FCO, L.P.
LIMITED PARTNERSHIP AGREEMENT
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS PURSUANT TO A
REGISTRATION OR EXEMPTION THEREFROM
TABLE OF CONTENTS
Page
ARTICLE I - INTERPRETIVE PROVISIONS........................................1
SECTION 1.1 Certain Definitions.......................................1
SECTION 1.2 Rules of Construction....................................11
ARTICLE II - CONTINUATION.................................................12
SECTION 2.1 Continuation.............................................12
SECTION 2.2 Name ....................................................12
SECTION 2.3 Place of Business; Registered Agent......................12
ARTICLE III - BUSINESS PURPOSE............................................12
SECTION 3.1 Business ................................................12
SECTION 3.2 Authorized Activities....................................13
ARTICLE IV - CAPITAL CONTRIBUTION.........................................13
SECTION 4.1 Capital Contributions....................................13
SECTION 4.2 Additional Partnership Interests.........................14
SECTION 4.3 No Third Party Beneficiaries.............................14
SECTION 4.4 Capital Accounts.........................................15
SECTION 4.5 Return of Capital Account; Interest......................16
SECTION 4.6 Preemptive Rights........................................17
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS.................................17
SECTION 5.1 Limited Liability........................................17
SECTION 5.2 Profits, Losses and Distributive Shares..................17
SECTION 5.3 Distributions............................................22
SECTION 5.4 Distributions upon Liquidation...........................24
SECTION 5.5 Amounts Withheld.........................................24
ARTICLE VI - PARTNERSHIP MANAGEMENT.......................................24
SECTION 6.1 Management and Control of Partnership Business...........24
SECTION 6.2 No Management by Limited partners;
Limitation of Liability.................................25
SECTION 6.3 Limitations on Partners..................................25
SECTION 6.4 Business with Affiliates.................................26
SECTION 6.5 Compensation; Reimbursement of Expenses..................26
SECTION 6.6 Liability for Acts and Omissions.........................26
SECTION 6.7 Indemnification..........................................27
ARTICLE VII - ADMINISTRATIVE, FINANCIAL AND TAX MATTERS...................28
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Page
SECTION 7.1 Books and Records........................................28
SECTION 7.2 Annual Audit and Accounting..............................28
SECTION 7.3 Partnership Funds........................................28
SECTION 7.4 Reports and Notices......................................28
SECTION 7.5 Tax Matters..............................................29
SECTION 7.6 Withholding..............................................29
ARTICLE VIII - TRANSFER OF PARTNERSHIP INTERESTS; ADMISSION OF PARTNERS..30
SECTION 8.1 Transfer by General Partner..............................30
SECTION 8.2 Obligations of a Prior General Partner...................30
SECTION 8.3 Successor General Partner................................30
SECTION 8.4 Restrictions on Transfer and Withdrawal
by Limited Partner..................................31
SECTION 8.5 Substituted Limited Partner..............................32
SECTION 8.6 Timing and Effect of Transfers...........................33
SECTION 8.7 Additional Limited Partners..............................33
SECTION 8.8 Amendment of Agreement and Certificate...................33
ARTICLE IX REDEMPTION AND CONVERSION......................................33
SECTION 9.1 Right of Redemption......................................33
SECTION 9.2 Timing of Redemption.....................................34
SECTION 9.3 Redemption Price.........................................34
SECTION 9.4 Assumption of Redemption Obligation......................34
SECTION 9.5 Further Assurances; Certain Representations..............35
SECTION 9.6 Effect of Redemption.....................................35
SECTION 9.7 Registration Rights......................................35
SECTION 9.8 Conversion...............................................35
SECTION 9.9 Redemption Restriction...................................36
SECTION 9.10 Special Event............................................36
ARTICLE X - DISSOLUTION AND LIQUIDATION...................................37
SECTION 10.1 Term and Dissolution.....................................37
SECTION 10.2 Liquidation of Partnership Assets........................38
SECTION 10.3 Effect of Treasury Regulations...........................39
SECTION 10.4 Time for Winding-Up......................................40
ARTICLE XI - AMENDMENTS AND MEETINGS......................................40
SECTION 11.1 Amendment Procedure......................................40
SECTION 11.2 Meetings and Voting......................................41
ARTICLE XII - MISCELLANEOUS PROVISIONS....................................41
SECTION 12.1 Title to Property........................................41
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Page
SECTION 12.2 Other Activities of Limited Partners
and Preferred Limited Partners.........................42
SECTION 12.3 Power of Attorney........................................42
SECTION 12.4 Notices .................................................43
SECTION 12.5 Further Assurances.......................................43
SECTION 12.6 Titles and Captions......................................43
SECTION 12.7 Applicable Law...........................................44
SECTION 12.8 Binding Agreement........................................44
SECTION 12.9 Waiver of Partition......................................44
SECTION 12.10 Counterparts and Effectiveness...........................44
SECTION 12.11 Survival of Representations..............................44
SECTION 12.12 Entire Agreement.........................................44
SECTION 12.13 Temporary Allocation.....................................44
SECTION 12.14 Authorization and Consent................................44
Exhibit 1 - Schedule of Partners
Exhibit 2 - Form of Redemption or Conversion Notice
Exhibit 3 - Form of Registration Rights Agreement
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FCO, L.P.
LIMITED PARTNERSHIP AGREEMENT
The undersigned, being the sole general partner and the initial Limited
Partners of FCO, L.P. (the "Partnership"), a limited partnership formed under
the Delaware Revised Uniform Limited Partnership Act, do hereby enter into this
Partnership Agreement this 14th day of October 1997.
R E C I T A L S:
A. The Partnership was formed pursuant to a Certificate of Limited
Partnership filed on October 10, 1997 with the Secretary of State of the State
of Delaware under the name "FCO, L.P."
B. The General Partner and the initial Limited Partners desire to set forth
the understandings and agreements, including certain rights and obligations,
among the Partners (as hereinafter defined) with respect to the Partnership.
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ARTICLE I - INTERPRETIVE PROVISIONS
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SECTION 1.1 Certain Definitions. The following terms have the definitions
hereinafter indicated whenever used in this Agreement with initial capital
letters:
Act: The Delaware Revised Uniform Limited Partnership Act, ▇▇.▇▇. 17-101 to
171 -1111 of the Delaware Code Annotated. Title 6, as amended from time to time.
Additional Limited Partner/Preferred Limited Partner: A Person admitted to
the Partnership as a Limited Partner or Preferred Limited Partner in accordance
with Section 8.7 hereof and who is shown as such on the books and records of the
Partnership.
Adjusted Capital Account: With respect to any Partner, such Partner's
Capital Account maintained in accordance with Section 4.4 hereof, as of the end
of the relevant Fiscal Year of the Partnership, after giving effect to the
following adjustments:
(A) Credit to such Capital Account such Partner's share of Partnership
Minimum Gain determined in accordance with Treasury Regulations Section
1.704-2(g)(1) and such Partner's share of Partner Minimum Gain determined in
accordance with Treasury Regulations Section 1.7042(i)(5).
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(B) Debit to such Capital Account the items described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of "Adjusted Capital Account" is intended to
comply with the provisions of Treasury Regulations Sections 1.704-1(b)(2)(ii)
and 1.704-2 and shall he interpreted consistently therewith.
Adjusted Capital Account Deficit: With respect to any Partner, the deficit
balance, if any, in that Partner's Adjusted Capital Account as of the end of the
relevant Fiscal Year of the Partnership.
Affiliate: With respect to any referenced Person, (i) a member of such
Person's immediate family; (ii) any Person who directly or indirectly owns,
controls or holds the power to vote ten percent (10%) or more of the outstanding
voting securities of the Person in question; (iii) any Person ten percent (10%)
or more of whose outstanding securities are directly or indirectly owned,
controlled, or held with power to vote by the Person in question; (iv) any
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with the Person in question; (v) if the Person in
question is a corporation, any executive officer or director of such Person or
of any corporation directly or indirectly controlling such Person: and (vi) if
the Person in question is a partnership, any general partner of the partnership
or any limited partner owning or controlling ten percent (10%) or more of either
the capital or profits interest in such partnership. As used herein, "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities. by contract. or otherwise.
Agreed Value: In the case of any (i) Contributed Property acquired pursuant
to a Contribution Agreement, the value of such Contributed Property as set forth
in or determined pursuant to such Contribution Agreement or, if no such value is
set forth or determined for such Contributed Property, the portion of the
consideration provided for under such Contribution Agreement allocable to such
Contributed Property, as determined by the General Partner in its reasonable
discretion, (ii) Contributed Property acquired other than pursuant to a
Contribution Agreement, the fair market value of such property at the time of
contribution, as determined by the General Partner using such method of
valuation as it may adopt in its reasonable discretion and (iii) property
distributed to a Partner by the Partnership. the Partnership's Book Value of
such property at the time such property is distributed without taking into
account, in the case of each of (i), (ii) and (iii)), the amount of any related
indebtedness assumed by the Partnership (or the Partner in the case of clause
(iii)) or to which the Contributed Property is taken subject.
Agreement: This Limited Partnership Agreement and all Exhibits attached
hereto, as the same may be amended or restated and in effect from time to time.
Assignee: Any Person to whom one or more Partnership Units have been
Transferred as permitted under this Agreement but who has not become a
Substituted Limited Partner in accordance with the provisions hereof.
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Bankruptcy: Either (i) a referenced Person's making an assignment for the
benefit of creditors, (ii) the filing by a referenced Person of a voluntary
petition in bankruptcy, (iii) a referenced Person's being adjudged insolvent or
having entered against him an order for relief in any bankruptcy or insolvency
proceeding, (iv) the filing by a referenced Person of an answer seeking any
reorganization, composition, readjustment, liquidation, dissolution, or similar
relief under any law or regulation, (v) the filing by a referenced Person of an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against him in any proceeding of reorganization,
composition, readjustment, liquidation, dissolution, or for similar relief under
any statute, law or regulation or (vi) a referenced Person's seeking, consenting
to, or acquiescing in the appointment of a trustee, receiver or liquidator for
all or substantially all of his property (or court appointment of such trustee,
receiver or liquidator).
Book-Tax Disparity: With respect to any item of Contributed Property, or
property the Book Value of which has been adjusted in accordance with Section
4.4(D), as of the date of determination, the difference between the Book Value
of such property and the adjusted basis of such property for federal income tax
purposes.
Book Value: With respect to any Contributed Property, the Agreed Value of
such property reduced (but not below zero) by all Depreciation with respect to
such property properly charged to the Partners' Capital Accounts and with
respect to any other asset, the asset's adjusted basis for federal income tax
purposes; provided, however, (a) the Book Value of all Partnership Assets shall
be adjusted in the event of a revaluation of Partnership Assets in accordance
with Section 4.4(D) hereof, N the Book Value of any Partnership Asset
distributed to any Partner shall be the fair market value of such asset on the
date of distribution as determined by the General Partner and (c) such Book
Value shall be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
Capital Account: The account maintained by the Partnership for each Partner
described in Section 4.4 hereof.
Capital Contribution: The total amount of cash or cash equivalents and the
Agreed Value (reduced to take into account the amount of any related
indebtedness assumed by the Partnership, or to which the Contributed Property is
subject) of Contributed Property which a Partner contributes or is deemed to
contribute to the Partnership pursuant to the terms of this Agreement.
Cash Payment: The payment to a Redeeming Party of a cash amount determined
by multiplying (i) the number of Partnership Units tendered for redemption by
such Redeeming Party pursuant to a validly proffered Redemption Notice by (ii)
the Unit Value with respect to such Partnership Units.
Certificate: The Partnership's Certificate of Limited Partnership filed in
the office of the Secretary of State of the State of Delaware, as amended from
time to time.
Code: The Internal Revenue Code of 1986, as amended from time to time.
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Consent: Either the written consent of a Person or the affirmative vote of
such Person at a meeting duly called and held pursuant to this Agreement, as the
case may be, to do the act or thing for which the consent or vote is required or
solicited, or the act of granting such consent or vote, as the context may
require.
Contributed Property: Each property or other asset (excluding cash and cash
equivalents) contributed or deemed contributed to the Partnership (whether as a
result of a Code Section 708 termination or otherwise). For the avoidance of
doubt, the properties and assets held by the partnership constituting the
Contributed Interests (as defined in the Formation Agreement) shall constitute
Contributed Properties to the extent the Contributed Interests are acquired by
the Partnership.
Contribution Agreements: Those certain agreements among one or more of the
Initial Limited Partners (or Persons in which such Initial Limited Partners have
direct or indirect interests) and the Partnership pursuant to which, inter alia,
the Initial Limited Partners (or such Persons), directly or indirectly are
contributing property to the Partnership on the date of this agreement in
exchange for Partnership Units including, without limitation, the Formation
Agreement.
Conversion Factor: The factor (carried out to four decimal places) applied
for converting Partnership Units to REIT Shares, which shall initially be 1.0;
provided, however, in the event that on or after the date of this Agreement the
General Partner (i) declares or pays a dividend on its outstanding REIT Shares
in REIT Shares or makes a distribution to all holders of its outstanding REIT
Shares in REIT Shares, (H) subdivides its outstanding REIT Shares or (iii)
combines its outstanding REIT Shares into a smaller number of REIT Shares, the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by a
fraction, the numerator of which shall be the number of REIT Shares issued and
outstanding on the record date (assuming for such purposes that such dividend,
distribution, subdivision or combination has occurred as of such time), and the
denominator of which shall be the actual number of REIT Shares (determined
without the above assumption) issued and outstanding on the record date for such
dividend, distribution, subdivision or combination; provided_further, in the
event that the Partnership (a) declares or pays a distribution on the
outstanding Partnership Units in Partnership Units or makes a distribution to
all Partners in Partnership Units. (b) subdivides the outstanding Partnership
Units or (c) combines the outstanding Partnership Units into a smaller number of
Partnership Units, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall he the actual
number of Partnership Units issued and outstanding on the record date
(determined without giving effect to such dividend, distribution, subdivision or
combination), and the denominator of which shall be the actual number of
Partnership Units (determined after giving effect to such dividend.
distribution, subdivision or combination) issued and outstanding on such record
date. Any adjustment to the Conversion Factor shall become effective immediately
after the effective date of such event retroactive to the record date, if any,
for such event.
Depreciation: For each Fiscal Year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period, except that if the Book Value
of an asset differs from its adjusted basis for fed-
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eral income tax purposes at the beginning of such year or other period,
Depreciation shall be adjusted as necessary so as to be an amount which bears
the same ratio to such beginning Book Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such year or
other period bears to the beginning adjusted tax basis; provided, however, that
if the federal income tax depreciation, amortization or other cost recovery
deduction for such year or other period is zero, Depreciation for such year or
other period shall be determined with reference to such beginning Book Value
using any reasonable method approved by the General Partner.
Distributable Cash: with respect to any period, and without duplication:
(i) all cash receipts of the Partnership during such period from all
sources,
(ii) less all cash disbursements of the Partnership during such period.
including, without limitation, disbursements for operating expenses, taxes, debt
service (including, without limitation. the payment of principal, premium and
interest), redemption of Partnership Interests and capital expenditures;
(iii) less amounts added to reserves in the reasonable discretion of the
General Partner, plus amounts withdrawn from reserves in the reasonable
discretion of the General Partner.
Distribution Period: The quarterly period commencing on January 1, April 1,
July 1 and October 1 of each year and ending on and including the day preceding
the next Distribution Period Commencement Date with respect to the Preferred
Units.
ERISA: The Employee Retirement Income Security Act of 1976, as amended from
time to time.
Fiscal Year: The calendar year or such other twelve (12) month period
designated by the General Partner. Formation Agreement: The
Formation/Contribution Agreement dated as of September 7, 1997 by and among
Royale, H/SIC Corporation, Strategic Facility Investors, Inc., South Brunswick
Investment Company, LLC. Comcourt Investment Corporation, Gateway ▇▇▇▇▇▇▇
Development Corporation, Crown Advisors, Inc., ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇,
as the same has heretofore been and hereafter may at any time be amended,
modified and supplemented and in effect.
General Partner: Royale Investments, Inc., a Minnesota corporation
("Royale"), and its respective successor(s) who or which become Successor
General Partner(s) in accordance with the terms of this Agreement.
General Partner Interest: A Partnership Interest held by the General
Partner that is a general partner interest. A General Partner Interest may be
expressed as a number of Partnership Units.
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Involuntary Withdrawal: As to any (i) individual shall mean such
individual's death, incapacity or adjudication of incompetence, (ii) corporation
shall mean its dissolution or revocation of its charter (unless such revocation
is promptly corrected upon notice thereof). (iii) partnership shall mean the
dissolution and commencement of winding up of its affairs, (iv) trust shall mean
the termination of the trust (but not the substitution of trustees). (v) estate
shall mean the distribution by the fiduciary of the estate's complete interest
in the Partnership and (vi) any Partner shall mean the Bankruptcy of such
Partner.
IRS: The Internal Revenue Service, which administers the internal revenue
laws of the United States.
Limited Partner: Those Persons listed as such on Exhibit 1 attached hereto
and made a part hereof, as such Exhibit may be amended from time to time,
including any Person who becomes a Substituted Limited Partner or an Additional
Limited Partner in accordance with the terms of this Agreement; provided that
such term shall not include the Preferred Limited Partners.
Limited Partner Interest: A Partnership Interest held by a Limited Partner
that is a limited partner interest. A Limited Partner Interest may be expressed
as a number of Partnership Units.
Nonrecourse Liability: A liability as defined in Treasury Regulations
Section 1.704-2(b)(3).
Notice: A writing containing the information required by this Agreement to
be communicated to a Person and delivered to such Person in accordance with
Section 12.4; provided, however, that any written communication containing such
information actually received by such Person shall constitute Notice for all
purposes of this Agreement.
Partner Minimum Gain: The gain (regardless of character) which would be
realized by the Partnership if property of the Partnership subject to a partner
nonrecourse debt (as such term is defined in Treasury Regulation Section
1.704-2(b)(4)) were disposed of in full satisfaction of such debt on the
relevant date. The adjusted basis of property subject to more than one partner
nonrecourse debt shall be allocated in a manner consistent with the allocation
of basis for purposes of determining Partnership Minimum Gain hereunder. Partner
Minimum Gain shall be computed hereunder using the Book Value, rather than the
adjusted tax basis, of the Partnership property in accordance with Treasury
Regulations Section 1.704-2(d)(3).
Partner Nonrecourse Deductions: With respect to any partner nonrecourse
debt (as such term is defined in Treasury Regulation Section 1.704-2(b)(4)), the
increase in Partner Minimum Gain during the tax year plus any increase in
Partner Minimum Gain for a prior tax year which has not previously generated a
Partner Nonrecourse Deduction hereunder. The determination of which Partnership
items constitute Partner Nonrecourse Deductions shall be made in a manner
consistent with the manner in which Partnership Nonrecourse Deductions are
determined hereunder.
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Partners: The General Partner, the Preferred Limited Partners and the
Limited Partners as a group. The term "Partner" shall mean a General Partner, a
Preferred Limited Partner or a Limited Partner. Such terms shall be deemed to
include such other Persons who become Partners pursuant to the terms of this
Agreement.
Partnership: The Delaware limited partnership referred to herein as FCO,
L.P., as such partnership may from time to time be constituted.
Partnership Assets: At any particulartime, any assets or property (real or
personal, tangible or intangible, cboate or inchoate, fixed or contingent) owned
by the Partnership.
Partnership Interest or Interest: As to any Partner, such Partner's
ownership interest in the Partnership and including such Partner's right to
distributions under this Agreement and any other rights or benefits which such
Partner has in the Partnership, together with any and all obligations of such
Person to comply with the terms and provisions of this Agreement. A Partnership
Interest may be expressed as a number of Partnership Units.
Partnership Minimum Gain: The aggregate gain (regardless of character)
which would be realized by the Partnership if all of the property of the
Partnership subject to nonrecourse debt (other than partner nonrecourse debt as
such term is defined in Treasury Regulations Section 1.704-2(b)(4)) were
disposed of in full satisfaction of such debt and for no other consideration on
the relevant date. In the case of any Nonrecourse Liability of the Partnership
which is not secured by a mortgage with respect to any specific property of the
Partnership, any and all property of the Partnership to which the holder of said
liability has recourse shall be treated as subject to such Nonrecourse Liability
for purposes of the preceding sentence. Partnership Minimum Gain shall be
computed separately for each Nonrecourse Liability of the Partnership. For this
purpose, the adjusted basis of property subject to two or more liabilities of
equal priority shall be allocated among such liabilities in proportion to the
outstanding balance of such liabilities, and the adjusted basis of property
subject to two or more liabilities of unequal priority shall be allocated to the
liability of inferior priority only to the extent of the excess, if any, of the
adjusted basis of such property over the outstanding balance of the liability of
superior priority. Partnership Minimum Gain shall be computed hereunder using
the Book Value, rather than the adjusted tax basis, of the Partnership property
in accordance with Treasury Regulations Section 1.704-2(d)(3).
Partnership Nonrecourse Deductions: The amount of Partnership deductions
equal to the increase, if any, in the amount of the aggregate Partnership
Minimum Gain during the tax year (plus any increase in Partnership Minimum Gain
for a prior tax year which has not previously generated a Partnership
Nonrecourse Deduction) reduced (but not below zero) by the aggregate
distributions made during the tax year of the proceeds of a Nonrecourse
Liability of the Partnership which are attributable to an increase in
Partnership Minimum Gain within the meaning of Treasury Regulations Section
1.704-2(d). The Partnership Nonrecourse Deductions for a Partnership tax year
shall consist first of depreciation or cost recovery deductions with respect to
each property of the Partnership giving rise to such increase in Partnership
Minimum Gain on a pro rata
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basis to the extent of each such increase, with any excess made up pro rata of
all items of deduction.
Partnership Unit: A fractional, undivided share of the Partnership
Interests of all Partners (other than the Preferred Limited Partners) issued
pursuant to Section 4.1 hereof.
Percentage Interest: As to any Partner (other than the Preferred Limited
Partners), the percentage in the Partnership, as determined by dividing the
Partnership Units then owned by such Partner by the total number of Partnership
Units then outstanding, as the same may be automatically adjusted from time to
time to reflect the issuance and redemption of Partnership Units in accordance
with this Agreement, without requiring the amendment of Exhibit 1 to reflect any
such issuance or redemption.
Person: Any individual, partnership, corporation, trust or other entity.
Preferred Conversion: As described in Section 9.8 hereof.
Preferred Limited Partner: Those persons listed as such on Exhibit 1
attached hereto and made a part hereof, as such Exhibit may be amended from time
to time, in their capacity as limited partners in the Partnership holding
Preferred Units, including any person who becomes a Substituted Preferred
Limited Partner or an Additional Preferred Limited Partner in accordance with
the terms of this Agreement.
Preferred Unit: The Partnership Interest held by a Preferred Limited
Partner.
Priority Return Amount: For each Distribution Period, an amount equal to
1.625% of that portion of the Capital Contribution of the Preferred Limited
Partner allocable to each Preferred Unit.
Profits and Losses: For each Fiscal Year or other period, an amount equal
to the Partnership's taxable income or loss (as the case may be) for such year
or period, determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
a. Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
b. Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition, shall be subtracted from such taxable income or loss;
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c. 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 Book Value of the property
disposed of notwithstanding that the adjusted tax basis of such property
differs from such Book Value;
d. In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or
other period, computed in accordance with the definition of "Depreciation"
herein; and
e. In the event that any item of income, gain, loss or deduction that
has been included in the initial computation of Profit or Loss is subject
to the special allocation rules of Sections 5.2(C) and 5.2(D), Profit or
Loss shall be recomputed without regard to such item.
Recourse Liabilities: The amount of liabilities owed by the Partnership
(other than nonrecourse liabilities and liabilities to which Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulations Section
1.704-2(i)).
Redeeming Party: A Limited Partner or Assignee (other than the General
Partner) who tenders Partnership Units for redemption pursuant to a Redemption
Notice.
Redemption Date: The date for redemption of Partnership Units as set forth
in Section 9.2.
Redemption Notice: A Notice to the General Partner by a Redeeming Party,
substantially in the form attached as Exhibit 2, pursuant to which the Redeeming
Party requests the redemption of Partnership Units in accordance with Article
IX.
Redemption Obligation: The obligation of the Partnership to redeem the
Partnership Units as set forth in Section 9. 1 (A).
Redemption Period: The 45-day period immediately following the filing with
the SEC by the General Partner of an annual report of the General Partner on
Form 10-K or a quarterly report of the General Partner on Form 10-Q or such
other period or periods as the General Partner may otherwise determine.
Redemption Price: As defined in Section 9.3 hereof.
Redemption Restriction: A restriction on the ability of the Partnership to
redeem the Partnership Units as set forth in Section 9. 1 (A).
Registration Rights Agreement: A Registration Rights Agreement,
substantially in the form of Exhibit 3 hereto, pursuant to which Royale will
agree, among other things, to register under the Securities Act of 1933, as
amended, REIT Shares issued in connection with Share Payments made under Article
IX hereof.
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REIT: A real estate investment trust, as defined in Code Section 856.
REIT Charter: The Amended and Restated Articles of Incorporation of Royale
filed with the Department of State of the State of Minnesota on November 2,
1990, as the same may hereafter be amended or restated and in effect from time
to time.
REIT Share: A share of common stock representing an ownership interest in
the General Partner.
REIT Share Rights: Rights to acquire additional REIT Shares issued to all
holders of REIT Shares, whether in the form of rights. options. warrants or
convertible or exchangeable securities, to the extent the same have been issued
without additional consideration after the initial acquisition of such REIT
Shares.
Royale: Royale Investments, Inc., a Minnesota corporation.
SEC: The Securities and Exchange Commission.
Share Payment: The payment to a Redeeming Party of a number of REIT Shares
determined by multiplying (i) the number of Partnership Units tendered for
redemption by such Redeeming Party pursuant to a validly proffered Redemption
Notice by (ii) the Conversion Factor. In the event the General Partner grants
any REIT Share Rights on or after the date of this Agreement and prior to such
payment, any Share Payment shall include for the Redeeming Party such Redeeming
Party's ratable share of such REIT Share Rights other than REIT Share Rights
which have expired.
Subsidiary: With respect to any Person, any corporation or other entity of
which a majority of (i) the voting power of the voting equity securities or (ii)
the outstanding equity interests is owned, directly or indirectly, by such
Person.
Substituted Limited Partner/Preferred Limited Partner: That Person or those
Persons admitted to the Partnership as a substitute Limited Partner or
substitute Preferred Limited Partner, in accordance with the provisions of this
Agreement. A Substituted Limited Partner or Substituted Preferred Limited
Partner, upon admission as such, shall succeed to the rights, privileges and
liabilities of the predecessor in interest as a Limited Partner or Preferred
Limited Partner.
Successor General Partner: Any Person who is admitted to the Partnership as
substitute General Partner pursuant to this Agreement. A Successor General
Partner, upon its admission as such, shall succeed to the rights, privileges and
liabilities of its predecessor in interest as General Partner, in accordance
with the provisions of the Act.
Tax Matters Partner: The General Partner or such other Partner who becomes
Tax Matters Partner pursuant to the terms of this Agreement.
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Terminating Capital Transaction: The sale or other disposition of all or
substantially all of the Partnership Assets or a related series of transactions
that, taken together, result in the sale or other disposition of all or
substantially all of the Partnership Assets.
Transfer: With respect to any Partnership Unit shall mean a transaction in
which a Partner assigns his Partnership Interest to another Person and includes
any sale. assignment, gift. pledge, mortgage, exchange, hypothecation,
encumbrance or other disposition by law or otherwise; provided, however, the
redemption of any Partnership Interest pursuant to Article IX hereof shall not
constitute a "transfer" for purposes hereof.
Treasury Regulations: The Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time.
Unit Value: With respect to any Partnership Unit, the average of the daily
market price for a REIT Share for the ten (10) consecutive trading days
immediately preceding the date of receipt of a Redemption Notice by the General
Partner multiplied by the Conversion Factor. If the REIT Shares are traded on a
securities exchange or the NASDAQ Small Cap Market or National Market System,
the market price for each such trading day shall be the reported last sale price
on such day or, if no sales take place on such day, the average of the closing
bid and asked prices on such day. If the REIT Shares are not traded on a
securities exchange or the NASDAQ Small Cap Market or National Market System,
the market price for each such trading day shall be determined by the General
Partner using any reasonable method of valuation. If a Share Payment would
include any REIT Share Rights, the value of such REIT Share Rights shall be
determined by the General Partner using any reasonable method of valuation,
taking into account the Unit Value determined hereunder and the factors used to
make such determination and the value of such REIT Share Rights shall be
included in the Unit Value.
SECTION 1.2 Rules of Construction. The following rules of construction
shall apply to this Agreement:
(A) All section headings in this Agreement are for convenience of reference
only and are not intended to qualify the meaning of any section.
(B) All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders, the
singular shall include the plural, and vice versa, as the context may require.
(C) Each provision of this Agreement shall be considered severable from the
rest, and if any provision of this Agreement or its application to any Person or
circumstances shall be held invalid and contrary to any existing or future law
or unenforceable to any extent, the remainder of this Agreement and the
application of any other provision to any Person or circumstances shall not be
affected thereby and shall be interpreted and enforced to the greatest extent
permitted by law so as to give effect to the original intent of the parties
hereto.
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(D) Unless otherwise specifically and expressly limited in the context, any
reference herein to a decision, determination, act, action, exercise of a right,
power or privilege, or other procedure by the General Partner shall mean and
refer to the decision, determination. act, action, exercise or other procedure
by the General Partner in its sole and absolute discretion.
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ARTICLE II - CONTINUATION
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SECTION 2.1 Continuation. The Partners hereby continue the Partnership as a
limited partnership under the Act. The General Partner shall take all action
required by law to perfect and maintain the Partnership as a limited partnership
under the Act and under the laws of all other . urisdictions in which the
Partnership may elect to conduct business, including but not limited to the
filing of amendments to the Certificate with the Delaware Secretary of State,
and qualification of the Partnership as a foreign limited partnership in the
jurisdictions in which such qualification shall be required, as determined by
the General Partner. The General Partner shall also promptly register the
Partnership under applicable assumed or fictitious name statutes or similar
laws.
SECTION 2.2 Name. The name of the Partnership is FCO, L.P. The General
Partner may adopt such assumed or fictitious names as it deems appropriate in
connection with the qualifications and registrations referred to in Section 2.
1.
SECTION 2.3 Place of Business; Registered Agent. The principal office of
the Partnership is located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
which office may be changed to such other place as the General Partner may from
time to time designate. The Partnership may establish offices for the
Partnership within or without the State of Delaware as may be determined by the
General Partner. The initial registered agent for the Partnership in the State
of Delaware is The Corporation Trust Company, whose address is c/o Corporation
Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
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ARTICLE III - BUSINESS PURPOSE
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SECTION 3.1 Business. The business of the Partnership shall be (i)
conducting any business that may be lawfully conducted by a limited partnership
pursuant to the Act including, without limitation, acquiring, owning, managing,
developing, leasing, marketing, operating and, if and when appropriate, selling,
commercial, industrial, office and net leased retail properties, (ii) entering
into any partnership, joint venture or other relationship to engage in any of
the foregoing or the ownership of interests in any entity engaged in any of the
foregoing, (iii) making loans, guarantees, indemnities or other financial
accommodations and borrowing money and pledging its assets to secure the
repayment thereof, (iv) to do any of the foregoing with respect to any Affiliate
or Subsidiary and (v) doing anything necessary or incidental to the foregoing;
provided, however, that
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business of the Partnership shall be limited so as to permit the General Partner
to elect and maintain its status as a REIT (unless the General Partner
determines no longer to qualify as a REIT).
SECTION 3.2 Authorized Activities. In carrying out the purposes of the
Partnership, but subject to all other provisions of this Agreement, the
Partnership is authorized to engage in any kind of lawful activity, and perform
and carry out contracts of any kind, necessary or advisable in connection with
the accomplishment of the purposes and business of the Partnership described
herein and for the protection and benefit of the Partnership; provided that the
General Partner shall not be obligated to cause the Partnership to take, or
refraining from taking, any action which, in the judgment of the General
Partner, (i) could adversely affect the ability of the General Partner to
qualify and continue to qualify as a REIT, (ii) could subject the General
Partner to additional taxes under Code Section 857 or 4981 or (iii) could
violate any law or regulation of any governmental body or agency having
jurisdiction over the General Partner or its securities.
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ARTICLE IV - CAPITAL CONTRIBUTION
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SECTION 4.1 Capital Contributions.
(A) Upon the contribution to the Partnership of property in accordance with
a Contribution Agreement. Partnership Units and/or Preferred Units shall be
issued in accordance with. and as contemplated by, such Contribution Agreement,
and the Persons receiving such Partnership Units and/or Preferred Units shall
become Partners and shall be deemed to have made a Capital Contribution as set
forth on Exhibit 1. The Capital Contribution made by each Partner contributing
assets to the Partnership as of the date hereof under the Formation Agreement
shall be determined by multiplying the number of Partnership Units issued to
such Partner by $5.50 and by multiplying the number of Preferred Units issued to
such Partner by $25.00. Exhibit I also sets forth the initial number of
Partnership Units and Preferred Units owned by each Partner and the Percentage
Interest of each Partner, which Percentage Interest shall be adjusted from time
to time by the General Partner to reflect the issuance of additional Partnership
Units, the redemption of Partnership Units, the conversion of Preferred Units
into Partnership Units, additional Capital Contributions and similar events
having an effect on a Partner's Percentage Interest. Except as set forth in
Section 4.2 (regarding issuance of additional Partnership Units) or Section 7.6
(regarding withholding obligations), no Partner shall be required under any
circumstances to contribute to the capital of the Partnership any amount beyond
that sum required pursuant to this Article IV.
(B) Anything in the foregoing Section 4. 1 (A) or elsewhere in this
Agreement notwithstanding, the Partnership Units held by the General Partner
shall, at all times, be deemed to be General Partner units and shall constitute
the General Partner Interest.
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SECTION 4.2 Additional Partnership Interests.
(A) The Partnership may issue additional limited partnership interests in
the form of Partnership Units or Preferred Units for any Partnership purpose at
any time or from time to time. to any Partner or other Person (other than the
General Partner, except in accordance with Section 4.2(B) below).
(B) The Partnership also may from time to time issue to the General Partner
additional Partnership Units, Preferred Units or other Partnership Interests in
such classes and having such designations, preferences and relative rights
(including preferences and rights senior to the existing Limited Partner
Interests) as shall be determined by the General Partner in accordance with the
Act and governing law. Except as provided in Article IX, any such issuance of
Partnership Units, Preferred Units or Partnership Interests to the General
Partner shall be conditioned upon (i) the undertaking by the General Partner of
a related issuance of its capital stock (with such shares having designations,
rights and preferences such that the economic rights of the holders of such
capital stock are substantially similar to the rights of the additional
Partnership Interests issued to the General Partner) and the General Partner
making a Capital Contribution (a) in an amount equal to the net proceeds raised
in the issuance of such capital stock, in the event such capital stock is sold
for cash or cash equivalents or (b) the property received in consideration for
such capital stock, in the event such capital stock is issued in consideration
for other property or (ii) the issuance by the General Partner of capital stock
under any stock option or bonus plan and the General Partner making a Capital
Contribution in an amount equal to the exercise price of the option exercised
pursuant to such stock option or other bonus plan.
(C) Except as contemplated by Article IX (regarding redemptions) or Section
4.2(B), the General Partner shall not issue any (i) additional RETT Shares, (ii)
rights, options or warrants containing the right to subscribe for or purchase
REIT Shares (other than options granted under the General Partner's Stock Option
Plan for Non-Employee Directors or any stock option or similar plan for
officers, directors and employees of the General Partner or any of its
Affiliates) or (iii) securities convertible or exchangeable into REIT Shares
(collectively, "Additional REIT Securities") other than to all holders of REIT
Shares, pro rata, unless (x) the Partnership issues to the General Partner (i)
Partnership Interests, (ii) rights, options or warrants containing the right to
subscribe for or purchase Partnership Interests or (iii) securities convertible
or exchangeable into Partnership Interests such that the General Partner
receives an economic interest in the Partnership substantially similar to the
economic interest in the General Partner represented by the Additional REIT
Securities and (y) the General Partner contributes to the Partnership the net
proceeds from, or the property received in consideration for, the issuance of
the Additional REIT Securities and the exercise of any rights contained in any
Additional REIT Securities.
SECTION 4.3 No Third Party Beneficiaries. The foregoing provisions of this
Article IV are not intended to be for the benefit of any creditor of the
Partnership or other Person to whom any debts, liabilities or obligations are
owed by (or who otherwise has any claim against) the Partnership or any of the
Partners and no such creditor or other Person shall obtain any right under
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any such foregoing provision against the Partnership or any of the Partners by
reason of any debt, liability or obligation (or otherwise).
SECTION 4.4 Capital Accounts.
(A) The Partnership shall establish and maintain a separate Capital Account
for each Partner in accordance with Code Section 704 and Treasury Regulations
Section 1.7041(b)(2)(iv). The Capital Account of each Partner shall be credited
with:
(1) the amount of all Capital Contributions made to the Partnership by
such Partner in accordance with this Agreement; plus
(2) all income and gain of the Partnership computed in accordance with
this Section 4.4 and allocated to such Partner pursuant to Article V
(including for purposes of this Section 4.4(A), income and gain exempt from
tax);
and shall be debited with the sum of:
(1) all losses or deductions of the Partnership computed in accordance with
this Section 4.4 and allocated to such Partner pursuant to Article V,
(2) such Partner's distributive share of expenditures of the Partnership
described in Code Section 705(a)(2)(B). and
(3) all cash and the Agreed Value (reduced to take into account the amount
of any related indebtedness assumed by the Partner, or to which the distributed
property is subject) of any property actually distributed or deemed distributed
by the Partnership to such Partner pursuant to the terms of this Agreement.
Any reference in any section or subsection of this Agreement to the Capital
Account of a Partner shall be deemed to refer to such Capital Account as the
same may be credited or debited from time to time as set forth above.
(B) For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, the
determination, recognition and classification of each such item shall be the
same as its determination, recognition and classification for federal income tax
purposes, determined in accordance with Code Section 703(a), with the following
adjustments:
(1) any income, gain or loss attributable to the taxable disposition of any
Partnership Asset shall be determined by treating the adjusted basis of such
property as of the date of such disposition as equal to the Book Value of such
property as of such date;
(2) the computation of all items of income, gain, loss and deduction shall
be made without regard to any Code Section 754 election that may be made by the
Partnership, except
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to the extent required in accordance with the provisions of Treasury Regulations
Section 1.7041(b)(2)(iv)(m);
(3) in lieu of depreciation, amortization and other cost recovery
deductions taken into account in computing Profit and Loss, there shall be taken
into account Depreciation for such Fiscal Year;
(4) in the event the Book Value of any Partnership Asset is adjusted
pursuant to Section 4.4(D) below, the amount of such adjustment shall be treated
as gain or loss from the disposition of such asset.
(C) Any transferee of a Partnership Interest shall succeed to a pro rata
portion of the transferor's Capital Account transferred unless such Transfer
causes a Code Section 708 termination of the Partnership, in which case the Book
Value of all Partnership Assets shall be adjusted immediately prior to the
deemed distribution pursuant thereto as provided in Section 4.4(D).
(D) Consistent with the provisions of Treasury Regulations Section 1.7041
(b)(2)(iv)(f), (i) immediately prior to the acquisition of an additional
Partnership Interest by any new or existing Partner in connection with the
contribution of money or other property (other than a de minimis amount) to the
Partnership, (ii) immediately prior to the distribution by the Partnership to a
Partner of Partnership property (other than a de minimis amount) as
consideration for a Partnership Interest and (iii) immediately prior to the
liquidation of the Partnership as defined in Treasury Regulations Section
1.704-1(b)(2)(ii)(g), the Book Value of all Partnership Assets shall be revalued
upward or downward to reflect the fair market value of each such Partnership
Asset as determined by the General Partner using such reasonable method of
valuation as it may adopt unless the General Partner shall determine that such
revaluation is not necessary to maintain Capital Accounts in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv).
(E) The foregoing provisions of this Section 4.4 are intended to comply
with Treasury Regulations Section 1.704- 1(b) and shall be interpreted and
applied in a manner consistent with such Treasury Regulations. In the event the
General Partner shall determine that it is prudent to modify the manner in which
the Partners' Capital Accounts are computed hereunder in order to comply with
such Treasury Regulations. the General Partner may make such modification if
such modification is not likely to have a material effect on the amount or
timing of any distribution to any Partner under the terms of this Agreement and
the General Partner notifies the other Partners in writing of such modification
prior to making such modification.
SECTION 4.5 Return of Capital Account; Interest. Except as otherwise
specifically provided in this Agreement, (i) no Partner shall have any right to
withdraw or reduce its Capital Contributions or Capital Account, or to demand
and receive property other than cash from the Partnership in return for its
Capital Contributions or Capital Account; (ii) no Partner shall have any
priority over any other Partners as to the return of its Capital Contributions
or Capital Account; (iii) any return of Capital Contributions or Capital
Accounts to the Partners shall be solely from the Partnership Assets, and no
Partner shall be personally liable for any such return; and (iv) no interest
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shall be paid by the Partnership on Capital Contributions or on balances in
Partners' Capital Accounts.
SECTION 4.6 Preemptive Rights. No Person shall have any preemptive or
similar rights with respect to the issuance or sale of additional Partnership
Units.
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ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS
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SECTION 5.1 Limited Liability. For bookkeeping purposes, the Profits of the
Partnership shall be shared, and the Losses of the Partnership shall be borne,
by the Partners as provided in Section 5.2 below; provided, however, that except
as expressly provided in this Agreement, neither any Limited Partner (in its
capacity as a Limited Partner) nor any Preferred Limited Partner (in its
capacity as a Preferred Limited Partner) shall be personally liable for losses,
costs, expenses, liabilities or obligations of the Partnership in excess of its
Capital Contribution required under Article IV hereof.
SECTION 5.2 Profits, Losses and Distributive Shares.
(A) Profits. After giving effect to the special allocations, if any,
provided in Sec-tion 5.2(C) and (D). Profits in each Fiscal Year shall be
allocated in the following order:
(1) First, to the General Partner until the cumulative Profits allocated to
the General Partner under this Section 5.2(A)(1) equal the cumulative Losses
allocated to such Partner under Section 5.2(B)(4);
(2) Second, to the Preferred Limited Partners in the proportion to the
cumulative Losses allocated to such Partners under Section 5.2(B)(3) until the
cumulative Profits allocated to such Partners under this Section 5.2(A)(2) equal
the cumulative Losses allocated to such Partners under Section 5.2(B)(3);
(3) Third, to each Partner in proportion to the cumulative Losses allocated
to such Partner under Section 5.2(B)(2), until the cumulative Profits allocated
to such Partner under this Section 5.2(A)(3) equal the cumulative Losses
allocated to such Partner under Section 5.2(B)(2);
(4) Fourth, to each Partner in proportion to the cumulative Losses
allocated to such Partner under Section 5.2(B)(1), until the cumulative Profits
allocated to such Partner under this Section 5.2(A)(4) equal the cumulative
Losses allocated to such Partner under Section 5.2(B)(1);
(5) Fifth, to the Preferred Limited Partners in an amount equal to the
excess of (x) the Priority Return Amount for each Distribution Period or portion
thereof that ends on or prior
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to the close of the Fiscal Year over (y) the cumulative Profits previously
allocated under this Section 5.2(B)(5); and
(6) Then, the balance, if any, to the Partners (other than the Preferred
Limited Partners, with respect to their Preferred Units) in accordance with
their respective Percentage Interests.
The allocation of Profits to any Preferred Limited Partner under Section
5.2(A)(5) shall be appropriately prorated in the case of Preferred Units that
are outstanding for less than all of any Distribution Period.
(B) Losses. After giving effect to the special allocations, if any,
provided in Section 5.2(C) and (D), Losses in each Fiscal Year shall be
allocated in the following order of priority:
(1) First, to the Partners (other than the Preferred Limited Partners, with
respect to their Preferred Units), in accordance with their respective
Percentage Interests, but not in excess of the positive Capital Account balance
of any Partner prior to the allocation provided for in this Section 5.2(B)(1);
(2) Second, to the Partners (other than the Preferred Limited Partners,
with respect to their Preferred Units) with positive Adjusted Capital Account
balances prior to the allocation provided for in this Section 5.2(B)(2), in
proportion to the amount of such balances until all such balances are reduced to
zero;
(3) Third, to the Preferred Limited Partners in proportion to their
Adjusted Capital Account balances until their Adjusted Capital Accounts are
reduced to zero; and
(4) Thereafter, to the General Partner;
provided, however, that this Section 5.2(B) shall control, notwithstanding any
reallocation or adjustment of taxable income. loss or other items by the
Internal Revenue Service or any other taxing authority.
(C) Special Allocations. Except as otherwise provided in this Agreement,
the following special allocations will be made in the following order and
priority:
(1) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Article V, if there is a net decrease in Partnership Minimum
Gain during any tax year or other period for which allocations are made, each
Partner will be specially allocated items of Partnership income and gain for
that tax year or other period (and, if necessary, subsequent periods) in an
amount equal to such Partner's share of the net decrease in Partnership Minimum
Gain during such tax year or other period determined in accordance with Treasury
Regulations Section 1.7042(g). Allocations pursuant to the preceding sentence
shall be made in proportion to the respective amounts required to be allocated
to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2).
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This Section 5.2(C)(1) is intended to comply with the minimum gain chargeback
requirements set forth in Treasury Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith, including the exceptions to the minimum gain
chargeback requirement set forth in Treasury Regulations Section 1.704-2(f) and
(3). If the General Partner concludes, after consultation with tax counsel, that
the Partnership meets the requirements for a waiver of the minimum gain
chargeback requirement as set forth in Treasury Regulations Section
1.704-2(f)(4), the General Partner may take steps reasonably necessary or
appropriate in order to obtain such waiver.
(2) Partner Nonrecourse Debt Minimum Gain Chargeback. Notwithstanding any
other provision of this Section (other than Section 5.2(C)(1) which shall be
applied before this Section 5.2(C)(2)), if there is a net decrease in Partner
Minimum Gain during any tax year or other period for which allocations are made,
each Partner with a share of Partner Minimum Gain determined in accordance with
Treasury Regulations Section 1.704-2(i)(5) shall be specially allocated items of
Partnership income and gain for that period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
Partner Minimum Gain determined in accordance with Treasury Regulations Section
1.704-2(i)(4). The items to be so allocated shall be determined in accordance
with Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii). This
Section 5.2(C)(2) is intended to comply with the minimum gain chargeback
requirements of Treasury Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith, including the exceptions set forth in
Treasury Regulations Section 1.704-2(f)(2) and (3) to the extent such exceptions
apply to Treasury Regulations Sections 1.704-2(i)(4). If the General Partner
concludes, after consultation with tax counsel, that the Partnership meets the
requirements for a waiver of the Partner Minimum Gain chargeback requirement set
forth in Treasury Regulation 1.704-2(f), but only to the extent such exception
applies to Treasury Regulations Section 1.704-2(i)(4), the General Partner may
take steps necessary or appropriate to obtain such waiver.
(3) Qualified Income Offset. A Partner who unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be specially allocated items of
Partnership income and gain in an amount and manner sufficient to eliminate, to
the extent required by Treasury Regulations 1.704-1(b)(2)(ii)(d), the Adjusted
Capital Account Deficit of the Partner as quickly as possible, provided that an
allocation pursuant to this Section 5.2(C)(3) shall be made if and only to the
extent that such Partner would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Article V have been tentatively made
as if this Section 5.2(C)(3) were not contained in this Agreement.
(4) Partnership Nonrecourse Deductions. Partnership Nonrecourse Deductions
for any taxable year or other period for which allocations are made will be
allocated among the Partners in proportion tot heir respective Partnership
Interests in the Partnership.
(5) Partner Nonrecopurse Deductions. Notwithstanding anything tot he
contrary in this Agreement, any Partner Nonrecourse Deductions for any taxable
year or other period for which allocations are madewill be allocated to the
Partner who bears the economic risk of loss with respect to the liability to
which the Partner Nonrecourse Deductions are attributable in accordance with
Treasury Regulations Section 1.704-2(i).
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(6) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset under Code Section 734(b) or 743(b)
is required to be taken into account in determining Capital Accounts under
Treasury Regulations Section --1.704-1(b)(2)(iv)(m)(2) or (4), the amount of the
adjustment to the Capital Accounts will be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustinent
decreases the basis of the asset), and the gain or loss will be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted under Treasury Regulations Section
1.704-1(b)(2)(iv)(m).
(7) Depreciation Recapture. In the event there is any recapture of
Depreciation or investment tax credit, the allocation thereof shall be made
among the Partners in the same proportion as the deduction for such Depreciation
or investment tax credit was allocated.
(8) Interest in Partnership. Notwithstanding any other provision of this
Agreement, no allocation of Profit or Loss (or item of Profit or Loss) will be
made to a Partner if the allocation would not have "economic effect" under
Treasury Regulations Section 1.704-1(b)(2)(ii)(a) or otherwise would not be in
accordance with the Partner's interest in the Partnership within the meaning of
Treasury Regulations Section 1.704-1(b)(3).
(D) Curative Allocations. The allocations set forth in Section 5.2(C)(1)
through (8) (the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2. The
Regulatory Allocations may not be consistent with the manner in which the
Partners intend to divide Partnership distributions. Accordingly, the General
Partner is authorized to further allocate Profits, Losses, and other items among
the Partners in a reasonable manner so as to prevent the Regulatory Allocations
from distorting the manner in which Partnership distributions would be divided
among the Partners under Section 5.3, but for application of the Regulatory
Allocations. In general, the reallocation will be accomplished by specially
allocating other Profits, Losses and items of income, gain, loss and deduction,
to the extent they exist, among the Partners so that the net amount of the
Regulatory Allocations and the special allocations to each Partner is zero. The
General Partner may accomplish this result in any reasonable manner that is
consistent with Code Section 704 and the related Treasury Regulations.
(E) Tax Allocations.
(1) Except as otherwise provided in Section 5.2(E)(2), each item of income,
gain, loss and deduction shall be allocated for federal income tax purposes in
the same manner as each correlative item of income, gain, loss or deduction, is
allocated for book purposes pursuant to the provisions of Section 5.2 hereof.
(2) Notwithstanding anything to the contrary in this Article V, in an
attempt to eliminate any Book-Tax Disparity with respect to a Contributed
Property, items of income, gain, loss or deduction with respect to each such
property shall be allocated for federal income tax purposes among the Partners
as follows:
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(a) Depreciation, Amortization and Other Cost Recovery Iterns. In the
case of each Contributed Property with a Book-Tax Disparity, any item of
depreciation, amortization or other cost recovery allowance attributable to
such property shall be allocated as follows: (x) first, to Partners (the
"Non-Contributing Partners") other than the Partners who contributed such
property to the Partnership (or are deemed to have contributed the property
pursuant to Section 4.1(A) (the "Contributing Partners') in an amount up to
the book allocation of such items made to the Non-Contributing Partners
pursuant to Section 5.2 hereof, pro rata in proportion to the respective
amount of book items so allocated to the Non-Contributing Partners pursuant
to Section 5.2 hereof; and (y) any remaining depreciation, amortization or
other cost recovery allowance to the Contributing Partners in proportion to
their Percentage Interests. In no event shall the total depreciation,
amortization or other cost recovery allowance allocated hereunder exceed
the amount of the Partnership's depreciation, amortization or other cost
recovery allowance with respect to such property.
(b) Gain or Loss on Disposition. In the event the Partnership sells or
otherwise disposes of a Contributed Property with a Book-Tax Disparity, any
gain or loss recognized by the Partnership in connection with such sale or
other disposition shall be allocated among the Partners as follows: (x)
first, any gain or loss shall be allocated to the Contributing Partners in
proportion to their Percentage Interests to the extent required to
eliminate any Book-Tax Disparity with respect to such property; and (y) any
remaining gain or loss shall be allocated among the Partners in the same
manner that the correlative items of book gain or loss are allocated among
the Partners pursuant to Section 5.2 hereof.
(3) In the event the Book Value of a Partnership Asset (including a
Contributed Property) is adjusted pursuant to Section 4.4(D) hereof, and such
asset has not been deemed contributed to a new partnership, with the
contributing partnership then being liquidated pursuant to Code Section 708
subsequent thereto, all items of income, gain. loss or deduction in respect of
such property shall be allocated for federal income tax purposes among the
Partners in the same manner as provided in Section 5.2(E)(2) hereof to take into
account any variation between the fair market value of the property, as
determined by the General Partner using such reasonable method of valuation as
it may adopt, and the Book Value of such property, both determined as of the
date of such adjustment.
(4) The General Partner shall have the authority to elect alternative
methods to eliminate the Book-Tax Disparity with respect to one or more
Contributed Properties, as permitted by Treasury Regulations Sections 1.704-3
and 1.704-3T, and such election shall be binding on all of the Partners.
(5) The Partners hereby intend that the allocation of tax items pursuant to
this Section 5.2(E) comply with the requirements of Code Section 704(c) and
Treasury Regulations Sections 1.704-3 and 1.704-3T.
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(6) The allocation of items of income, gain, loss or deduction pursuant to
this Section 5.2(E) are solely for federal, state and local income tax purposes,
and the Capital Account balances of the Partners shall be adjusted solely for
allocations of "book" items in respect of Partnership Assets pursuant to Section
5.2(A), (B), (C), (D) and (F) hereof
(F) Other Allocation Rules. The following rules will apply to the
calculation and allocation of Profits, Losses and other items:
(1) Except as otherwise provided in the Agreement. all Profits, Losses and
other items allocated to the Partners will be allocated among them in proportion
to their Percentage Interests.
(2) For purposes of determining the Profits, Losses or any other item
allocable to any period, Profits, Losses and other items will be determined on a
daily, monthly or other basis, as determined by the General Partner using any
permissible method under Code Section 706 and the related Treasury Regulations.
(3) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss and deduction, and other allocations not provided
for in this Agreement will be divided among the Partners in the same proportions
as they share Profits and Losses, provided that any credits shall be allocated
in accordance with Treasury Regulations Section 1.704-1(b)(4)(ii).
(4) For purposes of Treasury Regulations Section 1.752-3(a), the Partners
hereby agree that any nonrecourse liabilities of the Partnership in excess of
the sum of (i) the Partnership Minimum Gain and (ii) the aggregate amount of
taxable gain that would be allocated to the Partners under Section 704(c) (or in
the same manner as Section 704(c) in connection with a revaluation of
Partnership property) if the Partnership disposed of (in a taxable transaction)
all Partnership property subject to one or more nonrecourse liabilities of the
Partnership in full satisfaction of such liabilities and for no other
consideration, shall be allocated among the Partners in accordance with their
respective shares of Profits. The General Partner shall have discretion in any
Fiscal Year to allocate such excess nonrecourse liabilities among the Partners
(a) in a manner reasonably consistent with allocations (that have substantial
economic effect) of some other significant item of Partnership income or gain or
(b) in accordance with the manner in which it is reasonably expected that the
deductions attributable to the excess nonrecourse liabilities will be allocated.
(G) Partner Acknowledgment. The Partners agree to be bound by the
provisions of this Section 5.2 in reporting their shares of Partnership income,
gain, loss, deduction and credit for income tax purposes.
(H) Regulatory Compliance. The foregoing provisions of this Section 5.2
relating to the allocation of Profits, Losses and other items for federal income
tax purposes are intended to comply with Treasury Regulations Sections
1.704-1(b), 1.704-2, 1.704-3 and 1.704-3T and shall be interpreted and applied
in a manner consistent with such Treasury Regulations.
SECTION 5.3 Distributions.
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(A) Distributable Cash for each Fiscal Year shall be distributed in the
following order of priority:
(1) First, the General Partner shall cause the Partnership to distribute to
the holder of each Preferred Unit an amount in cash equal to the cumulative
undistributed Priority Return Amount on December 31, March 31, June 30 and
September 30 of each year, commencing on December 31, 1997 (or in the case of a
Preferred Unit with an issuance date after December 31, 1997, on the first such
distribution date following the applicable issuance date); provided that, if any
such distribution date shall be a Saturday, Sunday or day on which banking
institutions in the State of New York are authorized or obligated by law to
close, or a day which is declared a national or New York State holiday (any of
the foregoing, a "Non-business Day"), then such distribution shall be made on
the next succeeding day which is not a Non-business Day. In any case in which a
Preferred Unit is outstanding for less than all of one or more Distribution
Periods, the amount distributable to the Preferred Limited Partner in respect of
such Unit shall be appropriately adjusted on the basis of a 360 day year
consisting of twelve 30 day months.
(2) Second, there shall be distributed with respect to each Limited Partner
Unit (other than a Preferred Unit) an amount equal on a per Unit basis to the
amount (other than in General Partner common shares) distributed by the General
Partner on its common shares during the Fiscal Year (other than a liquidating
distribution), except that the first distribution paid on Units issued on
October 15, 1997 shall be pro rated to reflect the actual portion of the period
for which the distribution is being paid during which such Units were
outstanding. To the extent practicable, distributions under this paragraph shall
be made at the same time as the dividend distributions on the General Partner's
common shares.
(3) Third, there shall be distributed to each holder of a Limited Partner
Interest (other than the Preferred Limited Partners) an amount equal to (x) the
product of the taxable income and gain allocated to such holder for the Fiscal
Year under Section 5.2(E) and the maximum federal income tax rate plus 7%
reduced by (y) the distributions received by such holder under Section 5.3(A)(2)
during the Fiscal Year. To the extent practicable, distributions under this
paragraph shall be made in sufficient time to permit Limited Partners to pay
required installments of estimated tax and the final tax payment for the taxable
year.
(B) After giving effect to Section 5.3(A), the General Partner shall have
the authority to cause the Partnership to make other distributions from time to
time as it determines, including without limitation, distributions that are
sufficient to enable the General Partner to (i) maintain its status as a REIT,
(ii) avoid the imposition of any tax under Code Section 857 and (iii) avoid the
imposition of any excise tax under Code Section 4981.
(C) Distributions pursuant to Section 5.3(B) shall be made pro rata among
the Partners of record on the Record Date established by the General Partner for
the distribution, in accordance with their respective Percentage Interests,
without regard to the length of time the record holder has been such.
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(D) The General Partner shall use its reasonable efforts to make
distributions to the Partners so as to preclude any distribution or portion
thereof from being treated as part of a sale of property to the Partnership by a
Partner under Section 707 of the Code or the Treasury Regulations thereunder;
provided that the General Partner and the Partnership shall not have liability
to a Limited Partner under any circumstances as a result of any distribution to
a Partner being so treated.
SECTION 5.4 Distributions upon Liquidation. Notwithstanding any other
provision hereof, proceeds of a Terminating Capital Transaction shall be
distributed to the Partners in accordance with Section 10.2.
SECTION 5.5 Amounts Withheld. All amounts withheld pursuant to the Code or
any provision of state or local tax law and Section 7.6 of this Agreement with
respect to any allocation, payment or distribution to the General Partner, the
Preferred Limited Partners, the Limited Partners or Assignees shall be treated
as amounts distributed to such General Partner, the Preferred Limited Partners,
the Limited Partners or Assignees, as applicable, pursuant to Section 5.3 of
this Agreement.
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ARTICLE VI - PARTNERSHIP MANAGEMENT
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SECTION 6.1 Management and Control of Partnership Business.
(A) Except as otherwise expressly provided or limited by the provisions of
this Agreement, the General Partner shall have full, exclusive and complete
discretion to manage the business and affairs of the Partnership, to make all
decisions affecting the business and affairs of the Partnership and to take all
such action as it deems necessary or appropriate to accomplish the purposes of
the Partnership as set forth herein. Except as set forth in this Agreement, the
Limited Partners shall not have any authority, right, or power to bind the
Partnership, or to manage. or to participate in the management of the business
and affairs of the Partnership in any manner whatsoever. Such management shall
in every respect be the full and complete responsibility of the General Partner
alone as herein provided.
(B) In carrying out the purposes of the Partnership, the General Partner
shall be authorized to take all actions it deems necessary and appropriate to
carry on the business of the Partnership. The Limited Partners and the Preferred
Limited Partners, by execution hereof, agree that the General Partner is
authorized to execute, deliver and perform any agreement and/or transaction on
behalf of the Partnership.
(C) The General Partner and its Affiliates may acquire Limited Partner
Interests or Preferred Units from Limited Partners or Preferred Limited Partners
who agree so to transfer Limited Partner Interests or Preferred Units from the
Partnership in accordance with Section 4.2(A).
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Any Limited Partner Interest or Preferred Unit acquired by the General Partner
shall be converted into a General Partner Interest. Upon acquisition of any
Limited Partner Interest or Preferred Unit by an Affiliate of the General
Partner, such Affiliate shall have all the rights of a Limited Partner or
Preferred Limited Partner, as the case may be.
SECTION 6.2 No Management by Limited partners; Limitation of Liability.
(A) Neither the Limited Partners, in their capacity as Limited Partners,
nor the Preferred Limited Partners, in their capacity as Preferred Limited
Partners, shall take part in the day-to-day management, operation or control of
the business and affairs of the Partnership or have any right, power, or
authority to act for or on behalf of or to bind the Partnership or transact any
business in the name of the Partnership. Neither the Limited Partners nor the
Preferred Limited Partners, in their capacity as Preferred Limited Partners,
shall have any rights other than those specifically provided herein or granted
by law where consistent with a valid provision hereof. Any approvals rendered or
withheld by the Limited Partners or the Preferred Limited Partners pursuant to
this Agreement shall be deemed as consultation with or advice to the General
Partner in connection with the business of the Partnership and, in accordance
with the Act, shall not be deemed as participation by the Limited Partners or
the Preferred Limited Partners in the business of the Partnership and are not
intended to create any inference that the Limited Partners or the Preferred
Limited Partners should be classified as general partners under the Act.
(B) Neither any Limited Partner nor any Preferred Limited Partner shall
have any liability under this Agreement except with respect to withholding under
Section 7104, in connection with a violation of any provision of this Agreement
by such Limited Partner or Preferred Limited Partner or as provided in the Act.
(C) The General Partner shall not take any action which would subject a
Limited Partner (in its capacity as Limited Partner) or a Preferred Limited
Partner (in its capacity as a Preferred Limited Partner) to liability as a
general partner.
(D) No Partner shall take any action that would result in the Partnership
being treated as an association taxable as a corporation, or as a corporation,
for federal income tax purposes.
SECTION 6.3 Limitations on Partners.
(A) No Partner or Affiliate of a Partner shall have any authority to
perform (i) any act in violation of any applicable law or regulation thereunder,
(ii) any act prohibited by Section 6.2(C). or (iii) any act which is required to
be Consented to or ratified pursuant to this Agreement without such Consent or
ratification.
(B) No action shall be taken by a Partner if it would cause the Partnership
to be treated as an association taxable as a corporation for federal income tax
purposes or, without the consent of the General Partner, as a publicly-traded
partnership within the meaning of Section 7.6 of the Code. A determination of
whether such action will have the above described effect shall be
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based upon a declaratory judgment or similar relief obtained from a court of
competent jurisdiction, a favorable ruling from the IRS or the receipt of a
written opinion of counsel.
SECTION 6.4 Business with Affiliates.
(A) The General Partner, in its discretion, may cause the Partnership to
transact business with any Partner or its Affiliates for goods or services
reasonably required in the conduct of the Partnership's business; provided that
any such transaction shall be effected only on terms competitive with those that
may be obtained in the marketplace from unaffiliated Persons. The foregoing
proviso shall not apply to transactions between the Partnership and its
Subsidiaries. In addition, neither the General Partner nor any Affiliate of the
General Partner may sell, transfer or otherwise convey any property to, or
purchase any property from, the Partnership, except (i) on terms competitive
with those that may be obtained in the marketplace from unaffiliated Persons or
(ii) where the General Partner determines, in its sole judgment, that such sale,
transfer or conveyance confers benefits on the General Partner or the
Partnership in respect of matters of tax or corporate or financial structure;
provided, in the case of this clause (ii), such sale, transfer. or conveyance is
not being effected for the purpose of materially disadvantaging the Limited
Partners.
(B) In furtherance of Section 6.4(A), the Partnership may lend or
contribute to its Subsidiaries on terms and conditions established by the
General Partner.
SECTION 6.5 Compensation; Reimbursement of Expenses. In consideration for
the General Partner's services to the Partnership in its capacity as General
Partner, the Partnership shall pay on behalf of or reimburse to the General
Partner all expenses of the General Partner incurred in connection with the
management of the business and affairs of the Partnership, including all
employee compensation of employees of the General Partner related to services
performed for the Partnership and indemnity or other payments made pursuant to
agreements entered into in furtherance of the Partnership's business. Except as
otherwise set forth in this Agreement, the General Partner shall be fully and
entirely reimbursed by the Partnership for any and all direct and indirect costs
and expenses incurred in connection with the organization and continuation of
the Partnership pursuant to this Agreement. In addition, the General Partner
shall be reimbursed for all expenses incurred by the General Partner in
connection with issuance of additional Partnership Interests.
SECTION 6.6 Liability for Acts and Omissions.
(A) The General Partner shall not be liable, responsible or accountable in
damages or otherwise to the Partnership or any of the other Partners for any act
or omission performed or omitted in good faith on behalf of the Partnership and
in a manner reasonably believed to be (i) within the scope of the authority
granted by this Agreement and (ii) in the best interests of the Partnership or
the shareholders of the General Partner. In exercising its authority hereunder,
the General Partner may, but shall not be under any obligation to, take into
account the tax consequences to any Partner of any action it undertakes on
behalf of the Partnership. Neither the General Partner nor the Partnership shall
have any liability as a result of any income tax liability incurred by a Partner
as a result of any action or inaction of the General Partner hereunder and, by
their execution of
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this Agreement, the Limited Partners and the Preferred Limited Partners
acknowledge the foregoing.
(B) Unless otherwise prohibited hereunder, the General Partner shall be
entitled to exercise any of the powers granted to it and perform any of the
duties required of it under this Agreement directly or through any agent. The
General Partner shall not be responsible for any misconduct or negligence on the
part of any agent; provided that the General Partner selected or appointed such
agent in good faith.
(C) The General Partner acknowledges that it owes fiduciary duties both to
its shareholders and to the Limited Partners and the Preferred Limited Partners
and it shall use its reasonable efforts to discharge such duties to each-,
provided, however, that in the event of a conflict between the interests of the
shareholders of the General Partner and the interests of the Limited Partners or
the Preferred Limited Partners, the Limited Partners and the Preferred Limited
Partners agree that the General Partner shall discharge its fiduciary duties to
the Limited Partners and the Preferred Limited Partners by acting in the best
interests of the General Partner's shareholders. Nothing contained in the
preceding sentence shall be construed as entitling the General Partner to
realize any profit or gain from any transaction between the General Partner and
the Partnership (except in connection with a distribution in accordance with
this Agreement), including from the lending of money by the General Partner to
the Partnership or the contribution of property by the General Partner to the
Partnership, it being understood that in any such transaction the General
Partner shall be entitled to cost recovery only.
SECTION 6.7 Indemnification.
(A) The Partnership shall indemnify the General Partner and each director,
officer and shareholder of the General Partner and each Person (including any
Affiliate) designated as an agent by the General Partner in its reasonable
discretion (each, an "Indemnified Party") to the fullest extent permitted under
the Act (including any procedures set forth therein regarding advancement of
expenses to such Indemnified Party) from and against any and all losses, claims,
damages, liabilities, expenses (including reasonable attorneys' fees),
judgments, fines, settlements and any other amounts arising out of or in
connection with any claims, demands, actions, suits or proceedings (civil,
criminal or administrative) relating to or resulting (directly or indirectly)
from the operations of the Partnership, in which such Indemnified Party becomes
involved, or reasonably believes it may become involved, as a result of the
capacity referred to above.
(B) The Partnership shall have the authority to purchase and maintain such
insurance policies on behalf of the Indemnified Parties as the General Partner
shall determine, which policies may cover those liabilities the General Partner
reasonably believes may be incurred by an Indemnified Party in connection with
the operation of the business of the Partnership. The right to procure such
insurance on behalf of the Indemnified Parties shall in no way mitigate or
otherwise affect the right of any such Indemnified Party to indemnification
pursuant to Section 6.7(A) hereof.
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(C) The provisions of this Section 6.7 are for the benefit of the
Indemnified Parties, their heirs, successors, assigns and administrators and
shall not be deemed to create any rights in or benefit to any other Person.
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ARTICLE VII - ADMINISTRATIVE, FINANCIAL AND TAX MATTERS
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SECTION 7.1 Books and Records. The General Partner shall maintain at the
office of the Partnership full and accurate books of the Partnership showing all
receipts and expenditures, assets and liabilities, profits and losses, names and
current addresses of Partners, and all other records necessary for recording the
Partnership's business and affairs. Each Limited Partner and Preferred Limited
Partner shall have, upon written demand and at such Limited Partner's or
Preferred Limited Partner's expense, as the case may be, the right to receive
true and complete information regarding Partnership matters to the extent
required (and subject to the limitations) under Delaware law.
SECTION 7.2 Annual Audit and Accounting. The books and records of the
Partnership shall be kept for financial and tax reporting purposes on the
accrual basis of accounting in accordance with generally accepted accounting
principles ("GAAP"). The accounts of the Partnership shall be audited annually
by a nationally recognized accounting firm of independent public accountants
selected by the General Partner (the "Independent Accountants").
SECTION 7.3 Partnership Funds. The General Partner shall have
responsibility for the safekeeping and use of all funds and assets of the
Partnership, whether or not in its direct or indirect possession or control. All
funds of the Partnership not otherwise invested shall be deposited in one or
more accounts maintained in such banking institutions as the General Partner
shall determine, and withdrawals shall be made only in the regular course of
Partnership business on such signatures as the General Partner may from time to
time determine.
SECTION 7.4 Reports and Notices. The General Partner shall provide all
Partners with the following reports no later than the dates indicated or as soon
thereafter as circumstances permit:
(A) By March 31 of each year, IRS Form 1065 and Schedule K-1, or similar
forms as may be required by the IRS, stating each Partner's allocable share of
income, gain, loss, deduction or credit for the prior Fiscal Year;
(B) Within ninety (90) days after the end of each of the first three (3)
fiscal quarters. as of the last day of the fiscal quarter, a report containing
unaudited financial statements of the Partnership, or of the General Partner if
such statements are prepared on a consolidated basis with the General Partner,
and such other information as may be legally required or determined to be
appropriate by the General Partner; and
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(C) Within one hundred twenty (120) days after the end of each Fiscal Year,
as of the close of the Fiscal Year, an annual report containing audited
financial statements of the Partnership, or of the General Partner if such
statements are prepared on a consolidated basis with the General Partner,
presented in accordance with GAAP and certified by the Independent Accountants.
SECTION 7.5 Tax Matters.
(A) The General Partner shall be the Tax Matters Partner of the Partnership
for federal income tax matters pursuant to Code Section 6231(a)(7)(A). The Tax
Matters Partner is authorized and required to represent the Partnership (at the
expense of the Partnership) in connection with all examinations of the affairs
of the Partnership by any federal, state, or local tax authorities, including
any resulting administrative and judicial proceedings, and to expend funds of
the Partnership for professional services and costs associated therewith. The
Tax Matters Partner shall deliver to the Limited Partners and Preferred Limited
Partners within ten (10) business days of the receipt thereof a copy of any
notice or other communication with respect to the Partnership received from the
IRS (or other governmental tax authority), or any court, in each case with
respect to any administrative or judicial proceeding involving the Partnership.
The Partners agree to cooperate with each other in connection without the
conduct of all proceedings pursuant to this Section 7.5(A).
(B) The Tax Matters Partner shall receive no compensation for its services
in such capacity. If the Tax Matters Partner incurs any costs related to any tax
audit, declaration of any tax deficiency or any administrative proceeding or
litigation involving any Partnership tax matter, such amount shall be an expense
of the Partnership and the Tax Matters Partner shall be entitled to full
reimbursement therefor.
(C) The General Partner shall cause to be prepared all federal, state and
local income tax returns required of the Partnership at the Partnership's
expense.
(D) Except as set forth herein, the General Partner shall determine whether
to make (and, if necessary, revoke) any tax election available to the
Partnership under the Code or any state tax law; provided, however, upon the
request of any Partner, the General Partner shall make the election under code
Section 754 and the Treasury Regulations promulgated thereunder. The Partnership
shall elect to deduct expenses, if any, incurred by it in organizing the
Partnership in accordance with the provisions of Code Section 709.
SECTION 7.6 Withholding. Each Partner hereby authorizes the Partnership to
withhold from or pay to any taxing authority on behalf of such Partner any tax
that the General Partner determines the Partnership is required to withhold or
pay with respect to any amount distributable or allocable to such Partner. Any
amount paid to any taxing authority which does not constitute a reduction in the
amount otherwise distributable to such Partner shall be treated as a loan from
the Partnership to such Partner, which loan shall
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bear interest at the "prime rate" as published from time to time in The Wall
Street Journal plus two (2) percentage points, and shall be repaid within ten
(10) business days after request for repayment from the General Partner. The
obligation to repay any such loan shall be secured by such Partner's Partnership
Interest and each Partner hereby grants the Partnership a security interest in
his Partnership Interest for the purposes set forth in this Section 7.6, this
Section 7.6 being intended to serve as a security agreement for purposes of the
Uniform Commercial Code with the General Partner having in respect hereof all of
the remedies of a secured party under the Uniform Commercial Code. Each Partner
agrees to take such reasonable actions as the General Partner may request to
perfect and continue the perfection of the security interest granted hereby. In
the event any Partner fails to repay any deemed loan pursuant to this Section
7.6 the Partnership shall be entitled to avail itself of any rights and remedies
it may have. Furthermore, upon the expiration of ten (10) business days after
demand for payment, the General Partner shall have the right, but not the
obligation, to make the payment to the Partnership on behalf of the defaulting
Partner and thereupon be subrogated to the rights of the Partnership with
respect to such defaulting Partner.
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ARTICLE VIII - TRANSFER OF PARTNERSHIP INTERESTS; ADMISSION OF
PARTNERS
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SECTION 8.1 Transfer by General Partner. The General Partner may not
voluntarily withdraw or Transfer all or any portion of its General Partner
Interest. Notwithstanding the foregoing, the General Partner may pledge its
General Partner Interest in furtherance of the Partnership's business (including
without limitation, in connection with a loan agreement under which the
Partnership is a borrower) without the consent of any Partner.
SECTION 8.2 Obligations of a Prior General Partner. Upon an Involuntary
Withdrawal of the General Partner and the subsequent Transfer of the General
Partner's Interest, such General Partner shall (i) remain liable for all
obligations and liabilities (other than Partnership liabilities payable solely
from Partnership Assets) incurred by it as General Partner before the effective
date of such event and (ii) pay all costs associated with the admission of its
Successor General Partner. However, such General Partner shall be free of and
held harmless by the Partnership against any obligation or liability incurred on
account of the activities of the Partnership from and after the effective date
of such event, except as provided in this Agreement.
SECTION 8.3 Successor General Partner. A successor to all of a General
Partner's General Partner Interest who is proposed to be admitted to the
Partnership as a Successor General Partner shall be admitted as the General
Partner, effective upon the Transfer. Any such
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transferee shall carry on the business of the Partnership without dissolution.
In addition, the following conditions must be satisfied:
(A) The Person shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement by executing a counterpart thereof and such
other documents or instruments as may be required or appropriate in order to
effect the admission of such Person as a General Partner; and
(B) An amendment to this Agreement evidencing the admission of such Person
as a General Partner shall have been executed by all General Partners and an
amendment to the Certificate shall have been filed for recordation as required
by the Act.
(C) Any consent required under Section 10.1(A) shall have been obtained.
SECTION 8.4 Restrictions on Transfer and Withdrawal by Limited Partner.
(A) Subject to the provisions of Section 8.4(D), no Limited Partner or
Preferred Limited Partner may Transfer all or any portion of its Partnership
Interest without first obtaining the Consent of the General Partner, which
Consent may be granted or withheld in the sole and absolute discretion of the
General Partner. Any such purported transfer undertaken without such Consent
shall be considered to be null and void ab initio and shall not be given effect.
(B) No Limited Partner or Preferred Limited Partner may withdraw from the
Partnership other than as a result of a permitted Transfer (i.e., a Transfer
consented to as contemplated by clause (A) above or clause (D) below or a
Transfer pursuant to clause (C) below) of all of his Partnership Units pursuant
to this Article VIII or pursuant to a redemption or exchange of all of his
Partnership Units pursuant to Article IX. Upon the permitted Transfer or
redemption of all of a Limited Partner's or Preferred Limited Partners
Partnership Units, such Limited Partner or Preferred Limited Partner shall cease
to be a Limited Partner or Preferred Limited Partner.
(C) Upon the Involuntary Withdrawal of any Limited Partner or Preferred
Limited Partner (which shall under no circumstance cause the dissolution of the
Partnership), the executor, administrator, trustee, guardian, receiver or
conservator of such Limited Partner's or Preferred Limited Partners estate shall
become a Substituted Limited Partner or Substituted Preferred Limited Partner
upon compliance with the provisions of Section 8.5(A)(l)-(3).
(D) Subject to clause (E) below, a Limited Partner or Preferred Limited
Partner may Transfer, with the Consent of the General Partner, all or a portion
of his Partnership Units to (a) a parent or parents, spouse, natural or adopted
descendant or brother or sister, or a trust created by such Limited Partner or
Preferred Limited Partner for the benefit of such Limited Partner or Preferred
Limited Partner and/or any such person(s), of which trust such Limited Partner
or Preferred Limited Partner or any such person(s) is a trustee, (b) a
corporation controlled by a Person or Persons named in (a) above, (c) if the
Limited Partner or Preferred Limited Partner is an entity, its beneficial
owners, or (d) a family limited partnership comprised of members of the family
of a Limited Partner or a Preferred Limited Partner, and the General Partner
shall grant its Consent to any
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Transfer pursuant to this Section 8.4(D) unless such Transfer, in the reasonable
judgment of the General Partner, would cause (or have the potential to cause)
the General Partner to fail to qualify for taxation as a REIT, in which case the
General Partner shall have the absolute right to refuse to permit such Transfer,
and any purported Transfer in violation of this Section 8.4(D) shall be null and
void ab initio.
(E) No Transfer of Limited Partnership Units or Preferred Units shall be
made if such Transfer would (i) in the opinion of Partnership counsel, cause the
Partnership to be terminated for federal income tax purposes or to be treated as
an association taxable as a corporation (rather than a partnership) for federal
income tax purposes; (h) be effected through an "established securities market"
or a "secondary market (or the substantial equivalent thereof)" within the
meaning of Code Section 7704 and the Treasury Regulations thereunder, (iii) in
the opinion of Partnership counsel, violate the provisions of applicable
securities laws; (iv) violate the terms of (or result in a default or
acceleration under) any law, rule, regulation, agreement or commitment binding
on the Partnership; (v) cause the Partnership to become, with respect to any
employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(e) of the Code), (vi) in the opinion of counsel to the Partnership,
cause any portion of the underlying assets of the Partnership to constitute
assets of any employee benefit plan pursuant to Department of Labor Regulations
Section 2510.3-101; or (vii) result in a deemed distribution to any Partner
attributable to a failure to meet the requirements of Treasury Regulations
Section 1.752-2(d)(1), unless such Partner consents thereto.
(F) Prior to the consummation of any Transfer under this Section 8.4, the
transferor and/or the transferee shall deliver to the General Partner such
opinions, certificates and other documents as the General Partner shall request
in connection with such Transfer.
SECTION 8.5 Substituted Limited Partner.
(A) No transferee shall become a Substituted Limited Partner or Substituted
Preferred Limited Partner in place of its assignor unless and until the
following conditions have been satisfied:
(1) The assignor and transferee file a Notice or other evidence of Transfer
and such other information reasonably required by the General Partner,
including, without limitation, names, addresses and telephone numbers of the
assignor and transferee;
(2) The transferee executes, adopts and acknowledges this Agreement, or a
counterpart hereto, and such other documents as may be reasonably requested by
the General Partner, including without limitation, all documents necessary to
comply with applicable tax and/or securities rules and regulations; and
(3) The assignor or transferee pays all costs and fees incurred or charged
by the Partnership to effect the Transfer and substitution.
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(B) If a transferee of a Limited Partner or Preferred Limited Partner does
not become a Substituted Limited Partner or Substituted Preferred Limited
Partner pursuant to Section 8.5(A), such transferee shall be an Assignee and
shall not have any rights to require any information on account of the
Partnership's business, to inspect the Partnership's books or to vote or
otherwise take part in the affairs of the Partnership (such Partnership Units
being deemed to have been voted in the same proportion as all other Partnership
Units held by Limited Partners or Preferred Limited Partners have been voted).
Such Assignee shall be entitled, however, to all the rights of an assignee of a
limited partnership interest under the Act. Any Assignee wishing to Transfer the
Partnership Units acquired shall be subject to the restrictions set forth in
this Article VIII.
SECTION 8.6 Timing and Effect of Transfers. Unless the General Partner
agrees otherwise, Transfers under this Article VIII may only be made as of the
first day of a fiscal quarter of the Partnership. Upon any Transfer of a
Partnership Interest in accordance with this Article VIII or redemption of a
Partnership Interest in accordance with Article IX, the Partnership shall
allocate all items of Profit and Loss between the assignor Partner and the
transferee Partner in accordance with Section 5.2(F)(2) hereof. The assignor
Partner shall have the right to receive all distributions as to which the Record
Date precedes the date of Transfer and the transferee Partner shall have the
right to receive all distributions thereafter.
SECTION 8.7 Additional Limited Partners. Other than in accordance with the
transactions specified in the Contribution Agreements, after the initial
execution of this Agreement and the admission to the Partnership of the Initial
Limited Partners, any Person making a Capital Contribution to the Partnership in
accordance herewith shall be admitted as an Additional Limited Partner or
Additional Preferred Limited Partner of the Partnership only (i) with the
Consent of the General Partner and (ii) upon execution, adoption and
acknowledgment of this Agreement, or a counterpart hereto, and such other
documents as may be reasonably requested by the General Partner, including
without limitation, the power of attorney required under Section 12.3. Upon
satisfaction of the foregoing requirements, such Person shall be admitted as an
Additional Limited Partner or Additional Preferred Limited Partner effective on
the date upon which the name of such Person is recorded on the books of the
Partnership.
SECTION 8.8 Amendment of Agreement and Certificate. Upon any admission of a
Person as a Partner to the Partnership, the General Partner shall make any
necessary amendment to this Agreement to reflect such admission and, if required
by the Act, to cause to be filed an amendment to the Certificate.
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ARTICLE IX REDEMPTION AND CONVERSION
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SECTION 9.1 Right of Redemption
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(A) Subject to compliance with (w) the terms and conditions of the REIT
Charter,(x) all requirements under the Code applicable to real estate investment
trusts, (y) the Minnesota Business Corporation Act or any other law as in effect
from time to time and (z) any applicable rule or policy of any stock exchange or
self-regulatory organization (a "Redemption Restriction"), beginning on
September 1, 1998, during each Redemption Period each Redeeming Party shall have
the right to require the Partnership to redeem all or a portion of the
Partnership Units held by such Redeeming Party by providing the General Partner
with a Redemption Notice. A Limited Partner may invoke its rights under this
Article IX with respect to one or more Partnership Units or all of the
Partnership Units held by such Limited Partner. Upon the General Partner's
receipt of a Redemption Notice from a Redeeming Party, the Partnership shall be
obligated (subject to the existence of any Redemption Restriction) to redeem the
Partnership Units from such Redeeming Party (the "Redemption Obligation").
(B) Upon receipt of a Redemption Notice from a Redeeming Party, the General
Partner shall either (i) cause the Partnership to redeem the Partnership Units
tendered in the Redemption Notice, (ii) assume the Redemption Obligation, as set
forth in Section 9.4, or (iii) provide written Notice to the Redeeming Party of
each applicable Redemption Restriction.
SECTION 9.2 Timing of Redemption. The Redemption Obligation (or the
obligation to provide Notice of an applicable Redemption Restriction, if one
exists) shall mature on the date which is seven (7) business days after the
receipt by the General Partner of a Redemption Notice from the Redeeming Party
(the "Redemption Date").
SECTION 9.3 Redemption Price. On or before the Redemption Date, the
Partnership (or the General Partner if it elects pursuant to Section 9.4) shall
deliver to the Redeeming Party, in the sole and absolute discretion of the
General Partner, either (i) a Share Payment or (ii) a Cash Payment; provided,
however, that a Share Payment shall not be made, and a Cash Payment shall
instead be made in all cases, if, in the sole discretion of the General Partner,
the making of a Share Payment would result in a material risk of termination of
the General Partner's status as a REIT under the Code. In order to enable the
Partnership to effect a redemption by making a Share Payment pursuant to this
Section 9.3, the General Partner in its sole and absolute discretion may issue
to the Partnership the number of REIT Shares required to make such Share Payment
in exchange for the issuance to the General Partner of Partnership Units equal
in number to the quotient of the number of REIT Shares issued and the Conversion
Factor.
SECTION 9.4 Assumption of Redemption Obligation. Upon receipt of a
Redemption Notice, the General Partner, in its sole and absolute discretion,
shall have the right to assume the Redemption Obligation of the Partnership. In
such case, the General Partner shall be substituted for the Partnership for all
purposes of this Article IX and, upon acquisition of the Partnership Units
tendered by the Redeeming Party pursuant to the Redemption Notice shall be
treated for all purposes of this Agreement as the owner of such Partnership
Units. Such exchange transaction shall be treated for federal income tax
purposes by the Partnership, the General Partner and the Redeeming Party as a
sale by the Redeeming Party as seller to the General Partner as purchaser.
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SECTION 9.5 Further Assurances; Certain Representations. Each party to this
Agreement agrees to execute any documents deemed reasonably necessary by the
General Partner to evidence the issuance of any Share Payment to a Redeeming
Party. Each Limited Partner and Preferred Limited Partner, by executing this
Agreement, shall be deemed to have represented to the General Partner and the
Partnership that (i) its acquisition of its Partnership Interest is or will be
made as a principal for its own account, for investment purposes only and not
with a view to the resale or distribution of such Partnership Interest and (ii)
if it shall receive REIT Shares pursuant to this Article IX other than pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, that its acquisition of such REIT Shares is or will be made as a
principal for its own account, for investment purposes only and not with a view
to the resale or distribution of such REIT Shares and agrees that such REIT
Shares may be bear a legend to the effect that such REIT Shares have not been so
registered and may not be sold other than pursuant to such a registration
statement or an exemption from the registration requirements of such Act.
SECTION 9.6 Effect of Redemption. Upon the satisfaction of the Redemption
Obligation by the Partnership or the General Partner, as the case may be, the
Redeeming Party shall have no further right to receive any Partnership
distributions in respect of the Partnership Units so redeemed and shall be
deemed to have represented to the Partnership and the General Partner that the
Partnership Units tendered for redemption are not subject to any liens, claims
or encumbrances.
SECTION 9.7 Registration Rights. In the event a Limited Partner receives
REIT Shares in connection with a redemption of Partnership Units pursuant to
this Article IX, such Limited Partner shall be entitled to have such REIT Shares
registered under the Securities Act of 1933, as amended, as provided in the
Registration Rights Agreement.
SECTION 9.8 Conversion. (A) Each Preferred Limited Partner shall have the
right, at any time or from time to time, to convert on or after October 1, 1999
some or all of its Preferred Units into Limited Partner Interests, effective
upon January 1, April 1, July I or October I of any year, by providing the
General Partner with a Conversion Notice not less than 30 days prior to the
effective date of such conversion. Upon the effective date of any such
conversion, the Preferred Units which are the subject of such conversion shall
be converted, without necessity of any further action by the General Partner,
into Units of Limited Partner Interest on the basis of 3.5714 Units of Limited
Partner Interest for each Preferred Unit being converted plus an amount in cash
equal to the accrued Priority Return Amount in respect of such Preferred Units.
In any case in which the conversion into Limited Partner Interests under this
Section would result in the issuance of a fractional Limited Partner Interest,
the General Partner shall pay the converting Limited Partner cash in lieu of
issuance of a fractional Limited Partner Interest, with the value of such
fractional interest being determined by reference to the Unit Value applicable
on the date of conversion.
(B) In any case in which there is an unpaid Priority Return Amount with
respect to a Preferred Unit that is converted pursuant to paragraph (A) of this
Section, the converting partner shall continue to have the right to
distributions (and allocations) under Article V and Section 10.2 of this
Agreement as if the converting partner continued to hold the converted Preferred
Unit until the unpaid distributions (and related allocations) have been paid (or
allocated).
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SECTION 9.9 Redemption Restriction.
(A) The General Partner shall not take, or cause to be taken, any action
which would cause a Redemption Restriction to exist or continue.
(B) The General Partner shall, at its cost and expense, take, or cause to
be taken, all such actions that may be necessary or desirable to mitigate the
existence or effect of any Redemption Restriction and to facilitate and make
effective the rights of redemption and conversion provided in this Article IX.
SECTION 9.10 Special Event.
(A) Notwithstanding any provision of this Agreement to the contrary, upon
the occurrence of a Special Event (whether before or after September 1, 1998),
each Redeeming Party shall immediately have the unconditional right
(irrespective of whether a Redemption Restriction exists or could thereby be
created) to require the Partnership to redeem all or a portion of the
Partnership Units held by such Redeeming Party by providing the General Partner
with a Redemption Notice. A Limited Partner may invoke its rights under this
Section 9. 10 with respect to one or more Partnership Units or all of the
Partnership Units held by such Limited Partner. Any such redemption shall
otherwise be governed by and effected and implemented pursuant to this Article
IX as if no Redemption Restriction existed.
(B) Notwithstanding any provision of this Agreement to the contrary, upon
the occurrence of a Special Event (whether before or after October 1, 1999),
each Preferred Limited Partner shall have the right effective upon the happening
of such Special Event, at any time or from time to time, to convert some or all
of its Preferred Units into Limited Partner Interests by providing the General
Partner with a Conversion Notice. Anv such conversion shall otherwise be
governed by and effected and implemented pursuant to this Article IX.
(C) "Special Event" means the occurrence of any of the following:
(I) any person or group (as such terms are used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended ("Exchange Act")) other than
the Permitted Holders, directly or indirectly, makes an offer to purchase or
commences a tender offer for REIT Shares such that, after acquiring all such
REIT Shares offered to be acquired or tendered for, such person or group would
then be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of 20% or more of the total number of
REIT Shares then issued and outstanding; or
(II) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (C)(1) above, except that for purposes of
this clause (II) such person shall be deemed to have "beneficial ownership" of
all shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or indi-
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rectly, of more than 20% of the total voting power represented by all the REIT
Shares then outstanding; or
(III) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Royale (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of Royale was approved by a vote of
66 2/3 % of the directors of Royale then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Royale then in office; or
(IV) the merger or consolidation of Royale with or into another Person or
the merger or consolidation of another Person with or into Royale, or the sale
of all or substantially all the assets of Royale to another Person (other than a
Person that is controlled by the Permitted Holders in the aggregate), and, in
the case of any such merger or consolidation, the securities of Royale that are
outstanding immediately prior to such transaction and which represent 100% of
the aggregate voting power of the REIT Shares are changed into or exchanged for
cash, securities or property.
(D) "Permitted Holders" means ▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ III, ▇▇▇▇▇▇▇▇▇
Real Estate Fund I, L.P. and ▇▇▇▇▇▇▇▇▇ Real Estate Co. Investment Partnership I,
L.P. and any corporation, partnership, trust, estate or other legal entity
controlled by any of the foregoing Persons (or jointly controlled by Messrs.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇).
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ARTICLE X - DISSOLUTION AND LIQUIDATION
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SECTION 10.1 Term and Dissolution. The Partnership commenced as of October
10, 1997, and shall continue until October 31, 2096, at which time the
Partnership shall dissolve or until dissolution occurs prior to that date for
any one of the following reasons:
(A) An Involuntary Withdrawal or a voluntary withdrawal, even though in
violation of this Agreement, of the General Partner unless, within ninety (90)
days after such event of withdrawal of a majority of the Limited Partners
remaining agree in writing to the continuation of the Partnership and to the
appointment of a Successor General Partner;
(B) Entry of a decree of judicial dissolution of the Partnership under the
Act; or
(C) The sale, exchange or other disposition of all or substantially all of
the Partnership Assets; or
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(D) The affirmative vote of the holders of not less than two-thirds of the
Limited Partner Interests (for this purpose Preferred Units shall be treated as
if they have been converted on the date of such vote into Limited Partner
Interests pursuant to Section 9.8 and the Preferred Limited Partners holding
such Preferred Units shall be treated as Limited Partners).
SECTION 10.2 Liquidation of Partnership Assets.
(A) Subject to Section 10. 2(E), in the event of dissolution pursuant to
Section 10.1, the Partnership shall continue solely for purposes of winding up
the affairs of, achieving a final termination of, and satisfaction of the
creditors of, the Partnership. The General Partner (or, if there is no General
Partner remaining, any Person elected by a majority in interest of the Limited
Partners (the "Liquidator")) shall be responsible for oversight of the winding
up and dissolution of the Partnership. The Liquidator shall obtain a full
accounting of the assets and liabilities of the Partnership and such Partnership
Assets shall be liquidated (including, at the discretion of the Liquidator, in
exchange, in whole or in part, for REIT Shares) as promptly as the Liquidator is
able to do so without any undue loss in value, with the proceeds therefrom
applied and distributed in the following order:
(1) First, to creditors, including partners who are creditors, in
satisfaction of liabilities of the Partnership, other than liabilities for
distributions to Partners and former Partners;
(2) Second, to the Preferred Limited Partners in amounts equal to any
unpaid Priority Return Amounts;
(3) Third, to Partners and former Partners in satisfaction of liabilities
for distributions; and
(4) The balance, if any, to the Partners in accordance with their positive
Capital Accounts after giving effect to all contributions, distributions, and
allocations for all periods.
(B) In accordance with Section 10.2(A), the Liquidator shall proceed
without any unnecessary delay to sell and otherwise liquidate the Partnership
Assets; provided, however, that if the Liquidator shall determine that an
immediate sale of part or all of the Partnership Assets would cause undue loss
to the Partners, the Liquidator may defer the liquidation except (i) to the
extent provided by the Act or (ii) as may be necessary to satisfy the debts and
liabilities of the Partnership to Persons other than the Partners.
(C) If, in the sole and absolute discretion of the Liquidator, there are
Partnership Assets that the Liquidator will not be able to liquidate, or if the
liquidation of such assets would result in undue loss to the Partners, the
Liquidator may distribute such Partnership Assets to the Partners in-kind, in
lieu of cash, as tenants-in-common in accordance with the provisions of Section
10.2(A). The foregoing notwithstanding, such in-kind distributions shall only be
made if in the Liquidator's good faith judgment that is in the best interest of
the Partners.
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(D) Upon the complete liquidation and distribution of the Partnership
Assets, the Partners shall cease to be Partners of the Partnership, and the
Liquidator shall execute, acknowledge and cause to be filed all certificates and
notices required by law to terminate the Partnership. Upon the dissolution of
the Partnership pursuant to Section 10.1, the Liquidator shall cause to be
prepared, and shall furnish to each Partner, a statement setting forth the
assets and liabilities of the Partnership. Promptly following the complete
liquidation and distribution of the Partnership Assets, the Liquidator shall
furnish to each Partner a statement showing the manner in which the Partnership
Assets were liquidated and distributed.
(E) Notwithstanding the foregoing provisions of this Section 10.2, in the
event that the Partnership shall dissolve as a result of the expiration of the
term provided for herein or as a result of the occurrence of an event of the
type described in Section 10.1(B) or (C), then each Limited Partner shall be
deemed to have delivered a Redemption Notice on the date of such dissolution. In
connection with each such Redemption Notice, the General Partner shall have the
option of either (i) complying with the redemption procedures contained in
Article IX or (ii) at the request of any Limited Partner, delivering to such
Limited Partner, Partnership property approximately equal in value (after taking
into account the liabilities hereto referred to) the amount otherwise
distributable to such Partner under Section 10.4(A)(4) hereof upon the
assumption by such Limited Partner of such Limited Partner's proportionate share
of the Partnership's liabilities and payment by such Limited Partner (or the
Partnership) of any excess (or deficiency) of the value of the property so
delivered over the amount otherwise distributable to such Partner under Section
10.4(A)(4). In lieu of requiring such Limited Partner to assume its
proportionate share of Partnership liabilities, the General Partner may deliver
to such Limited Partner unencumbered Partnership property approximately equal in
value to the amount otherwise distributable to such Partner under Section
10.4(A)(4).
SECTION 10.3 Effect of Treasury Regulations.
(A) In the event the Partnership is "liquidated" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article X to the General Partner, the Limited Partners, the
Preferred Limited Partners who have positive Capital Accounts in compliance with
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Partner has a
deficit balance in its Capital Account (after giving effect to all contributions
(without regard to this Section 10.3(A)), distributions and allocations), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership. Any deficit restoration obligation pursuant to the provisions
hereof shall be for the benefit of creditors of the Partnership or any other
Person to whom any debts, liabilities, or obligations are owed by (or who
otherwise has any claim against) the Partnership or the general partner, in its
capacity as General Partner of the Partnership.
(B) In the event the Partnership is "liquidated" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g) but there has been no
dissolution of the Partnership under Section 10.1. I hereof, then the
Partnership Assets shall not be liquidated, the Partnership's liabilities shall
not be paid or discharged and the Partnership's affairs shall not be wound up.
In the event of such a liquidation there shall be deemed to have been a
distribution of Partnership Assets in kind
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to the Partners in accordance with their respective Capital Accounts followed by
a recontribution of the Partnership Assets by the Partners also in accordance
with their respective Capital Accounts.
SECTION 10.4 Time for Winding-Up. Anything in this Article X
notwithstanding, a reasonable time shall be allowed for the orderly winding-up
of the business and affairs of the Partnership and the liquidation of the
Partnership Assets in order to minimize any potential for losses as a result of
such process. During the period of winding-up, this Agreement shall remain in
full force and effect and shall govern the rights and relationships of the
Partners inter se.
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ARTICLE XI - AMENDMENTS AND MEETINGS
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SECTION 11.1 Amendment Procedure.
(A) Amendments to this Agreement may be proposed by the General Partner. An
amendment proposed at any time when the General Partner holds less than 90% of
all Partnership Units will be adopted and effective only if it receives the
Consent of the holders of a majority of the Partnership Units and Preferred
Units, voting separately, not then held by the General Partner and an amendment
proposed at any time when the General Partner holds 90% or more of all
Partnership Units and Preferred Units may be made by the General Partner without
the Consent of any Limited Partner or Preferred Limited Partner; provided,
however, no amendment shall be adopted if it would (i) convert a Limited
Partner's Partnership Interest or Preferred Limited Partner's Preferred Units
into a general partner interest, (ii) increase the liability of a Limited
Partner or a Preferred Limited Partner under this Agreement, (iii) except as
otherwise permitted in this Agreement, alter the amount or the Partner's rights
to distributions set forth in Article V or X, or the allocations set forth in
Article IV, (iv) alter or modify any aspect of the Partners' rights with respect
to redemption of Partnership Units or conversion of Preferred Units, (v) cause
the early termination of the Partnership (other than pursuant to the terms
hereof) or (vi) amend this Section 11.1(A), in each case without the Consent of
each Partner adversely affected thereby. In connection with any proposed
amendment of this Agreement requiring Consent, the General Partner shall either
call a meeting to solicit the vote of the Partners or seek the written vote of
the Partners to such amendment. In the case of a request for a written vote, the
General Partner shall be authorized to impose such reasonable time limitations
for response, but in no event less than ten (10) days, with the failure to
respond being deemed a vote consistent with the vote of the General Partner.
(B) Notwithstanding the foregoing, amendments may be made to this Agreement
by the General Partner, without the Consent of any Limited Partner or Preferred
Limited Partner, to (i) add to the representations, duties or obligations of the
General Partner or surrender any right or power granted to the General Partner
herein, (ii) cure any ambiguity, correct or supplement any provision herein
which may be inconsistent with any other provision herein or make any other
provisions with respect to matters or questions arising hereunder which will not
be inconsistent with any other provision hereof; (iii) reflect the admission,
substitution, termination or withdrawal of
-41-
Partners in accordance with this Agreement; or (iv) 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.
The General Partner shall reasonably promptly notify the Limited Partners and
Preferred Limited Partners whenever it exercises its authority pursuant to this
Section 11.1(B).
(C) Within ten (10) days of the making of any proposal to amend this
Agreement, the General Partner shall give all Partners Notice of such proposal
(along with the text of the proposed amendment and a statement of its purposes).
SECTION 11.2 Meetings and Voting.
(A) Meetings of Partners may be called by the General Partner. The General
Partner shall give all Partners Notice of the purpose of such proposed meeting
not less than seven (7) days nor more than thirty (30) days prior to the date of
the meeting. Meetings shall be held at a reasonable time and place selected by
the General Partner. Whenever the vote or Consent of Partners is permitted or
required hereunder, such vote or Consent shall be requested by the General
Partner and may be given by the Partners in the same manner as set forth for a
vote with respect to an amendment to this Agreement in Section 11.1(A).
(B) Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action to be taken is signed by the Partners owning Percentage Interests
required to vote in favor of such action, which consent may be evidenced in one
or more instruments (for this purpose Preferred Units and Preferred Limited
Partners shall be treated as provided in Section 10.1(D) in the case of a vote
pursuant to such Section). Consents need not be solicited from any other Partner
if the written consent of a sufficient number of Partners has been obtained to
take the action for which such solicitation was required.
(C) Each Limited Partner and each Preferred Limited Partner may authorize
any Person or Persons, including without limitation the General Partner, to act
for him by proxy on all matters on which a Limited Partner or a Preferred
Limited Partner may participate. Every proxy (i) must be signed by the Limited
Partner or his attomey-in-fact, (ii) shall expire eleven (11) months from the
date thereof unless the proxy provides otherwise and (iii) shall be revocable at
the discretion of the Limited Partner or Preferred Limited Partner granting such
proxy.
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ARTICLE XII - MISCELLANEOUS PROVISIONS
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SECTION 12.1 Title to Property. All property owned by the Partnership,
whether real or personal, tangible or intangible. shall be deemed to be owned by
the Partnership as an entity, and no Partner, individually, shall have any
ownership of such property. The Partnership
-42-
may hold any of its assets in its own name or, in the name of its nominee, which
nominee may be one or more individuals, corporations, partnerships, trusts or
other entities.
SECTION 12.2 Other Activities of Limited Partners and Preferred Limited
Partners. Except as expressly provided otherwise in this Agreement or in any
other agreement entered into by a Limited Partner or a Preferred Limited Partner
or any Affiliate of a Limited Partner or a Preferred Limited Partner and the
Partnership, the General Partner or any Subsidiary of the Partnership or the
General Partner, any Limited Partner or Preferred Limited Partner or any
Affiliate of any Limited Partner or Preferred Limited Partner may engage in, or
possess an interest in, other business ventures of every nature and description,
independently or with others, including, without limitation, real estate
business ventures, whether or not such other enterprises shall be in competition
with any activities of the Partnership, the General Partner or any Subsidiary of
the Partnership or the General Partner; and neither the Partnership, the General
Partner, any such Subsidiary nor the other Partners shall have any right by
virtue of this Agreement in and to such independent ventures or to the income or
profits derived therefrom.
SECTION 12.3 Power of Attorney.
(A) Each Partner hereby irrevocably appoints and empowers the General
Partner (which term shall include the Liquidator, in the event of a liquidation,
for purposes of this Section 12.3) and each of their authorized officers and
attorneys-in-fact with full power of substitution as his true and lawful agent
and attorney-in-fact, with full power and authority in his name, place and ▇▇▇▇▇
to:
(1) make, execute, acknowledge, publish and file in the appropriate public
offices (a) any duly approved amendments to the Certificate pursuant to the Act
and to the laws of any state in which such documents are required to be filed;
(b) any certificates, instruments or documents as may be required by, or may be
appropriate under, the laws of any state or other jurisdiction in which the
Partnership is doing or intends to do business; (c) any other instrument which
may be required to be filed by the Partnership under the laws of any state or by
any governmental agency, or which the General Partner deems advisable to file;
(d) any documents which may be required to effect the continuation of the
Partnership, the admission, withdrawal or substitution of any Partner pursuant
to Article VIII, dissolution and termination of the Partnership pursuant to
Article X, or the surrender of any rights or the assumption of any additional
responsibilities by the General Partner; (e) any document which may be required
to effect an amendment to this Agreement to correct any mistake, omission or
inconsistency, or to cure any ambiguity herein, to the extent such amendment is
permitted by Section 11.1(B); and (f) all instruments (including this Agreement
and amendments and restatements hereof) relating to the determination of the
rights, preferences and privileges of any class or series of Partnership Units
issued pursuant to Section 4.2(B) of this Agreement; and
(2) sign, execute, swear to and acknowledge all voting ballots, consents,
approvals, waivers, certificates and other instruments appropriate or necessary.
in the sole discretion of the General Partner, to make, evidence, give, confirm
or ratify any vote, consent, approval,
-43-
agreement or other action which is made or given by the Partners hereunder or is
consistent with the terms of this Agreement and appropriate or necessary, in the
sole discretion of the General Partner, to effectuate the terms or intent of
this Agreement.
(B) Nothing herein contained shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Article XI or as may
be otherwise expressly provided for in this Agreement.
(C) The foregoing grant of authority (i) is a special power of attorney,
coupled with an interest, and it shall survive the Involuntary Withdrawal of any
Partner and shall extend to such Partner's heirs, successors, assigns and
personal representatives; (ii) may be exercised by the General Partner for each
and every Partner acting as attorney-in-fact for each and every Partner; and
(iii) shall survive the Transfer by a Limited Partner of all or any portion of
its Interest and shall be fully binding upon such transferee; except that the
power of attorney shall survive such assignment with respect to the assignor
Limited Partner for the sole purpose of enabling the General Partner to execute,
acknowledge and file any instrument necessary to effect the admission of the
transferee as a Substitute Limited Partner. Each Partner hereby agrees to be
bound by any representations made by the General Partner, acting in good faith
pursuant to such power of attorney. Each Partner shall execute and deliver to
the General Partner, within fifteen (15) days after receipt of the General
Partner's request therefor, such further designations, powers of attorney and
other instruments as the General Partner deems necessary to effectuate this
Agreement and the purposes of the Partnership.
SECTION 12.4 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, (i) if to a Limited Partner or a Preferred Limited Partner, at the
most current address given by such Limited Partner or Preferred Limited Partner
to the General Partner by means of a notice given in accordance with the
provisions of this Section 12.4, which address initially is the address
contained in the records of the General Partner, or (ii) if to the General
Partner, Royale Investments, Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chairman.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if hand delivered, five business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; or when receipt is acknowledged, if telecopied.
SECTION 12.5 Further Assurances. The parties agree to execute and deliver
all such documents, provide all such information and take or refrain from taking
any action as may be necessary or desirable to achieve the purposes of this
Agreement and the Partnership.
SECTION 12.6 Titles and Captions. All article or section titles or captions
in this Agreement are solely for convenience and shall not be deemed to be part
of this Agreement or otherwise define, limit or extend the scope or intent of
any provision hereof.
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SECTION 12.7 Applicable Law. This Agreement, and the application or
interpretation thereof, shall be governed exclusively by its terms and by the
law of the State of Delaware, without regard to its principles of conflicts of
laws.
SECTION 12.8 Binding Agreement. This Agreement shall be binding upon the
parties hereto, their heirs, executors, personal representatives, successors and
assigns.
SECTION 12.9 Waiver of Partition. Each of the parties hereto irrevocably
waives during the term of the Partnership any right that it may have to maintain
any action for partition with respect to any property of the Partnership.
SECTION 12.10 Counterparts and Effectiveness. This Agreement may be
executed in several counterparts, which shall be treated as originals for all
purposes, and all so executed shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all the parties are not signatory to
the original or the same counterpart. Any such counterpart shall be admissible
into evidence as an original hereof against each Person who executed it. The
execution of this Agreement and delivery thereof by facsimile shall be
sufficient for all purposes, and shall be binding upon any party who so
executes.
SECTION 12.11 Survival of Representations. All representations and
warranties herein shall survive the dissolution and final liquidation of the
Partnership.
SECTION 12.12 Entire Agreement. This Agreement (and all Exhibits hereto)
contains the entire understanding among the parties hereto and supersedes all
prior written or oral agreements among them respecting the within subject
matter, unless otherwise provided herein. There are no representations,
agreements, arrangements or understandings, oral or written, among the Partners
hereto relating to the subject matter of this Agreement which are not fully
expressed herein and in said Exhibits.
SECTION 12.13 Temporary Allocation. With respect to the period from
inception of the Partnership through December 31, 2000, in lieu of the
allocation provided by Section 5.2(A)(6), the portion of Profits resulting from
Partnership operations for each fiscal year shall be allocated (x) 19.8% to the
General Partner and (y) 80.2% to all Partners (including the General Partner,
but other than the Preferred Limited Partners) in accordance with their
Percentage Interests. Profits from Partnership operations for a Fiscal Year
shall mean the portion of Partnership Profits in excess of the amounts allocated
pursuant to Sections 5.2(C) and (D) and 5.2(A)(1) through (5) of this Agreement,
but shall not include Profits that arise from sales or dispositions of
Partnership Assets, except in the ordinary course of business. The foregoing
allocation of Profits shall be considered to occur pursuant to Section 5.2(A) of
this Agreement.
SECTION 12.14 Authorization and Consent. The General Partner, each Limited
Partner and each Preferred Limited Partner hereby authorizes the General
Partner, in the name and on behalf of the Partnership, to execute, deliver and
perform the Senior Secured Credit Agreement dated as of September 30, 1997
("Credit Agreement") between Royale Investments, Inc. ("Royale") the
Partnership, FCO Holdings, Inc., Blue ▇▇▇▇ Investment Company, L.P., South
Brunswick In-
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vestors, L.P. Comcourt Investors, L.P. and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, L.P., as Loan
parties and Bankers Trust Company, as Banker and each of Security Documents (as
defined in the Credit Agreement) to which it is to be a party or by which it is
to be bound and to execute and deliver in the name and on behalf of the
Partnership such instruments, agreements and documents and to take or refrain
from taking all such action as it in its sole discretion shall deem necessary,
desirable or advisable in connection with the foregoing and in connection with
the Formation/Contribution Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as of the day and year first above written.
General Partner: ROYALE INVESTMENTS, INC., as sole
General Partner of the Partnership
By:
---------------------------------------
LIMITED PARTNERS:
▇▇▇▇▇▇▇ EQUITIES, L.P.
By: ▇▇▇▇▇▇▇ EQUITIES CORP.
By:
------------------------------
Name:
Title:
LBCW LIMITED PARTNERSHIP
By:
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ III, General Partner
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇. de ▇. ▇▇▇▇▇▇▇, Trustee of
the ▇▇▇▇ ▇. de ▇. ▇▇▇▇▇▇▇
Living Trust dated 9/12/88
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇
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---------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ III
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
TIGER SOUTH BRUNSWICK, L.L.C.
By:
-----------------------------------------
Name:
Title:
▇▇▇▇▇▇▇▇▇ REAL ESTATE FUND T, L.P.
By: ▇▇▇▇▇▇▇▇▇ REAL ESTATE
PARTNERS MANAGEMENT T, L.L.C.
By:
-----------------------------------------
Name:
Title:
▇▇▇▇▇▇▇▇▇ REAL ESTATE
CO. INVESTMENT PARTNERSHIP T, L.P.
By: ▇▇▇▇▇▇▇▇▇ REAL ESTATE
PARTNERS MANAGEMENT I, L.L.C.
By:
-----------------------------------------
Name:
Title:
-▇▇-
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
By:
-----------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ III, General Partner
LGR INVESTMENT FUND, LTD.
By:
----------------------------------------------
Name:
---------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit 1
Schedule Of Partners
---------------------------- ---------------------------- --------------------------
No. of Units Percentage Interest Preferred partnership
Units
---------------------------- ---------------------------- --------------------------
General Partner
Royale Investments, Inc. 600,000 20.6946%
Limited Partners and
Preferred Limited Partners
▇▇▇ ▇. ▇▇▇▇▇▇▇ 2,600 0.0897% 126,079
▇▇▇▇▇▇▇ Equities, L.P. 582,103 20.0773% 457,826
▇▇▇▇ ▇. ▇▇▇▇▇▇, III 5,235 0.1805% 115,334
LBCW Limited Partnership 875,284 30.1894% 663,808
CHLB Partnership 63,243 2.1813% 41,741
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 129,549 4.4683% 85,502
▇▇▇▇▇ ▇. ▇▇▇▇▇ 15,368 0.5300% 10,142
▇▇▇▇ ▇. ▇▇▇. ▇▇▇▇▇▇▇. 89,549 3.0886% 59,102
Trustee of the ▇▇▇▇ ▇. de
▇. ▇▇▇▇▇▇▇ Living Trust
dated 9/12/88
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 34,718 1.1975% 22,914
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇ 17,359 0.5987% 11,457
LGR investment Fund, Ltd. 80,030 2.7603% 52,820
Tiger South Brunswick, 2,875 0.0992% 1,898
L.L.C.
▇▇▇▇▇▇▇▇▇ Real Estate Fund 336,121 11.5931% 221,840
I, ▇.▇.
▇▇▇▇▇▇▇▇▇ Real Estate Co. 33,299 1.1485% 21,977
Investment Partnership I,
L.P.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 10,227 0.3527% 6,750
▇▇▇▇▇▇ ▇▇▇▇ 6,818 0.2352% 4,500
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 9,091 0.3136% 6,000
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ `4,091 0.1411% 2,700
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,750 0.0604% 1,155
---------------------------- --------------------------- ---------------------------
2,899,310 100.0000% 1,913,545
============================ =========================== ===========================
FCO, L.P.
EXHIBIT 2
TO
LIMITED PARTNERSHIP AGREEMENT
Form of Redemption or Conversion Notice
Exhibit 2
Redemption Conversion Notice
The undersigned hereby irrevocably (i) elects to exercise its [redemption]
[conversion] rights contained in ARTICLE IX of the Limited Partnership Agreement
of First Commercial, L.P. (the "Partnership Agreement") with respect to an
aggregate of ________ [Partnership Units] [Preferred Units], (ii) surrenders
such [Partnership Units] [Preferred Units] and all right, title and interest
therein and (iii) directs that the [REIT shares (or applicable cash amount if so
determined by the General Partner in accordance with the Partnership Agreement)]
[Units of Limited Partner Interest] deliverable upon [redemption] [conversion]
of such [Partnership Units] [Preferred Units] be delivered to the address
specified below. Terms used above which are defined in the Partnership Agreement
are used herein are defined therein.
Dated:
--------------------------------
Name of Limited Partner or Preferred
Limited Partner:
--------------------
Social Security or
Federal Employer ID Number:
--------------------
-------------------------------------------
(Signature of Limited Partner or Preferred
Limited Partner)
-------------------------------------------
(Street Address)
-------------------------------------------
(City) (State)(Zip Code)
Signature Guaranteed by:
-------------------------------------------
FCO, L.P.
EXHIBIT 3
TO
LIMITED PARTNERSHIP AGREEMENT
Form of Registration Rights Agreement