AGREEMENT
OF LIMITED PARTNERSHIP
OF
WESTERN/PINECREEK, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF WESTERN/PINECREEK, L.P. (this
"Agreement"), dated as of November ____, 1999, is entered into by and between
WESTERN PROPERTIES TRUST, a California business trust, as general partner (in
its capacity as General Partner) (the "General Partner"), and each person who is
a signatory hereto, as limited partner (each, a "Limited Partner" and
collectively, the "Limited Partners").
THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts,
understandings and intentions:
A. WESTERN/PINECREEK, L.P. (the "Partnership") was formed as a
limited partnership under the laws of the State of Delaware by a Certificate of
Limited Partnership filed with the Secretary of State of Delaware on November
10, 1999.
B. On the date hereof, pursuant to that certain Contribution
Agreement dated as of November __, 1999 (the "Contribution Agreement") among the
General Partner, the Partnership and each Partner, the Partners are making
certain capital contributions to the Partnership as described in EXHIBIT A
hereto (the "Initial Capital Contributions").
C. Upon completion of the Initial Capital Contributions and related
transactions under the Contribution Agreement, the Partnership will be the
holder, directly or indirectly, and will be the sole owner of the Contributed
Properties (as defined in the Contribution Agreement).
D. Upon completion of the Initial Capital Contributions, the Limited
Partners will be admitted to the Partnership as Limited Partners with rights and
obligations as set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and the covenants and
agreements between the parties hereto, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
DEFINED TERMS
The following defined terms used in this Agreement shall have the
meanings specified below:
"ACT" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time.
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"ADDITIONAL LIMITED PARTNER" means a Person admitted to this Partnership
as a Limited Partner pursuant to Section 4.2 hereof.
"ADMINISTRATIVE EXPENSES" means (i) all administrative and operating
costs and expenses incurred by the Partnership and (ii) a management fee, in an
amount not to exceed the greater of (A) five percent (5%) of the gross revenues
of the Property to the extent that such management fees are reimbursable
pursuant to the terms of tenant leases of the Property or (B) three percent (3%)
of gross revenues of the Property.
"AFFILIATE" means, (i) any Person that, directly or indirectly, controls
or is controlled by or is under common control with such Person, (ii) any other
Person that owns, beneficially, directly or indirectly, 5 % or more of the
outstanding capital stock, shares or equity interests. of such Person, or (iii)
any officer, director, employee, partner or trustee of such Person or any Person
controlling, controlled by or under common control with such Person (excluding
trustees and persons serving in similar capacities who are not otherwise an
Affiliate of such Person). For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
"AGREEMENT" means this Agreement of Limited Partnership of the
Partnership.
"CAPITAL ACCOUNT" has the meaning provided in Section 4.4 hereof.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any Contributed Property that such
Partner contributes to the Partnership pursuant to Section 4.2 or 4.3 hereof,
including the Initial Capital Contributions. Any reference to the Capital
Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Partnership Interest of such Partner.
"CAPITAL TRANSACTION" means the refinancing, sale, exchange,
condemnation, recovery of a damage award or insurance proceeds (other than
business or rental interruption insurance proceeds not reinvested in the repair
or reconstruction of Properties), or other disposition of any Property (or the
Partnership's interest therein).
"CASH AMOUNT" means an amount of cash per Limited Partnership Unit equal
to the value of the Common Shares Amount on the date of receipt by the General
Partner of a Notice of Conversion of Common Shares. The value of the Common
Shares Amount shall be based on the average of the daily market price of Common
Shares for the ten consecutive trading days immediately preceding the date of
receipt by the General Partner of a Notice of Conversion of Common Shares. The
market price for each such trading day shall be: (i) if the Common Shares are
listed or admitted to trading on any securities exchange, the sale price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, on such day, (ii) if
the Common Shares are not listed or admitted to trading on any securities
exchange, the last reported sale price on such day or, if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the General Partner, or
(iii) if the Common Shares are not listed or admitted to trading on any
securities exchange and no such last reported sale price or closing bid and
asked prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable
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quotation source designated by the General Partner, or if there shall be no
bid and asked prices on such day, the average of the high bid and low asked
prices, as so reported, on the most recent day (not more than 10 days prior
to the date in question) for which prices have been so reported; provided
that if there are no bid and asked prices reported during the ten days prior
to the date in question, the value of the Common Shares shall be determined
by the General Partner acting in good faith on the basis of such quotations
and other information as it considers, in its reasonable judgment,
appropriate. In the event the Common Shares Amount includes rights that a
holder of Common Shares would be enttled to receive, then the value of such
rights shall be determined by the Company acting in good faith on the basis
of such quotations and other information as it considers, in its reasonable
judgment, appropriate.
"CERTIFICATE" means any instrument or document that is required under the
laws of the State of Delaware, or any other jurisdiction in which the
Partnership conducts business, to be signed and sworn to by the Partners of the
Partnership (either by themselves or pursuant to the power-of-attorney granted
to the General Partner in Section 8.2 hereof) and filed for recording in the
appropriate public offices within the State of Delaware or such other
jurisdiction to perfect or maintain the Partnership as a limited partnership, to
effect the admission, withdrawal, or substitution of any Partner of the
Partnership, or to protect the limited liability of the Limited Partners as
limited partners under the laws of the State of Delaware or such other
jurisdiction.
"CODE" means the Internal Revenue Code of 1986, as amended, and as
hereafter amended from time to time. Reference to any particular provision of
the Code shall mean that provision in the Code at the date hereof and any
succeeding provision of the Code.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMPANY" means Western Properties Trust, a California business trust.
"COMMON SHARE" means a share of beneficial interest in the Company.
"COMMON SHARES AMOUNT" shall mean a number of Common Shares equal to the
number of Limited Partnership Units offered for conversion by a Converting
Partner, multiplied by the Conversion Factor; provided that in the event the
Company issues to all holders of Common Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase Common Shares, or any other securities or property
(collectively, the "rights"), then the Common Shares Amount shall also include
such rights that a holder of that number of Common Shares would be entitled to
receive.
"CONTRIBUTED PROPERTY" means each item of Property or other asset, in
such form as may be permitted by the Act, but excluding cash, contributed or
deemed contributed to the Partnership (or deemed contributed to a "new"
partnership pursuant to Code Section 708).
"CONVERSION AMOUNT" means either the Cash Amount, or the Common Shares
Amount, as determined pursuant to Section 8.4(b) hereof.
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"CONVERSION FACTOR" means 1.0, PROVIDED THAT in the event that the
Company (i) declares or pays a dividend on its outstanding Common Shares in
Common Shares or makes a distribution to all holders of its outstanding Common
Shares in Common Shares, (ii) subdivides its outstanding Common Shares, or (iii)
combines its outstanding Common Shares into a smaller number of Common Shares,
the Conversion Factor shall be adjusted by multiplying the Conversion Factor by
a fraction, the numerator of which shall be the number of Common Shares issued
and outstanding on the record date for such dividend, distribution, subdivision
or combination (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 Common Shares (determined without the above
assumption) issued and outstanding on such 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; PROVIDED,
HOWEVER, that if the Company receives a Notice of Conversion after the record
date, but prior to the effective date of such dividend, distribution,
subdivision or combination, the Conversion Factor shall be determined as if the
Company had received the Notice of Conversion immediately prior to the record
date for such dividend, distribution, subdivision or combination.
"CONVERSION RIGHT" has the meaning provided in Section 8.4(a) hereof.
"CONVERSION SHARES" has the meaning provided in Section 8.5(a) hereof.
"CONVERTING PARTNER" has the meaning provided in Section 8.4(a) hereof.
"CURRENT GENERAL DISTRIBUTION AMOUNT" for any a fiscal period shall mean
Three Hundred Seventy-Nine Thousand Two Hundred Fifty Dollars ($379,250) per
fiscal year, as such amount may be proportionately reduced or increased for
fiscal periods shorter or longer than a full fiscal year.
"CURRENT LIMITED DISTRIBUTION AMOUNT" for any a fiscal period shall mean
One and 45/100 Dollars ($1.45) per fiscal year, as such amount may be
proportionately reduced or increased for fiscal periods shorter or longer than a
full fiscal year.
"DEBT" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
that, in accordance with generally accepted accounting principles, should be
capitalized.
"DEFAULTING LIMITED PARTNER" has the meaning provided in Section 5.2(b)
hereof.
"EFFECTIVE DATE" means the date of this Agreement.
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"EVENT OF BANKRUPTCY" as to any Person means the filing of a petition for
relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978
or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within 90 days); insolvency or
bankruptcy of such Person as finally determined by a court proceeding; filing by
such Person of a petition or application to accomplish the same or for the
appointment of a receiver or a trustee for such Person or a substantial part of
his assets; commencement of any proceedings relating to such Person as a debtor
under any other reorganization, arrangement, insolvency, adjustment of debt or
liquidation law of any jurisdiction, whether now in existence or hereinafter in
effect, either by such Person or by another, provided that if such proceeding is
commenced by another, such Person indicates his approval of such proceeding,
consents thereto or acquiesces therein, or such proceeding is contested by such
Person and has not been finally dismissed within 90 days.
"FUNDING LOAN" has the meaning provided in Section 4.3 hereof.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GENERAL PARTNER" means the Company, any successor-in-interest to the
Company, as permitted under the terms hereof, and any Person who becomes a
substitute or additional General Partner as provided herein, and any of their
successors as General Partner.
"GENERAL PARTNERSHIP INTEREST" means the Partnership Interest held by the
General Partner.
"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value of such asset
as determined by the General Partner and agreed to by the contributing Partner.
The gross fair market value of the assets which constitute the Initial Capital
Contributions shall be as set forth on EXHIBIT A hereto.
(b) The Gross Asset Values of all Partnership assets
immediately prior to the occurrence of any event described in clause (i), clause
(ii), cause (iii), clause (iv) or clause (v) hereof shall be adjusted to equal
their respective gross fair market value, as determined by the General Partner
using such reasonable method of valuation as it may adopt, as of the following
times:
(i) the acquisition of an additional interest in the
Partnership (other than in connection with the execution of this
Agreement but including, without limitation, acquisitions pursuant to
Section 4.2 hereof or contributions by the General Partner pursuant to
such Section) by a new or existing Partner in exchange for more than a DE
MINIMIS Capital Contribution, if the General Partner reasonably
determines that such adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners in the partnership;
(ii) the distribution by the Partnership to a Partner of more
than a DE MINIMIS amount of Partnership property as consideration for an
interest in the
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Partnership, if the General Partnership reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
(iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g);
(iv) upon the admission of a successor General Partner pursuant
to Section 7.2 hereof; and
(v) at such other times as the General Partner shall
reasonably determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.
(c) The Gross Asset Value of any Partnership asset distributed
to a Partner shall be the gross fair market value of such asset on the date of
distribution as determined by the distributee and the General Partner provided
that, if the distributee is the General Partner or if the distributee and the
General Partner cannot agree on such a determination, such gross fair market
value shall be determined by Appraisal.
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.7041 (b)(2)(iv)(m); PROVIDED,
HOWEVER, that Gross Asset Values shall not be adjusted pursuant to this
subsection (d) to the extent that the General Partner reasonably determines that
an adjustment pursuant to subsection (b) above is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subsection (d).
(e) If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subsection (a), subsection (b) or
subsection (d) above, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Profits and Losses.
"HOLDER" means either (a) a Partner or (b) any permitted assignee
thereof, owning a Partnership Unit, that is treated as a member of the
Partnership for federal income tax purposes.
"INDEMNITEE" means (i) any Person made a party to a proceeding by reason
of his status as the General Partner, a Limited Partner or an affiliate of
either of the foregoing, or a director or officer of the Partnership, a Limited
Partner or the General Partner or an affiliate of any of the foregoing and (ii)
such other Persons as the General Partner may designate in good faith from time
to time, in its reasonable discretion, giving consideration to the interest of
the Partnership.
"INITIAL CAPITAL CONTRIBUTIONS" has the meaning provided in the recitals
hereto.
"LIMITED PARTNER" means any Person named as a Limited Partner on
EXHIBIT A attached hereto, and any Person who becomes a Substitute Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
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"LIMITED PARTNERSHIP INTEREST" means the ownership interest of a Limited
Partner in the Partnership at any particular time, including the right of such
Limited Partner to any and all benefits to which such Limited Partner may be
entitled as provided in this Agreement and in the Act, together with the
obligations of such Limited Partner to comply with all the provisions of this
Agreement and of such Act. A Limited Partnership Interest may be expressed as a
number of Limited Partnership Units.
"LIMITED PARTNERSHIP UNIT" means an interest in the Partnership
representing a portions of the Limited Partnership Interests issued pursuant to
Sections 4.1 or 4.2 hereof. The initial allocation of Limited Partnership Units
among the Partners is as set forth on EXHIBIT A, as may be amended for time. to
time.
"LOSS" has the meaning provided in Section 5.1(h) hereof.
"NOTICE OF CONVERSION" means the Notice of Exercise of Conversion Right
substantially in the form attached as EXHIBIT B hereto.
"PARTNER" means any General Partner or Limited Partner.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse
Debt Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership by
either a Limited Partner or the General Partner and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the
amount of Partnership Minimum Gain is determined by first computing, for each
Partnership nonrecourse liability, any gain the Partnership would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Partner's share of Partnership Minimum Gain shall be
determined in accordance with Regulations Section 1.704-2(g)(1).
"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of cash pursuant to Section 5.2 hereof,
which record date shall be the same as the record date established by the
Company for a distribution to its shareholders of some or all of its portion of
such distribution.
"PERCENTAGE INTEREST" means, as to each Limited Partner, its interest in
the Limited Partnership Units as determined by dividing the Limited Partnership
Units owned by such Limited Partner by the total number of Limited Partnership
Units then outstanding. The initial Percentage Interest of each Limited Partner
is as set forth opposite its respective name on EXHIBIT A, as may be amended
from time to time. All Partnership allocations and distributions to the Limited
Partners will be made in accordance with each Limited Partner's Percentage
Interest.
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"PERSON" means any individual, partnership, corporation, joint venture,
trust or other entity.
"PREFERRED INVESTMENT" has the meaning provided in Section 4.3 hereof.
"PRIOR GENERAL DISTRIBUTION DEFICIENCY" on any date shall mean the
excess, if any, of the aggregate Current Distribution Amounts for all prior
periods (beginning with the date the Initial Capital Contributions are made)
over the aggregate amount theretofore distributed to the General Partner under
Sections 5.2(a)(i) and (iii) hereof.
"PRIOR LIMITED DISTRIBUTION DEFICIENCY" on any date shall mean the
excess, if any, of the aggregate Current Distribution Amounts for all prior
periods (beginning with the date the Initial Capital Contributions are made)
over the aggregate amount theretofore distributed to the Limited Partners under
Sections 5.2(a)(ii) and (iii) hereof.
"PROFIT" has the meaning provided in Section 5.1(h) hereof.
"PROPERTY" means any investment in which the Partnership holds an
ownership interest.
"PROPERTY DEBT" shall mean (i) that certain Debt existing as of the
date that the Limited Partners make their Initial Capital Contribution, the
repayment of which is secured by the lien of a mortgage or a deed of trust
encumbering Contributed Property that constitutes the Limited Partners'
Initial Capital Contribution, or (ii) any replacement or refinancing of such
Debt; provided, however, Property Debt shall be limited to Three Million
Seven Hundred Ninety-Two Thousand Five Hundred Dollars ($3,792,500), and any
Debt in excess of said amount shall not be considered Property Debt.
"REGULATIONS" means the Federal Income Tax Regulations issued under the
Code, as amended and as hereafter amended from time to time. Reference to any
particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any succeeding provision of the Regulations.
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"RESERVED CASH" means cash reasonably determined by the General Partner
as necessary to pay contemplated tenant improvements, leasing commissions,
unreimbursed maintenance expenses and capital expenditures, and other costs of
operating the Property; provided that Reserved Cash in an amount equal to
fifteen percent (15%) of revenues of the Property, up to an aggregate reserved
sum of _____________ dollars ($______) shall be deemed reasonable.
"RULE 144" has the meaning set forth in Section 8.5(a) hereof.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" has the meaning set forth in Section 8.4(a) hereof.
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"SERVICE" means the Internal Revenue Service.
"SPECIFIED CONVERSION DATE" means 30 days after the receipt by the
Company of the Notice of Conversion.
"SUBSIDIARY" means, 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.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the Partnership
as a Limited Partner pursuant to Section 9.3 hereof.
"TRANSFER" has the meaning set forth in Section 9.2(a) hereof.
ARTICLE II.
PARTNERSHIP CONTINUATION AND IDENTIFICATION
2.1 CONTINUATION. The Partners hereby agree to continue the
Partnership pursuant to the Act and upon the terms and conditions set forth in
this Agreement.
2.2 NAME, OFFICE AND REGISTERED AGENT. The name of the Partnership
shall be WESTERN/PINECREEK, L.P. The specified office and place of business of
the Partnership shall be 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx
00000. The General Partner may at any time change the location of such office,
provided the General Partner gives notice to the Partners of any such change.
The name and address of the Partnership's registered agent is _________________.
The sole duty of the registered agent as such is to forward to the Partnership
any notice that is served on him as registered agent.
2.3 PARTNERS.
(a) As of the date hereof, the General Partner of the
Partnership is Western Properties Trust, a California business trust. Its
principal place of business shall be the same as that of the Partnership.
(b) The Limited Partners shall be those Persons identified as
Limited Partners in Exhibit A hereto, as amended from time to time.
2.4 TERM AND DISSOLUTION.
(a) The term of the Partnership shall continue in full force
and effect until June 15, 2049 except that the Partnership shall be dissolved
upon the happening of any of the following events:
(i) The occurrence of an Event of Bankruptcy as to a General
Partner or the dissolution, death or withdrawal of a General Partner
unless the business of the Partnership is continued pursuant to
Section 7.3(b) hereof; provided that if a General Partner is on the date
of such occurrence a partnership, the dissolution of such General Partner
as a result of the dissolution, death, withdrawal, removal or
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Event of Bankruptcy of a partner in such partnership shall not be an
event of dissolution of the Partnership if the business of such General
Partner is continued by the remaining partner or partners, either alone
or with additional partners, and such General Partner and such partners
comply with any other applicable requirements of this Agreement;
(ii) The passage of 90 days after the sale or other taxable
disposition of all or substantially all the assets of the Partnership;
provided that if the Partnership receives an installment obligation as
consideration for such sale or other disposition, the Partnership shall
continue, unless sooner dissolved under the provisions of this Agreement,
until such time as such note or notes are paid in full;
(iii) The conversion of all Limited Partnership Interests; or
(iv) The election by the General Partner that the Partnership
should be dissolved.
(b) Upon dissolution of the Partnership (unless the business
of the Partnership is continued pursuant to Section 7.3(b) hereof), the General
Partner (or its trustee, receiver, successor or legal representative) shall
amend or cancel the Certificate and liquidate the Partnership's assets and apply
and distribute the proceeds thereof in accordance with Section 5.6 hereof.
Notwithstanding the foregoing, the liquidating General Partner may either (i)
defer liquidation of, or withhold from distribution, for a reasonable time, any
assets of the Partnership (including those necessary to satisfy the
Partnership's debts and obligations), or (ii) distribute the assets to the
Partners in kind.
2.5 FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP. The
General Partner shall execute, acknowledge, record and file at the expense of
the Partnership, the Certificate and any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state
or other jurisdiction in which the Partnership conducts business.
ARTICLE III.
BUSINESS OF THE PARTNERSHIP
3.1 BUSINESS PURPOSE. The purpose and nature of the business to be
conducted by the Partnership is to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act; provided,
however, that such business shall be limited to and conducted in such a manner
as to permit the General Partner at all times to qualify as a REIT, unless the
Company otherwise ceases to qualify as a REIT. The General Partner shall also
be empowered to do any and all acts and things necessary or prudent to ensure
that the Partnership will not be classified as a "publicly traded partnership"
for purposes of Section 7704 of the Code.
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3.2 REPRESENTATIONS AND WARRANTIES BY THE PARTIES.
(a) Each Partner (including, without limitation, each
Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner) that
is an individual represents and warrants to each other Partner(s) that (i)
the consummation of the transactions contemplated by this Agreement to be
performed by such Partner will not result in a breach or violation of, or a
default under, any material agreement by which such Partner or any of such
Partner's property is bound, or any statute, regulation, order or other law
to which such Partner is subject, (ii) subject to the last sentence of this
Section 3.2(a), such Partner is neither a "foreign person" within the meaning
of Code Section 1445(f) nor a "foreign partner" within the meaning of Code
Section 1446(e), (iii) this Agreement is binding upon, and enforceable
against, such Partner in accordance with its terms. Notwithstanding anything
contained herein to the contrary, in the event that the representation
contained in clause (ii) foregoing would be inaccurate if given by a Partner,
such Partner (w) shall not be required to make and shall not be deemed to
have made such representation, (x) shall deliver to the General Partner in
connection with or prior to its execution of this Agreement written notice
that it may not truthfully make such representation, (y) hereby agrees that
it is subject to, and hereby authorizes the General Partner to withhold, all
withholdings to which such a "foreign person" or "foreign partner", as
applicable, is subject under the Code and (z) hereby agrees to cooperate
fully with the General Partner with respect to such withholdings, including
by effecting the timely completion and delivery to the General Partner of all
internal revenue forms required in connection therewith.
(b) Each Partner (including, without limitation, each
Additional Limited Partner or Substituted Limited Partner as a condition to
becoming an Additional Limited Partner or a Substituted Limited Partner) that
is not an individual represents and warrants to each other Partner(s) that
(i) all transactions contemplated by this Agreement to be performed by it
have been duly authorized by all necessary action, including, without
limitation, that of its general partner(s), committee(s), trustee(s),
beneficiaries, directors and/or shareholder(s), as the case may be, as
required, (ii) the consummation of such transactions shall not result in a
breach or violation of, or a default under, its partnership or operating
agreement, trust agreement, articles, charter or by-laws, as the case may be,
any material agreement by which such Partner or any of such Partner's
properties or any of its partners, members, beneficiaries, trustees or
shareholders, as the case may be, is or are bound, or any statute,
regulation, order or other law to which such Partner or any of its partners,
members, trustees, beneficiaries or shareholders, as the case may be, is or
are subject, (iii) subject to the last sentence of this Section 3.2(b), such
Partner is neither a "foreign person" within the meaning of the Code Section
1445(f) nor a "foreign partner" within the meaning of Code Section 1446(e),
and (iv) this Agreement is binding upon, and enforceable against, such
Partner in accordance with its terms. Notwithstanding anything contained
herein to the contrary, in the event that the representation contained in
clause (iii) foregoing would be inaccurate if given by a Partner, such
Partner (w) shall not be required to make and shall not be deemed to have
made such representation, (x) shall deliver to the General Partner in
connection with or prior to its execution of this Agreement written notice
that it may not truthfully make such representation, (y) hereby agrees that
it is subject to, and hereby authorizes the General Partner to withhold, all
withholdings to which such a "foreign person" or "foreign partner", as
applicable, is subject under the Code and (z) hereby agrees to cooperate
fully with the General
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Partner with respect to such withholdings, including by effecting the timely
completion and delivery to the General Partner of all internal revenue forms
required in connection therewith.
(c) Each Partner (including, without limitation, each
Substituted Limited Partner as a condition to becoming a Substituted Limited
Partner) represents, warrants and agrees that it has acquired and continues
to hold its interest in the Partnership for its own account for investment
purposes only and not for the purpose of, or with a view toward, the resale
or distribution of all or any part thereof, and not with a view toward
selling or otherwise distributing such interest or any part thereof at any
particular time or under any predetermined circumstances. Each Partner
further represents and warrants that it is a sophisticated investor, able and
accustomed to handling sophisticated financial matters for itself,
particularly real estate investments, and that is has a sufficiently high net
worth that it does not anticipate a need for the funds that it has invested
in the Partnership in what it understands to be a highly speculative and
liquid investment.
(d) The representations and warranties contained in Sections
3.2(a), 3.2(b), and 3.2(c) hereof shall survive the execution and delivery of
this Agreement by each Partner (and, in the case of an Additional Limited
Partner or a Substituted Limited Partner, the admission of such Additional
Limited Partner or Substituted Limited Partner as a Limited Partner in the
Partnership) and the dissolution, liquidation and termination of the
Partnership.
(e) Each Partner (including, without limitation, each
Substituted Limited Partner as a condition to becoming a Substituted Limited
Partner) hereby acknowledges that no representations as to potential profit,
cash flows, funds from operations or yield, if any, in respect of the
Partnership or General Partner have been made by any Partner or any employee
or representative or Affiliate of any Partner, and that projections and any
other information, including, without limitation, financial and descriptive
information and documentation, that may have been in any manner submitted to
such Partner shall not constitute any representation or warranty of any kind
or nature, express or implied.
ARTICLE IV.
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.1 CAPITAL CONTRIBUTIONS. The Partners shall make the Initial
Capital Contributions to the Partnership, whereupon the General Partner shall
own the sole General Partnership Interest in the Partnership with the rights
and obligations set forth herein, and each Limited Partner shall own Limited
Partnership Units in the amount set forth for such Partner on Exhibit A (as
the same may be amended from time to time by the General Partner to the
extent necessary to reflect accurately sales, exchanges or other transfers,
redemptions, Capital Contributions, the issuance of additional Partnership
Units, or similar events having an effect on a Partner's ownership of
Partnership Units), with the rights and obligations set forth herein. The
Initial Capital contributions shall be valued for Capital account purposes in
the manner set forth on Exhibit A. Any transfer tax owed as a result of the
Initial Capital Contributions shall be the responsibility of, and shall be
paid by, the Partnership.
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL
PARTNERSHIP INTERESTS. Except as provided in this Section 4.2, or in Section
4.3 or Section 5.6(b), the Partners
12
shall have no right or obligation to make any additional Capital
Contributions, loans or preferred equity investments to the Partnership.
(a) ADDITIONAL GENERAL PARTNER CONTRIBUTIONS. Except as
provided in Article VII hereof, the Company shall at all times be the sole
General Partner of the Partnership. The General Partner may, but shall not
be obligated to, contribute additional capital to the Partnership, from time
to time, as determined by the General Partner in its sole discretion.
(b) ADDITIONAL LIMITED PARTNERSHIP INTERESTS. The General
Partner may not admit additional Limited Partners or issue additional Limited
Partnership Interests without the consent of a majority-in-interest of the
Limited Partners, such consent not to be unreasonably withheld. Upon the
issuance of any additional Limited Partnership Interest, the General Partner
shall amend Article V, Exhibit A and such other provisions hereof as may be
necessary or appropriate to reflect such issuance.
4.3 GENERAL PARTNER LOANS AND ADDITIONAL INVESTMENTS. The General
Partner may, but shall not be obligated to, from time to time advance funds
to the Partnership for any proper Partnership purpose as reasonably
determined by the General Partner, as a loan ("Funding Loan") or a preferred
equity investment ("Preferred Investment"), which shall provide a return at a
rate of ten percent (10%) per annum on such terms and conditions as the
General Partner it shall determine in its good faith discretion.
4.4 CAPITAL ACCOUNTS. A separate capital account (a "Capital
Account") shall be established and maintained for each Partner in accordance
with Regulations Section 1.704-1(b)(2)(iv). If (i) a new or existing Partner
acquires an additional Partnership Interest in exchange for more than a DE
MINIMIS Capital Contribution, (ii) the Partnership distributes to a Partner
more than a DE MINIMIS amount of Partnership property as consideration for a
Partnership Interest, or (iii) the Partnership is liquidated within the
meaning of Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall
revalue the property of the Partnership to its fair market value (as
determined by the General Partner and taking into account Section 7701(g) of
the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f). When
the Partnership's property is revalued by the General Partner, the Capital
Accounts of the Partners shall be adjusted in accordance with Regulations
Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital
Accounts to be adjusted to reflect the manner in which the unrealized gain or
loss inherent in such property (that has not been reflected in the Capital
Accounts previously) would be allocated among the Partners pursuant to
Section 5.1 if there were a taxable disposition of such property for its fair
market value (as determined by the General Partner and taking into account
Section 7701(g) of the Code) on the date of the revaluation.
4.5 PERCENTAGE INTERESTS. If the number of outstanding Limited
Partnership Units increases or decreases during a taxable year, each Limited
Partner's Percentage Interest shall be adjusted to a percentage equal to the
number of Limited Partnership Units held by such Limited Partner divided by
the aggregate number of Limited Partnership Units outstanding after giving
effect to such increase or decrease. If the Limited Partners' Percentage
Interests are adjusted pursuant to this Section 4.5, the Profits and Losses
for the taxable year in which the adjustment occurs shall be allocated
between the part of the year ending on the day of the adjustment and the part
of the year beginning on the following day either (i) as if the taxable year
had ended on the
13
date of the adjustment or (ii) based on the number of days in each part. The
General Partner, in its sole discretion, shall determine which method shall
be used to allocate Profits and Losses for the taxable year in which the
adjustment occurs. The allocation of Profits and Losses for the earlier part
of the year shall be based on the Percentage Interests before adjustment, and
the allocation of Profits and Losses for the later part shall be based on the
adjusted Percentage Interests.
4.6 NO INTEREST ON CONTRIBUTIONS. No Partner shall be entitled to
interest on its Capital Contribution.
4.7 RETURN OF CAPITAL CONTRIBUTIONS. Except as specifically
provided in this Agreement, no Partner shall be entitled to withdraw any part
of its Capital Contribution or its Capital Account or to receive any
distribution from the Partnership. Except as otherwise provided herein,
there shall be no obligation to return to any Partner or withdrawn Partner
any part of such Partner's Capital Contribution for so long as the
Partnership continues in existence.
4.8 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the
right or obligation of any Partner to make Capital Contributions or loans or
to pursue any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns. None of the rights or
obligations of the Partners herein set forth to make Capital Contributions or
loans to the Partnership shall be deemed an asset of the Partnership for any
purpose by any creditor or other third party, nor may such rights or
obligations be sold, transferred or assigned by the Partnership or pledged or
encumbered by the Partnership to secure any debt or other obligation of the
Partnership or of any of the Partners. In addition, it is the intent of the
parties hereto that no distribution to any Limited Partner shall be deemed a
return of money or other property in violation of the Act.
ARTICLE V.
PROFITS AND LOSSES; DISTRIBUTIONS
5.1 ALLOCATION OF PROFIT AND LOSS. Except as otherwise provided in
this Section 5.1 or in Section 5.6, Profit and Loss of the Partnership for
each fiscal year of the Partnership shall be allocated as follows:
(a) LOSS. Loss shall be charged 99% to the Capital Account
of the Limited Partners, in proportion to their Percentage Interests, and 1%
to the Capital Account of the General Partner.
(b) PROFIT.
(i) First, to the Partners' Capital Accounts, until
Profit Allocations under this Section 5.1(b)(i) are equal to the
total amount of Loss Allocations to such Partner under Section
5.1(a) and in the same proportion thereof.
(ii) Second, to the Capital Account of the General
Partner until all Profits allocated under this clause (b)(ii)
shall equal the amounts theretofore
14
distributed to the General Partner under Section 5.2(a)(i), plus
the amounts theretofore of Partnership principal payments on
Property Debt that were subtracted in computing distributions
to the General Partner under Section 5.2(a)(i);
(iii) Third, to the Capital Accounts of the Limited
Partners, in proportion to their Percentage Interests, until all
Profits allocated under this clause (b)(iii) with respect to each
Limited Partnership Unit shall equal the amounts theretofore
distributed with respect to such Limited Partnership Unit under
Section 5.2(a)(ii) hereof;
(iv) Fourth, to the Capital Account of the General
Partner and the Capital Accounts of the Limited Partners (the
Limited Partners in proportion to their Percentage Interests)
until all Profits allocated under this clause (b)(iv) shall equal
the amounts theretofore distributed with respect to such General
Partner's Interest and Limited Partnership Unit, as the case may
be, under Section 5.2(a)(iii).
(v) Finally, 74.72% to the Capital Account of General
Partner and 25.28% to the Capital Account of the Limited Partner
(in proportion to their Percentage Interests).
(c) NONRECOURSE DEDUCTIONS, MINIMUM GAIN CHARGEBACK.
Notwithstanding any provision to the contrary, (i) any expense of the
Partnership that is a "nonrecourse deduction" within the meaning of
Regulations Section 1.704-2(b)(1), or a cost recovery deduction (depreciation
and amortization) under Sections 167 and 197 of the Code, shall be allocated
100% to the Capital Account of the Limited Partners, in proportion to their
Percentage Interests, (ii) any expense of the Partnership that is a "partner
nonrecourse deduction" within the meaning of Regulations Section
1.704-2(i)(2) shall be allocated to the Capital Accounts of the Partner in
accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net
decrease in Partnership Minimum Gain within the meaning of Regulations
Section 1.704-2(f)(1) for any Partnership taxable year, items of gain and
income shall be allocated among the Partners in accordance with Regulations
Section 1.704-2(f) and the ordering rules contained in Regulations Section
1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any
Partnership taxable year, items of gain and income shall be allocated among
the Partners in accordance with Regulations Section 1.704-2(i)(4) and the
ordering rules contained in Regulations Section 1.704-2(j). For purposes of
determining its share of the nonrecourse liabilities of the Partnership
within the meaning of Regulations Section 1.752-3(a)(3), the deductions
attributable to Partnership nonrecourse liabilities shall be considered to be
allocated 100% to the Limited Partners.
(d) QUALIFIED INCOME OFFSET. If a Limited Partner receives
in any taxable year an adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d)
that causes or increases a negative balance in such Partner's Capital Account
that exceeds the sum of such Partner's shares of Partnership Minimum Gain and
Partner Nonrecourse Debt Minimum Gain, as determined in accordance with
Regulations Sections 1.704-2(g) and 1.704-2(i), such Partner shall be
allocated specially for such
15
taxable year (and, if necessary, later taxable years) items of income and
gain in an amount and manner sufficient to eliminate such negative Capital
Account balance as quickly as possible as provided in Regulations Section
1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or
gain to a Limited Partner in accordance with this Section 5.1(d), to the
extent permitted by Regulations Section 1.704-1(b), items of expense or loss
shall be allocated to such Partner in an amount necessary to offset the
income or gain previously allocated to such Partner under this Section 5.1(d).
(e) CAPITAL ACCOUNT DEFICITS. During such period that the
Partnership has Nonrecourse Debt, loss shall not be allocated to the General
Partner to the extent that such allocation would cause a deficit in such
Partner's Capital Account (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum
of such Partner's shares of Partnership Minimum Gain and Partner Nonrecourse
Debt Minimum Gain and liabilities allocated to such Partner under Regulation
Section 1.752-3(a). Any Loss in excess of that limitation shall be allocated
to the Limited Partners in accordance with their Percentage Interests. After
the occurrence of an allocation of Loss to the General Partner in accordance
with this Section 5.1(e), to the extent permitted by Regulations Section
1.704-1(b), Profit shall be allocated to such Partner in an amount necessary
to offset the Loss previously allocated to such Partner under this Section
5.1(e).
(f) CURATIVE ALLOCATIONS. The allocations set forth in
Section 5.1(b), (c), (d), and (e) hereof (the "Regulatory Allocations") are
intended to comply with certain regulatory requirements, including the
requirements of Regulations Section 1.704-1(b) and 1.704-2. The Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, loss, and deduction among the Partners so that to the extent possible
without violating the requirements giving rise to the Regulatory Allocations,
the net amount of such allocations of other items and the Regulatory
Allocations to each Holder of a Partnership Common Unit shall be equal to the
net amount that would have been allocated to each such Holder if the
Regulatory Allocations had not been applied.
(g) ALLOCATIONS BETWEEN TRANSFEROR AND TRANSFEREE. If a
Partner transfers any part or all of its Partnership Interest, and the
transferee is admitted as a substitute Partner as provided herein, the
distributive shares of the various items of Profit and Loss allocable among
the Partners during such fiscal year of the Partnership shall be allocated
between the transferor and the substitute Partner either (i) as if the
Partnership's fiscal year had ended on the date of the transfer, or (ii)
based on the number of days of such fiscal year that each was a Partner
without regard to the results of Partnership activities in the respective
portions of such fiscal year in which the transferor and the transferee were
Partners. The General Partner, in its sole discretion, shall determine which
method shall be used to allocate the distributive shares of the various items
of Profit and Loss between the transferor and the substitute Partner.
(h) DEFINITION OF PROFIT AND LOSS. "Profit" and "Loss" and
any items of income, gain, expense, or loss referred to in this Agreement
shall be determined in accordance with federal income tax accounting
principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that
Profit and Loss shall not include items of income, gain and expense that are
specially allocated pursuant to Section 5.1(c), 5.1(d), or 5.1(e). All
allocations of income, Profit, gain, Loss, and expense (and all items
contained therein) for federal income tax purposes
16
shall be identical to all allocations of such items set forth in this Section
5.1, except as otherwise required by Section 704(c) of the Code and
Regulations Section 1.704-1(b)(4). The General Partner shall have the
authority to elect the method to be used by the Partnership for allocating
items of income, gain, and expense as required by Section 704(c) of the Code
and such election shall be binding on all Partners.
(i) RECOURSE DEBT. Notwithstanding anything in this
Agreement to the contrary, in the event the Partnership refinances the
Property Debt with debt of the General Partner or its affiliate or incurs any
other recourse Property Debt, the Limited Partners shall absolutely and
unconditionally guaranty the entire amount of such Property Debt, without
right of indemnification, subrogation, contribution, or reimbursement from
the General Partner or the Partnership. Each Limited Partner shall enter
into a direct agreement with the lender consistent therewith, it being the
intention of the Partners that 100% of the liability will be treated as
recourse debt to the Limited Partners and the liability allocated 100% to the
Limited Partners under Regulation Section 1.752-2 in proportion to their
Partnership Interests.
5.2 DISTRIBUTION OF CASH.
(a) On such dates as determined by the General Partner, but
not less frequently than quarterly, the General Partner shall cause the
Partnership to distribute such cash in excess of the Reserved Cash, as the
General Partner, in its reasonable discretion, considers available for
distribution on such date, to the Holders of Partnership Interests on the
Partnership Record Date with respect to such distribution period. Following
payment of any amounts due with respect to Funding Loans and/or Preferred
Investments, such Distributions shall be made as follows:
(i) First, to the General Partner in an amount equal to
the sum of (A) the Current General Distribution Amount, plus (B)
any Prior General Distribution Deficiency, MINUS any interest or
principal payments made by the Partnership with respect to any
Property Debt since the prior cash distribution of the
Partnership;
(ii) Second, to the Limited Partners, in an amount equal
to the sum of (A) Current Limited Distribution Amount, plus (B)
the Prior Limited Distribution Deficiency per each Limited
Partnership Unit;
(iii) Thereafter, Seventy-Four and Seventy-Two One-
Hundredths percent (74.72%) to the General Partner and Twenty-
Five and Twenty-Eight One-Hundredths percent (25.28%) to the
Limited Partners, as such percentage may be adjusted based upon
variation from an aggregate number of Eighty-Eight Thousand Four
Hundred Ninety-Eight (88,498) outstanding Limited Partnership
Units (each Limited Partnership Unit representing 0.00028566%).
(b) Notwithstanding any other provision of this Agreement,
the General Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any
withholding requirements established under the Code or any other federal,
state or local law including, without limitation, pursuant to Sections 1441,
1442,
17
1445 and 1446 of the Code. To the extent that the Partnership is required to
withhold and pay over to any taxing authority any amount resulting from the
allocation or distribution of income to a Partner or assignee (including by
reason of Section 1446 of the Code), either (i) if the actual amount to be
distributed to the Partner or assignee equals or exceeds the amount required
to be withheld by the Partnership, the amount withheld shall be treated as a
distribution of cash in the amount of such withholding to such Partner or
assignee, or (ii) if the actual amount to be distributed to the Partner or
assignee is less than the amount required to be withheld by the Partnership,
the amount required to be withheld shall be treated as a loan (a "Partnership
Loan") from the Partnership to the Partner on the day the Partnership pays
over such amount to the applicable taxing authority. A Partnership Loan
shall be repaid through withholding by the Partnership with respect to
subsequent distributions to the applicable Partner or assignee. In the event
that a Limited Partner or assignee (either, a "Defaulting Limited Partner")
fails to pay any amount owed to the Partnership with respect to a Partnership
Loan within 15 days after demand for payment thereof is made by the
Partnership on the Defaulting Limited Partner, the General Partner, in its
sole discretion, may elect to make the payment to the Partnership on behalf
of such Defaulting Limited Partner. In such event, on the date of payment,
the General Partner shall be deemed to have extended a Funding Loan to the
Defaulting Limited Partner in the amount of the payment made by the General
Partner.
Any amounts treated as a Partnership Loan or a General Partner
Loan pursuant to this Section 5.2(b) shall bear interest at the lesser of (i)
the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in THE WALL STREET JOURNAL,
or (ii) the maximum lawful rate of interest on such obligation, such interest
to accrue from the date the Partnership or the General Partner, as
applicable, is deemed to extend the loan until such loan is repaid in full.
(c) In no event may a Partner receive a distribution of cash
with respect to a Limited Partnership Unit if such Partner is entitled to
receive a dividend with respect to a Common Share for which all or part of
such Limited Partnership Unit has been or will be exchanged.
5.3 NO RIGHT TO DISTRIBUTIONS IN KIND; GENERAL PARTNER'S RIGHT OF
SUBSTITUTION.
(a) Except as provided in paragraph (b) hereof, no Partner
shall be entitled to demand property other than cash in connection with any
distributions by the Partnership.
(b) The General Partner shall be permitted, without
obtaining the consent of any other Partner, to cause any item of real
property now owned or hereafter acquired by the Partnership (including,
without limitation, those items of real property included in the Initial
Capital Contributions) to be distributed in-kind to the General Partner;
provided, however, that no such distribution shall be permitted unless,
concurrently with such distribution, the General Partner shall contribute to
the Partnership one or more properties which the General Partner reasonably
expects will generate cash available for distribution in an amount at least
equal to the amount of cash expected to be generated by the Property or
Properties distributed for the remainder of the period described in Section
8.7 hereof.
18
5.4 LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS.
Notwithstanding any of the provisions of this Article V, no Partner shall
have the right to receive, and the General Partner shall not have the right
to make, a distribution which includes a return of all or part of Partner's
Capital Contributions, unless after giving effect to the return of a Capital
Contribution, the sum of all liabilities of the Partnership, other than the
liabilities to a Partner for the return of his Capital Contribution, does not
exceed the fair market value of the Partnership's assets.
5.5 REIT DISTRIBUTION REQUIREMENTS. The General Partner shall use
its reasonable efforts to cause the Partnership to distribute amounts
sufficient to enable the General Partner (i) to meet its distribution
requirement for qualification as a REIT as set forth in Section 857(a)(i) of
the Code and (ii) to avoid any federal income or excise tax liability imposed
by the Code.
5.6 DISTRIBUTIONS UPON LIQUIDATION.
(a) Upon liquidation of the Partnership, after payment of,
or adequate provision for, debts and obligations of the Partnership,
including any Partner loans, any remaining assets of the Partnership shall be
distributed to all Partners with positive Capital Accounts in accordance with
their respective positive Capital Account balances. For purposes of the
preceding sentence, the Capital Account of each Partner shall be determined
after all adjustments made in accordance with Sections 5.1 and 5.2 resulting
from Partnership operations. Gain or loss resulting from any disposition of
Partnership assets in connection with such liquidation (including, without
limitation, attributable to any in-kind distributions undertaken in
connection therewith) shall be credited or charged to the Capital Accounts of
the Partners so as to result, as nearly as possible, in liquidating
distributions with respect to each Partner to equal the amount of the
Partners' positive Capital Accounts. Any distributions pursuant to this
Section 5.6 should be made by the end of the Partnership's taxable year in
which the liquidation occurs (or, if later, within 90 days after the date of
the liquidation). To the extent deemed advisable by the General Partner,
appropriate arrangements (including the use of a liquidating trust) may be
made to assure that adequate funds are available to pay any contingent debts
or obligations.
(b) NEGATIVE CAPITAL ACCOUNTS - If any Partner has a
negative balance in its Capital Account following a liquidation of the
Partnership, as determined after taking into account all Capital Account
adjustments in accordance with this Article V resulting from Partnership
operations and from all sales and dispositions of all or any part of the
Partnership's assets, such Partner shall contribute to the Partnership an
amount of cash equal to the negative balance in its Capital Account and such
cash shall be paid or distributed by the Partnership to creditors, if any,
and then to the Partners with positive Capital Accounts, pro rata in
proportion thereto, in accordance with Section 5.6(a). Such contribution by
a Partner shall be made by the end of the Partnership's taxable year in which
the liquidation occurs (or, if later, within 90 days after the date of the
liquidation).
5.7 SUBSTANTIAL ECONOMIC EFFECT. It is the intent of the Partners
that the allocations of Profit and Loss under the Agreement have substantial
economic effect (or be consistent with the Partners' interests in the
Partnership in the case of the allocation of losses attributable to
nonrecourse debt) within the meaning of Section 704(b) of the Code as
interpreted by the
19
Regulations promulgated pursuant thereto. Article V and other relevant
provisions of this Agreement shall be interpreted in a manner consistent with
such intent.
ARTICLE VI.
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER
6.1 MANAGEMENT OF THE PARTNERSHIP.
(a) Except as otherwise expressly provided in this Agreement,
the General Partner shall have full, complete and exclusive discretion to manage
and control the business of the Partnership for the purposes herein stated, and
shall make all decisions affecting the business and assets of the Partnership.
Subject to the restrictions specifically contained in this Agreement, the powers
of the General Partner shall include, without limitation, the authority to take
the following actions on behalf of the Partnership:
(i) to acquire, purchase, own, lease and dispose of any real
property and any other property or assets that the General Partner
determines are necessary or appropriate or in the best interests of the
business of the Partnership, provided that the Partnership shall provide
thirty (30) days prior written notice to the Limited Partners of the sale
of all or substantially all of the Partnership Property;
(ii) subject to the terms of any applicable lease, to construct
buildings and make other improvements on the properties owned or leased
by the Partnership;
(iii) to borrow money for the Partnership, issue evidences of
indebtedness in connection therewith, refinance, guarantee, increase the
amount of, modify, amend or change the terms of, or extend the time for
the payment of, any indebtedness or obligation to the Partnership, and
secure such indebtedness by mortgage, deed of trust, pledge or other lien
on the Partnership's assets;
(iv) to pay, either directly or by reimbursement, for all
Administrative Expenses as set forth in this Agreement, whether to the
Company, the General Partner, an Affiliate of the General Partner or to
third parties;
(v) to lease all or any portion of any of the Partnership's
assets, whether or not the terms of such leases extend beyond the
termination date of the Partnership and whether or not any portion of the
Partnership's assets so leased are to be occupied by the lessee, or, in
turn, subleased in whole or in part to others, for such consideration and
on such terms as the General Partner may determine;
(vi) to prosecute, defend, arbitrate, or compromise any and all
claims or Liabilities in favor of or against the Partnership, on such
terms and in such manner as the General Partner may reasonably determine,
and similarly to prosecute, settle or defend litigation with respect to
the Partners, the Partnership, or the Partnership's assets; PROVIDED,
HOWEVER, that the General Partner may not,
20
without the consent of all of the Partners, confess a judgment against
the Partnership;
(vii) to file applications, communicate, and otherwise deal with
any and all governmental agencies having jurisdiction over, or in any way
affecting, the Partnership's assets or any other aspect of the
Partnership business;
(viii) to make or revoke any election permitted or required of
the Partnership by any taxing authority;
(ix) to maintain such insurance coverage for public liability,
fire and casualty, and any and all other insurance for the protection of
the Partnership, for the conservation of Partnership assets, or for any
other purpose convenient or beneficial to the Partnership, in such
amounts and such types, as it shall determine from time to time;
(x) to determine whether or not to apply any insurance
proceeds for any property to the restoration of such property or to
distribute the same;
(xi) to retain legal counsel, accountants, consultants, real
estate brokers, and such other persons, as the General Partner may deem
necessary or appropriate in connection with the Partnership business and
to pay therefor such reasonable remuneration as the General Partner may
deem reasonable and proper;
(xii) to retain other services of any kind or nature in
connection with the Partnership business, and to pay therefor such
remuneration as the General Partner may deem reasonable and proper;
(xiii) to negotiate and conclude agreements on behalf of the
Partnership with respect to any of the rights, powers and authority
conferred upon the General Partner;
(xiv) to maintain accurate accounting records and to file
promptly all federal, state and local income tax returns on behalf of the
Partnership;
(xv) to distribute Partnership cash or other Partnership assets
in accordance with this Agreement;
(xvi) to form or acquire an interest in, and contribute property
to, any further limited or general partnerships, joint ventures or other
relationships that it deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property to, its
Subsidiaries and any other Person in which it has an equity interest from
time to time);
(xvii) to establish Partnership reserves for working capital,
capital expenditures, contingent liabilities, or any other valid
Partnership purpose;
21
(xviii) to take such other action, execute, acknowledge,
swear to or deliver such other documents and instruments, and perform any
and all other acts the General Partner deems necessary or appropriate for
the formation, continuation and conduct of the business and affairs of
the Partnership (including, without limitation, all actions consistent
with allowing the Company at all times to qualify as a REIT unless the
Company voluntarily terminates its REIT status) and to possess and enjoy
all of the rights and powers of a general partner as provided by the Act;
and
(xix) to reimburse the General Partner and/or the Limited
Partners for reasonable out-of-pocket expenses incurred in connection
with the formation of the Partnership.
(b) Except as otherwise provided herein, to the extent the
duties of the General Partner require expenditures of funds to be paid to third
parties, the General Partner shall not have any obligations hereunder except to
the extent that Partnership funds are reasonably available to it for the
performance of such duties, and nothing herein contained shall be deemed to
authorize or require the General Partner, in its capacity as such, to expend its
individual funds for payment to third parties or to undertake any individual
liability or obligation on behalf of the Partnership.
6.2 DELEGATION OF AUTHORITY. The General Partner may delegate any or
all of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the business
of the Partnership, which Person may, under supervision of the General Partner,
perform any acts or services for the Partnership as the General Partner may
approve.
6.3 INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.
(a) To the fullest extent permitted by applicable law,
unless otherwise provided in this Agreement, the Partnership shall indemnify
each Indemnitee from and against any and all losses, claims, damages,
liabilities (joint or several), expenses (including, without limitation,
attorney's fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or
investigative, that relate to the operations of the Partnership as set forth
in this Agreement in which such Indemnitee may be involved, or is threatened
to be involved, as a party or otherwise; provided, however, that the
Partnership shall not indemnify an Indemnitee: (i) for willful misconduct or
a knowing violation of the law or (ii) for any transaction for which such
Indemnitee received an improper personal benefit in violation or breach of
any provision of this Agreement. Unless otherwise provided in this
Agreement, the foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guarantee or otherwise, for any indebtedness
of the Partnership or any Subsidiary of the Partnership (including, without
limitation, any indebtedness which the Partnership or any Subsidiary of the
Partnership has assumed or taken subject to), and the General Partner is
hereby authorized to and empowered, on behalf of the Partnership, to enter
into one or more indemnity agreements consistent with the provisions of this
Section 6.3 in favor of Indemnitee having or potentially having liability for
any such indebtedness. It is the intention of this Section 6.3 that the
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Partnership indemnify each Indemnitee to the fullest extent permitted by law,
unless otherwise provided in this Agreement. The termination of any
proceeding by judgment, order or settlement does not create a presumption
that the Indemnitee did not meet the requisite standard of conduct set forth
in this Section 6.3. The termination of any proceeding by conviction of an
Indemnitee or upon a plea of nolo contendere or its equivalent by an
Indemnitee, or an entry of an order of probation against an Indemnitee prior
to judgment, does not create a presumption that such Indemnitee acted in a
manner contrary to that specified in this Section 6.3. Any indemnification
pursuant to this Section 6.3 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall
have any obligation to contribute to the capital of the Partnership or
otherwise provide funds to enable the Partnership to fund its obligations
under this Section 6.3. Notwithstanding anything in this Section 6.3 to the
contrary, the Partnership shall not indemnify a Limited Partner against any
liability for recourse Property Debt as provided in Section 5.1(i).
(b) To the fullest extent permitted by law, unless otherwise
provided in this Agreement, expenses incurred by an Indemnitee who is a party to
a proceeding or otherwise subject to or the focus of or is involved in any
proceeding shall be paid or reimbursed by the Partnership as incurred by the
Indemnitee in advance of the final disposition of the proceeding upon receipt by
the Partnership of (i) a written affirmation by the Indemnitee of the
Indemnitee's good faith belief that the standard of conduct necessary for
indemnification by the Partnership as authorized in this Section 6.3 has been
met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay
the amount if it shall ultimately be determined that the standard of conduct has
not been met.
(c) The indemnification provided by this Section 6.3 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity.
(d) The Partnership may, but shall not be obligated to,
purchase and maintain insurance, on behalf of the Indemnitees and such other
Persons as the General Partner shall determine, against any liability that may
be asserted against or expenses that may be incurred by such Person in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such Person against such liability
under the provisions of this Agreement.
(e) For purposes of this Section 6.3, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 6.3; and actions taken
or omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.
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(f) In no event may an Indemnitee subject the Limited Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 6.3 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.3 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
6.4 LIABILITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership or any Partners for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith. Additionally, the General Partner shall not be in breach
of any duty that the General Partner may owe to the Limited Partners or the
Partnership or any other Persons under this Agreement or of any duty stated or
implied by law or equity, provided the General Partner, acting in good faith,
abides by the terms of this Agreement.
(b) The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership, the Company and the
Company's shareholders collectively, and that the General Partner is under no
obligation to consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to the Limited Partners,
except as otherwise provided in Section 8.7 hereof) in deciding whether to cause
the Partnership to take (or decline to take) any actions. In the event of a
conflict between the interests of the shareholders of the Company on one hand
and the Limited Partners on the other, the General Partner shall endeavor in
good faith to resolve the conflict in a manner not adverse to either the
shareholders of the Company or the Limited Partners; provided the General
Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided that the General Partner has acted in good faith.
(c) Subject to its obligations and duties as General Partner
set forth in Section 6.1 hereof, the General Partner may exercise any of the
powers granted to it under this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by it in good faith.
(d) Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the Company to
continue to qualify as a REIT or (ii) to prevent the Company from incurring any
taxes under
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Section 857, Section 4981, or any other provision of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the Limited
Partners.
(e) Any amendment, modification or repeal of this Section
6.4 or any provision hereof shall be prospective only and shall not in any
way affect the limitations on the General Partner's liability to the
Partnership and the Limited Partners under this Section 6.4 as in effect
immediately prior to such amendment, modification or repeal with respect to
matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when claims relating to such matters may arise or be
asserted.
6.5 EXPENDITURES BY THE PARTNERSHIP.
(a) The General Partner shall not be compensated for its
services as general partner of the Partnership except as provided in this
Agreement (including the provisions of Article 4 hereof regarding
distributions, payments, and allocations to which it may be entitled in its
capacity as the General Partner).
(b) The General Partner is hereby authorized to pay
compensation for accounting, administrative, legal, technical, management and
other services rendered to the Partnership. All of the aforesaid
expenditures (including Administrative Expenses) shall be obligations of the
Partnership, and the General Partner shall be entitled to reimbursement by
the Partnership for any expenditure (including Administrative Expenses)
incurred by it on behalf of the Partnership which shall be made other than
out of the funds of the Partnership.
(c) To the extent practicable, Partnership expenses shall be
billed directly to and paid by the Partnership and reimbursements to the
General Partner or any of its Affiliates by the Partnership pursuant to this
Section 6.5 shall be treated as non-income reimbursements, and not as
"guaranteed payments" within the meaning of Code Section 707(c) or other
forms of gross income.
6.6 OUTSIDE ACTIVITIES. Subject to Section 6.7 hereof, it is
expressly understood and agreed that the General Partner, and any officer,
director, employee, agent, trustee, Affiliate or shareholder of the General
Partner, shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership,
including business interests and activities substantially similar or
identical to those of the Partnership. Neither the Partnership nor any of the
Limited Partners shall have any rights by virtue of this Agreement in any
such business ventures, interests or activities. None of the Limited
Partners nor any other Person shall have any rights by virtue of this
Agreement or the partnership relationship established hereby in any such
business ventures, interests or activities, and the General Partner shall
have no obligation pursuant to this Agreement to offer any interest in any
such business ventures, interests and activities to the Partnership or any
Limited Partner, even if such opportunity is of a character which, if
presented to the Partnership or any Limited Partner, could be taken by such
Person.
6.7 EMPLOYMENT OR RETENTION OF AFFILIATES.
(a) Any Affiliate of the General Partner may be employed or
retained by the Partnership and may otherwise deal with the Partnership
(whether as a buyer, lessor, lessee,
25
manager, furnisher of goods or services, broker, agent, lender or otherwise)
and may receive from the Partnership any compensation, price, or other
payment therefor which the General Partner determines to be fair and
reasonable.
(b) The Partnership may transfer assets to joint ventures,
other partnerships, corporations or other business entities in which it is or
thereby becomes a participant upon such terms and subject to such conditions
as the General Partner deems are consistent with this Agreement and
applicable law.
(c) Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates shall sell, transfer or convey
any property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are on terms that are fair
and reasonable to the Partnership.
6.8 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby
declares and warrants that any Partnership assets for which legal title is
held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit
of the Partnership in accordance with the provisions of this Agreement;
PROVIDED, HOWEVER, that the General Partner shall use its best efforts to
cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall
be recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
ARTICLE VII.
CHANGES IN GENERAL PARTNER
7.1 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST. The
General Partner may not transfer any of its General Partnership Interest or
withdraw as General Partner except (i) for transfers to a wholly-owned
subsidiary of the General Partner, or to a partnership or limited liability
company controlled by the General Partner, or (ii) in connection with a
merger, consolidation or other combination with or into another Person or a
sale of all or substantially all of its assets. In any such circumstance,
such transferee shall be admitted as a substitute General Partner hereunder.
7.2 ADMISSION OF A SUBSTITUTE OR ADDITIONAL GENERAL PARTNER.
Except in connection with a transaction described in Section 7.1, a Person
shall be admitted as a substitute or successor General Partner of the
Partnership only if the following terms and conditions are satisfied:
(a) a majority in interest of the Limited Partners shall
have consented in writing to the admission of the substitute or successor
General Partner;
(b) the Person to be admitted as a substitute or additional
General Partner shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement by
26
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 a certificate evidencing the admission of
such Person as a General Partner shall have been filed for recordation and
all other actions required by Section 2.5 hereof in connection with such
admission shall have been performed;
(c) if the Person to be admitted as a substitute or
additional General Partner is a corporation or a partnership it shall have
provided the Partnership with evidence satisfactory to counsel for the
Partnership of such Person's authority to become a General Partner and to be
bound by the terms and provisions of this Agreement; and
(d) counsel for the Partnership shall have rendered an
opinion (relying on such opinions from other counsel and the state or any
other jurisdiction as may be necessary) that the admission of the person to
be admitted as a substitute or additional General Partner is in conformity
with the Act, that none of the actions taken in connection with the admission
of such Person as a substitute or additional General Partner will cause (i)
the Partnership to be classified other than as a partnership for federal
income tax purposes, or (ii) the loss of any Limited Partner's limited
liability.
7.3 EFFECT OF BANKRUPTCY, WITHDRAWAL, DEATH OR DISSOLUTION OF A
GENERAL PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to a
General Partner (and its removal pursuant to Section 7.4(a) hereof) or the
withdrawal, death or dissolution of a General Partner (except that, if a
General Partner is on the date of such occurrence a partnership, the
withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a
partner in, such partnership shall be deemed not to be a dissolution of such
General Partner if the business of such General Partner is continued by the
remaining partner or partners), the Partnership shall be dissolved and
terminated unless the Partnership is continued pursuant to Section 7.3(b)
hereof.
(b) Following the occurrence of an Event of Bankruptcy as to
a General Partner (and its removal pursuant to Section 704(a) hereof) or the
death, withdrawal, removal or dissolution of a General Partner (except that,
if a General Partner is on the date of such occurrence a partnership, the
withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a
partner in, such partnership shall be deemed not to be a dissolution of such
General Partner if the business of such General Partner is continued by the
remaining partner or partners), the Limited Partners, within 90 days after
such occurrence, may elect to reconstitute the Partnership and continue the
business of the Partnership for the balance of the term specified in Section
2.4 hereof by selecting, subject to Section 7.2 hereof and any other
provisions of this Agreement, a substitute General Partner by unanimous
consent of the Limited Partners. If the Limited Partners elect to
reconstitute the Partnership and admit a substitute General Partner, the
relationship with the Partners and of any Person who has acquired an interest
of a Partner in the Partnership shall be governed by this Agreement.
7.4 REMOVAL OF A GENERAL PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to, or
the dissolution of, a General Partner, such General Partner shall be deemed
to be removed automatically;
27
provided, however, that if a General Partner is on the date of such
occurrence a partnership, the withdrawal, death, dissolution, Event of
Bankruptcy as to or removal of a partner in such partnership shall be deemed
not to be a dissolution of the General Partner if the business of such
General Partner is continued by the remaining partner or partners.
(b) If a General Partner has been removed pursuant to this
Section 7.4 and the Partnership is continued pursuant to Section 7.3 hereof,
such General Partner shall promptly transfer and assign its General
Partnership Interest in the Partnership to the substitute General Partner
approved by a majority in interest of the Limited Partners in accordance with
Section 7.3(b) hereof and otherwise admitted to the Partnership in accordance
with Section 7.2 hereof. At the time of assignment, the removed General
Partner shall be entitled to receive from the substitute General Partner the
fair market value of the General Partnership Interest of such removed General
Partner as reduced by any damages caused to the Partnership Interest of such
removed General Partner. Such fair market value shall be determined by an
appraiser mutually agreed upon by the General Partner and a majority in
interest of the Limited Partners within 10 days following the removal of the
General Partner. In the event that the parties are unable to agree upon an
appraiser, the removed General Partner and a majority in interest of the
Limited Partners each shall select an appraiser. Each such appraiser shall
complete an appraisal of the fair market value of the removed General
Partner's General Partnership Interest within 30 days of the General
Partner's removal, and the fair market value of the removed General Partner's
General Partnership Interest shall be the average of the two appraisals;
provided, however, that if the higher appraisal exceeds the lower appraisal
by more than 20% of the amount of the lower appraisal, the two appraisers, no
later than 40 days after the removal of the General Partner, shall select a
third appraiser who shall complete an appraisal of the fair market value of
the removed General Partner's General Partnership Interest no later than 60
days after the removal of the General Partner. In such case, the fair market
value of the removed General Partner's General Partnership Interest shall be
the average of the two appraisals closest in value.
(c) The General Partnership Interest of a removed General
Partner, during the time after default until transfer under Section 7.4(b),
shall be converted to that of a special Limited Partner; provided, however,
such removed General Partner shall not have any rights to participate in the
management and affairs of the Partnership, and shall not be entitled to any
portion of the income, expense, profit, gain or loss allocations or cash
distributions allocable or payable, as the case may be, to the Limited
Partners. Instead, such removed General Partner shall receive and be entitled
only to retain distributions or allocations of such items that it would have
been entitled to receive in its capacity as General Partner, until the
transfer is effective pursuant to Section 7.4(b).
(d) All Partners shall have given and hereby do give such
consents, shall take such actions and shall execute such documents as shall
be legally necessary and sufficient to effect all the foregoing provisions of
this Section.
ARTICLE VIII.
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
8.1 MANAGEMENT OF THE PARTNERSHIP. The Limited Partners shall not
participate in the management or control of Partnership business nor shall
they transact any business for the
28
Partnership, nor shall they have the power to sign for or bind the
Partnership, such powers being vested solely and exclusively in the General
Partner.
8.2 POWER OF ATTORNEY. Each Limited Partner hereby irrevocably
appoints the General Partner his true and lawful attorney-in-fact, who may
act for each Limited Partner and in his name, place and xxxxx, and for his
use and benefit, to sign, acknowledge, swear to, deliver, file and record, at
the appropriate public offices, any and all documents, certificates, and
instruments as may be deemed necessary or desirable by the General Partner to
carry out fully the provisions of this Agreement and the Act in accordance
with their terms, which power of attorney is coupled with an interest and
shall survive the death, dissolution or legal incapacity of the Limited
Partner, or the transfer by the Limited Partner of any part or all of his
Partnership Interest.
8.3 LIMITATION ON LIABILITY OF LIMITED PARTNERS. Except as
otherwise provided in Sections 5.1(i) and 5.6(b), no Limited Partner shall be
liable for any debts, liabilities, contracts or obligations of the
Partnership. After his Capital Contribution is fully paid, no Limited
Partner shall, except as provided in Sections 5.1(i) and 5.6(b) or otherwise
required by the Act, be required to make any further Capital Contributions or
other payments or lend any funds to the Partnership.
8.4 CONVERSION RIGHT.
(a) Subject to Sections 8.4(b)-(f), on or after the date
which is one (1) year after the Effective Date, each Limited Partner shall
have the right (the "Conversion Right") to require the General Partner to
convert on a Specified Conversion Date all or a portion of the Limited
Partnership Units held by such Limited Partner at a price equal to and in the
form of the Conversion Amount; provided that if any Common Shares are to be
issued in connection therewith they shall have been registered pursuant to a
registration statement declared effective under the Securities Act of 1933,
as amended (the "Securities Act"). The Conversion Right shall be exercised
pursuant to a Notice of Conversion delivered to the General Partner by the
Limited Partner who is exercising the Conversion Right (the "Converting
Partner"); provided, however, that the Partnership shall not be obligated to
satisfy such Conversion Right if the Company and/or the General Partner
elects to purchase the Limited Partnership Units subject to the Notice of
Conversion pursuant to Section 8.4(b) provided, however, that no Limited
Partner may deliver to the General Partner more than four (4) Notices of
Conversion during each calendar year; and further provided that such
Conversion Right shall terminate upon the sale of all or substantially all of
the Partnership Property where such sale is pursuant to the planned
liquidation of the Partnership. In addition to the restrictions on
conversion set forth in Section 8.5(h), a Limited Partner may not exercise
the Conversion Right for less than twenty thousand (20,000) Limited
Partnership Units or, if such Limited Partner holds less than twenty thousand
(20,000) Limited Partnership Units, all of the Limited Partnership Units held
by such Partner. The Converting Partner shall have no right, with respect to
any Limited Partnership Units so converted, to receive any distribution paid
with respect to Limited Partnership Units (including without limitation any
Prior Limited Distribution Deficiency) if the record date for such
distribution is on or after the Specified Conversion Date.
(b) Notwithstanding the provisions of Section 8.5(a), the
General Partner may, in its sole and absolute discretion, elect to purchase
directly and acquire Limited Partnership
29
Units with respect to which the Conversion Right has been exercised by paying
to the Converting Partner either the Cash Amount, or, provided that the
Common Shares have been registered pursuant to a registration statement
declared effective under the Securities Act, the Common Shares Amount, as
elected by the General Partner (in its sole and absolute discretion), on the
Specified Conversion Date, whereupon the General Partner shall acquire the
Limited Partnership Units offered for conversion by the Converting Partner,
which shall upon such acquisition become a part of the General Partnership
Interest (and shall no longer be considered Limited Partnership Units
hereunder). Each Converting Partner agrees to execute such documents as the
General Partner may reasonably require in connection with the issuance of
Common Shares upon exercise of the Conversion Right.
(c) Any Cash Amount to be paid to a Converting Partner
pursuant to this Section 8.5 shall be paid within 30 days after the initial
date of receipt by the Company of the Notice of Conversion relating to the
Limited Partnership Units to be converted.
(d) In the event that the General Partner permits the pledge
of a Limited Partner's Partnership Units to a lender, the General Partner may
agree, in its sole discretion, to allow such lender, upon foreclosure of such
Limited Partnership Units, to convert such Limited Partnership Units prior to
the expiration of the one-year period described in Section 8.5(a); provided,
that any such conversion shall be effected in the form of the Cash Amount.
(e) Notwithstanding any other provision of this Agreement,
the General Partner shall place appropriate restrictions on the ability of
the Limited Partners to exercise their Conversion Rights as and if deemed
necessary to ensure that the Partnership does not constitute a "publicly
traded partnership" under Section 7704 of the Code.
(f) Without limiting the obligations of the General Partner
to deliver registered shares as provided in Section 8.5(b), each certificate,
if any, evidencing Common Shares that may be issued in redemption of Limited
Partnership Units under Section 8.5 above (the "Conversion Shares") shall, to
the extent such shares have not been registered pursuant to a registration
statement declared effective under the Securities Act, bear a restrictive
legend in substantially the following form:
The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities law. No
transfer of the Shares represented by this
certificate shall be valid or effective unless (A)
such transfer is made pursuant to an effective
registration statement under the Act, or (B) the
holder of the securities proposed to be transferred
shall have delivered to the Company either a no-action
letter from the Securities and Exchange Commission or
an opinion of counsel (who may be an employee of such
holder) experienced in securities matters to the effect
that such proposed transfer is exempt from the
registration requirements of the Act which opinion
shall be reasonably satisfactory to the Company.
8.5 REGISTRATION.
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(a) SHELF REGISTRATION. Prior to or on the first date upon
which the Limited Partnership Units owned by any Limited Partner may be
converted, at the request of a Limited Partner, the Company agrees to file
with the Commission, a shelf registration statement on Form S-3 under Rule
415 of the Securities Act, or any similar rule that may be adopted by the
Commission (the "Shelf Registration"), with respect to all of the Common
Shares issued or issuable to the Limited Partners pursuant to Section 8.4(b)
hereof (the "Conversion Shares"). The Company will use its best efforts to
have the Shelf Registration declared effective under the Securities Act and
to keep the Shelf Registration continuously effective until a date agreed
upon by the Company and a majority in interest of the Limited Partners or
until such time as all of the shares registered pursuant to such Shelf
Registration (i) have been disposed of pursuant to such Shelf Registration,
(ii) have otherwise been distributed pursuant to Rule 144 promulgated under
the Securities Act ("Rule 144"), or (iii) may be sold in the market without
restriction under Rule 144. The Company further agrees to supplement or make
amendments to the Shelf Registration, if required by the rules, regulations
or instructions applicable to the registration form utilized by the Company
or by the Securities Act or rules and regulations thereunder for the Shelf
Registration. No provision of this Agreement shall require the Company to
file a registration statement on any form other than Form S-3. The Company,
in the exercise of its reasonable judgment, shall have the right to delay the
filing of the Shelf Registration for up to 120 days.
(b) REGISTRATION AND QUALIFICATION PROCEDURES. The Company,
upon the written request of a Limited Partner, is required by the provisions
of Section 8.5(a) hereof to use its best efforts to have the Shelf
Registration declared effective under the Securities Act. Accordingly, the
Company will:
(i) prepare and file with the Commission a registration
statement, including amendments thereof and supplements relating thereto,
with respect to the Conversion Shares;
(ii) use its best efforts to cause the Shelf Registration to be
declared effective by the Commission;
(iii) keep the Shelf Registration effective and the related
prospectus current as described in Section 8.5(a) hereof; provided,
however, that the Company shall have no obligation to file any amendment
or supplement at its own expense or the Partnership's expense more than
90 days after the effective date of the Shelf Registration;
(iv) furnish to each holder of Conversion Shares such numbers
of copies of prospectuses, and supplements or amendments thereto, and
such other documents as such holder reasonably requests;
(v) register or qualify the securities covered by the
registration statement under the securities or blue sky laws of such
jurisdictions within the United States as any holder of Conversion Shares
shall reasonably request, and do such other reasonable acts and things as
may be required of it to enable such holders to consummate the sale or
other disposition in such jurisdictions of the
31
Conversion Shares; provided, however, that the Company shall not be
required to (i) qualify as a foreign corporation or consent to a general
and unlimited service or process in any jurisdictions in which it would
not otherwise be required to be qualified or so consent or (ii) qualify
as a dealer in securities; and
(vi) keep the holders of Conversion Shares advised as to the
initiation and progress of the registration.
(c) ALLOCATION OF EXPENSES. The Company and the Partnership
shall each pay its proportionate share of all expenses in connection with the
Shelf Registration, including without limitation (i) all expenses incident to
filing with the National Association of Securities Dealers, Inc., (ii)
registration fees, (iii) printing expenses, (iv) accounting and legal fees
and expenses, except to the extent holders of Conversion Shares elect to
engage accountants or attorneys in addition to the accountants and attorneys
engaged by the Partnership or the Company, (v) accounting expenses incident
to or required by any such registration or qualification and (vi) expenses of
complying with the securities or blue sky laws of any jurisdictions in
connection with such registration or qualification; provided, however,
neither Company nor the Partnership shall not be liable for (A) any discounts
or commissions to any broker attributable to the sale of Conversion Shares,
(B) any direct out-of-pocket costs incurred by any Limited Partner in
connection with the registration of Conversion Shares, including but not
limited to the Limited Partner's attorney and accountant's fees, travel
expenses and any consulting fees or (C) any other fees or expenses incurred
by holders of Conversion Shares in connection with such registration which,
according to the written instructions of any regulatory authority, either
such person is not permitted to pay.
(d) SALE OF CONVERSION SHARES. The Company may require in its
sole discretion that the Conversion Shares be sold in block trades through
underwriters or broker-dealers or that the sale of the Conversion Shares be
underwritten by investment banking firms selected by the Company.
(e) LISTING ON SECURITIES EXCHANGE. If the Company shall list
or maintain the listing of any Common Shares on any securities exchange or
national market system, it will at its expense and as necessary to permit the
registration and sale of the Conversion Shares hereunder, list thereon, maintain
and, when necessary, increase such listing to include such Conversion Shares.
8.6 "PIGGYBACK" REGISTRATION RIGHTS.
(a) NOTICE OF REGISTRATION. If, at any time commencing upon
the date upon which all or any portion of the Limited Partnership Units shall
have been converted into Conversion Shares (but not if such Limited Partnership
Units shall have been exchanged for cash in accordance with the provisions
hereof), the Company files a registration statement under the Securities Act
with respect to a firm commitment underwritten public offering of any securities
of the Company, the Company shall give thirty (30) days prior written notice
thereof to each Limited Partner and shall, upon the written request of any or
all of the Limited Partners, include in the underwritten public offering the
number of Conversion Shares that each such Limited Partner may request (except
as set forth in Section 8.6(b) below). The Company will keep such
32
registration statement effective and current under the Securities Act
permitting the sale of Conversion Shares covered thereby for the same period
that the registration statement is maintained effective for the other persons
(including the Company) selling thereunder. In any underwritten offering,
however, the Conversion Shares to be included will be sold at the same time
and at the same price as the Company's securities. In the event that the
Company fails to receive a written request from a Limited Partner within
thirty (30) days of its written notice, then the Company shall have no
obligation to include any of the Conversion Shares in the offering. In
connection with any registration statement or subsequent amendment or similar
document filed pursuant to this Section 8.6, the Company shall take all
reasonable steps to make the securities covered thereby eligible for public
offering and sale under the securities or blue sky laws of the applicable
jurisdictions by the effective date of such registration statement; provided
that in no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not so qualified at the time of filing such
documents or to take any action which would subject it to unlimited service
of process in any jurisdiction where it is not so subject at such time. The
Company shall keep such filing current for the length of time it must keep
any registration statement, post-effective amendment, prospectus or offering
circular effective pursuant hereto.
(b) UNDERWRITING. In the event of an offering by the Company
in which one or more Limited Partners wishes to include Conversion Shares under
this Section 8.6, and it is determined in good faith by the managing underwriter
of such offering, giving effect to the number of Conversion Shares to be offered
by the Company, that the total number of Conversion Shares that would
consequently be offered is in excess of the number of Conversion Shares that can
be sold at the proposed price, then the number of Conversion Shares of the
Limited Partners to be offered will be reduced ratably, based upon the number of
Conversion Shares each Limited Partner has requested to include in such
registration.
(c) OBLIGATION OF LIMITED PARTNERS UPON REGISTRATION. To
include Conversion Shares in any registration, each Limited Partner shall:
(i) Cooperate with the Company in preparing each such
registration and execute all such agreements as any underwriter may deem
reasonably necessary in favor of such underwriter;
(ii) Promptly supply the Company with all information,
documents, representations and agreements as such underwriter may deem
reasonably necessary in connection with such registration; and
(iii) Agree in writing not to sell or transfer any share of the
Conversion Shares not included in such underwritten offering for a period
of seven (7) days prior to and thirty (30) days after the effective date
of such registration without the underwriters' consent, but no Limited
Partner shall be required to make such agreement unless the other Limited
Partners included in any offering covered by such registration shall
similarly agree.
(d) COMPANY'S OBLIGATIONS UPON REGISTRATION. If and whenever
the Company is obligated by the provisions of this Section 8.6 to effect the
registration of any offering of
33
Common Shares under the Securities Act, as expeditiously as possible the
Company will, or will use its best efforts to, as the case may be:
(i) Prepare and file with the SEC a registration statement
with respect to such Common Shares and, use its best efforts to cause
such registration statement to become effective;
(ii) Furnish to each Limited Partner so many copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such
Limited Partner may reasonably request; and
(iii) Register or qualify the securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as such Limited Partner shall reasonably request, and
do any and all other acts and things that may be reasonably necessary or
advisable to enable the Limited Partners to consummate the disposition in
such jurisdictions of such securities.
(e) EXPENSES. In connection with any filing or other
registration hereunder the Partnership shall bear its proportionate share of all
the expenses and professional fees which arise in connection with such filings
or registration (except for the Limited Partner's pro rata share of any
underwriters' discount) and all expenses incurred in making such filings and
keeping them effective and correct as provided hereunder and shall also provide
each Limited Partner with a reasonable number of printed copies of the
prospectus, offering circulars and/or supplemental prospectuses or amended
prospectuses in final and preliminary form; provided, however, each Limited
Partner will pay its own direct out-of-pocket costs incurred with the
registration of Common Shares, including but not limited to Limited Partner's
attorney and accountants fees, travel expenses and any consulting fees.
(f) INDEMNIFICATION BY THE COMPANY. The Company will
indemnify each Limited Partner, each of its officers and directors, and each
person controlling the Limited Partner, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 8.6,
against all claims, losses, damages, costs, expenses and liabilities
whatsoever (or actions in respect thereof) arising out of or based on (i) any
untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other similar
document (including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made or
(ii) any violation by the Company of the Securities Act or any state
securities law or of any rule or regulation promulgated under the Securities
Act or any state securities law applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse the Limited
Partner, each of its officers and directors, and each person controlling the
Limited Partner, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, provided, however, that (x) the Company will not be
liable in any such case to the extent that any such claim, loss,
34
damage, liability, or action arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omission)
based upon written information furnished to the Company by an instrument duly
executed by the Limited Partner and stated to be specifically for use therein
or furnished by the Limited Partner to the Company in response to a request
by the Company stating specifically that such information will be used by the
Company therein, and (y) such indemnity agreement shall not inure to the
benefit of the Limited Partner, insofar as it relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission)
made in the preliminary prospectus or prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the amended prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act or in
any subsequent amended prospectus filed with the Commission prior to the
written confirmation of the sale of the Registrable Securities at issue
(collectively, the "Final Prospectus"), if a copy of the Final Prospectus was
not furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(g) INDEMNIFICATION BY THE LIMITED PARTNERS. The Limited
Partners will, if Conversion Shares held by or issuable to such Limited
Partners are included in the Common Shares to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Common Shares
covered by such registration statement, and each person who controls the
Company within the meaning of the Securities Act against all claims, losses,
damages, costs, expenses and liabilities whatsoever (or actions in respect
thereof) arising out of or based on any untrue Statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other similar document (including any
related registration statement, notification or the like) incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances under which they were made, and will reimburse the
Company, such directors, officers, persons or underwriters for any legal or
any other expenses reasonably incurred in connection with investigation or
defending any such claim, loss, damage, costs, expense, liability or action,
in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by the Limited
Partners and stated to be specifically for use therein or furnished by any
Limited Partner to the Company in response to a request by the Company
stating specifically that such information will be used by the Company
therein, provided, however, that the foregoing indemnity agreement is subject
to the condition that, such indemity agreement shall not inure to the benefit
of the Company or any underwriter insofar as it relates to any such untrue
statements (or alleged untrue statements) or omission (or alleged omission)
made in the preliminary prospectus or prospectus but eliminated or remedied
in the Final Prospectus, if a copy of the Final Prospectus was not furnished
to the person or entity asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(h) INDEMNIFICATION PROCEDURES. Each party entitled to
indemnification under this Section 8.6 (the "Indemnified Party") shall give
notice to the party required to provide
35
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying party to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not unreasonably be withheld). The failure of any Indemnified Party to give
notice as provided herein shall relieve the Indemnifying Party of its
obligations under this Agreement only to the extent that such failure to give
notice shall materially prejudice the Indemnifying Party in the defense of
any such claim or any such litigation. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement that attributes any liability to the Indemnified Party, unless the
settlement includes as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. If any such Indemnified
Party shall have been advised by counsel chosen by it that there may be one
or more legal defenses available to such Indemnified Party that are different
from or additional to those available to the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such
action on behalf of such Indemnified Party and will reimburse such
Indemnified Party and any person controlling such Indemnified Party for the
reasonable fees and expenses of any counsel retained by the Indemnified
Party, it being understood that the Indemnifying Party shall not, in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys for each Indemnified Party or controlling
person (and all other Indemnified Parties and controlling persons which may
be represented without conflict by one counsel), which firm shall be
designated in writing by the Indemnified Party (or Indemnified Parties, if
more than one Indemnified Party is to be represented by such counsel) to the
Indemnifying Party. The Indemnifying Party shall not be subject to any
liability for any settlement made without its consent, which shall not be
unreasonably withheld.
If the indemnification provided for in this Section 8.6
from the Indemnifying Party is unavailable to an Indemnified Party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred
to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Parties in connection with the
actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such Indemnifying Party or Indemnified
Parties, and the parties, relative intent, knowledge, access to information
and opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses claims, damages, liabilities and
expenses referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
36
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.6 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. No person guilty of fraudulent misrepresentation
(within the meaning of section 11 (f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8.7 SALE OF 704(c) ASSETS. Notwithstanding anything herein to the
contrary, if, prior to the fifth anniversary hereof, the Partnership sells or
otherwise disposes of all or a portion of the Contributed Properties
contributed by the Limited Partner(s) and, as a result of such disposition,
the Limited Partner recognizes gain under Section 704(c) or 737 of the Code
(including, without limitation, pursuant to a liquidation of the Partnership
on or before such date), then the General Partner will indemnify and hold
harmless the Limited Partner, on an after-tax basis, from and against the
excess of (i) any federal or state income taxes owed by such Limited Partner
as a result of such disposition (including any penalties and interest
relating thereto) over (ii) the then-present value (utilizing then-prevailing
tax rates and a discount rate equal to 120 percent of the relevant
"applicable federal rate" then in effect under Section 1274 of the Code) of
the Federal and state income taxes that would have been owed by such Limited
Partner if such disposition had occurred on the fifth anniversary hereof.
The General Partner shall have the right to participate in any contest with a
governmental authority relating to whether any gain was recognized or any
such taxes are owed.
ARTICLE IX.
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
9.1 PURCHASE FOR INVESTMENT.
(a) Each Limited Partner hereby represents and warrants to
the General Partner and to the Partnership that the acquisition of his
Partnership Interest is made as a principal for his account for investment
purposes only and not with a view to the resale or distribution of such
Partnership Interest.
(b) Each Limited Partner agrees that he will not sell,
assign or otherwise transfer his Partnership Interest or any fraction
thereof, whether voluntarily or by operation of law or at judicial sale or
otherwise, to any Person who does not make the representations and warranties
to the General Partner set forth in Section 9.1(a) above and similarly agree
not to sell, assign or transfer such Partnership Interest or fraction thereof
to any Person who does not similarly represent, warrant and agree.
9.2 RESTRICTIONS ON TRANSFER OF LIMITED PARTNERSHIP INTERESTS.
(a) Except as otherwise provided in Section 9.2(d) hereof
and except for the pledge rights contained in Section 9.2(f) hereof, no
Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise
transfer his Limited Partnership Interest, in whole or in part, whether
voluntarily or by operation of law or at judicial sale or otherwise
(collectively, a "Transfer") without the written consent of the General
Partner, which consent may be withheld in the sole discretion of the General
Partner. The General Partner may require, as a condition of
37
any Transfer, that the transferor assume all costs incurred by the
Partnership in connection therewith.
(b) No Limited Partner may effect a Transfer of his Limited
Partnership Interest, in whole or in part, if, in the opinion of legal counsel
for the Partnership, such proposed Transfer would require the registration of
the Limited Partnership Interest under the Securities Act or would otherwise
violate any applicable federal or state securities or "Blue Sky" law (including
investment suitability standards).
(c) No transfer by a Limited Partner of his Limited
Partnership Interest in whole or in part, may be made to any Person if such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code.
(d) Section 9.2(a) shall not apply to the following
transactions, except that the General Partner may require that the transferor
assume all costs incurred by the Partnership in connection therewith:
(i) any Transfer by a Limited Partner pursuant to the exercise
of its Conversion Right under Section 8.4 hereof;
(ii) any Transfer by a Limited Partner that is a corporation or
other business entity to any of its Affiliates or subsidiaries or to any
successor in interest of such Limited Partner; or
(iii) any donative Transfer by an individual Limited Partner to
his immediate family members or any trust in which the individual or his
immediate family members own, collectively, 100 % of the beneficial
interests. For purposes of this Section 9.2(d)(iii), the term "immediate
family member" shall be deemed to include only an individual Limited
Partner's spouse, children and grandchildren.
(e) Any Transfer in contravention of any of the provisions of
this Article IX shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.
(f) No transfer of any Limited Partnership Interest may be
made to a lender to the Partnership or to any Person who is related (within the
meaning of Regulations Section 1.752-4(b)) to any lender to the Partnership
whose loan constitutes a non-recourse liability (within the meaning of
Regulations Section 1.752-1(a)(2)), without the consent of the General Partner,
which may be withheld in its sole and absolute discretion; provided, however,
that as a condition to such consent the lender will be required to enter into an
arrangement with the Partnership and the General Partner to exchange or redeem
for the Cash Amount any Limited Partnership Units in which a security interest
is held simultaneously with the time at which liabilities to such lender would
be deemed to be a partner in the Partnership for purposes of allocating
liabilities to such lender under Section 752 of the Code.
9.3 ADMISSION OF SUBSTITUTE LIMITED PARTNER.
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(a) Subject to the other provisions of this Article IX, an
assignee of the Limited Partnership Interest of a Limited Partner (which
shall be understood to include any purchaser, transferee, donee, or other
recipient of any disposition of such Limited Partnership Interest) shall be
deemed admitted as a Limited Partner of the Partnership only upon the
satisfactory completion of the following:
(i) The assignee shall have accepted and agreed to be bound by
the terms and provisions of this Agreement by executing a counterpart or
an amendment thereof, including a revised EXHIBIT A, and such other
documents or instruments as the General Partner may require in order to
effect the admission of such Person as a Limited Partner.
(ii) To the extent required, an amended Certificate evidencing
the admission of such Person as a Limited Partner shall have been signed,
acknowledged and filed for record in accordance with the Act.
(iii) The assignee shall have delivered a letter containing the
representation set forth in Section 9.1(a) hereof and the agreement set
forth in Section 9.1(b) hereof.
(iv) If the assignee is a corporation, partnership or trust,
the assignee shall have provided the General Partner with evidence
satisfactory to counsel for the Partnership of the assignee's authority
to become a Limited Partner under the terms and provisions of this
Agreement.
(v) The assignee shall have executed a power of attorney
containing the terms and provisions set forth in Section 8.2 hereof.
(vi) The assignee shall have paid all reasonable legal fees of
the Partnership and the General Partner and filing and publication costs
in connection with his substitution as a Limited Partner.
(vii) The assignee has obtained the prior written consent of the
General Partner to its admission as a Substitute Limited Partner, which
consent may be given or denied in the exercise of General Partner's sole
and absolute discretion.
(b) For the purpose of allocating profits and losses and
distributing cash received by the Partnership, a Substitute Limited Partner
shall be treated as having become, and appearing in the records of the
Partnership as, a Partner upon the filing of the Certificate described in
Section 9.3(a)(ii) hereof or, if no such filing is required, the later of the
date specified in the transfer documents or the date on which the General
Partner has received all necessary instruments of transfer and substitution.
(c) The General Partner shall cooperate with the Person
seeking to become a Substitute Limited Partner by preparing the documentation
required by this Section and making all official filings and publications. The
Partnership shall take all such action as promptly as practicable after the
satisfaction of the conditions in this Article IX to the admission of such
Person as a Limited Partner of the Partnership.
39
9.4 RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS.
(a) Subject to the provisions of Sections 9.1 and 9.2
hereof, except as required by operation of law, the Partnership shall not be
obligated for any purposes whatsoever to recognize the assignment by any
Limited Partner of his Partnership Interest until the Partnership has
received notice thereof.
(b) Any Person who is the assignee of all or any portion of
a Limited Partner's Limited Partnership Interest, but does not become a
Substitute Limited Partner and desires to make a further assignment of such
Limited Partnership Interest, shall be subject to all the provisions of this
Article IX to the same extent and in the same manner as any Limited Partner
desiring to make an assignment of his Limited Partnership Interest.
9.5 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A
LIMITED PARTNER. The occurrence of an Event of Bankruptcy as to a Limited
Partner, the death of a Limited Partner or a final adjudication that a
Limited Partner is incompetent (which term shall include, but not be limited
to, insanity) shall not cause the termination or dissolution of the
Partnership, and the business of the Partnership shall continue. If an order
for relief in a bankruptcy proceeding is entered against a Limited Partner,
the trustee or receiver of his estate or, if he dies, his executor,
administrator or trustee, or, if he is finally adjudicated incompetent, his
committee, guardian or conservator, shall have the rights of such Limited
Partner for the purpose of settling or managing his estate property and such
power as the bankrupt, deceased or incompetent Limited Partner possessed to
assign all or any part of his Partnership Interest and to join with the
assignee in satisfying conditions precedent to the admission of the assignee
as a Substitute Limited Partner.
9.6 JOINT OWNERSHIP OF INTERESTS. A Partnership Interest may be
acquired by two individuals as joint tenants with right of survivorship,
provided that such individuals either are married or are related and share
the same home as tenants in common. The written consent or vote of both
owners of any such jointly held Partnership Interest shall be required to
constitute the action of the owners of such Partnership Interest; provided,
however, that the written consent of only one joint owner will be required if
the Partnership has been provided with evidence satisfactory to the counsel
for the Partnership that the actions of a single joint owner can bind both
owners under the applicable laws of the state of residence of such joint
owners. Upon the death of one owner of a Partnership Interest held in a
joint tenancy with a right of survivorship, the Partnership Interest shall
become owned solely by the survivor as a Limited Partner and not as an
assignee. The Partnership need not recognize the death of one of the owners
of a jointly held Partnership Interest until it shall have received notice of
such death.
ARTICLE X.
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.1 BOOKS AND RECORDS. At all times during the continuance of the
Partnership, the Partners shall keep or cause to be kept at the Partnership's
specified office true and complete books of account in accordance with
generally accepted accounting principles, including: (a) a current list of
the full name and last known business address of each Partner, (b) a copy of
the Certificate of Limited Partnership and all certificates of amendment
thereto, (c) copies of the
40
Partnership's federal, state and local income tax returns and reports, (d)
copies of the Agreement and any financial statements of the Partnership for
the three most recent years and (e) all documents and information required
under the Act. Any Partner or his duly authorized representative, upon
paying the costs of collection, duplication and mailing, shall be entitled to
inspect or copy such records during ordinary business hours.
10.2 CUSTODY OF PARTNERSHIP FUNDS; BANK ACCOUNTS.
(a) All funds of the Partnership not otherwise invested
shall be deposited in one or more accounts maintained in such banking or
brokerage institutions as the General Partner shall determine, and
withdrawals shall be made only on such signature or signatures as the General
Partner may, from time to time, determine.
(b) All deposits and other funds not needed in the operation
of the business of the Partnership may be invested by the General Partner in
investment grade instruments (or investment companies whose portfolio
consists primarily thereof), government obligations, certificates of deposit,
bankers' acceptances and municipal notes and bonds. The funds of the
Partnership shall not be commingled with the funds of any other Person except
for such commingling as may necessarily result from an investment in those
investment companies permitted by this Section 10.2(b).
10.3 FISCAL AND TAXABLE YEAR. The fiscal and taxable year of the
Partnership shall be the calendar year.
10.4 ANNUAL TAX INFORMATION AND REPORT. Within 75 days after the
end of each fiscal year of the Partnership, the General Partner shall furnish
to each person who was a Limited Partner at any time during such year the tax
information necessary to file such Limited Partner's individual tax returns
as shall be reasonably required by law.
10.5 TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS.
(a) The General Partner shall be the Tax Matters Partner of
the Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax
Matters Partner, the General Partner shall have the right and obligation to
take all actions authorized and required, respectively, by the Code for the
Tax Matters Partner. The General Partner shall have the right to retain
professional assistance in respect of any audit of the Partnership by the
Service and all out-of-pocket expenses and fees incurred by the General
Partner on behalf of the Partnership as Tax Matters Partner shall constitute
Partnership expenses. In the event the General Partner receives notice of a
final Partnership adjustment under Section 6223(a)(2) of the Code, the
General Partner shall either (i) file a court petition for judicial review of
such final adjustment within the period provided under Section 6226(a) of the
Code, a copy of which petition shall be mailed to all Limited Partners on the
date such petition is filed, or (ii) mail a written notice to all Limited
Partners, within such period, that describes the General Partner's reasons
for determining not to file such a petition. The taking of any action and
the incurring of any expense by the Tax Matters Partner in connection with
any such matter, except to the extent required by law, is a matter in the
sole and absolute discretion of the Tax Matters Partner and the provisions
relating
41
to indemnification of the General Partner set forth in Section 6.3 hereof
shall be fully applicable to the Tax Matters Partner in its capacity as such.
(b) All elections required or permitted to be made by the
Partnership under the Code or under any applicable state law shall be made by
the General Partner in its sole discretion.
(c) In the event of a transfer of all or any part of the
Partnership Interest of any Partner, the Partnership, at the option of the
General Partner, may elect pursuant to Section 754 of the Code to adjust the
basis of the Properties. Notwithstanding anything contained in Article V of
this Agreement, any adjustments made pursuant to Section 754 shall affect
only the successor in interest to the transferring Partner and in no event
shall be taken into account in establishing, maintaining or computing Capital
Accounts for the other Partners for any purpose under this Agreement. Each
Partner will furnish the Partnership with all information necessary to give
effect to such election.
10.6 REPORTS TO LIMITED PARTNERS.
(a) As soon as practicable after the close of each fiscal
quarter, but in no event later than 45 days (other than the last quarter of
the fiscal year), the General Partner shall cause to be mailed to each
Limited Partner a quarterly report containing financial statements of the
Partnership, or of the Company if such statements are prepared solely on a
consolidated basis with the Company, for such fiscal quarter, presented in
accordance with generally accepted accounting principles. As soon as
practicable after the close of each fiscal year, the General Partner shall
cause to be mailed to each Limited Partner an annual report containing
financial statements of the Partnership, prepared in accordance with
generally accepted accounting principles. The annual financial statements
shall be audited by accountants selected by the General Partner.
(b) Any Partner shall further have the right to a private
audit of the books and records of the Partnership, provided such audit is
made for Partnership purposes, at the expense of the Partner desiring it and
is made during normal business hours.
ARTICLE XI.
AMENDMENT OF AGREEMENT
11.1 AMENDMENT OF AGREEMENT. The General Partner, without the
consent of the Limited Partners, may amend this Agreement in any respect;
provided, however, that the following amendments shall require the consent of
Limited Partners holding at least one half (1/2) of the Percentage Interests
of the Limited Partners:
(a) any amendment affecting the operation of the Conversion
Factor or Conversion Right (except as provided in Section 8.5(e) hereof) in a
manner adverse to the Limited Partners;
42
(b) any amendment that would adversely affect the rights of
the Limited Partners to receive the distributions payable to them hereunder
other than with respect to the issuance of additional Limited Partnership
Units pursuant to Section 4.2 of this Agreement;
(c) any amendment that would alter the Partnership's
allocations of Profit and Loss to the Limited Partners in a manner adverse to
Limited Partners, other than with respect to the issuance of additional
Limited Partnership Units pursuant to Section 4.2 of this Agreement;
(d) any amendment that would impose on the Limited Partners
any obligation to make additional Capital Contributions to the Partnership
other than as provided in Section 4.2;
(e) any amendment to Section 8.6 above in a manner adverse
to any Limited Partner;
(f) any amendment to one or more of the following
provisions, in each case in a manner adverse to any Limited Partner:
Sections 6.5(a), 6.7(c), 6.8, 7.2, 8.5, 8.7, 10.4 or 10.6 hereof; and
(g) any amendment to this Article X1.
ARTICLE XII.
GENERAL PROVISIONS
12.1 NOTICES. All communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or upon deposit in the United States mail, registered,
postage prepaid return receipt requested, to the Partners at the addresses
set forth in EXHIBIT A attached hereto; provided, however, that any Partner
may specify a different address by notifying the General Partner in writing
of such different address. Notices to the Partnership shall be delivered at
or mailed to its specified office.
12.2 SURVIVAL OF RIGHTS. Subject to the provisions hereof limiting
transfers, this Agreement shall be binding upon and inure to the benefit of
the Partners and the Partnership and their respective legal representatives,
successors, transferees and assigns.
12.3 ADDITIONAL DOCUMENTS. Each Partner agrees to perform all
further reasonable acts and execute, swear to, acknowledge and deliver all
further documents which may be reasonably necessary, appropriate or desirable
to carry out the provisions of this Agreement or the Act.
12.4 SEVERABILITY. If any provision of this Agreement shall be
declared illegal, invalid, or unenforceable in any jurisdiction, then such
provision shall be deemed to be severable from this Agreement (to the extent
permitted by law) and in any event such illegality, invalidity or
unenforceability shall not affect the remainder hereof.
12.5 ENTIRE AGREEMENT. This Agreement and exhibits attached hereto
constitute the entire Agreement of the Partners and supersede all prior
written agreements and prior and contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter hereof.
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12.6 PRONOUNS AND PLURALS. When the context in which words are used
in the Agreement indicates that such is the intent, words in the singular
number shall include the plural and the masculine gender shall include the
neuter or female gender as the context may require.
12.7 HEADINGS. The Article headings or Sections in this Agreement
are for convenience only and shall not be used in construing the scope of
this Agreement or any particular Article.
12.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one and the same instrument binding on all
parties hereto, notwithstanding that all parties shall not have signed the
same counterpart.
12.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this Agreement of Limited Partnership, all as of date first set
forth above.
LIMITED PARTNERS: GENERAL PARTNER:
XXXXXXX FAMILY TRUST WESTERN PROPERTIES TRUST, a
PARTNERSHIP, a California general California business trust
Partnership
By:________________________________ By: __________________________
Title: _______________________
Its: _______________________________
By: __________________________
Title: ________________________
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EXHIBIT A
SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, LIMITED PARTNER PERCENTAGE INTERESTS AND
THE AGREED VALUE OF NON-CASH CAPITAL CONTRIBUTIONS
Approximate
Adjusted Tax Basis of Value of Non- Limited Limited Partner
Date Non-Cash Capital Cash Capital Partnership Percentage
Admitted Name and Address of Partner Contribution Contribution Units Issued Interest
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Total . . . . . . . . . . . . . . . . . . . . . . .
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Exhibit A-1
EXHIBIT B
NOTICE OF EXERCISE OF CONVERSION RIGHT
In accordance with Section 8.4 of the Agreement of Limited Partnership (the
"Agreement") of WESTERN/PINECREEK, L.P., the undersigned hereby irrevocably (i)
presents for Conversion ___ units of limited partnership interest ("Units") in
WESTERN/PINECREEK, L.P. (the "Partnership") in accordance with the terms of the
Agreement and the "Conversion Right" referred to in Section 8.5 thereof, (ii)
surrenders such Units and all right, title and interest therein, (iii)
surrenders herewith any certificate or other writing evidencing the Units (and
requests that any Units so evidenced that are not redeemed be evidenced by the
issuance of a new certificate or writing) and (iv) directs that the "Cash
Amount" or "Common Shares Amount") (as determined by the General Partner), as
defined in the Agreement, deliverable upon exercise of the Conversion Rights be
delivered to the address specified below, and if Common Shares are to be
delivered, such Common Shares be registered or placed in the name(s) and at the
address(es) specified below.
Dated: _____________
Name of Limited Partner:
________________________
(Signature of Limited Partner)
________________________
(Mailing Address)
________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
________________________
If Common Shares are to be issued, issue to:
________________________
________________________
________________________
Please insert social security or identifying number:
________________________
Exhibit B-1