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EXHIBIT 3.5
SECOND
AMENDMENT
TO
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
VORNADO REALTY L.P.
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Dated as of April 1, 1998
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THIS SECOND AMENDMENT, dated as of April 1, 1998, to the Second Amended
and Restated Agreement of Limited Partnership of Vornado Realty L.P. (the
"Agreement"), a Delaware limited partnership (the "Partnership") is hereby
adopted by Vornado Realty Trust, a Maryland real estate investment trust
(defined therein as the "General Partner"), as the general partner of the
Partnership. For ease of reference, capitalized terms used herein and not
otherwise defined have the meanings assigned to them in the Agreement.
WHEREAS, the Partnership was formed under the name "Mendik Real Estate
Group, L.P." on October 2, 1996, and, on October 2, 1996, the Partnership
adopted an Agreement of Limited Partnership;
WHEREAS, on November 7, 1996, the general partner of the Partnership
changed the Partnership's name to "The Mendik Company, L.P." and, in connection
therewith, caused a Certificate of Amendment to the Certificate of Limited
Partnership of the Partnership to be filed in the office of the Delaware
Secretary of State on November 8, 1996;
WHEREAS, as of April 15, 1997, the General Partner, certain of affiliates
of the General Partner, FW/Mendik REIT, L.L.C., a Delaware limited liability
company, and The Mendik Company, Inc., a Maryland corporation, recapitalized
the Partnership and, in connection therewith, entered into a First Amended and
Restated Agreement of Limited Partnership, dated as of April 15, 1997 (the
"Prior Agreement"), and in connection therewith filed a Certificate of
Amendment to the Certificate of Limited Partnership of the Partnership in the
office of the Delaware Secretary of State, which filing was made on April 15,
1997;
WHEREAS, effective as of October 20, 1997, the General Partner caused the
Partnership to issue and distribute to each Person who was a Limited Partner on
October 15, 1997, an additional Common Partnership Unit for each Common
Partnership Unit (and in the same Class) that was owned by such Person on
October 15, 1997 and, in connection therewith, the General Partner amended and
restated the Prior Agreement in the form of the Agreement.
WHEREAS, as of December 16, 1997 the first Amendment to the Agreement was
adopted by the Partnership in connection with the acquisition of Arbor Property
Trust;
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WHEREAS, as of January 23, 1998, the Contribution Agreement (the
"Contribution Agreement") between Vornado Realty Trust, Vornado Realty L.P.
("Vornado Realty Group") and the contributors signatory thereto, Merchandise
Mart Properties, Inc. (DE) and Merchandise Mart Enterprises, Inc. (the "MM
Contributors") was entered into;
WHEREAS, as of the date of this Second Amendment, Vornado Realty Trust or
the Partnership is acquiring, by contribution, sale and/or transfer, pursuant
to the Contribution Agreement, certain assets previously owned by the MM
Contributors and, in connection with that contribution, sale and/or transfer,
is issuing 200,000 and 699,566 Series B-1 Convertible Preferred Units of
Beneficial Interest, no par value, $50.00 liquidation preference, to Washington
Design Center, L.L.C. and Merchandise Mart Owners, L.L.C., respectively, and
100,000 and 349,783 Series B-2 Restricted Preferred Units of Beneficial
Interest, no par value, $50.00 liquidation preference, to Washington Design
Center, L.L.C. and Merchandise Mart Owners, L.L.C., respectively, in exchange
for certain of the interests set forth in Section 1.1 of the Contribution
Agreement;
WHEREAS, pursuant to the Contribution Agreement and concurrently herewith,
the Partnership is issuing 395,967 Class A Units to Merchandise Mart
Enterprises, L.L.C., 603,948 Class A Units to World Trade Center Chicago,
L.L.C., and 65,807 Class A Units to Washington Design Center, L.L.C.;
WHEREAS, the General Partner has determined that it is in the best
interest of the Partnership to amend the Agreement to reflect the issuance of
the above-referenced Series B-1 Convertible Preferred Units, Series B-2
Restricted Preferred Units and the Class A Units;
WHEREAS, Section 14.1.B of the Agreement grants the General Partner power
and authority to amend the Agreement without the consent of any of the
Partnership's limited partners if the amendment does not adversely affect or
eliminate any right granted to a limited partner pursuant to any of the
provisions of the Agreement specified in Section 14.1.C or Section 14.1.D of
the Agreement as requiring a particular minimum vote; and
WHEREAS, the General Partner has determined that the amendment effected
hereby does not adversely affect or eliminate any of the limited partner rights
specified in Section 14.1.C or Section 14.1.D of the Agreement;
NOW, THEREFORE, the General Partner hereby amends the Agreement as follows:
1. Exhibit I, attached hereto as Attachment 1, is hereby incorporated into
the Agreement and made a part thereof.
2. Section 4.2 of the Agreement is hereby supplemented by adding the
following paragraph to the end thereof:
"G. Issuance of Series B-1 Convertible Preferred Units and Series B-2
Restricted Preferred Units. In consideration of the contribution on April
1, 1998 of the interests set forth in Section 1.1 of the Contribution
Agreement (the "MM Contribution Agreement") between Vornado Realty Trust,
Vornado Realty L.P. and the contributors signatory
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thereto, Merchandise Mart Properties, Inc. (DE) and Merchandise Mart
Enterprises, Inc. (the "Contributors") contributed, sold and/or
transferred to the Partnership by the MM Contributors pursuant to the
Contribution Agreement, the Partnership will issue to Washington Design
Center, L.L.C. and Merchandise Mart Owners, L.L.C. 200,000 and 699,566,
respectively, of a series of Preference Units designated as the "Series
B-1 Convertible Preferred Units" (as defined in Exhibit I hereto) and
100,000 and 349,783, respectively, of a series of Preference Units
designated as the "Series B-2 Restricted Preferred Units (as defined in
Exhibit I hereto). The terms of the Series B Preferred Units and Series
B-2 Restricted Preferred Units are set forth in Exhibit I attached
hereto and made part hereof."
3. In making distributions pursuant to Section 5.1(b) of the Agreement,
the General Partner of the Partnership shall take into account the provisions
of Section 2.B. of new Exhibit I of the Agreement, including, but not limited
to, Section 2.B. hereof.
4. Section 8.6 of the Agreement is hereby supplemented by adding the
following paragraph to the end thereof:
"G. Series B Preferred Unit Exception. Section 8.6A of this
Agreement shall not apply to Series B Preferred Units, as defined in Exhibit I
hereto."
5. Exhibit A of the Agreement is hereby deleted and is replaced in its
entirety by new Exhibit A attached hereto as Attachment 2.
6. Except as expressly amended hereby, the Agreement shall remain in
full force and effect.
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IN WITNESS WHEREOF, the General Partner has executed this Amendment as
of the date first written above.
VORNADO REALTY TRUST
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
Executive Vice President of
Finance and Administration
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Attachment 1
EXHIBIT I
DESIGNATION OF THE PREFERENCES, CONVERSION
AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS,
LIMITATIONS AS TO DISTRIBUTIONS, QUALIFICATIONS AND TERMS
AND CONDITIONS OF REDEMPTION
OF THE
SERIES B-1 CONVERTIBLE PREFERRED UNITS
AND OF THE
SERIES B-2 RESTRICTED PREFERRED UNITS
1. Definitions.
In addition to those terms defined in the Agreement and Exhibits
thereto, the following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary or if such terms defined in this Exhibit I are
defined differently elsewhere in the Agreement or in an Exhibit thereto (in
which case such definition provided in this Exhibit I shall only apply for
purposes of defined terms used in this Exhibit I), apply to the terms used in
the Agreement and Exhibits thereto including this Exhibit I:
"Common Shares" shall mean the common shares of beneficial interest of
the General Partner, par value $.04 per share.
"Contribution Agreement" shall mean the Contribution Agreement dated as
of January 23, 1998, between Vornado Realty Trust, Vornado Realty L.P., the
contributors signatory thereto, Merchandise Mart Properties, Inc. (DE) and
Merchandise Mart Enterprises, Inc., as amended.
"Conversion Price" shall mean the conversion price per Class A Unit for
which the Series B Preferred Units may be convertible, as such Conversion Price
may be adjusted pursuant to the terms of the Series B Preferred Units. The
initial conversion price shall be $54.7050 (equivalent to a conversion rate of
0.9140 Class A Units for each Series B Preferred Unit).
"Current Market Price" of publicly traded Common Shares or any other
class of shares of beneficial interest or other security of the General Partner
or any other issuer for any day shall mean the last reported sales price,
regular way, on such day, or, if no sale takes place on such day, the average of
the reported closing bid and asked prices on such day, regular way, in either
case as reported on the New York Stock Exchange ("NYSE") or, if such security is
not listed or admitted for trading on the NYSE, on the principal national
securities exchange on which such security is listed or admitted for trading or,
if not listed or admitted for trading on any national securities exchange, on
the NASDAQ National Market or, if such security is not quoted on such NASDAQ
National Market, the average of the closing bid and asked prices on such day in
the over-the-counter market as reported by NASDAQ or, if bid and asked prices
for such security on such day shall not have been reported through NASDAQ, the
average of the bid and asked prices on such day as furnished by any NYSE member
firm regularly making a market in such security selected for such purpose by the
Chief Executive Officer of the General Partner or the Board of Trustees.
"Distribution Payment Date" shall mean the first calendar day of
January, April, July and October, in each year, commencing on July 1, 1998;
provided, however, that if any Distribution Payment
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Date falls on any day other than a Unit Business Day, the dividend payment due
on such Distribution Payment Date shall be paid on the first Unit Business Day
immediately following such Distribution Payment Date.
"Distribution Periods" shall mean quarterly distribution periods
commencing on January 1, April 1, July 1 and October 1 of each year and ending
on and including the day preceding the first day of the next succeeding
Distribution Period (other than the Initial Distribution Period).
"Initial Distribution Period" shall mean the quarterly distribution
period commencing on January 1, 1998 and including March 31, 1998.
"Nongovernmental Account" shall mean an account established by the
Partnership in which the Partnership will deposit amounts which the Partnership
may use to make distributions to holders of units of the Partnership but shall
not contain any amounts derived from contracts with "the United States or any
agency thereof" as such terms are used in 18 U.S.C. Sections 431-433, 41
U.S.C. Section 22 and similar statutes.
"Series B Preferred Units" shall mean, collectively, the Series B-1
Convertible Preferred Units and the Series B-2 Restricted Preferred Units.
"Series B-1 Convertible Preferred Unit" means a Partnership Unit issued
by the Partnership pursuant to the Contribution Agreement and this Agreement.
The Series B-1 Convertible Preferred Units shall have the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
distributions, qualifications and terms and conditions of redemption as are set
forth in this Exhibit I.
"Series B-2 Restricted Preferred Unit" means a Partnership Unit issued
by the Partnership pursuant to the Contribution Agreement and this Agreement.
The Series B-2 Restricted Preferred Units shall have the preferences and other
rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption as are set forth in this
Exhibit I.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Partnership or the General
Partner on behalf of the Partnership in its accounting ledgers of any
accounting or bookkeeping entry which indicates, pursuant to a declaration of a
distribution by the General Partner, the allocation of funds to be so paid on
any series or class of Partnership Units; provided, however, that if any funds
for any class or series of Junior Units or any class or series of Partnership
Units ranking on a parity with the Series B Preferred Units as to the payment
of distributions are placed in a separate account of the Partnership or
delivered to a disbursing, paying or other similar agent, then "set apart for
payment" with respect to the Series B Preferred Units shall mean placing such
funds in a separate account or delivering such funds to a disbursing, paying or
other similar agent.
"Trading Day" shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which
such securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on the NASDAQ National Market, or
if such securities are not quoted on such NASDAQ National Market, in the
applicable securities market in which the securities are traded.
"Unit Business Day" shall mean any day other than a Saturday, Sunday or
a day on which state or federally chartered banking institutions in New York,
New York are not required to be open.
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2. Terms of the Series B Preferred Units.
A. Number. As of the close of business on the date hereof, the
total number of Series B-1 Convertible Preferred Units issued and outstanding
will be 899,566 and the total number of Series B-2 Restricted Preferred Units
will be 449,783. The General Partner may issue additional Series B Preferred
Units from time to time in accordance with the terms of the Agreement,
including Exhibit 1, and in connection with any such additional issuance the
General Partner shall revise Exhibit A and Exhibit I to the Agreement to reflect
the total number of Series B Preferred Units then issued and outstanding.
B. Distributors. (i) The holders of the then outstanding Series
B-1 Convertible Preferred Units, shall be entitled to receive, when, as and if
declared by the General Partner, distributions payable in cash at the rate per
annum of $2.50 per Series B-1 Convertible Preferred Unit and the holders of the
then outstanding Series B-2 Restricted Preferred Units, shall be entitled to
receive, when, as and if declared by the General Partner, distributions payable
in cash at the rate per annum of $4.00 per Series B-2 Restricted Preferred Unit
(together, the "Annual Distribution Rates"). Such distributions shall be
cumulative from January 1, 1998 and shall be payable quarterly, when, as and if
authorized and declared by the General Partner, in arrears on Distribution
Payment Dates, commencing on the first Distribution Payment Date after the date
of issuance of the Series B Preferred Units, provided, however, that all
distributions in respect of the Initial Distribution Period shall be paid on the
date of issuance of the Series B Preferred Units. Distributions are cumulative
from the most recent Distribution Payment Date to which distributions have been
paid. Accrued and unpaid distribution for any past Distribution Periods may be
declared and paid at any time, without reference to any regular Distribution
Payment Date. Distributions on the Series B-2 Restricted Preferred may only be
made by the Partnership from the Nongovernmental Account, provided, however, if
such account should not contain sufficient cash to fund distributions authorized
and declared by the General Partner on the Series B-2 Restricted Preferred
Units, such distributions shall accumulate without interest until such time as
the Nongovernmental Account contains sufficient cash to pay such cumulative
distributions, at which time such distributions shall be made on the Series B-2
Restricted Preferred Units. To the extent distributions are to be paid on the
Series B-2 Restricted Preferred Units or there exists accrued and unpaid
distributions or any Liquidation Preference or redemption amount thereon under
Section 2D below due to any prior deficiency in the Nongovernmental Account, and
funds not derived from contracts with "the United States or any agency thereof"
are available for distribution, the Partnership will cause such funds to be
deposited in the Nongovernmental Account for such purposes.
(ii) The amount of dividends payable for each full Distribution Period
for the Series B Preferred Units shall be computed by dividing the Annual
Distribution Rates by four. The amount of distributions payable for the initial
Distribution Period, or any other period shorter or longer than a full
Distribution Period, on the Series B Preferred Units shall be computed on the
basis of a 360-day year of twelve 30-day months. The holders of the then
outstanding Series B Preferred Units shall not be entitled to any distributions,
whether payable in cash, property or securities, in excess of cumulative
distribution, as herein provided, on the Series B Preferred Units. No interest,
or sum of money in lieu of interest, shall be payable in respect of any
distribution payment or payments on the Series B Preferred Units that may be in
arrears.
(iii) So long as any Series B Preferred Units are outstanding, no
distributions, except as described in the immediately following sentence, shall
be declared or paid or set apart for payment on any series or class or classes
of Parity Units for any period unless full cumulative distributions have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Series B Preferred Units
for all Distribution Periods terminating on or prior to the distribution
payment date on such class or series of Parity Units, except in the case of
distributions on the Series B-2 Restricted Preferred Units to the extent not
paid due to a lack of funds in the Nongovernmental Account. When distributions
are not paid in full or a sum sufficient for such payment is not set apart, as
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aforesaid, except in the case of distributions on the Series B-2 Restricted
Preferred Units to the extent not paid due to a lack of funds in the
Nongovernmental Account, all distributions declared upon Series B Preferred
Units and all distributions declared upon any other series or class or classes
of Parity Units shall be declared ratably in proportion to the respective
amounts of distributions accumulated and unpaid on the Series B Preferred Units
and such Parity Units.
(iv) So long as any Series B Preferred Units are outstanding, no
distributions (other than distributions paid solely in Junior Units or options,
warrants or rights to subscribe for or purchase Junior Units) shall be declared
or paid or set apart for payment or other distribution declared or made upon
Junior Units, nor shall any Junior Units be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Junior Units
made in respect of a redemption, purchase or other acquisition of Common Shares
made for purposes of and in compliance with requirements of an employee
incentive or benefit plan of the General Partner or any subsidiary, or as
permitted under Article VI of the Declaration of Trust of the General Partner),
for any consideration (or any moneys to be paid to or made available for a
sinking fund for the redemption of any such Junior Units) by the General
Partner, directly or indirectly (except by conversion into or exchange for
Junior Units), unless in each case (a) the full cumulative distributions on all
outstanding Series B Preferred Units and any other Parity Units of the
Partnership shall have been paid or set apart for payment for all past
Distribution Periods with respect to the Series B Preferred Units and all past
distribution periods with respect to such Parity Units, except to the extent
that distributions on the Series B-2 Restricted Preferred Units are not then
able to be paid owing to a lack of funds in the Nongovernmental Account, and (b)
sufficient funds shall have been paid or set apart for the payment of the
distribution for the current Distribution Period with respect to the Series B
Preferred Units and any Parity Units, except to the extent that distributions on
the Series B-2 Restricted Preferred Units are not then able to be paid owing to
a lack of funds in the Nongovernmental Account.
C. Liquidation Preference. (i) In the event of any liquidation,
dissolution or winding up of the Partnership or the General Partner, whether
voluntary or involuntary, before any payment or distribution of the assets of
the Partnership shall be made to or set apart for the holders of Junior Units,
holders of the Series B Preferred Units shall be entitled to receive Fifty
Dollars ($50.00) per Series B Preferred Unit (the "Liquidation Preference") plus
an amount equal to all distributions (whether or not earned or declared) accrued
and unpaid thereon to the date of final distribution to the holders of such
units, except in the case of distributions on or the Liquidation Preference of
the Series B-2 Restricted Preferred Units to the extent they may not be paid due
to a lack of funds in the Nongovernmental Account; but the holders of the Series
B Preferred Units shall not be entitled to any further payment, except, to the
extent certain distributions (or the Liquidation Preference) were not able to be
made on (or paid to) the Series B-2 Restricted Preferred Units due to a
deficiency in the Nongovernmental Account, such distributions will be made to
the extent funds later become available in the Nongovernmental Account. If, upon
any such liquidation, dissolution or winding up of the Partnership or the
General Partner, the assets of the Partnership, or proceeds thereof,
distributable to the holders of the Series B Preferred Units shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other Parity Units, then such assets, or the proceeds thereof,
shall be distributed among the holders of the Series B Preferred Units and the
holders of any such other Parity Units ratably in accordance with the respective
amounts that would be payable on such Series B Preferred Units and any such
other Parity Units if all amounts payable thereon were paid in full. For the
purposes of this Section C, (i) a consolidation or merger of the Partnership or
the General Partner with one or more entities, (ii) a statutory share exchange
by the Partnership or the General Partner and (iii) a sale or transfer of all or
substantially all of the Partnership's or the General Partner's assets, shall
not be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Partnership or General Partner.
(ii) Subject to the rights of the holders of Partnership Units of any
series or class or classes of shares ranking on a parity with or prior to the
Series B Preferred Units upon any liquidation, dissolution or winding up of the
General Partner or the Partnership, after payment shall have been made in
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full to the holders of the Series B Preferred Units as provided in this
Section, except in the case of distributions on the Series B-2 Restricted
Preferred Units to the extent not paid due to a lack of funds in the
Nongovernmental Account, any series or class or classes of Junior Units shall,
subject to any respective terms and provisions applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series B Preferred Units shall not be entitled to share therein.
D. Redemption of the Series B Preferred Units. (i) The Series B
Preferred Units shall not be redeemable prior to January 1, 2008. On and after
January 1, 2008, the General Partner may, at its option, cause the Partnership
to redeem the Series B Preferred Units for cash or Class A Units, as described
below, in whole or in part, as set forth herein, subject to the provisions
described below (the "Redemption Date"), provided, however, the Partnership may
redeem Series B Preferred Units only in one or more groups of two Series B-1
Convertible Preferred Units and one Series B-2 Restricted Preferred Unit to the
extent it redeems any Series B Preferred Units.
(ii) Upon redemption of Series B Preferred Units by the General Partner on
the Redemption Date, each Series B-1 Convertible Preferred Unit so redeemed
shall be converted into a number of Class A Units equal to the aggregate
Liquidation Preference of the Series B-1 Convertible Preferred Units being
redeemed divided by the Conversion Price as of the opening of business on the
Redemption Date and each Series B-2 Restricted Preferred Unit shall be redeemed
for $50.00 in cash which shall be paid only from the Nongovernmental Account.
Upon any redemption of Series B Preferred Units, the Partnership shall pay
any accrued and unpaid distributions thereon in arrears for any Distribution
Period ending on or prior to the Redemption Date, except to the extent that
such distributions or amounts distributable on the Series B-2 Restricted
Preferred Units may not be payable due to a lack of funds in the
Nongovernmental Account. If the Redemption Date falls after the record date for
a Distribution Payment Date and before the related Distribution Payment Date,
the holder of the Series B Preferred Units to which such redemption applies
shall be entitled to such distributions notwithstanding the redemption of such
Series B Preferred Units, except to the extent that such distributions or
amounts distributable on the Series B-2 Restricted Preferred Units may not be
payable due to a lack of funds in the Nongovernmental Account. Except as
provided above, the Partnership shall make no payment or allowance for unpaid
distributions, whether or not in arrears, on Series B Preferred Units called
for redemption or on the Class A Units issued upon such redemption. To the
extent certain distributions were not able to be made on the Series B-2
Restricted Preferred Units due to a deficiency in the Nongovernmental Account,
such distributions will be made to the extent funds become available in the
Nongovernmental Account.
(iii) If full cumulative distributions on the Series B Preferred Units and
any other series or class or classes of Parity Units of the Partnership have
not been paid or declared and set apart for payment, except to the extent that
such distributions or amounts distributable on the Series B-2 Restricted
Preferred Units may not be payable due to a lack of funds in the
Nongovernmental Account, the Series B Preferred Units may not be redeemed in
part and the Partnership may not purchase, redeem or otherwise acquire Series B
Preferred Units.
As promptly as practicable after the surrender of the certificates for any
such Series B Preferred Units so redeemed, such Series B Preferred Units shall
be exchanged for certificates of Class A Units and/or any cash (without interest
thereon), as provided herein, for which such Series B Preferred Units have been
redeemed. If fewer than all the Series B Preferred Units represented by any
certificate are redeemed, then new certificates representing the unredeemed
Series B Preferred Units shall be issued without cost to the holders thereof.
(iv) No fractional Partnership Unit shall be issued upon redemption of a
Series B-1 Convertible Preferred Unit. Instead of any fractional interest in a
Class A Unit that would otherwise be
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deliverable upon the redemption of a Series B-1 Convertible Preferred Unit, the
Partnership shall pay to the holders of the Series B-1 Convertible Preferred
Units an amount in cash (computed to the nearest cent) based upon the Current
Market Price of Common Shares of the General Partner on the Trading Day
immediately preceding the Redemption Date.
(v) The Partnership covenants that any Class A Unit issued upon redemption
of the Series B-1 Convertible Preferred Units shall be validly issued, fully
paid and non-assessable.
E. Conversion.
The holders of Series B-1 Convertible Preferred Units shall have the right
to convert all or a portion of such Series B Preferred Units into Class A
Units, converted as follows:
(i) Subject to and upon compliance with the provisions of this Section E,
the holders of Series B-1 Convertible Preferred Units shall have the right, at
their option, at any time and from time to time, to convert all or any portion
of the Series B Preferred Units into the number of fully paid and
non-assessable Class A Units obtained by dividing the aggregate Liquidation
Preference of the Series B Preferred Units by the Conversion Price (as in
effect at the time and on the date provided for in the last paragraph of
paragraph (ii) of this Section E) by surrendering Series B Preferred Units to
the Partnership to be converted as described herein, such surrender to be made
in the manner provided in paragraph (ii) of this Section E; provided, however,
that so long as, and to the extent that, Series B-2 Restricted Preferred Units
are outstanding, the right to convert Series B Preferred Units described herein
may only be exercised by a holder of Series B-1 Convertible Preferred Units and
if (x) such holder simultaneously converts the Series B Preferred Units in
groups of two Series B-1 Convertible Preferred Units and one Series B-2
Restricted Preferred Unit and (y) such holder of Series B-1 Convertible Units
is also a holder of Series B-2 Restricted Preferred Units on the date hereof or
acquires the applicable Series B-2 Restricted Preferred Units from the holder
thereof at a purchase price of $50.00 (and no more) per Unit in cash or by
delivery of a recourse unsecured promissory note or similar debt instrument
(provided such promissory note or similar debt instrument does not bear
interest in excess of 8% per annum), and provided further that the right to
convert Series B-1 Convertible Preferred Units called for redemption pursuant
to Section D hereof shall terminate at the close of business on the Redemption
Date fixed for such redemption, unless the Partnership shall default in making
payment of the Class A Units and any cash payable in lieu of fractional
Partnership Units upon such redemption under Section D hereof.
(ii) In order to exercise the conversion right, the holder of each group of
Series B Preferred Units to be converted shall surrender the certificate
representing such Series B-1 Convertible Preferred Units along with the
certificate representing the appropriate number of Series B-2 Restricted
Preferred Units to the Partnership.
The holders of Series B Preferred Units shall be entitled to receive the
distribution payable on such Series B Preferred Units on a Distribution Payment
Date notwithstanding the conversion thereof following the record date for such
Distribution Payment Date and prior to such Distribution Payment Date. However,
Series B Preferred Units surrendered for conversion during the period between
the close of business on the record date of any Distribution Payment Date and
the opening of business on the corresponding Distribution Payment Date must be
accompanied by payment of an amount equal to the distribution payable on such
Series B Preferred Units on such Distribution Payment Date, to the extent such
distribution amount has been received, or when such amount is thereafter
received, by the holder of the Series B Preferred Units, except to the extent
such distribution was in respect of accrued and unpaid distributions on the
Series B-2 Restricted Preferred Unit due to an earlier deficiency in the
Nongovernmental Account. Except as provided above, the Partnership shall make no
payment or allowance for unpaid distributions, whether or not in arrears, on
converted Series B Preferred Units or for distributions on the Class A Units
issued upon such conversion, except to the extent certain distributions
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were not able to be made on the Series B-2 Restricted Preferred Units solely
due to a shortfall of funds in the Nongovernmental Account.
As promptly as practicable after the surrender of certificates for Series
B Preferred Units as aforesaid, the General Partner shall receive a certificate
or certificates for the number of full Class A Units issuable upon the
conversion of Series B Preferred Units surrendered in accordance with the
provisions of this Section E, and any fractional interest in respect of a Class
A Unit arising upon such conversion shall be settled as provided in paragraph
(iii) of this Section E.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for Series B
Preferred Units shall have been surrendered (and if applicable, payment of an
amount equal to the distribution payable on such Series B Preferred Units) and
received by the Partnership as aforesaid, and the General Partner shall be
deemed to have become the holder or holders of record of the Class A Units
represented thereby at such time on such date, and such conversion shall be at
the Conversion Price in effect at such time and on such date unless the stock
transfer books of the Partnership shall be closed on that date, in which event
such person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such
partnership transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such Series B Preferred Units
shall have been surrendered and received by the General Partner.
(iii) No fractional Partnership Unit shall be issued upon conversion of
the Series B Preferred Units. Instead of any fractional interest in a Class A
Unit that would otherwise be deliverable upon the conversion of a Series B
Preferred Unit, the Partnerships shall pay to the holder of such Series B
Preferred Unit an amount in cash based upon the Current Market Price of Common
Shares of the General Partner on the Trading Day immediately preceding the date
of conversion.
(iv) Prior to effecting a conversion of Series B Preferred Units, the
Partnership shall have received from the holders of such Series B Preferred
Units a written certification that such conversion does not violate the
provisions of 18 U.S.C. Sections 431-433, 41 U.S.C. Section 22 or any similar
statute and that no Class A Units received upon conversion shall be held for the
benefit of or distributed to a person subject to the provisions of 18 U.S.C.
Sections 431-433, 41 U.S.C. Section 22 or any similar statute.
(v) No transfers or conversions shall be effected if such transfer or
conversion, in the opinion of counsel of the Partnership, would violate 18
U.S.C. Sections 431-433, 41 U.S.C. Section 22 or any similar statute. In
addition, holders of Series B-2 Restricted Preferred Units may only transfer and
assign such Units to the extent the consideration received in respect of such
transfer or assignment consists of cash or a recourse unsecured promissory note
or similar debt instrument (provided that such promissory note or similar debt
instrument may not bear interest in excess of 8% per annum) in an amount not in
excess of $50 per Unit.
F. Ranking. (i) Any class or series of Partnership Units shall be
deemed to rank:
(a) prior to the Series B Preferred Units, as to the payment of
distributions and as to distribution of assets upon liquidation, dissolution or
winding up of the General Partner or the Partnership, if the holders of such
class or series of Preferred Units shall be entitled to the receipt of
distributions or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
Series B Preferred Units;
(b) on a parity with the Series B Preferred Units, as to the payment of
distributions and as to the distribution of assets upon liquidation, dissolution
or winding up of the General Partner or the Partnership, whether or not the
distribution rates, distribution payment dates or redemption or liquidation
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prices per Partnership Unit be different from those of the Series B Preferred
Units, if the holders of such Partnership Units of such class or series and the
Series B Preferred Units shall be entitled to the receipt of distributions and
of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid distributions per
Partnership Unit or liquidation preferences, without preference or priority one
over the other, except to the extent that such distribution or amounts
distributable on the Series B-2 Restricted Preferred Units may not be payable
due to a lack of funds in the Nongovernmental Account ("Parity Unit"); and
(c) junior to the Series B Preferred Units, as to the payment of
distributions or as to the distribution of assets upon liquidation, dissolution
or winding up of the General Partner or the Partnership, if such class or
series of Partnership Units shall be Common Partnership Units or if the General
Partner, in its capacity as the holder of Series B Preferred Units, shall be
entitled to receipt of distribution or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Partnership Units of such class or series, and such
class or series of Partnership Units shall not in either case rank prior to the
Series B Preferred Units, except to the extent that such distributions or
amounts distributable on the Series B-2 Restricted Preferred Units may not be
payable due to a lack of funds in the Nongovernmental Account ("Junior Units").
(ii) The Series A Preferred Units shall be Parity Units with respect
to the Series B Preferred Units and the holders of the Series B Preferred Units
and the Series A Preferred Units shall be entitled to the receipt of
distributions and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
distributions per Partnership Unit or liquidation preferences, without
preference or priority one over the other, except in the case of distributions
on the Series B-2 Restricted Preferred Units to the extent not payable due to a
lack of funds in the Nongovernmental Account and except that:
(a) For so long as the Class C Units are outstanding, the Series B
Preferred Units shall not rank senior to the Class C Units as to preferential
distributions or redemption or voting rights and shall receive: (i) accumulated
and unpaid distributions pari passu with distributions made to the holders of
Class C Units pursuant to the Subsection 5.1.B(iv) of the Agreement and (ii)
other distributions pari passu with distributions made to the holders of Class C
Units pursuant to Subsection 5.1.B(v) of the Agreement, except to the extent
that distributions on the Series B-2 Restricted Preferred Units may not be paid
due to a lack of funds in the Nongovernmental Account.
(b) For so long as the Class D Units and Class E Units are
outstanding, the Series B Preferred Units shall not rank senior to the Class D
Units and Class E Units as to preferential distributions or redemption or voting
rights. For so long as the Class D Units or Class E Units are outstanding (and
the Class C Units are no longer outstanding), the Series B Preferred Units shall
receive: (i) accumulated and unpaid distributions pari passu with distributions
made to the holders of any outstanding Class D Units and Class E Units pursuant
to Subsection 5.1.B(ii) of the Agreement and (ii) other distributions pari passu
with distributions made to the holders of any outstanding Class D Units and
Class E Units pursuant to Subsection 5.1.B(iii) of the Agreement, except to the
extent that distributions on the Series B-2 Restricted Preferred Units may not
be paid due to a lack of funds in the Nongovernmental Account.
(c) When the Class C Units, Class D Units and Class E Units are no
longer outstanding, the Series B Preferred Units shall receive distributions
pari passu with other Partnership Units, if any, receiving distributions
pursuant to Section 5.1.B(i), except to the extent that distributions on the
Series B-2 Restricted Preferred Units may not be paid due to a lack of funds
in the Nongovernmental Account.
(d) Distributions made pursuant to Subsection F(ii)(a) and F(ii)(b)
of this Exhibit I shall be made pro rata with other distributions made to other
Partnership Units as to which they rank pari passu based on the ratio of the
amounts to be paid the Series B Preferred Units and such other Partnership
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Units, as applicable, to the total amounts to be paid the Series B Preferred
Units and such other Partnership Units taken together on the Partnership Record
Date, except in the case of distributions on the Series B-2 Restricted
Preferred Units to the extent such distribution may not be paid due to a lack
of funds in the Nongovernmental Account.
(iii) For purposes of allocations of items made pursuant to Article VI of
the Agreement:
(a) As long as Class C Units are outstanding, the Series B Preferred Units
shall be allocated items pari passu with the Class C Units (and shall share in
those allocations in a pro rata manner based on the distributions and
allocations of items, as applicable, made to such Partnership Units, as
applicable); references to Class C Units in Article VI of the Agreement shall
be deemed to also refer to Series B Preferred Units except that references to
distributions made to the Class C Units shall be deemed to refer to
distributions made to the Series B Preferred Units in a pro rata manner with
such distributions made to the Class C Units.
(b) As long as the Class D Units or Class E Units are outstanding (and the
Class C Units are no longer outstanding), the Series B Preferred Units shall be
allocated items pari passu with the Class D Units or Class E Units (and shall
share in those allocations in a pro rata manner based on the distributions and
allocations of items, as applicable, made to such Partnership Units, as
applicable); references to Class D Units or Class E Units in Article VI of the
Agreement shall be deemed to also refer to Series B Preferred Units except that
references to distributions made to the Class D Units or Class E Units shall be
deemed to refer to distributions made to the Series B Preferred Units in a pro
rata manner with such distributions made to the Class D Units or Class E Units.
(c) When the Class C Units, Class D Units and Class E Units are no longer
outstanding, the Series B Preferred Units shall be allocated items pari passu
with the Preference Units (and shall share in those allocations in a pro rata
manner based on the distributions and allocations of items, as applicable, made
to such Partnership Units, as applicable); references to Preference Units in
Article VI of the Agreement shall be deemed to also refer to Series B Preferred
Units except that references to distributions made to Preference Units shall be
deemed to refer to distributions made to the Series B Preferred Units in a pro
rata manner with such distributions, if any, made to the Preference Units.
G. Voting. Except as required by law, the holders of the Series B
Preferred Units shall not be entitled to vote at any meeting of the Partners or
for any other purpose or otherwise to participate in any action taken by the
Partnership or the Partners, or to receive notice of any meeting of the
Partners. When entitled to vote, the Series B Preferred Units shall vote
together as a class.
H. Restrictions on Ownership and Transfer. Transfers of Series B Preferred
Units shall be governed by Article XI of the Agreement. The Series B Preferred
Units shall be owned and held by Washington Design Center, L.L.C. and
Merchandise Mart Owners, L.L.C. as provided below:
Series B-1 Convertible Series B-2 Restricted
Preferred Units Preferred Units
---------------------- ---------------------
Washington Design Center, L.L.C. 200,000 100,000
Merchandise Mart Owners, L.L.C. 699,566 349,783
I. Conflicts with Federal Law. Notwithstanding anything to the contrary
contained in this Exhibit I, if the Partnership reasonably believes, based on
an opinion of counsel, that there is a material risk that the ownership of the
Series B Preferred Units will result in a violation of 18 U.S.C. Sections
431-433, 41 U.S.C. Section 22 or any similar statute or any regulations
thereunder then the Partnership shall have the right to suspend distributions
on the Series B Preferred Units and take any other actions it
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deems reasonably required to remedy such violation. In the case of such a
suspension of distributions on the Series B Preferred Units, (i) each holder of
Series B-2 Restricted Preferred Units shall have a right at its election to be
redeemed for $50 per Unit in cash, plus accrued and unpaid distributions
thereon, and (ii) each holder of Series B-1 Convertible Preferred Units shall
have a right at its election to be redeemed for an amount of cash per Unit equal
to 1.5 multiplied by (.9140 times the Current Market Price of the Common Shares
on the business day immediately preceding the redemption election), less $25.00,
provided, however, such redemption shall not be permitted if the Partnership
reasonably believes, based on an opinion of counsel, that there is a material
risk that such redemption will result in a violation of 18 U.S.C. Sections
431-433, 41 U.S.C. Section 22 or any similar statute or any regulations
thereunder. The Partnership shall only be required to redeem any Series B
Preferred Units from any one or more holders of Series B Preferred Units under
this paragraph to the extent that it may do so in one or more groups of two
Series B-1 Convertible Preferred Units and one Series B-2 Restricted Preferred
Unit.
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