor of the Partnership due to its guaranty of Partnership debt and the
proceeds of sale in such dissolution and liquidation are insufficient to
reimburse the General Partner for any amounts paid on such guaranty obligation
as contemplated in this Section 17.1(c). As provided in Exhibit D, this
indemnification is limited on a per Unit basis to Units owned by an indemnifying
Limited Partner at the time an indemnification is due to the General Partner as
provided by this Section 17.1(c), such that each Limited Partner's obligation is
reduced upon a redemption of Units as provided at Section 10.3 or upon any other
transfer or disposition of Units. In addition, any and all indemnification as
provided by this Section 17.1(c) shall terminate in full as to each and every
Limited Partner in the event that both (i) the General Partner receives from tax
counsel an opinion that the Outside Limited Partners will be allocated an amount
of excess nonrecourse liabilities under the provisions of Regulation Section
1.752-3(a)(3) equal to or greater than the amount of the indemnification
requirement indicated on Exhibit D, and (ii) upon the Consent of the Outside
Limited Partners to terminate the indemnification required by this Section
17.1(c).
66
17.2 Partner Indemnification of Partnership. In the event the
Partnership is made a party to any litigation or otherwise incurs any loss or
expense as a result of or in connection with any Partner's personal obligations
or liabilities unrelated to Partnership business, such Partner shall indemnify
and reimburse the Partnership for all such loss and expense incurred, including
reasonable attorneys' fees, and the interest of such Partner in the Partnership
may be charged therefor. The liability of a Partner under this Section 17.2
shall not be limited to such Partner's interest in the Partnership, but shall be
enforceable against such Partner personally.
ARTICLE 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.1 Notices. All notices and demands required or permitted under this
Agreement shall be in writing and may be delivered personally to the Person to
whom it is authorized to be given, or sent by registered, certified or first
class mail, or by overnight delivery, postage prepaid, and if intended for the
Partnership, addressed to the Partnership at the principal office of the
Partnership, and if intended for a Partner, addressed to the Partner at its
address on the signature pages hereof, or to such other person or at such other
address designated by written notice given to the Partnership. Any notice or
demand mailed as aforesaid shall be deemed to have been delivered two (2) days
after the date that such notice or demand is deposited in the mails.
18.2 Severability. If any provision of this Agreement or the
application of such provision to any Person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid
shall not be affected.
18.3 Parties Bound. Any Person acquiring or claiming an interest in the
Partnership, in any manner whatsoever, shall be subject to and bound by all
terms, conditions and obligations of this Agreement to which his or its
predecessor in interest was subject or bound, without regard to whether such
Person has executed a counterpart hereof or any other document contemplated
hereby. No Person, including the legal representative, heir or legatee of a
deceased Partner, shall have any rights or obligations greater than those set
forth in this Agreement and no
67
Person shall acquire an interest in the Partnership or become a Partner thereof
except as permitted by the terms of this Agreement. This Agreement shall be
binding upon the parties hereto, their successors, heirs, devisees, assigns,
legal representatives, executors and administrators.
18.4 Applicable Law. The Partnership and this Agreement shall be
governed by the laws of the State of Delaware.
18.5 Partition. Each Partner hereby irrevocably waives during the term
of the Partnership any right that he or it may have to maintain any action for
partition with respect to any property of the Partnership.
18.6 Computation of Accountants. Except with respect to matters as to
which the General Partner is granted discretion under this Agreement, the
opinion of the Accountants shall be final and binding with respect to all
allocations made under Article 7 or distributions made under Article 8 or
Section 14.4 hereof.
18.7 Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision.
18.8 Counterparts. This Agreement may be executed in multiple
counterparts with separate signature pages, each such counterpart shall be
considered an original, but all of which together shall constitute one and the
same instrument.
68
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first set forth above, confirms his or its agreement to become a
General Partner, Interim Managing General Partner or Limited Partner, as the
case may be, of the Partnership, agrees to be bound by this Agreement and
acknowledges the appointment of attorneys-in-fact as set forth herein, and
swears that the statements set forth herein are true and correct.
GENERAL PARTNER:
PHILIPS INTERNATIONAL REALTY CORP.
a Maryland corporation
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx X. Petra
Title: President
INTERIM MANAGING GENERAL PARTNER:
PHILIPS INTERNATIONAL REALTY, LLC
a Delaware limited liability company
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx, Sole Member
LIMITED PARTNERS:
XXXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxx Xxxxxxxx
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
------------------------------------
By: Xxxxxx Xxxxxx
00
XX XXXXXX XXXXXX U ASSOCIATES
/s/ Xxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxx Xxxxxxxx
PALM MILE CORP.
/s/ Xxxxxx Xxxxxx
------------------------------------
By: Xxxxxx Xxxxxx
PL PALM SPRINGS L.P.
/s/ Xxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxx Xxxxxxxx
XXXXXXX HOLIDAY LIMITED PARTNERSHIP
/s/ Xxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxx Xxxxxxxx
XXXXXXX EQUITIES L.P.
/s/ Xxxxxx Xxxxx
------------------------------------
By: Xxxxxx Xxxxx
SP AVENUE U CORP.
/s/ Xxxxxx Xxxxx
------------------------------------
By: Xxxxxx Xxxxx
XXXXXX XXXXX
/s/ Xxxxxx Xxxxx
------------------------------------
By: Xxxxxx Xxxxx
00
XX XXXXXX U ASSOCIATES
/s/ Xxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxx Xxxxxxxx
XXXX XXXXXXXX
/s/ Xxxx Xxxxxxxx
------------------------------------
By: Xxxx Xxxxxxxx
XXXXX XXXXXXXX
/s/ Xxxxx Xxxxxxxx
------------------------------------
By: Xxxxx Xxxxxxxx
PHILIPS FREEPORT DEVELOPMENT CORP.
/s/ Xxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxx Xxxxxxxx
XXXXXX REALTY CO.
/s/ Xxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxx Xxxxxxxx
CENTURY REALTY INC.
/s/ Xxxx Xxxxxx
------------------------------------
By: Xxxx Xxxxxx, CFO
XXXXXX XXXX
/s/ Xxxxxx Xxxx
------------------------------------
By: Xxxxxx Xxxx
71
ESTATE OF XXXXX XXXX
/s/ Xxxxxxx Xxxx
------------------------------------
By: Xxxxxxx Xxxx, as Executor
XXXXX XXXXXXXX
/s/ Xxxxx Xxxxxxxx
------------------------------------
By: Xxxxx Xxxxxxxx
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
------------------------------------
By: Xxxxxx X. Xxxxxxxx
XXXXXXX XXXXXXXX
/s/ Xxxxxxx Xxxxxxxx
------------------------------------
By: Xxxxxxx Xxxxxxxx
72
EXHIBIT A
---------
Partners and Partnership Units
------------------------------
Name and Address of Partner Partnership Units
--------------------------- -----------------
General Partner:
----------------
Philips International Realty Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Interim Managing General Partner:
---------------------------------
Philips International Realty, LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Limited Partners:
-----------------
Xxxxxx Xxxxxxxx 473,435
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxx 26,128
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
PL Forest Avenue Associates LLC 105,125
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Palm Mile Corp. 34,265
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
i
Name and Address of Partner Partnership Units
--------------------------- -----------------
PL Palm Springs L.P. 352,928
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Holiday Limited Partnership 33,355
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Equities L.P. 77,827
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
SP Avenue U Corp. 1,761
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxx 88,051
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
PL Avenue U Associates 86,289
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxx Xxxxxxxx 22,339
0000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Xxxxx Xxxxxxxx 22,339
0000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Philips Freeport Development Corp. 1,083
0000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
ii
Name and Address of Partner Partnership Units
--------------------------- -----------------
Baraka Realty Co. 26,721
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Century Realty Inc. 13,360
00 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxx 6,680
000 Xxxxxx Xxxxxxxx
Xxxxx Xxxxx, XX 00000
Estate of Xxxxx Xxxx 6,680
000 Xxxxxx Xxxxxxxx
Xxxxx Xxxxx, XX 00000
Xxxxx Xxxxxxxx 24,753
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx X. Xxxxxxxx 39,681
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Xxxxxxx Xxxxxxxx 7,200
000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
iii
EXHIBIT B
---------
PHILIPS INTERNATIONAL REALTY, L.P. UNIT CERTIFICATE
---------------------------------------------------
* SEE RESTRICTIVE LEGENDS ON REVERSE *
PHILIPS INTERNATIONAL REALTY, L.P.
A DELAWARE LIMITED PARTNERSHIP
Number: Units:
------ -----------
This is to certify that ____________________ is the owner of
______________________________________________________ fully paid limited
Partnership Units of Philips International Realty, L.P., a Delaware limited
partnership (the "Partnership"), transferable only on the books of the
Partnership by the holder hereof in person or by the duly authorized Attorney
upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the General Partner of the Partnership
and the signatures of its duly authorized officers.
Dated:
--------------
------------------------------------ ------------------------------------
President Secretary
-SEAL-
i
REVERSE OF
PHILIPS INTERNATIONAL REALTY, L.P. UNIT CERTIFICATE
---------------------------------------------------
THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PHILIPS
INTERNATIONAL REALTY, L.P., DATED AS OF APRIL 16, 1998 (A COPY OF WHICH
IS ON FILE WITH THE PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN SUCH
AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF THE
PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT
THEREUNDER. IN ADDITION, THE UNITS ARE SUBJECT TO THE PROVISIONS OF
SECTION 19.1 OF A CERTAIN CONTRIBUTION AND EXCHANGE AGREEMENT DATED AS
OF AUGUST 11, 1997 (A COPY OF WHICH IS ON FILE WITH THE PARTNERSHIP).
FOR VALUE RECEIVED, _________________ hereby sell, assign and transfer
unto __________________________________ _________________ limited Partnership
Units represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________ Attorney to transfer the said
limited Partnership Units on the books of the within named Partnership with full
power of substitution in the premises.
Dated:
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In presence of:
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Attachment 1 to Unit Certificate
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EXERCISE NOTICE
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To:
Reference is made to that certain Amended and Restated Agreement of
Limited Partnership of Philips International Realty, L.P. dated as of April 16,
1998 (the "Partnership Agreement"), pursuant to which Philips International
Realty Corp., a Maryland corporation, and certain other persons, including the
undersigned, continued the Delaware limited partnership known as Philips
International Realty, L.P. (the "Partnership"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Partnership Agreement.
Pursuant to Section 10.3 of the Partnership Agreement, each of the undersigned,
being a limited partner of the Partnership (an "Exercising Partner"), hereby
elects to exercise its Redemption Rights as to a portion or portions of its
Partnership Units, as all specified opposite its signature below
(notwithstanding the foregoing, each of the undersigned hereby acknowledges and
agrees that the General Partner has the right, in its sole and absolute
discretion, to deliver shares of Common Stock to the undersigned in lieu of all
or any portion of the cash requested below by the undersigned, all in accordance
with Section 10.3 of the Partnership Agreement):
Dated:
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Number of Offered Units to be Number of Offered Units to be
Exercising Partner Redeemed for Shares Redeemed for Cash
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i
