AGREEMENT OF LIMITED PARTNERSHIP
OF
PHILIPS INTERNATIONAL REALTY, L.P.
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS..............................................................................................2
ARTICLE 2 CONTINUATION OF THE PARTNERSHIP..........................................................................
2.1 Continuation................................................................................................
2.2 Entire Agreement............................................................................................
ARTICLE 3 NAME AND OFFICES.........................................................................................
3.1 Name........................................................................................................
3.2 Principal and Registered Offices............................................................................
ARTICLE 4 PURPOSE..................................................................................................
4.1 Purpose.....................................................................................................
4.2 Powers......................................................................................................
ARTICLE 5 TERM AND FISCAL YEAR.....................................................................................
5.1 Term........................................................................................................
5.2 Fiscal Year.................................................................................................
ARTICLE 6 CAPITAL CONTRIBUTIONS, ADDITIONAL FUNDING AND CAPITAL
ACCOUNTS...........................................................................................................
6.1 Capital Contributions of the General Partner................................................................
6.2 Capital Contributions of the Limited Partners...............................................................
6.3 General Partner Option to Contribute Additional Capital.....................................................
6.4 General Partner Option to Issue Additional Partnership Units to Limited Partners............................
6.5 Capital Accounts............................................................................................
6.6 Limited Liability...........................................................................................
6.7 Return of Capital...........................................................................................
6.8 No Interest on Capital Contributions........................................................................
6.9 No Third Party Beneficiary..................................................................................
6.10 Common Stock Option Plans..................................................................................
ARTICLE 7 ALLOCATION OF PROFITS AND LOSSES.........................................................................
7.1 General Allocation of Profits and Losses....................................................................
7.2 Allocations with Respect to Transferred Interests...........................................................
7.3 Regulatory Allocations......................................................................................
i
(a) Minimum Gain Chargeback................................................................................
(b) Exceptions to Section 7.3(a)...........................................................................
(c) Qualified Income Offset................................................................................
(d) Gross Income Allocation................................................................................
(e) Partner Nonrecourse Debt...............................................................................
(f) Interpretation.........................................................................................
(g) Curative Allocations...................................................................................
7.4 Special Allocations with Respect to Contributed or Revalued Property........................................
ARTICLE 8 DISTRIBUTIONS............................................................................................
8.1 Distribution of Net Cash Flow...............................................................................
8.2 Distributions in Kind.......................................................................................
8.3 Withholding.................................................................................................
ARTICLE 9 MANAGEMENT...............................................................................................
9.1 Management of Partnership Affairs...........................................................................
9.2 Powers and Authorities of the General Partner...............................................................
9.3 Major Decisions............................................................................................
9.4 Restrictions on General Partner's Authority.................................................................
9.5 Engagements by the Partnership..............................................................................
9.6 Engagement of Affiliates....................................................................................
9.7 Liability of the General Partner............................................................................
9.8 Reimbursement of Certain Expenses of the General Partner....................................................
9.9 Outside Activities of the General Partner...................................................................
9.10 Operation in Accordance with REIT Requirements.............................................................
9.11 Title Holder...............................................................................................
ARTICLE 10 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..............................................................
10.1 No Participation in Management of Partnership; Rights of Limited Partners to Certain
Documents...................................................................................................
10.2 Withdrawal, Retirement, Death, Incompetency, Insolvency or Dissolution of a Limited
Partner.....................................................................................................
10.3 Redemption Rights..........................................................................................
(a) Grant of Rights.........................................................................................
(b) Delivery of Exercise Notices............................................................................
(c) Assumption by General Partner...........................................................................
(d) Limitation on Exercise of Redemption Rights.............................................................
(e) Computation of Number of Exchange Shares and/or Cash To Be Paid.........................................
(f) Closing; Delivery of Election Notice....................................................................
(g) Closing Deliveries......................................................................................
(h) Term of Rights..........................................................................................
(i) Covenants of the General Partner........................................................................
ii
(j) Limited Partners' Covenant..............................................................................
ARTICLE 11 BANKING, RECORDS AND TAX MATTERS........................................................................
11.1 Partnership Funds..........................................................................................
11.2 Books and Records..........................................................................................
11.3 Financial Statements.......................................................................................
11.4 Tax Returns................................................................................................
11.5 Section 754 Matters........................................................................................
11.6 Tax Matter Partners........................................................................................
11.7 Other Reports..............................................................................................
ARTICLE 12 TRANSFER OF GENERAL PARTNER INTERESTS...................................................................
12.1 Transfer of Interest of the General Partner................................................................
12.2 Retirement of the General Partner..........................................................................
12.3 Transferee of the General Partner's Interest...............................................................
12.4 Retirement of Last Remaining General Partner...............................................................
12.5 Continuation of Partnership................................................................................
12.6 Merger or Consolidation of the General Partner.............................................................
ARTICLE 13 TRANSFER OF LIMITED PARTNER INTERESTS...................................................................
13.1 Transfer of Interest of a Limited Partner..................................................................
13.2 Assignee and Substitute Limited Partners...................................................................
13.3 Assignment.................................................................................................
13.4 Cost of Admission..........................................................................................
ARTICLE 14 DISSOLUTION AND LIQUIDATION OF PARTNERSHIP..............................................................
14.1 Dissolution of the Partnership.............................................................................
14.2 Winding Up of Affairs......................................................................................
14.3 Accounting.................................................................................................
14.4 Final Distribution of Partnership Property.................................................................
14.5 Certificate of Cancellation................................................................................
ARTICLE 15 POWER OF ATTORNEY.......................................................................................
15.1 Power of Attorney..........................................................................................
15.2 Grant of Authority Irrevocable.............................................................................
ARTICLE 16 AMENDMENT OF PARTNERSHIP AGREEMENT......................................................................
16.1 Amendments by Partners.....................................................................................
16.2 Amendment by the General Partner...........................................................................
iii
16.3 Amendment of Certificate...................................................................................
ARTICLE 17 INDEMNIFICATION.........................................................................................
17.1 Partnership Indemnification of Partner.....................................................................
17.2 Partner Indemnification of Partnership.....................................................................
ARTICLE 18 MISCELLANEOUS PROVISIONS................................................................................
18.1 Notices....................................................................................................
18.2 Severability...............................................................................................
18.3 Parties Bound..............................................................................................
18.4 Applicable Law.............................................................................................
18.5 Partition..................................................................................................
18.6 Computation of Accountants.................................................................................
18.7 Headings...................................................................................................
18.8 Counterparts...............................................................................................
iv
AGREEMENT OF LIMITED PARTNERSHIP
OF
PHILIPS INTERNATIONAL REALTY, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") of PHILIPS
INTERNATIONAL REALTY, L.P., a Delaware limited partnership (the "Partnership"),
is made and entered into as of the ___ day of ______, 1997, by and among PHILIPS
INTERNATIONAL REALTY CORP., a Maryland corporation, as general partner, PHILIPS
INTERNATIONAL REALTY, LLC, a Delaware limited liability company, as interim
managing general partner, and those parties who are designated as limited
partners on Exhibit A attached hereto and made a part hereof by this reference,
as limited partners.
R E C I T A L S:
WHEREAS, the parties hereto have determined that it is in the best
interests of the parties' long term strategic growth to combine their respective
properties and related assets pursuant to that certain Contribution and Exchange
Agreement, dated August ___, 1997 (the "Contribution and Exchange Agreement"),
among the Partnership, National Properties Investment Trust, a Massachusetts
business trust ("National"), Philips International Realty Corp. and the parties
designated as limited partners on Exhibit A attached hereto, whereby the
partners are contributing to the Partnership, directly or indirectly, all of the
partners' right, title and interest in and to their respective properties, on
the terms and conditions set forth therein;
WHEREAS, the Partnership was previously formed pursuant to that certain
Agreement of Limited Partnership, dated as of July 16, 1997 (the "Original
Agreement"), and that certain Certificate of Limited Partnership, dated as of
July 16, 1997, which was filed with the Secretary of State of Delaware on July
17, 1997;
WHEREAS, the parties hereto desire to continue the Partnership and
amend and restate the terms and provisions of the Original Agreement in its
entirety, all upon the terms and provisions, and subject to the conditions, set
forth herein;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, unless otherwise clearly indicated to the
contrary, the following terms have the meanings set forth below.
"Accountants" shall mean the firm or firms of independent certified
public accountants selected from time to time by the General Partner on behalf
of the Partnership to audit the books and records of the Partnership and to
prepare statements and reports in connection therewith.
"Act" shall mean the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time subsequent to the date hereof.
"Additional Partnership Units" shall have the definition assigned to
such term in Section 6.3 hereof.
"Additional Limited Partner" shall have the definition assigned to such
term in Section 6.4 hereof.
"Affiliate" shall mean, with respect to any Partner (or as to any other
Person the affiliates of whom are relevant for purposes of any of the provisions
of this Agreement), (i) any member of the Immediate Family of such Partner; (ii)
any trustee or beneficiary of a Partner; (iii) any legal representative,
successor or assignee of such Partner or any Person referred to in the preceding
clauses (i) and (ii); (iv) any trustee for the benefit of such Partner or any
Person referred to in the preceding clauses (i) through (iii); or (v) any Person
which directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such Partner or any Person
referred to in the preceding clauses (i) through (iv).
"Agreed Value" shall mean, with respect to any property contributed by
a Partner to the Partnership hereunder, an amount equal to (i) the Gross Asset
Value of the Capital Contribution
2
determined as of the date of such contribution, less (ii) the amount of any and
all liabilities securing such contributed property that the Partnership is
considered to assume or take subject to with respect to such property under Code
Section 752 or the Regulations promulgated thereunder.
"Board of Directors" shall mean the Board of Directors of the General
Partner.
"Capital Account" shall have the definition assigned to such term in
Section 6.5 hereof.
"Capital Contribution" shall mean, with respect to any Partner, the
amount of money and the Agreed Value of any property (other than money)
contributed to the Partnership with respect to the Partnership Interest held by
such Partner.
"Certificate" shall mean the Partnership's Certificate of Limited
Partnership, as amended from time to time in accordance with the terms hereof
and the Act.
"Closing Price" shall mean, on any date, with respect to a share of
Common Stock, the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
for one share of Common Stock in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common Stock is
not listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or if the Common Stock is not
listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System or, if such system is no
longer in use, the principal other automated quotations system that may then be
in use or, if the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock as such person is selected from
time to time by the Board of Directors.
3
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto.
"Common Stock" shall mean the shares of the common stock, par value
$.01 per share, of the General Partner.
"Contribution and Exchange Agreement" shall have the meaning assigned
to such term in the Recitals set forth above.
"Control" shall mean the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to select the managing
partner of a partnership, or otherwise to select, or have the power to remove
and then select, a majority of those persons exercising governing authority over
any particular entity. In the case of a limited partnership, the sole general
partner, all of the general partners to the extent each has equal management
control and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership and, in the
case of a trust, any trustee thereof or any Person having the right to select
any such trustee shall be deemed to have control of such trust.
"Current Per Share Market Price", on any date, shall mean the average
of the Closing Price for the five (5) consecutive Trading Days ending on such
date.
"Depreciation" shall mean, with respect to any asset of the Partnership
for any fiscal year or other period, the depreciation, depletion, amortization
or other cost recovery deduction, as the case may be, allowed or allowable for
Federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that if there is a difference between the Gross
Asset Value and the adjusted tax basis of such asset, Depreciation shall mean
"book depreciation, depletion or amortization" as determined under Section
1.704-1(b)(2)(iv)(g)(3) of the Regulations.
"Excess Deficit Capital Account Balance" of any Partner shall be the
Capital Account balance of such Partner, adjusted as provided in the immediately
following sentence, to the extent, if any, that such balance is a deficit (after
adjustment). For purposes of determining the existence and amount of an Excess
4
Deficit Capital Account Balance, the Capital Account balance of a Partner shall
be adjusted by: (i) crediting thereto (A) that portion of any deficit Capital
Account balance that such Partner is required to restore under the terms of this
Agreement or any other document, and (B) the amount of such Partner's share of
Minimum Gain, including any Partner Nonrecourse Debt Minimum Gain; and (ii)
charging thereto the items described in Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) that apply to such Partner. The existence
and amount of Excess Deficit Capital Account Balance at the end of any year
shall be determined before any other allocations provided for in Article 7 for
such year have been made.
"Exercise Notice" shall mean the written notice as described in Section
10.3(b) hereof to be given by an Exercising Partner to the General Partner to
exercise Redemption Rights, the form of which Exercise Notice is attached to the
Unit Certificate as Attachment 1.
"Exercising Partners" shall have the meaning set forth in Section
10.3(b) hereof.
"General Partner" shall mean Philips International Realty Corp., a
Maryland corporation, and any substitute or additional General Partner(s) duly
admitted pursuant to the terms of this Agreement, or, where the context so
requires, any successor General Partner(s) acting pursuant to the provisions of
this Agreement, or, where the context so requires, the Interim Managing General
Partner.
"Gross Asset Value" shall mean, with respect to any asset of the
Partnership, such asset's adjusted basis for Federal income tax purposes, except
as follows:
(a) The initial Gross Asset Value of any asset contributed by
a Partner shall be equal to the gross fair market value of such asset
without reduction for liabilities, as determined by the General
Partner, in its reasonable discretion (as set forth on Exhibit ___
attached hereto and as amended from time to time to reflect new
contributions); provided, however, that the Gross Asset Value of the
assets contributed by a Limited Partner concurrent with the Offering or
otherwise in exchange for Partnership Units shall be equal to the
product of (1) the number of Partnership Units received by such Limited
Partner
5
multiplied by (2) (i) the initial public offering price per share of
Common Stock in connection with the Offering, or (ii) the Current Per
Share Price (as determined on the dates specified in Article 6 of this
Agreement) in connection with Partnership Units issued subsequent to
the Offering, and increased, in both instances, by the amount of
liabilities assumed or taken subject to by the Partnership upon
contribution.
(b) If the General Partner reasonably determines that an
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners, the Gross Asset Values of all Partnership
assets shall be adjusted to equal their respective gross fair market
values, as reasonably determined by the General Partner, as of the
following times:
(i) a Capital Contribution (other than a de minimis
Capital Contribution) to the Partnership by a new or
existing Limited Partner as consideration for a
Partnership Interest;
(ii) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership money
or property as consideration for the redemption of a
Partnership Interest;
(iii) the liquidation of the Partnership within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations; and
(iv) any other time that such adjustment may be made
under the Code, the Regulations or any
administrative pronouncement or ruling by the IRS.
(c) The Gross Asset Value of any Partnership asset distributed
to a Partner shall be the gross fair market value of such asset as
reasonably determined by the General Partner as of the date of
distribution; and
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to
6
the adjusted basis of such assets pursuant to Sections 734(b) or 743(b)
of the Code, but only to the extent that such adjustments are taken
into account in determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross
Asset Values shall not be adjusted pursuant to this paragraph to the
extent that the General Partner reasonably determines that an
adjustment pursuant to paragraph (b) above is necessary or appropriate
in connection with a transaction that would otherwise result in an
adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Profits and Losses. Any adjustment to the Gross Asset Values of Partnership
property shall require an adjustment to the Partners' Capital Accounts; as for
the manner in which such adjustments are allocated to the Capital Accounts, see
clause (iii) of the definition of Profits and Losses in the case of adjustment
by Depreciation, and clause (iv) of said definition in all other cases.
"Immediate Family" shall mean, with respect to any individual Person,
such individual Person's spouse, parents, parents-in-law, descendants, nephews,
nieces, brothers, sisters, brothers-in-law, sisters-in-law and children-in-law.
"Indemnitee" means (i) the General Partner and the Interim Managing
General Partner (in their respective capacities as General Partner and Interim
Managing General Partner) and their respective Affiliates, trustees, officers,
directors, employees and agents, or their respective successors, executors,
administrators or personal representatives, or (ii) any Partner by reason of his
or its liabilities, pursuant to a loan guarantee or otherwise, for any
indebtedness of the Partnership or any Affiliate of the Partnership (including,
without limitation, any indebtedness which the Partnership or any Affiliate of
the Partnership has assumed or taken assets subject to).
"Interim Managing General Partner" shall mean Philips International
Realty, LLC, a Delaware limited liability company, and any substitute or
additional Interim Managing General Partner(s) duly admitted pursuant to the
terms of this Agreement and acting pursuant to Section 9.1(b) of this Agreement,
or, where the context so requires, any successor Interim Managing
7
General Partner(s), acting pursuant to the provisions of this Agreement.
"IRS" means the Internal Revenue Service, which administers the federal
tax laws of the United States.
"Limited Partners" shall mean any Person named as a Limited Partner on
the Exhibit A attached hereto as such Exhibit may be amended from time to time,
or any substituted Limited Partner or additional Limited Partner duly admitted
to the Partnership pursuant to the terms of this Agreement.
"Liquidation" shall mean the disposition of all or substantially all of
the assets of the Partnership pursuant to a complete liquidation of the
Partnership.
"Minimum Gain" shall have the meaning given such term in Treasury
Regulation Section 1.704-2(d), and shall generally mean the amount by which the
nonrecourse liabilities secured by any assets of the Partnership exceed the
adjusted tax basis of such assets as of the date of determination. A Partner's
share of Minimum Gain (and any net decrease thereof) at any time shall be
determined in accordance with Treasury Regulation Section 1.704-2(g).
"Net Cash Flow" shall mean, with respect to any fiscal period of the
Partnership, the excess, if any, of "Receipts" over "Expenditures." For purposes
hereof, the term "Receipts" means the sum of (i) all cash receipts of the
Partnership from all sources for such period, including Net Sale Proceeds and
Net Financing Proceeds but excluding Capital Contributions, and (ii) any amounts
held as reserves as of the last day of the period immediately prior to such
fiscal period that the General Partner deemed necessary for any capital or
operating expenditure permitted hereunder. The term "Expenditures" means the sum
of (a) all cash expenses of the Partnership for such period, (b) the amount of
all payments of principal and interest on account of any indebtedness of the
Partnership including payments of principal and interest on account of any
indebtedness owed to a Partner during such period, (c) any amounts held as
reserves as of the last day of such fiscal period as the General Partner in its
sole discretion deems necessary for any capital or operating expenditures
permitted hereunder or reserves for any other purpose that the General Partner
in its sole discretion shall determine to be appropriate and (d) any amounts
held in working
8
capital accounts or other cash or similar balances which the General Partner
determines to be necessary or appropriate in its sole discretion. In the event
the General Partner issues additional classes of Partnership Units other than OP
Units, the General Partner may, to the extent necessary, in its sole discretion,
determine the amount of Net Cash Flow attributable to each class of Partnership
Units and the timing of payment thereof.
"Net Financing Proceeds" shall mean the cash proceeds received by the
Partnership in connection with any borrowing or refinancing of borrowing by or
on behalf of the Partnership (whether or not secured), after deduction of all
costs and expenses incurred by the Partnership in connection with such
borrowing, and after deduction of that portion of such proceeds used to repay
any other indebtedness of the Partnership, or any interest or premium thereon.
"Net Sale Proceeds" means the cash proceeds received by the Partnership
in connection with a sale of any asset by or on behalf of the Partnership after
deduction of any costs or expenses incurred by the Partnership, or payable
specifically out of the proceeds of such sale (including, without limitation,
any repayment of any indebtedness required to be repaid as a result of such sale
or which the General Partner elects to repay out of the proceeds of such sale,
together with accrued interest and premium, if any, thereon and any sales
commissions or other costs and expenses due and payable to any Person in
connection with a sale, including to a Partner or its Affiliates).
"Offered Units" shall mean the Partnership Units of the Exercising
Partners identified in an Exercise Notice which, pursuant to the exercise of a
Redemption Right, can be acquired by the General Partner under the terms hereof.
"Offering" shall mean any public offering of the General Partner's
Common Stock under the Securities Act or private equity placement of securities
of the General Partner that occurs on or after the date hereof.
"OP Units" shall mean those Partnership Units issued pursuant to the
terms of the Contribution and Exchange Agreement and any additional OP Units
issued by the General Partner pursuant to Article 6 hereof.
9
"Organizational Limited Partner" shall mean the initial limited partner
of the Partnership.
"Original Agreement" shall have the meaning assigned to such term in
the Recitals set forth above.
"Partner or Partners" shall mean, unless the context in which the term
is used requires otherwise, the General Partner, the Interim Managing General
Partner and the Limited Partners.
"Partner Nonrecourse Debt" shall have the meaning assigned to such term
in Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning assigned
to such term in Regulation Section 1.704-2(i).
"Partnership" shall mean Philips International Realty, L.P., a Delaware
limited partnership.
"Partnership Agreement" shall mean this Agreement of Limited
Partnership and the Exhibits and Schedules hereto, and any amendments hereto
from time to time.
"Partnership Interest" shall mean the ownership interest of a Partner
in the Partnership from time to time, including such Partner's Percentage
Interest and Capital Account and any and all other benefits to which the holder
of such a Partnership Interest may be entitled as provided in this Agreement and
under applicable laws, together with all obligations of such Person to comply
with the terms and provisions of this Agreement.
"Partnership Unit" shall mean a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Article 6 hereof;
provided, however, that in the event the General Partner issues classes of
Partnership Units to Limited Partners other than the OP Units pursuant to
Section 6.4 hereof, the term Partnership Unit shall mean with respect to each
class of Partnership Units, a fractional, undivided share of the Partnership
Interests of all Partners in such class. Currently, each Partnership Unit may be
redeemed for one share of Common Stock. Accordingly, if the Common Stock of the
General Partner (or any other class of stock) undergoes any split or reverse
split, then, without any further action or consent by the General Partner or any
Limited Partner, each corresponding class of Partnership Unit that is
convertible into such stock shall
10
similarly be split or combined by the same ratio as was used to split or combine
the stock. For example if the Common Stock under a reverse 2 for 1 split (i.e.
every two shares of old Common Stock are converted into one share of new Common
Stock) then the corresponding class of Partnership Units shall undergo a similar
reverse split (i.e. every two old Partnership Units shall be converted into one
new Partnership Unit.
"Partnership Record Date" shall mean the record date established by the
General Partner for any particular distribution of Net Cash Flow pursuant to
Article 8 hereof, which record date shall be the same as the record date
established by the General Partner for distribution to its stockholders of some
or all of its portion of such distribution.
"Percentage Interest" shall mean, with respect to any Partner, its
interest in the Partnership as determined by dividing the Partnership Units
owned by such Partner by the total number of Partnership Units then issued and
outstanding; provided, however, that in the event the General Partner issues
classes of Partnership Units other than OP Units, the term Percentage Interest
shall mean with respect to any Partner, its interest in the Partnership as
determined by dividing the Partnership Units of each class owned by such Partner
by the total number of Partnership Units in such class then issued and
outstanding.
"Person" shall mean a natural person, corporation, trust, partnership,
estate, unincorporated association or other entity.
"Profits or Losses" shall mean, for each fiscal year or other
applicable period, an amount equal to the Partnership's net income or loss for
such year or period as determined for Federal income tax purposes by the
Accountants, determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included in taxable
income or loss), with the following adjustments: (i) by including as an item of
gross income any tax-exempt income received by the Partnership; (ii) by treating
as a deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (including amounts paid or incurred to organize the
Partnership (unless an election is made pursuant to Code Section 709(b)) or to
promote the sale of interests in the
11
Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or Section 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code); (iii) in lieu of depreciation, depletion,
amortization and other cost recovery deductions taken into account in computing
total income or loss, there shall be taken into account Depreciation; (iv) gain
or loss resulting from any disposition of Partnership property with respect to
which gain or loss is recognized for Federal income tax purposes shall be
computed by reference to the Gross Asset Value of such property rather than its
adjusted tax basis; and (v) in the event of an adjustment of the Gross Asset
Value of any Partnership asset which requires that the Capital Accounts of the
Partnership be adjusted pursuant to Regulation Section 1.704-1(b)(2)(iv)(e), (f)
and (m), the amount of such adjustment is to be taken into account as additional
Profits or Losses pursuant to Article 7.
"Properties" shall mean each of the following (i.e., those partnerships
or properties, as the case may be, in which, pursuant to the Contribution and
Exchange Agreement, the Partners are contributing to the Partnership, directly
or indirectly, all of their right, title and interest as partners in such
partnerships or owners of such properties, as the case may be): (i) Palm Springs
Mile Associates, Ltd., (ii) Forest Avenue Shopping Associates, (iii) Philips
Freeport Associates, L.P., (iv) Xxxxxxx Shopping Associates, (v) SP Avenue U
Associates, L.P., (vi) Foxborough Shopping, L.L.C., (vii) Enfield Shopping
L.L.C., (viii) Delran Shopping L.L.C., (ix) Branhaven Plaza LLC, and (x) The
Shoppes at Xxxx Xxxx (the "National Property").
"Redemption Rights" shall have the meaning set forth in Section 10.3(a)
hereof.
"Regulations" shall mean the Treasury regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 7.3(g) of
this Agreement.
"REIT" shall mean a real estate investment trust under Section 856 of
the Code.
12
"REIT Requirements" shall mean any and all requirements that must be
met to qualify as a REIT under the Code and the Regulations.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Surviving Partnership" shall have the meaning set forth in Section
12.6(b) hereof.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"Unit Certificate" shall have the meaning set forth in Section 6.2
hereof.
ARTICLE 2
CONTINUATION OF THE PARTNERSHIP
2.1 Continuation. The Partners hereby continue the Partnership as a
limited partnership formed under and pursuant to the terms and provisions of the
Act, and the rights and obligations of the Partners shall be as provided therein
except as otherwise expressly provided in this Agreement. The Partners agree to
execute such certificates or documents and do such filings and recordings and
all other acts, including the filing or recording of an amendment to the
Certificate and any assumed name certificates in the appropriate offices in the
State of Delaware and any other applicable jurisdictions as may be required to
comply with applicable law. The Partners agree that immediately after the
admission of one Limited Partner, the Organizational Limited Partner shall be
deemed to have withdrawn from the Partnership.
2.2 Entire Agreement. Each and every other agreement or understanding,
oral or written, relating in any way to the formation or operation of the
Partnership including, but not
13
limited to, the Original Agreement, is hereby superseded in its entirety. From
and after the execution of this Agreement, the same shall constitute the only
Agreement of Limited Partnership of the Partnership except as the same may
hereafter be amended pursuant to the provisions hereof. This Agreement
represents the entire agreement and understanding of the parties hereto
concerning the Partnership and their relationship as Partners, and all prior or
concurrent agreements, understandings, representations and warranties in regard
to the subject matter hereof including, but not limited to, the Original
Agreement, are and have been merged herein.
ARTICLE 3
NAME AND OFFICES
3.1 Name. The business of the Partnership shall be conducted under the
name of "Philips International Realty, L.P.", or such other name as the General
Partner may from time to time designate upon notice to the Limited Partners.
3.2 Principal and Registered Offices. The principal place of business
of the Partnership shall be located at c/o the General Partner at 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The registered agent of the Partnership shall
be [The Xxxxxxxx-Xxxx Corporation System, Inc.] The registered office of the
Partnership shall be [32 Xxxxxxxxxx Xxxxxx, Xxxxx X-000, Xxxxx, Xxxx Xxxxxx,
Xxxxxxxx 00000]. The General Partner may from time to time designate another
registered agent or another location for the registered office or principal
place of business of the Partnership upon notice to the other Partners. The
Partnership may maintain offices at such other place or places within or outside
the State of Delaware as the General Partner deems advisable.
ARTICLE 4
PURPOSE
4.1 Purpose. The purpose and nature of the business to be conducted by
the Partnership is (i) to conduct any business that may be lawfully conducted by
a limited partnership organized pursuant to the Act; provided, however, that
such business shall be limited to and conducted in such a manner as to permit
the General Partner at all times to be classified as a REIT for
14
federal income tax purposes, unless the General Partner has determined to cease
to qualify as a REIT, (ii) to enter into any partnership, joint venture or other
similar arrangements to engage in any of the foregoing or the ownership of
interests in any entity engaged in any of the foregoing and (iii) to do anything
necessary or incidental to the foregoing. In connection with the foregoing, and
without limiting the General Partner's right in its sole discretion to cease
qualifying as a REIT, the Partners acknowledge that the General Partner's status
as a REIT inures to the benefit of all of the Partners and not solely the
General Partner.
4.2 Powers. The Partnership is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Partnership; provided, that the
Partnership shall not take, or shall refrain from taking, any action which, in
the judgment of the General Partner, in its sole and absolute discretion, (i)
could adversely affect the ability of the General Partner to continue to qualify
as a REIT, (ii) could subject the General Partner to any additional taxes under
Section 857 or Section 4981 of the Code or any successor or newly enacted
provisions of the Code imposing other additional taxes or penalties on the
General Partner, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or its
securities, unless any such action (or inaction) under (i), (ii) or (iii) shall
have been specifically consented to by the General Partner in writing.
ARTICLE 5
TERM AND FISCAL YEAR
5.1 Term. The term of the Partnership commenced on July __, 1997, the
date the Certificate was filed in the appropriate offices in the State of
Delaware, and shall continue until terminated pursuant to the provisions of
Article 14 of this Agreement.
5.2 Fiscal Year. The first fiscal year of the Partnership shall
terminate on December 31, 1997, and succeeding fiscal years shall terminate on
December 31 of each year thereafter, or such other date as the Partnership shall
terminate as herein provided.
15
ARTICLE 6
CAPITAL CONTRIBUTIONS, ADDITIONAL FUNDING AND CAPITAL ACCOUNTS
6.1 Capital Contributions of the General Partner and the Interim
Managing General Partner.
(a) Initial Capital Contribution of the General Partner. Concurrent
with the execution of this Agreement, the General Partner, pursuant to the
Contribution and Exchange Agreement, shall contribute to the Partnership,
directly or indirectly, as its initial Capital Contribution, all of such General
Partner's right, title and interest in and to National Property. The General
Partner shall initially be issued and thereafter shall own Partnership Units in
the amount set forth opposite its name on Exhibit A, which number of Partnership
Units shall be adjusted on such Exhibit A from time to time by the General
Partner to the extent necessary to reflect accurately issuances, exchanges,
redemptions, Capital Contributions, or similar events having an effect on a
Partner's Partnership Units.
(b) Capital Contribution of the General Partner Upon Completion of an
Offering. Upon completion of any Offering, the General Partner shall contribute
the proceeds of the Offering to the Partnership, which proceeds will be net of
the underwriter's discount and other expenses, and the General Partner shall be
credited with having made a Capital Contribution to the Partnership in the
amount of the net proceeds of the Offering. The Partners hereby acknowledge and
agree that the aggregate number of additional Partnership Units to be issued to
the General Partner upon completion of any Offering shall be exactly equal to
the number of shares of Common Stock issued in the Offering. Upon any subsequent
sales of shares of Common Stock pursuant to the exercise of the over-allotment
option in connection with the Offering, the General Partner shall, subject to
and in accordance with the terms and conditions of this Section 6.1, contribute
the proceeds of such subsequent sale to the Partnership, and shall be issued
additional Partnership Units in an amount exactly equal to the number of shares
of Common Stock subsequently sold in connection with the Offering.
(c) Ownership Interest of the General Partner. The Partners acknowledge
and agree that the General Partner's ownership interest in the Partnership (and
therefore the number of Partnership Units owned by it) shall at all times be
equal to
16
the fraction the numerator of which is the number of issued and outstanding
shares of Common Stock of the General Partner (the "G.P. Shares") and the
denominator of which is the sum of the G.P. Shares plus the number of issued and
outstanding Partnership Units held by Partners other than the General Partner;
provided, however, that the foregoing shall only apply for so long as the only
class of Partnership Units is OP Units and the only equity securities of the
General Partner is Common Stock. If the Common Stock of the General Partner (or
any other class of stock) undergoes any split or reverse split, then, without
any further action or consent by the General Partner or any Limited Partner,
each corresponding class of Partnership Unit that is convertible into such stock
shall similarly be split or combined by the same ratio as was used to split or
combine the stock. For example if the Common Stock under a reverse 2 for 1 split
(i.e. every two shares of old Common Stock are converted into one share of new
Common Stock) then the corresponding class of Partnership Units shall undergo a
similar reverse split (i.e. every two old Partnership Units shall be converted
into one new Partnership Unit).
(d) Capital Contribution of the Interim Managing General Partner.
Concurrent with the execution of this Agreement, and subject to Section 9.1 (b)
hereof, the Interim Managing General Partner shall contribute to the Partnership
one dollar ($1.00) as its initial Capital Contribution. The Interim Managing
General Partner shall initially be issued and thereafter shall own one
Partnership Unit. Upon completion of the initial public Offering, the Interim
Managing General Partner shall automatically be entitled to a return of its
Capital Contribution, and shall automatically be deemed to have withdrawn from
the Partnership.
6.2 Capital Contributions of the Limited Partners. Concurrent with the
execution of this Agreement, each Limited Partner, pursuant to the Contribution
and Exchange Agreement, shall contribute to the Partnership, directly or
indirectly, as its initial Capital Contribution, all of such Limited Partner's
right, title and interest in and to the Properties. Each Limited Partner shall
initially be issued and thereafter shall own Partnership Units in the amount set
forth opposite such Limited Partner's name on Exhibit A, which number of
Partnership Units on such Exhibit A shall be adjusted from time to time by the
General Partner to the extent necessary to reflect accurately exchanges,
redemptions, Capital Contributions, capital stock changes of the General Partner
or similar events having an effect on such
17
Partner's Partnership Units. The Partnership Units issued to each Limited
Partner shall be evidenced by the issuance of a certificate (the "Unit
Certificate") in substantially the form of Exhibit B attached hereto, which Unit
Certificate shall bear the following legend:
"THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES
WITH THE PROVISIONS OF THE AGREEMENT OF LIMITED PARTNERSHIP OF PHILIPS
INTERNATIONAL REALTY, L.P., DATED AS OF ______, 1997 (A COPY OF WHICH IS ON FILE
WITH THE PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE
UNITS REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR (B) IF THE PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER. IN ADDITION, THE
UNITS ARE SUBJECT TO THE PROVISIONS OF SECTION 19.1 OF A CERTAIN CONTRIBUTION
AND EXCHANGE AGREEMENT DATED AS OF AUGUST 11, 1997 (A COPY OF WHICH IS ON FILE
WITH THE PARTNERSHIP)."
On the date of admission of one or more Limited Partners to the Partnership, the
Organizational Limited Partner shall be entitled to a return of its Capital
Contribution, and shall be deemed to have withdrawn from the Partnership.
6.3 General Partner Option to Contribute Additional Capital. If the
Partnership requires funds at any time or from time to time in excess of funds
available to the Partnership through borrowings and prior or additional Capital
Contributions, the General Partner may, but shall not be required to, borrow
such funds from a financial institution or other lender or through public debt
offerings and lend such funds to the Partnership on the same terms and
conditions as are applicable to the General Partner. If, notwithstanding the
foregoing, the Partnership requires funds for any proper Partnership purpose in
excess of any other funds anticipated by the General Partner to be available to
the Partnership (including through borrowings and prior Capital Contributions),
or if the General Partner concludes
18
that borrowings are inappropriate, the General Partner may, but shall not be
required to, raise such additional funds pursuant to the issuance of shares of
its Common Stock (or New Securities subject to Section 6.4(b))(any such issuance
which is made for the purpose of providing additional funds to the Partnership
shall be referred to herein as an "Additional Issuance"). In the event any such
Additional Issuance is consummated, then (i) the General Partner shall
contribute the net amount of cash raised pursuant to such Additional Issuance to
the capital of the Partnership and (ii) the Partnership shall issue additional
Partnership Units ("Additional Partnership Units") to the General Partner, on
the date upon which such funds are contributed to the Partnership, in an amount
equal to that number of Partnership Units which, if such Additional Partnership
Units were redeemed as of their date of issuance by the General Partner for
shares of Common Stock pursuant to Section 10.3 hereof, would result in the
General Partner receiving that number of shares of Common Stock equal to the
number of shares of Common Stock that were issued pursuant to such Additional
Issuance. In addition, in the event that the General Partner shall issue shares
of Common Stock (and/or pay cash out of the net proceeds of any Additional
Issuance) in connection with any subsequent merger, consolidation or other
acquisition, the General Partner shall contribute the shares of stock, assets
and/or other consideration received by the General Partner in connection
therewith to the capital of the Partnership in exchange for Additional
Partnership Units in an amount equal to that number of Partnership Units which,
if such Additional Partnership Units were redeemed as of their date of issuance
by the General Partner for shares of Common Stock pursuant to Section 10.3
hereof, would result in the General Partner receiving that number of shares of
Common Stock equal to the number of shares of Common Stock that were issued in
connection with such merger, consolidation or other acquisition and/or such
Additional Issuance. Notwithstanding the foregoing sentence, the General Partner
shall have the right, in its sole discretion, to treat a contribution to the
capital of the Partnership in a manner other than as described above if, upon
the advice of counsel to the General Partner and/or the Partnership, such
alternative treatment will provide a more favorable federal and/or state tax
consequence to the General Partner and/or the Partnership.
19
6.4 General Partner Option to Issue Additional Partnership Units to
Limited Partners.
(a) Issuance of Additional Partnership Units. At any time
after the date hereof without the consent of any Partner, but subject to the
provisions of Section 13.1 hereof, the General Partner may, upon its
determination, which shall be made in its sole and absolute discretion, that the
issuance of Additional Partnership Units to new or existing limited partners is
in the best commercial interests of the Partnership, cause the Partnership to
issue Additional Partnership Units to and admit as a limited partner in the
Partnership, any Person (an "Additional Limited Partner" herein) in exchange for
the contribution by such Person of cash and/or property desirable to further the
purposes of the Partnership under Article 4 hereof. In the event that Additional
Partnership Units are issued by the Partnership pursuant to this Section 6.4,
the amount of such Partnership Units issued to each Additional Limited Partner
shall, unless otherwise determined by the General Partner in the exercise of its
sole discretion but subject to its fiduciary duty to all Limited Partners (i) be
fixed by agreement between the General Partner and such Additional Limited
Partner in the General Partner's sole discretion or (ii) be equal to that number
of Partnership Units which, if such Additional Partnership Units were redeemed
as of their date of issuance by such Additional Limited Partner pursuant to
Section 10.3 hereof, would result in such Additional Limited Partner receiving
that number of shares of Common Stock equal to (x) the Agreed Value of any
property (as determined by the General Partner, in its sole and absolute
discretion), plus the amount of any cash contributed by the Additional Limited
Partner, as of the date of contribution to the Partnership divided by (y) the
Current Per Share Market Price (computed as of the Trading Day immediately
preceding the date of contribution to the Partnership or such other date or
average of Trading Days as the General Partner may agree with such Additional
Limited Partner in the exercise of its sole discretion). In addition, the
General Partner is hereby authorized to cause the Partnership from time to time
to issue to the Partners (including the General Partner) or other Persons
additional Partnership Units or such other Partnership Interests in one or more
classes, or one or more series of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights, powers and duties which may be senior, pari
passu or
20
junior to OP Units, all as shall be determined by the General Partner in its
sole and absolute discretion subject to Delaware law, including, without
limitation, (i) the allocations of items of Partnership income, gain, loss,
deduction and credit to each such class or series of Partnership Interests; (ii)
the right of each such class or series of Partnership Interests to share in
Partnership distributions; and (iii) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the Partnership;
provided that no such additional Partnership Units or other Partnership
Interests shall be issued to the General Partner unless either (A)(1) the
additional Partnership Interests are issued in connection with the issuance of
shares of Common Stock or other shares by the General Partner, which shares have
designations, preferences and other rights such that the economic interests
attributed to such shares are substantially similar to the designations,
preferences and other rights of the additional Partnership Interests issued to
the General Partner in accordance with this Section 6.4, and (2) the General
Partner shall make a Capital Contribution to the Partnership in an amount equal
to the proceeds raised in connection with the issuance of such shares of the
General Partner, or (B) the additional Partnership Units are issued to all the
Partners in proportion to their respective Percentage Interests. Any Additional
Limited Partner shall be issued a Unit Certificate representing the amount of
Partnership Units issued to such Additional Limited Partner and, in the event
the General Partner issues Partnership Units other than OP Units, indicating the
class, terms, preferences and other restrictions or rights of such Partnership
Unit. The General Partner shall be authorized on behalf of each of the Partners
to amend this Agreement to reflect the issuance of Additional Partnership Units
(including, without limitation, the issuance of new classes of Partnership
Units) and/or the admission of any Additional Limited Partner(s) in accordance
with the provisions of this Section 6.4, and the General Partner shall promptly
deliver a copy of such amendment (which, in the event that new classes of
Partnership Units are issued, shall contain the terms of such new classes of
Partnership Units) to each Limited Partner. Without limiting the foregoing, the
General Partner is expressly authorized to cause the Partnership to issue
Partnership Units for less than fair market value, so long as the General
Partner concludes in good faith that such issuance is in the interest of the
General Partner and the Partnership (for example, and not by way of limitation,
the issuance of Partnership Units pursuant to an employee purchase plan
providing for employee purchases of
21
Partnership Units at a discount from fair market value or employee options that
have an exercise price that is less than the fair market value of the
Partnership Units, either at the time of issuance or at the time of exercise).
(b) Adjustments to Partnership Units. If the Common Stock (or
any other class of stock of the General Partner for which a class of Partnership
Units may be redeemed) undergoes any split or reverse split, then without
further action or consent by the General Partner or any Limited Partner, each
corresponding class of Partnership Units that is redeemable for such stock shall
be split or combined in accordance with the same ratio used to split or combine
the stock. For example, if the Common Stock undergoes a reverse 2 for 1 split
(i.e., every two shares of old Common Stock are converted into one share of new
Common Stock) then the corresponding class of Partnership Units that are
redeemable for such Common Stock shall undergo a similar reverse split (i.e.,
every two old OP Units shall be converted into one new OP Unit). Similarly, if
any class of Partnership Units into which another class of Partnership Units is
convertible undergoes any split or reverse split, then without further action or
consent by the General Partner or any Limited Partner, the latter class of
Partnership Units shall be split or combined in accordance with the same ratio
used to split or combine the first class of Partnership Units.
(c) Fractional Units. The General Partner shall have the right
to issue fractional Partnership Units upon the conversion or exchange of one
class of Partnership Units for a second class of Partnership Units; provided,
however, that in accordance with Section 10.3(e) hereof no fractional shares of
Common Stock of the General Partner shall be issued upon the redemption of any
class of Partnership Units for Common Stock.
(d) Issuance of New Securities. Following completion of any
Offering, the General Partner shall not issue any additional shares of Common
Stock (other than shares of Common Stock issued pursuant to Section 10.3
hereof), or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of capital stock
(collectively, "New Securities"), other than to all holders of shares of Common
Stock, unless (i) the General Partner shall cause the Partnership to issue to
the General Partner Partnership Interests or rights, options, warrants or
convertible or exchangeable securities of the Partnership having
22
designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the New Securities, and (ii) the General
Partner contributes to the Partnership the proceeds from the issuance of such
New Securities and from the exercise of rights contained in such New Securities.
Without limiting the foregoing, the General Partner is expressly authorized to
issue New Securities for less than fair market value, and the General Partner is
expressly authorized to cause the Partnership to issue to the General Partner
corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such issuance is in the interest of the General
Partner and the Partnership (for example, and not by way of limitation, the
issuance of shares of Common Stock and corresponding Units pursuant to an
employee stock purchase plan providing for employee purchases of shares of
Common Stock at a discount from fair market value or employee stock options that
have an exercise price that is less than the fair market value of the shares of
Common Stock, either at the time of issuance or at the time of exercise), and
(y) the General Partner contributes all proceeds from such issuance and exercise
to the Partnership.
6.5 Capital Accounts. A separate capital account (a "Capital Account")
shall be maintained for each Partner in accordance with the Code and the
Regulations promulgated thereunder including, but not limited to, the rules
regarding the maintenance of partners' Capital Accounts set forth in Regulation
Section 1.704-1. Subject to the immediately preceding sentence, there shall be
credited to each Partner's Capital Account: (i) the amount of money contributed
by the Partner to the Partnership (subject, however, in the case of a Capital
Contribution by the General Partner upon completion of any Offering or upon
Additional Issuances (as defined in Section 6.3 above) of Common Stock, pursuant
to the provisions of Sections 6.1(b) and 6.3 hereof, the net amount of Offering
proceeds contributed to the Partnership), (ii) the Agreed Value of any property
contributed by the Partner to the Partnership, (iii) the amount of any
Partnership liabilities assumed by such Partner (other than liabilities secured
by property distributed to such Partner that such Partner is considered to have
assumed or taken subject to under Section 752 of the Code), and (iv) the
Partner's share of income or gain (or items thereof), including income and gain
exempt from tax. There shall be charged against each Partner's Capital Account:
(w) the amount of money distributed to the Partner by the Partnership, (x) the
Agreed Value of any property distributed to the Partner by the Partnership, (y)
the amount of
23
any liabilities of such Partner assumed by the Partnership (other than
liabilities secured by property contributed to the Partnership by such Partner
that the Partnership is considered to have assumed or taken subject to pursuant
to Section 752 of the Code) and (z) the Partner's share of loss and deduction
(or items thereof). To the extent a Partner's Capital Account is greater than
zero, such excess is hereinafter referred to as a "positive balance". To the
extent a Partner's Capital Account is less than zero, said amount is hereinafter
referred to as a "deficit balance".
6.6 Limited Liability. Notwithstanding anything in this Agreement to
the contrary, the personal liability of a Limited Partner arising out of or in
any manner relating to the Partnership shall be limited to and shall not exceed
such Limited Partner's Capital Contribution made or required to be made pursuant
to this Agreement plus the amount of any deficit balances in its Capital Account
such Limited Partner is obligated to restore pursuant to the provisions of
Section 7.3 hereof. No Limited Partner shall have any personal liability for
liabilities or obligations of the Partnership, except to the extent of its
Capital Contribution, as aforesaid or as specifically provided in Section 7.3.
6.7 Return of Capital. Except as otherwise provided herein, (i) no
Partner shall be required to make any further or additional contributions to the
capital of the Partnership or to lend or advance funds to the Partnership for
any purpose and (ii) no Partner shall be entitled to the return of its capital,
except to the extent, if any, that distributions are made or deemed to be made
to such Partner otherwise than out of Profits pursuant to this Agreement.
6.8 No Interest on Capital Contributions. No interest or additional
share of Profits shall be paid or credited to the Partners on their Capital
Accounts, or on any undistributed Profits or funds left on deposit with the
Partnership; provided, however, that nothing contained herein shall be construed
to prevent or prohibit the payment of interest on account of loans made by the
Partners to the Partnership. Any loans made to the Partnership by a Partner
shall not increase its Capital Contribution or interest in the Profits, Losses
or Net Cash Flow of the Partnership, but shall be a debt due from the
Partnership and repaid accordingly.
24
6.9 No Third Party Beneficiary. No creditor or other third party having
dealings with the Partnership shall have the right to enforce the right or
obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed among the parties hereto that the provisions of this Agreement shall
be solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns. None of the rights or obligations
of the Partners herein set forth to make Capital Contributions or loans to the
Partnership shall be deemed an asset of the Partnership for any purpose by any
creditor or other third party, nor may such rights or obligations be sold,
transferred or assigned by the Partnership or pledged or encumbered by the
Partnership to secure any debt or other obligation of the Partnership or of any
of the Partners.
6.10 Common Stock Option Plans. The Partners hereby acknowledge that
prior to the date hereof the General Partner has adopted, and the Partners
hereby acknowledge and agree that from and after the date hereof the General
Partner may adopt, without the consent of any Limited Partner, one or more stock
option or incentive plans ("Stock Plans") pursuant to which officers, directors,
trustees, employees and/or consultants of the General Partner, the Partnership
or any Affiliate of either of them may acquire shares of Common Stock. On each
date on which the General Partner issues any shares of Common Stock to a person
pursuant to a Stock Plan (i) the consideration paid for each such share of
Common Stock shall, as soon as received by the General Partner, be contributed
to the capital of the Partnership and (ii) the General Partner shall be issued
Partnership Units in an amount equal to that number of Partnership Units which,
if such Partnership Units were redeemed as of their date of issuance by the
General Partner for shares of Common Stock pursuant to Section 10.3 hereof,
would result in the General Partner receiving that number of shares of Common
Stock which are being issued to any such person pursuant to the Stock Plan. For
purposes of this Section 6.10 only, shares of Common Stock issued subject to
forfeiture or other similar restrictions shall be deemed issued upon the lapse
of such restrictions. Notwithstanding anything herein to the contrary, the mere
grant of options to purchase shares of Common Stock pursuant to any Stock Plan
shall not constitute the grant or issuance of shares of Common Stock for
purposes of this Section 6.10.
25
ARTICLE 7
ALLOCATION OF PROFITS AND LOSSES
7.1 General Allocation of Profits and Losses. Except as otherwise
provided in this Article 7, after giving effect to any and all allocations set
forth in Section 7.4 below, all Profits and Losses of the Partnership (including
all items of income and expense entering into the determination of such Profits
and Losses), as finally determined for Federal income tax purposes for each
fiscal year of the Partnership, shall be allocated to and among the Partners in
accordance with their respective Percentage Interests.
7.2 Allocations with Respect to Transferred Interests. Unless otherwise
required by the Code and/or the Regulations or as determined by the General
Partner, in its sole and absolute discretion, any Profits or Losses allocable to
an additional Partnership Interest issued during any year or any fiscal quarter
or to a Partnership Interest which has been transferred during any year shall be
allocated among the Persons who were holders of such Partnership Interest during
such year in the manner described in Section 13.3(c) below.
7.3 Deficit Restoration Obligation. In the event that any Limited
Partner hereto enters into a "deficit restoration obligation" to the Partnership
pursuant to this Section 7.3, and such Limited Partner has a deficit balance in
its Capital Account following the liquidation of its interest in the
Partnership, as determined after taking into account all Capital Account
adjustments for the Partnership's taxable year during which the liquidation
occurs, such Limited Partner shall be unconditionally obligated to restore the
amount of such deficit balance to the Partnership by the later of (i) the end of
such taxable year, or (ii) 90 days after the date of the liquidation of the
Limited Partner's interest in the Partnership, which amount shall, upon
liquidation of the Partnership, be paid to creditors of the Partnership or
distributed to other Partners in accordance with their positive Capital Account
balances. For purposes hereof, a "deficit restoration obligation" shall mean an
unconditional agreement by a Limited Partner to restore a deficit balance in its
Capital Account (which may be limited in amount) in the form thereof used by the
Partnership. Any Limited Partner may, but is not obligated to, enter into such
an agreement at any time during the term hereof but not more often than
annually.
26
7.4 Regulatory Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement (except as provided in Section 7.4(b) below), if
there is a net decrease in Minimum Gain for a Partnership taxable year, each
Partner shall be allocated, before any other allocation of Partnership items for
such taxable year, items of income and gain for such year (and, if necessary,
for subsequent years) in proportion to, and to the extent of, the amount of such
Partner's share of the net decrease in Minimum Gain during such year. The income
allocated pursuant to this Section 7.4(a) in any taxable year shall consist
first of gains recognized from the disposition of property subject to one or
more nonrecourse liabilities of the Partnership, and any remainder shall consist
of a pro rata portion of other items of income or gain of the Partnership.
(b) Exceptions to Section 7.4(a). The allocation otherwise
required pursuant to Section 7.4(a) shall not apply to a Partner to the extent
that: (a) such Partner's share of the net decrease in Minimum Gain is caused by
a guarantee, refinancing or other change in the instrument evidencing a
nonrecourse debt of the Partnership which causes such debt to become a partially
or wholly recourse debt or a Partner Nonrecourse Debt, and such Partner bears
the economic risk of loss (within the meaning of Treasury Regulation Section
1.752-2) for such changed debt; (b) such Partner's share of the net decrease in
Minimum Gain results from the repayment of a nonrecourse liability of the
Partnership, which repayment is made using funds contributed by such Partner to
the capital of the Partnership; (iii) the IRS, pursuant to Treasury Regulation
Section 1.704-2(f)(4), waives the requirement of such allocation in response to
a request for such waiver made by the General Partner on behalf of the
Partnership (which request the General Partner may or may not make, in its sole
discretion, if it determines that the Partnership would be eligible therefor);
or (iv) additional exceptions to the requirement of such allocation are
established by revenue rulings issued by the IRS pursuant to Treasury Regulation
Section 1.704-2(f)(5), which exceptions apply to such Partner, as determined by
the General Partner in its sole discretion.
(c) Qualified Income Offset. Notwithstanding any other
provision of this Agreement, if a Partner unexpectedly receives an adjustment,
allocation or distribution described in Regulation
27
Section 1.704-1(b)(2)(ii)(d)(4),(5) or (6) that causes or increases an Excess
Deficit Capital Account Balance with respect to such Partner, items of
Partnership gross income and gain shall be specially allocated to such Partner
in an amount and manner sufficient to eliminate such Excess Deficit Capital
Account Balance as quickly as possible.
(d) Gross Income Allocation. If at the end of any Partnership
taxable year, a Partner has an Excess Deficit Capital Account Balance, such
Partner shall be specially allocated items of Partnership gross income or gain
in an amount and manner sufficient to eliminate such Excess Deficit Capital
Account Balance as quickly as possible, until all Excess Deficit Capital Account
Balances have been eliminated. To the extent that any class of Partnership Units
that are convertible into OP Units has received distributions at the end of any
Partnership taxable year (including any prior taxable year) in excess of the
amounts such class of Partnership Units would have received during such taxable
year or years if all of the Partnership Units of such class had been converted
into OP Units (such excess being referred to hereinafter as "Excess Amounts"),
such items of gross income or gain shall then be allocated proportionately to
and among the holders of such class Partnership Units until such holders have
been allocated an amount equal to all Excess Amounts.
(e) Partner Nonrecourse Debt. Notwithstanding any other
provision of this Agreement, any item of Partnership Loss, deduction or
expenditures described in Code Section 705(a)(2)(B) that is attributable to a
Partner Nonrecourse Debt shall be allocated to those Partners that bear the
economic risk of loss for such Partner Nonrecourse Debt, and among such Partners
in accordance with the ratios in which they share such economic risk, determined
in accordance with Treasury Regulation Section 1.704-2(i). If there is a net
decrease for a Partnership taxable year in any Partner Nonrecourse Debt Minimum
Gain of the Partnership, each Partner with a share of such Partner Nonrecourse
Debt Minimum Gain as of the beginning of such year shall be allocated items of
gross income and gain in the manner and to the extent provided in Treasury
Regulation Section 1.704-2(i)(4).
(f) Interpretation. The foregoing provisions of this Section
7.4 are intended to comply with Treasury Regulation Sections 1.704-1(b) and
1.704-2 and shall be interpreted
28
consistently with this intention. Any terms used in such provisions that are not
specifically defined in this Agreement shall have the meaning, if any, given
such terms in the Regulations cited above.
(g) Curative Allocations. If any allocation of gain, income,
loss, expense or any other item is made pursuant to Section 7.4(a), 7.4(c),
7.4(d) or 7.4(e) of this Agreement (the "Regulatory Allocations") with respect
to one or more Partners (the "Deficit Partners"), then the balance of such items
for the current and all subsequent fiscal years shall be allocated among the
Partners other than the Deficit Partners as if such items were allocated among
all the Partners (including the Deficit Partners) without regard to this Section
7.3, until the amount of such items that would have been allocated to the
Deficit Partners but for the Regulatory Allocations equal the amount allocated
to the Deficit Partners pursuant to the Regulatory Allocations.
7.5 Special Allocations with Respect to Contributed or Revalued
Property. Notwithstanding anything contained herein to the contrary, taxable
income, gain, loss and deduction with respect to any Partnership property that
is contributed to the Partnership by a Partner shall be shared among the
Partners for income tax purposes pursuant to Regulations promulgated under
Section 704(c) of the Code, so as to take into account the variation, if any,
between the adjusted tax basis of the property to the Partnership and its
initial Gross Asset Value. With respect to Partnership property that is
initially contributed to the Partnership upon its formation, such variation
between the adjusted tax basis and initial Gross Asset Value shall be taken into
account under the "traditional method" as described in Treasury Regulation
Section 1.704-3(b), unless otherwise determined by the General Partner and the
contributing Partner. With respect to properties subsequently contributed to the
Partnership, the Partnership shall account for such variation under any method
approved under Section 704(c) of the Code and the applicable regulations as
chosen by the General Partner. In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to subparagraph (b) of the definition of
Gross Asset Value (as provided in Article 1 of this Agreement), subsequent
allocations of tax items with respect to such asset shall take account of the
variation, if any, between the adjusted tax basis of such asset and its Gross
Asset Value in the same manner as under Section 704(c) of the Code and the
applicable regulations.
29
7.6 Allocations with Respect to Partnership Units other than OP Units.
In the event the General Partner issues additional classes of Partnership Units
other than OP Units, then the General Partner shall determine, in its sole
discretion, the Profits and Losses attributable to each class and shall allocate
to Profits and Losses of each class of Partnership Units among the Partners in
such class in proportion to their respective Percentage Interests in such class,
after giving effect to any and all special allocations set forth in Section 7.4
above.
ARTICLE 8
DISTRIBUTIONS
8.1 Distribution of Net Cash Flow. Net Cash Flow of the Partnership, if
any, shall be distributed to and among the Partners as follows:
(a) If such Net Cash Flow has not arisen pursuant to a
Liquidation of the Partnership, such Net Cash Flow shall be distributed to and
among the Partners in accordance with their respective Percentage Interests; or
(b) If such Net Cash Flow has arisen pursuant to a Liquidation
of the Partnership, such Net Cash Flow shall be distributed to and among the
Partners having positive balances in their Capital Accounts (after taking into
account any and all Capital Account adjustments for the Partnership taxable year
during which the Liquidation occurs), in proportion to and to the extent of such
positive balances.
Net Cash Flow shall be distributed to the Partners in such amounts and at such
intervals as the General Partner, in its sole discretion, may determine, but no
less frequently than quarterly. With respect to each and every distribution of
Net Cash Flow to the Partners hereunder, the General Partner shall distribute
such Net Cash Flow only to those Partners who are Partners on the Partnership
Record Date and whose Partnership Units were outstanding during the period to
which such distribution relates and, with respect to those Partners who were
issued additional Partnership Units during such period, the General Partner
shall distribute Net Cash Flow (i) on a pro-rated basis based upon the number of
days during such period that such Partners held such additional Partnership
Units or (ii) on such other reasonable basis as determined by the General
Partner in its sole discre-
30
tion; provided, however, in no event may a Partner receive a distribution of Net
Cash Flow with respect to any particular Partnership Unit if such Partner is
entitled to receive a distribution out of such Net Cash Flow with respect to one
or more shares of Common Stock for which such Partnership Unit has been
redeemed. Notwithstanding the foregoing, the General Partner shall take such
reasonable efforts, as determined by it in its sole and absolute discretion and
consistent with its qualification as a REIT, to cause the Partnership to
distribute sufficient amounts to enable the General Partner to pay stockholder
dividends that will (i) satisfy the REIT Requirements and (ii) avoid any federal
income or excise tax liability of the General Partner.
8.2 Distributions in Kind. No right is given to any Partner to demand
and receive property or cash. The General Partner may determine, in its sole and
absolute discretion, to make a distribution in kind to the Partners of
Partnership assets, and such assets shall be distributed in such a fashion as to
ensure that the fair market value of such assets is distributed and allocated in
accordance with Section 8.1 hereof.
8.3 Withholding. Each Limited Partner hereby authorizes the Partnership
to withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local or foreign taxes that the General Partner
determines or reasonably believes that the Partnership is required to withhold
or pay with respect to any amount distributable or allocable to such Limited
Partner pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Partnership pursuant to Code Sections
1441, 1442, 1445 or 1446. Any and all amounts withheld pursuant to this Section
8.3 with respect to any allocation, payment or distribution to any Partner
hereunder shall be treated as amounts distributed to such Partner pursuant to
Section 8.1 hereof for all purposes under this Agreement. If any amount is
withheld by the Partnership pursuant to this Section 8.3 with respect to a
particular Partner and such amount would not have been distributed to such
Partner pursuant to Section 8.1 hereof at any time on or before the date it is
withheld, then such Partner shall contribute to the capital of the Partnership
an amount equal to the amount so withheld as soon as practicable after the
delivery by the General Partner to such Partner of a notice requesting such
contribution to the Partnership. The General Partner, on behalf of the
Partnership, shall have the right to offset any obligation of a Partner to
31
contribute additional funds to the Partnership pursuant to the immediately
preceding sentence of this Section 8.3 against any future distributions due to
such Partner under Section 8.1 hereof.
8.4 Distributions with Respect to Partnership Units other than OP
Units. Notwithstanding the foregoing provisions of this Article 8, in the event
the General Partner issues additional classes of Partnership Units other than OP
Units to Limited Partners, then the General Partner shall determine, in its sole
discretion, the amount of distributions of Net Cash Flow attributable to each
class and shall distribute such Net Cash Flow to each class of Partnership Units
among the Partners in such class in proportion to their respective Percentage
Interests in such class or otherwise required pursuant to the terms of such
Partner's Unit Certificates.
ARTICLE 9
MANAGEMENT
9.1 Management of Partnership Affairs.
(a) General Partner. Except as otherwise specifically provided
in this Agreement, and subject to Section 9.1(b) below, the General Partner
shall have full, exclusive and complete responsibility and discretion in the
management and control of the business and affairs of the Partnership and shall
make all decisions affecting the Partnership's business and affairs. Subject to
the foregoing, the General Partner shall have all the rights, powers and
obligations of a general partner as provided in the Act, and, except as
otherwise provided, any action taken by the General Partner (in its capacity as
such) shall constitute the act of and serve to legally bind the Partnership.
Persons dealing with the Partnership shall be entitled to rely conclusively on
the power and authority of the General Partner as set forth in this Agreement.
(b) Interim Managing General Partner. From the date hereof
until consummation of Offerings aggregating gross proceeds to the General
Partner of at least $25 million, the Interim Managing General Partner shall,
subject to the rights accorded the Limited Partners hereunder and under the Act
and subject to the prior consent of the General Partner with respect to
transactions with Affiliates of the Interim Managing General
32
Partner, have full, exclusive and complete responsibility and discretion in the
management and control of the business and affairs of the Partnership and shall
make all decisions affecting the Partnership's business and affairs to the
extent otherwise granted to the General Partner hereunder, and the General
Partner shall have no such rights. Subject to the foregoing, the Interim
Managing General Partner shall have all the rights, powers and obligations of a
general partner as provided in the Act, and, except as otherwise provided, any
action taken by the Interim Managing General Partner (in its capacity as such)
shall constitute the act of and serve to legally bind the Partnership. Persons
dealing with the Partnership shall be entitled to rely conclusively on the power
and authority of the Interim Managing General Partner as set forth in this
Agreement. The Partners agree that immediately upon consummation of Offerings
aggregating gross proceeds to the General Partner of at least $25 million, the
Interim Managing General Partner shall automatically be deemed to have withdrawn
from the Partnership, and the General Partner shall be entitled to exercise in
full the rights and responsibilities hereunder accorded to the General Partner
that it would have received but for the rights accorded the Interim Managing
General Partner under this Section 9.1(b). Until consummation of Offerings
aggregating gross proceeds to the General Partner of at least $25 million,
references to the General Partner in this Agreement shall be deemed to be
references to the Interim Managing General Partner, unless otherwise required by
the context thereof; provided, however, that references to the General Partner
herein, including, without limitation, those set forth in Articles 6, 7 and 8
and Section 10.3 hereof, shall always refer with respect to economic issues (as
opposed to management issues) to the General Partner.
9.2 Powers and Authorities of the General Partner. Except as otherwise
specifically provided in this Agreement, and subject to Sections 9.1(b) and 9.3
hereof, the General Partner is hereby granted the right, power and authority to
do on behalf of the Partnership all things which, in its best business judgment,
are necessary, proper or desirable to carry out its duties and responsibilities,
including but not limited to, the right, power and authority:
(a) To manage, control, invest, reinvest, acquire by purchase,
lease or otherwise, develop, expand, sell, contract to purchase or sell, grant,
obtain or exercise options to purchase, options to sell or conversion rights,
assign, transfer, convey,
33
deliver, endorse, exchange, pledge, mortgage, abandon, improve, repair,
maintain, insure, lease for any term and otherwise deal with any and all
property of whatsoever kind and nature, and wheresoever situated, in furtherance
of the purposes of the Partnership;
(b) To acquire, directly or indirectly, interests in real
estate of any kind and of any type, and any and all kinds of interests therein,
and to determine the manner in which title thereto is to be held; to manage,
insure against loss, protect and subdivide any of the real estate, interests
therein or parts thereof; to improve, develop or redevelop and expand any such
real estate; to participate in the ownership and development of any property; to
dedicate for public use, to vacate any subdivisions or parts thereof, to
resubdivide, to contract to sell, to grant options to purchase or lease, to sell
on any terms; to convey, to mortgage, pledge or otherwise encumber said
property, or any part thereof; to lease said property or any part thereof from
time to time, upon any terms and for any period of time, and to renew or extend
leases, to amend, change or modify the terms and provisions of any leases and to
grant options to lease and options to renew leases and options to purchase; to
partition or to exchange said real property, or any part thereof, for other real
or personal property; to grant easements or charges of any kind; to release,
convey or assign any right, title or interest in or about or easement
appurtenant to said property or any part thereof; to construct and reconstruct,
remodel, alter, repair, add to or take from buildings on said premises; to
insure any Person having an interest in or responsibility for the care,
management or repair of such property; to direct the trustee of any land trust
to mortgage, lease, convey or contract to convey the real estate held in such
land trust or to execute and deliver deeds, mortgages, notes, and any and all
documents pertaining to the property subject to such land trust or in any matter
regarding such trust; to execute assignments of all or any part of the
beneficial interest in such land trust;
(c) To employ, engage or contract with or dismiss from
employment or engagement Persons to the extent deemed necessary by the General
Partner for the operation and management of the Partnership business, including
but not limited to, contractors, subcontractors, engineers, architects,
surveyors, mechanics, consultants, accountants, attorneys, insurance brokers,
real estate brokers and others;
34
(d) To enter into contracts on behalf of the Partnership;
(e) To borrow money, procure loans and advances from any
Person for Partnership purposes, and to apply for and secure, from any Person,
credit or accommodations; to contract liabilities and obligations, direct or
contingent and of every kind and nature with or without security; and to repay,
discharge, settle, adjust, compromise or liquidate any such loan, advance,
credit, obligation or liability;
(f) To pledge, hypothecate, mortgage, assign, deposit,
deliver, enter into sale and leaseback arrangements or otherwise give as
security or as additional or substitute security, or for sale or other
disposition any and all Partnership property, tangible or intangible, including,
but not limited to, real estate and beneficial interests in land trusts, and to
make substitutions thereof, and to receive any proceeds thereof upon the release
or surrender thereof; to sign, execute and deliver any and all assignments,
deeds and other contracts and instruments in writing; to authorize, give, make,
procure, accept and receive moneys, payments, property, notices, demands,
vouchers, receipts, releases, compromises and adjustments; to waive notices,
demands, protests and authorize and execute waivers of every kind and nature; to
enter into, make, execute, deliver and receive written agreements, undertakings
and instruments of every kind and nature; to give oral instructions and make
oral agreements; and generally to do any and all other acts and things
incidental to any of the foregoing or with reference to any dealings or
transactions which any attorney may deem necessary, proper or advisable;
(g) To acquire and enter into any contract of insurance which
the General Partner deems necessary or appropriate for the protection of the
Partnership, for the conservation of the Partnership's assets or for any purpose
convenient or beneficial to the Partnership;
(h) To conduct any and all banking transactions on behalf of
the Partnership; to adjust and settle checking, savings, and other accounts with
such institutions as the General Partner shall deem appropriate; to draw, sign,
execute, accept, endorse, guarantee, deliver, receive and pay any checks,
drafts, bills of exchange, acceptances, notes, obligations, undertakings
35
and other instruments for or relating to the payment of money in, into, or from
any account in the Partnership's name; to execute, procure, consent to and
authorize extensions and renewals of the same; to make deposits and withdraw the
same and to negotiate or discount commercial paper, acceptances, negotiable
instruments, bills of exchange and dollar drafts;
(i) To demand, xxx for, receive, and otherwise take steps to
collect or recover all debts, rents, proceeds, interests, dividends, goods,
chattels, income from property, damages and all other property, to which the
Partnership may be entitled or which are or may become due to the Partnership
from any Person; to commence, prosecute or enforce, or to defend answer or
oppose, contest and abandon all legal proceedings in which the Partnership is or
may hereafter be interested; and to settle, compromise or submit to arbitration
any accounts, debts, claims, disputes and matters which may arise between the
Partnership and any other Person and to grant an extension of time for the
payment or satisfaction thereof on any terms, with or without security;
(j) To make arrangements for financing, including the taking
of all action deemed necessary or appropriate by the General Partner to cause
any approved loans to be closed;
(k) To take all reasonable measures necessary to insure
compliance by the Partnership with applicable arrangements, and other
contractual obligations and arrangements entered into by the Partnership from
time to including periodic reports as required to lenders and using all due
diligence to insure that the Partnership is in compliance with its contractual
obligations;
(l) To maintain the Partnership's books and records; and
(m) To prepare and deliver, or cause to be prepared and
delivered by the Partnership's Accountants, all financial and other reports with
respect to the operations of the Partnership, and preparation and filing of all
Federal and state tax returns and reports.
Except as otherwise provided herein, to the extent the duties of the General
Partner require expenditures of funds to be paid to third parties, the General
Partner shall not have any obligations
36
hereunder except to the extent that Partnership funds are reasonably available
to it for the performance of such duties, and nothing herein contained shall be
deemed to authorize or require the General Partner, in its capacity as such, to
expend its individual funds for payment to third parties or to undertake any
individual liability or obligation on behalf of the Partnership.
9.3 Major Decisions. In addition to the requirements of Sections
12.6(a) and (b), if applicable, until such time prior to the first anniversary
date hereof as the General Partner owns sixty-seven percent (67%) of the
Partnership Units, and thereafter until such time as the General Partner owns
sixty percent (60%) of the Partnership Units, the General Partner shall not,
without the prior written consent of holders of at least fifty-one percent (51%)
of the Partnership Units held by the Limited Partners, taken as a single class,
on behalf of the Partnership, undertake any of the following actions:
(a) Engage in a Termination Transaction as defined in Section
12.6(a) hereof;
(b) Dissolve, liquidate or wind-up the Partnership;
(c) Change the nature of the business of the Partnership; or
(d) Admit, remove or retain a general partner.
9.4 Restrictions on General Partner's Authority.
(a) The General Partner may not take any action in
contravention of this Agreement, including, without limitation:
(i) Take any action that would make it impossible to
carry on the ordinary business of the Partnership, except as otherwise
provided in this Agreement;
(ii) Admit a Person as a Partner, except as otherwise
provided in this Agreement;
(iii) Perform any act that would subject a Limited
Partner to liability as a general partner in any jurisdiction or any
other liability except as provided herein or under the Act;
37
(iv) Enter into any contract, mortgage, loan or other
agreement that prohibits or restricts, or has the effect of prohibiting
or restricting, the ability of a Limited Partner to exercise its
Redemption Rights in full, except with the written consent of such
Limited Partner; or
(v) Possess Partnership property, assign any rights
in specific Partnership property, for other than a Partnership purpose
except as otherwise provided in this Agreement.
(b) The General Partner may not, except as otherwise permitted
in Section 9.9 hereof, change its policy of holding its assets and conducting
its business substantially through the Partnership, nor may any transactions
described in Section 12.6(a) or 12.6(b), without the consent of all the Limited
Partners, be structured in a manner which will change the General Partner's
policy of holding its assets and conducting its business through the Partnership
(or the Surviving Partnership, if applicable) if the result of such transaction
is the recognition of gain by the Limited Partners.
9.5 Engagements by the Partnership. The General Partner may engage, on
behalf and at the expense of the Partnership, such professional persons, firms
or corporations as the General Partner in its reasonable judgment shall deem
advisable for the conduct and operation of the business of the Partnership,
including, without limitation, brokers, mortgage bankers, lawyers, accountants,
architects, engineers, consultants, contractors and purveyors of other such
services for the Partnership on such terms and for such compensation or costs as
the General Partner, in its reasonable judgment, shall determine.
9.6 Engagement of Affiliates. The General Partner may, on behalf and at
the expense of the Partnership, engage the General Partner or a firm in which
the General Partner, a Limited Partner, or a Partner, officer, director,
stockholder or Affiliate of any of them, has an interest, to render services to
the Partnership and/or the assets of the Partnership, provided that the fees or
other compensation payable for such services are specifically authorized by the
terms of this Agreement or are comparable to those prevailing in arm's-length
transactions for similar services and are approved by the Board of Directors.
38
9.7 Liability of the General Partner. The General Partner and its
Affiliates, officers, directors, agents and employees shall not be liable,
responsible or accountable in damages or otherwise to the Partnership or any of
the Partners or their successors or assigns for any acts or omissions performed
or omitted within the scope of its authority as General Partner, or otherwise
conferred on the General Partner and such Affiliates, officers, directors,
agents and employees by this Agreement, provided that the General Partner or
such Affiliates, officers, directors, agents or employees shall act in good
faith and shall not be guilty of willful misconduct or gross negligence.
9.8 Reimbursement of Certain Expenses of the General Partner.
(a) Except as provided in this Section 9.8 and elsewhere in
this Agreement (including the provisions of Articles 7 and 8 regarding
distributions, payments and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
(b) The Partnership shall be responsible for and shall pay all
expenses relating to the Partnership's organization, the ownership of its assets
and its operations. The General Partner shall be reimbursed on a monthly basis,
or such other basis as the General Partner may determine in its sole and
absolute discretion, for all expenses it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership (including, without
limitation, expenses relating to the management and administration of any
Affiliates of the General Partner or the Partnership such as auditing expenses
and filing fees); provided that (1) the amount of any such reimbursement shall
be reduced by (i) any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it as permitted in
Section 9.9 below and (ii) any amount derived by the General Partner from any
investments permitted in Section 9.9 below and (2) any expenses that are
determined by the General Partner to be unrelated to the Partnership shall not
be treated as Partnership expenses for purposes of this Section 9.8(b). The
General Partner shall determine in good faith the amount of expenses incurred by
it related to the ownership and operation of, or for the benefit of, the
Partnership. In the event that certain expenses are incurred
39
for the benefit of the Partnership and other entities (including the General
Partner), such expenses will be allocated to the Partnership and such other
entities in such a manner as the General Partner in it's sole and absolute
discretion deems fair and reasonable. All payments and reimbursements hereunder
shall be characterized for federal income tax purposes as expenses of the
Partnership incurred on its behalf, and not as expenses of the General Partner.
9.9 Outside Activities of the General Partner. Notwithstanding anything
to the contrary contained herein, except as set forth in this Section 9.9, the
General Partner shall not, directly or indirectly, without the consent of a
majority in interest of the Limited Partners (excluding the General Partner),
enter into or conduct any business other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a General Partner or
Limited Partner and the management of the business of the Partnership in such
activities as are incidental to any of the foregoing. Without the consent of a
majority in interest of the Limited Partners (excluding the General Partner),
the assets of the General Partner shall be limited to Partnership Interests and
permitted debt obligations of the Partnership, so that Common Stock and OP Units
are completely fungible except as otherwise specifically provided herein;
provided, that the General Partner shall be permitted to hold (i) interests and
entities, including "Qualified REIT Subsidiaries"(which are defined in Section
856(i)(2) of the Code, as amended, as any corporation if 100% of the stock of
such corporation is held by the REIT at all times the corporation was in
existence), that hold no material assets; (ii) interests in Qualified REIT
Subsidiaries or other entities that are not taxed as corporations for federal
income tax purposes) that own only interests in the Partnership and/or interests
in other Qualified REIT Subsidiaries (or other entities that are not taxed as
corporations for federal income tax purposes) that either hold no assets or hold
only interests in the Partnership; (iii) assets and or interests in entities,
including Qualified REIT Subsidiaries, that hold assets having an aggregate
value not greater than five percent (5%) of the total market value of the
General Partner entity (determined by reference to the value of all outstanding
equity securities of the General Partner), provided that (X) the General Partner
entity will apply the net income from such assets (other than net income derived
as a result of a Qualified REIT Subsidiary ownership of an interest in the
Partnership) to offset REIT expenses before utilizing the
40
distribution provisions of Section 8 hereof, (Y) the General Partner will
contribute all net income generated by such assets and or interests (other than
net income derived as a result of a Qualified REIT Subsidiary ownership of an
interest in the Partnership) to the Partnership (after taking into account REIT
expenses as described in clause (X) above, and (Z) the General Partner will use
commercially reasonable efforts to transfer such assets and interests (other
than interests in Qualified REIT Subsidiaries and the Partnerships) to the
Partnership or an entity controlled by the Partnership as soon as such transfer
can be made without causing the General Partner or the Partnership to incur any
material expenses in connection therewith; and (iv) such bank accounts or
similar instruments or accounts in its own name as it deems necessary to carry
out its responsibilities and purposes as contemplated under this Agreement and
its organizational documents; and, provided, further, that the General Partner
shall be permitted to acquire, directly or through a Qualified REIT Subsidiary
(or other entities that are not taxed as corporations for federal income tax
purposes), up to a one percent (1%) interest in any partnership or limited
liability company at least ninety-nine (99%) of the equity of which is owned
directly or indirectly by the Partnership. The General Partner and any of its
Affiliates may acquire Limited Partner Partnership Interests and shall be
entitled to exercise all rights of a Limited Partner relating to such
Partnership Interests.
9.10 Operation in Accordance with REIT Requirements. The Partners
acknowledge and agree that the Partnership shall be operated in a manner that
will enable the General Partner to (i) satisfy the REIT Requirements and (ii)
avoid the imposition of any federal income or excise tax liability. The
Partnership shall avoid taking any action which would result in the General
Partner ceasing to satisfy the REIT Requirements or would result in the
imposition of any federal income or excise tax liability on the General Partner.
9.11 Title Holder. To the extent allowable under applicable law, title
to all or any part of the properties of the Partnership may be held in the name
of the Partnership or any other individual, corporation, partnership, trust or
otherwise, 100% of the beneficial interest in which shall at all times be vested
in the Partnership except for de minimus interests held by qualified REIT
subsidiaries. Any such title holder shall perform any and all of its respective
functions to the extent and upon
41
such terms and conditions as may be determined from time to time by the General
Partner.
ARTICLE 10
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
10.1 No Participation in Management of Partnership; Rights of Limited
Partners to Certain Documents.
(a) The Limited Partners shall have such rights as are
enumerated as rights of limited partners under the Act. The Limited Partners, in
such capacity, shall not take part in, or interfere in any manner, with the
conduct or control of the Partnership's business and shall have no right or
authority to act for or bind the Partnership, said powers being vested solely
and exclusively in the General Partner. Except as specifically set forth in
Section 9.3 or otherwise in this Agreement, the Limited Partners, in their
capacities as such, shall not have any right or power whatsoever to take any
action with respect to the conduct or control of the Partnership or its business
including, but not limited to, any right to vote on, or otherwise approve, any
matters or decisions, whether material, major or otherwise, in connection with
the business of the Partnership.
(b) In addition to any other rights provided in this Agreement
or by the Act, and except as limited by Section 10.1(c) below, each Limited
Partner shall have the right, for a purpose reasonably related to such Limited
Partner's interest as a limited partner in the Partnership, upon written demand
with a statement of the purpose of such demand and at such Limited Partner's own
expense:
(i) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and Exchange
Commission by the General Partner pursuant to the Securities
Exchange Act of 1934, as amended, and each report sent to the
stockholders of the General Partner;
(ii) to obtain a copy of the Partnership's federal,
state and local income tax returns for each fiscal year of the
Partnership;
42
(iii) to obtain a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this
Agreement, the Certificate and all amendments thereto have
been executed; and
(v) to obtain true and full information regarding the
amount of cash and a description and statement of any other
property or services contributed by each Partner and which
each Partner has agreed to contribute in the future, and the
date on which each became a Partner.
(c) Notwithstanding any other provisions of Section 10.1(b)
hereof, the General Partner may keep confidential from the Limited Partners, for
such period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership or the General Partner or (ii) the Partnership
or the General Partner is required by law or by agreements with unaffiliated
third parties to keep confidential.
10.2 Withdrawal, Retirement, Death, Incompetency, Insolvency or
Dissolution of a Limited Partner. A Limited Partner shall have no right to
withdraw, retire or resign from the Partnership. The death, incompetency,
insolvency or dissolution of a Limited Partner shall not terminate the
Partnership. Upon the death of a Limited Partner, his or her executor,
administrator or successor in interest shall have all of the rights and duties
of a Limited Partner for the purpose of settling his or her estate.
10.3 Redemption Rights.
(a) Grant of Rights. The General Partner does hereby grant to
the Limited Partners and the Limited Partners do hereby accept the right, but
not the obligation (such right shall be referred to hereinafter sometimes as the
"Redemption Rights"), to require the Partnership to redeem all or part of their
43
Partnership Units for shares of Common Stock and/or cash, at any time or from
time to time after the date which is one (1) year after the date of the original
issuance by the Partnership to any Limited Partner of such Partnership Units, on
the terms and subject to the conditions and restrictions contained in this
Section 10.3.
(b) Delivery of Exercise Notices. Any one or more Limited
Partners ("Exercising Partners") may, subject to the limitations set forth in
this Section 10.3, deliver to the General Partner written notice in the form
attached to the Unit Certificate as Attachment 1 (the "Exercise Notice")
pursuant to which such Exercising Partners elect to exercise their Redemption
Rights with respect to all or any portion of their Partnership Units. The
Exercise Notice shall specify the specific number of Partnership Units which the
Limited Partner intends to require the Partnership to redeem for shares of
Common Stock and the specific number of Partnership Units which the Limited
Partner intends to require the Partnership to redeem for cash. Only whole
numbers of Partnership Units may be redeemed. Once delivered, the Exercise
Notice shall be irrevocable, subject to payment by the General Partner of shares
of Common Stock and/or cash in respect of such Partnership Units in accordance
with the terms hereof.
(c) Assumption by General Partner. Notwithstanding anything
contained herein to the contrary, the General Partner may, in its sole and
absolute discretion, assume directly the obligation with respect to and satisfy
an Exercising Partner's exercise of a Redemption Right by paying to the
Exercising Partner, at the General Partner's election, shares of Common Stock
and/or cash, as determined in accordance with the provisions of Section 10.3(e)
below, whereupon the General Partner shall acquire the Offered Units and shall
be treated for all purposes of this Agreement as the owner of such Offered
Units. In the event the General Partner shall exercise its right to satisfy the
Redemption Right in the manner described in the preceding sentence, the
Partnership shall have no obligation to pay any amount to the Exercising Partner
with respect to such Exercising Partner's exercise of the Redemption Right, and
each of the Exercising Partner, the Partnership and the General Partner shall
treat the transaction between the General Partner and the Exercising Partner as
a sale of the Offered Units to the General Partner for federal income tax
purposes. Moreover, in the event the General Partner shall exercise its right to
satisfy
44
the Redemption Right, any such interests acquired by the General Partner shall
be automatically converted into General Partner Interests.
(d) Limitation on Exercise of Redemption Rights. Redemption
Rights may be exercised at any time and from time to time after the date which
is one (1) year after the date of the original issuance by the Partnership to
any Limited Partner of such Partnership Units, subject to the following
limitations:
(i) A Limited Partner may not exercise its Redemption
Rights pursuant to any one particular Exercise Notice for less
than One Thousand (1,000) Partnership Units or, if such
Limited Partner holds less than One Thousand (1,000)
Partnership Units, all of the Partnership Units held by such
Limited Partner;
(ii) A Limited Partner shall not have the right to
exercise its Redemption Rights hereunder if, in the opinion of
counsel selected by the General Partner, in its sole and
absolute discretion, such exercise and/or issuance of shares
of Common Stock may or would (A) violate the General Partner's
Articles of Incorporation, as amended from time to time, (B)
cause the General Partner to fail any one or more of the REIT
Requirements or (C) constitute a violation of applicable
securities laws; and
(iii) Each Limited Partner acknowledges and agrees
that the issuance of shares of Common Stock pursuant to the
Redemption Rights will not be registered under the Securities
Act or any state securities laws. Accordingly, shares of
Common Stock issued to such Limited Partner may be required to
be held indefinitely and the General Partner shall have no
obligation to register such shares under the Securities Act or
any state securities laws unless required to do so pursuant to
a separate written agreement entered into by the General
Partner at the time of the issuance. In addition, such Limited
Partner will be required to meet such other requirements and
to provide such other information and representations as the
General Partner may require, which are required in the opinion
of its counsel to lawfully allow it to issue such shares
without registration under the Securities
45
Act and any applicable state securities laws. Each Limited
Partner acknowledges that the certificates representing shares
of Common Stock issued will also bear a legend with respect to
any restrictions on transfer required in the opinion of
counsel for the General Partner. The General Partner
acknowledges that the Limited Partners have been granted the
right, in certain circumstances and subject to certain
limitations, to require the registration under the Securities
Act of the shares of Common Stock issued pursuant to the
Redemption Rights.
(e) Computation of Number of Exchange Shares and/or Cash To Be
Paid. Each Partnership Unit which is to be redeemed for shares of Common Stock
shall be redeemed for one share of Common Stock, as adjusted from time to time
as provided in Section 10.3(i). Upon an election to redeem Partnership Units for
shares of Common Stock, the General Partner shall cause the Partnership to
purchase such Common Stock for the redemption either (i) from the General
Partner, or (ii) on the open market. Each Partnership Unit which is to be
redeemed for cash shall be redeemed for an amount of cash equal to the Current
Per Share Market Price (determined as of the Trading Day immediately preceding
the date upon which the closing of the redemption of Offered Units is to occur).
Notwithstanding anything contained herein to the contrary, the General Partner,
in its sole and absolute discretion, shall have the right either (i) to deliver
shares of Common Stock to each Exercising Partner in lieu of all or any portion
of the cash requested by such Exercising Partner, the number of which shares of
Common Stock shall be determined pursuant to the first sentence of this Section
10.3(e) or (ii) to cause the Partnership to pay cash to each Exercising Partner
in lieu of all or any portion of the number of shares of Common Stock requested
by such Exercising Partner, the amount of such cash per Partnership Unit shall
be determined pursuant to the second sentence of this Section 10.3(e). The
General Partner shall not be required to issue fractions of shares of Common
Stock in return for Partnership Units. If more than one Partnership Unit shall
be requested to be redeemed at the same time by the same Limited Partner, the
number of full shares of Common Stock that shall be issuable upon the redemption
thereof shall be computed on the basis of the aggregate number of shares of
Common Stock represented by the Partnership Units so presented. If any fraction
of a share of Common Stock would, except for the provisions of this Section
10.3(e), be issuable on
46
the redemption of any Partnership Units (or specified portion thereof), the
General Partner shall pay an amount in cash equal to the Current Per Share
Market Price (determined as of the Trading Day immediately preceding the date
upon the closing of the Redemption of the Offered Units is to occur), multiplied
by such fraction.
(f) Closing; Delivery of Election Notice. The closing of the
redemption of Offered Units shall, unless otherwise mutually agreed, be held at
the principal offices of the General Partner, on the date agreed to by the
General Partner and the Exercising Partners, which date shall in no event be
later than: (i) ten (10) business days after the date of delivery of the
Exercise Notice to the General Partner or (ii) the first date upon which all
legal and other conditions with respect to such redemption have been satisfied
(which shall include the expiration or termination of any applicable waiting
periods).
(g) Closing Deliveries. At the closing of the redemption of
Offered Units, (i) the Exercising Partners shall execute and deliver (A) proper
instruments of transfer and assignment of the Offered Units, (B) a Unit
Certificate or Unit Certificates representing the number of Offered Units to be
so redeemed and (C) representations and warranties with respect to their due
authority to sell all of the right, title and interest in and to such Offered
Units to the General Partner and, with respect to the status of the Offered
Units, that such Offered Units are free and clear of all liens, claims and
encumbrances whatsoever, and (ii) the General Partner shall (A) if shares of
Common Stock are to be issued, execute and deliver representations and
warranties with respect to its due authority to issue the shares of Common Stock
to be received in the exchange; deliver an opinion of counsel for the General
Partner, reasonably satisfactory to the Exercising Partners, to the effect that
such shares of Common Stock have been duly authorized, are validly issued,
fully-paid and non-assessable; and deliver a stock certificate or certificates
evidencing the shares of Common Stock to be issued and registered in the name(s)
of the Exercising Partner(s) or its or their designee(s), and/or (B) if cash is
to be paid for Partnership Units, deliver a check in the amount of any cash due
to the Exercising Partner(s) at such closing. If any Exercising Partner shall
have delivered a Unit Certificate or Unit Certificates representing a number of
Partnership Units in excess of the number of Offered Units, the Partnership
shall issue to such Exercising Partner, at the
47
expense of the Partnership, a new Unit Certificate covering the number of
Partnership Units representing the unredeemed portion of the Unit Certificate or
Unit Certificates so surrendered, which new Unit Certificate shall entitle the
holder thereof to such rights of ownership of Partnership Units to the same
extent as if the Unit Certificate covering such unredeemed Partnership Units had
not been surrendered for redemption.
(h) Term of Rights. Unless sooner terminated, the rights of
the parties with respect to the Redemption Rights shall commence as of the date
which is one (1) year after the date of this Agreement and lapse for all
purposes and in all respects upon the termination of the Partnership; provided,
however, that the parties hereto shall continue to be bound by an Exercise
Notice delivered to the General Partner prior to such termination.
(i) Covenants of the General Partner. To facilitate the
General Partner's ability to fully perform its obligations hereunder, the
General Partner covenants and agrees as follows:
(i) At all times during the pendency of the
Redemption Rights, the General Partner shall reserve for
issuance such number of shares of Common Stock as may be
necessary to enable the General Partner to issue such shares
in full exchange for all Partnership Units held by the Limited
Partners which are from time to time issued and outstanding;
(ii) During the pendency of the Redemption Rights,
each Limited Partner shall receive in a timely manner all
reports and/or other communications transmitted from time to
time by the General Partner to its stockholders generally; and
(iii) In case the General Partner shall issue rights
or warrants to all holders of shares of its Common Stock
entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Per Share
Market Price as of the date immediately prior to the date of
such issuance, the General Partner shall also issue to each
holder of a Partnership Unit such number of rights or
warrants, as the case may be, as he would have been entitled
to receive had he required the Partnership to redeem his
48
Partnership Units immediately prior to the record date for
such issuance by the General Partner.
(iv) In case the outstanding shares of Common Stock
shall be subdivided into a greater number of shares, the
number of shares of Common Stock for which each Partnership
Unit thereafter may be redeemed shall be increased
proportionately, and, conversely, in case outstanding shares
of Common Stock each shall be combined into a smaller number
of shares, the number of shares of Common Stock for which each
Partnership Unit thereafter may be redeemed shall be reduced
proportionately, such increase or reduction as the case may
be, to become effective immediately after the opening of
business on the Trading Day following the day upon which such
subdivision or combination becomes effective.
(v) In case shares of Common Stock shall be changed
into the same or a different number of shares of any class or
classes of shares of beneficial interest, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or a stock dividend
described in Section 10.3(i)(iv) above) then and in each such
event the Limited Partners shall have the right thereafter to
require the Partnership to redeem their Partnership Units for
the kind and amount of shares and other securities and
property which would have been received upon such
reorganization, reclassification or other change by holders of
the number of shares of Common Stock for which the Partnership
Units might have been redeemed immediately prior to such
reorganization, reclassification or change.
(vi) The General Partner may, but shall not be
required to, make such adjustments to the number of shares of
Common Stock issuable upon redemption of a Partnership Unit,
in addition to those required by paragraphs (iii), (iv) and
(v) of this Section 10.3(i), as the Board of Directors
considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients. The Board of
Directors shall have the power to resolve any ambiguity
49
or correct any error in the adjustments made pursuant to this
Section 10.3(i) and its actions in so doing shall be final and
conclusive.
(j) Limited Partners' Covenant. Each Limited Partner covenants
and agrees with the General Partner that all Offered Units tendered to the
General Partner in accordance with the exercise of Redemption Rights herein
provided shall be delivered to the General Partner free and clear of all liens,
claims and encumbrances whatsoever and should any such liens, claims and/or
encumbrances exist or arise with respect to such Offered Units, the General
Partner shall be under no obligation to acquire the same. Each Limited Partner
further agrees that, in the event any state or local property transfer tax is
payable as a result of the transfer of its Offered Units to the General Partner
(or its designee), such Limited Partner shall assume and pay such transfer tax.
ARTICLE 11
BANKING, RECORDS AND TAX MATTERS
11.1 Partnership Funds. All funds of the Partnership shall be deposited
in its name in accounts (with banks, "money-market funds," or securities of the
United States government or like investment or depository media) designated by
the General Partner, and the General Partner or its designees shall have the
right to draw checks or other orders of withdrawal thereon and make, deliver,
accept and endorse negotiable instruments in connection with the Partnership
business.
11.2 Books and Records. The following books, records, and accounts
shall be maintained by the Partnership, showing its assets, liabilities,
transactions, and financial condition: a current list of the full name and last
known address of each Partner, separately identifying the General and Limited
Partners and set forth in alphabetical order and setting forth the amount of
cash or a description and statement of the Agreed Value of other property
contributed or agreed to be contributed by each partner; the date on which each
became a Partner; a copy of the Certificate and all amendments thereto; copies
of the Partnership's federal, state and local income tax returns and reports, if
any, for the six most recent years; copies of this Agreement and any amendments
thereto; and copies of any financial statements of the Partnership for the three
most recent years.
50
The Partnership's books shall be maintained at the principal office of the
Partnership. Each Partner shall have the right to inspect and copy such
materials at all reasonable times and during ordinary business hours. The
General Partner is not required to deliver to any Limited Partner copies of the
Certificate or any amendments thereto, unless requested by such Limited Partner.
11.3 Financial Statements. Within ninety-five (95) days after the close
of each fiscal year of the Partnership, the General Partner shall cause to be
prepared (at the Partnership's expense) and furnished to each Person who was a
Partner during the fiscal year then ended, a balance sheet of the Partnership as
of the close of such fiscal year and statements of income or loss, and Net Cash
Flow, if any. Such statements shall be prepared in accordance with generally
accepted accounting principles and certified by the Accountants for the
Partnership, unless such certification is waived, in writing, by all of the
Partners.
11.4 Tax Returns. Within ninety (90) days following the close of each
fiscal year of the Partnership, the General Partner shall cause to be prepared
(at the Partnership's expense) a United States Partnership Return of Income and
cause to be furnished to each Person who was a Partner during the fiscal year a
schedule (a "K-1 Schedule") of each such Partner's share of income, credits, and
deductions on the form then prescribed by the IRS. All elections and options
available to, or determinations as to items of income or expense of, the
Partnership for federal or state income tax purposes shall be taken, rejected or
made by the Partnership in the sole discretion of the General Partner.
11.5 Section 754 Matters. The General Partner, on behalf of the
Partnership, shall file an election under Section 754 of the Code in accordance
with the procedures set forth in the applicable Regulations promulgated
thereunder, which shall be effective beginning with the first fiscal year of the
Partnership with respect to which the Partnership is eligible to make such
election, which election, for such fiscal year, may not be revoked for any
reason.
11.6 Tax Matter Partners. The General Partner is hereby appointed the
"tax matters partner" of the Partnership for all purposes pursuant to Sections
6221-6231 of the Code. The
51
Partnership shall reimburse the tax matters partner for any and all
out-of-pocket costs and expenses (including attorneys' and accountants' fees)
incurred or sustained by it in its capacity as tax matters partner. The
Partnership shall indemnify, defend and hold the tax matters partner harmless
from and against any loss, liability, damage, cost or expense (including
attorneys' and accountants' fees) sustained or incurred as a result of any act
or decision concerning the Partnership tax matters and within the scope of its
responsibility as tax matters partner.
11.7 Other Reports. The General Partner shall deliver to each Limited
Partner, in a timely manner, all reports and/or other communications transmitted
from time to time by the General Partner to its stockholders.
ARTICLE 12
TRANSFER OF GENERAL PARTNER INTERESTS
12.1 Transfer of Interest of the General Partner. Except as provided in
Section 9.3 hereof, no General Partner may at any time sell, assign, transfer,
pledge or encumber any or all of its Partnership Interest in the Partnership or
withdraw or retire from the Partnership except as otherwise provided herein.
Retirement or withdrawal from the Partnership shall not relieve the General
Partner of any obligation theretofore incurred by it hereunder. Notwithstanding
anything contained herein to the contrary, the Limited Partners shall have no
right whatsoever to remove the General Partner from the Partnership.
12.2 Retirement of the General Partner. If a General Partner other than
the Interim Managing General Partner shall liquidate or dissolve, be adjudged
bankrupt, enter into an assignment for the benefit of creditors, have a receiver
appointed to administer its interest in the Partnership, be the subject of a
voluntary or involuntary petition for bankruptcy that is not dismissed or
vacated within ninety (90) days of filing, or have its interest in the
Partnership seized by a judgment creditor, or if there shall be an individual
general partner and he shall die, be adjudicated incompetent or become
permanently disabled (each of the foregoing events is referred to hereinafter as
an "Event of Retirement"), such General Partner, without further act or notice,
immediately shall be deemed to have retired as General Partner of the
Partnership. If the General Partner retires as General Partner of the
Partnership as
52
aforesaid, (i) such General Partner (or its administrator, executor, personal
representative or successor) (a) shall become a nonparticipating Limited Partner
(a "Nonparticipating Limited Partner") retaining the General Partner's former
interest in the Profits, Losses and Net Cash Flow of the Partnership, but shall
not acquire any right or interest in any payment or distribution to the Limited
Partners, as such, pursuant hereto, (b) shall have no right to participate in
the management of the affairs of the Partnership, and (c) shall be disregarded
in determining whether any approval, consent, or other action has been given or
taken by the Limited Partners; and (ii) the surviving General Partner(s), if
any, shall remain as such and the Partners hereby agree and consent that the
Partnership shall continue in effect and shall not terminate, subject, however,
to the provisions of Section 12.5 hereof.
12.3 Transferee of the General Partner's Interest. Except for a
Termination Transaction within the meaning of Section 12.6 hereof, any Person,
other than the General Partner, who acquires, in any manner whatsoever (except
as herein otherwise provided) the interest, or any portion thereof, of the
General Partner, shall not be a General Partner, but shall be entitled to become
a Nonparticipating Limited Partner upon written acceptance and adoption of all
of the terms and provisions of this Agreement and compliance with the
requirements of Section 13.3 of this Agreement. Such Person shall, to the extent
of the interest acquired, be entitled only to the transferor General Partner's
rights, if any, in the Profits, Losses and Net Cash Flow of the Partnership, but
shall not acquire any right or interest in any payment or distribution to the
Limited Partners, as such, pursuant hereto. No such Person shall have any right
to participate in the management of the affairs of the Partnership, and the
interest acquired by such Person shall be disregarded in determining whether any
approval, consent or other action has been given or taken by the Limited
Partners.
12.4 Retirement of Last Remaining General Partner. If the last
remaining General Partner shall at any time withdraw or suffer an Event of
Retirement, the Limited Partners shall have the right, within ninety (90) days
thereafter, by a written consent executed and delivered by Limited Partners
owning a majority of the issued and outstanding Partnership Interests taken as a
single class, to appoint one or more new General Partners as replacement General
Partners, unless the Act requires a greater percentage of the Limited Partners
to consent to the
53
continuation of the Partnership, in which case such higher percentage shall be
required for the continuation of the Partnership. In such event, the Limited
Partners shall create for such replacement General Partners such interest in the
Partnership Profits, Losses and Net Cash Flow as the Limited Partners may agree
upon from among their collective interests in the Partnership.
12.5 Continuation of Partnership. In the event of the timely
appointment of a replacement or new General Partner(s) pursuant to this Article
12, the relationship of the Partners shall be governed by the provisions of this
Agreement, the Partnership shall be continued, and the replacement or new
General Partner(s) shall have all of the management rights, duties,
responsibilities, authority and powers provided the General Partner in this
Agreement. If the Limited Partners fail to select a replacement or new General
Partner(s), whichever the case may be, within ninety (90) days following
retirement of the last remaining General Partner, the Partnership shall dissolve
and terminate.
12.6 Merger or Consolidation of the General Partner.
(a) Whether or not Section 9.3 hereof is applicable, the
General Partner shall not, unless Section 12.6(b) is applicable, engage in any
merger, consolidation or other combination with or into another person, sale of
all or substantially all of its assets or any reclassification, recapitalization
or similar transaction (each, a "Termination Transaction"), unless such
Termination Transaction is one in connection with which all Limited Partners
either will receive, or will have the right to elect to receive, for each
Partnership Unit, an amount of cash, securities, or other property equal to the
product of (i) the number shares of Common Stock into which each Partnership
Unit is convertible and (ii) the greatest amount of cash, securities or other
property paid to a holder of one share of Common Stock in consideration of one
share of Common Stock pursuant to the terms of the Termination Transaction;
provided that; if, in connection with the Termination Transaction, a purchase,
tender or exchange offer shall have been made to and accepted by the holders of
the outstanding Common Stock, each holder of Partnership Units shall receive, or
shall have the right to elect to receive, the greatest amount of cash,
securities, or other property which such holder would have received had it
exercised its right to Redemption (as set forth
54
in Section 10.3) and received Common Stock in exchange for its Partnership Units
immediately prior to the expiration of such purchase, tender or exchange offer
and had thereupon accepted such purchase, tender or exchange offer and then such
Termination Transaction shall have been consummated.
(b) Whether or not Section 9.3 hereof is applicable, the
General Partner may merge, or otherwise combine its assets, with another entity
without satisfying the requirements of Section 12.6(a) hereof if: (i)
immediately after such merger or other combination, substantially all of the
assets directly or indirectly owned by the surviving entity, other than
Partnership Units held by such General Partner, are owned directly or indirectly
by the Partnership or another limited partnership or limited liability company
which is the survivor of a merger, consolidation or combination of assets with
the Partnership (in each case, the "Surviving Partnership"); (ii) the Limited
Partners own a percentage interest of the Surviving Partnership based on the
relative fair market value of the net assets of the Partnership (as determined
pursuant to Section 12.6(d)) and the relative fair market value of the other net
assets of the Surviving Partnership (as determined pursuant to Section 12.6(d))
immediately prior to the consummation of such transaction; (iii) the rights,
preferences and privileges of the Limited Partners in the Surviving Partnership
are at least as favorable as those in effect immediately prior to the
consummation of such transaction and as those applicable to any other limited
partners or non-managing members of the Surviving Partnership; and (iv) such
rights of the Limited Partners include the right to exchange their interests in
the Surviving Partnership for at least one of: (A) the consideration available
to such Limited Partners pursuant to Section 12.6(a), or (B) if the ultimate
controlling person of the Surviving Partnership has publicly traded common
equity securities, such common equity securities, with an exchange ration based
on the relative fair market value of such securities (as determined pursuant to
Section 12.6(d)) and the Common Stock.
(c) In connection with any transaction permitted by Section
12.6(a) or 12.6(b), the relative fair market values shall be reasonably
determined by the General Partner as of the time of such transaction and, to the
extent applicable, shall be no less favorable to the Limited Partners than the
relative values reflected in the terms of such transactions.
55
ARTICLE 13
TRANSFER OF LIMITED PARTNER INTERESTS
13.1 Transfer of Interest of a Limited Partner. Except as otherwise
specifically provided in this Agreement, no Limited Partner may sell, assign,
transfer, pledge, encumber or in any manner dispose of all or any part of its
Partnership Interest without the prior written consent of the General Partner,
which consent may not be unreasonably withheld. Notwithstanding the foregoing,
each Limited Partner shall have the right to (i) pledge or otherwise encumber
all or any portion of its Partnership Interest to an unrelated lender as
security for a bona fide obligation (subject, however, to applicable securities
laws) and/or (ii) transfer all or any portion of its Partnership Interest to
members of the Immediate Family of such Limited Partner and to one or more
trusts for the benefit of one or more members of the Immediate Family of such
Limited Partner for estate and/or gift tax purposes, upon prior written notice
to the General Partner. Without limiting the generality of the foregoing, in no
event shall the General Partner consent to an assignment of all or any portion
of the Partnership Interest of a Limited Partner in the Partnership if, in the
opinion of the General Partner (or of counsel satisfactory to the General
Partner), such assignment (i) will result in a termination of the Partnership
for federal income tax purposes or otherwise result in adverse tax consequences
to the Partnership or any Partner, (ii) will result in the Partnership failing
to qualify for an exemption from the registration requirements of the federal or
any applicable state securities laws, (iii) will result in the imposition of
fiduciary responsibility on the Partnership or any Partner under the Employee
Retirement Income Security Act of 1974, as amended from time to time, (iv) will
result in a violation of any provision of any mortgage or trust deed (or the
note or bond secured thereby) constituting a lien against any assets of the
Partnership, or other instrument, document or agreement to which the Partnership
is a party or otherwise bound, (v) represents a transfer of any component
portion of a Partnership Interest, such as the Capital Account, or rights to Net
Cash Flow, separate and apart from all other components of a Partnership
Interest, or (vi) will cause the General Partner to cease to comply with any and
all REIT Requirements. Subject to satisfaction of the conditions therefor set
forth or referred to herein, each Limited Partner hereby consents to the
substitution or admission of any assignee of a Limited Partner. Any sale,
56
assignment, transfer, pledge, encumbrance, hypothecation or other disposition by
a Limited Partner of all or any part of its Partnership Interest in violation of
the provisions hereof shall be void ab initio and of no force or effect
whatsoever.
13.2 Assignee and Substitute Limited Partners. No Person shall be
admitted as an assignee or substituted Limited Partner under this Agreement
unless and until:
(a) An assignment is made in writing, signed by the assigning
Partner and accepted in writing by the assignee, and a duplicate original of
such assignment has been delivered to and approved by the General Partner;
(b) The General Partner has received an opinion of counsel
favorably covering the matters described in clauses (i) through (vi) of Section
13.1 above, or waived all or any portion of this requirement;
(c) The prospective admittee executes and delivers to the
General Partner a written agreement in form reasonably satisfactory to the
General Partner pursuant to which said Person agrees to be bound by and confirms
the obligations, representations, warranties and power of attorney contained in
this Agreement; and
(d) An appropriate amendment to this Agreement is executed.
13.3 Assignment. In the event an assignment is made in accordance with
the terms hereof, unless otherwise required by the Code:
(a) The effective date of such assignment shall be the date
the written instrument of assignment is delivered to the Partnership and
approved by the General Partner;
(b) The Partnership and the General Partner shall be entitled
to treat the assignor of the assigned interest as the absolute owner thereof in
all respects and shall incur no liability for allocations of Profits or Losses
and distributions of Net Cash Flow made in good faith to such assignor until
such time as the written instrument of assignment has been actually received and
approved by the General Partner, and recorded in the books of the Partnership;
and
57
(c) The division and allocation of Profits or Losses, other
than Profits or Losses arising from a Liquidation of the Partnership,
attributable to the applicable Partnership Interests between the assignor and
assignee during any fiscal year of the Partnership shall be based upon the
length of time during such fiscal year, as measured by the effective date of
such assignment, that the assigned Partnership Interest was owned by each of
them and shall not be based upon the date or dates during such fiscal year in
which income was earned or losses were sustained by the Partnership; provided,
however, that the division and allocation of Profits or Losses resulting from a
Liquidation of the Partnership shall be based upon the date or dates such income
was earned or losses were sustained.
13.4 Cost of Admission. The cost of processing and perfecting an
admission contemplated by this Article 13 (including reasonable attorney's fees
incurred by the Partnership) shall be borne by the party seeking admission as a
Partner to the Partnership.
ARTICLE 14
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP
14.1 Dissolution of the Partnership. The Partnership shall be dissolved
upon the happening of any of the following:
(a) An election to dissolve and wind up the affairs of the
Partnership by the General Partner (subject to Section 9.3 hereof);
(b) The occurrence of an Event of Retirement to the last
remaining General Partner, unless the Limited Partners elect to continue the
business of the Partnership pursuant to the provisions of Sections 12.4 and 12.5
hereof;
(c) Any event that makes it unlawful for the Partnership
business to be continued;
(d) The sale, disposition, or abandonment of all or
substantially all of the assets of the Partnership unless the General Partner,
in compliance with Section 9.3 hereof, elects to continue the Partnership
business for the purpose of the receipt and the collection of indebtedness or
the collection of any other
58
consideration to be received in exchange for the assets of the Partnership
(which activities shall be deemed to be part of the winding up of the affairs of
the Partnership);
(e) Dissolution required by operation of law; or
(f) December 31, 2097, unless a majority in interest of the
Partnership elects to continue the Partnership.
14.2 Winding Up of Affairs. In the event of the dissolution and
liquidation of the Partnership for any reason, the General Partner shall
commence to wind up the affairs of the Partnership and shall convert all of the
Partnership's assets to cash or cash equivalents within such reasonable period
of time as may be required to receive fair value therefor. All items of income,
gain, loss, deduction and credit during the period of liquidation shall be
allocated among the Partners in the same manner as before the dissolution. If
there is no General Partner to effect such Liquidation, then the Limited
Partners, pursuant to a vote of Limited Partners owning a majority of the issued
and outstanding Partnership Units owned by all Limited Partners, may designate
any person, firm or corporation, as a Liquidating Trustee, for that purpose who
shall have all of the rights, powers and authority of a General Partner stated
herein in connection therewith.
14.3 Accounting. In the case of the dissolution and termination of the
Partnership, prior to any distributions to Partners pursuant to Section 14.4(c)
below, a proper accounting shall be made of the Capital Accounts of the Partners
and of each item of income, gain, loss, deduction and credit of the Partnership
from the date of the last previous accounting to the date of dissolution. The
General Partner shall provide a copy of such accounting to all Partners.
14.4 Final Distribution of Partnership Property. Upon termination of
the Partnership, the General Partner shall apply and distribute the remaining
property of the Partnership, together with the proceeds of any sales of same, as
follows:
(a) first, all Partnership debts and liabilities shall be paid
and discharged, including debts owed to Partners and any Affiliates of Partners;
59
(b) second, to establish any reserve for any contingent or
unforeseen liabilities or obligations of the Partnership. Such funds shall be
placed in escrow by the General Partner for the purposes of disbursing such
funds in payment of any of the contingencies, liabilities or obligations, and,
at the expiration of such period as the General Partner shall deem advisable,
the balance then remaining shall be distributed pursuant to subsection (c) of
this Section 14.4; and
(c) third, to distribute the balance to the Partners in the
manner and priority set forth in Article 8 hereof, with any and all Net Cash
Flow arising pursuant to the sale and/or other liquidation of Partnership
property being distributed pursuant to Section 8.1(b) hereof.
Distributions upon liquidation of the Partnership (or any
Partner's interest in the Partnership) and related adjustments shall be made by
the end of the taxable year of such liquidation (or, if later, within 90 days
after the date of such liquidation) or as otherwise permitted by the
Regulations.
14.5 Certificate of Cancellation. Upon completion of the liquidation of
the Partnership and the distribution of all Partnership property, the
Partnership shall terminate and the General Partner shall have the authority to
execute and record one or more Certificates of Cancellation of the Partnership
as well as any and all other documents required or considered advisable by the
General Partner to effectuate the dissolution and termination of the
Partnership.
ARTICLE 15
POWER OF ATTORNEY
15.1 Power of Attorney. Each Partner, by its execution hereof,
irrevocably constitutes and appoints the General Partner, or any substitute or
replacement General Partner, with full power of substitution, as such Partner's
true and lawful attorney-in-fact, in its name, place and stead to make, execute,
sign, acknowledge, certify, deliver, file and record on its behalf and on behalf
of the Partnership, the following:
(a) This Agreement, all Certificates of Limited Partnership,
Certificates of Doing Business under an Assumed Name, amendments to any or all
of the foregoing, and any other
60
certificates or instruments which may be required to be filed by the Partnership
or the Partners under the laws of the State of Delaware or any other
jurisdiction;
(b) One or more Certificates of Cancellation of the
Partnership and such other instruments or documents as may be deemed necessary
or desirable by the General Partner upon termination of the Partnership
business;
(c) Any and all amendments to this Agreement and to the
instruments described in subsections (a) and (b) above, provided such amendments
are either required by law or have been authorized by the Partner(s) in
accordance with Article 16 and/or any other provision of this Agreement
(including, without limitation, any amendment to this Agreement and to the
Certificate to reflect the substitution or admission of a Limited Partner
pursuant to this Agreement); and
(d) Any and all such other documents and instruments as may be
deemed necessary or desirable by said attorney to carry out fully the provisions
of this Agreement in accordance with its terms.
15.2 Grant of Authority Irrevocable. The foregoing grant of authority
(a) is a special power of attorney coupled with an interest, is irrevocable and
shall survive the death or incapacity of a Partner who is a natural person or,
in the case of a Partner that is not a natural person, the merger, dissolution
or other termination of its existence of the Partner, (b) may be exercised by
the General Partner on behalf of each Partner, by a facsimile signature or by
listing all of the Partners executing any instrument with a single signature as
attorney-in-fact for all of them, and (c) shall survive the assignment by a
Partner of the whole or any portion of his or its interest in the Partnership.
ARTICLE 16
AMENDMENT OF PARTNERSHIP AGREEMENT
16.1 Amendments by Partners. Except as may be specifically provided
below in this Section 16.1 and in Section 16.2 hereof, this Agreement may only
be amended with the written concurrence of the General Partner and the written
consent of holders of at least fifty-one percent (51%) of the Partnership Units
held by
61
the Limited Partners, taken as a single class; provided, that if at any time
prior to the first anniversary date hereof the General Partner owns sixty-seven
percent (67%) of the Partnership Units, and thereafter if at any time as the
General Partner owns sixty percent (60%) of the Partnership Units, then in
either case from such time and thereafter the amendment may be effectuated only
by the General Partner and the Limited Partners need not be solicited but shall
be informed of the amendment,; provided, further, however, that absent the
concurrence of the General Partner and the approval of all of the Limited
Partners no amendment shall:
(a) increase the obligation of any Limited Partner to make
contributions to the capital of the Partnership;
(b) modify the order of allocation of distributions of the Net
Cash Flow or liquidating distributions, or the allocation of Profits and Losses
among the Partners (other than as specifically provided for herein, including
without limitation, modifications pursuant to Section 6.4 hereof);
(c) change the Partnership to a general partnership;
(d) reduce the percentage of Limited Partners required to
consent to any matter in this Agreement; or
(e) amend Section 9.4(a)(iv) hereof or amend Section 10.3
hereof in any manner that prohibits or restricts, or has the effect of
prohibiting or restricting, the ability of a Limited Partner to exercise its
Redemption Rights in full; or
(f) amend Section 12.6(a), (b) or (c) hereof; or
(g) amend this Article 16.
16.2 Amendment by the General Partner. Notwithstanding anything
contained in this Agreement to the contrary, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(a) To add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
62
(b) To reflect the admission, substitution, termination or
withdrawal of Partners in accordance with this Agreement, including without
limitation, the issuance of additional classes of Partnership Units to Limited
Partners pursuant to Section 6.4 hereof;
(c) To reflect a change that is of an inconsequential nature
and does not adversely affect the Limited Partners in any material respect, or
to cure any ambiguity, correct or supplement any provision in this Agreement not
inconsistent with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(d) To satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law; and
(e) To amend the provisions of this Agreement that protect the
qualification of the General Partner as a REIT if such provisions are no longer
necessary because of a change in applicable law (or an authoritative
interpretation thereof), a ruling of the IRS, or if the General Partner has
determined to cease qualifying as a REIT.
The General Partner will provide notice to the Limited Partners when any action
under this Section 16.2 is taken.
16.3 Amendment of Certificate. If this Agreement shall be amended
pursuant to this Article 16, the General Partner shall cause the Certificate to
be amended, to the extent required by applicable law, to reflect such change.
The Partners shall be promptly notified of any amendments made under this
Article 16.
ARTICLE 17
INDEMNIFICATION
17.1 Indemnification.
(a) Except as provided in Section 17.1(c) hereof, the
Partnership shall indemnify, defend and hold harmless each Indemnitee from and
against any and all loss, damage, liability, cost or expense (including
reasonable attorneys' fees and
63
expenses) sustained or incurred as a result of any act or omission concerning
the business or activities of the Partnership, the General Partner or the
Interim Managing General Partner; provided, that such act or omission of the
Indemnitee was not in violation of any term or provision of this Agreement or
any provision of law. Without limitation, the foregoing indemnity shall extend
to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise for
any indebtedness of the Partnership or any Affiliate of the Partnership
(including without limitation, any indebtedness which the Partnership or any
Affiliate of the Partnership has assumed or taken subject to), and the General
Partner is hereby authorized and empowered, on behalf of the Partnership, to
enter into one or more indemnity agreements consistent with the provisions of
this Section 17.1 in favor of any Indemnitee having or potentially having
liability for any such indebtedness. Any indemnification pursuant to this
Section 17.1 shall be made only out of the assets of the Partnership, and
neither the General Partner nor any Limited Partner shall have any obligation to
contribute to the capital of the Partnership or otherwise provide funds, to
enable the Partnership to fund its obligations under this Section 17.1. The
foregoing indemnity shall not be enforceable against any Limited Partner
personally but solely from such Limited Partner's interest in the Partnership.
(b) The provisions of this Section 17.1 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 17.1 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 17.1 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
(c) The Partners hereby acknowledge that, in conjunction with
the financing and the refinancing of any of the property owned by the
Partnership, the General Partner may agree to guarantee part or all of such
debt. The Partners understand that, pursuant to Regulation Section
l.752-(2)(b)(3)(i), such guaranty obligation would, absent the indemnification
provided hereinafter, serve to increase the General Partner's share of
64
such debt pursuant to Regulation Section 1.752-2(a). Inasmuch as,
notwithstanding such guaranty obligation, each of the Limited Partners desires
to increase his share of such debt and the General Partner desires to decrease
its share of such debt (for purposes of Regulations Section 1.752-2(a)), each of
the Limited Partners, to the extent provided in Exhibit __ attached hereto,
hereby agrees to indemnify the General Partner in the event and to the extent
that the General Partner both is required to make a payment to the lender under
any such guaranty obligation and is unable to sell any or all of the assets of
the Partnership for money or moneys worth to make the General Partner whole on
account of such payment. This indemnification is effective only at the time, in
the event and to the extent that upon a dissolution and liquidation of the
Partnership, the General Partner is a creditor of the Partnership due to its
guaranty of Partnership debt and the proceeds of sale in such dissolution and
liquidation are insufficient to reimburse the General Partner for any amounts
paid on such guaranty obligation as contemplated in this Section 17.1(c). As
provided in Exhibit __, this indemnification is limited on a per Unit basis to
Units owned by an indemnifying Limited Partner at the time an indemnification is
due to the General Partner as provided by this Section 17.1(c), such that each
Limited Partner's obligation is reduced upon a redemption of Units as provided
at Section 10.3 or upon any other transfer or disposition of Units. In addition,
any and all indemnification as provided by this Section 17.1(c) shall terminate
in full as to each and every Limited Partner in the event that both (i) the
General Partner receives from tax counsel an opinion that the Outside Limited
Partners will be allocated an amount of excess nonrecourse liabilities under the
provisions of Regulation Section 1.752-3(a)(3) equal to or greater than the
amount of the indemnification requirement indicated on Exhibit __, and (ii) upon
the Consent of the Outside Limited Partners to terminate the indemnification
required by this Section 17.1(c).
17.2 Partner Indemnification of Partnership. In the event the
Partnership is made a party to any litigation or otherwise incurs any loss or
expense as a result of or in connection with any Partner's personal obligations
or liabilities unrelated to Partnership business, such Partner shall indemnify
and reimburse the Partnership for all such loss and expense incurred, including
reasonable attorneys' fees, and the interest of such Partner in the Partnership
may be charged therefor. The liability of a Partner under this Section 17.2
shall not be limited to such
65
Partner's interest in the Partnership, but shall be enforceable against such
Partner personally.
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 Notices. All notices and demands required or permitted under this
Agreement shall be in writing and may be delivered personally to the Person to
whom it is authorized to be given, or sent by registered, certified or first
class mail, or by overnight delivery, postage prepaid, and if intended for the
Partnership, addressed to the Partnership at the principal office of the
Partnership, and if intended for a Partner, addressed to the Partner at its
address on the signature pages hereof, or to such other person or at such other
address designated by written notice given to the Partnership. Any notice or
demand mailed as aforesaid shall be deemed to have been delivered two (2) days
after the date that such notice or demand is deposited in the mails.
18.2 Severability. If any provision of this Agreement or the
application of such provision to any Person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid
shall not be affected.
18.3 Parties Bound. Any Person acquiring or claiming an interest in the
Partnership, in any manner whatsoever, shall be subject to and bound by all
terms, conditions and obligations of this Agreement to which his or its
predecessor in interest was subject or bound, without regard to whether such
Person has executed a counterpart hereof or any other document contemplated
hereby. No Person, including the legal representative, heir or legatee of a
deceased Partner, shall have any rights or obligations greater than those set
forth in this Agreement and no Person shall acquire an interest in the
Partnership or become a Partner thereof except as permitted by the terms of this
Agreement. This Agreement shall be binding upon the parties hereto, their
successors, heirs, devisees, assigns, legal representatives, executors and
administrators.
18.4 Applicable Law. The Partnership and this Agreement shall be
governed by the laws of the State of Delaware.
66
18.5 Partition. Each Partner hereby irrevocably waives during the term
of the Partnership any right that he or it may have to maintain any action for
partition with respect to any property of the Partnership.
18.6 Computation of Accountants. Except with respect to matters as to
which the General Partner is granted discretion under this Agreement, the
opinion of the Accountants shall be final and binding with respect to all
allocations made under Article 7 or distributions made under Article 8 or
Section 14.4 hereof.
18.7 Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision.
18.8 Counterparts. This Agreement may be executed in multiple
counterparts with separate signature pages, each such counterpart shall be
considered an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first set forth above, confirms his or its agreement to become a
General Partner, Interim Managing General Partner or Limited Partner, as the
case may be, of the Partnership, agrees to be bound by this Agreement and
acknowledges the appointment of attorneys-in-fact as set forth herein, and
swears that the statements set forth herein are true and correct.
GENERAL PARTNER:
PHILIPS INTERNATIONAL REALTY CORP.
a Maryland corporation
By:_______________________________
Its:
67
INTERIM MANAGING GENERAL PARTNER:
PHILIPS INTERNATIONAL REALTY, LLC
a Delaware limited liability company
By:_______________________________
Its:
LIMITED PARTNERS:
PALM SPRINGS MILE ASSOCIATES, LTD.
By:_______________________________
Its:
FOREST AVENUE SHOPPING ASSOCIATES
By:_______________________________
Its:
PHILIPS FREEPORT ASSOCIATES, L.P.
By:_______________________________
Its:
XXXXXXX SHOPPING ASSOCIATES
By:_______________________________
Its:
SP AVENUE U ASSOCIATES, L.P.
By:_______________________________
Its:
68
FOXBOROUGH SHOPPING L.L.C.
By:_______________________________
Its:
ENFIELD SHOPPING L.L.C.
By:_______________________________
Its:
DELRAN SHOPPING L.L.C.
By:_______________________________
Its:
BRANHAVEN PLAZA LLC
By:_______________________________
Its:
69
EXHIBIT A
---------
Partners and Partnership Units
------------------------------
Name and Address of Partner Partnership Units
--------------------------- -----------------
General Partner:
----------------
Philips International Realty Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Interim Managing General Partner:
---------------------------------
Philips International Realty, LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Limited Partners:
-----------------
Palm Springs Mile Associates, Ltd.
Palm Springs Mile Shopping Center
Hialeah, Florida
Forest Avenue Shopping Associates
Forest & Xxxxxxx Avenues
Staten Island, New York
Philips Freeport Associates, L.P.
Fireman's Field
Sunrise Highway & Buffalo Avenue
Freeport, New York
Merrick Shopping Associates
0000-0000 Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx
i
SP Avenue U Associates, L.P.
5644 Avenue U
Brooklyn, New York
Foxborough Shopping L.L.C.
Xxxxxxx Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxx, Xxxxx 000
Foxborough, Mass
Enfield Shopping L.L.C.
Elm Plaza Shopping Center
00 Xxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx
Delran Shopping L.L.C.
Xxxxxxxx Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 000 at Xxxxx Mill Road
Delran, New Jersey
Branhaven Plaza LLC
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx
ii
EXHIBIT B
---------
PHILIPS INTERNATIONAL REALTY, L.P. UNIT CERTIFICATE
---------------------------------------------------
* SEE RESTRICTIVE LEGENDS ON REVERSE *
PHILIPS INTERNATIONAL REALTY, L.P.
A DELAWARE LIMITED PARTNERSHIP
Number: ______ Units: ______
This is to certify that ____________________ is the owner of
______________________________________________________ fully paid limited
Partnership Units of Philips International Realty, L.P., a Delaware limited
partnership (the "Partnership"), transferable only on the books of the
Partnership by the holder hereof in person or by the duly authorized Attorney
upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the General Partner of the Partnership
and the signatures of its duly authorized officers.
Dated: ______________
____________________ _____________________
President Secretary
-SEAL-
REVERSE OF
PHILIPS INTERNATIONAL REALTY, L.P. UNIT CERTIFICATE
---------------------------------------------------
i
THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AGREEMENT OF LIMITED PARTNERSHIP OF PHILIPS INTERNATIONAL REALTY, L.P.,
DATED AS OF JULY __, 1997 (A COPY OF WHICH IS ON FILE WITH THE
PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF THE PARTNERSHIP HAS BEEN
FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND
THE RULES AND REGULATIONS IN EFFECT THEREUNDER. IN ADDITION, THE UNITS
ARE SUBJECT TO THE PROVISIONS OF SECTION 19.1 OF A CERTAIN CONTRIBUTION
AND EXCHANGE AGREEMENT DATED AS OF August 11, 1997 (A COPY OF WHICH IS
ON FILE WITH THE PARTNERSHIP).
FOR VALUE RECEIVED, _________________ hereby sell, assign and transfer
unto __________________________________ _________________ limited Partnership
Units represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________ Attorney to transfer the said
limited Partnership Units on the books of the within named Partnership with full
power of substitution in the premises.
Dated: ________________ ___________________________
In presence of:
________________________
ii
Attachment 1 to Unit Certificate
--------------------------------
EXERCISE NOTICE
---------------
To:
Reference is made to that certain Agreement of Limited Partnership of
Philips International Realty, L.P. dated as of July ___, 1997 (the "Partnership
Agreement"), pursuant to which Philips International Realty Corporation, a
Maryland corporation, and certain other persons, including the undersigned,
continued the Delaware limited partnership known as Philips International
Realty, L.P. (the "Partnership"). Capitalized terms used but not defined herein
shall have the meanings set forth in the Partnership Agreement. Pursuant to
Section 10.3 of the Partnership Agreement, each of the undersigned, being a
limited partner of the Partnership (an "Exercising Partner"), hereby elects to
exercise its Redemption Rights as to a portion or portions of its Partnership
Units, as all specified opposite its signature below (notwithstanding the
foregoing, each of the undersigned hereby acknowledges and agrees that the
General Partner has the right, in its sole and absolute discretion, to deliver
shares of Common Stock to the undersigned in lieu of all or any portion of the
cash requested below by the undersigned, all in accordance with Section 10.3 of
the Partnership Agreement):
Dated:
==============================================================================
| | Number of | Number of |
| | Offered Units to | Offered Units to |
| Exercising | be Redeemed for | be Redeemed for |
| Partner | Shares | Cash |
|_________________________|__________________________|_______________________|
| | | |
| ---------------- | | |
| | | |
|_________________________|__________________________|_______________________|
| | | |
| ---------------- | | |
| | | |
|_________________________|__________________________|_______________________|
| | | |
| ---------------- | | |
| | | |
==============================================================================
