EXHIBIT 10.2
================================================================================
AGREEMENT OF LIMITED PARTNERSHIP
OF
NNN HEALTHCARE/OFFICE REIT HOLDINGS, L.P.
================================================================================
September 20, 2006
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINED TERMS.................................................. 1
ARTICLE 2 ORGANIZATIONAL MATTERS......................................... 13
2.1 Formation......................................................... 13
2.2 Name.............................................................. 13
2.3 Registered Office and Agent....................................... 14
2.4 Principal Place of Business....................................... 14
2.5 Term and Termination.............................................. 14
2.6 Power of Attorney................................................. 14
2.7 Effectiveness of this Agreement................................... 16
ARTICLE 3 PURPOSE AND POWERS............................................. 16
3.1 Purpose and Business.............................................. 16
3.2 Powers............................................................ 17
ARTICLE 4 CAPITAL CONTRIBUTIONS; PARTNERSHIP UNITS; ADDITIONAL FUNDS..... 17
4.1 Capital Contributions of the Partners............................. 17
4.2 Issuance of Additional Partnership Interests...................... 18
4.3 Issuance of Securities by the General Partner..................... 18
4.4 Additional Funds.................................................. 20
4.5 No Third-Party Beneficiary........................................ 20
4.6 No Interest....................................................... 20
4.7 No Preemptive Rights.............................................. 20
ARTICLE 5 DISTRIBUTIONS.................................................. 21
5.1 Distributions..................................................... 21
5.2 Qualification as a REIT........................................... 23
5.3 Withholding....................................................... 23
5.4 Additional Partnership Interests.................................. 23
ARTICLE 6 ALLOCATIONS.................................................... 23
6.1 Allocation of Profits and Net Losses.............................. 23
6.2 Special Allocations............................................... 24
6.4 Revisions to Allocations to Reflect Issuance of Partnership
Interests......................................................... 25
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS.......................... 26
7.1 Management........................................................ 26
7.2 Certificate of Limited Partnership................................ 29
7.3 Reimbursement of the General Partner.............................. 29
7.4 Acquisition of Limited Partner Interests by the General Partner... 30
7.5 Transactions with Affiliates...................................... 30
7.6 Indemnification................................................... 31
7.7 Liability of the General Partner.................................. 34
7.8 Other Matters Concerning the General Partner...................... 34
7.9 Title to Partnership Assets....................................... 35
7.10 Reliance by Third Parties........................................ 35
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..................... 36
8.1 Limitation of Liability........................................... 36
8.2 No Right to Participate in the Management of Business............. 36
8.3 Outside Activities of Limited Partners............................ 36
8.4 Return of Capital................................................. 37
8.5 Rights of Limited Partners Relating to the Partnership............ 37
8.6 Redemption Right.................................................. 38
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS......................... 40
9.1 Records and Accounting............................................ 40
9.2 Reports........................................................... 41
ARTICLE 10 TAX MATTERS................................................... 41
10.1 Preparation of Tax Returns....................................... 41
10.2 Tax Elections.................................................... 41
10.3 Tax Matters Partner.............................................. 42
10.4 Organizational Expenses.......................................... 43
10.5 Withholding...................................................... 43
ARTICLE 11 TRANSFERS AND WITHDRAWALS..................................... 44
11.1 Transfer......................................................... 44
11.2 Transfer of the General Partner's General Partner Interest....... 44
11.3 Limited Partners' Rights to Transfer............................. 45
11.4 Substituted Limited Partners..................................... 46
11.5 Assignees........................................................ 46
11.6 General Provisions............................................... 47
ARTICLE 12 ADMISSION OF PARTNERS......................................... 48
12.1 Admission of Successor General Partner........................... 48
12.2 Admission of Additional Limited Partners......................... 48
12.3 Amendment of Agreement and Certificate of Limited Partnership.... 49
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION...................... 49
13.1 Dissolution...................................................... 49
13.2 Winding Up; Liquidation.......................................... 50
13.3 No Obligation to Contribute Deficit.............................. 51
13.4 Notice of Dissolution............................................ 51
13.5 Termination of Partnership and Cancellation of Certificate of
Limited Partnership.............................................. 52
13.6 Reasonable Time for Winding-Up................................... 52
13.7 Waiver of Partition.............................................. 52
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS.................. 52
14.1 Amendments....................................................... 52
14.2 Meetings of the Partners......................................... 52
ARTICLE 15 GENERAL PROVISIONS............................................ 53
15.1 Addresses and Notice............................................. 53
15.2 Titles and Captions.............................................. 54
15.3 Pronouns and Plurals............................................. 54
15.4 Further Action................................................... 54
15.5 Binding Effect................................................... 54
15.6 Creditors........................................................ 54
15.7 Waiver........................................................... 54
15.8 Counterparts..................................................... 54
15.9 Applicable Law................................................... 55
15.10 Invalidity of Provisions........................................ 55
15.11 Merger.......................................................... 55
15.12 No Rights as Stockholders....................................... 55
-ii-
15.13 Entire Agreement................................................ 55
EXHIBITS
Exhibit A -- Partner's Contributions and Partnership Interests........... A-1
Exhibit B -- Form of Notice of Redemption Request........................ B-1
-iii-
FORM OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
NNN HEALTHCARE/OFFICE REIT HOLDINGS, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF NNN Healthcare/Office REIT
Holdings, L.P. (this "Agreement"), dated as of September , 2006, is entered
into by and among NNN Healthcare/Office REIT, Inc., a Maryland corporation, as
general partner (the "General Partner"), and those Persons who have executed
this Agreement or a counterpart hereof, or who become parties hereto pursuant to
the terms of this Agreement.
WITNESSETH
WHEREAS, the General Partner and the Initial Limited Partner formed NNN
Healthcare/Office REIT Holdings, L.P. (the "Partnership") as a limited
partnership pursuant to the Act by filing a certificate of limited partnership
with the Secretary of State of the State of Delaware on April 20, 2006; and
WHEREAS, this Agreement shall constitute the "partnership agreement"
(within the meaning of the Act) of the Partnership, and shall be binding upon
all Persons now or at any time hereafter who are Partners;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, and of other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
ARTICLE 1
DEFINED TERMS
Capitalized terms used in this Agreement (including exhibits, schedules and
amendments) shall have the meanings set forth below or in the Section of this
Agreement referred to below, except as otherwise expressly indicated or limited
by the context in which they appear in this Agreement. All terms defined in this
Agreement in the singular have the same meanings when used in the plural and
vice versa. Accounting terms used but not otherwise defined shall have the
meanings given to them under GAAP.
1.1 "ACT" means the Delaware Revised Uniform Limited Partnership Act, as amended
from time to time, and any successor to such statute.
1.2 "ADDITIONAL LIMITED PARTNER" means a Person that has executed and delivered
an additional limited partner signature page in the form required by the General
Partner and has been admitted to the Partnership as a Limited Partner pursuant
to Section 12.2.
1.3 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner, the
negative balance, if any, in such Partner's Capital Account as of the end of any
relevant Fiscal Year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative balance
which such Partner (i) is treated as obligated to restore to the Partnership
pursuant to the provisions of
Treasury Regulations Section 1.704-1(b)(2)(ii)(c), or (ii) is deemed to be
obligated to restore to the Partnership pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
This definition of Adjusted Capital Account Deficit is intended to comply with
the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
1.4 "ADVISOR" means Triple Net Properties, LLC, the advisor to the Partnership
and the General Partner pursuant to the Advisory Agreement.
1.5 "ADVISORY AGREEMENT" means that certain Advisory Agreement by and among the
Advisor, the Partnership and the General Partner dated as of September , 2006.
1.6 "ADVISOR PARTICIPATION IN SALES PROCEEDS" has the meaning set forth in
Section 5.1(c).
1.7 "AFFILIATE" means with respect to any Person, (i) any Person directly or
indirectly owning, controlling or holding, with the power to vote, ten percent
or more of the outstanding voting securities of such other Person; (ii) any
Person ten percent or more of whose outstanding voting securities are directly
or indirectly owned, controlled or held, with the power to vote, by such other
Person; (iii) any Person directly or indirectly controlling, controlled by or
under common control with such other Person; (iv) any executive officer,
director, trustee or general partner of such other Person; and (v) any legal
entity for which such Person acts as an executive officer, director, trustee or
general partner.
1.8 "AGREEMENT" means this Agreement of Limited Partnership of NNN
Healthcare/Office REIT Holdings, L.P., as originally executed and as amended,
modified, supplemented or restated from time to time, as the context requires.
1.9 "APPRAISED VALUE" means the value of the Partnership Assets as determined by
an appraisal made by an Independent Appraiser.
1.10 "ARTICLES OF INCORPORATION" means the General Partner's Articles of
Incorporation, filed with the Maryland State Department of Assessments and
Taxation, or other organizational document governing the General Partner, as
amended, modified, supplemented or restated from time to time.
1.11 "ASSIGNEE" means a Person to whom one or more Partnership Units have been
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
1.12 "AVAILABLE OPERATING CASH" means the cash flows derived by the Partnership
from the operation of the Partnership's business (other than any Net Sales
Proceeds or Capital Contributions) before any deduction for depreciation or
amortization and after deduction of:
(a) all operating costs and expenses including taxes;
(b) all payments of principal, interest and other charges in respect of any
Partnership indebtedness;
-2-
(c) all expenditures for capital improvements to the Partnership assets or
property; and
(d) all reserves, whether for working capital, debt repayment, new
portfolio investments or otherwise (including for the redemption of Partnership
Units) that are established by the General Partner in the exercise of its sole
and absolute discretion.
1.13 "BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California are authorized or required by
law to close.
1.14 "CAPITAL ACCOUNT" has the meaning set forth in Section 4.8.
1.15 "CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash, cash
equivalents or the fair market value of Contributed Property that such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4.
1.16 "CARRYING VALUE" means (a) with respect to a Contributed Property, the fair
market value of such Contributed Property at the time such property is
contributed, as determined by the General Partner and agreed to by the
contributing partner, without reduction for any liabilities either assumed by
the Partnership upon such contribution or to which such property was subject
when contributed, reduced (but not below zero) by all Depreciation with respect
to such property charged to the Partners' Capital Accounts, and (b) with respect
to any other Partnership Asset, the adjusted basis of such Partnership Asset for
Federal income tax purposes, all as of the time of determination; except that
the Carrying Values of all assets may, at the discretion of the general Partner,
be adjusted to equal their respective fair market values (as determined by the
General Partner), in accordance with the rules set forth in Treasury Regulations
Section 1.704-1(b)(2)(iv)(f), as provided for in Section 4.8.
1.17 "CASH AMOUNT" means an amount of cash equal to the Value of the REIT Stock
Amount on the Valuation Date.
1.18 "CERTIFICATE" means the Certificate of Limited Partnership of the
Partnership, filed on April 20, 2006, as amended, restated, supplemented or
otherwise modified from time to time as herein provided in accordance with the
Act.
1.19 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent Federal law of similar import, and, to the extent
applicable, any Treasury Regulations promulgated thereunder.
1.20 "COMMON STOCK" means a share of the common stock of the General Partner,
par value $.01 per share. Common Stock may be issued in one or more classes or
series in accordance with the terms of the Articles of Incorporation. If there
is more than one class or series of Common Stock, the term "Common Stock" shall,
as the context requires, be deemed to refer to the class or series of Common
Stock that correspond to the class or series of Partnership Units for which the
reference to Common Stock is made.
1.21 "CONSENT" means the consent or approval of a proposed action by a Partner
given in accordance with Section 14.2.
-3-
1.22 "CONSENT OF THE OUTSIDE LIMITED PARTNERS" means the Consent of the Outside
Limited Partners holding a number of Partnership Units greater than fifty
percent (50%) of the aggregate Partnership Units held by all Outside Limited
Partners.
1.23 "CONTRIBUTED PROPERTY" means each property or other asset (but excluding
cash and cash equivalents), in such form as may be contributed by a Partner to
the Partnership as permitted by the Act.
1.24 "DEPRECIATION" means, for each Fiscal Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period for Federal income tax
purposes; provided, that if the Carrying Value of an asset differs from its
adjusted basis for Federal income tax purposes at the beginning of any such year
or other period, Depreciation shall be determined in the manner described in
Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3) or 1.704-3(d)(2), whichever
is applicable, and if such asset has a zero adjusted tax basis, Depreciation
shall be an amount determined under any reasonable method selected by the
General Partner.
1.25 "EFFECTIVE DATE" means the date of first closing of the offering of Common
Stock pursuant to the Registration Statement.
1.26 "8% RETURN" means, with respect to the General Partner, an amount
calculated like simple interest at the rate of eight percent (8%) per annum
calculated on the varying daily balances of Invested Capital of the General
Partner during the period to which the 8% Return relates, and determined on the
basis of a 360-day year/30-day month, cumulative for the period for which such
8% Return is being determined.
1.27 "8% RETURN ACCOUNT" means, with respect to the General Partner, as of any
relevant date, an amount equal to the excess of (i) the 8% Return that has
accrued with respect to the Invested Capital of the General Partner through such
date, over (ii) the sum of (A) the cumulative distributions of Available
Operating Cash and Net Sales Proceeds made to the General Partner prior to such
relevant date pursuant to Section 5.1 hereof, and (B) the cumulative amounts
paid to the General Partner in redemption of its Partnership Units pursuant to
Section 8.6(g) as of such date, other than such distributions and payments that
are applied to reduce the Unrecovered Contribution Account of the General
Partner. All amounts distributed and paid to the General Partner pursuant to
Sections 5.1 and 8.6(g) shall first be applied to reduce the Unrecovered
Contribution Account of the General Partner until the balance of such
Unrecovered Contribution Account equals zero ($0), and then shall be applied to
reduce the 8% Return Account of the General Partner.
1.28 "ENTITY" means any general partnership, limited liability company,
proprietorship, corporation, joint venture, joint-stock company, limited
partnership, limited liability partnership, business trust, firm, trust, estate,
governmental entity, cooperative, association or other foreign or domestic
enterprise.
1.29 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding laws).
1.30 "FISCAL YEAR" means the fiscal year of the Partnership and shall be the
same as its taxable year, which shall be the calendar year unless otherwise
determined by the General Partner in accordance with the Code.
-4-
1.31 "GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
1.32 "GENERAL PARTNER" means NNN Healthcare/Office REIT, Inc., a Maryland
corporation, and any successor as general partner of the Partnership.
1.33 "GENERAL PARTNER INTEREST" means a Partnership Interest held by the General
Partner, in its capacity as general partner. A General Partner Interest may be
expressed as a number of Partnership Units.
1.34 "INCAPACITY" or "INCAPACITATED" means:
(a) as to any individual Partner, death, total physical disability or entry
by a court of competent jurisdiction adjudicating him incompetent to manage his
person or his estate;
(b) as to any corporation that is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter;
(c) as to any partnership that is a Partner, the dissolution and
commencement of winding up of the partnership;
(d) as to any estate that is a Partner, the distribution by the fiduciary
of the estate's entire interest in the Partnership;
(e) as to any trustee of a trust that is a Partner, the termination of the
trust (but not the substitution of a new trustee); or
(f) as to any Partner, the bankruptcy of such Partner, which shall be
deemed to have occurred when:
(i) the Partner commences a voluntary proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other
similar law now or hereafter in effect;
(ii) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar
law now or hereafter in effect has been entered against the Partner;
(iii) the Partner executes and delivers a general assignment for the
benefit of the Partner's creditors;
(iv) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (ii) above;
(v) the Partner seeks, consents to or acquiesces in the appointment of
a trustee, receiver or liquidator for the Partner or for all or any
substantial part of the Partner's assets;
(vi) any proceeding seeking liquidation, reorganization or other
relief of or against such Partner under any bankruptcy, insolvency or other
similar law now or
-5-
hereafter in effect has not been dismissed within one hundred twenty (120)
days after the commencement thereof;
(vii) the appointment without the Partner's consent or acquiescence of
a trustee, receiver or liquidator has not been vacated or stayed within
ninety (90) days of such appointment; or
(viii) an appointment referred to in clause (vii) which has been
stayed is not vacated within ninety (90) days after the expiration of any
such stay.
1.35 "INDEMNITEE" MEANS
(a) any Person made a party to a proceeding by reason of its status
as:
(i) the General Partner,
(ii) a Limited Partner,
(iii) the Advisor,
(iv) a director, trustee, manager, member or officer of the
Partnership, the General Partner or the Advisor, or
(v) a director, trustee, manager, member or officer of any other
Entity, serving in such capacity at the request of the Partnership,
the General Partner or the Advisor, acting on behalf of the
Partnership or the General Partner, or
(b) such other Persons (including Affiliates of the General Partner)
as the General Partner may designate from time to time (whether before or
after the event giving rise to potential liability), in its sole and
absolute discretion.
1.36 "INDEPENDENT APPRAISER" means an appraiser of real estate with no material
current or prior business or personal relationship with the Advisor, the
Partnership, the General Partner or the directors of the General Partner, that,
in the determination of the General Partner, is qualified to appraise real
estate by virtue of being engaged to a substantial extent in the business of
rendering opinions regarding the value of assets of the type held by the
Partnership. Membership in a nationally recognized appraisal society such as the
American Institute of Real Estate Appraisers or the Society of Real Estate
Appraisers shall be conclusive evidence of such qualification.
1.37 "INITIAL LIMITED PARTNER" means NNN Healthcare/Office REIT Advisor, LLC.
1.38 "INVESTED CAPITAL" means, with respect to the General Partner, as of any
relevant date, an amount equal to the excess of (i) the aggregate amount of cash
contributed or deemed contributed by the General Partner to the Partnership from
the gross proceeds of the issuance by the General Partner of REIT Stock or other
equity Securities pursuant to Article 4 hereof, over (ii) the cumulative amounts
paid to the General Partner in redemption of its Partnership Units pursuant to
Section 8.6(g) as of such date.
1.39 "IRS" shall mean the Internal Revenue Service of the United States.
-6-
1.40 "JOINT VENTURE" mean those joint venture or partnership arrangements in
which the Partnership or any of its subsidiaries is a co-venturer or general
partner established to acquire or hold Assets.
1.41 "LIEN" means any lien, security interest, mortgage, deed of trust, charge,
claim, encumbrance, pledge, option, right of first offer or first refusal and
any other right or interest of others of any kind or nature, actual or
contingent, or other similar encumbrance of any nature whatsoever.
1.42 "LIMITED PARTNER" means, prior to the admission of the first Additional
Limited Partner to the Partnership, the Initial Limited Partner, and thereafter
any Person named as a limited partner of the Partnership in Exhibit A, as such
Exhibit may be amended from time to time, upon the execution and delivery by
such Person of an additional limited partner signature page, including any
Additional Limited Partner or Substituted Limited Partner in each case, in such
Person's capacity as a limited partner of the Partnership.
1.43 "LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner in the Partnership. A Limited Partner Interest may be expressed as a
number of Partnership Units.
1.44 "LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
1.45 "LIQUIDATOR" has the meaning set forth in Section 13.2.
1.46 "LISTED MARKET PRICE" means, with respect to a share of REIT Stock for a
specified trading day, shall be the last reported sale price on such day or, if
no sale takes place on such day, the average of the closing bid and asked prices
on such day, as reported on the national securities exchange on which the REIT
Stock is listed for trading.
1.47 "LISTING AMOUNT" has the meaning set forth in Section 5.1(d).
1.48 "LISTING EVENT" means the listing of the REIT Stock on (i) the New York
Stock Exchange, the American Stock Exchange, or the Global Market and the Global
Select Market of the Nasdaq Stock Market (or any successor to such entities) or
(ii) a national securities exchange (or tier or segment thereof) that has
listing standards that the Securities and Exchange Commission has determined by
rule are substantially similar to the listing standards applicable to securities
described in Section 18(b)(1)(A) of the Securities Act.
1.49 "LISTING DATE" means the date on which a Listing Event occurs.
1.50 "MARKET VALUE" means the market value of the REIT Stock as of the date of a
Listing Event, which shall be equal to the product of (a) the number of shares
of REIT Stock issued and outstanding at the time of the Listing Event,
multiplied by (b) the average Listed Market Price of a share of REIT Stock for
the 30 trading days beginning on the 180th day after the Listing Date.
1.51 "MORTGAGE" means in connection with mortgage financing provided, invested
in, participated in or purchased by the Partnership, all of the notes, deeds of
trust, security interests or other evidences of indebtedness or obligations,
which are secured or collateralized by Real Property owned by the borrowers
under such notes, deeds of trust, security interests or other evidences of
indebtedness or obligations.
1.52 "NASAA GUIDELINES" means the North American Securities Administrators
Association, Inc. Statement of Policy Regarding Real Estate Investment Trusts.
1.53 "NET ASSETS" means the total assets of the Partnership (other than
intangibles) at cost, before deducting depreciation, reserves for bad debts or
other non-cash reserves, less total liabilities, calculated quarterly by the
Partnership on a basis consistently applied..
-7-
1.54 "NET SALES PROCEEDS" means in the case of a transaction described in clause
(i)(A) of the definition of Sale, the proceeds of any such transaction less the
amount of selling expenses incurred by or on behalf of the Partnership,
including all real estate commissions, closing costs and legal fees and
expenses. In the case of a transaction described in clause (i)(B) of the
definition of Sale, Net Sales Proceeds means the proceeds of any such
transaction less the amount of selling expenses incurred by or on behalf of the
Partnership, including any legal fees and expenses and other selling expenses
incurred in connection with such transaction. In the case of a transaction
described in clause (i)(C) of the definition of Sale, Net Sales Proceeds means
the proceeds of any such transaction actually distributed to the Partnership
from the Joint Venture less the amount of any selling expenses, including legal
fees and expenses incurred by or on behalf of the Partnership (other than those
paid by the Joint Venture). In the case of a transaction or series of
transactions described in clause (i)(D) of the definition of Sale, Net Sales
Proceeds means the proceeds of any such transaction (including the aggregate of
all payments under a Mortgage on or in satisfaction thereof other than regularly
scheduled interest payments) less the amount of selling expenses incurred by or
on behalf of the Partnership, including all commissions, closing costs and legal
fees and expenses. In the case of a transaction described in clause (i)(E) of
the definition of Sale, Net Sales Proceeds means the proceeds of any such
transaction less the amount of selling expenses incurred by or on behalf of the
Partnership, including any legal fees and expenses and other selling expenses
incurred in connection with such transaction. In the case of a transaction
described in clause (ii) of the definition of Sale, Net Sales Proceeds means the
proceeds of such transaction or series of transactions less all amounts
generated thereby which are reinvested in one or more Partnership Assets within
180 days thereafter and less the amount of any real estate commissions, closing
costs, and legal fees and expenses and other selling expenses incurred by or
allocated to the Partnership in connection with such transaction or series of
transactions. Net Sales Proceeds shall also include any amounts that the General
Partner determines, in its discretion, to be economically equivalent to the
proceeds of a Sale. Net Sales Proceeds shall not include (i) any reserves
established by the General Partner, in its sole discretion and; (ii) the receipt
by the Partnership of Capital Contributions.
1.55 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).
1.56 "NONRECOURSE LIABILITIES" has the meaning set forth in Treasury Regulations
Section 1.704-2(b)(3).
1.57 "NOTICE OF REDEMPTION REQUEST" means a notice of redemption request
substantially in the form of Exhibit B attached hereto.
1.58 "OUTSIDE LIMITED PARTNERS" means the Limited Partners, excluding the
Initial Limited Partner and any Limited Partner that is an Affiliate of the
General Partner or the Initial Limited Partner.
1.59 "PARTNER" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners, collectively.
1.60 "PARTNER MINIMUM GAIN" means an amount, with respect to each Partner's
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treasury Regulations Section 1.704-2(i)(3).
-8-
1.61 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
1.62 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Treasury Regulations
Section 1.704-2(i)(2).
1.63 "PARTNERSHIP" means NNN Healthcare/Office REIT Holdings, L.P., and any
successor thereto.
1.64 "PARTNERSHIP ASSET" means the interest of the Partnership in any Entity or
security (whether in corporate securities, equity, debt or hybrid securities,
partnership or joint venture interests, other contractual rights or otherwise),
or any other Real Estate Assets or other assets owned, directly or indirectly,
by the Partnership, as determined by the General Partner.
1.65 "PARTNERSHIP INTEREST" means the entire ownership interest of a Partner in
the Partnership at any particular time which represents a Capital Contribution
by such Partner and which includes the right of such Partner to any and all
benefits to which such Partner may be entitled as provided in this Agreement,
together with the obligations of such Partner to comply with all terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
1.66 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in a Partnership Minimum Gain, for a
Partnership taxable year shall be determined in accordance with the rules of
Treasury Regulations Section 1.704-2(d).
1.67 "PARTNERSHIP RECORD DATE" means the record date established by the General
Partner for the distribution by the Partnership of Available Operating Cash, Net
Sales Proceeds or other Partnership Assets pursuant to Section 5.1 hereof, which
record date shall be the same as the record date established by the General
Partner for a distribution to its stockholders of some or all of its portion of
such distribution by the Partnership.
1.68 "PARTNERSHIP UNIT" means a unit of Partnership Interest with the rights,
powers and duties set forth herein, designated as such on Exhibit A and
expressed in the number set forth on Exhibit A, as such exhibit may be amended
from time to time.
1.69 "PERCENTAGE INTEREST" means, as to each Partner, the percentage determined
by dividing the total number of Partnership Units owned by such Partner by the
aggregate number of Partnership Units then issued and outstanding, as set forth
on Exhibit A, as such exhibit may be amended from time to time.
1.70 "PERMITTED TRANSFEREE" means with respect to a Person, (a) any Affiliate of
such Person, (b) the spouse of such Person or any ancestor, descendent or
sibling of such Person or of the spouse of such Person, or (c) any trust for the
benefit of such Person or any other person described in clause (b) of this
Section 1.69.
1.71 "PERSON" means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such individual
or Entity where the context so permits.
-9-
1.72 "PROFITS" and "LOSSES" has the meaning set forth in Section 6.2(f).
1.73 "PROHIBITED TRANSFEREE" means any Person who is a:
(a) person or entity who is a "designated national," "specially designated
national," "specially designated terrorist," "specially designated global
terrorist," "foreign terrorist organization," or "blocked person" within the
definitions set forth in the Foreign Assets Control Regulations of the United
States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended;
(b) person acting on behalf of, or an entity owned or controlled by, any
government against whom the United States maintains economic sanctions or
embargoes under the Regulations of the United States Treasury Department, 31
C.F.R., Subtitle B, Chapter V, as amended, including, but not limited to, the
"Government of Sudan," the "Government of Iran," the "Government of Cuba or any
Cuban national"; or
(c) person or entity subject to restrictions imposed by the following
statutes or Regulations and Executive Orders issued thereunder: the Trading with
the Enemy Act, 50 U.S.C. app. Sections 1 et. seq., the Iraq Sanctions Act, Pub.
L. 101-513, Title V, Sections 586 to 586J, 104 Stat. 2047, the National
Emergencies Act, 50 U.S.C. Sections 1601 et. seq., the Antiterrorism and
Effective Death Penalty Act of 1996, Pub. L. 104-132, 110 Stat. 1214-1319, the
International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq.,
the United Nations Participation Act, 22 U.S.C. Section 287c, the International
Security and Development Cooperation Act, 22 U.S.C. Section 2349aa-9, the
Nuclear Proliferation Prevention Act of 1994, Pub. L. 103-236, 108 Stat. 507,
the Foreign Narcotics Kingpin Designation Act, 21 U.S.C. Sections 1901 et. seq.,
the Iran and Libya Sanctions Act of 1996, Pub. L. 104-172, 110 Stat. 1541, the
Cuban Democracy Act, 22 U.S.C. Sections 6001 et seq., the Cuban Liberty and
Democratic Solidarity Act, 22 U.S.C. Sections 6021-91, and the Foreign
Operations, Export Financing and Related Programs Appropriations Xxx, 0000, Pub.
L. 104-208, 110 Stat. 3009-172, or any other law of similar import as to any
non-U.S. country, person or entity, as each such Act or law has been or may be
amended, adjusted, modified, or reviewed from time to time.
1.74 "PROPERTY" OR "PROPERTIES" means, as the context requires, any, or all,
respectively, of the Real Property acquired by the Partnership, directly or
indirectly through joint venture arrangements or other partnership or investment
interests.
1.75 "REAL ESTATE ASSETS" means unimproved and improved real property, real
estate-related assets and any direct or indirect interest therein (including,
without limitation, fee or leasehold interests, options, leases, partnership and
joint venture interests, equity and debt securities of entities that own real
estate, first or second mortgages on real property, mezzanine loans secured by
junior liens on real property, preferred equity interests secured by a property
owner's interest in real property and other contractual rights in real estate).
1.76 "REAL PROPERTY" means land, rights in land (including leasehold interests),
and any buildings, structures, improvements, furnishings, fixtures and equipment
located on or used in connection with land and rights or interests in land.
1.77 "REDEEMING PARTNER" has the meaning set forth in Section 8.6.
1.78 "REDEMPTION AMOUNT" means either the Cash Amount or the REIT Stock Amount,
as determined by the General Partner in its sole and absolute discretion.
-10-
1.79 "REDEMPTION RIGHT" has the meaning set forth in Section 8.6.
1.80 "REGISTRATION STATEMENT" means the Registration Statement on Form S-11
filed by the General Partner with the Securities and Exchange Commission on
April 28, 2006, and any amendments thereto made at any time.
1.81 "REIT" means a "real estate investment trust" as defined under Section 856
of the Code.
1.82 "REIT NOTICE" has the meaning set forth in Section 8.6(g).
1.83 "REIT REQUIREMENTS" has the meaning set forth in Section 5.2.
1.84 "REIT STOCK" means the Common Stock and all other shares of capital stock
of the General Partner.
1.85 "REIT STOCK AMOUNT" means a number of shares of REIT Stock equal to the
number of Partnership Units offered for redemption by a Redeeming Partner;
provided that in the event that the General Partner issues to all holders of
REIT Stock rights, options, warrants, or convertible or exchangeable securities
entitling stockholders of the General Partner to acquire REIT Stock, or any
other securities or property (collectively, the "rights"), then the REIT Stock
Amount shall also include such rights that a holder of that number of shares of
REIT Stock would be entitled to receive.
1.86 "SALE" means (i) any transaction or series of transactions whereby: (A) the
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, transfers, conveys, or relinquishes its
ownership of any Property or portion thereof, including the lease of any
Property consisting of a building only, and including any event with respect to
any Property which gives rise to a significant amount of insurance proceeds or
condemnation awards; (B) the Partnership directly or indirectly (except as
described in other subsections of this definition) sells, grants, transfers,
conveys, or relinquishes its ownership of all or substantially all of the
interest of the Partnership in any Joint Venture in which it is a co-venturer or
partner; (C) any Joint Venture directly or indirectly (except as described in
other subsections of this definition) in which the Partnership as a co-venturer
or partner sells, grants, transfers, conveys, or relinquishes its ownership of
any Property or portion thereof, including any event with respect to any
Property which gives rise to insurance claims or condemnation awards; (D) the
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, conveys or relinquishes its interest in any
Mortgage or portion thereof (including with respect to any Mortgage, all
payments thereunder or in satisfaction thereof other than regularly scheduled
interest payments) of amounts owed pursuant to such Mortgage and any event which
gives rise to a significant amount of insurance proceeds or similar awards; or
(E) the Partnership directly or indirectly (except as described in other
subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any other Partnership Asset not previously
described in this definition or any portion thereof, but (ii) not including any
transaction or series of transactions specified in clause (i) (A) through (E)
above in which the proceeds of such transaction or series of transactions are
reinvested by the Partnership in one or more Partnership Assets within 180 days
thereafter, and not including the receipt by the Partnership of Capital
Contributions.
1.87 "SECURITIES" has the meaning set forth in Section 4.3(a).
-11-
1.88 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.89 "SPECIFIED REDEMPTION DATE" means the tenth (10th) Business Day after
receipt by the General Partner of a Notice of Redemption Request (or, in the
case of the General Partner exercising the Redemption Right, after the date of
the General Partner's receipt of a REIT Notice).
1.90 "STOCK INCENTIVE PLANS" means, collectively, any and all plans adopted from
time to time by the General Partner pursuant to which REIT Stock is issued, or
options to acquire REIT Stock are granted, to employees or directors of the
General Partner, employees of the Partnership or employees of their respective
Affiliates in consideration for services or future services.
1.91 "SUBSIDIARY" means, with respect to any Person, any Entity of which a
majority of the voting power or the voting equity securities, and/or the
outstanding equity interests (whether or not voting), is owned, directly or
indirectly, by such Person.
1.92 "SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4 hereof.
1.93 "TERMINATING SALE TRANSACTION" means any sale or other disposition (other
than a deemed disposition pursuant to Code Section 708(b)(1)(B) and the Treasury
Regulations thereunder) of all or substantially all of the assets of the
Partnership or a related series of transactions that, taken together, result in
the sale or other disposition of all or substantially all of the assets of the
Partnership.
1.94 "TERMINATION AMOUNT" has the meaning set forth in Section 5.1(e).
1.95 "TERMINATION EVENT" means the expiration of the Advisory Agreement or any
termination of the Advisor as advisor to the Partnership and the General Partner
under the terms of the Advisory Agreement, other than any termination for
"Cause" (as defined in the Advisory Agreement) and other than any termination of
the Advisory Agreement due to the occurrence of a Listing Event.
1.96 "TERMINATION NOTE" has the meaning set forth in Section 5.1(e).
1.97 "TRANSFER" means to give, sell, assign, pledge, hypothecate, devise,
bequeath, or otherwise dispose of, transfer, or permit to be transferred, during
life or at death. The word "Transfer," when used as a noun, shall mean any
Transfer transaction.
1.98 "TREASURY REGULATIONS" means the Federal income tax regulations, including
any temporary or proposed regulations, promulgated under the Code, as such
Treasury Regulations may be amended from time to time (it being understood that
all references herein to specific sections of the Treasury Regulations shall be
deemed also to refer to any corresponding provisions of succeeding Treasury
Regulations).
1.99 "UNRECOVERED CONTRIBUTION ACCOUNT" means, with respect to the General
Partner, as of any relevant date, the excess of (i) the aggregate amount of cash
contributed or deemed contributed by the General Partner to the Partnership
pursuant to the provisions of Article 4 as of such date, over (ii) the sum of
(A) the cumulative distributions of Available Operating Cash and Net Sales
Proceeds made to the General Partner prior to such relevant date pursuant to
Section 5.1 hereof, and (B) the cumulative amounts paid to the General Partner
in redemption of its Partnership Units pursuant to Section 8.6(g) as of such
date. All amounts distributed and paid to
-12-
the General Partner pursuant to Sections 5.1 and 8.6(g) shall first be applied
to reduce the Unrecovered Contribution Account of the General Partner until the
balance of such Unrecovered Contribution Account equals zero ($0), and then
shall be applied to reduce the 8% Return Account of the General Partner.
1.100 "VALUATION DATE" means the date of receipt by the General Partner of a
Notice of Redemption Request (or, in the case of the General Partner exercising
the Redemption Right, the date of the General Partner's receipt of a REIT
Notice) or, if such date is not a Business Day, the first Business Day
thereafter.
1.101 "VALUE" means, with respect to a share of REIT Stock, (a) if REIT Stock is
traded on a national securities exchange or otherwise traded over-the-counter,
the average of the daily Market Price (as defined below) for shares of REIT
Stock for the ten (10) consecutive trading days immediately preceding the
Valuation Date, or (b) if REIT Stock is not traded in a manner described in
clause (a), the value of a share of REIT Stock as determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. The
"Market Price" for each such trading day shall be (i) the last reported sale
price on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable quotation
source designated by the General Partner; or (ii) if no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the General Partner, or (iii) if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than ten (10) days prior to the
date in question) for which prices have been so reported. In the event the REIT
Stock Amount includes rights that a holder of REIT Stock would be entitled to
receive, then the Value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
2.1 FORMATION.
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act.
2.2 NAME
The name of the Partnership is NNN Healthcare/Office REIT Holdings, L.P.
The Partnership's business may be conducted under such name or under any other
name or names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner, acting in its sole
and absolute discretion without the Consent of any Limited Partner, may change
the name of the Partnership. The General Partner shall notify the Limited
Partners of any such name change in the next regular communication to the
Limited Partners. Upon termination of the Partnership or the termination,
resignation or withdrawal of the Initial Limited Partner as the Advisor, all of
the Partnership's
-13-
right, title and interest in and to the use of the name "NNN Healthcare/Office
REIT Holdings, L.P. and any variation thereof, shall become the property of the
Initial Limited Partner, and if requested to do so by the Initial Limited
Partner, the Partnership shall change the name of the Partnership to exclude the
term "NNN." Neither the Partnership nor any Limited Partner shall have any right
or interest in and to the use of any such name or xxxx.
2.3 REGISTERED OFFICE AND AGENT
The address of the registered office of the Partnership in the State of
Delaware shall be c/o The Corporation Trust Company, Corporation Trust Center,
0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, XX 00000, or such
other place as may be designated from time to time by the General Partner. The
name of the registered agent for service of process on the Partnership in the
State of Delaware at such address shall be The Corporation Trust Company,
Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx
Xxxxxx, XX 00000, or such other Person as may be designated from time to time by
the General Partner.
2.4 PRINCIPAL PLACE OF BUSINESS
The Partnership may maintain offices at such other place or places within
or outside the State of Delaware as the General Partner deems advisable. The
principal office of the Partnership shall be 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000, or such other place as the General Partner may from time to
time designate by notice to the Limited Partners.
2.5 TERM AND TERMINATION
The term of the Partnership shall commence on the date hereof and shall
continue until December 31, 2036, unless the Partnership is dissolved sooner
pursuant to the provisions of Article 13 or as otherwise provided by law.
2.6 POWER OF ATTORNEY
(a) Each Limited Partner and each Assignee who accepts Partnership Units
(or any other Partnership Interest or any rights, benefits or privileges
associated therewith) is deemed to irrevocably constitute and appoint the
General Partner, any Liquidator and authorized officers and attorneys-in-fact of
each, and each such Person acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices:
(A) all certificates, documents and other instruments (including,
without limitation, this Agreement and the Certificate and all
amendments or restatements thereof) that the General Partner or the
Liquidator deems appropriate or necessary to form, qualify or continue
the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have
limited liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may or plans to conduct
business or own property, including, without limitation, any documents
necessary or advisable to convey any Contributed Property to the
Partnership;
-14-
(B) all instruments that the General Partner or any Liquidator
deems appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with its
terms;
(C) all conveyances and other instruments or documents that the
General Partner or any Liquidator deems appropriate or necessary to
reflect the dissolution and liquidation of the Partnership pursuant to
the terms of this Agreement, including, without limitation, a
certificate of cancellation;
(D) all instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to, or other events
described in, Article 11, 12 or 13 hereof or any Capital Contribution
of any Partner;
(E) all certificates, documents and other instruments relating to
the determination of the rights, preferences and privileges of
Partnership Interests;
(F) all amendments to this Agreement as provided in Article 14
hereof; and
(G) all other instruments that may be required by law to be filed
on behalf of or relating to the Partnership and that are not
inconsistent with this Agreement; and
(ii) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
General Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Partners hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the
General Partner or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14 hereof or as may be otherwise expressly provided for in this
Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and/or
the Transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives.
(c) Each such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the General Partner or any Liquidator, acting in good
faith pursuant to such power of attorney, and each such Limited Partner or
Assignee hereby waives any and all defenses which may be available to contest,
negate or disaffirm the action of the General Partner or any Liquidator, taken
in good faith under such power of attorney.
(d) Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or
-15-
Liquidator's request therefor, such further designation, powers of attorney and
other instruments as the General Partner or the Liquidator, as the case may be,
deems necessary to effectuate this Agreement and the purposes of the
Partnership.
(e) Any Person dealing with the Partnership may conclusively presume and
rely upon the fact that any instrument referred to in this Section 2.6, executed
by the General Partner or the Liquidator acting as attorney-in-fact, is
authorized by and binding on the Partnership, without further inquiry.
2.7 EFFECTIVENESS OF THIS AGREEMENT
This Agreement shall govern the operations of the Partnership and the
rights and restrictions applicable to the Partners, to the extent permitted by
law. Pursuant to Section 17-101(12) of the Act, all Persons who become holders
of Partnership Interests shall be bound by the provisions of this Agreement. The
execution by a Person of this Agreement and acceptance thereof by the General
Partner in accordance with the terms of this Agreement or the receipt of
Partnership Interests by a Person as a successor or assign of an existing
Partner and the consent of the General Partner to the admission of such Person
as a Substituted Limited Partner in accordance with the terms of this Agreement
shall be deemed to constitute a request that the records of the Partnership
reflect such admission, and shall be deemed to be a sufficient act to comply
with the requirements of Section 17-101(12) of the Act and to so cause that
Person to become a Partner as of the date of acceptance of its Capital
Contribution by the Partnership and to bind that Person to the terms and
conditions of this Agreement (and to entitle that Person to the rights of a
Partner hereunder).
ARTICLE 3
PURPOSE AND POWERS
3.1 PURPOSE AND BUSINESS
The purpose and nature of the business to be conducted by the Partnership
is to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act including, without limitation, to
engage in the following activities:
(a) to acquire, hold, own, develop, construct, improve, maintain, operate,
sell, lease, transfer, encumber, convey, exchange and otherwise dispose of or
deal with Real Estate Assets;
(b) to acquire, hold, own, develop, construct, maintain, operate, sell,
lease, transfer, encumber, convey, exchange and otherwise dispose of or deal
with other real and personal property of all kinds;
(c) acquire own, hold for investment and ultimately dispose of general and
limited partner interests, and stock, warrants, options or other equity and debt
interests in Entities, and exercise all rights and powers granted to the owner
of any such interests;
(d) make any type of investment and engage in any other lawful act or
activity for which limited partnerships may be formed under the Act, and by such
statement all lawful acts and activities shall be within the purposes of the
Partnership;
(e) to undertake such other activities as may be necessary, advisable,
desirable or convenient to the business of the Partnership; and
-16-
(f) to engage in such other ancillary activities as shall be necessary or
desirable to effectuate the foregoing purposes; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT, unless the General
Partner determines not to qualify as a REIT or ceases to qualify as a REIT for
reasons other than the conduct of the business of the Partnership.
3.2 POWERS
(a) 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 in Section
3.1 and for the protection and benefit of the Partnership including, without
limitation, full power and authority to enter into, perform, and carry out
contracts of any kind, to borrow money and to issue evidences of indebtedness,
whether or not secured by mortgage, trust deed, pledge or other Lien, and,
directly or indirectly, to acquire, hold, own, develop, construct, improve,
maintain and operate Real Estate Assets, and to sell, lease, transfer, encumber,
convey, exchange and otherwise dispose of Real Estate Assets.
(b) The General Partner also is empowered to do any and all acts and things
necessary, appropriate or advisable to ensure that the Partnership will not be
classified as a "publicly traded partnership" within the meaning of Section 7704
of the Code, including, but not limited to, imposing restrictions on Transfers
of Partnership Units.
ARTICLE 4
CAPITAL CONTRIBUTIONS; PARTNERSHIP UNITS;
ADDITIONAL FUNDS
4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS
(a) Initial Capital Contributions. The General Partner and the Initial
Limited Partner have made or shall make on the Effective Date, the Capital
Contributions as set forth on Exhibit A to this Agreement in exchange for the
number of Partnership Units set forth opposite their names on Exhibit A. At such
time as Additional Limited Partners are admitted to the Partnership, each such
Additional Limited Partner shall make Capital Contributions in the amount set
forth opposite such Limited Partner's name on Exhibit A, as it shall be amended
at the time of such contribution.
(b) Deemed Capital Contributions. To the extent the Partnership acquires
any property by the merger of any other Person into the Partnership or the
contribution of assets by any other Person to the Partnership, Persons who
receive Partnership Interests in exchange for their interests in the Person
merging into or contributing assets to the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement or contribution agreement and as set forth in Exhibit A, as it
shall be amended to reflect such deemed Capital Contributions.
(c) Partnership Units. Each Partner shall own Partnership Units in the
amounts set forth for such Partner in Exhibit A and shall have a Percentage
Interest in the Partnership as set forth in Exhibit A, which Percentage Interest
shall be adjusted in Exhibit A from time to time by the General Partner to the
extent necessary to reflect accurately redemptions, additional Capital
Contributions, the issuance of additional Partnership Units or similar events
having an effect on
-17-
the number of Partnership Units held by, and the Percentage Interest of, any
Partner. Each Partnership Unit shall entitle the holder thereof to one vote on
all matters on which the Partners (or any portion of the Partners) are entitled
to vote under this Agreement.
(d) No Additional Capital Contributions. Except as provided in Sections
4.3(a) and 10.5, the Partners shall have no obligation to make any additional
Capital Contributions or provide any additional funding to the Partnership
(whether in the form of loans or otherwise) and no Partner shall have any
obligation to restore any deficit that may exist in its Capital Account, either
upon a liquidation of the Partnership or otherwise.
4.2 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS
(a) The General Partner is authorized to cause the Partnership to issue
additional Partnership Interests (or options or warrants to acquire Partnership
Interests) in the form of Partnership Units or other Partnership Interests in
one or more series or classes to any Persons at any time or from time to time,
on such terms and conditions as the General Partner shall establish in each case
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 class or series of Partnership Interests, (ii) the
right of each class or series of Partnership Interests to share in Partnership
distributions, and (iii) the rights of each class or series of Partnership
Interest upon dissolution and liquidation of the Partnership; provided, that, no
such Partnership Interests shall be issued to the General Partner unless either
(A) the Partnership Interests are issued pursuant to Section 4.3, or (B) the
additional Partnership Interests are issued to all Partners holding Partnership
Interests in the same class in proportion to their respective Percentage
Interests in such class.
(b) Subject to the limitations set forth in Sections 4.2(a) and 4.3(a), the
General Partner may take such steps as it, in its sole and absolute discretion,
deems necessary or appropriate to admit any Person as a Limited Partner of the
Partnership in accordance with Section 12.2 or to issue any Partnership
Interests, including, without limitation, amending the Certificate, Exhibit A or
any other provision of this Agreement.
(c) Without limiting the foregoing, the General Partner is expressly
authorized to cause the Partnership to issue Partnership Interests (or options
to acquire Partnership Interests) 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 Partnership and the Partners (for example, and not by way of
limitation, the issuance of Partnership Units in connection with a Stock
Incentive Plan providing for employee purchases of REIT Stock and corresponding
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 REIT Stock
and corresponding Partnership Units covered by the option, either at the time of
issuance or at the time of exercise).
4.3 ISSUANCE OF SECURITIES BY THE GENERAL PARTNER
(a) General. The General Partner shall not issue any debt securities,
preferred stock, Common Stock, any other class of REIT Stock or rights, options,
warrants or other securities convertible into or exchangeable for preferred
stock, Common Stock or any other class of REIT Stock (collectively,
"Securities"), other than (1) as payment of the REIT Stock Amount in connection
with a redemption of Partnership Units pursuant to Section 8.6, (2) upon the
conversion, exchange or exercise of other outstanding securities of the General
Partner in
-18-
accordance with the terms of such securities, or (3) to all holders of REIT
Stock on a pro rata basis, unless the General Partner shall:
(i) in the case of REIT Stock or other equity Securities other than
Securities described in clause (ii) below, (A) contribute to the
Partnership the proceeds of or consideration (including any property or
other non-cash assets) received upon the issuance of such Securities, and
(B) receive from the Partnership in consideration for such contributions
Partnership Interests with the same terms and conditions, including
dividend, dividend priority and liquidation preference, as are applicable
to such Securities (including, for purposes of clarification, Partnership
Units in the case of any issuance of Common Stock by the General Partner);
(ii) in the case of options, warrants or other rights to purchase REIT
Stock, or other equity securities convertible into or exchangeable for REIT
Stock, (A) contribute to the Partnership the proceeds of or consideration
(including any property or other non-cash assets) received upon the
issuance of such equity Securities, and (B) receive from the Partnership in
consideration for such contributions a number of options, warrants or other
rights to purchase Partnership Interests equal to the number of such
Securities issued by the General Partner, with equivalent rights,
preferences and limitations to the terms of such equity Securities; and
(iii) in the case of debt securities, lend to the Partnership the
proceeds of or consideration received for such Securities on the same terms
and conditions, including interest rate and repayment schedule, as shall be
applicable with respect to or incurred in connection with the issuance of
such Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange or conversion thereof (if applicable).
(b) Splits. The Partnership shall (i) make a distribution in Partnership
Units, (ii) subdivide its outstanding Partnership Units, or (iii) combine its
outstanding Partnership Units into a smaller number of Partnership Units, in the
event the General Partner takes an analogous action with respect to the Common
Stock. The intent of the previous sentence is that one Partnership Unit remains
the economic equivalent of one share of Common Stock without dilution. If the
General Partner determines that it is necessary or desirable to make any filings
under the Act or otherwise in order to reference the existence of such action,
the General Partner may cause such filings to be made, which filings might take
the form of amendments to the Certificate; provided, however, that, unless
specifically required by this Agreement or the Act after giving effect to the
terms of this Agreement, no approval or consent of any Partners shall be
required in connection with the making of any such filing.
(c) Treatment of Proceeds. If the proceeds actually received by the General
Partner in connection with an issuance of Securities by the General Partner are
less than the gross proceeds of such offering, grant, award or issuance as a
result of any underwriter's discounts, commissions or other fees or expenses
paid or incurred in connection with such offering, grant, award or issuance,
then the General Partner shall be deemed to have made a Capital Contribution to
the Partnership in the amount of the gross proceeds of such offering, grant,
award or issuance and the Partnership shall be deemed simultaneously to have
paid pursuant to Section 7.3(c) for the amount of such expenses.
-19-
4.4 ADDITIONAL FUNDS
(a) The sums of money required to finance the business and affairs of the
Partnership shall be derived from the initial Capital Contributions made to the
Partnership by the Partners as set forth in Section 4.1 and from funds generated
from the operation and business of the Partnership.
(b) In the event additional financing is needed from sources other than as
set forth in Section 4.4(a) for any reason, the General Partner may, in its sole
and absolute discretion, in such amounts and at such times as it solely shall
determine to be necessary or appropriate:
(i) cause the Partnership to issue additional Partnership Interests
and admit additional Limited Partners to the Partnership in accordance with
Section 4.2;
(ii) make additional Capital Contributions to the Partnership (subject
to the provisions of Section 4.3(a));
(iii) cause the Partnership to borrow money, enter into loan
arrangements, issue debt securities, obtain letters of credit or otherwise
borrow money on a secured or unsecured basis;
(iv) make a loan or loans to the Partnership (subject to Section
4.3(a)); or
(v) cause the Partnership to sell any assets or properties directly or
indirectly owned by the Partnership.
4.5 NO THIRD-PARTY BENEFICIARY
No creditor or other third party having dealings with the Partnership shall
have the right to enforce the right or obligations of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns.
4.6 NO INTEREST
No Partner shall be entitled to interest on any Capital Contribution or on
such Partner's Capital Account.
4.7 NO PREEMPTIVE RIGHTS
Subject to any preemptive rights that may be granted in connection with the
issuance of Partnership Interests under Section 4.3(a), no Person shall have any
preemptive or other similar right with respect to any:
(a) additional Capital Contributions or loans to the Partnership; or
(b) issuance or sale of any Partnership Units or other Partnership
Interests.
-20-
4.8 CAPITAL ACCOUNTS
The Partnership shall establish and maintain throughout the life of the
Partnership for each Partner a separate "Capital Account" in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner
acquires an additional Partnership Interest in exchange for more than a de
minimis Capital Contribution, (ii) the Partnership distributes to a Partner more
than a de minimis amount of Partnership property as consideration for a
Partnership Interest, (iii) the Partnership is liquidated within the meaning of
Treasury Regulation Section 1.704-1(b)(2)(ii)(g), or (iv) at such other times as
the General Partner may determine so long as such adjustment is made under
generally accepted industry accounting practices within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(iv)(f)(5), the General Partner shall revalue
the property of the Partnership to its fair market value (as determined by the
General Partner, in its sole and absolute discretion, and taking into account
Section 7701(g) of the Code) in accordance with Regulations Section
1.704-1(b)(2)(iv)(f). When the Partnership's property is revalued by the General
Partner, the Capital Accounts of the Partners shall be adjusted in accordance
with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally
require such Capital Accounts to be adjusted to reflect the manner in which the
unrealized gain or loss inherent in such property (that has not been reflected
in the Capital Accounts previously) would be allocated among the Partners
pursuant to Section 5.1 if there were a taxable disposition of such property for
its fair market value (as determined by the General Partner, in its sole and
absolute discretion, and taking into account Section 7701(g) of the Code) on the
date of the revaluation.
ARTICLE 5
DISTRIBUTIONS
5.1 DISTRIBUTIONS
(a) General. Subject to the provisions of Sections 5.3, 5.4, 8.6(b),
11.6(d) and 13.2, the General Partner shall cause the Partnership to distribute
to the Partners as of the applicable Partnership Record Date, at such times as
the General Partner shall determine, amounts of Available Operating Cash and Net
Sales Proceeds in the manner set forth in this Section 5.1.
(b) Available Operating Cash. Available Operating Cash shall be distributed
to the Partners as determined by the General Partner in its sole and absolute
discretion in accordance with their respective Percentage Interests as of the
applicable Partnership Record Date.
(c) Net Sales Proceeds. Net Sales Proceeds shall be distributed to the
Partners as determined by the General Partner in its sole and absolute
discretion in accordance with their respective Percentage Interests as of the
applicable Partnership Record Date until the Unrecovered Contribution Account
and 8% Return Account of the General Partner have been reduced to zero ($0).
Thereafter, 15% of any Net Sales Proceeds shall be distributed to the Advisor
(in its capacity as Partner) (such distributions, the "Advisor Participation in
Sales Proceeds"), and 85% of such Net Sales Proceeds shall be distributed to the
Partners as determined by the General Partner in its sole and absolute
discretion in accordance with their respective Percentage Interests as of the
applicable Partnership Record Date.
(d) Distribution to Advisor Upon Listing.
(i) Upon a Listing Event, the Advisor shall no longer be entitled to
any distributions of the Advisor Participation in Sales Proceeds under
Section 5.1(c). If the
-21-
Advisor has not been terminated under the Advisory Agreement as of the
Listing Date, the Advisor (in its capacity as Partner) shall receive a
distribution ("Listing Amount"), which shall be paid within five (5)
Business Days of the determination of the Market Value, in an amount equal
to 15% of the amount, if any, by which (A) the Market Value plus the
cumulative distributions made to the General Partner from the inception of
the Partnership through the Listing Date exceeds (B) the sum of (1) the
Invested Capital of the General Partner as of the Listing Date, and (2) the
8% Return that has accrued with respect to the Invested Capital of the
General Partner from the inception of the Partnership through the Listing
Date.
(ii) The Listing Amount shall be paid, as determined by the General
Partner's board of directors, including a majority of the independent
directors, either in the form of cash or REIT Stock with a Market Value
equal to the Listing Amount. The Advisor agrees to execute such documents
as the General Partner may reasonably require in connection with the
issuance of REIT Stock if the Listing Amount is paid in the form of REIT
Stock as provided herein.
(e) Distribution to Advisor Upon Termination.
(i) Upon a Termination Event, the Advisor shall no longer be entitled
to any distributions of the Advisor Participation in Sales Proceeds under
Section 5.1(c). If a Listing Event has not occurred as of the date of a
Termination Event, then the Advisor (in its capacity as Partner) shall
receive a distribution (the "Termination Amount"), which shall be paid
within five (5) Business Days of the date of such Termination Event, in an
amount equal to 15% of the amount, if any, by which (A) the Appraised Value
of all of the Partnership Assets as of the date of the Termination Event,
less any indebtedness secured by such assets, plus the cumulative
distributions made to the General Partner from the inception of the
Partnership through the date of the Termination Event, exceeds (B) the sum
of (1) the Invested Capital of the General Partner as of such date, and (2)
the 8% Return that has accrued with respect to the Invested Capital of the
General Partner from the inception of the Partnership through the date of
Termination Event.
(ii) The Termination Amount shall be paid, as determined by the
General Partner's board of directors, including a majority of the
independent directors, either in the form of cash or the issuance to the
Advisor of an interest-bearing promissory note (the "Termination Note") in
an amount equal to the Termination Amount. Interest on the Termination Note
will accrue beginning on the date of the Termination Event at a rate deemed
fair and reasonable by the General Partner. In the event the Termination
Amount is paid in the form of the Termination Note, the Partnership shall
repay the Termination Note using Net Sales Proceeds prior to making any
distributions under Section 5.1(c) until the Termination Note is paid in
full, including all accrued but unpaid interest. If the Termination Note
has not been paid in full within five (5) years after the date of the
Termination Event, then the General Partner (as determined by the General
Partner's board of directors, including a majority of the independent
directors) shall purchase the Termination Note from the Advisor in exchange
for either cash or REIT Stock with a Value equal to the aggregate amount
outstanding under the Termination Note, including principal and accrued but
unpaid interest. The Advisor agrees to execute such documents as the
General Partner may reasonably require in connection with the issuance of
REIT Stock if the Termination Note is purchased with REIT Stock as provided
herein.
-22-
5.2 QUALIFICATION AS A REIT
The General Partner shall take such action as it deems necessary or
advisable to cause the Partnership to distribute sufficient amounts under this
Article 5 to enable the General Partner to pay stockholder dividends that will
enable the General Partner to (a) satisfy the requirements for qualification as
a REIT under the Code and the Treasury Regulations (the "REIT Requirements"),
and (b) avoid any Federal income or excise tax liability; provided, however, the
General Partner shall not be bound to comply with this covenant to the extent
such distributions would violate applicable Delaware law.
5.3 WITHHOLDING
With respect to any withholding tax or other similar tax liability or
obligation to which the Partnership may be subject as a result of any act by or
status of any Partner or to which the Partnership becomes subject with respect
to any Partnership Interest, the Partnership shall have the right to withhold
amounts of Available Operating Cash or Net Sales Proceeds or other Partnership
Assets distributable to such Partner or with respect to such Partnership
Interests, to the extent of the amount of such withholding tax or other similar
tax liability or obligation pursuant to the provisions contained in Section
10.5.
5.4 ADDITIONAL PARTNERSHIP INTERESTS
If the Partnership issues Partnership Interests in accordance with Section
4.2 or 4.3, the distribution priorities set forth in Section 5.1 shall be
amended, as necessary, to reflect any distribution priority of such Partnership
Interests and corresponding amendments shall be made to the provisions of
Article 6. If a new or existing Partner acquires an additional Partnership
Interest in exchange for a Capital Contribution on any date other than a
Partnership Record Date, such Partner shall not be entitled to any distributions
with respect to such additional Partnership Interest until the first Partnership
Record Date following the date of such issuance.
ARTICLE 6
ALLOCATIONS
6.1 ALLOCATION OF PROFITS AND NET LOSSES
(a) General. Except as otherwise provided in this Article 6 and in Section
11.6(c), and after making any special allocations under Section 6.2, Profits and
Losses for each Fiscal Year shall be allocated among the Partners in accordance
with their respective Percentage Interests as of the end of such Fiscal Year,
subject to any rights of holders of Partnership Interests other than Partnership
Units.
(b) Adjustment. If the amount of Losses for any Fiscal Year that otherwise
would be allocated to a Partner under Section 6.1(a) or this Section 6.1(b)
would cause or increase an Adjusted Capital Account Deficit of such Partner as
of the last day of such Fiscal Year (after all other allocations have been made
pursuant to this Article 6), then such Partner shall be allocated that amount of
Losses which does not cause or increase such Adjusted Capital Account Deficit,
and the remainder of such Losses that would have been allocated to such Partner
shall be allocated to the other Partners in proportion to their Percentage
Interests.
-23-
(c) Special Allocation with Respect to Sales. Profits (and items thereof)
and Losses (and items thereof) for each Fiscal Year or other applicable period
from Sales shall be allocated among the Partners such that the ending Capital
Account of each Partner, immediately after giving effect to the allocations
under this Article 6, is, as nearly as possible, equal to the amount of the
hypothetical distribution that such Partner would receive if the Partnership
were liquidated on the last day of such period and all assets of the
Partnership, including cash, were sold for cash equal to their Carrying Value,
all liabilities of the Partnership were satisfied with cash according to their
terms (limited with respect to each nonrecourse liability to the Carrying Value
of the assets securing such liability), and Net Sales Proceeds (after
satisfaction of such liabilities) were distributed in full pursuant to Section
5.1(c). For purposes of the preceding allocations only, a Partner holding more
than one class or series of Partnership Interests or units shall be deemed to be
a separate Partner with respect to each such class, series or units.
6.2 SPECIAL ALLOCATIONS
Notwithstanding any provisions of Section 6.1, the following special
allocations shall be made in the following order of priority:
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as otherwise
provided in Treasury Regulations Section 1.704-2(f), if there is a net decrease
in Partnership Minimum Gain for any Fiscal Year, each Partner shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to such Partner's share of the net decrease
in Partnership Minimum Gain to the extent required by Treasury Regulations
Section 1.704-2(f). The items to be so allocated shall be determined in
accordance with Treasury Regulations Sections 1.704-2(f) and (j)(2). This
subparagraph is intended to comply with the minimum gain chargeback requirement
in said section of the Treasury Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph shall be made
in proportion to the respective amounts required to be allocated to each Partner
pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2(i)(4), if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
Fiscal Year, each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to that Partner's share of the net decrease in the
Partner Minimum Gain attributable to such Partner Nonrecourse Debt to the extent
and in the manner required by Treasury Regulations Section 1.704-2(i). The items
to be so allocated shall be determined in accordance with Treasury Regulations
Sections 1.704-2(i)(4) and (j)(2). This subparagraph is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt
contained in said section of the Treasury Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph shall be made
in proportion to the respective amounts to be allocated to each Partner pursuant
hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly receives
any adjustment, allocation or distribution described in Treasury Regulation
Sections 1.704 1(b)(2)(ii)(d)(4), (5) and (6) that causes or increases an
Adjusted Capital Account Deficit, gross items of income and gain shall be
specially allocated to such Partner so as to eliminate such Adjusted Capital
Account Deficit as quickly as possible. This subparagraph is intended to
-24-
constitute a "qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of the
Treasury Regulations and shall be interpreted consistently therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be allocated to the Partners in accordance with their respective
Percentage Interests.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
Fiscal Year with respect to a Partner Nonrecourse Debt shall be specially
allocated to the Partners that bear the economic risk of loss for such Partner
Nonrecourse Debt (as determined under Treasury Regulations Sections
1.704-2(b)(4) and 1.704-2(i)(1).
(f) Definition of "Profits" and "Losses". "Profits" and "Losses" and any
item of income, gain, expense, or loss referred to in this Agreement shall be
determined in accordance with federal income tax accounting principles, as
modified by Treasury Regulations Section 1.704-1(b)(2)(iv), except that Profit
and Loss shall not include items of income, gain and expense that are specially
allocated pursuant to Sections 6.1(b), 6.2(a), 6.2(b), 6.2(c), 6.2(d), and
6.2(e). All allocations of Profit and Loss (and all items contained therein) for
federal income tax purposes shall be identical to all allocations of such items
set forth in Section 6.1 and this Section 6.2, except as otherwise required by
Section 704(c) of the Code and Regulations Section 1.704-1(b)(4). The General
Partner shall have the authority to elect the method to be used by the
Partnership for allocating items of income, gain, and expense as required by
Section 704(c) of the Code including a method that may result in a Partner
receiving a disproportionately larger share of the Partnership tax depreciation
deductions, and such election shall be binding on all Partners.
(g) Curative Allocations. The allocations set forth in Section 6.1(b) and
Sections 6.2(a) through (e) hereof (the "Regulatory Allocations") are intended
to comply with certain requirements of the Treasury Regulations. It is the
intent of the Partners that, to the extent possible all Regulatory Allocations
that are made be offset either with other Regulatory Allocations or with special
allocations pursuant to this Section 6.2(g). Therefore, notwithstanding any
other provision of this Article 6 (other than the Regulatory Allocations), the
General Partner shall make such offsetting special allocations in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Partner's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of the Agreement and all Partnership items were
allocated pursuant to Sections 6.1(a) and 6.1(c). In exercising its discretion
under this Section 6.2(g), the General Partner shall take into account future
Regulatory Allocations under Sections 6.2(a) and 6.2(b) that, although not yet
made, are likely to offset other Regulatory Allocations previously made under
Sections 6.2(d) and 6.2(e).
(h) Changes in Interest. If during any Fiscal Year there is a change in any
Partner's Percentage Interest, then for purposes of determining the Profits,
Losses, or any other items allocable to such Partner for such Fiscal Year,
Profits, Losses, and any such other items shall be determined on a daily,
monthly, or other basis, as determined by the General Partner using any
permissible method under Code Section 706 and the Treasury Regulations
thereunder.
6.3 REVISIONS TO ALLOCATIONS TO REFLECT ISSUANCE OF PARTNERSHIP INTERESTS
If the Partnership issues Partnership Interests to the General Partner or
any additional Limited Partner pursuant to Article 4, the General Partner shall
make any such revisions to this Article 6 as it deems necessary to reflect the
terms of the issuance of such Partnership Interests,
-25-
including making preferential allocations to classes of Partnership Interests
that are entitled thereto. Such revisions shall not require the consent or
approval of any other Partner.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
7.1 MANAGEMENT
(a) Management By the General Partner. Except as otherwise expressly
provided in this Agreement, full, complete and exclusive discretion to manage
and control the business and affairs of the Partnership are and shall be vested
in the General Partner, and no Limited Partner other than the Advisor shall have
any right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause.
(b) Power and Authority of the General Partner. In addition to the powers
now or hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any other
provision of this Agreement, the General Partner shall have full power and
authority to do all things deemed necessary or desirable by it to conduct the
business of the Partnership, to exercise all powers set forth in Section 3.2
hereof and to effectuate the purposes set forth in Section 3.1 hereof,
including, without limitation:
(i) (A) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on loans and
borrowing money to permit the Partnership to make distributions to its
Partners in such amounts as will permit the General Partner (so long as the
General Partner qualifies as a REIT) to (1) avoid the payment of any
Federal income or excise tax (including any excise tax pursuant to Section
4981 of the Code) and (2) make distributions to its stockholders in amounts
sufficient to permit the General Partner to maintain REIT status), (B) the
assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, (C) the issuance of any evidence of indebtedness
(including the securing of the same by deed, mortgage, deed of trust or
other lien or encumbrance on the Partnership's assets), and (D) the
incurring of any obligations it deems necessary for the conduct of the
activities of the Partnership, including the payment of all expenses
associated with the General Partner;
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership or the General
Partner;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets, including Real Estate Assets, of
the Partnership (including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in connection
with any assets at any time held by the Partnership) or the merger or other
combination of the Partnership with or into another entity on such terms as
the General Partner deems proper;
(iv) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this
Agreement and on any terms the General Partner sees fit, including, without
limitation,
-26-
(A) the financing of the conduct of the operations of the General
Partner, the Partnership or any of the Partnership's Subsidiaries,
(B) the lending of funds to other Persons (including, without
limitation, the Subsidiaries of the Partnership and/or the General
Partner) and the repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which it has an equity
investment, and
(C) the making of capital contributions to the Partnership's
Subsidiaries;
(v) the development, expansion, construction, management, operation,
leasing, repair, alteration, demolition or improvement of any real property
in which the Partnership or any Subsidiary of the Partnership owns a direct
or indirect interest;
(vi) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner considers useful
or necessary to the conduct of the Partnership's operations or the
implementation of the General Partner's powers under this Agreement,
including contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and other agents
and the payment of their expenses and compensation out of the Partnership's
assets;
(vii) the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement;
(viii) the holding, management, investment and reinvestment of cash
and other assets of the Partnership;
(ix) the collection and receipt of revenues and income of the
Partnership;
(x) the establishment of one or more divisions of the Partnership, the
selection and dismissal of employees of the Partnership (including, without
limitation, employees having titles such as "president," "vice president,"
"secretary" and "treasurer" of the Partnership), and agents, outside
attorneys, accountants, consultants and contractors of the Partnership, and
the determination of their compensation and other terms of employment or
engagement;
(xi) the formation of, or acquisition of an interest (including
non-voting interests in entities controlled by Affiliates of the
Partnership or third parties) in, and the contribution of property to, any
other Entities that the General Partner deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of funds
or property to, or making of loans to, Subsidiaries of the Partnership and
any other Person from time to time), or the incurrence of indebtedness on
behalf of such Persons or the guarantee of the obligations of such Persons;
provided that, as long as the General Partner has determined to elect to
qualify as a REIT or to continue to qualify as a REIT, the Partnership may
not engage in any such formation, acquisition or contribution that would
cause the General Partner to fail to qualify as a REIT;
(xii) the control of any matters affecting the rights and obligations
of the Partnership, including:
-27-
(A) the settlement, compromise, submission to arbitration or any
other form of dispute resolution, or abandonment of, any claim, cause
of action, liability, debt or damages, due or owing to or from the
Partnership,
(B) the commencement or defense of suits, legal proceedings,
administrative proceedings, arbitration or other forms of dispute
resolution, and
(C) the representation of the Partnership in all suits or legal
proceedings, administrative proceedings, arbitrations or other forms
of dispute resolution, the incurring of legal expenses, and the
indemnification of any Person against liabilities and contingencies to
the extent permitted by law;
(xiii) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any
other Person (including, without limitation, the contribution or loan of
funds by the Partnership to such Persons);
(xiv) the determination of the fair market value of any Partnership
Assets distributed in kind using such reasonable method of valuation as the
General Partner, in its sole discretion, may adopt;
(xv) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;
(xvi) the exercise of any of the powers of the General Partner
enumerated in this Agreement or the undertaking of any action on behalf of
or in connection with any Subsidiary of the Partnership or any other Person
in which the Partnership has a direct or indirect interest, or jointly with
any such Subsidiary or other Person;
(xvii) the making, execution and delivery of any and all deeds,
leases, notes, mortgages, deeds of trust, security agreements, conveyances,
contracts, guarantees, warranties, indemnities, waivers, releases or legal
instruments or agreements in writing necessary or appropriate, in the
judgment of the General Partner, for the accomplishment of any of the
foregoing;
(xviii) the issuance of additional Partnership Interests in connection
with Capital Contributions by Additional Limited Partners and additional
Capital Contributions by Partners pursuant to Article 4 hereof;
(xix) the opening of bank accounts on behalf of, and in the name of,
the Partnership and its Subsidiaries; and
(xx) the amendment and restatement of Exhibit A to reflect accurately
at all times the Capital Contributions of, Partnership Units held by and
Percentage Interests of the Partners as the same are adjusted from time to
time to the extent necessary to reflect any Capital Contributions,
redemptions, issuance of Partnership Units, admission of any Additional
Limited Partner or any Substituted Limited Partner or otherwise, which
amendment and restatement, notwithstanding anything in this Agreement to
the contrary, shall not be deemed an amendment of this Agreement, as long
as the matter or event being reflected in Exhibit A otherwise is authorized
by this Agreement.
-28-
(c) Advisor. The General Partner has engaged the Advisor to serve
as the advisor to the Partnership and the General Partner pursuant to
the terms and conditions of the Advisory Agreement. In consideration
for the services to be provided to the Partnership and the General
Partner, the Advisor will receive the fees described in the Advisory
Agreement. In addition, the Advisor (in its capacity as a Partner) is
entitled to receive distributions of the Advisor Participation in
Sales Proceeds under Section 5.1(c) hereof, and distributions upon a
Listing Event under Section 5.1(d) hereof or upon a Termination Event
under Section 5.1(e) hereof.
(d) Insurance. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain:
(i) casualty, liability and other insurance on the Real
Estate Assets of the Partnership;
(ii) liability insurance for the Indemnitees hereunder; and
(iii) such other insurance as the General Partner, in its
sole and absolute discretion, determines to be appropriate and
reasonable.
(e) Working Capital and Other Reserves. At all times from and
after the date hereof, the General Partner may cause the Partnership
to establish and maintain at any and all times working capital
accounts and other cash or similar balances in such amount as the
General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
7.2 CERTIFICATE OF LIMITED PARTNERSHIP
The General Partner has previously filed the Certificate with the Secretary
of State of Delaware as required by the Act. The General Partner shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware and any
other state, or the District of Columbia, in which the Partnership may elect to
do business or own property. To the extent that such action is determined by the
General Partner to be reasonable and necessary or appropriate, the General
Partner shall file amendments to and restatements of the Certificate and do all
of the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5(a)(iv) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate or any
amendment thereto to any Limited Partner.
7.3 REIMBURSEMENT OF THE GENERAL PARTNER
(a) No Compensation. Except as provided in this Section 7.3 and elsewhere
in this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
(b) Responsibility for Partnership Expenses. The Partnership shall be
responsible for and shall pay all expenses relating to the Partnership's
organization and the ownership and operation of the Partnership Assets. The
General Partner shall be reimbursed on a monthly basis,
-29-
or such other basis as it may determine in its sole and absolute discretion, for
all expenses that it incurs on behalf of the Partnership relating to the
ownership and operation of the Partnership Assets, or for the benefit of the
Partnership; provided, that the amount of any such reimbursement shall be
reduced by any interest earned by the General Partner with respect to bank
accounts or other instruments or accounts held by it on behalf of the
Partnership. Such reimbursement shall be in addition to any reimbursement made
as a result of indemnification pursuant to Section 7.6 hereof.
(c) Responsibility for General Partner Expenses. The General Partner shall
also be reimbursed for (i) all expenses related to the operations of the General
Partner and to the management and administration of any Subsidiaries of the
General Partner or the Partnership or Affiliates of the Partnership, such as
auditing expenses and filing fees and any and all salaries, compensation and
expenses of officers and employees of the General Partner, and (ii) all expenses
the General Partner incurs relating to the organization and/or reorganization of
the Partnership and the General Partner, the public offering of REIT Stock by
the General Partner, and any other offering, grant, award or issuance of REIT
Stock or additional Partnership Interests pursuant to Section 4.2 or 4.3,
including all expenses associated with compliance by the General Partner and the
Initial Limited Partner with laws, rules and regulations promulgated by any
regulatory body.
(d) Business of the General Partner. The Limited Partners acknowledge that
the sole business of the General Partner is the ownership of direct or indirect
interests in, and the direct or indirect operation of, the Partnership, and that
all of the expenses of the General Partner are incurred for the benefit of the
Partnership.
(e) Characterization of Reimbursements. 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.
7.4 ACQUISITION OF LIMITED PARTNER INTERESTS BY THE GENERAL PARTNER
The General Partner and any Affiliates of the General Partner may acquire
Limited Partner Interests and shall be entitled to exercise all rights of a
Limited Partner relating to such Limited Partner Interests.
7.5 TRANSACTIONS WITH AFFILIATES
(a) Transactions with Subsidiaries. The Partnership may lend or contribute
funds or other assets to its Subsidiaries or other Persons in which it has an
equity investment and such Subsidiaries and Persons may borrow funds from the
Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create any
right or benefit in favor of any Subsidiary or any other Person.
(b) Certain Transactions with the Advisor and its Affiliates.
Notwithstanding anything to the contrary in this Agreement, the General Partner
shall not cause the Partnership, directly or indirectly, to Transfer any
property to, purchase any property from, loan any money to, borrow any money
from or enter into any other transaction with the Advisor or any of its
Affiliates, or any director of the General Partner, except in accordance with
the procedures set forth in the Articles of Incorporation for transactions
between the General Partner and the Advisor or its Affiliates.
-30-
(c) Benefit Plans Sponsored by the Partnership. The General Partner, in its
sole and absolute discretion and without the approval of the Limited Partners,
may propose and adopt, on behalf of the Partnership, employee benefit plans,
option or other equity incentive plans, and similar plans funded by the
Partnership for the benefit of employees of the Partnership, the General
Partner, any Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, any Subsidiaries of the Partnership or any of
their respective Affiliates.
7.6 INDEMNIFICATION
(a) General. Subject to the limitations of Section 7.6(b), to the maximum
extent permitted under the Act in effect from time to time and subject to the
limitations of Section II.G. of the NASAA Guidelines, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
reasonable attorneys' fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative
(collectively, "Claims"), that relate to the operations of the Partnership, the
General Partner or any of the Partnership's Subsidiaries in which such
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise; provided, however, that in no event shall this Section 7.6(a) enlarge
the indemnification permitted below under Section 7.6(b).
(b) Limitation. Notwithstanding any provision hereof to the contrary:
(i) the Partnership will not indemnify any Indemnitee unless:
(A) the Indemnitee has determined in good faith that the course
of conduct which caused the loss, liability or expenses was in the
best interests of the Partnership;
(B) the Indemnitee was acting on behalf of the Partnership or
performing services for the Partnership;
(C) Such Claim was not the result of:
(1) with respect to the General Partner, the gross
negligence, willful misconduct or fraud of the General Partner;
(2) with respect to any Limited Partner, the gross
negligence, willful misconduct or fraud of the Limited Partner;
(3) with respect to (A) the directors, officers and
employees of the General Partner, (B) the Advisor and (C) the
members, managers and employees of the Advisor, the negligence or
misconduct of such Person; or
(4) with respect to the Independent Directors (as defined in
the Articles of Incorporation), the gross negligence or willful
misconduct of such Independent Director; and
-31-
(D) any indemnification or agreement to hold harmless may be paid
only out of the Net Assets of the Partnership, and neither the General
Partner nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership, or otherwise provide
funds, to enable the Partnership to fund its obligations under this
Section 7.6;
(ii) notwithstanding anything to the contrary in Section 7.6(b)(ii),
the Partnership will not indemnify any Indemnitee for losses, liabilities
or expenses arising from or out of an alleged violation of federal or state
securities laws unless:
(A) there has been a successful adjudication on the merits of
each count involving alleged securities law violations as to the
particular Indemnitee;
(B) such claims have been dismissed with prejudice on the merits
by a court of competent jurisdiction as to the particular Indemnitee;
or
(C) a court of competent jurisdiction approves a settlement of
the claims against the particular Indemnitee and finds that
indemnification of the settlement and related costs should be made,
and the court considering the matter has been advised of the position
of the Securities Exchange Commission and the published position of
any state securities regulatory authority in which the securities were
offered or sold as to indemnification for violations of securities
laws.
(c) Contractual Obligations. Without limitation, the indemnity set forth in
this Section 7.6 shall extend to any liability of any Indemnitee pursuant to a
loan guaranty (except a guaranty by a Limited Partner of nonrecourse
indebtedness of the Partnership or as otherwise provided in any such loan
guaranty), contractual obligation for any indebtedness or other obligation or
otherwise for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnification agreements consistent
with the provisions of this Section 7.6 in favor of any Indemnitee having or
potentially having liability for any such indebtedness.
(d) Advancement of Expenses. Reasonable expenses incurred by an Indemnitee
who is a party to a proceeding shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all Claims made or threatened
against an Indemnitee only if all of the following conditions are satisfied: (i)
the Claim relates to acts or omissions with respect to the performance of duties
or services on behalf of the Partnership, (ii) either (A) the Claim was
initiated by a third party who is not a stockholder of the General Partner or
(B) if the Proceeding was initiated by a Stockholder, the initiating Stockholder
was acting in his or her capacity as such and the advancement was approved by a
court of competent jurisdiction, and (iii) the Indemnitee provides the
Partnership with a written undertaking to repay the amount paid or reimbursed by
the Partnership, together with the applicable legal rate of interest thereon, if
it is ultimately determined that the Indemnitee did not comply with the
requisite standard of conduct and is not entitled to indemnification.
(e) No Exclusivity. The indemnification provided by this Section 7.6 shall
be in addition to any other rights to which an Indemnitee or any other Person
may be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall
-32-
continue as to an Indemnitee who has ceased to serve in such capacity unless
otherwise provided in a written agreement pursuant to which such Indemnitees are
indemnified.
(f) Insurance. The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(g) Benefit Plan Fiduciary. For purposes of this Section 7.6, the
Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by such
Indemnitee of its duties to the Partnership also imposes duties on, or otherwise
involves services by, such Indemnitee to the plan or participants or
beneficiaries of the plan. Excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of this Section 7.6 and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by such Indemnitee to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.
(h) No Personal Liability for Partners. In no event may an Indemnitee
subject any of the Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.
(i) Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.6 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.
(j) Benefit. The provisions of this Section 7.6 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.
(k) Amendment of this Section 7.6. Any amendment, modification or repeal of
this Section 7.6 or any provision hereof shall be prospective only and shall not
in any way affect the Partnership's liability to any Indemnitee under this
Section 7.6, as in effect immediately prior to such amendment, modification, or
repeal with respect to Claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when such Claims may arise or be asserted.
(l) Indemnification Payments Not Distributions. If and to the extent any
payments to the General Partner or the Initial Limited Partner in its capacity
as the Advisor pursuant to this Section 7.6 constitute gross income to the
General Partner or the Initial Limited Partner (as opposed to the repayment of
advances made on behalf of the Partnership), such amounts shall constitute
guaranteed payments within the meaning of Section 707(c) of the Code, shall be
treated consistently therewith by the Partnership and all Partners, and shall
not be treated as distributions for purposes of computing the Partners' Capital
Accounts.
(m) Exception to Indemnification. Notwithstanding anything to the contrary
in this Agreement, the General Partner shall not be entitled to indemnification
hereunder for any Claim
-33-
for which the General Partner is obligated to indemnify the Partnership under
any other agreement between the General Partner and the Partnership.
7.7 LIABILITY OF THE GENERAL PARTNER
(a) General. To the maximum extent permitted under the Act and subject to
the limitations of Section II.G. of the NASAA Guidelines in effect from time to
time, neither the General Partner nor any director, officer, shareholder,
partner, member or employee, trustee, representative or agent of the General
Partner (including the Advisor and its Affiliates) shall be liable to the
Partnership or to any Partner for (i) any act or omission performed or failed to
be performed by it, or for any losses, claims, costs, damages, or liabilities
arising from any such act or omission, except to the extent such loss, claim,
cost damage or liability results from such Person's gross negligence, willful
misconduct or fraud, (ii) any tax liability imposed on the Partnership or (iii)
any losses due to the misconduct, negligence (gross or ordinary), dishonesty or
bad faith of any agents of the Partnership. Notwithstanding anything to the
contrary in this Section 7.7(a), this limitation on liability applies only to
the extent that the particular officer or director has satisfied the
requirements of Sections 7.6(b)(i) and (ii).
(b) No Obligation to Consider Separate Interests of Limited Partners. The
Limited Partners expressly acknowledge that (i) the General Partner (and the
Advisor, in advising the General Partner) is acting on behalf of the Partnership
and the stockholders of the General Partner, collectively, (ii) the General
Partner (and the Advisor, in advising the General Partner) is under no
obligation to consider the separate interest of the Limited Partners (including,
without limitation, the tax consequences to Limited Partners or Assignees) in
deciding whether to cause the Partnership to take (or decline to take) any
actions, and (iii) neither the General Partner nor the Advisor shall be liable
for monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Limited Partners in connection with such decisions, unless the
General Partner or the Advisor, as the case may be, acted in bad faith and the
act or omission was material to the matter giving rise to the loss, liability or
benefit not derived.
(c) Conflict. The Limited Partners expressly acknowledge that in the event
of any conflict in the fiduciary duties owed by the General Partner to its
stockholders and by the General Partner, in its capacity as a general partner of
the Partnership, to the Limited Partners, the General Partner may act in the
best interests of the General Partner's stockholders without violating its
fiduciary duties to the Limited Partners, and that the General Partner shall not
be liable for monetary damages for losses sustained, liabilities incurred, or
benefits not derived by the Limited Partners in connection with any such
violation.
(d) Amendment of this Section 7.7. Any amendment, modification or repeal of
this Section 7.7 or any provision hereof shall be prospective only and shall not
in any way affect the limitations on the General Partner's and its officers' and
directors' liability to the Partnership and the Limited Partners under this
Section 7.7 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
7.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER
(a) Reliance on Documents. The General Partner may rely and shall be
protected in acting, or refraining from acting, upon any resolution,
certificate, statement, instrument, opinion,
-34-
report, notice, request, consent, order, bond, debenture, or other paper or
document believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties.
(b) Reliance on Advisors. The General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion of such Persons as to matters which such General Partner
reasonably believes to be within such Person's professional or expert competence
shall be conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.
(c) Action Through Agents. The General Partner shall have the right, in
respect of any of its powers or obligations hereunder, to act through any of its
duly authorized officers, agents, including the Advisor, and duly appointed
attorneys-in-fact. Each such officer, agent or attorney-in-fact shall, to the
extent granted by the General Partner in writing, have full power and authority
to do and perform each and every act and duty which is permitted or required to
be done by the General Partner hereunder.
(d) Actions to Maintain REIT Status. Notwithstanding any other provisions
of this Agreement or the Act, any action of the General Partner on behalf of the
Partnership or any decision of the General Partner to refrain from acting on
behalf of the Partnership, undertaken in the good faith belief that such action
or omission is necessary or advisable in order to: (i) protect the ability of
the General Partner to continue to qualify as a REIT, or (ii) avoid the General
Partner incurring any taxes under Sections 857 or 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the Limited
Partners.
7.9 TITLE TO PARTNERSHIP ASSETS
Title to all Partnership Assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be held by the Partnership as
an entity, and no Partner, individually or collectively, shall have any
ownership interest in the Partnership Assets or any portion thereof. Title to
any or all of the Partnership Assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership Asset for which legal title is
held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
that the General Partner shall use reasonable efforts to cause beneficial and
record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership Assets shall be recorded as the property
of the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership Assets is held.
7.10 RELIANCE BY THIRD PARTIES
(a) Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without the consent or approval of any
other Partner or Person, to encumber, sell or otherwise use in any manner any
and all Partnership Assets and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership, and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially.
-35-
(b) Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
(c) In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expediency of any act or
action of the General Partner or its representatives.
(d) Each and every certificate, document or other instrument executed on
behalf of the Partnership by the General Partner or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that:
(i) at the time of the execution and delivery of such certificate,
document or instrument, this Agreement was in full force and effect;
(ii) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of
the Partnership; and
(iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 LIMITATION OF LIABILITY
The Limited Partners shall have no liability under this Agreement, except
as expressly provided in this Agreement, including Section 10.5 hereof, or under
the Act.
8.2 NO RIGHT TO PARTICIPATE IN THE MANAGEMENT OF BUSINESS
No Limited Partner shall take part in the management or control of the
Partnership's investment or other activities, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. Except as expressly provided herein, no Limited Partner shall have
the right to vote for the election, removal or replacement of the General
Partner. The exercise by any Limited Partner of any right conferred herein shall
not be construed to constitute participation by such Limited Partner in the
control of the business of the Partnership so as to make such Limited Partner
liable as a general partner for the debts and obligations of the Partnership for
purposes of the Act, laws of non-U.S. jurisdictions or otherwise.
8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS
Subject to any agreements entered into by a Limited Partner or its
Affiliates, or any Assignee, with the Partnership or any of its Subsidiaries,
any Limited Partner or Assignee and any officer, director, employee, agent,
trustee, Affiliate or shareholder or other equity owner of any Limited Partner
or Assignee shall be entitled to and may have business interests and engage
-36-
in business activities in addition to those relating to the Partnership,
including business interests and activities that are in direct competition with
the Partnership or that are enhanced by the activities of the Partnership.
Neither the Partnership nor any of the other Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. None of the Limited Partners nor any other Person shall have any
rights by virtue of this Agreement or the Partnership relationship established
hereby in any business ventures of any other Person and such Person shall have
no obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
8.4 RETURN OF CAPITAL
No Limited Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except (a) to the extent of such Limited Partner's right
of redemption set forth in Section 8.6, and (b) to the extent that the General
Partner (or the Liquidator) determines to make distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. Except
as otherwise expressly provided in this Agreement, no Limited Partner or
Assignee shall have priority over any other Limited Partner or Assignee, either
as to the return of Capital Contributions or as to distributions or allocations
of Profits or Losses.
8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP
(a) General. In addition to the other rights provided by this Agreement and
any rights granted to limited partners of a limited partnership under the Act
that such limited partners are not permitted to waive under the Act, and except
as limited by Section 8.5(b) hereof, each Limited Partner shall have the right,
for a purpose reasonably related to such Limited Partner's interest as a limited
partner in the Partnership, upon written demand with a statement of the purpose
of such demand and at such Limited Partner's own expense (including such
reasonable copying and administrative charges as the General Partner may
establish from time to time):
(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;
(ii) to obtain a copy of the Partnership's Federal, state and local
income tax returns for each Fiscal Year;
(iii) to obtain a current list of the name and last known business,
residence or mailing address of each Partner; and
(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.
Each Limited Partner hereby waives any and all rights that such Limited Partner
may have under the Act that the Act permits limited partners to waive, except
any such right that is granted expressly to such Limited Partner under this
Agreement.
(b) Confidentiality. Notwithstanding any other provision of this Section
8.5, the General Partner may keep confidential from the Limited Partners, for
such period of time as the
-37-
General Partner determines in its sole and absolute discretion to be reasonable,
any information that:
(i) the General Partner reasonably believes to be in the nature of
trade secrets or other information, the disclosure of which the General
Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business; or
(ii) the Partnership is required by law or by agreements with an
unaffiliated third party to keep confidential.
8.6 REDEMPTION RIGHT
(a) Redemption Right. Subject to the provisions of this Section 8.6, at any
time on or after the first anniversary date of the issuance of a Partnership
Unit to a Partner, such Partner shall have the right (the "Redemption Right") to
require the Partnership to redeem on a Specified Redemption Date all or a
portion of the Partnership Units held by such Partner, at a redemption price
equal to and in the form of the Redemption Amount. The Redemption Right shall be
exercised pursuant to a Notice of Redemption Request delivered to the General
Partner by the Partner who is exercising the Redemption Right (the "Redeeming
Partner").
(b) Distributions and Allocations.
(i) Subject to Section 8.6(c), the Redeeming Partner shall have no
right to receive any distributions that are paid after the Specified
Redemption Date with respect to any Partnership Units redeemed pursuant to
this Section 8.6.
(ii) If any Partnership Interest is redeemed (other than pursuant to
Section 8.6(c)) on any day other than the first day of a Fiscal Year, then
Profit, Losses, each item thereof and all other items attributable to such
Partnership Interest for such Fiscal Year shall be divided and allocated to
the Redeeming Partner by taking into account the Redeeming Partner's
ownership of such Partnership Interest during the Fiscal Year in accordance
with Section 706(d) of the Code, using the interim closing of the books
method (unless the General Partner, in its sole and absolute discretion,
elects to adopt a daily, weekly or monthly proration period, in which event
Profits, Losses, each item thereof and all other items attributable to such
redeemed Partnership Interest for such Fiscal Year shall be prorated based
upon the applicable method selected by the General Partner).
(c) General Partner Assumption of Obligation. Notwithstanding the
provisions of Section 8.6(a), the General Partner may, in its sole and absolute
discretion (subject to the limitations on ownership and transfer of shares of
REIT Stock in the Articles of Incorporation), assume directly the obligation to
satisfy a Redemption Right and satisfy such Redemption Right by paying to the
Redeeming Partner the Redemption Amount on the Specified Redemption Date,
whereupon the General Partner shall acquire the Partnership Units offered for
redemption by the Redeeming Partner and shall be treated for all purposes of
this Agreement as the owner of such Partnership Units. In the event that the
General Partner shall exercise this right to satisfy the Redemption Right in the
manner described in the preceding sentence and shall fully perform its
obligation to pay the Redemption Amount on the Specified Redemption Date, the
Partnership shall have no obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner's exercise of the Redemption Right, and
each of the Redeeming Partner, the
-38-
Partnership and the General Partner shall treat the transaction between the
General Partner and the Redeeming Partner as a sale of the Redeeming Partner's
Partnership Units to the General Partner for Federal income tax purposes.
Distributions and allocations with respect to Partnership Units acquired by the
General Partner pursuant to this Section 8.6(c) shall be made in accordance with
Sections 11.6(c) and 11.6(d).
(d) Fractional Shares. If the General Partner elects, either on its own
behalf or on behalf of the Partnership, to satisfy the Redemption Right by
paying the REIT Stock Amount, and the REIT Stock Amount is not equal to a whole
number of shares of REIT Stock, the Redeeming Partner shall be paid (i) that
number of shares of REIT Stock which equals the nearest whole number less than
the REIT Stock Amount, plus (ii) (A) an amount of cash equal to the Value of one
share of REIT Stock on the applicable Valuation Date, multiplied by (B) the REIT
Stock Amount minus the whole number of shares of REIT Stock pursuant to clause
(i) of this Section 8.6(d).
(e) Execution of Documents. Each Redeeming Partner agrees to execute such
documents as the General Partner may reasonably require in connection with (i)
the exercise and satisfaction of the Redemption Right, (ii) any assumption by
the General Partner pursuant to Section 8.6(c), and (iii) any issuance of REIT
Stock in connection with the Partnership or the General Partner paying the
Redemption Amount to the Redeeming Partner.
(f) Exceptions to Redemption Right. Notwithstanding the provisions of
Section 8.6(a), unless the General Partner elects for payment of the Redemption
Amount by the Partnership to be the Cash Amount, a Partner shall not be entitled
to exercise the Redemption Right if the delivery of REIT Stock to such Partner
on the Specified Redemption Date would (i) be prohibited under the Articles of
Incorporation or the bylaws of the General Partner, (ii) adversely affect the
ability of the General Partner to continue to qualify as a REIT or would subject
the General Partner to any additional taxes under Sections 857 or 4981 of the
Code, (iii) constitute or be likely to constitute a violation of any applicable
federal or state securities laws or regulations, or (iv) be prohibited under
Section 11.6(f) of this Agreement (in each case regardless of whether the
General Partner would in fact assume and satisfy the Redemption Right).
(g) Exercise of the Redemption Right by the General Partner. The receipt of
a notice of redemption with respect to shares of REIT Stock held by stockholders
of the General Partner (a "REIT Notice") shall be deemed to be a Notice of
Redemption Request given by the General Partner to the Partnership. The
redemption by the REIT of REIT Stock pursuant to a REIT Notice shall be deemed
an exercise of the Redemption Right with respect to a number of Partnership
Units equal to the number of shares of REIT Stock identified in the REIT Notice.
With respect to any Redemption Right exercised by the General Partner pursuant
to this Section 8.6(g), the General Partner will elect for payment of the
Redemption Amount by the Partnership to the General Partner to be the Cash
Amount.
(h) Assignees. The Assignee of any Limited Partner may exercise the rights
of such Limited Partner pursuant to this Section 8.6 with respect to any
Partnership Units Transferred by such Limited Partner to such Assignee, and such
Limited Partner shall be deemed to have assigned such rights to such Assignee
and shall be bound by the exercise of such rights by such Assignee. In
connection with any exercise of such rights by such Assignee on behalf of such
Limited Partner, the Redemption Amount shall be paid by the Partnership directly
to such Assignee and not to such Limited Partner.
-39-
(i) No Liens on Partnership Units Delivered for Redemption. Each Partner
covenants and agrees that all Partnership Units delivered for redemption
pursuant to this Section 8.6 shall be delivered to the Partnership or the
General Partner, as the case may be, free and clear of all Liens.
Notwithstanding anything contained herein to the contrary, neither the General
Partner nor the Partnership shall be under any obligation to acquire Partnership
Units which are or may be subject to any Liens. Each Partner further agrees
that, if any state or local property transfer tax is payable as a result of the
Transfer of its Partnership Units to the Partnership or the General Partner
pursuant to this Section 8.6, such Partner shall assume and pay such transfer
tax.
(j) Cancellation of Units; Amendments to Exhibit A. Upon the redemption of
Partnership Units pursuant to this Section 8.6, (i) all such redeemed
Partnership Units (other than Partnership Units redeemed pursuant to Section
8.6(c)) shall be cancelled, and (ii) the General Partner shall amend Exhibit A
to reflect the new Percentage Interests of the Partners and to (A) either adjust
the number of Partnership Units and the Percentage Interest of the Redeeming
Partner or eliminate the Redeeming Partner from Exhibit A, as applicable, and
(B) in the event that the General Partner assumes the obligation to satisfy a
Redemption Right pursuant to Section 8.6(c), adjust the number of Partnership
Units and the Percentage Interest of the General Partner to reflect the Transfer
of such Partnership Units to the General Partner.
(k) Additional Partnership Interests. If the Partnership issues Partnership
Interests to any Additional Limited Partner pursuant to Article 4, the General
Partner shall make such revisions to this Section 8.6 as the General Partner
determines are necessary to reflect the issuance of such Partnership Interests
(including setting forth any restrictions on the exercise of the Redemption
Right with respect to such Partnership Interests).
(l) Redemptions by the Advisor. For so long as the Advisor remains the
advisor to the Partnership and General Partner under the Advisory Agreement,
neither the Advisor nor any Affiliate of the Advisor (other than the General
Partner) may redeem any portion of the Partnership Units held by such Person;
provided that, upon the occurrence of a Listing Event, immediately following the
distribution to the Advisor of all amounts required to be distributed to the
Advisor pursuant to Section 5.1(d), the Partnership shall redeem all of the
Partnership Units held by the Advisor and its Affiliates (other than the General
Partner), at a redemption price equal to and in the form of the Redemption
Amount. In addition, upon the occurrence of a Termination Event, immediately
following the distribution to the Advisor of all amounts required to be
distributed to the Advisor pursuant to Section 5.1(e) (including, but not
limited to the repayment of the Termination Note in full, if applicable), the
Partnership shall redeem all of the Partnership Units held by the Advisor and
its Affiliates (other than the General Partner), at a redemption price equal to
and in the form of the Redemption Amount. With respect to any automatic
redemption of Partnership Units held by the Advisor or its Affiliates (other
than the General Partner) pursuant to this Section 8.6(l), the General Partner
will elect for payment of the Redemption Amount by the Partnership to the
Advisor and/or any such Affiliate to be the Cash Amount.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 RECORDS AND ACCOUNTING
(a) Books and Records. The General Partner shall keep or cause to be kept
at the principal office of the Partnership those records and documents required
to be maintained by the Act and other books and records deemed by the General
Partner to be appropriate with respect to the Partnership's business, including,
without limitation, all books and records necessary for the
-40-
General Partner to comply with applicable REIT Requirements and to provide to
the Limited Partners any information, lists and copies of documents required to
be provided pursuant to Sections 8.5(a) and 9.2 hereof.
(b) Accounting Method. The books of the Partnership shall be maintained,
for financial and tax reporting purposes, on an accrual basis in accordance with
GAAP.
9.2 REPORTS
(a) Annual Reports. As soon as practicable after the end of each Fiscal
Year, but in no event later than the date on which the General Partner mails its
annual report to its stockholders, the General Partner shall cause to be mailed
to each Limited Partner as of the close of the Fiscal Year, an annual report
containing financial statements of the Partnership, or of the General Partner,
if such statements are prepared on a consolidated basis with the Partnership,
for such Fiscal Year, presented in accordance with GAAP, such statements to be
audited by a nationally recognized firm of independent public accountants
selected by the General Partner in its sole discretion.
(b) Quarterly Reports. If and to the extent that the General Partner mails
quarterly reports to its stockholders, then as soon as practicable after the end
of each fiscal quarter of the Partnership, but in no event later than the date
such reports are mailed, the General Partner shall cause to be mailed to each
Limited Partner a report containing unaudited financial statements as of the
last day of the calendar quarter of the Partnership, or of the General Partner,
if such statements are prepared on a consolidated basis with the Partnership,
and such other information as may be required by applicable law or regulation,
or as the General Partner determines to be appropriate.
(c) Delivery. Notwithstanding the foregoing, the General Partner may
deliver to the Limited Partners each of the reports described above, as well as
any other communications that it may provide hereunder, by e-mail or by any
other electronic means.
ARTICLE 10
TAX MATTERS
10.1 PREPARATION OF TAX RETURNS
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
10.2 TAX ELECTIONS
Except as otherwise provided herein, the General Partner shall, in its sole
and absolute discretion, determine whether to make any available election
pursuant to the Code; provided, however, that the General Partner shall make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder. The General Partner shall have the right to seek to revoke any such
election it makes, including, without limitation, the election under Section 754
of the Code, upon the General Partner's determination, in its sole and absolute
discretion, that such revocation is in the best interests of the Partners.
-41-
10.3 TAX MATTERS PARTNER
(a) General. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3) of
the Code, upon receipt of notice from the Internal Revenue Service of the
beginning of an administrative proceeding with respect to the Partnership, the
tax matters partner shall furnish the Internal Revenue Service with the name,
address, taxpayer identification number, and profit interest of each of the
Limited Partners and the Assignees; provided, that such information is provided
to the Partnership by the Limited Partners and the Assignees.
(b) Powers. The tax matters partner is authorized, but not required:
(i) to enter into any settlement with the Internal Revenue Service
with respect to any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into account by a
Partner for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being referred
to as "judicial review"), and in the settlement agreement the tax matters
partner may expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any Partner:
(A) who (within the time prescribed pursuant to the Code and the
Treasury Regulations) files a statement with the Internal Revenue
Service providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such
Partner; or
(B) who is a "notice partner" (as defined in Section 6231(a)(8)
of the Code) or a member of a "notice group" (as defined in Section
6223(b)(2) of the Code);
(ii) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States Claims Court or
the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(iii) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is not allowed by
the Internal Revenue Service, to file an appropriate pleading (petition or
complaint) for judicial review with respect to such request;
(v) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to any item
required to be taken account of by a Partner for tax purposes, or an item
affected by such item; and
-42-
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of
the tax matters partner and the provisions relating to indemnification of
the General Partner set forth in Section 7.6 of this Agreement shall be
fully applicable to the tax matters partner in its capacity as such.
(c) Reimbursements. The tax matters partner shall receive no compensation
for its services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm to assist
the tax matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable.
10.4 ORGANIZATIONAL EXPENSES
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
10.5 WITHHOLDING
(a) General. Each Limited Partner hereby authorizes the Partnership to
withhold from, or pay on behalf of or with respect to, such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the
Code.
(b) Treatment of Amounts Withheld. Any amount paid on behalf of or with
respect to a Limited Partner shall constitute a loan by the Partnership to such
Limited Partner, which loan shall be repaid by such Limited Partner within
fifteen (15) days after notice from the General Partner that such payment must
be made unless:
(i) the Partnership withholds such payment from a distribution which
would otherwise be made to the Limited Partner; or
(ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds
of the Partnership which would, but for such payment, be distributed to the
Limited Partner.
Any amounts withheld from amounts otherwise distributable to a Limited Partner
as described in clause (i) or (ii) of this Section 10.5(b) shall be treated as
having been distributed to such Limited Partner.
(c) Security Interest. Each Limited Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this Section
10.5. Each Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security
interest created hereunder.
-43-
(d) Default. In the event that a Limited Partner fails to pay when due any
amounts owed to the Partnership pursuant to this Section 10.5, the General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner. Without limitation, in such event, the General
Partner shall have the right to receive distributions that would otherwise be
distributable to such defaulting Limited Partner until such time as such loan,
together with all interest thereon, has been paid in full, and any such
distributions so received by the General Partner shall be treated as having been
distributed to the defaulting Limited Partner and immediately paid by the
defaulting Limited Partner to the General Partner in repayment of such loan.
(e) Interest. Any amount payable by a Limited Partner under this Section
10.5 shall bear interest at the lesser of (i) the base rate on corporate loans
at large United States money center commercial banks, as published from time to
time in The Wall Street Journal, plus four (4) percentage points, and (ii) the
maximum lawful rate of interest on such obligation, such interest to accrue from
the date such amount is due (i.e., fifteen (15) days after demand) until such
amount is paid in full.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
11.1 TRANSFER
(a) Definition. The term "Transfer," when used in this Article 11 with
respect to a Partnership Interest or a Partnership Unit, shall be deemed to
refer to a transaction by which the General Partner purports to assign all or
any part of its General Partner Interest to another Person or a Limited Partner
purports to assign all or any part of its Limited Partner Interest to another
Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.
The term "Transfer" when used in this Article 11 does not include any redemption
of Partnership Units or other Partnership Interests for cash or REIT Stock
pursuant to Section 8.6.
(b) Restriction on Transfer. No Partnership Interest shall be Transferred,
in whole or in part, except in accordance with the terms and conditions set
forth in this Article 11. Any Transfer or purported Transfer of a Partnership
Interest not made in accordance with this Article 11 shall be null and void.
11.2 TRANSFER OF THE GENERAL PARTNER'S GENERAL PARTNER INTEREST
(a) The General Partner may not Transfer any of its General Partner
Interest or withdraw as General Partner, except:
(i) with the Consent of the Outside Limited Partners; or
(ii) if such Transfer is to an entity which is wholly-owned, directly
or indirectly, by the General Partner.
-44-
(b) In the event the General Partner withdraws as general partner of the
Partnership in accordance with Section 11.2(a), the General Partner's General
Partner Interest shall immediately be converted into a Limited Partner Interest.
11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER
(a) General. Subject to the provisions of Section 11.3(b), no Limited
Partner shall have the right to Transfer all or a portion of such Limited
Partner's Partnership Interest, or any of such Limited Partner's rights as a
Limited Partner, without the consent of the General Partner, which may be given
or withheld by the General Partner in its sole and absolute discretion.
(b) Transfers to Permitted Transferees. Notwithstanding the provisions of
Section 11.3(a), but subject to the provisions of Sections 11.3(c), 11.3(d), and
11.3(e) and other applicable restrictions on Transfers contained in this Article
11, a Limited Partner may Transfer, with or without the consent of the General
Partner, all or a portion of his Partnership Units to a Permitted Transferee;
provided that such Permitted Transferee must qualify as "accredited investor" as
such term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act; and provided further that, no Transfer pursuant to this Section
11.3(b) shall be effective until the General Partner receives notice of such
Transfer.
(c) No Transfers Violating Securities Laws. The General Partner may
prohibit any Transfer by a Limited Partner of its Partnership Units if, in the
opinion of legal counsel to the Partnership, such Transfer would require the
filing of a registration statement under the Securities Act, or would otherwise
violate any federal or state securities laws or regulations applicable to the
Partnership or the Partnership Units.
(d) No Transfers to Certain Lenders. No Transfer of any Partnership Units
may be made to a lender to the Partnership or any Person who is related (within
the meaning of Treasury Regulations Section 1.752-4(b)) to any lender to the
Partnership whose loan constitutes a nonrecourse liability (within the meaning
of Treasury Regulations Section 1.752-1(a)(2)), without the consent of the
General Partner, which may be withheld in its sole and absolute discretion.
(e) Additional Prohibited Transfers. No Transfer by a Limited Partner of
its Partnership Units may be made to any Person if:
(i) in the opinion the General Partner based on the advice of legal
counsel, if appropriate, it would adversely affect the ability of the
General Partner to continue to qualify as a REIT or would subject the
General Partner to any additional taxes under Sections 857 or 4981 of the
Code;
(ii) in the opinion of the General Partner based on the advice of
legal counsel, if appropriate, it would result in the Partnership being
treated as an association taxable as a corporation for federal income tax
purposes;
(iii) such Transfer would subject the Partnership to regulation under
the Investment Company Act of 1940, the Investment Advisers Act of 1940, as
amended or ERISA;
-45-
(iv) such Transfer is effectuated through an "established securities
market" or a "secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code; or
(v) such Transfer is to a Prohibited Transferee.
(f) Incapacitated Limited Partners. If a Limited Partner is Incapacitated,
the executor, administrator, trustee, committee, guardian, conservator or
receiver of such Limited Partner's estate shall have all of the rights of a
Limited Partner, but not more rights than those enjoyed by other Limited
Partners, for the purpose of settling or managing the estate and such power as
the Incapacitated Limited Partner possessed to Transfer all or any part of his
or its interest in the Partnership. The Incapacity of a Limited Partner, in and
of itself, shall not dissolve or terminate the Partnership.
(g) Transfers by the Advisor. For so long as the Advisor remains the
advisor to the Partnership and General Partner under the Advisory Agreement,
neither the Advisor nor any Affiliate of the Advisor (other than the General
Partner) may Transfer any portion of the Partnership Units held by the Advisor
to any Person, other than (i) Transfers to any Affiliate of the Advisor, and
(ii) deemed Transfers to the General Partner pursuant to Section 8.6(c).
11.4 SUBSTITUTED LIMITED PARTNERS
(a) Consent of the General Partner. No Limited Partner shall have the right
to substitute a Permitted Transferee in such Limited Partner's place. The
General Partner shall, however, have the right to consent to the admission of a
Permitted Transferee of the Partnership Interest of a Limited Partner pursuant
to this Section 11.4 as a Substitute Limited Partner, which consent may be given
or withheld by the General Partner in its sole and absolute discretion. The
General Partner's failure or refusal to permit such transferee to become a
Substituted Limited Partner shall not give rise to any cause of action against
the Partnership or any Partner.
(b) Rights of a Substituted Limited Partner. A transferee who has been
admitted as a Substituted Limited Partner in accordance with this Article 11
shall have all the rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement. The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all of
the terms and conditions of this Agreement, including, without limitation, the
power of attorney granted in Section 2.6, and such other documents or
instruments as may be required in the reasonable discretion of the General
Partner in order to effect such Person's admission as a Substituted Limited
Partner.
(c) Amendments to Exhibit A. Upon the admission of a Substituted Limited
Partner, the General Partner shall amend Exhibit A to reflect the name, address,
number of Partnership Units, and Percentage Interest of such Substituted Limited
Partner and to eliminate or adjust, if necessary, the name, address and interest
of the predecessor of such Substituted Limited Partner.
11.5 ASSIGNEES
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any transferee as a Substituted Limited Partner, as
described in Section 11.4(a), such transferee shall be considered an Assignee
for purposes of this Agreement. An Assignee shall be deemed to have had assigned
to it, and shall be entitled to receive distributions from the
-46-
Partnership and the share of Profit, Losses and any other items of gain, loss,
deduction or credit of the Partnership attributable to the Partnership Units
assigned to such transferee, but shall not be deemed to be a holder of
Partnership Units for any other purpose under this Agreement except as otherwise
provided in this Agreement, and shall not be entitled to vote such Partnership
Units in any matter presented to the Limited Partners for a vote (such
Partnership Units being deemed to have been voted on such matter in the same
proportion as all other Partnership Units held by Limited Partners are voted).
In the event any such transferee desires to make a further assignment of any
such Partnership Units, such transferee shall be subject to all of the
provisions of this Article 11 to the same extent and in the same manner as any
Limited Partner desiring to make an assignment of Partnership Units.
11.6 GENERAL PROVISIONS
(a) Withdrawal of a Limited Partner. No Limited Partner may withdraw from
the Partnership other than as a result of a Transfer of all of such Limited
Partner's Partnership Units pursuant to which the transferee is admitted as a
Substituted Limited Partner or a redemption of all of the Partnership Units held
by such Limited Partner pursuant to Section 8.6.
(b) Termination of Status as a Limited Partner. Any Limited Partner that
(i) Transfers all of such Limited Partner's Partnership Units (or other
Partnership Interests) in a Transfer pursuant to which the transferee is
admitted as a Substituted Limited Partner, or (ii) redeems all of such the
Partnership Units held by such Limited Partner pursuant to Section 8.6 shall
cease to be a Limited Partner.
(c) Allocations. If any Partnership Interest is Transferred during the
Partnership's Fiscal Year in compliance with the provisions of this Article 11
(including Transfers to the General Partner pursuant to Section 8.6(c)) on any
day other than the first day of a Fiscal Year, then Profit, Losses, each item
thereof and all other items attributable to such Partnership Interest for such
Fiscal Year shall be divided and allocated between the transferor Partner and
the transferee Partner by taking into account their varying interests during the
Fiscal Year in accordance with Section 706(d) of the Code, using the interim
closing of the books method (unless the General Partner, in its sole and
absolute discretion, elects to adopt a daily, weekly or monthly proration
period, in which event Profits, Losses, each item thereof and all other items
attributable to such transferred Partnership Interest for such Fiscal Year shall
be prorated based upon the applicable method selected by the General Partner).
(d) Distributions. All distributions of Available Operating Cash, Net Sales
Proceeds or other Partnership Assets attributable to Partnership Units, with
respect to which the Partnership Record Date is before the date of a Transfer of
such Partnership Units (including any Transfer to the General Partner pursuant
to Section 8.6(c)), shall be made to the transferor Partner, and all
distributions of Available Operating Cash, Net Sales Proceeds or other
Partnership Assets thereafter attributable to such Partnership Units shall be
made to the transferee Partner.
(e) Capital Accounts. The original Capital Account established for each
transferee shall be in the same amount as the Capital Account or portion thereof
of the Partner to which such transferee succeeds, at the time such transferee is
admitted to the Partnership. The Capital Account of any Partner whose Percentage
Interest shall be increased by means of the Transfer to it of all or part of the
Partnership Interest of another Partner shall be appropriately adjusted to
reflect such Transfer. Any reference in this Agreement to a Capital Contribution
of, or distribution to, a then-Partner shall include a Capital Contribution or
distribution previously made by or to any prior Partner on account of the
Partnership Interest of such then-Partner.
-47-
(f) Additional Restrictions. In addition to any other restrictions on
transfer contained in this Agreement, in no event may any Transfer of a
Partnership Interest by any Partner or any redemption pursuant to Section 8.6 be
made without the express consent of the General Partner, in its sole and
absolute discretion, (i) to any person or entity who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of applicable
law; (iii) of any component portion of a Partnership Interest, such as the
Capital Account, or rights to distributions, separate and apart from all other
components of a Partnership Interest; (iv) if in the opinion of the General
Partner based on the advice of legal counsel, if appropriate, such Transfer
would cause a termination of the Partnership for Federal or state income tax
purposes (except as a result of a redemption of all Partnership Units held by
all Limited Partners); (v) if in the opinion of the General Partner based on the
advice of legal counsel, if appropriate, such Transfer would cause the
Partnership to cease to be classified as a partnership for Federal income tax
purposes (except as a result of a redemption of all Partnership Units held by
all Limited Partners); (vi) if such Transfer requires the registration of such
Partnership Interest pursuant to any applicable federal or state securities
laws; (vii) if such Transfer would cause the Partnership to become a "publicly
traded partnership," as such term is defined in Section 7704(b) of the Code
(provided that this clause (vii) shall not be the basis for limiting or
restricting in any manner the exercise of the Redemption Right under Section 8.6
unless, and only to the extent that, outside tax counsel advises the General
Partner that, in the absence of such limitation or restriction, there is a
significant risk that the Partnership will be treated as a "publicly traded
partnership" and, by reason thereof, taxable as a corporation); (viii) if such
Transfer would cause the General Partner to own 10% or more of the ownership
interests of any tenant of a property held by the Partnership within the meaning
of Section 856(d)(2)(B) of the Code; (ix) if such Transfer would result in the
General Partner being "closely held" within the meaning of Section 856(h) of the
Code; or (x) if in the opinion the General Partner based on the advice of legal
counsel, if appropriate, such Transfer would adversely affect the ability of the
General Partner to continue to qualify as a REIT or subject the General Partner
to any additional taxes under Sections 857 or 4981 of the Code.
ARTICLE 12
ADMISSION OF PARTNERS
12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER
A successor to all of the General Partner Interest pursuant to Article 11
hereof who is proposed to be admitted as a successor General Partner shall be
admitted to the Partnership as the General Partner, effective immediately
following the successor General Partner's execution and delivery to the
Partnership of an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required or
appropriate to effect such Person's admission as General Partner. In the case of
such admission on any day other than the first day of a Fiscal Year, all items
attributable to the General Partner Interest for such Fiscal Year shall be
allocated between the transferring General Partner and such successor as
provided in Section 11.6(c) hereof. Any such successor General Partner shall
carry on the business of the Partnership without dissolution.
12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS
(a) General. A Person other than the General Partner and the Initial
Limited Partner who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon executing and delivering to the General
Partner:
-48-
(i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.6 hereof; and
(ii) such other documents or instruments as may be required in the
discretion of the General Partner in order to effect such Person's
admission as an Additional Limited Partner.
(b) General Partner's Consent Required. Notwithstanding anything to the
contrary in this Section 12.2, no Person shall be admitted as an Additional
Limited Partner without the consent of the General Partner, which consent may be
given or withheld in the General Partner's sole and absolute discretion. The
admission of any Person as an Additional Limited Partner shall become effective
on the date upon which the name of such Person is recorded on the books and
records of the Partnership, following the consent of the General Partner to such
admission and the satisfaction of the conditions set forth in Section 12.2(a).
(c) Allocations to Additional Limited Partners. If any Additional Limited
Partner is admitted to the Partnership on any day other than the first day of a
Fiscal Year, then Profit, Losses, each item thereof and all other items
allocable among Partners and Assignees for such Fiscal Year shall be allocated
among such Additional Limited Partner and all other Partners and Assignees by
taking into account their varying interests during the Fiscal Year in accordance
with Section 706(d) of the Code, using the interim closing of the books method.
Solely for purposes of making such allocations, each of such items for the
calendar month in which an admission of any Additional Limited Partner occurs
shall be allocated among all of the Partners and Assignees, including such
Additional Limited Partner.
12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.6
hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
13.1 DISSOLUTION
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement.
Subject to Section 13.1(b), upon the withdrawal of the General Partner, any
successor General Partner shall continue the business of the Partnership. The
Partnership shall dissolve, and its affairs shall be wound up, only upon the
first to occur of any of the following ("Liquidating Events"):
(a) the expiration of its term as provided in Section 2.5 hereof;
-49-
(b) an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within ninety (90) days after such
event of withdrawal, a "majority in interest" (as defined below) of the
remaining Partners Consent in writing to continue the business of the
Partnership and to the appointment, effective as of the date of withdrawal, of a
successor General Partner;
(c) an election to dissolve the Partnership made by the General Partner, in
its sole and absolute discretion;
(d) entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
(e) the occurrence of a Terminating Sale Transaction; or
(f) a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner or the Partnership is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the General Partner or the Partnership, in
each case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect, unless prior to the entry of such order or judgment a
"majority in interest" (as defined below) of the remaining Partners Consent in
writing to continue the business of the Partnership and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute General Partner, if applicable.
As used in this Article 13, a "majority in interest" shall refer to Partners
(excluding the General Partner) who hold Partnership Units that constitute more
than fifty percent (50%) of the aggregate number of outstanding Partnership
Units not held by the General Partner.
13.2 WINDING UP; LIQUIDATION
(a) Upon dissolution of the Partnership, the business and affairs of the
Partnership shall be wound up as provided in this Section 13.2. The General
Partner shall act as the "Liquidator" (or, in the event there is no remaining
General Partner, any Person elected by Limited Partners holding more than 50% of
the total number of Partnership Units then issued and outstanding). The
Liquidator shall wind up the affairs of the Partnership, shall dispose of such
Partnership Assets as it deems necessary or appropriate and shall pay and
distribute the assets of the Partnership, including the proceeds of any such
disposition, as follows:
(i) first, to creditors, including Partners who are creditors, to the
extent otherwise permitted by law, in satisfaction of liabilities of the
Partnership (whether by payment or by establishment or reserves as
determined by the Liquidator in its sole discretion), other than
distributions to Partners pursuant to Article 5, and
(ii) second, to the Partners in accordance with their positive Capital
Account balances.
It is intended that such distributions will result in the Partners
receiving aggregate distributions in the order of and equal to the amount
of distributions that would have been received if the liquidating
distributions were made in accordance with Section 5.1. However, if the
balances in the Capital Accounts do not result in such intention being
satisfied, items of Profits and Losses will be reallocated among the
Partners for the Fiscal Year of the liquidation (and, at the election of
the General Partner, if necessary and
-50-
permissible, prior Fiscal Years) so as to cause the balances in the Capital
Accounts to be in the amounts necessary to assure that such result is
achieved. Notwithstanding anything herein to the contrary, in the event the
Partnership is liquidated within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g), liquidation distributions shall be made by the end of
the taxable year in which the Partnership liquidates or, if later, within
ninety (90) days of the date of such liquidation.
(b) In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the Partners pursuant to this
Article 13 may be:
(i) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and paying any
contingent or unforeseen liabilities or obligations of the Partnership or
the General Partner arising out of or in connection with the Partnership;
the assets of any such trust shall be distributed to the General Partner
and Limited Partners from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the General
Partner and Limited Partners pursuant to this Agreement; or
(ii) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority
set forth in Section 13.2(a) as soon as practicable.
(c) The Liquidator shall, in its sole discretion, determine whether to sell
any Partnership Assets, including, without limitation, Real Estate Assets, and
if so, whether at a public or private sale, for what price and on what terms. If
the Liquidator determines to sell or otherwise dispose of any Partnership Asset
or any interest therein, the Liquidator shall do so expeditiously and for its
fair market value under the circumstances, giving due regard to the activity and
condition of the relevant market and general financial and economic conditions.
If the Liquidator determines not to sell or otherwise dispose of any Partnership
Asset or any interest therein, the Liquidator shall not be required to
distribute the same to the Partners promptly but shall have full right and
discretion to determine the time and manner of such distribution and
distributions giving due regard to the interests of the Partners.
13.3 NO OBLIGATION TO CONTRIBUTE DEFICIT
If any Partner has a deficit balance in his Capital Account (after giving
effect to all contributions, distributions and allocations for all taxable
years, including the year during which such liquidation occurs), such Partner
shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever.
13.4 NOTICE OF DISSOLUTION
In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.
-51-
13.5 TERMINATION OF PARTNERSHIP AND CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
13.6 REASONABLE TIME FOR WINDING-UP
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.
13.7 WAIVER OF PARTITION
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
14.1 AMENDMENTS
(a) By the General Partner. The General Partner shall have the power,
without the consent of the Limited Partners, to amend this Agreement except as
set forth in Section 14.1(b) hereof. The General Partner shall provide notice to
the Limited Partners when any action under this Section 14.1(a) is taken in the
next regular communication to the Limited Partners. The Limited Partners shall
not have the power to amend this Agreement.
(b) Restrictions on General Partner's Ability to Amend this Agreement.
Notwithstanding Section 14.1(a) hereof, this Agreement shall not be amended with
respect to any Partner adversely affected without the Consent of such Partner
adversely affected if such amendment would:
(i) convert a Limited Partner's interest in the Partnership into a
General Partner Interest;
(ii) impose on the Limited Partners any obligation to make additional
Capital Contributions to the Partnership;
(iii) modify the limited liability of a Limited Partner in a manner
adverse to such Limited Partner; or
(iv) amend this Section 14.1(b).
14.2 MEETINGS OF THE PARTNERS
(a) General. Meetings of the Partners may be called by the General Partner
and shall be called upon the receipt by the General Partner of a written request
by Limited Partners holding
-52-
twenty-five percent (25%) or more of the Partnership Interests. The request
shall state the nature of the business to be transacted. Notice of any such
meeting shall be given to all Partners not less than seven (7) days nor more
than thirty (30) days prior to the date of such meeting. Partners may vote in
person or by proxy at such meeting.
(b) Vote Required. Whenever the vote or Consent of the Partners is
permitted or required under this Agreement, such vote or Consent may be given at
a meeting of the Partners or may be given in accordance with the procedure
prescribed in Section 14.2(c) hereof. Except as otherwise expressly provided in
this Agreement, the Consent of holders of Partnership Units that constitute more
than fifty percent (50%) of the aggregate number of outstanding Partnership
Units held by the Partners (including the General Partner) shall constitute the
consent of the Partners.
(c) Action Without a Meeting. Any action required or permitted to be taken
at a meeting of the Partners may be taken without a meeting if a written consent
setting forth the action so taken is signed by holders of Partnership Units that
constitute more than fifty percent (50%) (or such other percentage as is
expressly required by this Agreement) of the aggregate number of outstanding
Partnership Units held by the Partners (including the General Partner). Such
consent may be in one instrument or in several instruments, and shall have the
same force and effect as a vote the holders of Partnership Units that constitute
more than fifty percent (50%) (or such other percentage as is expressly required
by this Agreement) of the aggregate number of outstanding Partnership Units held
by the Partners (including the General Partner). Such consent shall be filed
with the General Partner. An action so taken shall be deemed to have been taken
at a meeting held on the effective date of the consent as certified by the
General Partner.
(d) Proxy. Each Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Partner is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Partner or his attorney-in-fact and a copy thereof
delivered to the Partnership. No proxy shall be valid after the expiration of
eleven (11) months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Partner executing it, such
revocation to be effective upon the General Partner's receipt of written notice
of such revocation from the Partner executing such proxy.
(e) Conduct of Meeting. Each meeting of the Partners shall be conducted by
the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner or
such other Person deems appropriate. Meetings of Partners may be conducted in
the same manner as meetings of the stockholders of the General Partner and may
be held at the same time, and as part of, meetings of the stockholders of the
General Partner.
ARTICLE 15
GENERAL PROVISIONS
15.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered if delivered in person, sent by first
class United States mail, by overnight delivery or via facsimile to the Partner
or Assignee at the address set forth in Exhibit A or such other address of which
the Partner shall notify the General Partner in writing. Notwithstanding the
-53-
foregoing, the General Partner may elect to deliver any such notice, demand,
request or report by e-mail or by any other electronic means, in which case such
communication shall be deemed given or made one day after being sent.
15.2 TITLES AND CAPTIONS
All article or section titles or captions in this Agreement are for
convenience of reference only, shall not be deemed part of this Agreement and
shall in no way define, limit, extend or describe the scope or intent of any
provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
15.3 PRONOUNS AND PLURALS
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
15.4 FURTHER ACTION
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
15.5 BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
15.6 CREDITORS
Other than as expressly set forth herein with respect to the Indemnitees,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
15.7 WAIVER
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
15.8 COUNTERPARTS
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all of the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto.
-54-
15.9 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of laws thereof.
15.10 INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
15.11 MERGER
Subject to Section 11.2, the Partnership may merge with, or consolidate
into, any Person or Entity in accordance with Section 17-211 of the Act.
15.12 NO RIGHTS AS STOCKHOLDERS
Nothing contained in this Agreement shall be construed as conferring upon
the holders of the Partnership Units any rights whatsoever as stockholders of
the General Partner, including, without limitation, any right to receive
dividends or other distributions made to such stockholders or to vote or to
consent or receive notice as stockholders in respect to any meeting or
stockholders for the election of directors of the General Partner or any other
matter.
15.13 ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
[SIGNATURE PAGE FOLLOWS]
-55-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amended and Restated Agreement of Limited Partnership as of the day and year
first-above written.
GENERAL PARTNER:
NNN Healthcare/Office REIT, Inc.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
LIMITED PARTNER:
NNN Healthcare/Office REIT Advisor, LLC
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
-56-
EXHIBIT A
PARTNERS' CONTRIBUTIONS AND PARTNERSHIP INTERESTS
NUMBER OF
CAPITAL PARTNERSHIP PERCENTAGE
NAME AND ADDRESS OF PARTNER TYPE OF INTEREST CONTRIBUTION UNITS INTEREST
--------------------------- ---------------------------- ------------ ----------- ----------
NNN Healthcare/Office REIT, Inc. General Partnership Interest $ 2,000 200 1.00%
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxx, XX 00000
Fax: (000) 000-0000
Attention: Chief Executive Officer
NNN Healthcare/Office REIT Advisor, LLC
c/o Triple Net Properties, LLC Limited Partnership Interest $200,000 20,000 99.00%
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
TOTAL $202,000 20,200 100.00%
-57-
EXHIBIT B
NOTICE OF REDEMPTION REQUEST
The undersigned Limited Partner hereby irrevocably (i) requests that NNN
Healthcare/Office REIT Holdings, L.P. (the "Partnership") redeem Partnership
Units in the Partnership held by such Limited Partner in accordance with the
terms of the Agreement of Limited Partnership of the Partnership, as such
agreement may be amended from time to time (the "Partnership Agreement") and the
Redemption Right referred to therein; (ii) agrees to surrender such Partnership
Units and all right, title, and interest therein promptly upon payment of the
Redemption Amount; (iii) directs that the Redemption Amount deliverable upon
exercise of the Redemption Right be delivered to such Limited Partner at the
address as specified in the Partnership Agreement; and (iv) directs that, if the
General Partner determines that the Redemption Amount shall be the REIT Stock
Amount, the REIT Stock be registered or placed in the name of such Limited
Partner and at such address specified in the Partnership Agreement. The
undersigned hereby represents, warrants, and certifies that the undersigned (a)
has not transferred or encumbered title to such Partnership Units; (b) has the
full right, power and authority to redeem and surrender such Partnership Units
as provided herein; and (c) has obtained the consent or approval of all Persons,
if any, having the right to consent or approve such redemption and surrender.
Dated:
-------------------------
[NAME OF LIMITED PARTNER]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-58-
